DATED 2001
FROM: ELCOM HOLDINGS LIMITED (Company No. 02838561) whose registered office
is at First Floor Bouverie House, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
("Elcom Holdings") and
ELCOM INFORMATION TECHNOLOGY LIMITED (Company No. 02977666) whose
registered office is at First Floor Bouverie House, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ("Elcom Technology")
TO: AJJP LIMITED (Company No. 04336259) whose registered office is at ▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ("Newco")
OPERATIVE PROVISIONS
1 Definitions and interpretation
1.1 In this document, the following definitions apply:
2001 Performance as defined in clause 7.1;
Consideration
2002 as defined in clause 7.3;
Performance
Consideration
Accounts Date 31 December 2000;
Agreed Form a form agreed between Elcom Holdings and Newco, a copy of
which has been initialled for the purpose of identification
by or on behalf of the parties;
Ancillary Offer
Documents the Lloyds TSB Novation Agreement, the Property
Document, the Elcom Logo Licence, the Starbuyer
Trademark Licence and the Domain Name
1
Transfer Documents;
Ancillary Rights save to the extent they are or relate to Excluded Assets or
Excluded Liabilities, all rights of or enjoyed by the Elcom
Group against, and all obligations owing to the Elcom Group
by, third parties whether in contract, tort or otherwise in
respect of or relating to the Business and/or Assets (to the
extent only, in each case, that they so relate) including,
but not limited to, all rights under any manufacturers" or
suppliers" or other third party guarantees, representations
or warranties (whether express or implied), and claims made
under or in respect of those and remaining unsatisfied at or
following the Effective Time of Sale;
Assets the assets and rights offered for sale to Newco under clause
2.1;
Assumed
Liabilities all liabilities and obligations that the Elcom Group would
(but for this Offer) have at or following the Effective Time
of Sale in connection with or arising from the carrying out
of the Business in the ordinary course including, without
limitation, the liabilities and obligations relating to or
arising from:
(a) the Contracts
(b) the Assets,
(c) the liabilities and obligations relating to the
Employees agreed to be assumed by Newco in
accordance with clause 10,
2
and
(d) the liabilities and obligations relating to the
Property Assets agreed to be assumed by Newco in
accordance with the Property Document (other than,
in each case, those Excluded Liabilities listed in
part II of schedule 3);
Balance Sheet
Assumed
Liabilities as defined in clause 8.2;
Audited Accounts the audited balance sheet as at the Accounts Date and the
audited profit and loss account for the financial year ended
on the Accounts Date of Elcom Holdings, including the
directors" report and notes ("financial year" being
determined in accordance with s223 Companies Act 1985);
Book Debts (a) the trade debts owed to Elcom;
(b) the benefit of payments made in advance paid by
Elcom at the Effective Time of Sale in connection
with the Business and/or Assets (including all
securities and negotiable instruments) and/or the
Leases given to Elcom in payment or satisfaction
of such debts;
(c) the Relevant Debts and all residual rights of
Elcom relating to the Lloyds TSB Agreements to any
Debts and Related Rights (as those terms are
defined in the Lloyds TSB Agreements) the subject
of the Lloyds TSB
3
Agreements to the extent not novated to Newco
under the Lloyds TSB Novation Agreement; and
(d) the benefit of all amounts owing to members of the
Elcom Group under the underleases referred to in
the Property Document;
Business the information technology products reseller business
carried on by Elcom Holdings (or by Elcom Technology as
agent for Elcom Holdings) in the United Kingdom and/or Eire
immediately before Completion;
Business Day a day (other than a Saturday or Sunday) on which the
clearing banks in the City of London are open for business;
Business IPR Elcom"s interest in copyright and rights in the nature of
copyright, moral rights, know-how, confidential information,
and any other intellectual property rights (not being the
business names forming part of the Goodwill or the Domain
Names or the subject of the licensing or user arrangements
provided in the Ancillary Offer Documents or any of them) to
the extent used for the purposes of the Business;
Completion the completion of the sale of the Business and Assets in
accordance with clause 4;
Completion Balance
Sheet the balance sheet of the Business as of the Effective Time
of Sale prepared in accordance with clause 8;
4
Completion Date 31 December 2001;
Consent Contracts the Contracts listed or referred to in part II of schedule 7
and all other Contracts in relation to which the consent of
a person other than Elcom is required to assign the Elcom
Group"s rights thereunder to Newco or to effect the
substitution of Newco as a party in place of the member of
the Elcom Group party thereto;
Contracts the contracts of Elcom Holdings (or of other members of the
Elcom Group where party to a contract for the purposes of
the Business) at the Effective Time of Sale in relation to
the Business listed or referred to in parts I and II of
schedule 7 and all other supplier and customer contracts and
orders and contracts and engagements for the purchase, hire
purchase, lease or rental or use of Assets by Elcom Holdings
in and for the purpose of the Business but excluding (a) the
Leases (which are transferred in accordance with the
Property Document) (b) contracts of employment and (c) any
contracts forming part of, or relating to, the Excluded
Assets;
Domain Names the internet domain names and related registrations
particulars of which are set out in schedule 8;
Domain Name
Transfer Documents the document(s) in Agreed Form or otherwise necessary for
the transfer of the Domain Name registrations to Newco;
Effective Time
of Sale midnight at the end of the Completion Date;
5
Elcom each of Elcom Holdings and (to the extent only that it has
acted as agent of Elcom Holdings for the purpose of carrying
on the Business) Elcom Technology;
Elcom Disclosure
Letter the letter (if any) dated with the same date as this
document from Elcom to Newco relating to certain of the
Elcom Warranties;
Elcom Group Elcom, its ultimate holding company and their respective
Subsidiary Undertakings for the time being and from time to
time;
Elcom Management ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇;
Elcom Systems Elcom Systems Limited (Company number 3141508)
Elcom Logo
Licence the licence for Newco to use the Elcom logo in the Agreed
Form;
Elcom
Warranties the warranties given by Elcom Holdings contained in clause
16 and part I of schedule 5;
Employees all employees of Elcom employed solely or for the majority
of their time for the purpose of the Business including
those employees named in part I of schedule 6 but expressly
excluding those employees named in part II of schedule 6 who
shall remain with Elcom for the purpose of continuing the
Retained Business;
Excluded Assets the assets listed in part I of schedule 3;
6
Excluded
Liabilities all liabilities of the Elcom Group other than the Assumed
Liabilities including, without limitation, the liabilities
listed in part II of schedule 3;
First Quarter as defined in clause 7.1;
Fixed Plant and
Equipment such of the Plant and Equipment as is annexed to or forms
part of any of the Properties as fixtures (as defined in
s1(1) Capital Allowances Act 1990) (which are to be
transferred to Newco in accordance with the Property
Document);
Former Restricted
Employee a person who was a Restricted Employee and whose employment
with the relevant member of the Elcom Group or, as the case
may be, Newco was terminated within the six (6) month period
preceding the proposed employment by a member of the Elcom
Group or, as the case may be, Newco;
Goodwill the goodwill of each member of the Elcom Group in relation
to the Business, together with the sole and exclusive right
for Newco to represent itself as carrying on the Business in
succession to Elcom Holdings, in the United Kingdom and Eire
under the name "Elcom Information Technology", "Elcom
Information Services", "Starbuyergold", the Domain Names and
(to the extent permitted by the Starbuyer Licence)
"Starbuyer";
Interim Period as defined in clause 5.1;
Leases the leases or underleases under which the Properties are
held;
7
Lloyds TSB
Agreements the Debt Purchase Agreements between Lloyds TSB Commercial
Finance Limited and Elcom relating to certain finance
arrangements of the Business as defined and referred to in
the Lloyds TSB Novation Agreement;
Lloyds TSB
Novation Agreement the agreement between Lloyds TSB Commercial
Finance Limited, Elcom and Newco for the novation to Newco
of certain finance arrangements of the Business in the
Agreed Form;
Newco Disclosure
Letter the letter (if any) dated with the same date as this
document from Newco to Elcom Holdings relating to certain of
the Newco Warranties;
Newco Management ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇;
Newco Warranties the warranties given by Newco contained in clause 17 and
part II of schedule 5;
November Management
Accounts Elcom Holding"s management accounts for November 2001 to the
extent referable to the Business, in the Agreed Form
Offer the offer by Elcom to Newco made in clause 2 and "Offer"
includes that offer, if accepted by ▇▇▇▇▇, as so accepted;
Payment Settlement
Date as defined in clause 4.3;
Performance
Consideration as defined in clause 7.5;
Plant and Equipment all of Elcom Group"s interest in the plant, machinery,
vehicles and other chattels (other
8
than Stock and Fixed Plant and Equipment) owned and/or used
by Elcom Group at the Effective Time of Sale to the extent
used in connection with the Business, including items which,
although subject to reservation of title by the vendors, are
under the control of Elcom Group;
Prepayments the benefit of all prepayments made by the Elcom Group in
respect of obligations of the Business referable to the
period after the Effective Time of Sale;
Pro Forma
Novation Deed the pro forma novation deed for the novation of Contracts in
the Agreed Form;
Property Assets the Properties and the Fixed Plant and Equipment;
Properties the premises described in schedule 1;
Property Document the Agreement for Sale in respect of the Properties in
Agreed Form;
Records all written and/or computer books of account, income and
expenditure records, Employee related records and tax
records, records relating to Stock, invoices, information
relating to customers and suppliers and all price lists,
catalogues, sales, promotional and advertising literature
which in each case are within the control of Elcom Holdings
and to the extent that they relate to the Business and/or
the Assets and/or the Property Assets other than the
Retained Records;
9
Relevant Actions as defined in clause 12.1;
Retained Records to the extent that they relate to the Business and are in
existence at the Effective Time of Sale all:
(a) records which the Elcom Group is under the
provisions of this agreement entitled to retain or
is by law required to retain (including VAT
records and records relating to other Taxation,
minute books relating to directors" and
shareholders" meetings and statutory books);
(b) records relating to Excluded Assets and Excluded
Liabilities; and
(c) any records and papers which would, but for an
election by ▇▇▇▇▇, constitute Records in respect
of which ▇▇▇▇▇ makes an election that the relevant
record should be retained by ▇▇▇▇▇;
Relevant Debts those debts of the Business which at the Effective Time of
Sale have Vested (as defined in the Lloyds TSB Agreements)
in Lloyds TSB Commercial Finance Limited pursuant to the
Debt Purchase Agreements referred to in the Lloyds TSB
Novation Agreement, or any of them; and
Reseller Gross
Margin as defined in clause 7.6;
Restricted
Employee in relation to:
(a) an employee of Elcom Systems who is or was engaged
or employed (whether as a software engineer or in
a similar
10
technical function) in the creation or development
or implementation of the PECOS technology; and
(b) in relation to each member of the Elcom Group or
Newco, an individual who is or was engaged or
employed as an employee, director or (if in a
capacity in which he obtained confidential
information about the Business or the Retained
Business) as a consultant by them respectively;
Retained Business all business carried on at any time by Elcom or by Elcom
Systems, excluding the Business;
Second Quarter as defined in clause 7.3;
Stock Elcom Group"s interest in the computer equipment, computer
peripherals and associated parts and all other stock,
including work in progress, finished goods and goods for
resale, owned and/or contracted to be acquired (even if
subject to retention of title arrangements) by Elcom
Holdings at the Effective Time of Sale for the purposes of
or in connection with the Business;
Subsidiary
Undertaking as defined in section 258 Companies Act 1985
Tax or Taxation includes all forms of duties, contributions and withholdings
in the nature of taxation, and sums payable on account of
them, charged or demanded by a Taxation Authority (including
without limitation VAT and amounts payable as a
11
result of counteraction, adjustment or set off by a Taxation
Authority in relation to a liability to tax, interest on
unpaid tax, repayment of tax or interest or repayment
supplement in respect of a repayment of tax) and all amounts
recoverable by a Taxation Authority as if they were Taxation
(or by any other person by virtue of an entitlement arising
by operation of law or document in relation to Taxation) and
shall be deemed to include the cost of removing any charge
over assets imposed by any Taxation Authority and in each
case all charges, interest, fines, penalties and surcharges
incidental, or relating, to the same;
Taxation Authority the Inland Revenue, HM Customs and Excise and any other
governmental, state, federal or other fiscal, revenue,
customs or excise authority, department, agency, body or
office whether in the United Kingdom or elsewhere in the
world having authority or jurisdiction for any Taxation
purpose;
TUPE Regulations the Transfer of Undertakings (Protection of Employment)
Regulations 1981 and the implementation of the EC Acquired
Rights Directive 77/187;
Value of the Assets as defined in clause8.2;
VAT value added tax;
VATA Value Added Tax Act 1994; and
VAT
Regulations Value Added Tax Regulations 1995 (SI
12
1995/2518).
