EXHIBIT 4.41
DATED 24 August 2000
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XXXXXX XXXXXXX
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TRINTECH GROUP PLC
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SALE AND PURCHASE AGREEMENT
relating to
the issued share capital of
CHECKLINE PLC
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XXXXXX XXXXXXX XXXXXXX
Xxxxxxxxx
00 Xxxxxxxx Xxxxxxxxxx
Xxxxxxxxxxx
Xxxxxx XX0X 0XX
Tel No: 000-0000 0000
Fax No: 000-0000 0000
DX: 41 London
Telex: 268014
Ref: SXW/MXR
Index
Clause No. Page No
1. Definitions and Interpretation.......................................... 1
2. Sale and Purchase....................................................... 8
3. Consideration........................................................... 8
4. Warranties and indemnity................................................ 9
5. Limitations............................................................. 11
6. Completion.............................................................. 11
7. Post-Completion......................................................... 13
8. Restrictions............................................................ 15
9. Confidentiality......................................................... 17
10. Competition Act 1998.................................................... 18
11. Notices................................................................. 18
12. Miscellaneous........................................................... 19
13. Law and Jurisdiction.................................................... 20
Schedules
1. Shareholders
2. The Company
3. Company IPR
4. Properties
5. Warranties
6. Restrictive Covenants
7. Earnout Consideration
8. Options
9. Vendor Protection Provisions
* Certain schedules to the Sale and Purchase Agreement by and between Xxxxxx
Xxxxxxx and Trintech Group PLC, dated August 24, 2000 are not being filed
herewith pursuant to Item 601(b)(2) of Regulation S-K. We undertake to furnish
supplementally a copy of any omitted schedule to the Securities and Exchange
Commission upon request.
THIS AGREEMENT is made the ____________ day of _______________________ 2000
BETWEEN
(1) XXXXXX XXXXXXX of 280 Chase Side Southgate London N14 4PR (the "Vendor");
and
(2) TRINTECH GROUP PLC whose registered office is at Xxxxx Xxxxxx Xxxxxxxx
Xxxx, Xxxxxxxxxxxx, Xxxxxx 00 (the "Purchaser").
INTRODUCTION
Subject to the terms and conditions of this agreement the Vendor has agreed to
sell and the Purchaser has agreed to purchase all of the issued share capital of
the Company.
AGREED TERMS
1. Definitions and Interpretation
1.1 In this agreement:
"accounting period" means an accounting period determined in
accordance with section 12 of ICTA;
"Accounting Requirements" means the accounting requirements of the
Companies Act, SSAPs, FRSs, abstracts of the Urgent Issues Task Force, any other
requirement of a United Kingdom accounting body having mandatory effect, and
other generally accepted accounting principles and practices in the United
Kingdom;
"Accounts" means the accounts of the Company (initialled by the
parties for the purposes of identification only) for the financial year ended on
the Accounts Date including the directors' report, the balance sheet as at the
Accounts Date, the profit and loss account for such period and the notes to
them;
"Accounts Date" means 31 March 2000;
"Affiliate" means, in respect of any person:
(a) any person connected with such person (and "connected with" bears
the meaning set out in section 839 of ICTA); and/or
(b) any company under the control of such person (and "control" bears
the meaning set out in section 840 of ICTA); and/or
(c) any associated company of such person (and "associated company"
bears the meaning set out in section 416 of ICTA);
"Business Day" means any day other than a Saturday, Sunday or any day
which is a public holiday in the Republic of Ireland, United Kingdom and the
United States of America;
"Business Hours" means the hours of 09.00 to 17.30 on a Business Day
in the place to which any notice or other written communication is sent pursuant
to this agreement;
"Business Plan" means the business plan prepared by the Company and
annexed to this Agreement;
"CAA" means the Capital Xxxxxxxxxx Xxx 0000;
"Companies Act" means the Companies Xxx 0000;
"Company" means Checkline PLC details of which are set out in
schedule 2;
"Company IPR" means:
(a) the registered trademarks, service marks and applications therefor
and all other business names, brand names, trade marks (whether in fancy script
or otherwise), devices, logos, get up and signs (and whether or not registered
or applied for) owned by the Company together with all goodwill associated with
or symbolised by any of the foregoing;
(b) all confidential technical, commercial and other proprietary
information and techniques owned or used by the Company in the course of its
business including (without prejudice to the generality of the foregoing) know-
how of any nature, drawings, formulae, processes, specifications, trade secrets,
test reports, operating and testing procedures, practices, instruction manuals,
tables of operating conditions, lists and particulars of customers and
suppliers, marketing methods, pricing, credit and payment policies, profit
margins, discounts and rebates other than in respect of any of the foregoing
that are at the relevant time in the public domain ("the Company Confidential
Information");
(c) all copyright, database rights, moral rights or rights in the
nature of copyright in relation to or comprised in the Products;
(d) all Intellectual Property currently or previously owned by or
licensed to the Company;
"Completion" means completion of the sale and purchase of the Sale
Shares in accordance with the parties' respective obligations under clause 6;
"Completion Date" means the date of Completion as set out in clause
6.1;
"Computer System" means the computer systems, including all its
equipment, hardware, firmware, software and accessories used in the business of
the Company;
"Consideration Shares" means such number of ordinary shares in the
Purchaser as is equal to US $29,000,000 divided by twice the average Nasdaq
closing price of the Purchaser's ADSs over the ten (10) trading days prior to
Completion;
"Costs" means liabilities, losses, damages, awards, together with
reasonably incurred costs (including reasonably incurred legal costs on an
indemnity basis), claims and expenses in each case of any nature whatsoever;
"Customer" means any customer or client of the Company in connection
with the Restricted Business with whom the Company has traded during the 12
month period immediately prior to Completion;
"Deferred Ordinary Shares" means the issued deferred ordinary shares
of 10 xxxxx each as referred to in schedule 1 in the capital of Company;
"Disclosed" means accurately disclosed to the Purchaser in the
Disclosure Letter with sufficient clarity and detail to enable the Purchaser to
assess the financial and commercial impact on the Company and the Purchaser of
the matter disclosed;
"Disclosure Letter" means the letter of even date with this agreement
from the Vendor to the Purchaser executed and delivered immediately before the
signing of this agreement;
"Disclosed Schemes" means the Pensions Scheme and the personal pension
scheme established by certain of the employees of the Company and to which the
Company contributes;
"Earnout Consideration" means the sum to be calculated and paid in
accordance with schedule 7;
"Encumbrance" means any mortgage, charge, security interest, lien,
pledge, assignment by way of security, equity, claim, right of pre-emption,
option, covenant, restriction, reservation, lease, trust, order, decree,
judgment, title defect (including retention of title claim), conflicting claim
of ownership or any other third party right or encumbrance of any nature
whatsoever (whether or not perfected);
"Escrow Account" means the escrow account established and regulated
pursuant to the Escrow Agreement;
"Escrow Agent" means the agent appointed pursuant to the Escrow
Agreement;
"Escrow Agreement" means the escrow agreement in the agreed form;
"Financial Year" shall be construed in accordance with section 223 of
the Companies Act;
"FRSs" means the financial reporting standards established by the
Accounting Standards Board Limited;
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"ICTA" means the Income and Corporation Taxes Xxx 0000;
"IHTA" means the Inheritance Tax Xxx 0000;
"Indebtedness" means all indebtedness whatsoever owing by the Company
other than:
(a) normal trading debts to suppliers;
(b) finance lease indebtedness; and
(c) any liability to Taxation;
"Initial Consideration" has the meaning ascribed to it in clause 3.2;
"Intellectual Property" means all patents, registered designs, know-
how, rights in trade secrets and confidential information; registered or
