1
EXHIBIT 2.1
31/12/97
ACQUISITION AGREEMENT
BY AND AMONG
THE
SHAREHOLDERS
AND
OPTIONHOLDERS
OF
MCQUEEN INTERNATIONAL LIMITED
AND
XXXXX ENTERPRISES, INCORPORATED
DATED DECEMBER 31, 1997
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TABLE OF CONTENTS
ARTICLE I - DEFINITIONS2
Section 1.2. Interpretation.7
ARTICLE II - PURCHASE AND SALE OF SHARES AND ROLLOVER
OF OPTIONS8
Section 2.1. Purchase and Sale of Sale Shares8
Section 2.2. Title8
Section 2.3. Waiver8
Section 2.4. Sale Shares8
Section 2.5. Exchange of Options8
Section 2.6 Conversion of C Note and Consent to Transactions ..................................... 9
ARTICLE III - PAYMENT FOR SALE SHARES9
Section 3.1. Delivery of Purchase Price Shares. 9
Section 3.2. Payment for CBE Shares. 9
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF WARRANTORS9
Section 4.1. Corporate Organization of Company.9
Section 4.2. Corporate Organization of Subsidiaries and Investments.9
Section 4.3. Capitalization of Company.10
Section 4.4. Capitalization of Subsidiaries and Investments.11
Section 4.5. Ownership of Subsidiary and Investment Share Capital, Title.11
Section 4.6. Consents and Approvals; No Violations. 12
Section 4.7 Financial Statements. 12
Section 4.8. Undisclosed Liabilities. 13
Section 4.9. Taxes. 13
Section 4.10. Title to Properties.15
Section 4.11. Absence of Changes. 16
Section 4.12. Intellectual Property.18
Section 4.13. Leases. 21
Section 4.14. Bank Accounts; Investments; Powers of Attorney. 22
Section 4.15. Material Contracts and Customers.22
Section 4.16. Related Transactions.24
Section 4.17. Insurance.25
Section 4.18. Industrial Disputes.25
Section 4.19. Employee Benefit Plans.26
Section 4.20. Employees and Terms of Employment. 27
Section 4.21. Bonus Schemes.27
Section 4.22. Changes in Remuneration.27
Section 4.23. Termination of Contracts of Employment.28
Section 4.24. Industrial Agreements. 28
Section 4.25. Redundancies28
Section 4.26. Pension.28
Section 4.27. Litigation. 29
Section 4.28. Compliance with Laws.29
Section 4.29. Books and Records. 30
Section 4.30. Copies of Documents. 31
Section 4.31. Adequacy of Assets. 31
Section 4.32. Grants.31
Section 4.33. Accounts Receivable. 31
Section 4.34. Brokers and Finders. 32
Section 4.35. Pooling of Interests..................................................................34
Section 4.36. Restrictive Covenants. 35
Section 4.37. Product Liabilities and Warranties. 35
Section 4.38. Disclosure. 35
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ARTICLE V - REPRESENTATIONS AND WARRANTIES OF SELLERS. 35
Section 5.1. Authority; Binding Effect. 35
Section 5.2. Ownership of Company Share Capital; Title. 36
Section 5.3. Ownership of Options; Title. 36
Section 5.4. Sellers' Consents and Approvals; No Violations. 36
Section 5.5 Investment Intent, Information Disclosures
Section 5.6 Pooling of Interests
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF SEi37
Section 6.1. Corporate Organization. 37
Section 6.2. Capitalization of SEi. 37
Section 6.3. Authority. 37
Section 6.4. SEi's Consents and Approvals; No Violations. 38
Section 6.5. Litigation. 38
Section 6.6. Brokers and Finders. 38
Section 6.7. SEi Information. 38
Section 6.8. Absence of Changes. 39
Section 6.9. Undisclosed Liabilities. 39
Section 6.10. SEi Financial Statements. 39
Section 6.11. Compliance with Laws. 40
ARTICLE VII - FURTHER COVENANTS AND AGREEMENTS40
Section 7.1. Filings. 42
Section 7.2. Effective Time of Closing and Transfer. 42
Section 7.3. Announcements. 42
Section 7.4. Costs and Expenses. 43
Section 7.5 Further Assurances. 43
Section 7.6. Certain Agreements. 43
Section 7.7. Non-Disclosure; Covenant Not to Compete. 43
Section 7.8 Pooling of Interests. 45
Section 7.9 Legend. 46
Section 7.10 No Warranty by the Company. 46
Section 7.11. Power of Attorney. 46
Section 7.12. Procedure and Effect of Termination. 46
ARTICLE VIII - CONDITIONS TO SEi'S OBLIGATIONS47
Section 8.1. Sellers' Closing Deliveries. 47
Section 8.2. Governmental Consents and Approvals. 49
Section 8.3. No Injunction or Proceeding. 49
Section 8.4 Opinion of Accountants. 49
ARTICLE IX - CONDITIONS TO SELLERS' OBLIGATIONS49
Section 9.1. Delivery of Purchase Price Shares. 49
Section 9.2. Payment for CBE Shares. 49
Section 9.3. SEi's Closing Deliveries. 49
Section 9.4. Governmental Consents and Approvals. 50
Section 9.5. No Injunction or Proceeding. 50
ARTICLE X - INDEMNIFICATION50
Section 10.1. Indemnification by Sellers.50
Section 10.2. Indemnification by Warrantors. 51
Section 10.3. Indemnification by SEi.51
Section 10.4. Survival of Representations. 51
Section 10.5. Indemnification Claims Procedures. 52
Section 10.6. Limitation of Liability. 55
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Section 10.7. Exclusive Remedy. 57
ARTICLE XI - MISCELLANEOUS57
Section 11.1. Governing Law. 57
Section 11.2. Arbitration.57
Section 11.3. Entire Understanding, Waiver, Etc. 58
Section 11.4. Severability. 59
Section 11.5. Captions. 59
Section 11.6. Notices. 59
Section 11.7. Successors and Assigns. 60
Section 11.8. IBJ. 60
Section 11.9. Parties in Interest. 60
Section 11.10. Construction of Terms. 60
EXHIBITS
Exhibit A Form of Registration Rights Agreement
Exhibit B Form(s) of Employment Agreement
SCHEDULE
Part 1 Shareholders and Ownership of Company
Part 2 Optionholders
Part 3 Consolidated Revenue Schedule
DISCLOSURE SCHEDULE
Section 4.1 Corporate Organization of the Company
Section 4.2(i) Subsidiaries
Section 4.2(ii) Investments
Section 4.3 Capitalization of the Company
Section 4.4 Capitalization of the Subsidiaries and the Investments
Section 4.5 Ownership of Share Capital of the Subsidiaries and the Investments
Section 4.6 Consents and Approvals; No Violations
Section 4.7(a) Financial Statements
Section 4.7(b) Financial Statements Exceptions
Section 4.7(c)(i) Investments Financial Statements
Section 4.7(c)(ii) Exceptions to Investments Financial Statements
Section 4.8 Undisclosed Liabilities
Section 4.9 Taxes
Section 4.10(a) Property List
Section 4.10(e) Asset Register
Section 4.10(f) Title to Properties Exceptions
Section 4.10(g) Possession and Condition of Assets
Section 4.11 Absence of Changes
Section 4.12(a) List of Intellectual Property
Section 4.12(b) Fees and Royalties
Section 4.12(c) Registrations; Exclusive Rights
Section 4.12(d) Trade Secrets
Section 4.12(e) Intellectual Property Claims
Section 4.12(g) Exceptions re Intellectual Property
Section 4.12(h) Exceptions re System Documentation
Section 4.12(i) Exceptions re Licenses, etc.
Section 4.13 Leases
Section 4.14(a) List of Bank Accounts
Section 4.14(b) Investments of Excess Cash
Section 4.14(c) Ownership of SEi Stock
Section 4.15(a) Material Contracts
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Section 4.15(b) Material Contracts Exceptions
Section 4.15(c) Customers and Suppliers
Section 4.16 Related Transactions
Section 4.17(a) List of Insurance Policies
Section 4.17(b) Insurance Policy Terminations
Section 4.17(c) Insurance Policy Claims
Section 4.17(d) Unpaid Insurance Claims
Section 4.18(a) Labor Matters
Section 4.18(b) List of Employees
Section 4.18(c) Summary Information re Employees
Section 4.18(d) Summary Information re Independent Contractors and Consultants
Section 4.19 Employee Benefit Plans
Section 4.27 Litigation
Section 4.28(a) Compliance with Laws
Section 4.28(b) Environmental Matters
Section 4.28(b)(v) Environmental Permits
Section 4.29 Books and Records
Section 4.31 Adequacy of Assets
Section 4.32(a) Grants
Section 4.32(b) Grants Exceptions
Section 4.33 Accounts Receivable
Section 4.34 Brokers and Finders
Section 4.36 Restrictive Covenants
Section 4.37 Product Liabilities and Warranties
Section 5.4 Sellers' Consents and Approvals
Section 6.4 SEi Consents and Approvals
Section 7.6 Key Employees
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT is made among (i) THE SEVERAL PERSONS
whose names and addresses are set forth in Part 1 of the Schedule attached
hereto (collectively, the "Shareholders"), (ii) THE SEVERAL PERSONS whose names
and addresses are set forth in Part 2 of the Schedule attached hereto
(collectively, the "Optionholders," and collectively, with the Shareholders,
the "Sellers"), and (iii) XXXXX ENTERPRISES, INCORPORATED, a corporation
organized and existing under the laws of the State of Florida and whose address
is 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxx 00000 ("SEi").
RECITALS
WHEREAS, McQueen International Limited (the "Company") is incorporated
in Scotland with the registered number SC153126 as a private company limited by
shares; and
WHEREAS, the Shareholders are the beneficial owners or holders in
trust of all of the issued share capital of the Company (the "Sale Shares") in
the amounts set forth opposite their respective names in Part 1 of the Schedule
attached hereto; and
WHEREAS, the Optionholders are the beneficial owners of all the issued
options to subscribe for "B" Ordinary Shares of 10p each of the Company (the
"Options") in the amounts set forth opposite their respective names in Part 2
of the Schedule attached hereto; and
WHEREAS, in addition to owning shares of the Company, the Warrantors
(as defined below) have participated and currently participate in the
management of the Company and the Subsidiaries; and
WHEREAS, the Company owns the proportion of the issued share capital
of each of the undertakings listed in Section 4.2(b)(i) of the Disclosure
Schedule (collectively, the "Subsidiaries"); and
WHEREAS, the Company owns the proportion of the issued share capital
of each of the undertakings listed in Section 4.2(b)(ii) of the Disclosure
Schedule (collectively, the "Investments"); and
WHEREAS, except as otherwise provided in Section 3.2, the Sellers
desire to sell the Sale Shares in exchange for shares of SEi Stock (as
hereinafter defined), and SEi is willing to purchase the Sale Shares from
Sellers in exchange for shares of SEi's Stock and, to the extent provided in
Section 3.2, for cash on the terms and subject to the conditions hereinafter
set forth;
WHEREAS, the Optionholders desire to release their Options and to
receive in their place options in respect of SEi Stock on the terms and subject
to
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the conditions hereinafter set forth; and
WHEREAS, SEi intends to treat the acquisition of the Sale Shares and
the Options as a "pooling of interests" for financial accounting purposes.
NOW, THEREFORE, in consideration of these presents and of the mutual
representations, warranties, covenants and agreements hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby and thereby expressly acknowledged by the Sellers and SEi, and
intending to be legally bound, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. The terms defined in this Article shall
have the following respective meanings for all purposes of this Agreement:
"1933 ACT" shall have the meaning set forth in Section 5.5.
"AFFILIATE" means, with respect to any Person, an officer, director or
beneficial owner of five percent (5%) or more of the issued and outstanding
shares of any class of capital stock or other equity of such Person, or a
family member of such Person, if an individual.
"ALTERNATIVE TRANSACTION" means any merger, consolidation, sale of
substantial assets, sale of capital interests or securities or similar
transaction involving the Company or any Subsidiary, other than the
transactions contemplated by this Agreement.
"BUSINESS" means the businesses conducted by the Company and the
Subsidiaries as of the date of this Agreement which consist of providing
outsource services to the technology and information industries and includes
the following services on a "for hire" basis:
(i) call center services, including telemarketing and
telecalling services;
(ii) software manufacturing and fulfillment services;
(iii) localization services; and
(iv) incoming customer support calls and help desk
services.
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"BUSINESS DAY" means any day on which banks are open for business in
New York, New York.
"CBE" means Clydesdale Bank Equity Ltd.
"CBE SHARES" means all Sale Shares owned by CBE.
"CLOSING" means the consummation and effectuation of the transactions
contemplated herein pursuant to the terms and conditions of this Agreement,
which shall be held on the 31st day of December 1997, at the offices of Brodies
WS, or on such other date or at such other time or place as is mutually agreed
by the parties hereto.