1.2 A reference to a statutory provision includes a reference to:
1.2.1 a statutory amendment, consolidation or re-enactment made
before the date of this document;
1.2.2 statutory instruments or subordinate legislation or orders made under
the statutory provision before the date of this document; and
1.2.3 statutory provisions of which the statutory provision is an amendment,
consolidation or re-enactment;
but does not include a substituted provision.
1.3 References to a statutory provision applying in England and Wales
shall, where the context requires, be replaced by references to the
nearest corresponding provision or principle in the local jurisdiction
and references to a governmental, local governmental or administrative
authority or agency shall be replaced by references to the nearest
equivalent governmental, local governmental or administrative
authority or agency in that jurisdiction.
1.4 Reference to:
1.4.1 a person includes a legal or natural person, partnership,
trust, company, government or local authority department or
other body (whether corporate or unincorporate);
1.4.2 an individual includes, where appropriate, his personal
representatives;
1.4.3 the singular includes a reference to the plural and vice
versa; and
1.4.4 one gender includes all genders.
1.5 Unless otherwise stated, a reference to a clause, sub-clause or
schedule is a reference to a clause or a sub-clause of, or a schedule
to, this document and a reference to this document includes its
schedules.
1.6 Clause headings in this document and in the schedules are included for
ease of reference only and do not affect its construction.
13
1.7 In construing this document the so-called ejusdem generis rule does
not apply and accordingly the interpretation of general words is not
restricted by words indicating a particular class or particular
examples.
1.8 Newco shall be deemed (for the purposes of construction only) on
acceptance of the Offer to be a "party" to this document.
2 Offer to sell
2.1 Elcom offers to sell (or procure the sale) to Newco as at the
Effective Time of Sale the Goodwill and all the interests of the Elcom
Group in the following assets (other than the Excluded Assets and
Excluded Liabilities) owned as assets of the Business and/or used (to
the extent only so used) for the purposes of carrying on the Business
(together with the Goodwill, the "Assets"):
2.1.1 the Business IPR;
2.1.2 the Domain Names;
2.1.3 the Plant and Equipment;
2.1.4 the Stock;
2.1.5 the benefit (subject to the burden) of the Contracts;
2.1.6 the Book Debts and Prepayments;
2.1.7 the Records;
2.1.8 the Ancillary Rights
in each case subject to and on the terms of this document.
2.2 The provisions of the Property Document shall apply in relation to the
transfer of the Properties and the Fixed Plant and Equipment.
2.3 Subject to clause 2.1, Elcom shall sell or procure the sale of the
Assets with full title guarantee free from all charges, liens and
encumbrances save for:
2.3.1 retention of title provisions relating to the Stock which
have arisen in the ordinary course of business;
14
2.3.2 liens and similar or analogous third party rights which have
arisen in the ordinary course of business or by operation of
law;
2.3.3 any encumbrance or other security interest arising from the
Lloyds TSB Agreements and/or the Lloyds TSB Novation
Agreement;
2.3.4 anything fairly disclosed in the Elcom Disclosure Letter (if
there is one);
2.3.5 any charges, liens or encumbrances which at the time of
acceptance by Newco of the Offer were known to, or had been
created by, any of Newco Management; and
2.3.6 the terms of the Contracts.
2.4 The provisions of clause 12 (Adverse Claims resulting from Elcom
Management actions) shall apply in respect of encumbrances over assets
created by Relevant Actions.
3 Consideration
3.1 Subject to clause 3.3, the consideration payable by Newco to Elcom
Holdings for the Business and the Assets shall be (Pound
Sterling)1,360,000 plus an amount equal to the Value of the Assets
(together the "Gross Value").
3.2 The consideration shall be satisfied as to an amount equal to the
Balance Sheet Assumed Liabilities by Newco agreeing to assume and
discharge them in accordance with clause 9 and as to any balance due
by payment in cash by Newco to Elcom Holdings in accordance with
clause 4.3.
3.3 If the Balance Sheet Assumed Liabilities exceed the Gross Value, Elcom
Holdings shall pay to Newco an amount equal to the excess as provided
in clause 4.3.
3.4 The consideration shall be apportioned between the Assets as detailed
in schedule 4.
4 Acceptance and Completion
4.1 The Offer shall remain open for acceptance until midnight on the date
of this document and Newco may only accept this Offer by:
4.1.1 paying (Pound Sterling)1 (One Pound) to each of Elcom
Holdings and Elcom Technology; and
15
4.1.2 executing and delivering to Elcom Holdings the Ancillary
Offer Documents (subject to and conditionally upon
Completion),
on or before 12.00 midnight on the date of this document.
4.2 If Newco accepts the Offer, Completion shall take place on or before
12.00 midnight on the Completion Date when the following shall take
place in the order stated:
4.2.1 Elcom shall execute the Lloyds TSB Novation Agreement and
Newco shall procure that the Lloyds TSB Novation Agreement
is duly entered into by all of the other parties thereto;
4.2.2 to the extent not already done so, Elcom shall execute or
deliver to Newco and, where another member of the Elcom
Group is party thereto procure that the relevant member of
the Elcom Group shall execute or deliver to Newco on
Completion or (in the case of the Domain Name Transfer
Documents) within 90 days of Completion the Ancillary Offer
Documents to which they are respectively party;
4.2.3 Elcom shall procure that the Special Resolutions for changes
of name referred to in clause 18 are duly passed and that
filing copies of those resolutions are delivered to Newco;
4.2.4 Elcom Holdings shall make available for collection and/or
entry by Newco all the Assets which are capable of passing
by delivery, together with all relevant documents of title
within the Elcom Group"s control.
4.3 Payment of any amount payable pursuant to clause 3.2 or 3.3 shall be
made within five Business Days after the Value of the Assets and the
Balance Sheet Assumed Liabilities have been finally agreed or
determined in accordance with the provisions of clause 8 (that fifth
Business Day being the "Payment Settlement Date").
4.4 Amounts due as provided in clause 4.3 shall be paid by way of
electronic funds bank transfer for same day value to:
4.4.1 if payable to Elcom Holdings:
NatWest Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
16
Sort Code 60-19-28
Account ▇▇▇▇▇▇▇▇
; and
4.4.2 if payable to Newco:
Lloyds TSB Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇ Code 30-97-73
Account ▇▇▇▇▇▇▇▇
4.5 The Offer (and its acceptance and resulting acts) may not be rescinded
or terminated by Elcom or Newco after Completion.
5 Conduct of Business pending Completion
5.1 Elcom shall procure that Elcom Management shall in the period
following acceptance of the Offer and up until Completion (the
"Interim Period") and unless otherwise agreed by ▇▇▇▇▇ in writing:
5.1.1 procure that (subject to any force majeure event) the
Business is carried on in the same manner as prior to the
date of this agreement;
5.1.2 not create, extend, grant or issue a mortgage, charge, debenture or
other security over any of the Assets;
5.1.3 not engage in a transaction which is not made on a bona fide arm"s
length basis in the normal course of the Business;
5.1.4 not enter into a long-term or abnormal contract in connection with the
Business;
5.1.5 not do, procure or allow anything which may cause or constitute a
breach of the Elcom Warranties or the Newco Warranties;
5.1.6 promptly disclose, in writing to Elcom Holdings, or, as the case may
be, Newco, anything which becomes known to any of them prior to
Completion which is inconsistent with either the Elcom Warranties or
the Newco Warranties or the contents of either the Elcom Disclosure
Letter (if there is one) or the Newco Disclosure Letter (if there is
one), or which
17
would result in any of the Elcom Warranties or the Newco Warranties
not being accurate or capable of being performed or either disclosure
letter not being complete at Completion with reference to the facts or
circumstances then applying, or which might be material to be known by
a buyer for value of the Business or any of the Assets;
5.1.7 ensure that nothing is done in the Interim Period which is
outside the ordinary course of Business.
5.2 Nothing done by Elcom in the Interim Period by or on the instructions
of, or with the clear consent of, ▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇
▇▇▇▇▇▇▇ (except for anything done by them outside the ordinary course
of Business on direct written instructions of Elcom) shall constitute
a breach of clause 5.1.
6 Title and risk
6.1 Notwithstanding that in accordance with the terms of the Offer the
total purchase price for the Assets may not be paid in full on
Completion, Elcom agrees that, on and subject to the terms of the
Offer, the Elcom Group"s rights in respect of, and title to, the
Assets shall pass to Newco absolutely.
6.2 On Completion, the risk of loss or damage to the Assets shall pass to
Newco.
7 Performance consideration
7.1 If the Reseller Gross Margin (as defined in clause 7.6) in the period
from 1 October until 31 December 2001 (the "First Quarter") is equal
to or greater than (Pound Sterling)1,741,000, Newco shall pay Elcom
Holdings the amount set out in the second column below opposite the
relevant range of Reseller Gross Margin amounts set out in the first
column below (the "2001 Performance Consideration"):
(Pound Sterling)1,771,000 or greater (Pound Sterling)100,000
(Pound Sterling)1,761,000-(Pound Sterling)1,770,999 (Pound Sterling)70,000
(Pound Sterling)1,751,000-(Pound Sterling)1,760,999 (Pound Sterling)40,000
(Pound Sterling)1,741,000-(Pound Sterling)1,750,999 (Pound Sterling)10,000
7.2 If applicable, Newco shall pay the 2001 Performance Consideration or,
if appropriate,
18
any undisputed amount of the 2001 Performance Consideration, in cash
to Elcom Holdings or such other person as Elcom Holdings directs, no
later than 31 March 2002 or (as regards any amount of 2001 Performance
Consideration still in dispute at that date) within fourteen days of
the amount (if any) thereof payable being determined under clause 7.5.
