STOCK PURCHASE AGREEMENT
BETWEEN
XXXXX XXXXX,
XXXXXXXXX XXXXX,
XXXXXXX XXXXX,
XXXXXX XXXXX,
XXXXXX XXXXXXXXX,
AND
DRI EUROPA AB,
AND
DIGITAL RECORDERS, INC.,
DATED 27 JUNE 2001
2
TABLE OF CONTENTS
1. DEFINITIONS...................................................... 7
2. SALE AND PURCHASE OF THE SHARES..................................13
3. PURCHASE PRICE...................................................13
4. CONDITIONS PRECEDENT TO THE PURCHASERS' OBLIGATIONS..............19
5. CLOSING..........................................................20
6. REPRESENTATIONS AND WARRANTIES OF ALL THE SELLERS................22
7. REPRESENTATIONS AND WARRANTIES OF THE BODIN SELLERS..............23
8. COVENANTS........................................................39
9. INDEMNIFICATION..................................................45
10. REPRESENTATIONS AND WARRANTIES OF DRI EUROPA.....................49
11. CLOSING DATE.....................................................50
12. GENERAL PROVISIONS...............................................50
3
APPENDICES
1.9 a - c Consolidated Financial Statements
1.14 a - c Financial Statements
1.19 Interim Financial Statements
2 Shares to be sold
3.2.1.3 Registration Rights Agreement
3.2.1.4 Promissory Note
3.2.1.5 Xxxxx Warrant Agreement
5.3 Legal Opinion
6.5 Articles of Association, Share Ledgers
7.4 Pledges, commitments and contingent liabilities
7.6 Dividends since 1st January 2000
7.8 Inventory stored and obsolete products
7.19 Material Agreements and Warranties
7.30 Customer List
7.36 Insurances
7.39 Employment conditions
7.41 List of persons authorised to sign
7.42 Bonus agreement
7.46 Pension arrangement Xxxxx Xxxxx
8.4 Mobitec Stock Option Program
8.5 Trademark License Agreement
8.10 Disputes
4
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of 27 June 2001, by
and between
Xxxxx Xxxxx, an individual resident at La Piniere, Cidex 000, X.X.
0000, XX-00000 Xxxxxxxxx xxx Xxxx, Xxxxxx;
Xxxxxxxxx Xxxxx, an individual resident at La Piniere, Cidex 000,
X.X. 0000, XX-00000 Xxxxxxxxx xxx Xxxx, Xxxxxx;
Xxxxxxx Xxxxx, an individual resident at Xxxxxxxxx 00, XX-000 00
Xxxxxxxxx, Xxxxxx;
Xxxxxx Xxxxx, an individual resident at Xxxx Xxxxxxxxxx 00 X,
XX-000 00 Xxxxxxxxxx, Xxxxxx; and
Xxxxxx Xxxxxxxxx, an individual resident at Xxxxxxxxxx 00 X, 000
00 Xxxxxxxxx.
(Xxxxx Xxxxx, Xxxxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxx Xxxxx and
Xxxxxx Xxxxxxxxx are hereinafter collectively referred to as the
"Sellers".)
AND
DRI Europa AB, a Swedish corporation having its principal office
in Gothenburg, ("DRI Europa") and
Digital Recorders, Inc., a company duly incorporated and
organised under the laws of the state of North Carolina, USA,
having its principal office at Durham, North Carolina, ("DRI").
5
(DRI Europa and DRI are hereinafter collectively referred to as
the "Purchasers".)
PREAMBLES
A. The Sellers are at the date hereof the owners of the shares (the
Shares) of Mobitec Holding AB, a Swedish corporation, registration
number 556546-6793, (the "Company"). The ownership of the Shares
is, at the date hereof as follows:
Xxxxx Xxxxx 51.900 shares
Xxxxxxxxx Xxxxx 20.400 shares
Xxxxxxx Xxxxx 9.100 shares
Xxxxxx Xxxxx 9.100 shares
Xxxxxx Xxxxxxxxx 9.500 SHARES
--------------
TOTAL 100.000 shares
B. The Company is the parent company of a group of companies engaged
in developing, manufacturing, marketing and selling information
systems for public transport vehicles.
C. The aforesaid group of companies has presently a strong market
position on its respective market, has a customer base on these
markets and has highly professional and skilled personnel in the
field of business where the group of companies is active.
D. DRI Europa is a wholly owned subsidiary of Digital Recorders, Inc.
0
X. XXX is engaged in the businesses of design, development,
production, marketing, sales and service of information systems
for transit and transportation markets worldwide.
F. DRI is desirous of strengthening its presence and its operations
in Europe. After analysis of the market situation and the business
environment in Europe, DRI believes that a stronger presence and
good business opportunities will be achieved by the purchase of
the shares of the Company.
G. The Sellers are willing to sell the Shares to DRI Europa and/or to
DRI on the terms and conditions set forth herein subject to the
exercise by DRI Europa and/or DRI of its right under the Option
Agreement.
H. Although Xxxxxx Xxxxxxxxx, owner of 9,500 shares of the Company,
agrees to sell his shares it is understood that he shall be paid
the purchase price for his portion of the shares in full on the
Closing Date and shall only be liable hereunder to the extent
explicitly set forth hereunder. Any other liability for breach of
representations or warranties or any other failure or breach under
this Agreement will be assumed by the other Sellers in full as if
they were the Sellers of Xxxxxx Xxxxxxxxx'x shares too.
I. The Sellers have submitted to the Purchasers the budget for 2001,
which has been prepared with normal and reasonable care in
accordance with previous practice. The Board of Directors of
Mobitec AB has stated that there is some degree of uncertainty
with respect to the budgeted result for Mobitec Ltda but that this
will probably be compensated by the result of other entities of
the Group. For the avoidance of doubt the purchase price for the
Shares is, however, not based on any forecasts or budgets issued
by the Company or any Subsidiary with respect to the operation of
the Group beyond the Closing Date.
7
J. It is understood between the parties that all shares of Klimat and
Hexair will be sold prior to Closing and that such sale will have
no negative effect on the Company or any Subsidiary except for
changes in the net equity to be reflected when adjusting the
Preliminary Purchase Price into the Final Purchase Price as set
forth in sub-section 3.2.2 hereof.
K. Taking into consideration what has been set forth above, the
Sellers and the Purchasers, intending to be legally bound, agree
as follows:
1. DEFINITIONS
For the purpose of this Agreement the following terms have the meanings set
forth below.
1.1 Xxxxxx Xxxxxxxxx Shares shall mean the 9,500 shares out of the
Shares held by Xxxxxx Xxxxxxxxx.
1.2 Bodin Sellers shall mean the aforesaid Xxxxx Xxxxx, Xxxxxxxxx
Xxxxx, Xxxxxxx Xxxxx and Xxxxxx Xxxxx collectively and Xxxxx
Seller shall mean any of them.
1.3 Xxxxx Shares shall mean the 90,500 shares out of the Shares held
by the Bodin Sellers.
1.4 Xxxxx Warrant Agreement shall mean the agreement referred to in
sub-section 3.2.1.5 below.
1.5 Closing shall mean the completion of the sale and purchase of the
Shares in accordance with this Agreement.
8
1.6 Closing Financial Statement shall mean the audited profit and loss
accounts and the balance sheets of the Company and each Subsidiary
as well as of the Group on a consolidated basis for the period 1
January - 31 March 2001.
1.7 Closing Date shall mean the date set forth in section 11 below.
1.8 Company shall mean the aforesaid Mobitec Holding AB.
1.9 Consolidated Financial Statements shall mean the audited
consolidated annual reports for the Group for the financial years
1998, 1999 and 2000, APPENDIX 1.9a)-c) hereto.
1.10 DRI shall mean the aforesaid Digital Recorders, Inc.
1.11 Encumbrance shall mean any charge, claim, condition, lien, option,
pledge, security interest, right of first refusal or restriction
of any kind, including any restriction on use, voting, transfer or
receipt of income.
1.12 Family shall mean wife, husband and co-habitant (Sw. sambo).
1.13 Financial Documents shall mean the Financial Statements, the
Consolidated Financial Statements and the Interim Financial
Statements.
1.14 Financial Statements shall mean the audited annual reports of the
Company and each Subsidiary for the financial years 1998, 1999 and
2000, APPENDIX 1.14a)-c) hereto.
1.15 GAAP shall with respect to the Company and the Swedish
Subsidiaries mean the generally accepted accounting principles
including the statements and recommendations of the Swedish
Financial Accounting Standards Council (Sw.
9
Redovisningsradet) of the Accounting Board (Sw. Bokforingsnamnden)
as well as the Swedish Accounting Act (Sw. Bokforingslagen) and
shall with respect to non-Swedish Subsidiaries mean the generally
accepted accounting principles in the country of domicile of each
such Subsidiary.
1.16 Group shall mean the Company and the Subsidiaries.
1.17 Hexair shall mean Hexair AB, registration number 556505-5067.
1.18 Intellectual Property shall mean patents, trademarks, designs,
applications for any of the foregoing, copyrights and registerable
business names - including the name "Mobitec" but with the
observation of what has been set forth in sub-section 8.5 below -
and any similar rights in any country and all rights under
licenses and consents in relation to any of the foregoing.
1.19 Interim Financial Statements shall mean the profit and loss
accounts and the balance sheets of the Company and each Subsidiary
as well as of the Group on a consolidated basis for the period 1
January - 31 March 2000, APPENDIX 1.19 hereto.