unregistered trademarks, service marks and applications therefor and all other
business names, brand names, devices, logos, get up and signs (and whether or
not registered or applied for) with all the goodwill associated with or
symbolised by any of the foregoing; all other inventions (whether or not capable
of protection by patent or other form of registration); all copyright, rights in
the nature of copyright, sui generis rights, design rights, semi-conductor
topography rights, moral rights, database rights and all other like rights in
all parts of the world whether present or vested future or contingent in any
software, object code, source code, database (including extraction rights),
interface, text, drawing, design, artwork, sound recording, film, video,
photograph, mould, three dimensional artistic work or any other material; all
other intellectual property rights throughout the world for the full term of the
rights concerned and including: all registrations and pending registrations
relating to any such rights and the benefit of any pending applications for any
such registrations; all reversions, extensions and renewals of such rights; and
all accrued rights of action in relation to such rights (including the right to
xxx for and recover damages for past infringements);
"Licences" means the licences, agreements, contracts, permissions,
undertakings and understandings listed in part A of schedule 3 being legal
arrangements pursuant to which the Company is entitled to utilise any
Intellectual Property owned by any third party in the development of Products;
"Licensed Software" means that Software which is used by the Company
pursuant to the Licences;
"Licensors" means the licensors under the Licences;
"Loan Notes" means the loan notes in the agreed form to be issued by
the Purchaser in favour of the Vendor at the date of payment of any Earnout
Consideration;
"Management Accounts" means the management accounts of the Company
comprising the balance sheet as at the Management Accounts Date and the profit
and loss account
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for the months commencing on the day immediately following the Accounts Date and
ending on the Management Accounts Date;
"Management Accounts Date" means 31 July 2000;
"Pension Scheme" means the Checkline Business Machines Limited
Retirement and Death Benefits Scheme insured with Friends Provident Life Office
and established by a Declaration of Trust dated 19 July 1991;
"Products" means all products offered for sale or licensed to third
parties at any time by or on behalf of the Company;
"Property" means the property short particulars of which are set out
in schedule 4;
"Purchaser's Accountants" means Ernst & Young of Ernst & Xxxxx
Xxxxxxxx, Xxxxxxxx Xxxxxx, Xxxxxxxx Xxxxxx, Xxxxxx, Xxxx;
"Purchaser's ADSs" means the American depositary shares of the
Purchaser as traded on the Nasdaq National Market from time to time;
"Purchaser's Group" means the Purchaser and any other company which is
a subsidiary or holding company of the Purchaser (as defined by Section 736 of
the Companies Act);
"Purchaser's Solicitors" means Xxxxxx Xxxxxxx Xxxxxxx of Carmelite, 00
Xxxxxxxx Xxxxxxxxxx, Xxxxxxxxxxx, Xxxxxx XX0X 0XX;
"Restricted Area" means the United Kingdom, Germany and the United
States of America;
"Restricted Business" means the business of electronic payment
solutions;
"Sale Shares" means the issued Deferred Ordinary Shares and the Share
Warrants in the Company;
"Securities Act" means the United States Securities Act of 1933, as
amended;
"Share Warrants" means the issued share warrants of US $1 each in the
capital of the Company as referred to in schedule 1;
"Software" means all computer programs and all related object code and
source code and database used by the Company in connection within its business
and/or Products;
"SSAPs" means the statements of standard accounting practice adopted
by the Accounting Standards Board Limited;
"Supplier" means any supplier (other than utilities in respect of the
supply of services in the ordinary and normal course of their business to their
general body of customers) or
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sub-contractor of the Company in connection with the Restricted Business with
whom the Company has traded during the 12 months immediately prior to
Completion;
"TCGA" means the Taxation of Chargeable Gains Xxx 0000;
"Taxation" has the meaning ascribed to it in the Tax Deed;
"Tax Covenants" means the covenants on the part of the Vendor
contained in the Tax Deed;
"Tax Deed" means the tax covenant between the Purchaser and the Vendor
in the agreed form;
"UK" means the United Kingdom of Great Britain and Northern Ireland;
"Trintech Share Option Scheme" means the Trintech Group plc Share
Option 1997 Scheme;
"VAT" means Value Added Tax chargeable under the VATA or under any
legislation replacing the same or under any legislation which the VATA replaced
and shall further mean Value Added Tax at the rate in force when the relevant
supply is made and any tax of a similar nature which is introduced in
substitution for or as an addition to such tax from time to time and any
penalties or fines in relation thereto;
"VATA" means the Value Added Tax Xxx 0000;
"Vendor's Accountants" means Xxxxxxxxx Xxxxxx of Xxxx Xxxxx, 0000 Xxxx
Xxxx, Xxxxxx, X00 0XX;
"Vendor's Affiliate" means an Affiliate of any Vendor but excludes the
Company;
"Vendor's Solicitors" means EMW Law of Seckloe House, 000 Xxxxx 00xx
Xxxxxx, Xxxxxxx Xxxxxx Xxxxxx XX0 0XX;
"Warranties" means the warranties set out in parts A to E of schedule
5;
"Year 2000 Compliant" means, in relation to the Products, that neither
its performance nor its functionality is or will be affected by dates prior to,
during or after the year 2000, and in particular:
(a) no value for current date causes or will cause any interruption
in its operation;
(b) no value for any date element in any data used as input by the
software cause or will cause any interruption in the operation of the software,
which will either correctly interpret the date element (where it is a valid
date) or else detect and report it as an invalid date and continue processing
accordingly;
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(c) date-based functionality behaves and will behave consistently for
dates prior to, during and after year 2000 and produces and will produce correct
results in accordance with the software's specifications;
(d) in all interfaces and data storage, the century in any date is
and will be specified either explicitly or by unambiguous algorithms or
inferencing rules; and
(e) the year 2000 is and will be recognised as a leap year. In this
agreement references to:
1.2 In this agreement reference to:
(a) an enactment includes a reference
(i) that enactment as amended, extended or applied by or under
any other enactment before the date of this agreement;
(ii) any enactment which that enactment re-enacts (with or
without modification); and
(iii) any subordinate legislation made before the date of this
agreement underenactment, including an enactment referred to in sub-clause
1.2(a)(i) or (ii) above;
(b) the singular includes a reference to the plural and vice versa;
(c) any clause, sub-clause or schedule is to a clause, sub-clause or
schedule (as the case may be) of or to this agreement;
(d) any gender includes a reference to all other gende
(e) persons include all forms of legal entity including individuals,
companies, bodies corporate (wherever incorporated or established or carrying on
business), unincorporated associations, governmental entities and partnerships
and, in relation to any party who is an individual, his legal personal
representative(s);
(f) the words "including", "include" and "in particular" shall be
construed as being by way of illustration only and shall not be construed as
limiting the generality of any foregoing words;
(g) documents "in the agreed form" are to documents in the form of
the draft agreed between the parties to this agreement and initialled by the
parties for the purposes of identification;
(h) reference to writing or similar expressions include transmission
by telecopier or electronic means;
(i) headings are inserted for convenience only and do not effect the
construction of this agreement;
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1.3 In part D of schedule 5 reference to a section only is to a section of
the ICTA, reference to a schedule with a number is to a schedule of ICTA and
reference to an Act followed by a Year 1s to the Finance Act of that year.
1.4 The introduction and schedules form part of this agreement and shall
have the same force and effect as if expressly set out in the body of this
agreement. Accordingly, any reference to this agreement shall include the
introduction and schedules.