7.3 If the Reseller Gross Margin in the period from 1 January until 31
March 2002 (the "Second Quarter") is equal or greater than (Pound
Sterling)2,128,000, Newco shall pay Elcom Holdings the amount set out
in the second column below opposite the relevant range of Reseller
Gross Margin amounts set out in the first column below (the "2002
Performance Consideration"):
(Pound Sterling)2,218,000 or greater (Pound Sterling)300,000
(Pound Sterling)2,208,000-(Pound Sterling)2,217,999 (Pound Sterling)270,000
(Pound Sterling)2,198,000-(Pound Sterling)2,207,999 (Pound Sterling)240,000
(Pound Sterling)2,188,000-(Pound Sterling)2,197,999 (Pound Sterling)210,000
(Pound Sterling)2,178,000-(Pound Sterling)2,187,999 (Pound Sterling)180,000
(Pound Sterling)2,168,000-(Pound Sterling)2,177,999 (Pound Sterling)150,000
(Pound Sterling)2,158,000-(Pound Sterling)2167,999 (Pound Sterling)120,000
(Pound Sterling)2,148,000-(Pound Sterling)2,157,999 (Pound Sterling)90,000
(Pound Sterling)2,138,000-(Pound Sterling)2,147,999 (Pound Sterling)60,000
(Pound Sterling)2,128,000-(Pound Sterling)2,137,999 (Pound Sterling)30,000
7.4 If applicable, Newco shall pay the 2002 Performance Consideration or,
if appropriate, any undisputed amount of the 2002 Performance
Consideration, in cash to Elcom Holdings or such other person as Elcom
Holdings directs, within fourteen (14) days of the 2002 Performance
Consideration being determined in accordance with clause 7.5.
7.5 For the purposes of determining the 2001 Performance Consideration
and/or the 2002 Performance Consideration (each a "Performance
Consideration") Newco and Elcom Holdings shall:
19
7.5.1 each use its best endeavours to agree the relevant
Performance Consideration within 10 Business Days following
the date of completion of the management accounts for the
last month of the relevant Quarter;
7.5.2 if Newco and Elcom Holdings fail to agree the relevant
Performance Consideration or any part of it, each shall
refer the matter without delay to its respective chairman of
its board of directors who shall use their best endeavours
to agree the relevant Performance Consideration; and
7.5.3 if within 5 Business Days of any disputed amount having been
referred to the respective chairmen, the relevant
Performance Consideration cannot be agreed, the
determination of the Performance Consideration shall be
referred for final settlement to a firm of chartered
accountants nominated jointly by ▇▇▇▇▇ and Elcom Holdings
or, failing nomination within 5 Business Days after request
by either of them, nominated at the request of either of
them by the president for the time being of the Institute of
Chartered Accountants in England and Wales. The accountants
may call for Newco to deliver to them such documents as they
reasonably consider necessary. In making their determination
the accountants shall act as experts and not as arbitrators,
and (in the absence of manifest error) their decision shall
be final and binding on the parties. Their fees shall be
borne and paid by Newco and Elcom Holdings in such
proportions as the accountants determine.
7.6 The "Reseller Gross Margin" means turnover less cost of sales of
Newco, accounted for on the basis of the same accounting policies used
by Elcom Holdings immediately before Completion.
7.7 Newco shall grant Elcom Holdings access to such of Newco"s books,
records, documents, auditors and staff (and permit Elcom Holdings to
take copies of) as Elcom Holdings considers reasonably necessary to
verify Newco"s calculation of Reseller Gross Margin provided that
Elcom Holdings shall treat all information so obtained as
confidential.
7.8 Newco undertakes to use best endeavours from Completion until 31 March
2002 to execute all its sales expediently and substantially within the
same timeframes as purchase orders were fulfilled in the 12 month
period before Completion.
20
7.9 Newco undertakes to deliver the management accounts necessary to
determine the 2001 Performance Consideration to Elcom Holdings by 31
January 2002 and the management accounts necessary to determine the
2002 Performance Consideration to Elcom Holdings by 30 April 2002.
7.10 Newco undertakes to act in good faith pursuant to the Offer and will
not take any steps which are substantially motivated by a desire or
intention to avoid or reduce a payment being made (or falling due to
be made) by Newco under this clause 7.
8 Completion Balance Sheet
8.1 The parties shall procure that, following Completion and as required
by clause 8.4, a Completion Balance Sheet showing the Value of the
Assets and the Balance Sheet Assumed Liabilities as at the Effective
Time of Sale is prepared. For the purpose of preparing the Completion
Balance Sheet the valuation policies, principles and practices applied
in preparing the Audited Accounts (the "Applicable Accounting
Policies") shall be used except that:
8.1.1 all rent deposits held and paid in respect of the Properties
shall be treated in the same way as in the November
Management Accounts (even though those deposits are Excluded
Liabilities and Excluded Assets);
8.1.2 provisions and accruals shall be made to the level made in
the November 30, 2001 Management Accounts (in the Agreed
Form) to the extent referable to the Business, as adjusted
for movements in the ordinary course of business since that
date and including all liabilities arising under purchase
orders raised in the ordinary course made before the
Effective Time of Sale, except that the Excluded Liabilities
shall not be included as liabilities in the calculation of
the Balance Sheet Assumed Liabilities.
8.2 The "Value of the Assets" means the aggregate value of the Assets as
shown in the Completion Balance Sheet except that no value shall be
attributed to the Goodwill.
21
8.3 The "Balance Sheet Assumed Liabilities" means all liabilities and
obligations of the Elcom Group as at the Effective Time of Sale in
connection with the Business to the extent provided for in the
Completion Balance Sheet.
8.4 Schedule 2 gives a pro forma example of the Completion Balance Sheet
(based on the November Management Accounts), which Elcom and Newco
each agree represents the position as it would have been as at that
date. On the basis of that pro forma Completion Balance Sheet Newco
would pay Elcom Holdings (Pound Sterling)259,678 under clause 3.2 and
Elcom would pay Newco nothing under clause 3.3.
8.5 The Completion Balance Sheet shall be prepared by Newco and (if Elcom
so requires) audited by Elcom Holdings" auditors and Newco shall
procure that a draft of the Completion Balance Sheet (as so audited)
shall be delivered to each of Elcom Holdings and Newco within sixty
days of Completion. If Elcom Holdings disputes the determination of
the Value of the Assets or the Balance Sheet Liabilities it shall
notify Newco in writing of the matters disputed within twenty business
days of receipt of the draft Completion Balance Sheet. If it fails to
do so it shall be deemed to have agreed the draft Completion Balance
Sheet and the statements of the Value of the Assets or the Balance
Sheet Liabilities as shown in it. If any disputed matters are notified
within the required time and are not resolved within ten business days
of the end of the twenty business day period referred to above, that
dispute shall be referred for final settlement to a firm of chartered
accountants nominated jointly by the Newco and Elcom Holdings or,
failing a joint nomination within 14 days, after request by either
Newco or Elcom Holdings, nominated at the request of either of them by
the president for the time being of the Institute of Chartered
Accountants in England and Wales. The accountants may call for and
inspect such documents as they reasonably consider necessary. In
making their determination the accountants shall act as experts and
not as arbitrators, and (in the absence of manifest error) their
decision shall be final and binding on the Newco and Elcom Holdings.
Their fees shall be borne and paid by Newco and Elcom Holdings in the
proportions determined by the accountants.
9 Liabilities
9.1 Newco shall assume liability in respect of and discharge and carry out
the Assumed Liabilities in accordance with any terms applying to them
and notify Elcom Holdings in writing as soon as it or Newco Management
believes it has discharged all the Assumed Liabilities.
22
9.2 Newco shall indemnify the Elcom Group in respect of all liabilities,
costs, actions, proceedings, claims and demands referable to the
Assumed Liabilities (including, without limitation, referable to a
breach of any contractual arrangement to which an Assumed Liability
relates). If Elcom considers it desirable to take preventative action
with a view to avoiding or mitigating claims under this clause 9 in
circumstances where it considers such action necessary to protect the
goodwill of the Retained Business, Elcom shall consult with Newco
before taking any such action and Newco shall bear the costs of any
reasonable actions taken by the Elcom Group. In all other
circumstances Elcom shall consult with Newco before taking any such
action (and obtain Newco"s consent to any such action where it could
damage the commercial interests of the Business or accelerate the time
for payment or discharge of an Assumed Liability) and Newco shall bear
the cost of any reasonable preventative action taken by the Elcom
Group.
9.3 The Elcom Group shall indemnify Newco in respect of all liabilities,
costs, actions, proceedings, claims and demands which are or arise
from the Excluded Liabilities. If Newco considers it desirable to take
preventative action with a view to avoiding or mitigating claims under
this clause, Newco shall consult with Elcom before taking any such
action (and obtain Elcom"s consent to any such action where it could
damage the commercial interest of the Retained Business or accelerate
the time for payment or discharge of an Excluded Liability) and Elcom
shall bear the cost of any reasonable preventative action taken by
Newco.
9.4 Without prejudice to clause 9.3, Elcom Holdings shall, on Newco"s
request, provide particulars of the outstanding amounts it owes in
relation to the Business and of any disputes which exist in relation
to them. To the extent that those liabilities are not contained in the
Assumed Liabilities, Elcom Holdings shall, in consultation with Newco
and in accordance with any reasonable request by Newco discharge such
liabilities that, in Newco"s reasonable opinion, need to be discharged
in the manner it requests aforesaid if the relationships of the
Business with creditors concerned would otherwise be substantially
adversely affected.
9.5 Subject to the provisions of clause 9.6, where any Assumed Liabilities
are covered by any insurances of the Elcom Group in force at the
Effective Time of Sale then, whether or not the rights of the Elcom
Group to make a claim under such insurances in respect of such Assumed
Liabilities form part of the Ancillary Rights, Elcom shall, at the
expense of Newco, do everything reasonably within its power and
requested by Newco which is
23
permitted by such insurances to seek recovery thereunder in respect of
the Assumed Liabilities concerned. If recovery pursuant to this clause
9.5 is made, any amount payable by Newco under its indemnity contained
in clause 9.2 shall be reduced by the net amount of that recovery.
9.6 If the making of a claim under clause 9.5 would result in an increase
of Elcom"s premium for, or have any other adverse affect in respect
of, Elcom"s insurance cover, Elcom shall consult with Newco and:
9.6.1 if so agreed with Newco, shall bring a claim under that
insurance, but only once Newco has undertaken, in a form
satisfactory to Elcom, to indemnify Elcom in respect of any
and all premium increases or other adverse affects referable
to the bringing of that claim; or
9.6.2 if an agreement with Newco pursuant to clause 9.6.1 cannot
be reached within a reasonable time, Elcom may decline
bringing a claim under the relevant insurance.
9.7 Subject to the provisions of clause 9.8, where any Excluded
Liabilities are covered by any insurances of Newco then Newco shall,
at the expense of Elcom, do everything reasonably within its power and
requested by Elcom which is permitted by such insurances to seek
recovery thereunder in respect of the Excluded Liabilities concerned.
If recovery pursuant to this clause 9.7 is made, any amount payable by
the Elcom Group under its indemnity contained in clause 9.3 shall be
reduced by the net amount of that recovery.
9.8 If the making of a claim under clause 9.7 would result in an increase
of Newco"s premium for, or have any other adverse affect in respect
of, Newco"s insurance cover, Newco shall consult with Elcom and:
9.8.1 if so agreed with Elcom, shall bring a claim under that
insurance, but only once Elcom has undertaken, in a form
satisfactory to Newco, to indemnify Newco in respect of any
and all premium increases or other adverse affects referable
to the bringing of that claim; or
9.8.2 if an agreement with Elcom pursuant to clause 9.8.1 cannot
be reached within a reasonable time, Newco may decline
bringing a claim under a relevant insurance.