1.20 Key Employee shall mean each of Xxx Xxxxxxx, Xxxxxxx Xxxxxx and
Bjorn Ronnhede.
1.21 Klimat shall mean Mobitec Klimat AB, registration number
556487-3403.
1.22 Know-how shall - irrespective of whether it is in verbal or any
other form - mean all technical data, specifications, procedures,
manufacturing information, product information as well as all
commercial information such as but not limited to the Customer
List (as defined in sub-section 7.30 below) market information,
information on customers and competitors, price calculations and
10
offers all of which is used in the Company's or any Subsidiary's
development, manufacture, marketing, selling or use of any product
of the Company or any Subsidiary irrespective of whether such
product is in one or more of the stages of development,
manufacture, marketing, sale or use.
1.23 Loss shall mean any claims, losses, deficits, damages, costs,
liabilities and expenses incurred by the Group, the Company, any
Subsidiary, DRI, DRI Europa or any of the Sellers, as the case may
be, including settlement costs and any reasonable legal,
accounting and other expenses for investigation or defending any
actions or threatened actions.
1.24 Except for employment agreements, the contents of which appears
from Appendix 7.39, Material Agreement shall mean all agency-,
distributorship and other sales representative agreements as well
as all license- and secrecy agreements to which the Company or any
Subsidiary is a party as well as any other agreement, contract,
obligation, promise or undertaking (whether written or oral and
whether express or implied) that is legally binding between the
Company or any Subsidiary on the one hand and any third party or
any of the Sellers on the other hand and having a contract value
of more than SEK 200,000 or a remaining contract term or a period
of notice of termination of more than six months.
1.25 Mobitec Stock Option Program shall mean the stock option program
of the Company, described in APPENDIX 8.4 hereto.
1.26 Option Agreement shall mean the agreement entered into between the
Sellers, DRI Europa and DRI under which the Sellers have granted
DRI Europa and DRI options to acquire the Shares.
11
This Stock Purchase Agreement is an appendix to the Option
Agreement and forms an integral part thereof.
1.27 Person shall mean any individual, corporation, general or limited
partnership, limited liability company, joint venture, estate,
trust, association, organisation, labour union, or other entity or
governmental body, agency or authority.
1.28 Promissory Notes shall mean the promissory notes referred to in
sub-section 3.2.1.4 below.
1.29 DRI Europa shall mean the aforesaid DRI Europa AB, in the process
of incorporation.
1.30 Related Person shall with respect to a particular individual mean:
(i) each other member of such individual's Family;
(ii) any Person that is directly or indirectly controlled
by such individual or one or more members of such
individual's Family;
(iii) any Person in which such individual or members of
such individual's Family hold (individually or in
the aggregate) a material interest; and
(iv) any Person with respect to which such individual or one
or more members of such individual's Family serves as a
director, officer, partner, executor or trustee (or in
a similar capacity).
1.31 Restricted Shares shall mean the 430,000 shares of the voting
Common Stock of DRI of the class authorized as of the date hereof
to be issued to Xxxxxxx Xxxxx and Xxxxxx Xxxxx pursuant to the
terms hereof.
1.32 Shares shall mean all the shares numbered from 1 to 100,000 of the
capital stock of the Company.
12
1.33 Sellers shall mean the aforesaid Xxxxx Xxxxx, Xxxxxxxxx Xxxxx,
Xxxxxxx Xxxxx, Xxxxxx Xxxxx and Xxxxxx Xxxxxxxxx collectively and
Seller shall mean any of them.
1.34 Subsidiary shall mean each of
Mobitec AB, reg. number 556344-9999
Mobitec GmbH, reg. number DE 812 639 645
Mobitec Australia Pty Ltd, reg. number 092 439 159
Mobitec Brazil Ltda, reg. number CNPJ-03.393.064/0001-98
and Subsidiaries shall mean all of them.
1.35 The expression "Acquired Knowledge" shall mean that the statement
has been made after the Bodin Sellers have made due and reasonable
inquiries among those of the employees, consultants and
representatives of the Company and any Subsidiary who reasonably
should have been asked with respect to the relevant matter and
that the statement shall be deemed to include the knowledge
obtained as aforesaid from such employees, consultants and
representatives. Knowledge, as aforesaid, of one Xxxxx Seller
shall be deemed to be the knowledge of all Bodin Sellers.
1.36 The expression "to the best of Bodin Sellers' Knowledge" shall
mean that the statement shall be deemed to include all information
which - without this being Acquired Knowledge - reasonably should
be known to the Bodin Sellers. Knowledge, as aforesaid, of one
Xxxxx Seller shall be deemed to be the knowledge of all Bodin
Sellers.
13
1.37 Purchasers shall mean the aforesaid DRI Europa AB and Digital
Recorder, Inc. and Purchaser shall mean any of them.
2. SALE AND PURCHASE OF THE SHARES
Upon the terms and subject to the conditions of this Agreement the Sellers agree
to sell to the Purchasers and the Purchasers agree to purchase from the Sellers
the Shares, as described in APPENDIX 2 hereto.
3. PURCHASE PRICE
3.1 XXXXXX XXXXXXXXX SHARES
The portion of the purchase price to be paid to Xxxxxx Xxxxxxxxx
for the Xxxxxx Xxxxxxxxx Shares shall be SEK 5,700,000 (five
million seven hundred thousand), the said amount to be paid in
cash on the Closing Date - subject to sections 4 and 5 below - to
an account to be specified by Xxxxxx Xxxxxxxxx not later than ten
days prior to Closing.
3.2 XXXXX SHARES
The purchase price for the Xxxxx Shares is a Preliminary Purchase
Price to be adjusted into a Final Purchase Price in accordance
with the provisions of sub-section 3.2.2 below.
The Preliminary Purchase Price has been calculated and agreed upon
between the Bodin Sellers and the Purchasers inter alia on the
basis of the balance sheet forming part of the Interim Financial
Statement for Mobitec AB, Mobitec GmbH and Mobitec Brazil Ltda on
a consolidated basis as per 31 March 2000, APPENDIX 1.19 hereto.
14
3.2.1 PRELIMINARY PURCHASE PRICE
The following is the Preliminary Purchase Price to be paid to the
Bodin Sellers for the sale and transfer to the Purchasers of the
Xxxxx Shares:
3.2.1.1 The Sellers shall notify DRI Europa and DRI in writing on 31
January 2001 at the latest of the amount set forth in sub-section
3.2.1.2 to be paid in cash to each of the Bodin Sellers, the
number of Restricted Shares set forth in sub-section 3.2.1.3 to be
transferred to each of Xxxxxxx Xxxxx and Xxxxxx Xxxxx as well as
the amounts of the Promissory Notes set forth in sub-section
3.2.1.4.
In the event that DRI Europa and DRI have not received
notification as aforesaid the aforesaid cash amounts, the
Restricted Shares and the amounts of the Promissory Notes shall be
divided between the Bodin Sellers in proportion to their holding
of shares in the Company.
3.2.1.2 The cash amount of USD 3.680.000 to be paid in cash on the Closing
Date by wire transfer to the Bodin Sellers' bank accounts to be
notified by the Bodin Sellers to the Purchaser and DRI in writing
not later than ten days prior to Closing.
3.2.1.3 The Restricted Shares shall be transferred to the Bodin Sellers on
the Closing Date, which shares shall be voting Common Stock of
DRI, subject to all of the terms and conditions of the
Registration Rights Agreement, APPENDIX 3.2.1.3 hereto, dated as
of the date hereof by and among DRI, Xxxxx Xxxxx, Xxxxxxxxx Xxxxx,
Xxxxxxx Xxxxx and Xxxxxx Xxxxx. All certificates evidencing the
Restricted Shares shall bear legends as specified in Section 5.4
hereunder. The said shares shall be divided among the Bodin
Sellers (subject to adjustments as provided in sub-sections (a)
through (d) below:
15
(a) If, on or before the Closing Date, DRI shall issue any of its
Common Stock as a share dividend or subdivide the number of
outstanding shares of Common Stock into a greater number of shares
then, in either of such cases, the number of Restricted Shares
issuable pursuant to this Agreement shall be proportionately
increased; and conversely, if DRI shall reduce the number of
outstanding shares of Common Stock by combining such shares into a
smaller number of shares then, in such case, the number of
Restricted Shares issuable pursuant to this Agreement shall be
proportionately decreased. If DRI shall, on or before the Closing
Date, declare a dividend payable in cash on its Common Stock and
shall at substantially the same time offer to its shareholders a
right to purchase new Common Stock from the proceeds of such
dividend or for an amount substantially equal to the dividend, all
Common Stock so issued shall, for the purpose of this Agreement,
be deemed to have been issued as a share dividend. Any dividend
paid or distributed upon Common Stock in shares of any other class
of securities convertible into Common Stock shall be treated as a
dividend paid in Common Stock to the extent that Common Stock is
issuable upon the conversion thereof.