"CLOSING DATE" means the date on which the Closing actually occurs.
"CODE" means the Internal Revenue Code of 1986.
"CONTRACTS" shall have the meaning set forth in Section 4.15.
"COPYRIGHTS" means domestic and foreign copyrights, whether registered
or unregistered and pending applications to register the same.
"C NOTE" means the US$1,600,000 Class C Secured Convertible Loan Note
issued by the Company on 7th April 1997.
"CUSTOMERS" shall have the meaning set forth in Section 4.15.
"DISCLOSURE SCHEDULE" means the disclosure schedule letter signed by
Dundas & Xxxxxx X.X. (on behalf of the Warrantors) and accepted by Brodies,
W.S. (on behalf of SEi) as of the date hereof disclosing information
constituting exceptions to the representations and warranties contained in this
Agreement.
"EMPLOYEE BENEFIT PLAN" means any pension, retirement, profit sharing,
savings, thrift, stock bonus, stock option, stock purchase, restricted stock
purchase, stock ownership, stock appreciation right, phantom stock, deferred
compensation, supplemental retirement, deferred bonus, severance, change of
control, parachute, health, medical, dental, vision, prescription drugs,
fitness, dependent care, educational assistance, group legal services, life
insurance, accidental death, accidental dismemberment, sick pay, short-term or
long-term disability, supplemental unemployment income, training,
apprenticeship, scholarship, tuition reimbursement, employee assistance,
employee discount, subsidized cafeteria, fringe benefit, vacation, holiday,
employer-sponsored recreational facility, or other employee pension benefit or
welfare benefit plan, policy, contract, or arrangement, or other similar fringe
or employee benefit plan, program, policy, contract, or arrangement, written or
oral,
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qualified or nonqualified, funded or unfunded, foreign or domestic.
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means, with respect to any
Person, all applicable Legal Requirements and common law requirements relating
to the generation, storage, handling, release, discharge, emission,
transportation, treatment or disposal of Hazardous Substances or wastes or to
the protection of human health and the environment, including, but not limited
to, the Control of Pollution Xxx 0000, the Environmental Protection Xxx 0000,
the Environment Xxx 0000 and the Health and Safety at Work etc. Xxx 0000, or
similar laws of foreign jurisdictions including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation
and Recovery Act, the Clean Water Act, the Federal Water Pollution Control Act,
the Safe Drinking Water Act, the Toxic Substances Control Act, the Occupational
Safety and Health Act, and the Hazardous Material Transportation Act and all
regulations, guidance (to the extent mandatory) and codes of practice (to the
extent mandatory) made under or pursuant to such Acts.
"ENVIRONMENTAL PERMITS" shall have the meaning set forth in Section
4.28.
"ERISA" means the Employee Retirement Income Security Act of 1994.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4.7.
"FORM 10-Q BALANCE SHEET" means the unaudited balance sheet dated
September 28, 1997 (and any related notes thereto), found in the quarterly
report filed on Form 10-Q filed with the Securities and Exchange Commission for
the quarterly period ended September 28, 1997, a copy of which is included as
part of the SEi Filings.
"FRS" means the financial reporting standards issued by The Accounting
Standards Board Limited or SSAPs.
"GRANTS" means governmental grants, subsidies, guarantees and/or loans
and other similar grants and subsidies provided to or for the benefit of a
Person.
"XXXX" means Xxxxxxx X. Xxxx.
"HAZARDOUS SUBSTANCES" means any radioactive materials, asbestos,
ureaformaldehyde, hazardous wastes, hazardous substances, toxic substances,
petroleum, petroleum byproducts or any other substances defined or regulated as
hazardous or toxic, or as a "pollutant" or "contaminant", in any applicable
Legal Requirements.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976
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and the rules and regulations promulgated thereunder.
"INTELLECTUAL PROPERTY" means all intellectual property and
intellectual property rights, including all Patent Rights, Copyrights,
Trademarks, Licenses, Trade Names, Trade Secrets and all other forms of
proprietary information.
"KNOWLEDGE" means the actual knowledge of any of the Warrantors after
inquiry which was reasonable under the circumstances of a tight time schedule.
"LEASED REAL PROPERTY" means all heritable or real property and
premises currently leased to any of the Company, a Subsidiary or an Investment.
"LEGAL REQUIREMENTS" means all judgments, decrees, injunctions,
interdicts, orders, writs, rulings, laws, ordinances, statutes, rules,
regulations, codes (other than in the United Kingdom) and other obligatory
requirements of all foreign, federal, state and local governmental,
administrative and judicial bodies and authorities and mandatory codes of
governmental, administrative and judicial bodies and authorities in the United
Kingdom.
"LICENSED PRODUCT" means any product of Intellectual Property which is
the subject of a License.
"LICENSES" means all licenses, sublicenses and rights to use any
Intellectual Property of another Person.
"MANAGEMENT ACCOUNTS" means the unaudited consolidated management
accounts of the Company and the Subsidiaries dated as of the Management
Accounts Date (and any related notes thereto).
"MANAGEMENT ACCOUNTS DATE" means 31st October, 1997.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person other than
SEi, an adverse effect on the financial condition or results of operations of
such Person which, on a consolidated group basis, has or is reasonably likely
to have a quantifiable adverse financial impact on the profit and loss account
or balance sheet of $125,000 or more.
"MCQUEEN AFFILIATE" means for purposes of this Agreement (i) the
Warrantors, (ii) Xxxx X Xxxxxxxxx, (iii) Xxxxxxxxx Xxxxxxxxxx and (iv) such of
the Shareholders that own, currently, as of the Closing, or on a fully diluted
basis, at least five percent of any class of the outstanding capital stock of
the Company.
"NASDAQ" means The Nasdaq Stock Market, Inc.'s National Market.
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"PATENT RIGHTS" means all United States, United Kingdom and foreign
patents, patent applications, continuations, continuations in part, divisions,
reissues and patent disclosures.
"PERSON" means an individual, partnership, limited liability company,
corporation, trust, unincorporated organization, association or joint venture
or a government, agency, political subdivision or instrumentality thereof.
"PROSPECT" means, with respect to any Person, a prospective customer
of such Person by reason of a presentation, solicitation or other contact
concerning a future business relationship during the twelve months preceding
the date of determination.
"PURCHASE PRICE SHARES" means the shares of SEi Stock to be issued to
the Sellers other than CBE in consideration of the transfer of the Sale Shares
pursuant to this Agreement, which shall consist of 3,537,882 shares of SEi
Stock, such number of shares of SEi Stock being equal to the result obtained by
dividing (A), $72,924,937 million, by (B), the average SEi Stock Closing Price
for the ten trading days immediately preceding 27 December 1997 (as adjusted to
reflect the cash out in respect of fractional shares).
"REAL PROPERTY" means all real or heritable property and premises
currently owned by any of the Company, a Subsidiary or an Investment.
"RELATED AGREEMENTS" means the agreements described in Section 7.6.
"RETURNS" shall have the meaning set forth in Section 4.9.
"SEC" means the United States Securities and Exchange Commission.
"SEI FILINGS" means the following filings made by SEi with the SEC:
the annual report on Form 10-K for the annual period ending December 31, 1996,
the quarterly reports on Form 10-Q for the quarterly periods ending March 30,
1997, June 30, 1997 and September 28, 1997 and the Annual Report to
Stockholders and related proxy statement filed on Schedule 14A with respect to
an annual meeting of SEi's shareholders held on May 8, 1997.
"SEI MATERIAL ADVERSE EFFECT" means, with respect to SEi, an adverse
effect on the financial condition or results of operations which, on a
consolidated basis, has or is reasonably likely to have a quantifiable adverse
financial impact on the income statement or balance sheet of $1,000,000 or
more.
"SEI STOCK" means SEi's common stock, $.01 par value per share.
"SEI STOCK CLOSING PRICE" means the closing price for SEi Stock as
reported on
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NASDAQ (as published in the Wall Street Journal or, if not reported therein, in
another mutually agreed upon authoritative source).
"SEI STOCK OPTION PLAN" means the SEi 1996 Employee Stock Option Plan.
"SELLER'S SHARES" means, with respect to any Seller other than CBE,
such number of the Purchase Price Shares to be issued to the Seller as shown
opposite such Seller's name in Part 1 of the Schedule attached hereto.
"SOFTWARE" means computer programme code in whatever language or
format, including but not limited to object code and source code.
"SOFTWARE CONTRACTS" means all contracts, agreements and Licenses,
oral or written, with any Person respecting the ownership, license,
acquisition, design, development, distribution, marketing, use or maintenance
of computer programme code or related technical or user documentation and
databases.
"TAXES" means all taxes, assessments and charges imposed by any
national, federal, state, provincial, local, or foreign taxing authority,
including national insurance contributions, social security, insurance and
other state-sponsored pension funds and all interest, penalties and additions
thereto.
"TECHNICAL DOCUMENTATION" means all technical and descriptive
materials relating to the acquisition, design, development, use or maintenance
of computer code and programme documentation including, but not limited to, all
user manuals, flowcharts, algorithms, programmer's annotations, data
dictionaries and databases relating to computer programme code whether or not
development of such computer code and programme documentation is complete.
"TRADE NAMES" means all names used to identify a particular company,
business, subsidiary or division thereof.
"TRADE SECRETS" means confidential and proprietary ideas, trade
secrets, know how, concepts, methods, processes, formulae, reports, data,
customer lists, mailing lists, business plans or other proprietary information,
including, without limitation, with respect to any Person, any formulae,
pattern, device or compilation of information which is used in such Person's
business and which derives independent commercial value from not being
generally known or readily ascertainable through independent development or
reverse engineering by other Persons who can obtain economic value from its
disclosure or use.
"TRADEMARKS" means anything recognizable as a trademark, service xxxx
or trade dress at common law, under the Trade Marks Act 1994, the Xxxxxx Act or
under the corresponding laws of any foreign country, whether registered or not,
which is used to identify the source and quality of goods or services or to
distinguish them from those
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of others, and all registrations and applications for registration, including
intent-to-use registrations and applications for registration.
"TRANSFER AGENT" means Firstar Trust Company of Milwaukee, Wisconsin,
in its capacity as transfer agent for SEi Stock.
"US EMPLOYEE PLAN" means any Employee Benefit Plan covering any
employees with United States source income.
"USGAAP" means generally accepted accounting principles as in effect
in the United States on 31 December 1996.
"WARRANTORS" means Xxxx, Xxxx X.X. Xxxxx, Xxxxxx X. Xxxx and Xxxxx X.
Xxxxxx.
SECTION 1.2. INTERPRETATION.
(a) Unless the context otherwise requires, the masculine
gender shall be deemed to include the feminine and neuter and vice versa, and
the singular number shall be deemed to include the plural and vice versa.
(b) The headings in this Agreement are for convenience of
reference only and shall not affect the construction or interpretation hereof.
(c) In this Agreement,
(i) references to any statute or
statutory provision shall include references to such statute or provision as
from time to time amended, extended, re-enacted, or consolidated, whether
before, on, or (in the case of re-enactment or consolidation only) after the
last date of execution hereof;
(ii) references to Articles, Recitals,
Sections, or Schedules and subdivisions thereof are to articles of and recitals
or sections or the schedule to this Agreement and subdivisions thereof
respectively and the Schedule attached hereto shall form part of this
Agreement; and
(iii) references to any Scottish legal term
for any action, remedy, method of judicial proceeding, legal document, legal
status, court, official or any legal concept or thing shall in respect of any
jurisdiction other than Scotland be deemed to include what most nearly
approximates in that jurisdiction to the Scottish legal term; provided,
however, that notwithstanding the foregoing, references in Article IV (and in
the terms defined in Article I where used in Article IV) to any legal term for
any action, remedy, method of judicial proceeding, legal document, legal
status, court, official or any legal concept or thing which has a reasonably
ascertainable meaning if
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used in a legal document governed by Florida law but which cannot reasonably
easily be interpreted in accordance with Scots law shall apply, where the
context so permits, only to any of the Subsidiaries which are incorporated
under the laws of any jurisdiction in the United States and to the portion of
the Business conducted in the United States
ARTICLE II
PURCHASE AND SALE OF SHARES AND EXCHANGE OF OPTIONS
SECTION 2.1. PURCHASE AND SALE OF SALE SHARES. Upon the terms and
subject to the conditions hereof, each of the Sellers shall sell to SEi, and
SEi shall buy from each of the Sellers, such of the Sale Shares as are set
opposite the name (and address) of such Seller in Part 1 of the Schedule
attached hereto, in each case together with all rights, privileges and
advantages now or hereafter attached or accruing thereto, in each case in
consideration for the delivery of the Purchase Price Shares or, in the case of
CBE, immediately available funds as provided in Article III below.