24
10 Employees
10.1 Newco and Elcom Holdings confirm their understanding that the TUPE
Regulations will apply to the transaction effected by accepting the
Offer so that on Completion the employment of the Employees (and all
rights, liabilities and obligations in relation to them arising from
their employment) shall transfer to Newco.
10.2 Elcom shall comply with its obligations under regulation 10 of the
TUPE Regulations and shall supply Newco with the information required
by regulation 10(3) of the TUPE Regulations.
10.3 Elcom Holdings shall indemnify Newco against all reasonable
liabilities incurred by ▇▇▇▇▇ as a result of claims by or on behalf of
any Employee arising out of or in connection with:
10.3.1 a failure by Elcom to comply with its obligations under
Regulation 10 of the TUPE Regulations save where that
failure is the result of any act or omission in respect of
Regulation 10 of TUPE Regulations by ▇▇▇▇▇;
10.3.2 an act or omission by Elcom made on or before the Effective
Time of Sale in connection with the employment of an
Employee; and
10.3.3 the termination by Elcom of the employment of any of the
Employees on Completion save for claims in respect of
actions taken at the written request of, or with the written
approval of, Newco.
10.4 Newco shall indemnify each and every member of the Elcom Group against
liabilities incurred by that member of the Elcom Group as a result of
claims by or on behalf of any Employee arising out of or in connection
with:
10.4.1 a failure by Newco to comply with its obligations under
Regulation 10 of the TUPE Regulations save where that
failure is due to any act or omission of any member of the
Elcom Group in relation to any duties it may have under
Regulation 10 TUPE Regulations;
10.4.2 an act or omission of Newco occurring after Completion;
25
10.4.3 the termination by Newco of the employment of an Employee
after Completion; or
10.4.4 an objection by any Employee to transferring to Newco under
Regulation 5(5) TUPE Regulations other than claims in
respect of actions taken at the written request of, or with
the written approval of, the relevant member of the Elcom
Group and claims relating to any breach by Elcom of
regulation 10 of the TUPE Regulations (otherwise then by
reason of a breach of clause 10.2 by Newco).
10.5 If any contract of employment of any Employee is deemed not to have
transferred on Completion to Newco then Elcom shall inform ▇▇▇▇▇ as
soon as reasonably practicable that the employee has not transferred
and within 30 calendar days Newco may offer employment to the employee
on the same terms and conditions as he was engaged by ▇▇▇▇▇. In any
event 30 days after notifying Newco under this clause 10.5, and
irrespective of whether an offer of employment is made or accepted,
Elcom may terminate the Employee"s contract of employment forthwith
and Newco shall indemnify Elcom against any reasonable costs arising
from any claims, demands or proceedings brought directly in connection
with that termination.
10.6 If any contract of employment of any employee other than an Employee
is deemed to have transferred on Completion or by reason of acceptance
of the Offer or Completion to Newco then Newco shall inform ▇▇▇▇▇ as
soon as reasonably practicable that the employee has transferred and
within 30 calendar days Elcom may re-employ or offer employment to the
employee. In any event 30 days after notifying Elcom under this clause
10 irrespective of whether an offer to re-employ the employee or an
offer of employment has been made or accepted Newco may terminate the
employee"s contract of employment forthwith and Elcom shall indemnify
Newco against any reasonable costs arising from any claims, demands or
proceedings brought directly in connection with that termination.
10.7 Newco warrants that all amounts which any member of the Elcom Group
has been contractually obliged to pay into personal pension plans of
the Employees before acceptance of the Offer have been duly paid and
that so far as it is aware all such amounts due to have been so paid
into personal pension plans of any other full time employees of the
Business since the Accounts Date have been duly paid and Newco
26
undertakes to indemnify each member of the Elcom Group in respect of
any breach of this warranty. Newco further warrants that Newco
Management are not aware of any other pension related liability that a
member of the Elcom Group may owe any person who has been an employee
of the Business as a result of any action taken by (or on the
instruction of) any of Newco Management without the knowledge of Elcom
Management.
11 Debtors
11.1 Following Completion Elcom shall, subject to clause 11.2:
11.1.1 permit Newco in the name and on behalf of Elcom to take such
steps (including but not limited to bringing and pursuing
legal proceedings) for the purposes of recovering Book Debts
PROVIDED ALWAYS THAT Newco shall first indemnify Elcom to
its reasonable satisfaction against any costs expenses or
other liability it may thereby incur;
11.1.2 hold all sums of monies and securities representing any Book
Debt received by it upon trust for Newco and separately from
all other monies and like securities of the Elcom Group,
until accounting to Newco for the same as provided below;
11.1.3 promptly and in any event within three Business Days of
receipt account to Newco for the amounts collected or
received by it in respect of Book Debts less any reasonable
expenses incurred by it in the course of such collection or
receipt;
11.1.4 (subject always to any bona fide direction by the person
paying the same), apply any monies received by it from any
person indebted in relation to the Book Debts in liquidation
of such Book Debts owing by such person in priority to any
debts due to it from such person and which were incurred
subsequent in time;
11.1.5 not without prior written consent of Newco effect or purport
to effect any settlement compromise or release of any claim
in respect of any of the Book Debts nor without such consent
institute carry on defend compromise abandon or submit to
judgment in any legal or arbitration proceedings in
connection therewith; and
27
11.1.6 provide to Newco promptly after request such information and
other evidence in relation to Book Debts and its performance
of its obligations under this clause 11 as Newco shall from
time to time reasonably require.
11.2 The provisions of clause 11.1 shall be subject to the terms of the
Lloyds TSB Novation Agreement and Elcom shall not do or be obliged to
do anything which would result in it being in breach of that
Agreement.
11.3 Newco shall use all reasonable endeavours to collect the Relevant
Debts and (subject always to any bona fide direction by the person
paying the same), apply any monies received by it from any person
indebted in relation to a Relevant Debt in liquidation of the first of
such Relevant Debts owing by such person in priority to any other
debts due from such person.
11.4 Newco undertakes to indemnify Elcom in respect of any liability or
loss that Elcom may incur as a result of or in connection with any
Relevant Debt.
12 Adverse claims resulting from Elcom Management actions
12.1 In this clause 12 references to "Relevant Actions" are to documents
signed or actions or steps taken by, or on the instructions of, any
member or members of Elcom Management in their capacity (or purported
capacity) as a director or directors of any member of the Elcom Group
without the knowledge of any of Newco Management and the existence of
which is not known to any of Newco Management at or before the time of
its acceptance of the Offer.
12.2 Clause 12.4 shall apply if:
12.2.1 due to any Relevant Actions any of the Assets or Property Assets is:
(a) not owned by a member of the Elcom Group (or the ownership
interest of the Elcom Group is less than it would have been
but for the Relevant Actions) for these purposes the fact
that an Asset or Property Asset in the obligation of Elcom
to sell it or procure its sale is defined by reference to
the extent of the present right or interest of a member of
the Elcom Group shall be ignored, or
28
(b) subject to any security interest, finance lease obligation
or other similar encumbrance; or
(c) subject to any possessory lien securing Excluded Liabilities
(those Assets and Property Assets being "Flawed Assets")
and/or;
12.2.2 an Assumed Liability arises or has arisen due to Relevant
Actions (each such liability being an "Elcom Liability").
12.3 Elcom shall:
12.3.1 in the case of each Flawed Asset do everything reasonably
within its power to procure that Newco shall hold such title
to the Flawed Asset as it would have held but for the
Relevant Actions as a result of which the Asset became a
Flawed Asset;
12.3.2 to the extent that Newco would not have suffered loss in
respect of a Flawed Asset or an Elcom Liability but for the
Relevant Actions, indemnify Newco against any losses and/or
liabilities which it incurs as a result of any claim by the
true owner of and/or any holder of any encumbrance arising
by reason of the Relevant Actions over the Flawed Asset or
reasonably incurred by Newco as a result of the Elcom
Liability; and
12.3.3 if a Flawed Asset proves not to be owned by a member of the
Elcom Group then no purchase price shall be payable for that
Encumbered Asset and any sums previously paid by Newco to
Elcom by way of consideration in respect of it shall be
refunded by Elcom to Newco together with interest thereon
from the date the consideration was paid (or assumed by way
of Assumed Liability) to the date of payment at a rate (as
well after as before judgement) of 2% above the base rate
for the time being of Lloyds TSB Bank plc.
12.4 If an Assumed Liability becomes or is determined to be an Elcom
Liability Newco may by written notice to Elcom redesignate it as an
Excluded Liability but until so designated it shall continue as an
Assumed Liability but without prejudice, in either event, to the
rights of Newco under clause 12.3. If Newco elects to redesignate the
Assumed Liability concerned as an Excluded Liability it will pay to
Elcom the amount, if any,
29
provided for that Assumed Liability in the Balance Sheet Assumed
Liabilities (less any amounts previously paid by Newco in respect of
the Assumed Liability to third parties or to Elcom under this clause
12). If whilst the Elcom Liability remains an Assumed Liability Elcom
makes a payment in accordance with 12.3 in respect of it then Newco
shall reimburse to Elcom an equivalent amount up to a maximum amount
equal to the amount attributed to the liability in the Balance Sheet
Assumed Liabilities taken into account in determining the Completion
Balance Sheet.
13 Contracts and Ancillary Rights
13.1 Newco shall take all reasonable steps (with the assistance of Elcom to
the extent reasonably possible) to procure that third parties to
Consent Contracts consent to the substitution of Newco in place of
Elcom Holdings as a party thereto (or the assignment of Elcom"s rights
thereunder to Newco) as from the Effective Time of Sale and where a
novation is required shall endeavour to effect the novation on terms
that are as near as may be to the terms of the Pro Forma Novation
Deed.
13.2 Pending the obtaining of consent under clause 13.1, or in
circumstances where consent is not obtained, in relation to each
Consent Contract:
13.2.1 the relevant Consent Contract shall not be assigned or shall
be deemed not to have been assigned to Newco but to the
extent possible without breaching its terms, Elcom Holdings
or Elcom Technology (as appropriate) shall hold its interest
in the relevant Contract on trust for Newco;
13.2.2 Elcom shall (so far as it lawfully may) give all reasonable
assistance to ▇▇▇▇▇, at the request and cost of Newco, to
enable Newco to enforce Elcom"s rights under the relevant
Consent Contract;
13.2.3 Elcom shall, upon receipt, deliver to Newco any documents or
monies concerning or relating to the relevant Consent
Contract;
13.2.4 Newco shall (if sub-contracting is permissible under the
relevant Consent Contract) as sub-contractor for Elcom
perform all the obligations of Elcom for its own account and
indemnify Elcom in respect of any failure by Newco to
perform obligations it has assumed as a sub-contractor;
30
13.2.5 if the relevant Consent Contract does not permit
sub-contracting, Elcom and Newco will make such other
reasonable arrangements between themselves (at Newco"s cost)
as may be permissible to implement as far as possible the
effective transfer of the benefit and obligations of the
relevant Consent Contract to Newco; and
13.2.6 (so far as it lawfully may) Elcom shall give to Newco the
benefit of the relevant Consent Contract to the same extent
as if Newco has been substituted for it and act under the
reasonable direction of Newco but Elcom shall have no
liability to Newco in respect of the relevant Consent
Contract arising out of or in connection with its
termination, variation or amendment by Newco after the
Completion Date and Newco shall indemnify Elcom Holdings in
respect of any liability so arising.