(b) If, on or before the Closing Date, DRI shall be recapitalized
by reclassifying its outstanding Common Stock, or DRI or a
successor corporation shall consolidate or merge with or convey
all or substantially all of its or any successor corporation's
property and assets to any other corporation or corporations (any
such corporation being included within the meaning of the term
"successor corporation" used above in the event of any
consolidation or merger of any such corporation with, or the sale
of all or substantially all of the property of any such
corporation, to another corporation or corporations), the Bodin
Sellers shall thereafter have the right to receive, upon the basis
and upon the terms and conditions and at the time specified in
this Agreement, in lieu of the Restricted Shares theretofore
issuable hereunder, such shares, securities or assets as may be
issued or payable with respect to, or in exchange for, the
16
number of Restricted Shares theretofore issuable hereunder had
such recapitalization, consolidation, merger or conveyance not
taken place and, in any such event, the rights of the Bodin
Sellers to an adjustment in the number of Restricted Shares
issuable hereunder as herein provided shall continue and be
preserved in respect of any shares, securities or assets which
the Bodin Sellers become entitled to receive.
(c) If: (i) DRI shall take a record of holders of its Common Stock
for the purpose of entitling them to receive a dividend payable
otherwise than in cash, or any other distribution in respect of
the Common Stock (including cash), pursuant to, without
limitation, any spin-off, split-off, or distribution of DRI's
assets; or (ii) DRI shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or
purchase any shares of any class or to receive any other rights;
or (iii) in the event of any classification, reclassification or
other reorganization of the securities which DRI is authorized to
issue, consolidation or merger by DRI with or into another
corporation, or conveyance of all or substantially all of the
assets of DRI; or (iv) in the event of any voluntary or
involuntary dissolution, liquidation or winding up of DRI; then,
and in any such case, DRI shall mail to the Bodin Sellers, at
least 15 days prior thereto, a notice stating the date or expected
date on which a record is to be taken for the purpose of such
dividend, distribution or rights, or the date on which such
classification, reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up, as the
case may be, will be effected. Such notice shall also specify the
date or expected date, if any is to be fixed, as to which holders
of Common Stock of record shall be entitled to participate in such
dividend, distribution or rights, or shall be entitled to exchange
their Common Stock or securities or other property deliverable
upon such classification, reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or
winding up, as the case may be.
17
(d) If DRI, on or before the Closing Date, shall sell all or
substantially all of its property, dissolve, liquidate or wind up
its affairs, the Bodin Sellers may thereafter receive upon
exercise hereof, in lieu of each Restricted Share which it would
have been entitled to receive, the same kind and amount of any
securities or assets as may be issuable, distributable or payable
upon any such sale, dissolution, liquidation or winding up with
respect to each share of Common Stock of DRI issuable to the Bodin
Sellers hereunder.
3.2.1.4 The Promissory Notes totalling USD 2,000,000 (two million) to be
issued and submitted to each Xxxxx Seller on the Closing Date, the
Promissory Notes to carry the amounts determined in accordance
with sub-section 3.2.1.1 above, subject to any adjustment set
forth in sub-section 3.2.2.8 below, and falling due 36 months from
the Closing Date and accruing interest at the rate of 9 per cent
per annum payable quarterly in arrears. The Promissory Notes shall
have the contents set forth in APPENDIX 3.2.1.4 hereto. The
detailed terms of the Promissory Notes appear from the said
Appendix.
3.2.1.5 The Xxxxx Warrant Agreement, APPENDIX 3.2.1.5 hereto to be
executed and delivered to Xxxxx Xxxxx. As set forth in the Xxxxx
Warrant Agreement, DRI will grant to Xxxxx Xxxxx the right to
purchase for five (5) years (the "Warrant") up to an additional
100,000 shares of registered Common Stock of DRI (the "Warrant
Shares") at an exercise price of USD 4.00 per share (the "Warrant
Exercise Price"), all as more fully set forth in the Xxxxx Warrant
Agreement, subject to all the terms and conditions of the
Registration Rights Agreement.
3.2.2 FINAL PURCHASE PRICE
18
3.2.2.1 The Preliminary Purchase Price set forth in sub-section 3.2.1
shall be adjusted into a Final Purchase Price on the basis of the
balance sheet forming part of the Closing Financial Statement for
the Group on a consolidated basis.
3.2.2.2 The Bodin Sellers shall procure that the Company prepares the
Closing Financial Statement which shall be audited by the
Company's chartered accountant (auktoriserad revisor) and submit
the same to the Purchasers within 15 days from the Closing Date
together with all accounting and other documentation used in the
preparation of the Closing Financial Statement.
3.2.2.3 In the event that there is any discrepancy between the net equity
appearing in the balance sheet forming part of the Closing
Financial Statement for the Group - including the Company - on a
consolidated basis (koncernens beskattade egna kapital) and the
net equity SEK 10.867.000 appearing in the balance sheet forming
part of the Interim Financial Statement on a consolidated basis
for Mobitec AB, Mobitec GmbH and Mobitec Ltda as per 31 March
2000, APPENDIX 1.19 hereto (koncernens beskattade egna kapital)
the Preliminary Purchase Price shall be increased or decreased, as
the case may be, by the full amount of any such discrepancy
provided the discrepancy exceeds SEK 100.000.
3.2.2.4 The aforesaid submission by the Bodin Sellers to the Purchasers of
the Closing Financial Statement shall be accompanied by the Bodin
Sellers' written statement of any discrepancy of the net equity as
aforesaid and reasonably detailed information on the calculation
thereof.
3.2.2.5 The Purchasers shall within 15 days from receipt of the Closing
Financial Statement and the documentation mentioned in sub-section
3.2.2.2 as well as the Bodin Sellers' written statement mentioned
in sub-section 3.2.2.4 including information on the calculation
thereof notify the Bodin Sellers in writing
19
whether the Purchasers accept the contents of the Closing
Financial Statement and/or the Bodin Sellers' calculation of the
discrepancy, if any, of the net equity as aforesaid. Failing
such notice the Final Purchase Price shall be determined
according to the statement of the Bodin Sellers referred to in
sub-section 3.2.2.4 above.
3.2.2.6 In the event that the Bodin Sellers and the Purchasers have not
agreed in writing within 15 days from the date of the Bodin
Sellers' receipt of the Purchasers' notification mentioned in
sub-section 3.2.2.5 above the matter of the contents of the
Closing Financial Statement and the calculation of the discrepancy
of the net equity shall be referred to arbitration in accordance
with sub-section 12.13 below unless the Bodin Sellers and the
Purchasers agree in writing on an extension of the 15 days period.
3.2.2.7 The Closing Financial Statement shall be prepared in accordance
with GAAP and all applicable laws applied on a basis consistent
with that of the Interim Financial Statements.
3.2.2.8 The amounts of the Promissory Notes shall proportionally be
increased or decreased, as the case may be, by the discrepancy of
the net equity as set forth in sub-sections 3.2.2.3 - 3.2.2.7
above should it exceed the amount SEK 100,000.
4. CONDITIONS PRECEDENT TO THE PURCHASERS' OBLIGATIONS
4.1 The obligation of the Purchasers to consummate this Agreement is
subject to the satisfaction of the Purchasers at or prior to the
Closing Date of all of the following conditions, anyone or more of
which may be waived, in whole or in part, by the Purchasers.
20
4.1.1 All of the statements, representations, warranties and covenants
of Xxxxxx Xxxxxxxxx and of the Bodin Sellers contained herein are
true and accurate, not only when made but also at and as of the
Closing Date with the same force and effect as if made at and as
of such time.
4.1.2 No litigation, action, suit or other proceeding shall be pending
or threatened against any of the Sellers, DRI Europa, DRI or the
Company or any Subsidiary at the Closing Date wherein an
unfavourable judgement, decree or order would prevent or make
unlawful the carrying out of this Agreement.
5. CLOSING
The Closing shall take place on the Closing Date at the offices of Advokatfirman
Xxxxx KB at Xxxx Xxxxxxxxxxxxx 00, Xxxxxxxxxx, or at such other place as is
agreed between the Bodin Sellers and the Purchasers.
At the Closing each of the Sellers and the Purchasers shall do or procure to be
done all acts necessary in order to consummate the transactions contemplated by
this Agreement including, but not limited to, the following:
5.1 Xxxxxx Xxxxxxxxx shall, subject to receipt of the purchase price
for the Xxxxxx Xxxxxxxxx Shares referred to in sub-section 3.1
above, and each Xxxxx Seller shall, subject to receipt of the
Preliminary Purchase Price referred to in sub-section 3.2.1 above,
deliver to the Purchasers the share certificates evidencing 90.800
of the Shares (class B shares) - representing 49,7 percent of the
votes of the Shares and 90,8 percent of the share capital - duly
endorsed in favour of DRI Europa, and share certificates
evidencing the remaining 9.200 of the Shares (class A shares) -
representing 50,3 percent of the votes of the Shares and 9,2
percent of the share capital - duly endorsed in favour of DRI.
21
5.2 The Bodin Sellers shall present to the Purchasers the share ledger
of the Company evidencing that DRI Europa as per the Closing Date
has been registered as owner of 90.800 of the Shares and
evidencing that DRI as per the Closing Date has been registered as
owner of the remaining 9.200 of the Shares.
The Bodin Sellers shall further present to the Purchasers the
original of the share certificates as well as certified copies of
the share ledger or corresponding document with regard to each
Subsidiary evidencing that all the shares of each Subsidiary as
per the Closing Date has the following registered ownership:
Mobitec AB total of 100.000 100% held by the Company
shares
Mobitec GmbH 100% held by Mobitec AB
Mobitec Ltda total of 360.000 180.000 quotas or 50% held by Mobitec AB
quotas
Mobitec Australia total of one share held by Mobitec AB
Pty Ltd
5.3 DRI shall submit to the Bodin Sellers a legal opinion issued by
Xxxx, Leyton, Kersh, Solomon, Sigmon, Xxxx & Xxxxx, P.A. in the
form appearing from APPENDIX 5.3 hereto.