2. Sale and Purchase
2.1 The Vendor with full title guarantee shall sell the number of Sale
Shares set out against his name and the name of Xxxx Xxxxxxx in schedule 1 and
the Purchaser shall purchase all right, title and interest in the Sale Shares
with effect from Completion.
2.2 The Sale Shares shall be sold free from all Encumbrances and together
with all rights to dividends and other distributions of whatsoever nature
declared after the date of this agreement in respect of the Sale Shares and all
other rights and advantages belonging to or accruing on the Sale Shares as at
and from that date.
2.3 The Purchaser shall not be obliged to complete the purchase of any of
the Sale Shares unless the purchase of all the Sale Shares is completed
simultaneously.
3. Consideration
3.1 The consideration for the sale of the Deferred Ordinary Shares shall
be the sum of $75,000 and shall be satisfied by way of cash at Completion.
3.2 The consideration for the sale of the Share Warrants shall be the
aggregate of:
(a) the sum of US$38,925,000 (the "Initial Consideration"); and
(b) the Earnout Consideration (if any).
3.3 The Initial Consideration shall be satisfied as follows:
(a) as to US$6,025,000 in cash on Completi
(b) as to US$3,900,000 in cash on Completion to be paid into the
Escrow Account; and
(c) as to US$29,000,000 by the issue of the Consideration Shares.
3.4 The Earnout Consideration shall be calculated and paid in accordance
with the provisions of schedule 7.
3.5 For the avoidance of doubt the Purchaser confirms that the
Consideration Shares shall rank pari passu in all respects with the existing
ordinary shares in the capital of the Purchaser and so far as regards any
dividend declared or paid by reference to a record date falling on or after the
date
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of the registration thereof in the register of members of the Purchaser shall
rank as if they had been issued fully paid on and from the commencement of the
period in respect of which such dividend is paid.
4. Warranties and indemnity
4.1 The Vendor represents and warrants to the Purchaser in relation to the
Company in the terms set out in Schedule 5 and in the knowledge that the
Purchaser is entering into this agreement in reliance upon the accuracy of each
of the Warranties that (subject to the limitations contained in clause 5) the
Warranties are true and accurate subject only to the exceptions Disclosed.
4.2 If there is a breach of any of the Warranties then, in respect of each
such breach and without prejudice to the right of the Purchaser to claim damages
on any basis available to it or to any other right or remedy available to the
Purchaser, the Vendor agree to pay to the Purchaser on demand or in
circumstances where there are sufficient funds in the Escrow Account to
authorise the Escrow Agent to make a payment to the Purchaser in accordance with
the Escrow Agreement such sum as would put the Company into the position which
(after payment of any Taxation payable in respect of the receipt of such sum)
would have existed if there had been no such breach plus all Costs incurred by
the Purchaser or the Company in connection with such breach of the Warranties.
4.3 The benefit of the Warranties may be assigned in whole or in part and
without restriction by the person for the time being entitled to them provided
that no assignee shall be entitled to a greater sum of damages or other
compensation than the sum to which the Purchaser would have been entitled had it
not assigned the benefit of the Warranties.
4.4 Each of the Warranties shall be construed as a separate and
independent warranty and (save as expressly provided to the contrary in clause
5) shall not be governed, limited or restricted by reference to or inference
from any other terms of this agreement, the Tax Deed or any other Warranty.
4.5 Any payments made by the Vendor to the Purchaser in respect of claims
under the Warranties or under the Tax Covenants shall so far as possible be
treated by the parties as a reduction in the consideration for the Sale Shares.
4.6 Where any of the Warranties is qualified by the expression "so far as
the Vendor is aware" or any similar expression, the Vendor shall be deemed to
have such additional awareness as the Vendor would have after having made all
due, diligent and careful enquiry.
4.7 The Vendor hereby agrees with the Purchaser (for itself and as trustee
for the Company) to waive any right which it may have in respect of any
misrepresentation, inaccuracy or omission in or from any information or advice
supplied or given by the Company or any of its officers and employees or
advisers in enabling the Vendor to give the Warranties, to prepare the
Disclosure Letter and to enter into this agreement and the Tax Deed and
undertakes not to make any claim in respect of such reliance.
4.8 The rights and remedies of the Purchaser in respect of any breach of
this agreement shall not be affected by any investigation made by or on behalf
of the Purchaser into the affairs of
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the Company or actual or constructive knowledge on the part of the Purchaser or
its agents or advisers or by any other event or matter whatsoever, except a
specific and duly authorised written waiver or release given by the Purchaser
and except as otherwise expressly provided in this agreement in relation to the
Disclosure Letter.
4.9 The Vendor shall indemnify the Purchaser and the Company and keep
indemnified the Purchaser and the Company against all Costs arising under or in
respect of:
(a) any claim against the Company or the Purchaser by any broker,
finder, financial adviser or other person retained by the Vendor or the Company
in connection with this agreement or the transactions effected by this
agreement; or
(b) any claim against the Company or the Purchaser arising from any
breach of warranty 1, warranty 2 (a) in part A of schedule 5 insofar as such
claim relates to the Sale Shares or warranty 2 (b), 2 (c) or 2(d) or 3 of Part A
of schedule 5; or
(c) any claim against the Company or the Purchaser arising from or in
connection with the ownership of Sale Shares previously owned by Bathford Trust;
or
(d) any claim against the Company or the Purchaser in relation to a
breach of paragraph 12 of part B of schedule 5;
(e) any claim against the Company or the Purchaser arising from or in
connection with the pension scheme established by the trust deed dated 23
January 1995 and made between Checkline Business Machines Limited and Xxxxxx
Xxxxxxx, Xxxx Xxxxxxx and Xxxxxx and Co Trustees Limited;
(f) any claim that Xxxx Xxxxxxx makes against the Company or the
Purchaser pursuant to her employment with the Company which was terminated on 22
August 2000;
(g) any claims against the Company or the Purchaser in respect of any
arrangements between the Vendor and Xxxxxxxx Xxxxxx whereby the Vendor directs
that any of the consideration received pursuant to this agreement is paid to
Xxxxxxxx Xxxxxx.
4.10 All sums payable by the Vendor under this agreement shall be paid free
and clear of all deductions or withholdings unless the deduction or withholding
is required by law.
4.11 If any payment made by the Vendor in relation to a claim for breach of
Warranty will be or has been subject to Taxation in the hands of the Purchaser,
the Purchaser may demand in writing from the Vendor such sum (after taking into
account any Taxation payable in respect of such sum) as will ensure that the
Purchaser receives and retains a net sum equal to the sum which it would have
received had the payment not been subject to Taxation. The Vendor shall pay any
sum which is demanded pursuant to this sub-clause 4.11 within two Business Days
of service of such demand.
4.12 The Purchaser represents and warrants to the Vendor in the terms set
out in schedule 10 and in the knowledge that the Vendor is entering into this
agreement in reliance upon the accuracy of the warranties that the warranties
are true and accurate.
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5. Limitations
5.1 Notwithstanding any other provision of this agreement, no limitations
of any kind whatsoever shall apply to any claim under this agreement or under
the Tax Deed against the Vendor:
(a) which is (or the delay in discovery of which is) the consequence
of any fraud, dishonesty or deliberate concealment as determined by a court of
law on the part of any of the Vendor, his agents or advisers;
(b) which is the result of a breach of any Warranty in part A of
schedule 5;
(c) which is a claim under clause 4.9 other than clause 4.9(d) in
which event the following limitations shall apply:
(i) for the purposes of paragraph 1.2(a) of schedule 9 the
amount shall be equal to the aggregate of the following amounts:
(a) the sum of $10,000,000;
(b) the proceeds of any sale of any of the Consideration
Shares/or any American Depositary Shares into which they have been converted
before the date on which the Vendor is notified of a claim under the indemnity
in clause 4.9(d); and
(c) the market value of the Consideration Shares and any
American Depository Shares into which they have been converted for which
purposes the Nasdaq closing price of the Purchasers American Depositary Shares
on the date of any such claim shall be used;
(ii) the two year limitation period in paragraph 1.3 shall apply.