SECTION 2.2. TITLE. Each of the Sale Shares shall be sold and
purchased free from any option, lien, charge or encumbrance.
SECTION 2.3. WAIVER. Each of the Sellers hereby consents to the sales
and transfers effected herein and waives (i) any preemptive rights or rights of
first refusal, veto or otherwise, he may have under the Articles of Association
of the Company or otherwise; and (ii) any right to require an offer in cash for
his shares for the purposes of, or as contemplated by, Article 9 of the
Articles of Association of the Company or otherwise.
SECTION 2.4. SALE SHARES. SEi shall not be obliged to complete the
purchase of any of the Sale Shares unless the purchase of all of the Sale
Shares and the exchange of all of the Options is completed simultaneously.
SECTION 2.5. EXCHANGE OF OPTIONS. Each of the Optionholders hereby
releases, conditional on Closing, his rights ("the Old Rights") as identified
in Part 2 of the Schedule attached hereto under, as applicable, the McQueen
International Group Second Unapproved Share Option Scheme, the McQueen
International Group Unapproved Share Option Scheme, the McQueen International
Group Second Shadow Unapproved Share Option Scheme and the McQueen
International Group Shadow Unapproved Share Option Scheme to subscribe in the
aggregate among all the Optionholders for 44,924 'B' Ordinary Shares of 10p
each of the Company on the Closing Date in consideration of and subject to the
grant to him on the Closing Date of new rights which are substantially similar
to the Old Rights but relate to SEi Stock. In consideration of the foregoing
releases of their Old Rights by the Optionholders, SEi hereby grants to the
Optionholders, conditional on Closing, rights relating to the number of shares
of SEi Stock set forth opposite the name of the Optionholder in Part 2 of the
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Schedule attached to this Agreement, which will be held under the rules of the
SEi Stock Option Plan.
SECTION 2.6. CONVERSION OF C NOTE AND CONSENT TO TRANSACTIONS. IBJ
Xxxxxxxx Bank and Trust Company as trustee of the Rand XxXxxxx Earn Out Trust
("IBJ") has converted the 'C' Note into 64,888 C Ordinary Shares of 10p each of
the capital stock of the Company which are part of the Sale Shares and shall be
acquired by SEi as provided in this Article II. IBJ hereby consents to the
transactions contemplated by this Agreement. IBJ agrees with SEi, as Noteholder
and as trustee for the Noteholders (as defined in the Trust Deed
aftermentioned), that the consummation of the transactions contemplated in this
Agreement does not, and will not be claimed by IBJ nor any transferees, to
constitute an Event of Default under the Trust Deed ("the Trust Deed") between
the Company and Rand XxXxxxx & Company dated 7th April 1997 (under which IBJ is
now the trustee) and further that neither IBJ nor any transferees will have any
entitlement whatsoever to prepayment or acceleration of the payment of the A1
Notes, the A2 Notes or the B Notes (as defined in the Trust Deed) (i) for a
period of 6 months from Closing except as a result of circumstances included
within sub-clauses 8(A)(i), (iv), (v) or (x) only of the Trust Deed but shall
otherwise be entitled to exercise in full all other rights and remedies
available to it or them under the Trust Deed as long as the exercise of any
such rights or remedies does not result in the obligation to prepay or to
accelerate the payment of any such Notes and (ii) thereafter not solely or
partially as a result of any repayment of any indebtedness to Bank of Scotland,
any repayment of any indebtedness to CBE, any borrowings by the Company on an
unsecured basis from SEi or any borrowings by the Company after the Closing of
up to an aggregate outstanding amount of $10,000,000 having a priority and
collateral position superior to that of said Notes as long as, on or before the
date of any such secured borrowing, the Company is no longer indebted to CBE or
Bank of Scotland for money borrowed by the Company and provided that SEi shall
be responsible for all fees and outlays incurred by IBJ or its transferees in
connection with the documentation of such priority position and related matters
subject to a maximum amount of US$5,000.
ARTICLE III
PAYMENT FOR SALE SHARES
SECTION 3.1. DELIVERY OF PURCHASE PRICE SHARES. Upon the terms and
subject to the conditions hereof, SEi shall issue and deliver the Purchase
Price Shares to each of the Sellers other than CBE at the Closing, a
certificate or certificates or, at SEi's option, an original or a facsimile
copy of an irrevocable letter of instructions to the Transfer Agent for the
issue and delivery of a certificate or certificates, issued in such Seller's
name, each such certificate bearing or to bear the legend provided for in
Section 5.5(h) and evidencing or to evidence a number of shares equal to the
16
applicable Seller's Shares.
SECTION 3.2. PAYMENT FOR CBE SHARES. CBE has declined the opportunity
to receive Purchase Price Shares as consideration for the sale of the CBE
Shares. Consequently, upon the terms and subject to the conditions hereof, SEi
shall purchase the CBE Shares at the Closing from CBE in consideration of Five
Million Four Hundred and Eighteen Thousand Dollars ($5,418,000) in immediately
available funds.
SECTION 3.3. XXXX X XXXXXXXXX. Xxxx X Xxxxxxxxx has declined the
opportunity to receive by way of grant to him on the Closing Date new rights
which are substantially similar to the Old Rights but relate to SEi Stock.
Consequently, upon and subject to the terms and the conditions hereof on the
Closing Date Xxxx X Xxxxxxxxx shall release the Old Rights (as provided for in
Section 2.5) in consideration of a payment to him from SEi of (pound)66,929.39.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF WARRANTORS
The Warrantors hereby jointly and severally represent and warrant to
SEi as follows:
SECTION 4.1. CORPORATE ORGANIZATION OF COMPANY.
The Company is a limited liability company duly incorporated
and validly existing under the laws of Scotland and has the full right, power
and authority to own, lease and operate all of its properties and assets and to
carry out the Business as it is presently conducted by the Company. The Company
is duly licensed or qualified to do business in each jurisdiction, if any, in
which the ownership of property or the conduct of its Business requires such
qualification or license and, in such of these jurisdictions, if any, which
recognize the concept of good standing, the Company is in good standing.
Section 4.1 of the Disclosure Schedule sets forth a list of all jurisdictions,
if any, in which the Company is licensed or qualified to transact business as a
foreign company. Except for the Subsidiaries and the Investments, there are no
Persons in which the Company, directly or indirectly, owns any capital stock or
any equity interest.
SECTION 4.2. CORPORATE ORGANIZATION OF SUBSIDIARIES AND INVESTMENTS.
Section 4.2(i) of the Disclosure Schedule sets forth a list
(including the full legal name of the Person and its jurisdiction of
organization) of all Persons in which the Company holds directly or indirectly
a controlling or majority ownership interest. Section 4.2(ii) of the Disclosure
Schedule sets forth a list (including the full legal name
17
of the Person and its jurisdiction of organization) of all other Persons in
which the Company directly or indirectly holds an ownership interest. Each of
the Subsidiaries and, to the knowledge of the Warrantors, each of the
Investments is a limited liability entity duly organized and validly existing
under the laws of the jurisdiction set forth opposite its name in Section
4.2(i) or 4.2(ii) of the Disclosure Schedule with the full right, power and
authority to own, lease and operate all of its respective properties and assets
and to carry out the Business as it is presently conducted by such Subsidiary
or Investment. Each of the Subsidiaries and, to the knowledge of the
Warrantors, each of the Investments is duly licensed or qualified to do
business in each jurisdiction, if any, in which the ownership of property or
the conduct of its Business requires such qualification or license and, in such
jurisdictions, if any, which recognize the concept of good standing, each of
the Subsidiaries and, to the knowledge of the Warrantors, each of the
Investments is in good standing. Section 4.2(iii) of the Disclosure Schedule
sets forth a list (subdivided by Person) of all jurisdictions, if any, in which
a Subsidiary or, to the knowledge of the Warrantors, an Investment is licensed
or qualified to do business as a foreign company or entity. Except as set forth
in Section 4.2(i) or (ii) of the Disclosure Schedule, there are no Persons in
which any Subsidiary or, to the knowledge of the Warrantors, any Investment
directly or indirectly, owns any capital stock or any equity interest.
SECTION 4.3. CAPITALIZATION OF COMPANY.
(a) The authorised share capital of the Company is
(pound)3,727,166.80 divided into 632,801 5% Cumulative Redeemable Preference
Shares of (pound)1 each, 2,408,272 'A' 5% Cumulative Convertible Participating
Preference Shares of (pound)1 each, 150,765 Ordinary Shares of 10p each,
361,772 'A' Ordinary Shares of 10p each, 206,179 'B' Ordinary Shares of 10p
each, 343,041 'C' Ordinary Shares of 10p each, 44,114 Cumulative Convertible
Participating Preferred Ordinary Shares of 10p each, 1 'D' Ordinary Share of
(pound)1, 573,405 unclassified shares of (pound)1 each and 21,007 unclassified
shares of 10p each.
(b) The Sale Shares are owned by the Shareholders in the
amounts set forth opposite their respective names in Part 1 of the Schedule
attached hereto and represent all the issued share capital of the Company and
have been duly authorized and validly issued, are fully paid, were issued
without violation of any preemptive rights, and can be transferred to SEi as
provided herein free of any preemptive rights. Except for this Agreement and as
set forth in Section 4.3(b) of the Disclosure Schedule, there are no options,
warrants or other rights, nor any agreements, commitments or arrangements of
any kind, relating to the subscription for or the issuance, voting,
acquisition, sale, repurchase, transfer or disposition of (i) any share capital
of the Company or securities convertible into or exchangeable for share capital
of the Company, or (ii) any options, warrants or subscription rights relating
to any such share capital or other securities of the Company.
18
(c) The Company has not repaid any stated share capital to
any of the Sellers, or to any prior holder of the Company's share capital, or
paid out any other equity capital in a manner which would adversely affect
(other than by reason of depletion of cash) the Company's ability to pay
dividends in a situation in which the Company would otherwise be permitted to
pay dividends according to Scots law. Except as disclosed in Section 4.3(c) of
the Disclosure Schedule, all issued share capital of the Company has been
registered and beneficially owned at all times during the last five years
exclusively by individual citizens of the United Kingdom, or other Persons
organized and existing under the laws of Scotland or England and Wales.
SECTION 4.4. CAPITALIZATION OF SUBSIDIARIES AND INVESTMENTS.
The aggregate authorized equity capital of each Subsidiary
and, to the knowledge of the Warrantors, each Investment, and the percentage
and amount of the issued equity capital owned by the Company, are set forth in
Section 4.4 of the Disclosure Schedule. Except as set forth in Section 4.4 of
the Disclosure Schedule, the issued equity capital set forth in Section 4.4 of
the Disclosure Schedule with respect to each of the Subsidiaries and, to the
knowledge of the Warrantors, with respect to each of the Investments has been
duly authorized and validly issued, is fully paid, and was issued without
violation of any preemptive rights. Except as set forth in Section 4.4 of the
Disclosure Schedule, the Subsidiaries and, to the knowledge of the Warrantors,
the Investments have not repaid any equity capital to any holder of their
respective equity capital, or to any prior holder of such equity capital, or
paid out any other equity capital in a manner which would adversely affect
(other than by reason of depletion of cash) such Subsidiary's or Investment's
ability to pay dividends in a situation in which such Subsidiary or Investment
would otherwise be permitted to pay dividends according to the law of such
Subsidiary's or Investment's domestic jurisdiction. Except for this Agreement
and as set forth in Section 4.4 of the Disclosure Schedule, there are no
options, warrants or other rights, nor any agreements, commitments or
arrangements of any kind, relating to the subscription for or the issuance,
voting, acquisition, sale, repurchase, transfer or disposition of (i) any
equity capital of, or securities convertible into or exchangeable for equity
capital of, any of the Subsidiaries or, to the knowledge of the Warrantors, the
Investments, or (ii) any options, warrants or subscription rights relating to
any such equity capital or other securities of any of the Subsidiaries or, to
the knowledge of the Warrantors, the Investments.
SECTION 4.5. OWNERSHIP OF SUBSIDIARY AND INVESTMENT SHARE CAPITAL,
TITLE.
Except as disclosed in Section 4.5 of the Disclosure Schedule, the
Company is the beneficial and registered owner of the share capital in the
Subsidiaries and the Investments set forth in Section 4.4 of the Disclosure
Schedule. Except as disclosed in Section 4.5 of the Disclosure Schedule, all
issued share capital of the Subsidiaries and, to the knowledge of the
Warrantors, all issued share capital of the Investments has been registered and
beneficially owned at all times during the last five years exclusively by
individual citizens of the United Kingdom, or other Persons organized and
existing
19
under the laws of Scotland or England and Wales. The Company or a Subsidiary
has and will have, on the Closing Date, full right and title to such share
capital, free and clear of all liens, pledges, encumbrances, claims, security
interests, charges, voting trusts, voting agreements, other agreements, rights,
options, warrants or other restrictions of any kind, nature or description,
other than those referenced in Section 4.4 of the Disclosure Schedule or
imposed by applicable United States securities laws.