13.3 In relation to a Contract which is for the supply of goods if the
supplier delivers goods to Elcom, Elcom shall receive them as agent
for Newco, notify Newco of the delivery and shall, against payment by
Newco of its reasonable charges and out of pocket expenses for doing
so, keep the goods safe and secure and make them available for
collection by Newco.
13.4 Subject to the provisions of the Offer and the Ancillary Offer
Documents, on Completion, all documents and arrangements between Elcom
Holdings and a company under its control or associated with it by
common ownership, insofar as they affect the Business, the Assets or
the Assumed Liabilities, shall be cancelled by mutual consent of the
Elcom Holdings and Newco.
13.5 Newco shall take all reasonable steps to perform, in accordance with
its normal business standards (which shall be no less beneficial to
customers than those offered by Elcom), the obligations of Elcom to
provide after-sales service or to meet warranty claims of customers
arising in the normal course of the Business as a result of
transactions carried out by Elcom prior to the Completion Date.
13.6 Elcom shall refer to Newco all enquiries and orders it receives within
six months after the Completion Date relating to the Business.
13.7 The provisions of clauses 13.1 and 13.2 shall apply mutatis mutandis
to any Ancillary Rights which require the consent of a third party for
their assignment or novation to Newco.
31
14 Value added tax
14.1 Elcom Holdings and Newco intend that the sale of the Assets and
transfer of the Business shall be treated with effect from Completion
as a transfer of part of the business of the Elcom Group as a going
concern for the purposes of section 49 of VATA and Article 5 of the
Value Added Tax (Special Provisions) Order 1995 and shall be treated
as neither a supply of goods nor a supply of services for the purposes
of VATA.
14.2 Newco undertakes to Elcom Holdings that:
14.2.1 after Completion the Assets will be used by it in carrying
on the Business (being the same kind as that carried on by
Elcom Holdings); and
14.2.2 Newco is already, or will as a result of the transfer of the
Business immediately on Completion become, a taxable person
(as defined in section 3 of VATA).
14.3 The parties shall agree a form of letter to be sent by Elcom Holdings
to the HM Customs and Excise ("Customs") office responsible for the
VAT affairs of Elcom Holdings and copied to such office as is
responsible for the VAT affairs of Newco on Completion seeking written
confirmation that the sale is to be treated as a transfer of a going
concern for VAT purposes within Article 5 of the VAT Regulations.
14.4 If Customs determine that the sale of the Business is not a transfer
of a going concern within Article 5 of the VAT Regulations:
14.4.1 Elcom Holdings shall account to Customs for the VAT plus any
interest, penalty or surcharge for which it (or the
representative member of its VAT group) is liable as a
result of the sale of the Business (the "Chargeable VAT") on
the date that the Chargeable VAT is due or as soon as
reasonably practicable following determination by Customs
that the sale of the Business is not a transfer of a going
concern within Article 5 if that determination is made after
the due date (this being without prejudice to the obligation
of Newco to pay VAT in addition to the Consideration); and
14.4.2 Newco shall, on the day that Elcom Holdings delivers a valid
VAT invoice (together with a statement of the Chargeable
VAT) to Newco, pay to
32
Elcom Holdings a sum equal to the Chargeable VAT.
14.5 In relation to the VAT records of the Business:
14.5.1 on or immediately after Completion Elcom Holdings shall
apply to Customs for a direction that all VAT records which
Newco is required to preserve for any period under section
49(1)(b) of and paragraph 6 of schedule 11 to the VATA (the
"VAT Records") shall be preserved by Elcom Holdings (a
"Record Direction") and Elcom Holdings shall provide Newco
with a copy of the response by Customs forthwith on receipt
by Elcom Holdings;
14.5.2 if Customs make a Record Direction Elcom Holdings will
preserve the VAT Records for such period as may be required
by law and during that period shall permit Newco or its
agents to inspect, and, at its expense, make copies of those
parts of the VAT Records as are relevant to the Business;
and
14.5.3 if Customs do not make a Record Direction within 90 days of
Completion Elcom Holdings shall at Newco"s request make the
VAT Records available to Newco for collection and Newco
shall subsequently permit any member of the Elcom Group or
their agents to inspect and make copies of those VAT
Records.
14.6 If following Completion Newco wishes in the ordinary course of the
Business to issue a credit or rebate to a customer or other third
party in respect of a Relevant Debt in circumstances where the debt
was invoiced inclusive of VAT falling within the Excluded Liabilities,
Elcom will, if so requested by ▇▇▇▇▇ and if it may properly do so,
promptly issue to the customer or third party a VAT credit note to the
extent of the VAT element of the credit concerned.
15 Books and Records
15.1 Newco will for a period of six years from Completion keep safely all
Records which have been delivered to Newco pursuant to its acceptance
of the Offer and shall afford Elcom and its agents and professional
advisers reasonable access thereto so long as shall be necessary to
enable them to deal with the liabilities of Elcom in respect of the
period up to the date of Completion or to perform its obligations, or
enforce its rights in respect of
33
the arrangements contemplated in this document or the Ancillary Offer
Agreement or for the purposes of the Retained Business and Newco will
permit Elcom and its agents and professional advisers to take (free of
charge) copies of such Records and extracts therefrom for the
foregoing purposes, subject to keeping the same confidential as
required by the terms of the Offer.
15.2 Elcom will for a period of six years from Completion keep safely all
the Retained Records relating to the Business and/or Assets and shall
afford Newco or its agents or professional advisers reasonable access
thereto and will permit it or such agents and professional advisers to
take (free of charge) copies of such books, records, documents and
information and extracts therefrom subject to it keeping confidential
any confidential information therein which relates to the Elcom Group.
16 Elcom Warranties
16.1 Elcom Holdings warrants to Newco that except as fairly set out in the
Elcom Disclosure Letter (if there is one), the statements in part I of
schedule 5 are accurate.
16.2 References in the Elcom Warranties or elsewhere in this document to
the awareness or knowledge of Elcom Holdings are to the knowledge or
awareness of Elcom Management.
16.3 Each of the Elcom Warranties is without prejudice to the other Elcom
Warranties and, except where expressly stated otherwise, no clause
governs or limits the extent or application of the other clauses.
16.4 No claim under the Elcom Warranties may be made unless written notice
of the claim concerned has been given to Elcom Holdings before 30 June
2003 and even then any such notified claim shall (except to the extent
previously settled or withdrawn) be deemed irrevocably withdrawn if
legal proceedings in respect of it have not been issued and served on
the proposed defendant(s) within twelve months of its notification.
16.5 No individual claim may be made under the Elcom Warranties for an
amount less than (Pound Sterling)5,000 or unless and until the
aggregate amount of all such claims under the Elcom Warranties exceeds
(Pound Sterling)50,000 in which event the full amount (and not merely
the excess) shall be recoverable.
16.6 In the absence of fraud or wilful concealment, the aggregate liability
of the Elcom
34
Group under the Elcom Warranties shall not exceed (Pound
Sterling)500,000.
16.7 The rights of Newco under the Elcom Warranties are without prejudice
and in addition to its rights under any other provision of this Offer
and/or any Ancillary Offer Document but there shall be no right of
recovery under the Elcom Warranties to the extent that recovery has
already been made by Newco under any other such provision in respect
of the same subject matter or liability.
16.8 Nothing in the Offer or the Ancillary Offer Document shall affect the
common law duty of Newco to mitigate any loss or damage suffered by it
by reason of any breach of the Warranties.
17 Newco"s warranties
17.1 Newco warrants to Elcom Holdings that except as fairly set out in the
Newco Disclosure Letter (if there is one), the statements in part II
of schedule 5 are accurate.
17.2 References in the Newco Warranties or elsewhere in this document to
the knowledge or awareness of Newco are to the knowledge or awareness
of Newco Management and of any other shareholders of Newco at the
Effective Time of Sale. For the purposes of construing the Newco
Warranties a matter shall be deemed to be material if it involves an
actual or potential value, liability payment or receipt of (Pound
Sterling)50,000 or more.
17.3 Each of the Newco Warranties is without prejudice to the other Newco
Warranties and, expect where expressly stated otherwise, no clause
governs or limits the extent or application of the other clauses.
17.4 No claim under the Newco Warranties may be made unless written notice
of the claim concerned has been given to Newco before 30 June 2003 and
even then any such notified claim shall (except to the extent
previously settled or withdrawn) be deemed irrevocably withdrawn if
legal proceedings in respect of it have not been issued and served on
Newco within twelve months of its notification.
17.5 No individual claim may be made under the Newco Warranties for an
amount less than (Pound Sterling)5,000 or unless and until the
aggregate amount of all such claims under the Newco Warranties exceeds
(Pound Sterling)50,000 in which event the full amount (and not merely
the excess) shall be recoverable.
17.6 In the absence of fraud or wilful concealment, the aggregate liability
of Newco under
35
the Newco Warranties shall not exceed (Pound Sterling)500,000.
17.7 The rights of Elcom Holdings under the Newco Warranties are without
prejudice and in addition to its rights under any other provision of
the Offer and/or any Ancillary Offer Document but there shall be no
right of recovery under the Newco Warranties to the extent that
recovery has already been made by Elcom Holdings or any other member
of the Elcom Group under any other such provision in respect of the
same subject matter or liability.
17.8 Nothing in the Offer or the Ancillary Offer Document shall affect the
common law duty of Elcom Holdings to mitigate any loss or damage
suffered by it by reason of any breach of the Elcom Warranties
18 Names
18.1 Elcom Holdings shall procure that, on Completion, the companies listed
in the first column of the below list duly pass special resolutions to
change their respective names to those stated in the second column
opposite the relevant company"s current name or such other name as may
be agreed between Elcom Holdings and Newco and deliver filing copies
or originals of such special resolutions (signed by a duly authorised
officer thereof) to Newco which agrees to file the same with the
Registrar of Companies (at Elcom"s expense):
Elcom Technology (Company
No. 02977666) Elcom Holdings Limited
Elcom Holdings (Company
No. 02838561) Elcom Systems Limited
AMA (UK) Limited (Company
No. 2846252) Elcom 5 Limited
Portable Computers Limited
(Company No. 2448018) Elcom 6 Limited
Elcom Systems Limited
(Company No. 3141508) Elcom 7 Limited
18.2 Elcom shall not and shall procure that no other member of the Elcom
Group shall after Completion directly or indirectly use as a business
or trade name in the UK or Eire:
36
18.2.1 the Domain Names or the names "Elcom Information Technology
Limited" or "Elcom Information Services Limited",
"Starbuyergold" or ;
18.2.2 the names "Portable Computers" or "AMA" or "AMA (UK)" or any
names similar thereto or liable to be confused therewith.
18.3 Members of the Elcom Group shall be entitled to continue to use the
Business IPR to the extent that it is currently used in the context of
the Retained Business.
18.4 To the extent that any of the Domain Names or related rights is
registered in the name of or under the control of ▇▇▇▇ ▇▇▇▇▇, Newco
Management shall procure that ▇▇ ▇▇▇▇▇ signs all relevant forms to
ensure the Domain Names are transferred to Newco.
18.5 Newco undertakes to file the change of name documents delivered to it
in accordance with clause 4.2.3 with the registrar of companies as
soon as reasonably practicable following Completion.
18.6 Newco undertakes that following Completion it shall not, except as
expressly permitted under any Ancillary Offer Document or written
agreement entered into between Newco and any member(s) of the Elcom
Group, use any business or trade name incorporating the word "Elcom"
expect for the names "Elcom Information Technology", "Elcom
Information Services" or "▇▇▇▇▇.▇▇.▇▇" (whether with or without the
word "Limited" or "plc" accompanying the same).