5.2 The provisions of schedule 9 shall apply so as to limit the liability
of the Vendor to any claim under this Agreement or under the Tax Deed.
5.3 No term of this agreement is enforceable under the Contracts (Rights
of Third Parties) Xxx 0000 by a person who is not a party to this agreement.
6. Completion
6.1 The sale and purchase of the Sale Shares shall be completed at the
offices of the Purchaser's Irish solicitors at 2.00pm on 24 August 2000 (or at
such other time or place as the parties shall agree).
6.2 On Completion the Vendor shall deliver or cause to be delivered to the
Purchaser:
(a) duly executed stock transfer forms in respect of the Sale Shares
together with the related share certificates (such stock transfer forms to be in
favour of the Purchaser or its nominees, as the Purchaser shall direct) together
with such waivers, consents, or other documents as
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the Purchaser may require to enable it or its nominees to be registered as the
holders of the Sale Shares free from all Encumbrances and other adverse rights
whatsoever;
(b) an acknowledgement from the Vendor to the Purchaser and the
Company executed as a deed to the effect that save in relation to remuneration
or reimbursement of expenses incurred in relation to his or her employment,
there is no outstanding indebtedness owing at Completion from the Company to
such Vendor or to any such Vendor's Affiliate or vice versa;
(c) letter of resignation from Xxxxx Xxxxxx and Xxxxxx St. Xxxxxx as
directors of the Company;
(d) the statutory books of the Company complete and accurate up to
Completion and any company seal, certificates of incorporation, certificates of
incorporation on change of name and all unused share certificates of the Company
and all cheque books of the Company;
(e) the Tax Deed duly executed by the Vendor;
(f) the Disclosure Letter;
(g) revised service agreements in the agreed form between the Company
and Xxxxxx Xxxxxxx, Xxxxxxxx Xxxxxx duly executed by the parties;
(h) the Escrow Agreement duly executed by the Vendor and the Vendor's
Solicitors;
(i) the written resignation of the auditors of the Compa
(j) the title deeds and documents to the Properties;
(k) letter of non-crystallisation in the agreed form executed by
NatWest Bank plc.
6.3 On Completion the Vendor shall procure the holding of a meeting of the
directors of the Company at which the directors of the Company shall:
(a) (subject to stamping) approve the transfers to the Purchaser (or
its nominee(s)) of the Sale Shares;
(b) appoint Xxxx Xxxxx, Xxxxx Xxxxxxxx. Xxxx Xxxxxxxx and Xxxxx Xxxx
as additional directors of the Company;
(c) accept the resignations referred to in sub-clauses 6.2(c) and (i)
relating to the Company;
(d) approve the documents referred to in sub-clause 6.2(g) and
authorise one or more of the directors referred to in sub-clause (b) of this
clause to execute the same on behalf of the Company;
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(e) cancel the existing mandates to the Company's bankers and replace
them with new mandates as requested by the Purchaser; and
(f) pass any other resolutions reasonably requested by the Purchas
6.4 On Completion the Purchaser shall deliver to the Vendor or to the
Vendor's Solicitors (whose receipt shall be a sufficient discharge):
(a) a counterpart of the Tax Deed duly executed by the Purchas
(b) a counterpart of the Escrow Agreement duly executed by the
Purchaser and the Purchaser's Solicitors.
6.5 On Completion the Purchaser shall on account of its obligations under
sub-clause 3.2:
(a) cause the sum of US$4,980,000 to be paid by electronic funds
transfer to the bank account of the Vendor;
(b) (at the direction of the Vendor) cause the sum of US$1,120,000 to
be paid by electronic funds transfer to the bank account of Xxxx Xxxxxxx;
(c) cause the sum of US$3,900,000 in cash to be paid by electronic
funds transfer to the bank account of the Escrow Agent; and
(d) allot the Consideration Shares to the Vendor (or at his
direction) enter their names into the register of members of the Purchaser and
issue share certificates in their names,
and payment made in accordance with this clause shall constitute a good
discharge for the Purchaser of its obligations under clauses 3.2(a) and 3.2(c).
6.6 On or as soon as practicable after Completion the Purchaser shall
offer options vesting over two years and otherwise pursuant to the Trintech
Share Option Scheme to each of the individuals set out in schedule 8 over such
number of ordinary shares in the Purchaser as is equal to the sum set out
against their name to be determined by dividing such number by twice the average
Nasdaq closing price of the Purchaser's ADSs over the ten (10) trading days
prior to Completion.
6.7 On or as soon as practicable after Completion the Purchaser shall
offer options vesting over four years and otherwise pursuant to the Trintech
Share Option Scheme to such employees of the Company as shall be proposed by the
board of directors of the Company over the equivalent of 100,000 American
Depositary Shares in the Purchase.
7. Post-Completion
7.1 The Vendor shall and shall procure that any other necessary party
shall execute and do all such documents acts and things as may be reasonably
required on or subsequent to
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Completion by the Purchaser for securing to or vesting in the Purchaser the
legal and beneficial ownership of the Sale Shares.
7.2 The Vendor:
(a) irrevocably appoints the Purchaser to be his attorney to exercise
in the absolute discretion of the Purchaser all rights attaching to the Sale
Shares registered in his name or exercisable by him in his capacity as a member
of the Company, and without prejudice to the generality of the foregoing the
powers exercisable by the Purchaser shall include the power to execute, deliver
and do all deeds, instruments and acts in that Vendor's name and on that
Vendor's behalf in pursuance of the foregoing, and shall include the power to
sub-delegate this power;
(b) undertakes and agrees that, other than at the written request of
the Purchaser, he shall not exercise any rights attaching to the Sale Shares or
exercisable by that Vendor in his or her capacity as a member of the Company or
appoint any other person to exercise such rights;
(c) undertakes and agree that any dividends, securities or notices,
documents or other communications which may be received after today's date by
that Vendor from the Company or any third party in respect of the Sale Shares or
in that Vendor's capacity as a member of the Company shall be received by that
Vendor and held in trust for the Purchaser and, without prejudice to the
generality of the obligations imposed by the foregoing, undertakes and agrees
promptly to procure the forwarding to the Purchaser of all such benefits or
communications and to account to the Purchaser for all benefits arising from the
Sale Shares registered in his name and/or from that Vendor's capacity as a
member of the Company;
(d) agrees and undertakes upon written request by the Purchaser to
ratify all deeds, instruments and acts exercised by the Purchaser in pursuance
of this power;
(e) agrees that in acting under this power the Purchaser may act by
its secretary or any director or person acting pursuant to authority conferred
by its board of directors or any director; and
(f) declares that such power, undertaking and agreement shall cease
and determine upon that Vendor ceasing to be a member of the Company, but
without prejudice to any power exercised prior to such date and shall not, save
as may be required by law, terminate on that Vendor's previous death, bankruptcy
or mental disorder, and shall, save as aforesaid, in connection with the Sale
Shares be accordingly binding upon any personal representative, trustee in
bankruptcy or trustee in respect of any mental disorder.