SECTION 4.6. CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set
forth in Section 4.6 of the Disclosure Schedule, the execution, delivery and
performance by each of the Sellers of this Agreement and the Related Agreements
to which he is a party will not (with or without the giving of notice or the
passage of time, or both) (a) breach any applicable provision of law or any
rule or regulation of any national, federal, state, provincial or local
administrative agency or governmental authority applicable to the Company, any
of the Subsidiaries or, to the knowledge of the Warrantors, any of the
Investments, or any order, writ, injunction, interdict, judgment or decree of
any court, administrative agency or governmental authority applicable to the
Company, any of the Subsidiaries or, to the knowledge of the Warrantors, any of
the Investments, (b) breach the organizational or constitutional documents of
the Company, any of the Subsidiaries or, to the knowledge of the Warrantors,
any of the Investments, (c) violate or require any consent, waiver or approval
under, result in a breach, modification or termination of any provisions of,
constitute a default under, affect the rights under or enforceability of,
result in the imposition of any pledge, security interest or other encumbrance
pursuant to, or give any Person the right to terminate, modify or renegotiate
any provision of, any agreement, indenture, mortgage, security, charge, deed of
trust, lease, license, or other instrument to which the Company, any of the
Subsidiaries or, to the knowledge of the Warrantors, any of the Investments is
a party or by which the Company, any of the Subsidiaries or, to the knowledge
of the Warrantors, any of the Investments is bound, or any license, permit or
certificate held by the Company, any of the Subsidiaries or, to the knowledge
of the Warrantors, any of the Investments including, without limitation, those
listed in the Disclosure Schedule, (d) require any consent or approval by,
notice to or registration with any governmental authority or other Person which
is applicable to the Company, any of the Subsidiaries or, to the knowledge of
the Warrantors, any of the Investments, or (e) result in the creation of any
lien, claim, encumbrance or charge upon any property or assets of the Company,
any of the Subsidiaries or, to the knowledge of the Warrantors, any of the
Investments.
SECTION 4.7 FINANCIAL STATEMENTS.
(a) Except as disclosed in Section 4.7(a) of the Disclosure
Schedule, Section 4.7(a) of the Disclosure Schedule contains (i) the audited
consolidated balance sheet and the related audited consolidated profit and loss
statement (including any related notes thereto) of the Company and the
Subsidiaries, as of and for the fiscal years ended February 28, 1996 and
February 28, 1997 (the latter being the "Audited
20
Accounts"), and (ii) the Management Accounts (collectively, the "Financial
Statements").
(b) Except as set forth on Section 4.7(b) of the Disclosure
Schedule, the Management Accounts are consistent with the books and records of
the Company and the Subsidiaries and fairly present the financial position of
the Company and the Subsidiaries as of the Management Accounts Date, and all
other Financial Statements (i) are in accordance with the books and records of
the Company and the Subsidiaries as of the respective dates such Financial
Statements were prepared; (ii) have been prepared in accordance with principles
of orderly bookkeeping, the Companies Xxx 0000 and applicable FRSs applied on a
consistent basis throughout the periods involved, respecting principles of
prudence and continuity; and (iii) present a true and fair view of the state of
affairs and the financial positions of the Company and the Subsidiaries as of
the respective dates thereof and, in the case of the related profit and loss
accounts, the results of operations and earnings of the Company and the
Subsidiaries for the respective periods indicated.
(c) Section 4.7(c) (i) of the Disclosure Schedule contains
the audited balance sheet and related audited profit and loss statement
(including any related notes thereto) of each of the Investments as of and for
the fiscal year ended March 31, 1997. Except as set forth on Section 4.7(c)(ii)
of the Disclosure Schedule, to the knowledge of the Warrantors, the financial
statements set forth in Section 4.7(c)(i) of the Disclosure Schedule (i) are in
accordance with the books and records of the Investments as of the date of such
financial statements were prepared; (ii) have been prepared in accordance with
the principles of orderly bookkeeping and applicable accounting principles
applicable to the Investments; and (iii) present a true and fair view of the
state of affairs and financial positions of the Investments as of the date
thereof and, in the case of the related profit and loss statements, the results
of operations and earnings of the Investments for the respective periods
indicated.
SECTION 4.8. UNDISCLOSED LIABILITIES. Except as set forth on Section
4.8 of the Disclosure Schedule, none of the Company, the Subsidiaries and, to
the knowledge of the Warrantors, the Investments has any liabilities (absolute,
accrued, contingent or otherwise) which would be required to be reflected in a
balance sheet or in the notes thereto prepared as at Closing under the
Companies Xxx 0000 and FRSs (or, in respect of any of the Subsidiaries or
Investments which prepare its annual accounts under or pursuant to legislation
or standards of or applicable in a country other than the United Kingdom, that
legislation or those standards, as the case may be) except, (a) liabilities
reflected or reserved against in the Management Accounts, and (b) liabilities
incurred since the Management Accounts Date in the ordinary course of business,
and which, in the aggregate with respect to the Company on a consolidated
basis, do not exceed $125,000.
SECTION 4.9. TAXES. Except as set forth in Section 4.9 of the
Disclosure
21
Schedule, each of the Company, the Subsidiaries and, to the knowledge of the
Warrantors, the Investments has timely filed all returns, declarations,
reports, information returns, computations, and statements required to be filed
by it (the "Returns") in respect of any Taxes and has paid all Taxes currently
due and payable by it. Except as set forth in Section 4.9 of the Disclosure
Schedule, the Returns accurately and completely reflect the facts regarding the
income, gains, taxable amounts of any type, properties, operations and status
of any entity required to be shown thereon, and no notice of any proposed
deficiency, assessment or levy in respect of Taxes has been received by the
Company, any Subsidiary or, to the knowledge of the Warrantors, any Investment.
Except as set forth in Section 4.9 of the Disclosure Schedule, neither the
Company, nor any of the Subsidiaries, nor, to the knowledge of the Warrantors,
any of the Investments is currently or, during the past five years, has been
the subject of an audit, dispute, or inquiry, or in receipt of a notice that it
is being or will be audited, disputed, or inquired into, by a relevant Taxing
authority, or has agreed to any extension of time of any applicable statute of
limitations period (or similar restriction) with a relevant Taxing authority.
Except as set forth in Section 4.9 of the Disclosure Schedule, each of the
Company, the Subsidiaries and, to the knowledge of the Warrantors, the
Investments has duly withheld from each payment from which such withholding is
required by law, the amount of all Taxes or other deductions required to be
withheld therefrom and has paid the same (to the extent due) together with the
employer's share of the same and all Taxes chargeable (to the extent due) on,
or deductible by, the employer in respect of benefits provided for employees or
former employees, if any, to the proper Tax or other receiving officers. There
is no agreement or consent made, nor any commitment to enter into any agreement
or consent, under Section 341(f) of the Code affecting the Company, a
Subsidiary or, to the knowledge of the Warrantors, an Investment. Except as set
forth in Section 4.10(b) of the Disclosure Schedule, there are no liens or
other burdens or restrictions for any Tax on any of the assets of the Company,
a Subsidiary or, to the knowledge of the Warrantors, an Investment. To the
knowledge of the Warrantors with respect to the Investments and except as set
forth in Section 4.9 of the Disclosure Schedule, (i) the charges, accruals, and
reserves for Taxes due, or accrued but not yet due, relating to the income,
gains, taxable amounts of any type, properties, or operations of each of the
Subsidiaries and the Investments as are organized under the laws of the United
States of America for any period prior to or up to and including the Closing
Date as reflected in the books of each such Subsidiary and Investment are
adequate in all respects to cover such Taxes; (ii) the Audited Accounts for the
period ended February 28, 1997 make proper provision or reserve for (or, as
appropriate, disclose by way of note) all liabilities (actual, deferred,
contingent or disputed) of the Company and the Subsidiaries for Taxes as at
February 28, 1997; (iii) all Tax deficiencies which have been notified to the
Company, any Subsidiary or any Investment have been fully paid or finally
settled; (iv) no issue has been raised in any examination of the Company, a
Subsidiary or an Investment which, by application of similar principles, can be
expected to result in the notification of a Tax deficiency for any other year
not so examined; and (v) each of the Company, the Subsidiaries and the
Investments has incurred liabilities for Taxes only in the ordinary course of
its Business. Save in respect of
22
(a) any Liability to Taxation or Claim for Taxation to the extent that
proper provision or reserve was made in the Audited Accounts for the
period ended February 28, 1997;
(b) any Liability to Taxation or Claim for Taxation for which any of the
Company, the Subsidiaries or the Investments is or may be liable
wholly or primarily as a result of transactions in the normal course
of their respective businesses since February 28, 1997,
neither the Company nor any of the Subsidiaries or, to the knowledge
of the Warrantors, the Investments has, or will have, any Liability to
Taxation or liability to settle any Claim for Taxation where the
Liability to Taxation or the Claim for Taxation:-
(x) arises or is made wholly or partly in respect of or in
consequence of any acts, omissions or transactions of the
Company or any of its Subsidiaries or of the Sellers or the
Investments occurring or entered into on or before the
Closing Date; or
(y) results from or is calculated by reference to any actual or
deemed income, profits or gains earned, received or accrued,
or deemed to have been earned, received or accrued, on or
before the Closing Date.
Except as set forth in Section 4.9 of the Disclosure Schedule, none of the
Company, the Subsidiaries and, to the knowledge of the Warrantors, the
Investments is, or will become, liable to pay or make reimbursement or
indemnity in respect of any Taxes (or amounts corresponding thereto) in
consequence of the failure by any other Person to discharge such Taxes within
any specified period or otherwise where such Taxes relate to income, gains,
taxable amounts of any type, events, omissions, or circumstances arising,
occurring, or deemed to arise or occur (whether wholly or partly) before the
Closing Date. Except as set forth in Section 4.9 of the Disclosure Schedule,
each of the Company, the Subsidiaries and, to the knowledge of the Warrantors,
the Investments has complied in all material respects with all requirements,
orders, provisions, directions, or conditions relating to value added tax and
any system of indirect taxation in any part of the world, and, in relation to
value added tax, no company which forms part of a Group for United Kingdom
value added tax purposes has taken any action which would prejudice its
membership of that Group. Except as set forth in Section 4.9 of the Disclosure
Schedule, none of the Company, the Subsidiaries and, to the knowledge of the
Warrantors, the Investments has engaged in any scheme or arrangement of which
the main purpose, or one of the main purposes, was the avoidance of or a
reduction in liability to any Taxes. The execution or completion of this
Agreement will not result in any profit or gain being deemed to accrue to the
Company, any Subsidiary or, to the knowledge of the Warrantors, any Investment.
Except as set forth in Section 4.9 of the Disclosure Schedule, none of the
Company, the Subsidiaries and, to the knowledge of the Warrantors, the
Investments has ever conducted business in the United States, has ever had any
assets, employees or shareholders located or resident in the United States, or
has ever made any election with the United States Internal Revenue Service
regarding Taxes in the United States.
SECTION 4.10. TITLE TO PROPERTIES.
(a) Section 4.10(a) of the Disclosure Schedule sets forth a
complete and accurate list (subdivided by Person) (the "Properties List") of
the Real Property and the Leased Real Property, including the address of each
parcel, as of the Management Accounts Date. Except as set forth in Section
4.10(a) of the Disclosure Schedule, except for the Real Property and the
leasehold interests in the Leased Real Property, neither the Company, nor any
of the Subsidiaries, nor to the knowledge of the Warrantors, any of the
Investments owns, or has ever in the last three years owned, in whole or in
part, any interests in any real or heritable property.
23
(b) The Real Properties and the Leased Real Property
appearing on the Properties List include all the land and buildings owned,
leased or occupied by the Company and the Subsidiaries for the purpose of the
Business. Except as set forth in Section 4.10(b) of the Disclosure Schedule,
none of the Company and the Subsidiaries has entered into any contract,
arrangement, or agreement for the purchase or lease of any real or heritable
property and the Company and the Subsidiaries have the exclusive, undisputed
and unrestricted possession of the properties listed opposite their names in
the Properties List. The Company and the Subsidiaries have not entered into any
agreement or arrangement to dispose of any interest in any of the properties on
the Properties List.
(c) The Company and the Subsidiaries have good, valid and
marketable title to the properties listed opposite their names in the
Properties List free from all options, liens, securities, charges, mortgages,
security charges, encumbrances, tenancies (including tenancies protected by
statute or otherwise) and rights of occupation and the properties listed in the
Properties List are not subject to any covenants, restrictions, stipulations,
servitudes, wayleaves, licenses, grants overriding interests, or conditions
which would materially affect the value or use of the properties listed in the
Properties List or to any option, right of pre-emption or right of first
refusal.