5.4 DRI shall deliver to the Bodin Sellers the Restricted Shares. The
certificates evidencing said shares shall contain a legend showing
them to be restricted shares of DRI subject to restrictions on
sale or transfer provided for in the United States Securities Act
of 1933, as amended (the "Securities Act"). Upon registration
pursuant to the Registration Rights Agreement, but in no event
later than one year from the Closing Date, DRI shall remove the
restrictive legends associated with 200,000 shares and shall
further remove the restrictive legends associated with the
remaining shares upon registration of such shares
22
pursuant to the Registration Rights Agreement, but in no event
later than on the second anniversary of the Closing Date. DRI
shall reasonably and expeditiously take necessary action to
remove the restrictions on the shares as aforesaid.
The Restricted Shares shall be divided between the Bodin Sellers
in accordance with sub-section 3.2.1.31 above.
5.5 The Xxxxx Warrant Agreement, the Registration Rights Agreement and
the Xxxxx Consulting Agreement shall be executed by the parties
thereto.
6. REPRESENTATIONS AND WARRANTIES OF ALL THE SELLERS
The Sellers jointly and severally represent and warrant that on and as of the
date of signing of the Option Agreement as well as of this Agreement and on and
as of the Closing Date (unless the context otherwise requires):
CORPORATE
6.1 Each Seller has full authority to execute and deliver this
Agreement and each other document or instrument executed and
delivered in connection herewith and to consummate the
transactions contemplated hereby.
6.2 The execution of this Agreement, the consummation of the
transactions provided for herein and the fulfilment of the terms
hereof will not result in a breach of any agreement to which any
of the Sellers is a party or the Articles of Association of the
Company or any Subsidiary.
6.3 The Shares constitute the entire issued capital stock of the
Company and are legally and validly issued and fully paid. Each
Seller lawfully owns the number of the Shares set forth in
Preamble A above, free and clear of any
23
Encumbrances whatsoever and each Seller has good and
transferable title to the said Shares and has the absolute
right, power and capacity to sell, assign and deliver the said
number of the Shares to the Purchasers in accordance with the
terms of this Agreement, free and clear of all Encumbrances and
there are no outstanding subscriptions, options, rights or
agreements which may require the Company or any Subsidiary to
issue or transfer any additional shares. Matters related to the
Mobitec Stock Option Program have been provided for in
sub-section 8.4 below.
6.4 The Company and each Subsidiary are duly organised and validly
existing and in good standing under the laws of Sweden or, in
respect of Subsidiaries domiciled outside of Sweden under the laws
of the country of domicile and have full corporate power and all
necessary licenses, permits and authorisations to carry on its
businesses as presently and on the Closing Date conducted and to
own, lease and operate the assets and properties used in
connection therewith.
6.5 Copies of the Company's and each Subsidiary's Articles of
Association, and share ledger or corresponding documents are
enclosed as APPENDIX 6.5, which copies are true and complete and
fully and completely set forth all information required to be
recorded therein.
7. REPRESENTATIONS AND WARRANTIES OF THE BODIN SELLERS
The Bodin Sellers jointly and severally represent and warrant that on and as of
the date of signing of the Option Agreement as well as of this Agreement and on
and as of the Closing Date (unless the context otherwise requires):
FINANCIAL
24
7.1 Except for the Subsidiaries, the shares of which are held in
accordance with sub-section 5.2 above, lawfully and free and clear
of any Encumbrances whatsoever and to which the representations
and warranties contained in this section 7 shall apply, the
Company does not own any interest, directly or indirectly, in any
corporation or partnership and does not have a branch office in
any country.
7.2 The Financial Documents
(i) give a true and fair view of the financial position and
results of the operations of the Group, the Company and
of each Subsidiary as of the dates appearing in the
Financial Documents and for the periods appearing in
the Financial Documents and have been prepared from and
in accordance with the books and records of the Company
and of each Subsidiary;
(ii) have been prepared in accordance with GAAP and all
applicable laws, applied on a basis consistent with
that of preceding years;
(iii) contain and reflect such reserves as were necessary and
required by the laws and principles referred to under
(ii) above to be reflected in such reports as of the
said dates.
7.3 The net equity appearing in the balance sheet forming part of the
Interim Financial Statement as per 31 March 2000 on a consolidated
basis (koncernens beskattade egna kapital) for Mobitec AB, Mobitec
GmbH and Mobitec Ltda is not less than SEK 10.867.000 in
accordance with GAAP and all applicable laws applied on a basis
consistent with that of preceding years.
25
7.4 In excess of the pledges, commitments or contingent liabilities
disclosed in APPENDIX 7.4 neither the Company nor any Subsidiary
have pledged any assets or have any commitments or contingent
liabilities and the Company and each Subsidiary have full and
exclusive title to all assets in the balance sheets comprised by
the Interim Financial Statement, APPENDIX 1.19 - except assets
disposed of in the ordinary course of business - and the assets
are not the subject of any Encumbrance.
7.5 The operations and other activities of the Company and each
Subsidiary during the period as from 1 January 2000 to the date
hereof have been conducted in the ordinary course of business with
a view to maintaining their respective businesses as a going
concern and there has not occurred or arisen since 1 January 2000
with respect to the Company or any of the Subsidiaries
(i) any material adverse change in their financial
conditions or in the operations of their respective
businesses; or
(ii) to Acquired Knowledge any obligations, commitments or
liabilities, liquidated or unliquidated, contingent or
otherwise, except obligations, commitments and
liabilities arising in the ordinary course of business
and which are not material in relation to their
respective businesses; or
(iii) to Acquired Knowledge any amendment or termination or
any agreement to amend or terminate any Material
Agreement, save in the ordinary course of business; or
(iv) to Acquired Knowledge any extraordinary event or any
extraordinary loss suffered or any waiver of any debts,
claims, rights under any Material Agreement, or other
rights representing a value in excess of SEK 100,000;
or
26
(v) any damage, destruction, or loss or any other event or
condition adversely affecting their respective
properties and businesses, representing loss to
property to the extent not covered by insurance in the
aggregate in excess of SEK 100,000; or
(vi) any sale, assignment, transfer, pledge, lease or other
disposal of any individual asset with a value in excess
of SEK 300.000 except for the sale of real property
Mellerud Frosbo 1:7, 1:10 and 1:32 at a sales price of
SEK 350.000; or
(vii) any increase in the rates of compensation (including
bonuses) payable or to become payable to any agent,
distributor, sales representative, independent
contractor or consultant other than increases made in
the ordinary course of business; or
(viii) any change of accounting methods, principles or
practices; or
(ix) any investment in fixed assets that exceed individually
SEK 300.000 or in the aggregate SEK 500.000; or
(x) any other transaction other than in the ordinary
course of business;
and neither the Company nor any of the Subsidiaries have to the
Acquired Knowledge agreed or arranged to do any of the foregoing.
The terms and conditions for the Company's sale of the shares of
Hexair and Klimat appear from sub-section 8.9 below.
27
7.6 Since 1 January 2000 no dividends or interim dividends have been
declared or paid by the Company or any of the Subsidiaries except
for what has been set forth in Appendix 7.6 and except for a
dividend of SEK 500.000 the said dividend to be taken into account
in adjusting the Preliminary Purchase Price into the Final
Purchase Price.
7.7 All accounts receivable of whatsoever nature appearing in the
Financial Documents have been valued in accordance with GAAP and
all applicable laws.
7.8 The inventory of the Company and of each Subsidiary as appearing
in the Closing Financial Statement will be valued in accordance
with GAAP and applicable laws applied on a basis consistent with
that of the Interim Financial Statement for the period 1 January -
31 March 2000, Appendix 1.19 hereto. The inventory of Mobitec AB
as per 6 December 2000 was as set forth in APPENDIX 7.8 and was
kept at Mobitec AB's premises at Herrljunga. The said Appendix 7.8
also comprises the obsolete products as of the said date.
7.9 All liquid assets of the Company and each Subsidiary such as, but
not limited to, bank accounts and cash are on the Closing Date
available free and clear of any restriction or condition.
7.10 All assets, properties and rights belonging to the Company and
each Subsidiary, whether or not recorded in the books of the
Company or the Subsidiaries that until this date have been used in
the Company's and the Subsidiaries' respective businesses have
been included in the transfer to the Purchasers under the terms of
this Agreement.
7.11 Neither the Company nor any Subsidiary has any liability or
obligation of any kind as a result of purchase or sale of shares
or business operations or part
28
thereof or of individual assets and such purchases and sales, if
any, have been completed in all respects and neither the Company
nor any Subsidiary has or will have any liability of any kind as
a result of any such purchase or sale or as a result of any
transaction or transfer internally between any of the companies
of the Group including but not limited to payment of
considerations, debts, taxes and social charges.
7.12 All properties and assets of the Company and the Subsidiaries are
to Acquired Knowledge in good physical repair and condition,
ordinary wear and tear excepted.
ENVIRONMENTAL MATTERS
To Acquired Knowledge
7.13 the Company and each Subsidiary has at all times obtained all
necessary environmental approvals, permits and consents for its
operations;.