7.3 Each of the Vendor undertakes not to sell, offer to sell, grant an
option to purchase or otherwise transfer or dispose of ("Transfer") his or her
Consideration Shares during the period of 180 days from Completion. Thereafter,
each Vendor shall not transfer more than:
(a) 10% (in aggregate) of his or her Consideration Shares after 180
days of Completion but within 360 days;
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(b) 30% ( in aggregate) of his or her Consideration Shares after 360
days of Completion but within 725 days.
After the second anniversary following Completion, the Vendor shall be free to
Transfer any or all of their Consideration Shares.
7.4 The Vendor acknowledge that the Purchaser will be entitled to refuse
to register any subsequent transfer of the Consideration Shares if such transfer
is not made in accordance with Regulation S of the Securities Act, pursuant to
registration under the Securities Act or pursuant to an available exemption from
registration under the Securities Act. The Vendor acknowledge that they are
aware of the provisions of Rule 144 promulgated under the Securities Act which
permits limited resale of shares subject to the satisfaction of certain
conditions, which include, among other things, the resale occurring not less
than one year after a party has purchased and paid for the security to be sold,
the sale being effected through a "brokers transaction" or in transactions
directly with a "market maker "and the number of shares being sold during any
three month period not exceeding specified limitations.
7.5 As soon as practicable after Completion and in any event no later than
6 months following Completion, the Purchaser shall procure that a resolution is
passed to change the name of the Company to Trintech UK Limited, or other such
name as the Purchaser may decide.
7.6 With a view to making available to the Vendor the benefits of certain
rules and regulations of the Securities and Exchange Commission which may permit
the sale of the Consideration Shares to the public without registration, the
Purchaser agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Securities and Exchange
Commission in a timely manner all reports and other documents required of the
Purchaser under the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); and
(c) so long as the Vendor owns any Consideration Shares, co-operate
with the Vendor in providing information necessary to effect a sale, including
furnishing to the Vendor forthwith upon request a written statement by the
Purchaser as to its compliance with the reporting requirements of the Securities
Act (including Rule 144 promulgated under such Act) and the Exchange Act and a
copy of the most recent annual or quarterly report of the Purchaser filed with
the Securities and Exchange Commission.
8. Restrictions
8.1 By way of further consideration of the Purchaser agreeing to purchase
the Sale Shares from the Vendor, the Vendor covenants with the Purchaser that he
will not whether alone or jointly with or as agent of any person or persons
directly or indirectly:
(a) for the period stated in column (a) of schedule 6 opposite his
name after Completion:
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(i) take up or hold any office in or with any business which is
engaged in the Restricted Business within the Restricted Area;
(ii) take up or hold any post or position which enables or
permits that Vendor to exercise whether personally or by an agent and whether on
his own account or in association with or for the benefit of any other person a
controlling influence over any business which is engaged in the Restricted
Business within the Restricted Area;
(iii) take up or hold any employment or consultancy with any
person which is engin the Restricted Business within the Restricted Area,
which results in that Vendor being engaged in business activities which are in
competition with the Restricted Business provided that the Vendor shall not be
precluded from being employed or otherwise engaged by a company whose activities
include the Restricted Business so long as that Vendor will not be directly or
indirectly employed in, engaged in or otherwise responsible for the Restricted
Business;
(b) for the period stated in column (b) of schedule 6 opposite his
name after Completion and within the Restricted Area either personally or by an
agent and either on his own account or by an association with any other person
or otherwise directly or indirectly engage in any capacity in any business
concern (of whatever kind) which shall be in competition at Completion with the
Restricted Business;
(c) for the period stated in column (c) of schedule 6 opposite his
name after Completion and within the Restricted Area either personally or by an
agent and either on his own account or by or in association with any other
person directly or indirectly canvass, solicit, approach or seek out or cause to
be canvassed, solicited, approached or sought out or by any other means
endeavour to entice away from the Company any person for orders or instructions
in respect of any goods or services provided to or supplied by the Company in
the course of the Restricted Business and with whom the Company has transacted
at any time during the period of twelve months prior to Completion as a Customer
or as a Supplier;
(d) for the period stated in column (d) of schedule 6 opposite his
name after Completion either personally or by an agent and either on his own
account or for or in association with any other person directly or indirectly
canvass, solicit, approach, seek out, or cause to be canvassed, solicited,
approached or sought out or by any other means endeavour to entice away from the
Company, or aid or assist any other person or persons in employing or otherwise
retaining the services of anyone who is employed by the Company or who is a
consultant to the "Company at Completion and who is at Completion employed or
engaged in or about one or more of the following:
(i) research and developme
(ii) sales, marketing, maintenance or distribution including
establishing or maintaining relationships or dealings with Customers;
but shall not include any person performing the functions of junior
administrative or secretarial staff;
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(e) for the period stated in column (e) of schedule 6 opposite his
name after Completion either represent himself or hold himself out to be in any
way connected with or interested in the Restricted Business of the Company.
8.2 The Vendor shall not at any time and whether directly or indirectly
use in connection with any competing business the name of CHECKLINE or any name
resembling the same or capable of confusion with such name provided that the
Vendor shall be entitled to use the name Checknet in relation to a non-competing
business.
8.3 The Vendor hereby acknowledges and declares that the restrictions in
clauses 8.1 and 8.2 are reasonable in all the circumstances as at today's
date; that such restrictions are integral to the terms on which the Purchaser
has agreed to purchase the Sale Shares; and that each of such restrictions shall
be construed and take effect independently of the others.
8.4 If any breach or violation of the provisions of clauses 8.1 and 8.2
occurs, the Vendor and the Purchaser agree that damages alone are likely not to
be sufficient compensation and that injunctive relief is reasonable and is
likely to be essential to safeguard the interests of the Purchaser and of the
Company and that injunctive relief (in addition to any other remedies afforded
by a court of equity) may (subject to the discretion of the courts) be obtained.
No waiver of any breach or violation shall be implied from forbearance or
failure by the Purchaser to take action.
8.5 At any time after Completion while he is acting as a director,
consultant or employee of the Company in accordance with the terms of the
agreements referred to in sub-clause 6.2(h), Xxxxxx Xxxxxxx shall not, by
virtue of such fact, be treated as committing a breach or violation of the
provisions of clauses 8.1 (a) or 8.2 provided always that the periods stated in
schedule 6 opposite his name should commence from the later of the date upon
which he ceases to be a director, consultant or employee of the Company.
9. Confidentiality
9.1 The Vendor acknowledges that he has been exposed to information about
the Company which is either a trade secret, confidential or commercially
sensitive and which may not be readily available to others engaged in a similar
business to that of the Company or to the general public and which if disclosed
may cause harm to the Company or the Purchaser.
9.2 The Vendor shall keep secret and shall not at any time, for whatever
reason, use communicate or reveal to any person for his own or another's
benefit, any Company Confidential Information which shall have come to his
knowledge prior to Completion. The Vendor shall as soon as reasonably
practicable inform the Purchaser of any disclosure or use of any such
information of which he becomes actually aware knowing it to be Company
Confidential Information.
9.3 The restrictions contained in sub-clause 9.2 shall not apply to:
(a) any disclosure or use authorised in writing by the Purchaser or
required in the ordinary and proper course of the particular Vendor's service
agreement with the Company or in or as required law or any securities exchange,
regulatory or government body; or
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(b) any information which was known to the Vendor concerned prior to
the commencement of his employment or engagement by the Company or is in the
public domain otherwise than as a result of a breach of this clause.