(d) Except as set forth in Section 4.10(d) of the Disclosure
Schedule, the Company and the Subsidiaries have not received any written notice
of any breach of any, and the Company and the Subsidiaries have complied with
all material, obligations or covenants, including statutory obligations
relating to the Properties on the Properties List. The Company has made
available to SEi all title deeds, land certificates, and/ other documentation
affecting, qualifying, or relating to the interests of the Company and the
Subsidiaries in the Real Property. The Company has made available to SEi all
title deeds, land certificates and other documentation affecting, qualifying or
relating to the interests of the Company and the Subsidiaries in the leasehold
interests in the Leased Real Property, including all consents and permission
granted thereunder. Except as set forth in Section 4.10(d) of the Disclosure
Schedule, none of the Company and the Subsidiaries is a party to any
negotiations concerning the documentation affecting the Real Property or any of
the leasehold interests in the Leased Real Property.
(e) Section 4.10(e) of the Disclosure Schedule contains a
list (subdivided by Person) which is complete and accurate in all material
respects of all fixed assets used in the Business and owned by the Company or a
Subsidiary ("the Asset Register").
(f) Except for the normal reservation of title of suppliers
to the extent not paid and as set forth in Section 4.10(f) of the Disclosure
Schedule, each of the Company, the Subsidiaries and, to the knowledge of the
Warrantors, the Investments
24
has good and marketable title to all the movable property and assets (tangible
and intangible) reflected as owned by it in the Management Accounts or acquired
since the Management Accounts Date (except for properties and assets disposed
of since such date in the ordinary course of business and consistent with past
practice), free and clear of all liens, charges, security interests or other
encumbrances of any nature whatsoever.
(g) Except as set forth in Section 4.10(g) of the Disclosure
Schedule, all assets listed in the Properties List or the Asset Register (i)
are now in the possession of the Company, the Subsidiaries or, to the knowledge
of the Warrantors, the Investments; (ii) are not subject to any claim by any
other Person with a right to possession of all or any part of such assets;
(iii) are in good operating condition (ordinary wear and tear excepted); (iv)
are not, individually or in the aggregate, in need of any repairs which
individually or in the aggregate could cost in excess of $125,000; and (v) are
located on the Leased Real Property or the Real Property.
SECTION 4.11. ABSENCE OF CHANGES. Except as set forth in Section 4.11
of the Disclosure Schedule, since February 28, 1997, each of the Company and
each of the Subsidiaries and, to the knowledge of the Warrantors, each of the
Investments has operated only in the ordinary course of the Business in all
respects. Except as set forth in Section 4.11 of the Disclosure Schedule, since
February 28, 1997, there has not been, with respect to the Company on a
consolidated basis nor with respect to the Company, any Subsidiary or, to the
knowledge of the Warrantors, any Investment:
(a) any change or changes in the Business, financial
condition, properties, results of operations or assets or liabilities, other
than changes in the ordinary course of the Business and other changes which
singularly or in the aggregate, have not had and will not have a Material
Adverse Effect;
(b) any damage or destruction, loss or other casualty,
however arising and whether or not covered by insurance which, singularly or in
the aggregate, has had or is reasonably likely to have a Material Adverse
Effect;
(c) any indebtedness incurred for borrowed money (except by
endorsement for collection or for deposit of negotiable instruments received in
the ordinary course of the Business it conducts) or any agreement to incur any
such indebtedness;
(d) any change in the accounting methods, procedures or
practices or any change in depreciation or amortization policies or rates
theretofore adopted;
(e) any amendment or termination of any contract, agreement,
lease, franchise or license which, singularly or in the aggregate, has had or
is reasonably likely
25
to have a Material Adverse Effect;
(f) any amendment of its organizational or constitutional
documents, as applicable;
(g) any mortgage, pledge or other encumbering of any property
or assets (other than a lien or hypothec arising in the ordinary course of
business in respect of obligations which are not overdue);
(h) any liability or obligation incurred which is still
outstanding and in excess of $10,000, except liabilities incurred in the
ordinary course of the Business it conducts, or any cancellation or compromise
of any debt owed to or claim by such Person with a value in excess of $50,000,
or any waiver or release of any right of value in excess of $50,000 to the
Business it conducts;
(i) any sale, transfer, lease, abandonment or other disposal
of any machinery, equipment or real or heritable property with a fair market
value in excess of $50,000 or, except in the ordinary course of the Business it
conducts, any sale, transfer, lease, abandonment or other disposal of any
portion of any other properties or assets (real, heritable, personal or mixed,
tangible or intangible) with a fair market value in excess of $50,000;
(j) any transfer, disposal or grant of any rights under any
Intellectual Property owned by or licensed to such Person, or any disposal of
or disclosure to any other Person other than representatives of SEi of any
trade secret, formula, process or know-how not theretofore a matter of public
knowledge; except, in each case, in the ordinary course of the Business it
conducts;
(k) any single capital expenditure made, or any commitment to
make any capital expenditure, in excess of $50,000 for any tangible or
intangible capital assets, additions or improvements, except in the ordinary
course of the Business it conducts;
(l) any declaration, payment or reservation for payment of
any dividend or other distribution in respect of the share capital of such
Person or any other securities, or any redemption, purchase or other
acquisition, directly or indirectly, of any share capital or other securities
of such Person;
(m) any grant or extension of any power-of-attorney or
guaranty in respect of any other Person;
(n) any forward purchase commitment that is not in the
ordinary course of the Business it conducts and which is still outstanding;
26
(o) the adoption of any ruling, law, ordinance, statute,
rule, regulation, code, or other requirement of any governmental authority
which materially adversely affects such Person or the Business it conducts; or
(p) any entry into any binding agreement, whether in writing
or otherwise, to take any action described in this Section 4.11.
SECTION 4.12. INTELLECTUAL PROPERTY.
(a) Section 4.12(a) of the Disclosure Schedule contains a
list (subdivided by Person), which is accurate and complete in all material
respects, and description of all Software Contracts with a fair market value,
or involving the payment or receipt of any amount, in excess of $50,000 to
which any of the Company, a Subsidiary or, to the knowledge of the Warrantors,
an Investment is a party or to which the Company, a Subsidiary or, to the
knowledge of the Warrantors, an Investment or any of the assets owned, used or
held for use by the Company, a Subsidiary or, to the knowledge of the
Warrantors, an Investment is subject, subdivided under the following
categories:
(i) License agreements from third parties;
(ii) development contracts, work-for-hire
agreements and consulting and employment agreements;
(iii) distributorship, dealership, franchise and
commercial sales representation agreements;
(iv) License agreements and sublicense agreements
to others; and
(v) maintenance, support and enhancement
agreements.
Except as disclosed in Section 4.12(a) of the Disclosure Schedule, no fees or
royalties are payable or will be payable under the Software Contracts described
in Section 4.12(a)(i) as a result of continued use by the Company, a Subsidiary
or, to the knowledge of the Warrantors, an Investment of the licensed Software
in the ordinary course of the Business, other than fees or royalties due for
upgrades.
(b) Section 4.12(b) of the Disclosure Schedule contains a
list (subdivided by Person) which is accurate and complete in all material
respects, and description of all Intellectual Property having a fair market
value in excess of $50,000 owned or used by, or licensed to, the Company, a
Subsidiary or, to the knowledge of the Warrantors, an Investment in the conduct
of the Business, subdivided under the following categories:
27
(i) Copyrights owned by, licensed to or used by
the Company, a Subsidiary or an Investment, showing in each case, the owner,
licensor, if any, and, where registered, the country of registration,
registration number, title and date of issuance.
(ii) Software used or possessed by the Company, a
Subsidiary or an Investment which is the subject of a License in favor of the
Company, a Subsidiary or an Investment.
(iii) Software owned by the Company, a Subsidiary or
an Investment, showing in each case, the name of the product, the current
release number of the product, the release numbers of all prior releases and
the date of such releases and the registration number, if any, of all
registered Copyrights in such product.
(iv) Trademarks and Trade Names adopted and used by
the Company, a Subsidiary or an Investment, showing in each case, the Trademark
or Trade Name, its domestic and foreign registration numbers, if any, the
countries of such registration, its date of registration and the date of its
most recent renewal or affidavit of continued use, if any.
(v) Registered Patent Rights owned or used by the
Company, a Subsidiary or an Investment in the Business, showing in each case
the country of registration, the registration number, the title and date of
issue.
(c) Except for the rights and Licenses validly and
effectively established by the Software Contracts and as otherwise disclosed in
Section 4.12(c) of the Disclosure Schedule , to the knowledge of the
Warrantors, the Company, a Subsidiary or an Investment owns all right, title
and interest in the Intellectual Property required to be identified on Section
4.12(b) of the Disclosure Schedule, free and clear of any encumbrance.
(d) Except as disclosed in Section 4.12(d) of the
Disclosure Schedule, to the knowledge of the Warrantors (i) all registrations
for Copyrights, Patent Rights and Trademarks required to be identified in
Section 4.12(b) of the Disclosure Schedule as being owned by the Company, a
Subsidiary or an Investment are valid and in force and applications to register
any unregistered Copyrights, Patent Rights and Trademarks so identified are
pending and unchallenged; (ii) the Intellectual Property owned by each and any
of the Company, the Subsidiaries and the Investments is valid and enforceable;
and (iii) the Company, a Subsidiary or an Investment has the exclusive right to
bring actions for infringement or unauthorized use of the Intellectual Property.
(e) Except as disclosed in Section 4.12(e) of the
Disclosure Schedule, to the knowledge of the Warrantors, all Software required
to be disclosed in Section 4.12(b) of the Disclosure Schedule is subject to
valid and enforceable
28
copyrights solely owned by the Company, a Subsidiary or an Investment, and to
the knowledge of the Warrantors, in no instance has the eligibility of the
Software for protection under applicable copyright law been forfeited to the
public domain.
(f) The Company, the Subsidiaries and, to the knowledge of
the Warrantors, the Investments take reasonable steps to keep confidential
their Trade Secrets. To the knowledge of the Warrantors, there has been no
material breach of the confidentiality of any such Trade Secret.
(g) Except as disclosed in Section 4.12(g) of the Disclosure
Schedule, to the knowledge of the Warrantors, all personnel, including
employees, agents, consultants and contractors, who have contributed to or
participated in the conception and development of the Software, Technical
Documentation or Intellectual Property on behalf of the Company, a Subsidiary
or an Investment either (i) have been party to a "work-for-hire" arrangement or
agreement in accordance with applicable law that has accorded the Company, a
Subsidiary or an Investment full, effective, exclusive and original ownership
of all tangible and intangible property arising thereby, or (ii) have executed
appropriate instruments of assignation in favor of the Company, a Subsidiary or
an Investment as assignee that have conveyed to the Company, a Subsidiary or an
Investment full effective and exclusive ownership of all tangible and
intangible property thereby arising.
(h) Except as disclosed in Section 4.12(h) of the Disclosure
Schedule, to the knowledge of the Warrantors, the Technical Documentation of
each and any of the Company, the Subsidiaries and the Investments includes the
system documentation, statements of principles of operation, flow charts,
algorithms and schematics for all Software required to be disclosed in Section
4.12(b) of the Disclosure Schedule, as well as any pertinent commentary or
explanation that may be necessary to render such materials understandable and
usable by a computer programmer of ordinary skill.
(i) Except as disclosed in Section 4.12(i) of the Disclosure
Schedule, to the knowledge of the Warrantors, (i) the Company, the Subsidiaries
and the Investments have validly and effectively obtained the right and license
to use, copy, modify and distribute the third party programming and materials
contained in the Software and Technical Documentation required to be disclosed
on Section 4.12(b) of the Disclosure Schedule pursuant to the Software
Contracts identified as "Licenses from third parties" in Section 4.12(a)(i) of
the Disclosure Schedule; (ii) such Software and Technical Documentation contain
no other programming or materials in which any third party may claim superior,
joint or common ownership, including any right or License; and (iii) such
Software and Technical Documentation do not contain derivative works of any
programming or materials not owned in their entirety by the Company, a
Subsidiary or, to the knowledge of the Warrantors, an Investment and included
in the Intellectual Property.
29
(j) To the knowledge of the Warrantors, none of the Company,
the Subsidiaries and the Investments has granted, transferred, or assigned any
right or interest in its Software, Technical Documentation or Intellectual
Property to any Person, except pursuant to the Software Contracts identified as
"distributorship, dealerships, franchise, and commercial sales representation
agreements" or "License and sublicense agreements to others" in Section 4.12(a)
of the Disclosure Schedule. To the knowledge of the Warrantors, there are no
contracts, agreements, Licenses or other commitments and arrangements in effect
with respect to the marketing, distribution, licensing or promotion of the
Software or any Intellectual Property by any independent sales person,
distributor, sublicensor or other remarketer or sales organization, except for
the Software Contracts identified as "distributorship, dealership, franchise,
and commercial sales representation agreements" in Section 4.12(a) of the
Disclosure Schedule.