19 Restrictive covenant
19.1 To assure to Newco the full benefit of Business Elcom undertakes,
subject to clauses 19.6 and 19.7, by way of consideration for the
obligations of Newco resulting from Newco"s acceptance of the Offer,
as separate and independent undertakings, that Elcom shall procure
that no member of the Elcom Group shall without Newco"s prior written
consent:
19.1.1 disclose to another person or itself use for any purpose,
and shall use all reasonable endeavours to prevent the
publication or disclosure of, information concerning the
Business or Assets or the transactions or affairs of the
clients or customers of the Business to the extent referable
to their dealings with the Business, of which it has
knowledge except for disclosure (i) required by law or
applicable regulation or (ii) on a
37
confidential basis to its professional advisers or (iii) of
information that has come into the public domain through no
breach of the Offer or any of the Ancillary Offer Documents
or (iv) for use of information in the proper enjoyment of
its rights under the Offer or an Ancillary Offer Document;
19.1.2 for three years after Completion, either on its own account
or for another person, directly or indirectly solicit,
interfere with or endeavour to entice away from Newco in a
manner which might reasonably be expected to be prejudicial
to the interests of Newco a person who, to the knowledge of
the relevant member of the Elcom Group, is, or has, during
the two years preceding Completion, been (i) a client or
customer of the Business, (ii) a Restricted Employee of
Newco, or (iii) a Former Restricted Employee of Newco or the
Elcom Group in relation to the Business;
19.1.3 for three years after Completion, in relation to a business
which is substantially the same as or in direct competition
with the Business and in a manner which might reasonably be
expected to be prejudicial to the interests of Newco either
on its own account or for another person, directly or
indirectly supply goods or services to a person who, to its
knowledge, is, or has during the two years preceding
Completion been, a client or customer in the habit of
dealing with Elcom in relation to the Business; and
19.1.4 for three years after Completion, carry on or be engaged or
concerned within the UK or Eire, in a business which is
substantially the same as or in direct competition with the
Business, or a material part of it, as now carried on.
19.2 To assure to Elcom Holdings and Elcom Systems the full benefit of the
Retained Business, Newco undertakes, subject to clauses 19.5 and 19.7,
by way of consideration for the obligations of Elcom Holdings
resulting from Newco"s acceptance of the Offer, as separate and
independent undertakings, that Newco shall not, without Elcom
Holdings" prior written consent:
19.2.1 disclose to another person or itself use for any purpose,
and shall use all reasonable endeavours to prevent the
publication or disclosure of, information concerning Elcom
Group, the Retained Business or Excluded
38
Assets or the transactions or affairs of the clients or
customers of Elcom Holdings and Elcom Systems, of which it
has knowledge except for disclosure (a) required by law or
applicable regulation or (b) on a confidential basis to its
professional advisers, or (c) of information that has come
into the public domain through no breach by Newco of the
Offer or any of the Ancillary Offer Documents and (d) for
the proper enjoyment of its rights under the Offer or an
Ancillary Offer Document;
19.2.2 for three years after Completion, either on its own account
or for another person, directly or indirectly solicit,
interfere with or endeavour to entice away from a member of
the Elcom Group in a manner which might reasonably be
expected to be prejudicial to the interests a member of the
Elcom Group a person who, to its knowledge, is, or has,
during the two years preceding Completion, been (i) a client
or customer of the Retained Business or (ii) a Restricted
Employee or Former Restricted Employee of a member of the
Elcom Group;
19.2.3 for three years after Completion, in relation to a business
which is substantially the same as or in direct competition
with the Retained Business and in a manner which might
reasonably be expected to be prejudicial to the interests of
Elcom or Elcom Systems either on its own account or for
another person, directly or indirectly supply goods or
services to a person who, to its knowledge is, or has during
the two years preceding Completion been a client or customer
in the habit of dealing with the Elcom Group; and
19.2.4 for three years after Completion carry on or be engaged or
concerned, within the UK or Eire with the sale of
e-procurement systems other than those provided by a member
of the Elcom Group, and, in a business which is essentially
the same as, or in direct competition with the Retained
Business or a material part of it, as now carried on.
19.3 Elcom and Newco further undertake to procure that none of their
respective Subsidiary Undertakings from time to time or officers or
employees does any of the matters set out (as appropriate) in clauses
19.1 or 19.2
19.4 Elcom Holdings and Newco agree that the covenants and undertakings
contained in
39
clause 19.1 to 19.3 are reasonable and are entered into for the
purpose of protecting the goodwill of their respective businesses.
Accordingly the benefit of the covenants and undertakings may be
assigned by each of them and their successors in title without the
consent of the other.
19.5 Each covenant and undertaking contained in clauses 19.1 to 19.4 shall
be construed as a separate covenant and undertaking. If one or more of
them is held to be against the public interest or unlawful or an
unreasonable restraint of trade, the remaining covenants and
undertakings shall continue to bind, as the case may be, Elcom
Holdings or Newco.
19.6 None of the following shall of itself constitute a breach of any of
the covenants and undertakings contained in clause 19.1:
19.6.1 the provision by any member of the Elcom Group (whether
directly or indirectly) of technology of any electronic
marketplace or electronic procurement product that includes
the ability to sell and purchase information technology
products (whether by a member of the Elcom Group or a third
party) to any person; or
19.6.2 the conduct of any business wholly outside the United
Kingdom and Eire.
19.7 Nothing in clause 19.1 or 19.2 shall prevent Newco or a member of the
Elcom Group from performing its obligations or exercising the rights
granted to it under the Offer or any Ancillary Offer Document or any
other agreement from time to time entered in to between Newco and any
member of the Elcom Group.
20 Announcements
Except as required by law or regulation of the US Securities and
Exchange Commission, the NASDAQ National Market, the UK Listing
Authority, the London Stock Exchange or the Panel on Take-overs and
Mergers, no announcement or comment shall be made in relation to this
document except for the announcement(s) in the Agreed Form or
otherwise as specifically agreed between Elcom Holdings and Newco.
21 Rights and Waiver
21.1 The obligations of Elcom hereunder are joint and several.
40
21.2 The rights of Newco and Elcom Holdings in respect of a breach of the
Offer shall not be affected by Completion, by investigations made by
them or on their respective behalves into the Business or the Assets,
by its purporting to rescind, or failing to rescind, the Offer, or
(subject as provided in clause 16.4 or 17.4 (as appropriate))
exercising or failing to exercise, or delaying in exercising, a right
or remedy, or (in the case of any joint and several obligation owed by
more than one party to the Offer) by any release or time or indulgence
or waiver given one or more but not all of them or by anything else,
except a specific authorised written waiver or release. A single or
partial exercise of a right or remedy provided by this document or by
law does not prevent its further exercise or the exercise of another
right or remedy.
21.3 Waiver by Newco or Elcom Holdings of a breach of a term of the Offer,
or of a default under it, does not constitute a waiver of another
breach or default nor affect the other terms of the Offer.
21.4 The rights and remedies provided in the Offer and Ancillary Offer
Document are cumulative and not exclusive of any other rights or
remedies.
21.5 The Offer, once constituted, and the Ancillary Offer Documents and the
agreements referred therein (the "Relevant Agreements") represent the
entire agreement between the parties in relation to the subject matter
thereof. Save as expressly set out in any Relevant Agreement, each
party acknowledges that is not entering into any such Relevant
Agreement in reliance upon any warranty or representation made to it
by any other party or any agent or employee thereof.
21.6 Nothing in clause 21.5 shall exclude any liability of a party in
respect of any fraud or fraudulent misrepresentation by that party.
22 Contracts (Rights of Third Parties) Act 1999
22.1 Unless the right of enforcement is expressly granted, it is not
intended that a third party should have the right to enforce a
provision of the Offer (other than clause 23, in respect of which it
is intended any relevant person shall have rights) pursuant to the
Contracts (Rights of Third Parties) Act 1999.
22.2 Newco and Elcom Holdings may rescind or vary this document without the
consent of a third party to whom an express right to enforce any of
its terms has been provided.
41
23 Costs
23.1 Subject to clauses 23.2 and 23.3, expenses incurred by or on behalf of
Newco or Elcom (including the fees of agents and advisers employed in
connection with the negotiation, preparation or execution of this
document) shall be borne by the party which incurred the liability.
23.2 Newco shall pay the stamp duty, if any, payable in respect of the
Offer, this document, the transactions affected pursuant to the Offer,
the Ancillary Offer Documents or other documents relating to the
transactions to be effected pursuant to this Offer and all fees for
registration of transfers of any Assets.
23.3 If a person other than Newco is obliged to pay any stamp duty as a
result of any legal requirement to pay that duty or in order to
enforce or rely on or in respect of the Offer, this document, the
transactions affected pursuant to the Offer, the Ancillary Offer
Document or other documents relating to the transactions to be
effected pursuant to this Offer (or if a person other than Newco pays
fees for registration of the transfer of any of the Assets) Elcom
Holdings shall consult with Newco in respect of this requirement and
shall take such action as Newco shall reasonably request to resist the
requirement, but if stamp duty is payable, Newco shall promptly
reimburse Elcom Holdings or other relevant person (together with any
interest calculated at 2% above the base lending rate of Lloyds TSB
from and including the date of demand for reimbursement by the
relevant person to the date of reimbursement by Newco).
24 Further assurance
24.1 Following Completion Elcom shall, from time to time within two years
following the Completion Date at Newco"s written request and (except
to that extent that the action is required to remedy a breach by Elcom
of the Offer or a breach of obligations owed to Newco pursuant to the
Offer by another member of Elcom"s Group or as otherwise provided in
the Property Document) at Newco"s expense (and so that no member of
the Elcom Group shall in any event become liable for any associated
stamp duty):
24.1.1 execute any document and shall procure that a relevant
member of the Elcom Group shall execute any document; and
24.1.2 use reasonable endeavours to procure that a third party
executes any document,
42
reasonably necessary to vest legal and beneficial title to
such of the Assets.
24.2 Following Completion Newco shall, from time to time within two years
following the Completion Date at Elcom"s written request and at
Newco"s expense:
24.2.1 execute any document of novation or release;
24.2.2 subject to clause 24.3, execute any other document; and
24.2.3 use reasonable endeavours to procure that a third party
executes any document, reasonably necessary to relieve
members of the Elcom Group from liabilities and obligations
in respect of Assumed Liabilities.
24.3 Elcom shall consult with Newco before requiring Newco to execute any
document other than a novation or release pursuant to clause 24.2 and
shall not require Newco to execute a document if by doing so it would
result in Newco incurring a liability to Tax provided that ▇▇▇▇▇ first
agrees to put Elcom in to the same financial position that Elcom would
have been in if Newco had executed the relevant document.
25 Assignment
25.1 Except as expressly provided in this document, no rights of a party to
the Offer may be transferred.
25.2 Newco or any member of the Elcom Group or any permitted assignee
thereof may transfer its rights under the Offer to a Subsidiary
Undertaking thereof or, by way of security, to any financiers thereof
and any such financier may further transfer such rights on any lawful
exercise of its rights under such security, but Newco or the relevant
member of the Elcom Group (the "Assignor") shall procure the
re-transfer to it of any transferred right before a relevant
Subsidiary Undertaking ceases to be a Subsidiary Undertaking of the
Assignor.