9.4 Except:
(a) as may be required by law or in the case of the Purchaser by any
securities exchange, regulatory or government body; or
(b) as may be required to vest the full benefit of this agreement in
the Purchaser, including informing any employee, consultant, trade contact or
customer connection of the Company or of the Purchaser of the change of
ownership of the Company,
the provisions of this agreement and all negotiations relating to this agreement
are strictly confidential and no announcement or disclosure of or publicity
relating to the sale and purchase hereunder and terms of this agreement shall be
made by the parties to any third party (other than their professional advisers)
without the written agreement of the other parties.
10. Competition Xxx 0000
10.1 The Vendor shall forthwith upon request provide to the Purchaser all
such information and assistance as the Purchaser may reasonably require in
connection with any application for guidance under sections 13 or 21 or for a
decision under sections 14 or 22 of the Competition Xxx 0000 considered
necessary or desirable by the Purchaser in respect of this agreement or any
agreement or concerted practice of which it forms part.
10.2 The Vendor shall forthwith give notice to the Purchaser of any notice
given to it under Schedule 1, paragraph 4(2) of the Competition Act 1998
pertaining to the Company or this agreement or any agreement or concerted
practice of which it forms part. The Vendor and the Purchaser shall co-operate
in good faith in order to enable the Purchaser to respond fully and completely
to any such notice within 10 Business Days of receipt.
11. Notices
11.1 Any notice or other written communication given under or in
connection with this agreement may be delivered personally or sent by prepaid
recorded delivery or registered post or by facsimile to the address and for
the attention of the relevant party set out in sub-clause 11.2 (or such other
address in England as is otherwise notified from time to time).
11.2 The addresses of the parties for the purpose of sub-clause 11.1 are
as follows:
The Vendor: 000 Xxxxx Xxxx, Xxxxxxxxx, Xxxxxx X00 0XX.
The Purchaser: Trintech Group Plc
Xxxxx Xxxxxx Xxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxx 00
(marked "For the attention of Xxxx Xxxxx")
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11.3 Any such notice or other written communication shall be deemed to
have been served:
(a) if delivered personally, at the time of delive
(b) if posted, at the expiry of two Business Days after it was post
(c) if posted overseas, at the expiry of five Business Days after it
was posted by air mail;
(d) if sent by facsimile message, at the time of transmission (if
sent during Business Hours) or (if not sent during Business Hours) at the
beginning of Business Hours next following the time of transmission in the place
to which the facsimile was sent.
11.4 In proving such service it shall be sufficient to prove that personal
delivery was made, or that such notice or other written communication was
properly addressed stamped and posted or in the case of a facsimile message that
an activity or other report from the sender's facsimile machine can be produced
in respect of the notice or other written communication showing the recipient's
facsimile number and the number of pages transmitted.
12. Miscellaneous
12.1 Each party shall bear its own costs incurred in the negotiations
leading up to and in the preparation of this agreement and of matters incidental
to this agreement.
12.2 This agreement shall so far as it remains to be performed after
execution continue in full force and effect notwithstanding Completion and, in
particular, the rights and remedies of the Purchaser in respect of the
Warranties and/or the Tax Deed shall not be affected by Completion.
12.3 No term or provision of this agreement shall be varied or modified by
any prior subsequent statement, conduct or act of any party, except that the
parties may amend this agreement but only by letter or written instrument signed
by all of the parties.
12.4 No waiver by any of the parties to this agreement of any requirements
of this agreement or of any of such party's rights under this agreement shall be
valid unless such waiver is in writing and signed by or on behalf of each of the
parties to this agreement.
12.5 No failure to exercise, and no delay in exercising, on the part of
either party any right or remedy under this agreement shall operate as a waiver
of such right or remedy nor shall any single or partial exercise of any right or
remedy preclude the exercise of any other right or remedy.
12.6 The rights and remedies conferred on the Purchaser in this agreement
are cumulative and in addition to and without prejudice to all other rights and
remedies available to the Purchaser.
12.7 The headings to the clauses in this agreement and in the schedules
are for ease of reference only and shall not form any part of this agreement for
the purposes of construction.
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12.8 This agreement and the documents to be delivered on Completion as set
out in clause 6:
(a) set out the entire agreement and understanding between the
parties in respect of the sale and purchase of the Shares; and
(b) (in relation to such subject matter) supersede all prior
discussions, understandings, undertakings, promises, conditions, covenants,
undertakings and agreements between the parties and their agents (or any of
them) and all prior representations, warranties and expressions of opinion by
any party (or its agent) to any other party (or its agent).
12.9 It is acknowledged and agreed that:
(a) no party has entered into this agreement in reliance upon any
representation, warranty, promise, condition, covenant, indemnity or undertaking
of any other party which is not expressly set out in this agreement;
(b) no party shall have any claim or remedy in respect of
misrepresentation or breach of warranty (whether negligent or otherwise) or any
untrue statement made by any other party save to the extent set out in or
expressly incorporated in this agreement and each party irrevocably and
unconditionally waives any right which it may have to claim damages for any
misrepresentation (other than a misrepresentation contained in this agreement)
or for breach of any express or implied warranties (other than a warranty set
out in or expressly incorporated in this agreement),
provided that this clause shall not exclude or limit any right of the
Purchaser in relation to fraudulent misrepresentation or other breach of this
agreement arising out of any matter referred to in clause 5.1(a).
12.10 This agreement may be entered into in any number of counterparts and
by the parties to it on separate counterparts, each of which when so executed
and delivered shall be an original, but all the counterparts shall together
constitute one and the same instrument.
12.11 If at any time any term or provision in this agreement shall be held
to be illegal, invalid or unenforceable, in whole or in part, under any rule of
law or enactment, such term or provision or part shall to that extent be deemed
not to form part of this agreement, but the enforceability of the remainder of
this agreement shall not be affected.
12.12 This agreement shall be binding on and shall enure for the benefit
of the personal representatives and successors of the parties.
13. Law and Jurisdiction
13.1 This agreement shall be governed by and construed in accordance with
English law and each party to this agreement submits to the exclusive
jurisdiction of the English courts.
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13.2 The Vendor and the Purchaser agree that any legal action or
proceeding arising out of or in connection with this agreement may be brought in
the High Court of Justice in England, and the Vendor and the Purchaser hereby
irrevocably submit to the exclusive jurisdiction of such court in connection
with any such legal action or proceedings.
The parties to this agreement have signed and entered into this agreement as a
deed on the date and year first written above.
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SCHEDULE 7
Earn out Consideration
Part A
1.1 Within 60 days of the Earnout Consideration Accounts of the Company
being approved in the manner set out in paragraph 2 below, the Purchaser shall
pay to the Vendor the Earnout Consideration set out in column 3 of the table
below subject to paragraphs 1.2 to 1.6 and provided the Earnout Consideration
Accounts confirm that the Company has achieved the targets set out in column 2
of the tables below:
Revenue Targets
DATE PERFORMANCE TARGET EARN OUT CONSIDERATION
-------------------------------------------------------------------------------------------
31 March 2001 M1 - (Pounds)8.3m US$0.4m
-------------------------------------------------------------------------------------------
M2 - (Pounds)9.7m US$0.8m
-------------------------------------------------------------------------------------------
M3 - (Pounds)12.2m US$0.4m
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
31 March 2002 M1 - (Pounds)17.5m US$0.4m
-------------------------------------------------------------------------------------------
M2 - (Pounds)17.5m US$0.8m
-------------------------------------------------------------------------------------------
M3 - (Pounds)19.1m US$0.4m
-------------------------------------------------------------------------------------------
Profit Targets
DATE PERFORMANCE TARGET EARN OUT CONSIDERATION
-------------------------------------------------------------------------------------------
31 March 2001 M1 - (Pounds)1.1m US$0.2m
-------------------------------------------------------------------------------------------
M2 - (Pounds)l.9m US$0.5m
-------------------------------------------------------------------------------------------
M3 - (Pounds)3.8m US$0.2m
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
31 March 2002 M1 - (Pounds)3.8m US$0.2m
-------------------------------------------------------------------------------------------
M2 - (Pounds)3.8m US$0.5m
-------------------------------------------------------------------------------------------
M3 - (Pounds)5.7m US$0.2m
-------------------------------------------------------------------------------------------
For the avoidance of doubt, all performance targets are cumulative so that
the Vendor will be entitled to the Earnout Consideration in column 3 every time
one of the performance targets in column 2 is achieved.