7.14 all environmental approvals, permits and consents, to the extent
required, are in full force and effect and there are no facts or
circumstances which may lead to any environmental approvals,
permits or consents being revoked, cancelled or modified;
7.15 the Company's and each Subsidiary's operations have in all
respects and at all times been carried out in compliance with any
necessary environmental approvals, permits and consents as well as
any applicable environmental laws;
7.16 all registrations and other information required to be provided by
the Company and each Subsidiary and all records and data required
to be maintained by the Company and each Subsidiary in accordance
with any environmental laws and
29
any approvals, permits and consents, to the extent required, have
been provided and maintained;
7.17 no real property has at any point in time been used by the Company
or a Subsidiary in such way which have led to any real property
having become contaminated in a manner which will result in any
liability under environmental laws;
7.18 there are no environmental actions, claims, complaints,
investigations or other proceedings being taken or pending in
connection with the operations of the Company or any Subsidiary
and there is no actual or contingent liability to make good,
repair, restore or clean up any real property and no act or
omission of the Company or any Subsidiary has given rise to any
such environmental liability.
AGREEMENTS
7.19 There are no other Material Agreements than those listed in
APPENDIX 7.19. The said Appendix contains information on the
parties, contract term, purpose of the agreement as well as any
other vital matter provided for in any Material Agreement.
The Company and the respective Subsidiary have performed or taken
all action necessary to enable them to perform when due all
obligations under any Material Agreement. The execution of this
Agreement, the consummation of the transactions provided for
herein, and the fulfilment of the terms hereof will not result in
a breach of any of the terms and provisions of, or constitute a
default under, or conflict with or give the counterparty the right
to terminate any Material Agreement and to Acquired Knowledge no
such third party has indicated its interest to terminate any
Material Agreement.
30
(i) NO DEFAULT. Neither the Company nor any of the
Subsidiaries is
(a) in default under any provision of any
contract, commitment, agreement, letter of
intent, lease or service arrangement to which
any of them is a party or by which any of
them is bound, which default would have a
materially adverse effect on their respective
businesses, properties or condition,
financial or otherwise, and no event has
occurred which would constitute such a
default;
(b) a party to or bound by any contract,
commitment, agreement, lease, service
arrangement, order or letter of intent not
made in the ordinary course of their
respective businesses;
(c) a party to any contract containing provisions
for material price redeterminations or price
revision that is not on normal market
conditions, or
(d) a party to any contract containing any terms
or conditions not consistent with
fair market terms, conditions and prices.
(ii) PRICING. Prices and payment terms on all contracts,
bids and sales order (order backlog) and purchase
orders of the Company and any Subsidiary which are
presently in effect or outstanding have been entered
into by the Company and the respective Subsidiary on a
basis consistent with its prior practice with respect
to profits and profit margins which were estimated
substantially in accordance with its prior practice and
contain no provision restricting competition or being
unlawful and all sales and services to customers have
been made at arm's-length prices, terms and conditions.
31
(iii) WARRANTIES. Neither the Company nor any of the
Subsidiaries have granted or offered any other
warranties for goods sold or services rendered other
than on normal market conditions or as is disclosed in
APPENDIX 7.19.
7.20 To Acquired Knowledge neither the Company nor any Subsidiary is or
has been a party to any agreement or is bound or has been bound by
any commitment, obligation or undertaking or has participated or
is participating in any activity prohibited or invalid pursuant to
sections 6, 7 or 19 of the Swedish Competition Act or articles 81
or 82 of the Treaty of Rome or pursuant to corresponding or
similar rules or regulations in any foreign jurisdiction.
7.21 Neither the Company nor any Subsidiary is bound by any prohibition
to compete or any other obligation which in any respect prohibits
or restricts the Company or any Subsidiary, to carry on such
businesses as the Company or any Subsidiary has been carrying on
during five years preceding the Closing Date.
INTELLECTUAL PROPERTY AND KNOW-HOW
7.22 All Intellectual Property, including software, which is used in,
or is necessary for, the business of the Company or any
Subsidiary, whether registered or not, is owned by or licensed to
the Company or the respective Subsidiary without any restrictions
in respect of current use. Matters related to the name Mobitec
have been provided for in sub-section 8.5 below.
7.23 All Know-how is owned by or licensed to the Company or any of the
Subsidiaries without any restrictions in respect of current use.
32
7.24 There is no infringement by any third party of any Know-how or any
Intellectual Property owned by or licensed to the Company or any
Subsidiary within any country in which the Company or any
Subsidiary is operating except that a third party has registered
the company name "Nolato Mobitec AB".
7.25 The registrations of all registered Intellectual Property are made
in the name of the Company or any of the Subsidiaries and are in
force and the renewal fees for all such registrations have
heretofore been paid.
7.26 There is no claim against the Company or any Subsidiary such as,
but not limited to infringement, damages or otherwise, raised by
any third party which relates to the use of Intellectual Property
or Know-How by the Company or any Subsidiary other than as set
forth in Appendix 8.10 hereof.
7.27 Neither the Company nor any Subsidiary has granted, or is obliged
to grant, any license or assignment in respect of any Intellectual
Property or Know-How owned or used by it, or is obliged to
disclose any Intellectual Property or Know-How to any Person.
7.28 The Company and each Subsidiary fully owns or has a license or
other right to use, in addition to the Intellectual Property and
Know-How set forth above, all other technology, technical and
commercial know-how used in the businesses of the Company and the
respective Subsidiary.
BUSINESS
7.29 The Company and each Subsidiary has in all material respects
conducted its respective businesses at all times in accordance
with and have complied with applicable national and local laws
relating to its operations and businesses, and is not a party to
or subject to any judgement, decree or order issued in any suit
33
or proceeding brought by any Person or party materially enjoining
or otherwise restraining or restricting the Company or any of the
Subsidiaries with respect to any business activity or practice in
the conduct of its respective businesses and will not be, in
respect of circumstances, existing before or upon the Closing Date
and there is to Acquired Knowledge no controversy or investigation
pending or threatened with respect to the Company's or any of the
Subsidiary's respective businesses by any Person or party that
would materially be detrimental to the Company's or any
Subsidiary's businesses.
7.30 The Customer List, APPENDIX 7.30 hereto, contains any customer
having purchased products from the Group in excess of the
aggregate sales value of SEK 3.000.000 during the calendar year
1999 or the period as from 1 January 2000 up to and including the
Closing Date.
7.31 To Acquired Knowledge all products sold and all services rendered
by the Company or any Subsidiary meet with the customer
requirements with respect to quality and suitability for intended
purposes.
7.32 To Acquired Knowledge no customer appearing in the Customer List
has manifestly ceased to buy products from the Group during the
calendar year 1999 or the period as from 1 January 2000 up to and
including the Closing Date except for the customers listed in
APPENDIX 7.30 hereto.
7.33 To the best of Bodin Sellers' Knowledge no supplier of the Company
or any Subsidiary will cease to sell products or components to any
of them and to the best of Bodin Sellers' knowledge none of them
will increase their prices or otherwise make any changes in their
businesses with the Company or any Subsidiary which could have a
materially adverse effect on the Company's or any Subsidiary's
businesses.
34
7.34 To the best of Bodin Sellers' Knowledge no business partner of the
Company or any Subsidiary will terminate its business relations
with the Company or any Subsidiary.
7.35 Neither the Company nor any Subsidiary is or will be liable, due
to circumstances existing before or upon the Closing Date or
related thereto, to compensate for damages caused to the
environment or third parties as a result of products sold or
services rendered.
7.36 Attached hereto as APPENDIX 7.36 is a schedule of the insurances
for the Group. The Company and each Subsidiary maintains the said
policies of fire, product and general liability, use and occupancy
and other forms of insurance covering its properties and assets in
amounts and against such losses and risks as are normally
maintained for comparable business and properties, and valid
policies for the said insurances are now and will be outstanding
and duly in force on the Closing Date and for at least 30 days
thereafter.
7.37 The books of account and other records of the Company and each
Subsidiary are complete and correct and have been maintained in
accordance with all relevant legislations and rules in each
country of domicile of the Company and each Subsidiary and all
documents of the Company and each Subsidiary such as, but not
limited to, share ledgers, minutes of Board of Directors' meetings
and shareholders' meetings, contracts, permits and licences exist
and are safely kept and are correct, and all registrations and
applications related thereto have been fulfilled, and all
applicable fees have been paid.
7.38 To Acquired Knowledge there is no matters or circumstances that
may materially affect the businesses of the Company or any
Subsidiary and the financial results thereof other than as
explicitly set forth herein.
35
EMPLOYEES
7.39 All employees of the Company and each Swedish Subsidiary are
employed on normal employment conditions and in accordance with
applicable collective bargaining agreements and all employees of
each foreign Subsidiary are employed on normal employment
conditions in each respective country.
In APPENDIX 7.39 are shown all employment conditions of all
employees of the Company and each Subsidiary as well as the
conditions of all Board Directors of the Company and each
Subsidiary as per 31 December 1999 and no salary or other
employment benefit or condition for any of the said employees or
Board Directors has been changed after the said date except for
what has been set forth in the said Appendix.
No salary increase or additional employment benefit may be granted
for the time period after 31 December 2000 without consultation
with the Purchasers.
7.40 There are no collective bargaining agreements or deferred
compensation agreements, pension, profit sharing, severance pay or
retirement plans, agreements or arrangements presently in force
with respect to any former employee of the Company or any of the
Subsidiaries.
7.41 Attached hereto as APPENDIX 7.41 is a list of all employees and of
all other persons being authorised to sign for the Company and for
each Subsidiary, including all persons authorised to operate any
bank accounts and safe deposits. APPENDIX 7.41 also includes those
employees holding credit cards for the Company or any Subsidiary.