SECTION 4.13. LEASES. The Properties List and Section 4.13 of the
Disclosure Schedule contains an accurate and complete list (subdivided by
Person) of all leases pursuant to which the Company, a Subsidiary or, to the
knowledge of the Warrantors, an Investment leases (as lessor or lessee) real,
heritable, or personal property. Except as set forth in Section 4.13 of the
Disclosure Schedule, all such leases are in full force and effect and are
valid, binding and enforceable against the Company, the Subsidiary or the
Investment, as applicable, and, to the knowledge of the Warrantors, against
each other party thereto in accordance with their terms; there are no existing
defaults or events which, with the giving of notice or the lapse of time or
both, would constitute a default thereunder by the Company, the Subsidiary or
the Investment, as applicable, or to the knowledge of the Warrantors, any other
parties thereto. All rents due to date pursuant to each such lease have been
timely paid. The Company, the Subsidiaries and the Investments are in
compliance with the terms and conditions of each such lease in all material
respects, and, to the knowledge of the Warrantors, all of the covenants to be
performed by any other party under each such lease have been fully performed in
all material respects. All leased items of personalty which are material to the
Business are in good operating condition (reasonable wear and tear excepted).
Each such lease contains terms and conditions obtained from independent third
parties and negotiated in good faith at arms-length. None of the rights of the
Company, the Subsidiary or, to the knowledge of the Warrantors, the Investment,
as applicable, under each such lease is subject to termination or modification
as a result of the transactions contemplated hereby. All warranties in this
Section 4.13 relating to leases of the Investments are made only to the
knowledge of the Warrantors.
SECTION 4.14. BANK ACCOUNTS; INVESTMENTS; POWERS OF ATTORNEY.
(a) Section 4.14(a) of the Disclosure Schedule sets forth the
names and locations of all banks, trust companies, savings and loan
associations and other
30
financial institutions at which the Company, a Subsidiary or, to the knowledge
of the Warrantors, an Investment maintains safe deposit boxes or accounts of
any nature and the names (and limits, if any) of all Persons authorized to draw
thereon, make withdrawals therefrom or have access thereto.
(b) Section 4.14(b) of the Disclosure Schedule sets forth an
accurate and complete list (subdivided by Person) and description (including
interest rates and other significant terms) of all funds, securities and other
instruments (excluding interest bearing bank accounts) in which excess cash of
the Company, a Subsidiary or, to the knowledge of the Warrantors, an Investment
was invested as of the Management Accounts Date.
(c) Except as set forth in Section 4.14(c) of the Disclosure
Schedule, none of the Company, the Subsidiaries and, to the knowledge of the
Warrantors, the Investments, nor, to the knowledge of the Warrantors, any of
their respective Affiliates beneficially or of record owns any shares of SEi
Stock.
(d) None of the Company, the Subsidiaries, and, to the
knowledge of the Warrantors, any of the Investments has granted or extended to
any Person, or is otherwise subject to or bound by, any power of attorney which
remains in effect.
SECTION 4.15. MATERIAL CONTRACTS AND CUSTOMERS.
(a) Section 4.15(a) of the Disclosure Schedule contains an
accurate and complete list (subdivided by Person) of all material contracts,
agreements or other understandings or arrangements, written or oral, formal or
informal, or commitments therefor, relating to the Business, assets or
liabilities of Company, a Subsidiary, or, to the knowledge of the Warrantors,
an Investment, (collectively, the "Contracts") namely :
(i) agreements involving payment or receipt during any
twelve-month period of an amount in excess of $50,000 including, without
limitation, agreements for the purchase or sale of products, materials,
supplies, equipment or services, distributor, sales agency, manufacturer's
representative, consignment and customer agreements and agreements for capital
expenditures;
(ii) agreements not cancelable by the Company, the
Subsidiary or the Investment, as applicable, without penalty upon notice of not
more than 180 days;
(iii) agreements with any governmental entity, agency or
authority;
(iv) agreements limiting the freedom of the Company, a
Subsidiary or an Investment to engage in any line of business or to compete with
any
31
other Person;
(v) secrecy agreements;
(vi) indentures, mortgages, promissory notes, loan
and credit agreements, capital leases, security documents, bank letters and
other evidences of indebtedness or other financing arrangements including sale
and leaseback arrangements, installment purchases and deferred payment
arrangements, whether involving the Company, a Subsidiary or an Investment as
lender or borrower;
(vii) guarantees of obligations of third parties;
(viii) agreements to indemnify third parties;
(ix) agreements with any of the Company's, a
Subsidiary's or an Investment's shareholders, directors, or officers;
(x) agreements which contain restrictions on the
payment of dividends or any other distribution in respect of the Company's, a
Subsidiary's or an Investment's share or equity capital;
(xi) to the knowledge of the Warrantors, any other
agreement which might reasonably be expected to materially adversely affect the
business practices, operations or conditions of the Company, a Subsidiary or an
Investment or any of their assets or property or which would prevent
consummation of the transactions contemplated hereby;
(xii) the agreements listed in Sections 4.12(a),
4.13(a), 4.13(b) and 4.18(c) of the Disclosure Schedule; and
(xiii) any other agreement or arrangement which is
material to the Company or a Subsidiary as a result of a non-financial term or
provision of such agreement or arrangement.
Each of the warranties in Section 4.15(a) relating to contracts of the
Investments are made only to the knowledge of the Warrantors.
(b) True and complete copies of each of the Contracts
(other than the secrecy agreements identified in sub-paragraph (v) above as to
which the Warrantors have provided to SEi the standard form of secrecy agreement
utilized by the Company), have been provided to SEi by the Warrantors. With
respect to each of the Company, the Subsidiaries and, to the knowledge of the
Warrantors, the Investments that is a party to such Contract, each of the
Contracts is in full force and effect. With respect to each other party to each
Contract, to the knowledge of the Warrantors, each of the
32
Contracts is in full force and effect. There exists no default or event which,
with the giving of notice or lapse of time or both, would constitute a default
under any of the Contracts by the Company, a Subsidiary or, to the knowledge of
the Warrantors, an Investment, as applicable, or, to the knowledge of the
Warrantors, by any other party thereto. Except as referenced in Section 4.15(b)
of the Disclosure Schedule, (i) none of the Company, the Subsidiaries and, to
the knowledge of the Warrantors, the Investments is (or would be with or
without the giving of notice or the passage of time, or both) in breach of the
terms or conditions of any Contract in any respect; (ii) to the knowledge of
the Warrantors, all the covenants to be performed by any other party thereto
have been fully performed; and (iii) none of the rights of the Company, a
Subsidiary or, to the knowledge of the Warrantors, an Investment, as
applicable, under any of the Contracts is subject to termination or
modification as a result of the transactions contemplated hereby. No notice of
termination or nonrenewal has been given under any Contract. None of the
Contracts with suppliers of goods or services to the Company, a Subsidiary or,
to the knowledge of the Warrantors, an Investment, as applicable, requires the
payment by or on behalf of the Company, a Subsidiary or, to the knowledge of
the Warrantors, an Investment of any commission, royalty, fee, brokerage fee or
other similar charge. The amounts set forth in this Section 4.15 with respect
to the Contracts shall not be deemed to represent any standard of "materiality"
with respect to the Contracts or otherwise for any other purpose and shall have
no application to any other Section of this Agreement.
(c) Section 4.15(c) of the Disclosure Schedule contains an
accurate and complete list (subdivided by Person) of the name and location of
the fifteen (15) largest customers (the "Customers") and the fifteen (15)
largest suppliers, in each case measured by revenues generated or amounts paid,
of the Company and the Subsidiaries on a consolidated basis as of the
Management Accounts Date. To the knowledge of the Warrantors, the relationships
of each of the Company and the Subsidiaries with its respective Customers are
good, no Warrantor is aware of any intention of any such Customers or suppliers
to terminate or modify any of such relationships, and no Warrantor anticipates
any adverse change in such relationships to result from the consummation of
transactions contemplated by this Agreement. None of the Company, the
Subsidiaries and, to the knowledge of the Warrantors, the Investments is
generally required to provide bonding or any other security arrangements in
connection with any transactions with its customers or suppliers.
(d) Section 4.15(d) of the Disclosure Schedule (and Part 3 of
the Schedule attached hereto) contains a revenue schedule for the Company on a
consolidated basis for the first eight months (through 31st October 1997) of
the Company's current fiscal year ("the Consolidated Revenue Schedule").
The Warrantors warrant and confirm the following with respect to the
Consolidated Revenue Schedule:
33
(i) The Consolidated Revenue Schedule contains, in all material
respects, a full, complete and accurate list of the revenue
figures from the Company's 15 largest revenue customers
(determined on a consolidated basis) listed in order of
consolidated revenues for the period shown.
(ii) The (pound)46.482 m represents the total revenues of the
Company for the current period year through 31st October 1997
and represents the total of the revenues from the 15 largest
customers plus the balance of customer revenues for the
remaining customers which are combined under the heading
"Other". None of the revenues for the period shown for
individual customer included in Other category is greater
than (pound)600,000.
(iii) The designation as to each customer of whether the services
and products being provided for that customer are either
under a written contract, or a verbal agreement, or a mixture
of both, is correct. The contracts for the customers shown as
being under contract have not expired and are not under the
contract terms due to expire within the next 60 days unless
otherwise so identified in the Comment section of the
Consolidated Revenue Schedule.
(iv) The Warrantors have no knowledge of any notice of
termination, reduction in products or services to be
currently provided or to be provided in the future, or
customer complaints which are material as to service or
products, whether written or verbal, except as noted in the
Comment section of the Consolidated Revenue Schedule.
(v) All terms and provisions of the customers agreements for
customers listed and those included under Other on the
Consolidated Revenue Schedule, whether written or verbal,
were negotiated in "arms length" transactions in the normal
course of business, and do not contain terms, provisions, or
any concessions not normally given or offered to customers in
these types of businesses except as noted in the Comment
section of the Consolidated Revenue Schedule.
SECTION 4.16. RELATED TRANSACTIONS.
(a) Except as set forth in Section 4.16 of the Disclosure
Schedule, to the knowledge of the Warrantors, none of the Company, the
Subsidiaries and the Investments has any contractual relationship with, or any
obligation or liability owed to, any of the Sellers, any Affiliate of a Seller,
or any Person of which one or more Sellers is an Affiliate. All contractual
relationships that any of the Company and the Subsidiaries has with any of the
Sellers, any Affiliate of a Seller or any Person of which one or more Sellers
is an Affiliate are on terms that are no less favorable to the Company or the
Subsidiary, as the case may be, than would be the case with a non-affiliated
party. To the knowledge of the Warrantors, all contractual relationships
34
that any Investment has with any of the Sellers, any Affiliate of a Seller or
any Person of which one or more Sellers is an Affiliate are on terms that are no
less favorable to the Investment than would be the case with a non-affiliated
party.
(b) Except as set forth in Section 4.16 of the Disclosure
Schedule, none of the Warrantors, to the knowledge of the Warrantors, none of
the directors and officers of the Company, the Subsidiaries and the Investments
and, to the knowledge of the Warrantors, none of the Sellers has any interest,
direct or indirect, in any Person which (i) is a competitor, customer,
subcontractor or supplier of the Company, any of the Subsidiaries or, to the
knowledge of the Warrantors, any of the Investments, or (ii) has an existing
relationship with, or an interest in, the Company, any of the Subsidiaries or,
to the knowledge of the Warrantors, any of the Investments, including but not
limited to lessors of real, heritable, moveable, or personal property and
Persons against which rights or options are exercisable by the Company, any of
the Subsidiaries or, to the knowledge of the Warrantors, any of the
Investments.
SECTION 4.17. INSURANCE.
(a) Section 4.17(a) of the Disclosure Schedule contains an
accurate and complete list (subdivided by Person) of all policies of insurance
presently maintained with respect to the Company, a Subsidiary or, to the
knowledge of the Warrantors, an Investment including, without limitation, "key
man" insurance with respect to any employee. Such list includes a description
of coverage, the amount of coverage and the name of the insurer or an
indication that the Company, the Subsidiary or, to the knowledge of the
Warrantors, the Investment, as the case may be, has self-insured any particular
aspect of the Business. All such policies are in full force and effect and no
notice of cancellation or termination has been received with respect to any
such policy and there is, and has been, no default by the Company, the
Subsidiary, or, to the knowledge of the Warrantors, the Investment, as
applicable, with respect to its obligations under any such policy. Except as
set forth in Section 4.17(b) of the Disclosure Schedule, none of the
Warrantors, the Company, the Subsidiaries and, to the knowledge of the
Warrantors, the Investments has received during the past three (3) years any
written notice or other written communication from any insurance company
declining to write insurance with respect to any part of the Business, or
canceling or amending any of the Company's, a Subsidiary's or, to the knowledge
of the Warrantors, an Investment's insurance policies or proposing to do so.