The amounts set out above in respect of the Earnout Consideration shall
each be reduced by such proportion as equals the proportion that the maximum
aggregate payments under the Earnout Consideration Bonus Scheme bears to the sum
of US $5,000,000.
1.2 The performance of M3 targets assumes that the Purchaser delivers the
following items to the Company:
(a) an existing ISO8583 interface file for integration by the
Company's development staff into the Company's range of products;
(b) an existing Trintech Compact 9000 terminal and the existing
software development kit for customisation for the target markets by the
Company's development staff;
(c) confirmation of the availability of the Purchaser's Payware e-
Issuer product for resale by the Company in the UK,
collectively "the deliverables" and should the Purchaser fail to deliver the
deliverables within:
(i) 30 days of Completion, the performance targets shall be
adjusted so that the performance targets for Year 1, M3 shall be the same as for
Year 1, M2; and
(ii) 100 days of Completion, the performance targets shall be
adjusted so that the performance targets for Year 2, M3 shall be the same as for
Year 2, M2.
1.3 In the event that the Company fails to achieve both of the M1 profits
and revenue targets in Year 1 and Year 2 and fails to achieve both of the M1
profits and revenue target in Year 1 and Year 2 then only then the Purchaser
shall be entitled to a sum equal to US$390,000 (the "claw back sum") from the
Vendor which may at the Purchaser's option be satisfied by way of deduction from
the funds held in the Escrow Account. In the event that the Purchaser does not
elect to deduct the claw back sum from the Escrow Account, the Vendor shall pay
to the Purchaser the claw back sum within 60 days of notice being given by the
Purchaser to the Vendor that M1 has not been achieved. For the avoidance of
doubt, if the Company exceeds either M1 target in Year 1, this provision shall
cease to apply.
1.4 In the event that the Company exceeds the profit targets for M3 in
Year 1 or Year 2, the Purchaser shall pay to the Vendor a sum equal to 50% of
any profit in excess of the M3 (as the case may be) before tax and such sum
shall be added to the Year 1 Earnout Consideration or the Year 2 Earnout
Consideration, as the case may be.
1.5 Any excess over any of the performance targets in Year 1 which is not
taken into account in calculating the Year 1 Earnout Consideration shall be
added to the revenue or profit in Year 2, as the case may be, following the
agreement of the Earnout Consideration Accounts for Year 2 in accordance with
paragraph 2 and before any payment is made pursuant to paragraph 1.7.
1.6 Any excess over any of the performance targets in Year 2 which is not
taken into account in calculating the Year 2 Earnout Consideration shall be
added to the revenue or profit in Year 1, as the case may be, and the Purchaser
shall procure that the Earnout Consideration Accounts for Year 1 are adjusted
and delivered to the Vendor and to the Vendor's accountant for settlement in
accordance with paragraph 2.
-2-
1.7 Any such payment made pursuant to this paragraph:
(a) shall be paid within 60 days of the relevant Earnout
Consideration Accounts being approved; and
(b) shall be satisfied by the issue of Loan Notes equal to the amount
of the Year 1 Earnout Consideration and the Year 2 Earnout Consideration, as the
case may be, and of any such amounts a Loan Note equal to 88.8% thereof shall be
issued and delivered to the Vendor and a Loan Note equal to 11.2% thereof shall
be issued and delivered as the Vendor shall direct.
2. The Year 1 and Year 2 Earnout Consideration shall be determined as follows:
2.1 The Purchaser shall procure that, as soon as reasonably practicable
following the end of Year 1 or Year 2 (as the case may be) (and in any event
within 90 days of the end of Year 1) or Year 2 (as the case may be) the draft
Earnout Consideration Accounts are prepared in accordance with the general
principles, accounting policies and procedures set out in part B of this
schedule and delivered to the Vendor and to the Vendor's Accountants);
2.2 The Vendor shall procure that the Vendor's Accountants shall notify
the Purchaser within 30 days of receipt of such draft Earnout Consideration
Accounts whether or not he accepts them for the purposes of this agreement;
2.3 If the Vendor's Accountants notify the Purchaser that the Vendor does
not accept such draft Earnout Consideration Accounts:
(a) the Vendor shall procure that the Vendor's Accountants shall set
out in detail reasons for such non-acceptance and specify the adjustments which,
in their opinion, should be made to the draft Earnout Consideration Accounts in
order to comply with the requirements of this agreement; and
(b) the parties shall use all reasonable endeavours to meet and
discuss the objections of the Vendor's Accountants and to reach agreement upon
the adjustments (if any) required to be made to the draft Earnout Consideration
Accounts.
2.4 If the Vendor's Accountants are satisfied with the draft Earnout
Consideration Accounts (either as originally submitted or after adjustments
agreed between the Vendor's Accountants and the Purchaser) or if the Vendor's
Accountants fails to notify the Purchaser in writing of the Vendor's non-
acceptance of the draft Earnout Consideration Accounts within the 30 day period
referred to in paragraph 2.2, then the draft Earnout Consideration Accounts
(incorporating any agreed adjustments) shall be deemed to constitute the Earnout
Consideration Accounts for the purposes of this Part A.
2.5 If the Vendor's Accountants and the Purchaser do not reach agreement
within 30 days of the Vendor's Accountants notice of non acceptance under
paragraph 2.3, then the matters in dispute shall be referred, on the application
of either party, for determination by an independent firm of internationally
recognised chartered accountants to be agreed upon by the Vendor and the
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Purchaser or, failing agreement, to be selected by the President for the time
being of the Institute of Chartered Accountants in England and Wales. The
following terms of reference shall apply:
(a) the Purchaser and the Vendor's Accountants shall each promptly
prepare a written statement on the matters in dispute which (together with the
relevant documents) shall be submitted to such independent firm for
determination;
(b) in giving such determination the firm shall state what
adjustments (if any) are necessary to the draft Earnout Consideration Accounts
in respect of the matters in dispute in order to comply with the requirements of
this agreement;
(c) any such firm shall act as an expert (and not as an arbitrator)
in making any such determination which shall be final and binding on the
parties;
(d) the expenses of any such determination by an independent firm of
accountants shall be borne between the Vendor's Accountants and the Purchaser in
such proportions as the firm shall in its discretion determine.
2.6 When the Vendor's Accountants and the Purchaser reach (or pursuant to
paragraph 2.4 are deemed to reach) agreement on the Earnout Consideration
Accounts or the Earnout Consideration Accounts are finally determined at any
stage in the procedures set out in this paragraph 2, then the Earnout
Consideration Accounts as so agreed or determined shall be the Earnout
Consideration Accounts for the purposes of this Part A and shall be final and
binding on the parties.
2.7 The Purchaser shall use all reasonable endeavours to ensure that the
Company and all other members of the Purchaser's Group provide the Vendor and
the Vendor's Accountants with such access to the employees, accounts, working
papers and other financial information of the relevant company as is reasonably
necessary for the purposes of determining the Year 1 and Year 2 Earnout
Consideration.