7.42 Any term, condition or obligation pursuant to the letter from the
Company to Xxxxxxx Xxxxxxx, Xxxxxx Xxxxx and Xxxxxx Xxxxxxxx dated
10 August 1998, APPENDIX 7.42 hereto has in its entirety ceased to
have effect prior to the
36
Closing Date without any cost or other negative financial effect
of any kind to the Company or any Subsidiary or DRI Europa or
DRI in excess of what appears from the Closing Financial
Statement and neither the Company nor any Subsidiary has any
other contractual relationship with any of the aforesaid
individuals, except for employment agreements, and none of them
has any other right to any kind of compensation from the Company
or any Subsidiary except for salary and other employment
benefits as set forth in Appendix 7.39.
THE SELLERS
7.43 None of the Sellers or any Related Person of any of the Sellers
own, directly or indirectly, individually or collectively, any
interest in any corporation, company, partnership, entity or
organisation which is in a business similar or competitive to the
businesses of the Company or any Subsidiary or which has any
existing undisclosed contractual relationship with the Company or
any Subsidiary.
7.44 None of the Sellers or any Related Person to any of the Sellers or
any of the members of the Board of Directors of the Company or of
any Subsidiary has any claim against the Company or any Subsidiary
for compensation or payment of any nature whatsoever except for
Directors' fees appearing in the balance sheet forming part of the
Closing Financial Statement and there are no loans, guarantees or
other forms of undertaking provided by the Company and any of the
Subsidiaries to any of the Sellers or to any Related Person to any
of them which are prohibited by chapter 12 section 7 of the
Swedish Companies Act of 1975.
7.45 Except for the consultancy agreement with Xxxxx Xxxxx and the
pension arrangement referred to in sub-section 7.47 below, there
are no contractual relations of any kind between the Company or
any Subsidiary on one hand and any of the Sellers or any Related
Person to any of the Sellers on the other hand.
37
7.46 The pension arrangement with Xxxxx Xxxxx, which is described in
full detail in APPENDIX 7.46 hereto, will not have any negative
net effect on the financial position of the Company or any
Subsidiary.
LITIGATION AND INVESTIGATIONS
7.47 Except for what has been provided for in sub-section 8.10 below
neither the Company nor any Subsidiary has been served with any
law suit or notice to arbitrate, and there is no law suit,
administrative, arbitration or other legal proceedings pending or
to Acquired Knowledge threatened against the Company or any
Subsidiary or their businesses, properties or assets, and there is
no such suit or proceedings pending or to Acquired Knowledge
threatened by the Company or any Subsidiary against any Person or
party.
TAXES AND OTHER CHARGES
7.48 All necessary tax and other returns and reports with regard to
taxes, social charges and duties required to be filed prior to the
Closing Date by the Company or any Subsidiary have been duly filed
with the appropriate authorities and are true and correct.
7.49 All invoices with regard to all products sold or all services
rendered by the Company or any Subsidiary contain all taxes,
duties and public fees related to such sale or service.
7.50 All taxes, social charges and duties assessed or due by the
Company or any Subsidiary on or before the Closing Date have,
where applicable, been fully paid, or full reserves therefor has
been made in the Financial Documents.
7.51 No deficiency in payment of taxes, social charges and duties or
any additional assessment thereof in respect of the period up to
and including the Closing
38
Date, will be claimed or made by any authority for any year or
part thereof in respect of the Company or any Subsidiary.
7.52 All amounts required to be paid by the Company or any Subsidiary
for the purpose of social security, insurance, pensions and the
like have been duly and punctually paid and all amounts required
to be deducted from moneys paid to employees, consultants and
others for the purposes of taxes, social security, insurance,
pensions and the like have been deducted and have been accounted
for to the appropriate authority or person, and there is no
dispute on any issue in respect of any of the foregoing.
7.53 There are no audits with regard to taxes, social charges or duties
currently pending with respect to the Company, any Subsidiary or
any of the Sellers.
7.54 Full reserves or provisions have been made in the Financial
Documents for all liabilities in respect of pensions to be paid to
employees or former employees of the Company or any Subsidiary.
INFORMATION
7.55 No representation or warranty herein, and no document heretofore
or hereafter provided to the Purchasers by or on behalf of any of
the Sellers or the Company or any Subsidiary, contained or will
contain any material untrue statement of a fact or omitted or will
omit to state a fact necessary to make the statements contained
herein or therein not misleading.
7.56 The Bodin Sellers acknowledge that they are aware that their
ownership of the Restricted Shares is subject to a substantial
risk of loss, including risks associated with price fluctuations
of the Common Stock on the United States securities exchanges.
39
8. COVENANTS
8.1 CONDUCT OF BUSINESS PENDING CLOSING
After the date of the Sellers' and the Purchasers' signatures
hereof no contract or commitment shall be entered into by or on
behalf of the Company or any Subsidiary extending beyond the
Closing Date, except for contracts or commitments made in the
ordinary course of business. Moreover, neither the Company nor any
Subsidiary shall borrow any additional funds from banks or other
external sources other than as required in the ordinary course of
business.
8.2 NON-COMPETITION
The Purchasers are entering into this Agreement and the purchase
price has been accepted inter alia on the basis of and in reliance
upon the fact that none of the Sellers will carry on activities
competing with those of the Company or of any Subsidiary. The
Sellers have expressly stated their full understanding thereof and
have declared their willingness to undertake the following
non-competition obligation.
8.2.1 Each Seller agrees and ensures, for a period of three years from
the Closing Date not to directly or indirectly carry on, engage or
otherwise participate in any businesses competing with the
businesses of the Company or any Subsidiary in any part of the
world - provided, however, that in respect of countries which are
members of the European Economic Area, the non-compete obligation
shall be limited to a period of two years and shall apply only to
the extent that the Company or the Subsidiary was active in the
market at issue on the Closing Date.
8.2.2 In case of any breach of the obligations undertaken pursuant to
sub-section 8.2 and such breach is not remedied within five
business days of written notice to do so Xxxxxx Xxxxxxxxx solely
on his part and the Bodin Sellers jointly and
40
severally - in addition to any other remedy that may be
available to the Purchasers - shall be liable to pay to the
Purchasers the actual damage resulting from each such breach but
in no case an amount being less than SEK 8,000,000 (eight
million) for each such breach.
8.2.3 For the purposes of this sub-section 8.2 the Sellers' engagement
in Klimat's and Hexair's present businesses, Xxxxx Xxxxx'x
services under the Xxxxx Consulting Agreement and the Bodin
Sellers' shareholding in DRI shall not be deemed competing.
8.3 EMPLOYMENT OF KEY EMPLOYEES
From the date of this Agreement and for a period of three years
after the Closing Date each Seller undertakes and ensures to
refrain from employing, or offering or negotiating employment with
any Key Employee of the Company or of any Subsidiary without the
prior written consent of the Purchasers.
In case of breach of this obligation by any of the Bodin Sellers,
the Bodin Sellers shall jointly and severally be liable to pay to
the Purchasers the actual damage resulting from such breach but in
no case with an amount being less than SEK 3,000,000 for each such
breach and in case of breach of this obligation by Xxxxxx
Xxxxxxxxx he shall solely be liable to pay the aforesaid damage or
minimum amount.
8.4 MOBITEC STOCK OPTION PROGRAM
The Mobitec Stock Option Program is described in full detail in
APPENDIX 8.4 hereto.
The Bodin Sellers ensure that the Company and any Subsidiary will
make their best efforts in order to fulfil the obligations under
the Mobitec Stock Option Program prior to the Closing Date.
41
The Bodin Sellers shall have no responsibility for the acquisition
of additional options under the Mobitec Stock Option Program if on
the Closing Date there remain outstanding options representing
1000 shares or less.
The costs of the Company and any Subsidiary in fulfilling the
aforesaid obligations will in full be accounted for and appear in
the Closing Financial Statement. However, for the purposes of
adjusting the Preliminary Purchase Price into the Final Purchase
Price in accordance with sub-section 3.2.2 above, any amount of
such cost exceeding 50 per cent of the aforesaid total cost, or
the amount SEK 1.188.000 whichever is the lower, shall be
accounted for and appear in the Closing Financial Statement.
8.5 MOBITEC NAME
The Bodin Sellers agree that Mobitec AB is the full and
unrestricted owner of the trademark and business name Mobitec and
has the exclusive right thereto.
The Bodin Sellers ensure that all measures will be taken within 12
months from the Closing Date to remove the name Mobitec from the
company name of Klimat.
The Bodin Sellers agree and ensure that no Related Person of any
of the Sellers has any right of any kind to the name Mobitec or
the use thereof except for the rights set forth in the Trademark
License Agreement APPENDIX 8.5 hereto.
8.6 PUBLICITY
No announcement concerning the transaction contemplated by this
Agreement or any matter ancillary thereto shall be made by either
party hereto before or on the Closing Date, without the prior
written consent of the other party, provided that nothing herein
shall prevent either party from making, in consultation with
42
the other party, any announcement or filing required by law,
regulations or by the rules and regulations of any stock exchange
on which it is listed including any announcement or filing in
connection with the filing under the SEC regulations of
shareholders' vote and proxies thereto.