Section 4.17(c) of the Disclosure Schedule sets forth a summary of information
(subdivided by Person) pertaining to property damage, personal injury and
products liability claims filed by the Company, the Subsidiaries and, to the
knowledge of the Warrantors, the Investments during the past three (3) years
which exceed $50,000 in any instance, all of which have been paid or are being
defended by the Company's, a Subsidiary's, or, to the knowledge of the
Warrantors, an Investment's insurance carriers and involve no exposure to the
Company, the Subsidiaries or, to the knowledge of the Warrantors, the
Investments which relates to policy or coverage limits under the applicable
insurance
35
policy. Section 4.17(d) of the Disclosure Schedule sets forth an accurate and
complete list of any claims that the Company, a Subsidiary or, to the knowledge
of the Warrantors, an Investment has under any of its insurance policies which
have not been fully paid.
SECTION 4.18. INDUSTRIAL DISPUTES
(a) To the extent applicable, except to the extent set forth
in Section 4.18(a) of the Disclosure Schedule, (i) each of the Company, the
Subsidiaries and, to the knowledge of the Warrantors, the Investments is in
compliance in all material respects with all Legal Requirements with respect to
employment and employment practices, (ii) no summons, writ, claim, lawsuit,
application or other court or legal papers have been served on the Company, a
Subsidiary or, to the knowledge of the Warrantors, an Investment relating to
any unfair labor practice, charge or complaint against such Person before any
labor grievance board, authority or industrial or other tribunal, nor to the
knowledge of the Warrantors, is any such charge, application or complaint
pending against the Company, a Subsidiary or an Investment; (iii) to the
knowledge of the Warrantors, no unfair labor practice charge or complaint has
been threatened against the Company, a Subsidiary or an Investment; (iv) there
is no labor strike, dispute, slowdown, or stoppage pending against or affecting
the Company, a Subsidiary or, to the knowledge of the Warrantors, an
Investment; (v) none of the Company, the Subsidiaries nor, to the knowledge of
the Warrantors, any of the Investments is a party to any collective bargaining
agreement, arrangement, or contract with any labor or trade union and no works
council exists with respect to employees of the Company, a Subsidiary or, to
the knowledge of the Warrantors, an Investment; (vi) none of the Company, and
the Subsidiaries or, to the knowledge of the Warrantors, the Investments has
experienced any industrial dispute during the last three (3) years; and (vii)
no other applications, complaints or claims have been served upon the Company,
any of the Subsidiaries or, to the knowledge of the Warrantors, any of the
Investments by any of their respective employees, including, without
limitation, claims, applications or complaints arising under any labor or
employment laws and, to the knowledge of the Warrantors, no disputes are
pending with or have been threatened by any such employees.
(b) Section 4.18(b) of the Disclosure Schedule sets forth an
accurate and complete list (subdivided by Person) of the names of all
employees, consultants, officers and directors of each of the Company, the
Subsidiaries and, to the knowledge of the Warrantors, the Investments as of the
date hereof, including length of employment, date of birth and compensation or
remuneration.
(c) The Warrantors have delivered to SEi copies of each model
employment agreement by the Company, the Subsidiaries and, to the knowledge of
the Warrantors, the Investments. To the knowledge of the Warrantors with
respect to matters relating exclusively to the Investments, Section 4.18(c) of
the Disclosure
36
Schedule sets forth (i) a summary of the material terms of each type or class
of employees for which no written model employment agreement exists, (ii) a
list of all employment agreements which either (A) vary materially from the
model employment agreements and the foregoing summaries, or (B) involve payment
during any twelve-month period of $50,000 or more, and (iii) a list of any
collective bargaining or other agreements with labor or trade unions.
(d) Section 4.18(d) of the Disclosure Schedule sets forth (i)
a description of the areas with respect to which any of the Company, the
Subsidiaries and, to the knowledge of the Warrantors, the Investments at any
time within the last five years has utilized any consultant(s) or independent
contractor(s), and (ii) a list of all agreements of the Company, a Subsidiary
or, to the knowledge of the Warrantors, an Investment entered into within the
last twelve months with any consultants or independent contractors and
involving the payment during any twelve month period of $50,000 or more.
SECTION 4.19. EMPLOYEE BENEFIT PLANS.
(a) To the extent applicable to the Person, set forth in
Section 4.19 of the Disclosure Schedule is an accurate and complete list
(subdivided by Person) of each Employee Benefit Plan maintained or contributed
to by the Company, the Subsidiaries or, to the knowledge of the Warrantors, the
Investments.
(b) Except as set forth in Section 4.19 of the Disclosure
Schedule, all amounts that the Company, a Subsidiary or, to the knowledge of
the Warrantors, an Investment are required to have contributed to any Employee
Benefit Plan have been contributed within the time prescribed by applicable law
and all benefits, expenses, and other amounts due and payable and all transfers
or payments required to be made by the Company, a Subsidiary or, to the
knowledge of the Warrantors, an Investment with respect to any Employee Benefit
Plan have been paid within the time prescribed by the applicable documents and
governing law.
(c) Except as set forth in Section 4.19 of the Disclosure
Schedule, no summons, writ, claim (other than routine claims for benefits),
lawsuit or other court or legal papers with respect to any Employee Benefit
Plan have been served on, or to the knowledge of the Warrantors, have been
threatened (either in writing or through legal counsel or which would be
disclosed in an audit letter for the plan) against, the Company, any Subsidiary
or, to the knowledge of the Warrantors, either any Investment or the Trustees
of any Employment Benefit Plan.
(d) Except as set forth in Section 4.19 of the Disclosure
Schedule, the Warrantors have previously delivered or made available to SEi
true and complete copies of the plan documents for each Employee Benefit Plan
identified in Section 4.19 of the Disclosure Schedule.
37
(e) Except as set forth in Section 4.19 of the Disclosure
Schedule, the assets, investments or policies held by the trustees of any
Employee Benefit Plan of the Company, a Subsidiary or, to the knowledge of the
Warrantors, an Investment are sufficient to satisfy the liabilities and
obligations (both current and contingent) which the relevant Employee Benefit
Plan has to its members at the date of this Agreement.
(f) Except as required by Chapter 6 of Title 1 of ERISA and
any applicable state continuation or conversion laws, no US Employee Plan
provides any health or life insurance coverage to any individual for events
occurring, or expenses incurred, after termination of employment and no promise
has been made nor any liability incurred by the Company, a Subsidiary or, to the
knowledge of the Warrantors, an Investment for post-retirement and/or post-
termination health or life insurance or other benefits (other than pursuant to
an Employee Benefit Plan which is a written pension plan which has been
disclosed to SEi, or to a written employment contract which has been disclosed
to SEi or to the McQueen Inc Severance Pay Plan as disclosed to SEi).
(g) Each US Employee Plan is in all material respects, with
respect to form, operation, and administration, in compliance with its terms,
ERISA, the Code and any other legal requirements applicable to the Company, a
Subsidiary or, to the knowledge of the Warrantors, an Investment and none of
the Company, the Subsidiaries and, to the knowledge of the Warrantors, the
Investments nor any US Employee Plan is liable for any material fine, excise
tax, or loss of income tax deduction with respect to the operation of any such
US Employee Plan. Each US Employee Plan that is intended to be qualified under
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified and each trust maintained in connection with such US
Employee Plan has been determined by the Internal Revenue Service to be
tax-exempt under Section 501(a) of the Code, and no circumstances exist which
would cause any US Employee Plan to be subject to disqualification or a related
trust to lose its tax-exempt status.
(h) Except as set forth in Section 4.19 of the Disclosure
Schedule, none of the Company, the Subsidiaries and, to the knowledge of the
Warrantors, the Investments has maintained or contributed to any US Employee
Plan during the last five years, which has not either been fully terminated or
steps otherwise taken to assure that none of the Company, the Subsidiaries and
the Investments has any liability remaining under that plan.
(i) All required reports and descriptions (including, but not
limited to, Form 5500 annual reports, summary annual reports, and summary plan
descriptions) with respect to each US Employee Plan have been properly filed
with the appropriate governmental authority and distributed to participants
substantially as required by law.
38
(j) None of the Company, the Subsidiaries and, to the
knowledge of the Warrantors, the Investments has incurred and is not reasonably
expected to incur any liability to the PBGC (as defined under Title IV of
ERISA), the Internal Revenue Service, the Department of Labor of the United
States, or otherwise with respect to any US Employee Plan currently or
previously maintained or contributed to the Company, any Subsidiary or, to the
knowledge of the Warrantors, any Investment or by members of the "Controlled
Group" (as determined under Code Section 414) to which any such Person is a
member that has not been satisfied in full, and no condition exists that
presents a material risk to the Company, the Subsidiaries or, to the knowledge
of the Warrantors, the Investments or the Company's Controlled Group of
incurring such a liability, other than liability for premiums due to the PBGC.
(k) Except as identified in Section 4.19 of the Disclosure
Schedule, none of the Company, the Subsidiaries and, to the knowledge of the
Warrantors, the Investments nor any member of the Controlled Group to which any
such Person is a member has at any time sponsored, participated in or
contributed to a US Employee Plan that is a multiemployer plan (as defined
Section 3(37) or 4001(a)(3) of ERISA) or a defined benefit plan (as defined in
Section 3(35) of ERISA) or any other plan covered under Title IV of ERISA.
SECTION 4.20. EMPLOYEES AND TERMS OF EMPLOYMENT. No contract of
service exists between the Company, a Subsidiary or, to the knowledge of the
Warrantors, an Investment, on the one hand, and a director or employee, on the
other hand, in relation to which any material Legal Requirements have not been
fulfilled.
SECTION 4.21. BONUS SCHEMES.
(a) Except as set forth in Section 4.21 of the Disclosure
Schedule, there are no schemes in operation under which any employee of the
Company, the Subsidiaries or, to the knowledge of the Warrantors, an Investment
is entitled to a commission or remuneration calculated by reference to the
whole or part of the turnover, profits, or sales of the Company, any
Subsidiary, or any Investment (as relevant).
(b) None of the Company, the Subsidiaries and, to the
knowledge of the Warrantors, the Investments has registered any profit-related
pay scheme under Part V, Chapter III of the Income and Corporation Taxes Xxx
0000.
SECTION 4.22. CHANGES IN REMUNERATION.
(a) Except as set forth in Section 4.22 of the Disclosure
Schedule, during the period from 28th February 1997 to the Management Accounts
Date and since that date or (where employment or holding of office commenced
after the beginning of such period) since the commencing date of the employment
or holding
39
office:
(i) no change has been made in the rate of remuneration,
emoluments or pension benefits, of any officer, ex-officer or senior executive
of the Company or the Subsidiaries or, to the knowledge of the Warrantors, the
Investments (a senior executive being a person in receipt of remuneration in
excess of $50,000 per annum);
(ii) no change has been made in any other terms of
employment of any officer or senior executive.
(b) No negotiations for any increase in the remuneration or
benefits of any officer or employee of the Company, any Subsidiary or, to the
knowledge of the Warrantors, any Investment are currently taking or likely to
take place within six (6) months after the Closing Date.
SECTION 4.23. TERMINATION OF CONTRACTS OF EMPLOYMENT.
(a) Except as set forth in Section 4.23 of the Disclosure
Schedule, all subsisting contracts of service to which the Company, a
Subsidiary or, to the knowledge of the Warrantors, an Investment is a party are
determinable at any time on three months' notice or less without compensation
(other than compensation in accordance with the Employment Rights Xxx 0000 to
employees who have rights under that Act).
(b) No executive of the Company, any Subsidiary or, to the
knowledge of the Warrantors, any Investment who is in receipt of remuneration
in excess of $50,000 per annum, and no officer of the Company, any Subsidiary
or, to the knowledge of the Warrantors, the Investments has given or received
notice terminating his employment, except as expressly contemplated in this
Agreement, and no such executive or officer will be entitled to give such
notice as a result of this Agreement.
SECTION 4.24. INDUSTRIAL AGREEMENTS. Except as set forth in Section
4.24 of the Disclosure Schedule, none of the Company, the Subsidiaries and, to
the knowledge of the Warrantors, the Investments has entered into any
recognition agreement with a trade union nor have they done any act which might
be construed as recognition.
SECTION 4.25. REDUNDANCIES. No employee based in the United Kingdom
will become redundant and be entitled to a redundancy payment as a result of
this Agreement.
SECTION 4.26. PENSION.