26 Communications
26.1 Communications between the Newco and any member of the Elcom Group
with respect to this document shall be in writing and shall:
26.1.1 be delivered by hand, or sent by first class prepaid post
(or airmail if sent
43
outside Great Britain) to the registered office for the time
being of the addressee (and, in the case of any member of
the Elcom Group, also to ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇) for the attention of the Managing
Director of Elcom Systems Limited or to such other address
in Great Britain as the addressee notifies for the purpose
of this clause 26; or
26.1.2 be sent by facsimile to the facsimile numbers stated below
or as notified for the purpose of this clause 26.
26.2 In the absence of evidence of earlier receipt, communications shall be
deemed to have been received as follows:
26.2.1 (if sent by post within Great Britain) two Business Days
after posting;
26.2.2 (if sent by post outside Great Britain) five Business Days
after posting;
26.2.3 (if delivered by hand) on the day of delivery, if delivered
at least two hours before the close of business hours on a
Business Day, and otherwise on the next Business Day; or
26.2.4 (if sent by facsimile) at the time of transmission, if
received at least two hours before the close of business
hours on a Business Day, and otherwise on the next Business
Day.
26.3 For the purposes of this clause 26, "business hours" means between the
hours of 10.00 and 18.00 inclusive, London time.
26.4 In proving service it shall be sufficient to prove that personal
delivery was made, or that the envelope containing the notice was
properly addressed and stamped and placed in the post or that the
facsimile transmission was transmitted to the specified number and a
confirmatory transmission report received.
26.5 A copy of all Communications addressed or served on Elcom must also be
sent to the Chief Financial Officer, Elcom International Inc., ▇▇
▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇, with a copy to the General Counsel,
at the same address.
26.6 Communications addressed to Newco shall be marked for the attention of
▇▇▇▇ ▇▇▇▇▇.
44
26.7 The facsimile numbers referred to in clause 26.1 are: for Elcom
Holdings: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇; for Newco: 01753-442501
27 Invalidity
27.1 Subject to clauses 27.2 and 27.3, if a term in or provision of this
document is held to be illegal or unenforceable, in whole or in part,
under an enactment or rule of law, it shall to that extent be deemed
not to form part of the Offer, and the enforceability of the remainder
of the Agreement shall not be affected.
27.2 If a provision of this document is, or but for this clause 27 would
be, held to be illegal or unenforceable, in whole or part, but would
be legal and enforceable if the period or geographical application
were reduced or if part of the provision were deleted, the provision
shall apply with the minimum modification necessary to make it legal
and enforceable.
27.3 If a provision of this document is held to be illegal or
unenforceable, in whole or in part, and clause 27.2 cannot be used to
make it legal and enforceable, either Elcom Holdings or Newco may
request the parties bound by that provision to enter into a deed under
which the relevant party or parties undertake(s) in the terms of the
original provision, but subject to such amendments as the requesting
person shall reasonably specify in order to make the provision legal
and enforceable. Elcom Holdings and Newco shall use reasonable
endeavours to agree the form of the desired deed but no party shall be
obliged to enter into a deed that would increase its liability beyond
that contained in the Offer, had all its provisions been legal and
enforceable.
28 Proper law
This document shall be governed by and construed in accordance with
English law and the parties submit to the non-exclusive jurisdiction
of the English courts.
Signed
45
SCHEDULE 1
Properties
The properties and the leases to which they are subject disclosed in schedule 1
to the Property Sale Agreement comprising the Property Document.
46
SCHEDULE 2
Pro Forma Completion Balance Sheet
Pro Forma Calculation of Consideration Using November Management Accounts
Balance Sheet as at 30 November 2001
Total Excluded Assumed
Fixed assets
Computer Hardware
& Software 1,965,809 94,971 1,870,838
Furniture Fixtures
& Equipment 781,650 781,650
2,747,459 94,971 2,652,488
Less Depreciation
to date (1,141,755) (53,299) (1,088,456)
Net Book Value 1,605,704 41,672 1,564,032
Investment in
Subsidiaries 25,000 25,000 0
1,630,704 66,672 1,564,032
Current assets
Inventory 326,119 326,119
Trade Debtors -
assigned 7,949,331 7,949,331
Trade Debtors - manual
(not assigned) 79,148 79,148
Bad Debt Provision (513,942) (513,942)
Prepayments 834,397 834,397
Inter-Company Balances
(see below) 11,578,710 11,578,710 0
Cash at bank - Thomson
Broadcast rent deposit 25,000 25,000
Cash at bank and in hand 12,687 12,687 0
20,291,450 11,591,397 8,700,053
------------------------------
Value of the Assets (1) 10,264,085
Gross Value (2) ((Pound Sterling)1,360,000 plus
the Value of the Assets) 11,624,085
Current Liabilities
Trade Creditors (10,607,408) (10,607,408)
VAT (322,327) (322,327) 0
PAYE & NIC (141,505) (141,505)
--------------------------------------------------------------------------------
----------------------------------------------------------
(1) Clause 8.3
(2) Clause 3.1
47
Other Accruals (797,432) (183,500) (613,932)
Profit Sharing Bonus
Accrual + NIC (157,000) (157,000)
Lloyds TSB Current
Account 155,438 155,438
(11,870,234) (505,827) (11,364,407)
------------------------------
Balance Sheet Assumed
Liabilities (3) (11,364,407)
---------------
---------------
Difference between
Gross Value and
Balance Sheet Assumed
Liabilities 259,678
-----------------------------------------------------------------
(3) Clause 8.4
48
SCHEDULE 3
Excluded Assets and Liabilities
Part I: Specifically Excluded Assets
1 All fixed assets used solely by Elcom Systems Limited (Company No.
3141508)
2 All assets of Elcom Systems Limited (Company No. 3141508) other than
any Domain Names and related registrations in its name specified in
schedule 8
3 All investments and all assets of the members of the Elcom Group which
are not used or held as assets in connection with the Business
4 Inter-company balances owing to Elcom by members of the Elcom Group
5 Any cash at bank or in hand of the Business at the Effective Time of
Sale
6 The Retained Records
7 Any rent deposits made by the Elcom Group in respect of any of the
Properties.
Part II: Specifically Excluded Liabilities
1 Inter-company balances owing by Elcom to any member(s) of the Elcom
Group;
2 Any charge to Tax (other than PAYE and national insurance liability on
remuneration) of a member of the Elcom Group relating to a liability
incurred before Completion including (without limitation) any VAT on
goods or services which for VAT purposes are supplied or invoiced
before Completion;
3 PAYE and national insurance liability relating to the "Platinum
Sponge" bonus arrangement effected before Completion and professional
fees relating to that scheme or any PAYE or national insurance
liability relating to that scheme;
4 Liabilities that are not known to Newco or Newco Management at the
time of acceptance of the Offer and are not provided for in the
Completion Balance Sheet as Assumed Liabilities but relate to:
4.1 claims by third parties in respect of a service supplied by a member
of Elcom before the Effective Time of Sale; or
49
4.2 a representation, act or omission of Elcom before the Effective Time
of Sale otherwise than (i) by a member of Newco Management acting
outside the scope of his ostensible authority as an employee of Elcom
or (ii) in the ordinary course of the Business; or
4.3 arising from defective products or parts of products sold by Elcom
before the Effective Time of Sale.
5 Claims by Specialist Computer Holdings Limited arising from the sale
of the Elcom Group"s UK reseller business in 1999 and/or claims by
Loft Shop.
6 Liabilities of the Elcom Group in connection with the preparation and
carrying in to effect of this document and/or any Ancillary Offer
Document or any other documents entered into contemporaneously with
Completion.
7 Any liabilities referable to rent deposits paid under the Underleases
referred to in the Property Sale Agreement comprising the Property
Document.
50
SCHEDULE 4
Consideration
Allocation of Consideration
Goodwill (Pound Sterling)1,360,000
Business IPR and Domain Names (Pound Sterling) -
Prepayments (Pound Sterling) -
Plant and Equipment (Pound Sterling) -
Stock (Pound Sterling) -
Contracts (Pound Sterling) -
Book Debts (Pound Sterling) -
Records (Pound Sterling) -
Ancillary Rights (Pound Sterling) -
Subject to adjustment under clause 3.
Where no specific amount is specified above, the consideration shall be the
value attributed to the Assets concerned in the Completion Balance Sheet or (if
no such value is attributed) (Pound Sterling)1 for all such Assets).
51
SCHEDULE 5
Warranties
Part I: Elcom Warranties
1 Each of Elcom Holdings and Elcom Technology is a company incorporated
in England and Wales, duly constituted in conformity with all
applicable law and regulations in all material respects and is validly
existing.
2 Each of the companies within the Elcom Group making the Offer (the
"Offeror Elcom Companies") has full corporate power and authority to
make the Offer and enter into all other agreements to be entered into
by it in accordance with the terms thereof and to carry out the
transactions contemplated thereby.
3 Each of the Offeror Elcom Companies has taken all necessary corporate
action to enable each of them effectively to make the Offer and to
perform the Offer and all agreements and other documents entered into,
or to be entered into, pursuant to the terms of the Offer, and this
document and such other agreements and documents when executed, will
constitute valid, binding and enforceable obligations on each of the
Offeror Elcom Companies and no Offeror Elcom Company requires the
consent, approval or authority of any other person to make the Offer
or perform its obligations under this document.
4 Elcom has the corporate power and authority to own the Assets and
operate the Business and to sell or transfer them to Newco as required
by the Offer.
5 The performance of the Offer and the execution, delivery and
performance of the Ancillary Agreements and all the other agreements
or documents to be executed in relation to the subject matter of the
Offer will not: (a) conflict with, violate or result in a breach of
any provision of the constitutional documents of any member of the
Elcom Group; or (b) so far as Elcom is aware (having made reasonable
enquiry of its legal advisers) violate any statute or law or any
judgement decree order directive regulation or rule of any court,
governmental authority or supranational or trade agency
6 Save for the Offer or as expressly contemplated thereby, no member of
Elcom Management has since the Accounts Date and on behalf or
purported behalf of any member of the Elcom Group entered into or
expressly authorised any agreement or
52
other commitment or incurred any liability or granted any material
waiver or consent or security interest in connection with or in
respect of the Business of any Asset and without the knowledge of
Newco Management of all material facts and circumstances relevant
thereto.
7 To the best of Elcom"s knowledge, there is no current litigation or
arbitration not known to Newco or Newco Management (except for the
collection of debts in the ordinary course of business) and there are
no proceedings pending or threatened either by or against Elcom in
relation to the Business or anything which Elcom considers is likely
to give rise to proceedings relating to the Business which in any such
case is not known to Newco.
8 To the best of Elcom"s knowledge, there are, and have been, no
agreements or arrangements not known to Newco Management affecting
Elcom"s ownership of or the transfer of ownership by it, of any of the
Assets except with regard to Assets whose transfer is subject to a
Consent Contract.
9 No member of Elcom Management is aware of any reason not also known to
Newco why the performance of the Offer and the execution delivery and
performance of the Ancillary Offer Documents and all other agreements
or documents to be executed in relation to the subject matter of the
Offer will conflict with, violate, result in a breach of, or result in
a breach of, or result in a person being entitled to terminate any
agreement or arrangement relating to the Business, other than (to the
extent only that consent to novate or assign such Contract to Newco is
required) an agreement or arrangement constituting a Consent Contract.