8.7 DISCHARGE OF DIRECTOR LIABILITY
The Purchasers shall, provided that the auditors so recommend,
discharge or procure the discharge of all directors of the Company
and any of the Subsidiaries from their personal liability for the
period as from 1 January 2001 to the Closing Date on the next
Annual General Shareholders' Meeting of the Company and of any
Subsidiary, which discharges shall not in any way limit or
restrict or be construed to limit or restrict the Purchasers'
rights against the Sellers under this Agreement.
8.8 DIVIDENDS
The Purchasers shall be entitled to all dividends and other
profits of the Group deriving from the financial year 2000 and the
Company shall not from this day through the Closing Date declare
or pay any dividend or make any other distribution to its
shareholders except for the dividend of SEK 500.000 mentioned in
sub-section 7.6 above.
8.9 KLIMAT AND HEXAIR
8.9.1 The Bodin Sellers ensure that all measures shall have been taken
by the Company or any Subsidiary, as the case may be, prior to the
Closing Date to transfer and sell all its shares of Klimat and
Hexair including all obligations and liabilities of all types,
direct as well as indirect, contingent or otherwise in any way
related to Klimat or Hexair or the operations, activities or
businesses carried on by any of them to an aktiebolag wholly owned
by the Sellers or the Bodin Sellers.
43
8.9.2 The said transfer and sale shall be made at purchase prices and
other terms and conditions having no negative effect on the
Company's or any Subsidiary's financial position or otherwise in
any way be detrimental to the remaining businesses of the Company
or any Subsidiary except for changes in the net equity to be
reflected when adjusting the Preliminary Purchase Price into the
Final Purchase Price as set forth in sub-section 3.2.2 hereof.
8.9.3 As per the Closing Date there shall not exist any financial,
contractual or other relation of any kind between any of Klimat or
Hexair on one hand and the Company or any Subsidiary on the other
hand except for what has been set forth in sub-section 8.5 above.
8.9.4 As per the Closing Date neither the Company nor any Subsidiary
shall be bound by any contract or have any commitment or
obligation of any kind or in any way relating to Klimat or Hexair
or the operations, activities or businesses carried on by any of
them.
8.9.5 The Bodin Sellers shall jointly and severally indemnify and hold
the Company or any Subsidiary or the Purchasers harmless from any
kind of costs, damages and claims as a result of or in any way
related to the aforesaid sales and transfers pursuant to this
sub-section 8.9 including but not limited to any kind of taxes,
duties and social charges.
8.10 DISPUTES
In APPENDIX 8.10 is a brief description of all disputes or pending
or threatened disputes involving the Company and/or any
Subsidiary. The following shall apply with respect to the said
disputes.
For the purposes of a potential payment of compensation to
Xxxxxxxx Electrical Industries Pty Ltd an amount of SEK 500.000
shall be reserved and deducted
44
for in the balance sheet forming part of the Annual Report for
the financial year 2000. However, such reservation and deduction
shall not be taken into account in the adjustment of the
Preliminary Purchase Price into the Final Purchase Price.
The tax dispute involving Mobitec Ltda and the dispute involving
Xxxxxxxx Elektronikmontering AB shall be reflected in the Closing
Financial Statement in accordance with GAAP.
The dispute with FP regarding the Xxxx component is handled as set
forth in the Option Agreement.
The Bodin Sellers shall have no liability for the outcome of the
other disputes set forth in Appendix 8.10.
8.11 LIABILITY OF XXXXXX XXXXXXXXX
The following provisions shall apply with regard to Xxxxxx
Xxxxxxxxx'x liability under this Agreement:
Sections 1 and 2, sub-section 3.1, section 4, sub-section 5.1,
section 6, sub-sections 8.1 - 8.3, 8.6 - 8.8, 9.1 - 9.3, 9.5 -
9.11, section 11 and sub-sections 12.3 and 12.4 and 12.6 - 12.13.
8.12 REGISTRATION OF DRI SHARES
DRI agrees that the Restricted Shares shall be duly registered
under a valid and effective registration statement of DRI pursuant
to the Securities Act and any applicable state securities laws,
pursuant to all terms, and subject to all the conditions, of the
Registration Rights Agreement. The Bodin Sellers
45
acknowledge that the Registration Rights Agreement has been
prepared by their counsel and that they have been advised of the
basic terms and consequences of such Agreement.
9. INDEMNIFICATION
With the exclusion of the provisions of the Swedish Sales of Goods Act:
9.1 The Bodin Sellers shall - except for what has been set forth below
with respect to Xxxxxx Xxxxxxxxx - jointly and severally be liable
and shall indemnify and hold the Purchasers harmless in full from
and against any Loss arising out of misrepresentation, breach of
warranty or failure to perform a covenant or other obligation or
any other breach of this Agreement on the part of any of the
Sellers.
Xxxxxx Xxxxxxxxx shall be liable and shall indemnify and hold the
Purchasers harmless from and against any Loss arising out of
misrepresentation, breach of warranty or failure to perform a
covenant or other obligation undertaken by Xxxxxx Xxxxxxxxx under
this Agreement as set forth in sub-section 8.11 above.
9.2 Payment for Losses and other forms of compensation under this
Agreement shall be made by reduction and repayment to the
Purchasers of the purchase price for the Xxxxx Shares or the
Xxxxxx Xxxxxxxxx Shares, as the case may be. With respect to the
Bodin Sellers, such reduction shall primarily be made by the
Purchasers reducing the Promissory Notes by any sum of any such
Loss and in the event that the sum of any such Loss exceeds the
total amount of the Promissory Notes the Bodin Sellers having
received Restricted Shares shall return such number of the
Restricted Shares as corresponds to the said excess amount.
46
In calculating the value of each Restricted Share it shall be
valued at USD 3 (three).
The Purchasers shall be entitled to compensation hereunder only
upon agreement with the Sellers or any of them or upon an
arbitration award having gained legal force and effect.
The Sellers reserve the right to settle any claim with cash
payment.
9.3 The liability of the Bodin Sellers and of Xxxxxx Xxxxxxxxx to the
extent applicable with regard to Losses as a result of any
misrepresentation or breach of any of the representations and
warranties
a) set forth in sub-sections 7.1 - 7.12, 7.19 - 7.34,
7.36 - 7.47 and 7.54 - 7.56 shall remain valid until 18
months from the Closing Date;
b) set forth in sub-sections 6.1 - 6.5, 7.13 - 7.18 and
7.35 shall remain valid for a period of five years from
the Closing Date; and
c) with regard to taxes, social charges and duties, such
as misrepresentation or breaches set forth in
sub-sections 7.48 - 7.53 shall remain valid until three
months from the date such taxes, social charges and
duties have been determined by the relevant authority.
If a Loss has occurred before any of the aforesaid dates but the
amount hereof cannot be quantified, the Purchasers may claim
compensation, provided that the claim is made within the
applicable time period and a quantified claim is made as soon as
information is available of the amount.
9.4 The Purchasers shall only be indemnified under the provisions of
sub-section 9.3 if the aggregate amount of the aforesaid Losses
equals or exceeds SEK 500.000 provided, however, that in the
event the Loss equals or exceeds
47
the said amount, the Purchasers are entitled to be indemnified
for the full amount of the Loss.
In calculating the aforesaid aggregate amount individual Losses
amounting to less than SEK 50.000 shall not be taken into account.
9.5 In calculating a Loss in accordance with this section 9
consideration shall be given to the fact whether the Loss fully or
partly is a deductible item which can be used by the Company for
tax purposes.
9.6 The aggregate liability of the Bodin Sellers under sub-section 9.3
above shall not exceed SEK 33.000.000 (thirty three million) and
with respect to Xxxxxx Xxxxxxxxx it shall not exceed the purchase
price for the Xxxxxx Xxxxxxxxx Shares.
9.7 There shall be no exemption from any of the Sellers' liability for
representations, warranties, covenants or obligations under this
Agreement other than as explicitly set forth herein or by
reference to an Appendix attached hereto or pursuant to
sub-section 9.8 below and no representation, warranty, covenant or
other obligation of any of the Sellers set forth herein shall be
deemed waived or otherwise affected
- by any commercial or financial analysis, or any inquiry
or investigation which the Purchasers, their advisors,
auditors, legal counsels or representatives have made or
may make with respect to the Company, any of its
Subsidiaries or their businesses or the Closing Balance
Sheet or the approval thereof; or
- by the fact that the Board of Directors and/or the
Managing Director of the Company or any Subsidiary
nominated and appointed by the Purchasers have approved
the annual report for the financial year 2000
48
or that the Annual General Shareholders' Meeting of the
Company or any of the Subsidiaries - at which the Shares
have been represented by the Purchasers - has adopted the
aforesaid annual report; or
- by the fact that the Purchasers have agreed to the
adjustment of the Preliminary Purchase Price into the
Final Purchase Price as set forth in sub-section 3.2.2
above.
9.8 No liability shall arise in respect of any misrepresentation,
breach of warranty or failure to perform a covenant or other
obligation or any other breach of this Agreement on the part of
any of the Sellers
- if and to the extent a Loss has been made part of the
Closing Financial Statement and has been taken into
account in adjusting the Preliminary Purchase Price
into the Final Purchase Price; or
- if and to the extent that a claim occurs as a result of
any legislation not in force at the date hereof which
takes effect retrospectively or occurs as a result of
any increase in the rate of tax in force at the date
hereof;
- in respect of any Loss which is recoverable and
recovered under any of the insurances set forth in
Appendix7.36 and in force on the date of Loss (for the
avoidance of doubt it is hereby expressly stated that
any deductible shall be compensated by the Sellers as a
claim).