3. In the event that at any time prior to 31 March 2002 the service agreement
of the Vendor is terminated by the Company for any reason other than by reason
of an event entitling the Company to lawfully terminate the Vendor's service
agreement summarily then notwithstanding the provisions of this schedule 7, the
Earnout Consideration shall be adjusted as follows:
(a) if termination occurs at any time prior to 1 April 2001 the Year
1 Earnout Consideration shall be the aggregate of the following:
(i) the Relevant Proportion of the Year 1 Earnout Considerati
(ii) the maximum amount of the Year 1 Earnout Consideration that
the Vendor could have received for the period commencing on the date following
the date of termination of his service agreement and ending on 31 March 2001;
and
(iii) the maximum amount of the Year 2 Earnout Considerat
-4-
and such amount shall be paid following the determination of the Year 1 Earnout
Consideration pursuant to paragraph 2;
(b) if termination occurs at any time prior to 1 April 2002 the Year
2 Earnout Consideration shall be the aggregate of the following:
(i) the Relevant Proportion of the Year 2 Earnout Consideration;
(ii) the maximum amount of the Year 2 Earnout Consideration that
the Vendor could have received for the period commencing on the date following
the date of termination of his service agreement and ending on 31 March 2002
and such amount shall be paid following the determination of the Year 2 Earnout
Consideration pursuant to paragraph 2.
4. After Completion the Purchaser shall establish a bonus scheme for the
benefit of certain employees of the Company (to be agreed between the Vendor and
Purchaser) under which the amount of bonus payable and the time for payment
shall be calculated and paid in the same manner as the calculation and payment
of the Earnout Consideration provided always that the bonus shall be satisfied
in cash and provided that the maximum amount payable under the scheme is
$1,049,000.
5. Save with the written consent of the Vendor (such consent not to be
unreasonably withheld or delayed in the event of the Vendor and the Purchaser
agreeing to an appropriate adjustment to the Earnout Consideration Accounts) the
Purchaser shall procure that the Company shall not petition for the liquidation
of the Company or permit or procure the passing of a resolution to wind-up the
Company voluntarily.
6. The Purchaser shall not, in relation to the Company, take any action with
the express intention of restricting the ability of the Company to earn such
level of profits and turnover which the Company might reasonably have expected
to have earned in the normal and ordinary course of business as envisaged by the
Business Plan.
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Part B
1. The following provisions shall apply for the purpose of calculating the Year
1 and Year 2 Earnout Consideration Accounts:
(a) no account shall be taken of extraordinary ite
(b) capital receipts and expenditure, otherwise than from the
disposal or acquisition of fixed assets (but not plant and machinery) in the
ordinary course of business as carried on up to Completion shall be disregarded
save that any interest earned or saved in consequence of the same shall be taken
into account and calculated in accordance with paragraph 1( );
(c) depreciation attributable to any revaluation of plant and
machinery or freehold property or other capital assets made after Completion or
any capital receipt or expenditure referred to in paragraph l(b) shall be
disregarded;
(d) to the extent that the Company shall be required to pay any
management or administration charge or charge for goods or services or any
facility to any member of the Purchaser's Group and (i) the amount of such
charges exceeds the amount which the company in question would have had to pay
on an open market arm's length basis or (ii) the goods or services or facility
in question were not required by the company in question (or would not have been
required had such company not been a subsidiary of any member of the Purchaser's
Group the Earn Out Consideration Accounts shall be adjusted to eliminate such
excess:
(e) to the extent that the Company shall be required to provide goods
or services or any facility to any person and the amount payable for such goods
services or facilities is less than the amount that the Company would have been
likely to obtain on an open arms length basis, the Earn Out Consideration
Accounts shall be adjusted to eliminate such deficit or loss;
(f) notwithstanding the actual cost of funds, interest on all
borrowings including all sums loaned from any company in the Purchaser's Group
(otherwise than under hire-purchase or lease agreements) shall be deemed to
accrue at a yearly rate of 2 per cent. above the base rate of National
Westminster Bank plc from time to time in force;
(g) no account shall be taken of any profit or loss of any business,
company or other undertaking acquired by the Company following Completion or any
joint venture or profit or loss sharing arrangement entered into other than in
the ordinary course of business as carried on prior to Completion or any costs
and expenses borne by the Company in respect of any such business, company,
undertaking, venture or arrangement;
(h) to the extent that the Company makes payments to employees under
the Earnout Bonus Scheme, the Earnout Consideration Accounts shall be adjusted
to eliminate such payments and to eliminate the employer's National Insurance
Contributions made in respect of such payments;
(i) pension contributions shall be payable in accordance with
the trust deeds and rules of the pension schemes referred to in the Disclosure
Letter and on the bases referred to in the Disclosure Letter;
(j) any claim under the Warranties or the Tax Deed shall, to the
extent that it is paid by the Vendor, be treated in accordance with paragraph 9;
(k) auditors' remuneration shall be disregarded, insofar as it
exceeds (Pounds)30,000 exclusive of VAT, and other accountancy fees shall be
disregarded in any event.
-2-
Part C
Set-off
1.1 If the Purchaser shall have notified the Vendor in accordance with the Sale
and Purchase Agreement of any claim under clause 5 of the Sale and Purchase
Agreement or the Tax Deed the Purchaser shall, subject to compliance with the
provisions of this part C, have the right to set-off such amount in respect of
any claim or claims so notified as shall either:
(a) be agreed in writing by the Vendor or the Vendor's solicitors on
their behalf:
(b) be the subject of a final judgment of a court of competent
jurisdiction against the Vendor in respect of that claim (for which there shall
be no right of appeal or any time for the bringing of an appeal has expired
without any appeal being made); or
(c) be in the case of any claim for Taxation, the subject of a final
and binding assessment of the relevant revenue authority in respect of that
claim
against any part of the Earnout Consideration for the Sale Shares remaining
unsatisfied.
1.2 The rights of set-off set out in this part C are without prejudice to any
other right or remedy which the Purchaser may have against the Vendor or any of
them, whether under the terms of this agreement or otherwise, but other than as
set out in this Part C, the Purchaser shall have no right to withhold the
allotment of Consideration Shares, due under this agreement or claim any other
form of set-off, deduction or withholding from such amounts.
1.3 Any exercise by the Purchaser of its right of set-off under paragraph 1.1
shall not operate to prevent or delay settlement of any part of the Earnout
Consideration then due.
Part D
Definitions
"Earnout Consideration Accounts" means the accounts prepared pursuant to
paragraph 2 of this Schedule in order to determine the Year 1 Earnout
Consideration or the Year 2 Earnout Consideration (as the case may be) and in
accordance with the principles, policies and procedures set out in part B of
this Schedule;
"Earnout Consideration Bonus Scheme" means the bonus scheme described in
paragraph 4 of Part A;
"Purchaser's Group" means the Purchaser and any company which is a
subsidiary or holding company of the Purchaser (as defined in section 736 of the
Companies Act);
"Relevant Proportion" means that proportion of the 12 month period ending
31 March 2001 or 31 March 2002 during which the Vendor was employed by the
Company;
"Year 1" means the accounting period ending 31 March 2001;
"Year 1 Earnout Consideration" means the Year 1 Earnout Consideration
calculated in accordance with part A of this Schedule;
"Year 2" means the accounting period ending 31 March 2002;
"Year 2 Earnout Consideration" means the Year 2 Earnout Consideration
calculated in accordance with part A of this Schedule;