Part II: Newco Warranties
1 Newco is a limited liability company incorporated in England and
Wales, duly constituted in conformity with all applicable law and
regulations in all material respects and is validly existing.
2 Newco has full corporate power and authority to accept the Offer and
all other agreements to be entered into by Newco in accordance with
the terms of the Offer and to carry out the transactions contemplated
by the Offer.
3 Newco has taken all necessary corporate action to enable it
effectively to accept
53
the Offer and to perform its obligations in respect of the Offer and
all agreements and other documents entered into, or to be entered
into, pursuant to the terms of the Offer, and the Offer when accepted
and such other agreements and documents when executed, will constitute
valid, binding and enforceable obligations on Newco and Newco does not
require the consent, approval or authority of any other person to
accept the Offer or perform its obligations under the Offer.
4 Newco has the corporate power and authority to own the Assets and
operate the Business.
5 The performance of the Offer and the execution, delivery and
performance of the Ancillary Offer Documents and all the other
agreements or documents to be executed in relation to the subject
matter of the Offer will not:
(a) conflict with, violate or result in a breach of any
provision of the constitutional documents of Newco, or
(b) so far as Newco is aware (having made reasonable enquiry of
its legal advisers) constitute a breach by Newco of any
statute or law or any judgement, decree, order, directive,
regulation or rule of any court, governmental authority or
supranational or trade agency.
6 To the best of Newco"s knowledge, there are no material Excluded
Liabilities other than those specifically referred to in schedule 3.
7 To the best of Newco"s knowledge, there is no current litigation or
arbitration (except for the collection of debts in the ordinary course
of business) and there are no proceedings pending or threatened either
by or against Elcom, and there is nothing which Newco or Newco
Management considers is likely to give rise to proceedings relating to
the Business.
8 To the best of Newco"s knowledge, there are, and have been, no
agreements or arrangements affecting Elcom"s ownership of or the
transfer of ownership by it, of any of the Assets except for the
Lloyds TSB Agreements or with regard to Assets whose transfer is
subject to a Consent Contract.
9 To the best of the knowledge of ▇▇▇▇▇, the performance of the Offer
and the execution, delivery and performance of the Ancillary Offer
Documents and all other agreements or documents to be executed in
relation to the subject matter of the Agreement will not conflict
with, violate, result in a breach of, or result in a person being
entitled to terminate any agreement or arrangement relating to the
Business,
54
other than a Lease or an agreement or arrangement constituting a
Consent Contract.
10 To the best of Newco"s knowledge, the Contracts listed in schedule 7
and the Leases constitute all the material contracts and other
contractual arrangements, whether written or oral referable to the
Business to which Elcom is a party, apart from the contracts of
employment of the Employees and ordinary course of business purchase
and sales orders.
55
SCHEDULE 6
Part I
Employees
1 ▇▇▇▇▇▇ ▇▇▇▇▇▇
2 ▇▇▇▇▇ ▇▇▇▇▇
3 ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇
4 ▇▇▇ ▇▇▇▇▇▇▇
5 ▇▇▇▇▇ ▇▇▇▇
6 ▇▇▇▇▇ ▇▇▇▇▇▇▇
7 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
8 ▇▇▇▇▇ ▇▇▇▇▇▇▇
9 ▇▇▇▇▇▇ ▇▇▇▇▇
10 ▇▇▇▇▇ ▇ ▇▇▇▇▇
11 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
12 ▇▇▇▇ ▇▇▇▇▇▇▇
13 ▇▇▇▇▇▇▇▇ ▇▇▇▇
14 ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇
15 ▇▇▇▇▇▇ ▇▇▇▇
16 ▇▇▇ ▇▇▇▇▇▇
17 ▇▇▇▇ ▇▇▇▇▇▇
18 ▇▇▇▇ ▇▇▇▇▇▇▇▇
19 ▇▇▇▇▇▇ ▇▇▇▇▇
56
20 ▇▇▇▇▇ ▇▇▇▇▇▇
21 ▇▇▇▇▇▇ ▇▇▇▇▇▇
22 ▇▇▇▇▇▇ ▇▇▇▇▇
23 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
24 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
25 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
26 ▇▇▇▇ ▇▇▇▇▇▇▇▇
27 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
28 ▇▇▇▇▇ ▇▇▇▇
29 ▇▇▇▇▇▇▇ ▇▇▇▇▇
30 ▇▇▇▇▇ ▇▇▇▇▇
31 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
32 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
33 ▇▇▇▇ ▇▇▇▇▇▇
34 ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇
35 ▇▇▇▇▇▇ ▇▇▇▇▇
36 ▇▇▇▇▇ ▇▇▇▇▇
37 ▇▇▇▇▇▇ ▇▇▇▇
38 ▇▇▇▇ ▇▇▇▇
39 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
40 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
41 ▇▇▇▇ ▇▇▇▇▇▇▇
42 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
57
43 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
44 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
45 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
46 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
47 ▇▇▇▇▇▇▇ ▇▇▇▇▇
48 ▇▇▇▇ ▇▇▇▇▇▇▇
49 ▇▇▇▇ ▇▇▇▇▇▇
50 ▇▇▇▇▇ ▇▇▇▇▇▇
51 ▇▇▇▇ ▇▇▇▇
52 ▇▇▇▇▇ ▇▇▇▇▇▇▇
53 ▇▇▇▇▇ ▇▇▇▇▇▇▇
54 ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇
55 ▇▇▇▇ ▇▇▇▇▇▇▇
56 ▇▇▇▇▇ ▇▇▇▇▇▇▇
57 ▇▇▇▇ ▇▇▇▇▇▇
58 Deleted Deleted
59 ▇▇▇▇▇ ▇▇▇▇▇
60 ▇▇▇▇▇▇▇ ▇▇▇▇▇
61 ▇▇▇▇ ▇▇▇▇▇▇▇▇
62 ▇▇▇▇▇▇▇ ▇▇▇▇
63 ▇▇▇▇ ▇▇▇▇
64 ▇▇▇▇▇▇ ▇▇▇▇▇▇
65 ▇▇▇ ▇▇▇▇
58
66 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
67 ▇▇▇▇▇▇ ▇▇▇▇▇▇
68 ▇▇▇▇▇▇ ▇▇▇▇
69 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
70 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
71 ▇▇▇▇▇▇ ▇▇▇▇▇
72 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
73 ▇▇▇▇▇ ▇▇▇▇▇▇
74 ▇▇▇▇ ▇▇▇▇▇▇▇
75 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
76 ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇
77 ▇▇▇▇▇▇ ▇▇▇▇▇
78 ▇▇▇▇ ▇▇▇▇▇▇▇
79 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
80 ▇▇▇▇▇ ▇▇▇▇▇
81 ▇▇▇▇ ▇▇▇▇▇▇
82 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
83 ▇▇▇▇ ▇▇▇▇▇▇▇
84 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
85 ▇▇▇▇▇ ▇▇▇▇▇▇
86 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
87 ▇▇▇▇▇▇▇ ▇▇▇▇
88 ALISON STREAK
59
89 ▇▇▇▇▇▇ ▇▇▇▇▇▇
90 ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
91 ▇▇▇▇▇ ▇▇▇▇▇▇▇
92 ▇▇▇▇ ▇▇▇▇▇
93 ▇▇▇▇▇ ▇▇▇▇▇▇▇
94 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
95 ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
96 ▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇
97 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
98 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
99 ▇▇▇▇ ▇▇▇▇▇▇▇▇
100 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
101 ▇▇▇▇▇▇▇ ▇▇▇▇▇
102 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
103 ▇▇▇▇▇▇ ▇▇▇▇▇
Part II
Excluded Employees
1 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
2 ▇▇▇▇▇▇▇ ▇▇▇▇
3 ▇▇▇▇▇▇ ▇▇▇▇
4 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
60
5 ▇▇▇ ▇▇▇▇▇▇
6 ▇▇▇▇▇▇ ▇▇▇▇▇▇
7 ▇▇▇▇▇ ▇▇▇▇▇
8 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
9 ▇▇▇▇▇ ▇▇▇▇▇▇
10 ▇▇▇▇▇▇ ▇▇▇▇▇▇
11 ▇▇▇▇▇▇ ▇▇▇▇▇▇
12 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
13 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
14 ▇▇▇▇▇ ▇▇▇▇
61
SCHEDULE 7
Contracts
See the schedule in Agreed Form
62
SCHEDULE 8
Domain Names/Registration Details
Domain Name Registered holder
▇▇▇▇▇.▇▇.▇▇ Elcom Systems
▇▇▇▇▇▇▇▇▇.▇▇.▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇.▇▇ Elcom Technology
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ ▇▇▇▇ ▇▇▇▇▇
63
Signed by )
ELCOM HOLDINGS LIMITED: )
Director
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Director/Secretary
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Signed by )
ELCOM INFORMATION TECHNOLOGY )
LIMITED )
)
)
)
Director
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Director/Secretary
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
64
Master
DATED 2001
ELCOM HOLDINGS LIMITED
ELCOM INFORMATION TECHNOLOGY LIMITED
OFFER
for the sale of the business and certain assets of
Elcom Holdings Limited and
Elcom Information Technology Limited
*▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (LETTERHEAD)
Adelaide House London Bridge London EC4R 9HA
Tel ▇▇▇ (▇) ▇▇ ▇▇▇▇ ▇▇▇▇ Fax ▇▇▇ (▇) ▇▇ ▇▇▇▇ ▇▇▇▇
CONTENTS
1 Definitions and interpretation ............................1
2 Offer to sell ............................................14
3 Consideration ............................................15
4 Acceptance and Completion ................................15
5 Conduct of Business pending Completion ...................17
6 Title and risk ...........................................18
7 Performance consideration ................................18
8 Completion Balance Sheet .................................21
9 Liabilities ..............................................22
10 Employees ................................................25
11 Debtors ..................................................27
12 Adverse claims resulting from Elcom Management actions ...28
13 Contracts and Ancillary Rights ...........................30
14 Value added tax ..........................................32
15 Books and Records ........................................33
16 Elcom Warranties .........................................34
17 Newco"s warranties .......................................35
18 Names ....................................................36
19 Restrictive covenant .....................................37
20 Announcements ............................................40
21 Rights and Waiver ........................................40
22 Contracts (Rights of Third Parties) Act 1999 .............41
23 Costs ....................................................42
24 Further assurance ........................................42
25 Assignment ...............................................43
26 Communications ...........................................43
27 Invalidity ...............................................45
28 Proper law ...............................................45
SCHEDULE 1 ...................................................46
SCHEDULE 2 Pro Forma Completion Balance Sheet ...............47
SCHEDULE 3 Excluded Assets and Liabilities .................49
Part I: Specifically Excluded Assets .......................49
Part II: Specifically Excluded Liabilities ...............49
SCHEDULE 4 Consideration ...............................51
Allocation of Consideration ...............................51
SCHEDULE 5 Warranties .......................................52
Part I: Elcom Warranties ...............................52
Part II: Newco Warranties ...............................53
SCHEDULE 6 ...............................................56
Part I Employees .......................................56
Part II Excluded Employees ...............................60
SCHEDULE 7 Contracts .......................................62
SCHEDULE 8 Domain Names/Registration Details ...............63
Documents in Agreed Form:
-------------------------
Domain Name Transfer Documents
Elcom Logo Licence
Lloyds TSB Novation Agreement
November Management Accounts
Pro Forma Novation Deed
Property Document
Starbuyer Trademark Licence