9.9 The Purchasers shall not make any admission of liability,
agreement or compromise with any third party concerning any claim
for which the Sellers or any of them may be liable without prior
written notification with Xxxxx Xxxxx.
49
9.10 In the event that an exemption from liability hereunder has
explicitly been made - by reference made herein or by reference to
an Appendix attached hereto - in one provision hereof the same
exemption shall apply in respect of other provisions providing for
the same subject matter.
9.11 In the event that any of the Purchasers shall demand
indemnification hereunder, that Purchaser shall notify each Seller
without undue delay, such notification to be given within the
period of limitation as set out in sub-section 9.3 above and in
any event not later than on the sixth anniversary of the Closing
Date, whichever occurs first.
9.12 DRI shall, notwithstanding sub-section 12.8 below, have the right
to assign any claim regarding payment for Losses or other forms of
compensation under this Agreement to DRI Europa. DRI Europa shall
after such assignment have the right to receive full payment for
such claims as if DRI Europa was the sole purchaser of all the
Shares under this Agreement.
10. REPRESENTATIONS AND WARRANTIES OF DRI EUROPA
10.1 DRI Europa represents and warrants that on and as of the date of
signing of the Option Agreement as well as this Agreement and on
and as of the Closing Date (unless the context otherwise requires)
10.1.1 DRI Europa and DRI have full authority to execute and deliver this
Agreement and each other document or instrument executed and
delivered in connection herewith and to consummate the
transactions contemplated hereby.
10.1.2 The execution of this Agreement, the consummation of the
transactions provided for herein and the fulfilment of the terms
hereof will not result in a
50
breach of any agreement to which any of DRI Europa or DRI is a
party nor the Articles of Association of DRI Europa.
10.1.3 DRI Europa or DRI are duly organised and validly existing and in
good standing under the laws of its respective country of domicile
and have full corporate power and all necessary licenses, permits
and authorisations to carry on its businesses as presently and on
the Closing Date conducted and to own, lease and operate all
material assets and properties used in connection therewith.
10.1.4 The Restricted Shares are credited as fully paid, non assessable
and rank pari passu in all respects with the existing issued
shares of DRI and, subject to the provision in sub-section 5.4 are
free and clear of any Encumbrances whatsoever and free from all
taxes, liens and charges with respect to the issue thereof and DRI
has the absolute right, power and capacity to issue all Restricted
Shares to the Bodin Sellers in accordance with the terms of this
Agreement.
11. CLOSING DATE
The Closing Date shall occur within five business days from the date of all
parties' signatures hereof.
12. GENERAL PROVISIONS
12.1 CONSULTANCY AGREEMENT XXXXX XXXXX
DRI and Xxxxx Xxxxx will enter into a separate Consultancy
Agreement, the said agreement to enter into effect on the Closing
Date.
51
12.2 DRI LIABILITY
DRI shall be jointly and severally liable with the Purchaser with
regard to the fulfilment of any liability resting on the Purchaser
according to or as a result of this Agreement.
12.3 POWER OF ATTORNEY
12.3.1 Each Seller undertakes to issue on the Closing Date all necessary
Powers of Attorney and other documents requested by the Purchasers
to the Purchasers or their nominees to represent the Company and
any Subsidiary until the new Board of Directors has been
registered.
12.3.2 Further each of Xxxxxxx Xxxxx and Xxxxxx Xxxxx shall on the
Closing Date issue a Power of Attorney to Xxxxx Xxxxx to represent
their DRI shares during a period of 36 months from the Closing
Date.
12.4 NOTICES
Any notice to be provided under this Agreement shall be in the
English language and deemed valid and effective if sent by courier
or registered mail or telefax to the following addresses:
If to Xxxxx Xxxxx: Xxxxx Xxxxx
La Piniere, Cidex 000, X.X. 0000,
XX-00000 Xxxxxxxxx xxx Xxxx, Xxxxxx
Fax: x00 000 000 000
If to Xxxxxxxxx Xxxxx: Xxxxxxxxx Xxxxx
La Piniere, Cidex 000, X.X. 0000,
XX-00000 Xxxxxxxxx xxx Xxxx, Xxxxxx
Fax: + 00 000 000 000
52
If to Xxxxxxx Xxxxx: Xxxxxxx Xxxxx
Xxxxxxxxx 00
XX-000 00 XXXXXXXXX, Xxxxxx
If to Xxxxxx Xxxxx: Xxxxxx Xxxxx
Xxxx Xxxxxxxxxx 00 X
XX-000 00 XXXXXXXX, Xxxxxx
If to Xxxxxx Xxxxxxxxx: Xxxxxx Xxxxxxxxx
Xxxxxxxxxx 00 X,
XX-000 00 XXXXXXXXX, Xxxxxx
Fax: x00 0000 0000
If to DRI Europa: DRI Europa AB
c/o Mannheimer Swartling
Advokatbyra AB
Xxx 0000
XX-000 00 XXXXXXXX, Xxxxxx
Fax: x00 00 00 00 00
If to DRI Digital Recorders, Inc.
Xxxxxxxx Xxxxx, Xxx 00
0000 Xxxxxx Xxxx, Xxxxx 0000
XXXXXX, XX 00000
The communications will be considered having reached the
addressees:
(i) if sent by courier - on delivery
(ii) if sent by registered mail - seven days from the date of
dispatch
(iii) if sent by telefax - on the day of recipient
confirms receipt
53
Each Seller and each Purchaser shall be obliged to send a
communication to the other parties in accordance with this
sub-section 12.4 notifying any changes in the relevant details set
out herein, which details shall then be deemed to have been
amended accordingly.
12.5 TRANSFER OF SHARES
Xxxxx Xxxxx, Xxxxxxx Xxxxx and Xxxxxx Xxxxx undertake for a period
of 36 months from the Closing Date to consult with DRI prior to
any sale of any of their shares of DRI.
The Purchasers undertake not to transfer the Shares or cause any
other changes in respect of their shareholding in the Company
prior to the expiry of year 2001.
12.6 CONFIDENTIALITY
Subject to sub-section 8.6 the parties agree not to disclose in
whole or in part any of the contents of this Agreement to any
third party, unless required by law.
12.7 COSTS
Each party agrees to carry his own fees and costs (including
brokers', finders' and attorney's fees) relating to this Agreement
and the consummation of the transactions hereunder.
12.8 ASSIGNMENT
None of the parties shall have the right to assign this Agreement
partly or wholly without the prior written consent of the other
parties.
12.9 EXHAUSTIVE CONTRACT DOCUMENT
54
This Agreement sets forth exhaustively all terms and conditions
related to the transfer of the Shares and supersedes all prior
agreements between the Sellers and any of the Purchasers with
respect to the subject matter hereof.
12.10 AMENDMENTS
No amendment to this Agreement shall be effective unless made in
writing and signed by authorised representatives of each Seller
and each Purchaser.
12.11 WAIVER
The failure of any of the parties hereto to insist upon strict
adherence to any provision of this Agreement on any occasion shall
not be considered as a waiver of any right hereunder, nor shall it
deprive that party of the right thereafter to insist upon strict
adherence to that provision or any other provision of this
Agreement.
12.12 GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with the laws of Sweden.
12.13 ARBITRATION
Any dispute arising out of or in connection with this Agreement
shall be exclusively settled by arbitration in accordance with the
Rules of the Arbitration Institute of the Stockholm Chamber of
Commerce (the "Institute"). The arbitral tribunal shall be
composed of three (3) arbitrators. The place of arbitration shall
be Gothenburg, Sweden. The arbitration proceedings shall be
conducted in the English language.
Each party shall nominate one arbitrator and the Institute shall
nominate the third arbitrator, who shall be the Chairman. If
arbitration is initiated by more than one claimant simultaneously
and/or against one or more respondents, each
55
side shall jointly appoint an arbitrator. If the respondent has
not (or, if there are more respondents than one, the respondents
have not jointly) within 30 days after receipt of a request for
arbitration, appointed an arbitrator, such arbitrator shall
upon request of any claimant be appointed by the Institute. If
the provision related to the appointment of the arbitrators is
held by any court of competent jurisdiction or arbitrators to
be illegal, void or unenforceable the illegality, voidness or
unenforceability of such provision shall have no effect upon
and shall not impair the enforceability of any other provisions
of this sub-section 12.13. The parties agree that the Institute
in such case shall appoint all three arbitrators.
Any dispute arising at any time between the parties shall be
referred to one single arbitration tribunal, unless (i) the
arbitration tribunal considers it inappropriate having regard to
the point of time at which the request for arbitration is made, or
(ii) one or more of the arbitrators declares that he or they do
not accept to serve as arbitrators in a dispute other than the
actual dispute for which such arbitrator(s) was appointed.
The rules regarding joinder of claims in Chapter 14 of the Code of
Judicial Procedure (Sw. Rattegangsbalken) shall be applied by the
arbitral tribunal to the extent so is appropriate and accepted by
the arbitrators. The voting rules in the Code of Judicial
Procedure shall be applied by the arbitral tribunal.
------------
56
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in seven
copies as of the day and year first above written.
DRI EUROPA AB
------------------------------ -----------------------------
Xxxxx Xxxxx
------------------------------ DIGITAL RECORDERS, INC.
Xxxxxxxxx Xxxxx
------------------------------ -----------------------------
Xxxxxxx Xxxxx
------------------------------
Xxxxxx Xxxxx
------------------------------
Xxxxxx Xxxxxxxxx