(a) Except as set forth in Section 4.19 of the Disclosure
Schedule, the
40
Company, the Subsidiaries and, to the knowledge of the Warrantors, the
Investments are not under any legal liability or obligation or a party to any ex
gratia arrangement or promise to pay pensions, gratuities, superannuation
allowances or the like, or otherwise to provide "relevant benefits" within the
meaning of Section 612 of the Income and Corporation Taxes Xxx 0000 to, or for,
any of its past or present officers or employees or their dependents; and there
are no retirement benefits, or pension or death benefits, or similar schemes or
arrangements in relation to or binding on the Company, any Subsidiary or, to the
knowledge of the Warrantors, any Investment, or to which the Company, any
Subsidiary or, to the knowledge of the Warrantors, any Investments contributes.
(b) Any of the Employee Benefit Plans which are pension
schemes operated in, or for the benefit of employees in, the United Kingdom by
the Company, any Subsidiary or, to the knowledge of the Warrantors, any
Investment are exempt approved scheme(s) within the meaning of Section 592 of
the Income and Corporation Taxes Act 1988 and, so far as the Warrantors are
aware, there is no reason why such approval may be withdrawn.
(c) All benefits (other than a refund of contributions with
interest where appropriate) payable under any pension scheme operated within
the United Kingdom or the Republic of Ireland, France or Sweden by the Company,
any Subsidiary or, to the knowledge of the Warrantors, any Investment on the
death of a member while in an employment to which the pension scheme relates or
during a period of sickness or disability of a member are fully insured. Except
as set forth in Section 4.26 of the Disclosure Schedule, each member has been
covered for insurance by the insurance company at its normal rates and on its
normal terms for persons in good health.
(d) Except as set forth in Section 4.26 of the Disclosure
Schedule, the Employee Benefit Plans which are pension schemes operated by the
Company, any Subsidiary or, to the knowledge of the Warrantors, any Investment
do not and have not been operated in such a way as to directly or indirectly
discriminate between male and female employees as regards eligibility, the
rates of contributions and the amounts of any benefits provided or the dates on
or from which the benefits are to be or may be provided or otherwise in any way
which is contrary to Article 119 of the Treaty of Rome or any corresponding
domestic legislation.
(e) Except as set forth in Section 4.26 of the Disclosure
Schedule, the Employee Benefit Plans which are pension schemes operated by the
Company, any Subsidiary or, to the knowledge of the Warrantors, any Investment
do not and have not been operated in such a way as to directly or indirectly
discriminate in any other way which is unlawful between employees as regards
eligibility, the rates of contributions and the amounts of any benefits
provided or the dates on or from which the benefits are to be or may be
provided or otherwise.
41
(f) Except as set forth in Section 4.26 of the Disclosure
Schedule, no employments or categories of employments with the Company or any
Subsidiary are contracted out of the State Earnings Related Pension Schemes as
operate in the United Kingdom (or any similar scheme within another country in
which the pension scheme operates).
SECTION 4.27. LITIGATION. Except as set forth in Section 4.27 of
the Disclosure Schedule, none of the Company, the Subsidiaries and, to the
knowledge of the Warrantors, the Investments is engaged in any litigation or
arbitration proceedings. No summons, writ, claim, lawsuit or other court or
legal papers have been served on the Company, any Subsidiary or, to the
knowledge of the Warrantors, any Investment or their respective agents in
respect of any pending arbitration or litigation proceedings. Except as set
forth in Section 4.27 of the Disclosure Schedule, to the knowledge of
Warrantors, there are no claims, actions, suits, or proceedings pending or,
threatened against the Company, any Subsidiary or any Investment relating to
this Agreement or the transactions contemplated hereby or to the Business or the
properties of any of them at law or in equity or before or by any national,
federal, state, provincial, local, or foreign court or other governmental
department, commission, board, agency, instrumentality or authority, nor any
arbitration proceeding, in each case including, without limitation, any claims
relating to environmental matters. None of the Company, the Subsidiaries and, to
the knowledge of the Warrantors, the Investments is subject to any adverse
judgment, order, writ, injunction or decree of any court or governmental body.
SECTION 4.28. COMPLIANCE WITH LAWS.
(a) Except as set forth in Section 4.28(a) of the Disclosure
Schedule, each of the Company, the Subsidiaries and, to the knowledge of the
Warrantors, the Investments has conducted the Business conducted by it so as to
comply in all material respects with, and is not in material breach of, nor has
it received any written notice claiming it is in breach of any order, law,
ordinance, statute, rule or regulation applicable to it, or to the Business
conducted by it or any of the property or assets of it including, without
limitation, any environmental or worker safety and protection laws and
regulations. Except as set forth in Section 4.28(a) of the Disclosure Schedule,
each of the Company, the Subsidiaries and, to the knowledge of the Warrantors,
the Investments has all licenses, permits, certificates of occupancy and
authorizations necessary to conduct the Business conducted by it.
(b) Except as set forth in Section 4.28(b) of the Disclosure
Schedule:
(i) the conduct of the Business by the Company, the
42
Subsidiaries and, to the knowledge of the Warrantors, the Investments has at all
times complied and currently complies in all material respects with all
applicable Environmental, Health and Safety Laws and each of the Company, the
Subsidiaries and, to the knowledge of the Warrantors, the Investments has not
been and is not in violation in any material respect of any applicable
Environmental, Health and Safety Laws;
(ii) none of the Company, the Subsidiaries and, to the
knowledge of the Warrantors, the Investments has received notification from any
governmental authority or any other Person of any violations of, or actual or
alleged liability under, any Environmental, Health and Safety Laws, nor are
there any judicial or administrative writs, injunctions, decrees, orders or
judgments outstanding or, to the knowledge of the Warrantors, any lawsuits,
claims, proceedings or investigations pending or threatened relating to the
ownership, use, maintenance or operation of the conduct of the Business by the
Company, a Subsidiary or, to the knowledge of the Warrantors, an Investment;
(iii) there are no Hazardous Substances present at or
migrating from any Leased Real Property or Real Property, and there are no and
have been no environmental conditions or circumstances (including, without
limitation, the release or threatened release of Hazardous Substances) at any
location which has given or could give rise to any liability of the Company, a
Subsidiary or, to the knowledge of the Warrantors, an Investment under any
Environmental, Health and Safety Law;
(iv) without limiting the generality of the foregoing,
each of the Company, the Subsidiaries and, to the knowledge of the Warrantors,
the Investments has not (A) received notification from any applicable
enforcement or protection agency or any other Person of any actual or potential
"removal," "remedial" or similar action at any site or (B) received notification
that it is liable or potentially liable for contribution for costs incurred by
another Person in taking "removal," "remedial" or similar action at any site or
(C) transported or disposed, arranged for transportation or disposal of, any
Hazardous Substance to any location whatsoever;
(v) Section 4.28(b)(v) of the Disclosure Schedule sets
forth all of the licenses, permits and approvals held by each and any of the
Company, the Subsidiaries and, to the knowledge of the Warrantors, the
Investments and required by Environmental, Health and Safety Laws for the
conduct of the Business as now conducted ("Environmental Permits"), which
constitute all material permits required of the Company, the Subsidiaries and,
to the knowledge of the Warrantors, the Investments by the Environmental, Health
and Safety Laws for the conduct of the Business by the Company, the Subsidiaries
and the Investments. None of the Company, the Subsidiaries and, to the knowledge
of the Warrantors, the Investments has been or is presently in violation of any
Environmental Permit and there is no proceeding outstanding or, to the knowledge
of the Warrantors, pending or threatened
43
with respect to the revocation or limitation of any Environmental Permit. None
of the Environmental Permits are required to be transferred or reissued as a
result of the transactions contemplated by this Agreement.
(c) Each of the warranties in this Section 4.28 which directly
relate (i) to Environmental, Health and Safety Laws or Environmental Permits,
and (ii) to the assets or business acquired by the Company from Rand XxXxxxx &
Company pursuant to the Stock Purchase Agreement dated March 21, 1997 between
the Company and Rand XxXxxxx & Company are made only to the knowledge of the
Warrantors.
SECTION 4.29. BOOKS AND RECORDS. The books, accounts and records of
each of the Company, the Subsidiaries and, to the knowledge of the Warrantors,
the Investments (a) are located at the locations as identified in Section 4.29
of the Disclosure Schedule, (b) are correct and complete in all material
respects, (c) have been maintained in accordance with law and good business
practice, and (d) constitute all the books, accounts and records necessary to
carry on the Business conducted by it in the manner in which it is currently
being conducted and has over the preceding twelve (12) months been carried on.
The organizational or constitutional, as applicable, documents and the minutes
of all shareholder and director meetings of the Company, the Subsidiaries and
the Investments hereto with respect to the immediately preceding five years have
been made available by the Warrantors to SEi and are complete and correct.
SECTION 4.30. COPIES OF DOCUMENTS. Each of the Company and the
Subsidiaries has delivered or specifically made available to SEi and its
advisors true, complete and correct copies of all documents referred to in this
Agreement or in any Section of the Disclosure Schedule with the understanding
and intention that SEi may and will rely upon the completeness and accuracy
thereof.
SECTION 4.31. ADEQUACY OF ASSETS. Except as set forth in Section
4.31 of the Disclosure Schedule, to the knowledge of the Warrantors, the assets
of each of the Company, the Subsidiaries and the Investments, and the
facilities, assets and services to which each of the Company, the Subsidiaries
or the Investments has a contractual right of use include all rights,
properties, assets, facilities and services necessary or appropriate for the
carrying on of the Business it conducts in the manner in which it is currently
being and has over the immediately preceding twelve (12) months been carried on.
None of the Company, the Subsidiaries and, to the knowledge of the Warrantors,
the Investments depends in any material respect upon the use of assets owned by,
or facilities or services provided by, any of the Sellers or, to the knowledge
of the Warrantors, any Affiliate of any of them.
SECTION 4.32. GRANTS.
(a) Section 4.32(a) of the Disclosure Schedule sets forth a
true, correct
44
and complete description of all Grants received by the Company, a Subsidiary or,
to the knowledge of the Warrantors, any Investment during the past five years,
including (i) all amounts paid to the Company, any Subsidiary or, to the
knowledge of the Warrantors, any Investment to date, and (ii) all conditions to
the receipt of payments by the Company, any Subsidiary or, to the knowledge of
the Warrantors, any Investment with respect to any such Grants.
(b) The consummation of the transactions contemplated hereby
will not affect the right of the Company, a Subsidiary or, to the knowledge of
the Warrantors, an Investment, as the case may be, to retain the Grants. Except
as set forth in Section 4.32(b) of the Disclosure Schedule, to the knowledge of
the Warrantors, no facts or circumstances exist that could, directly or
indirectly, (i) cause or contribute to the revocation of any of the Grants, (ii)
cause or contribute to an obligation of the Company, a Subsidiary or, to the
knowledge of the Warrantors, an Investment to repay any Grants or (iii)
otherwise cause or contribute to the failure of the Company, a Subsidiary or, to
the knowledge of the Warrantors, an Investment to receive the full amounts of
the Grants.
SECTION 4.33. ACCOUNTS RECEIVABLE. Section 4.33 of the Disclosure
Schedule sets forth a list (subdivided by Person) of aged debtors of the
Company, and the Subsidiaries as of the Management Accounts Date. The accounts
receivable of the Company, the Subsidiaries and, to the knowledge of the
Warrantors, the Investments including, without limitation, those reflected in
Section 4.33 of the Disclosure Schedule, constitute legal, valid, binding and
enforceable claims arising from bona fide transactions in the ordinary course of
the Business and, except to the extent reserved against in the Management
Accounts or as set forth in Section 4.33 of the Disclosure Schedule, to the
knowledge of Warrantors, are collectible in the ordinary course of the Business
and are not subject to any counterclaims or set-offs. The reserves for bad or
doubtful debts and provisions with respect to the debtors generated after the
Management Accounts Date and prior to the Closing will be established on the
basis of evaluation of specific accounts and age classifications in accordance
with the basis used in the most recent audited consolidated financial statements
of the Company as identified in the notes thereto.
SECTION 4.34. BROKERS AND FINDERS. Except as disclosed in Section
4.34 of the Disclosure Schedule, no agent, broker, investment banker, Person or
firm acting on behalf of any of the Company, a Subsidiary, or, to the knowledge
of the Warrantors, an Investment, is or will be entitled to any brokers' or
finders' fee or any other commission or similar fee directly or indirectly from
the Company or a Subsidiary in connection with the transactions contemplated
hereby.
SECTION 4.35. POOLING OF INTERESTS. Each Warrantor acknowledges
that SEi intends to account for the acquisition of the Sale Shares as a pooling
of interests, and
45
that qualifying for such accounting treatment is dependent in part upon actions
taken, or not taken, by the Company and the Sellers both before and after the
date hereof. In this regard, and with the understanding that SEi is relying
thereon in making its commitment to enter into this transaction, the Warrantors
warrant that none of the Company, the Subsidiaries, any Affiliates of the
Company that is not a Seller or an Affiliate of a Seller, the Warrantors and the
Affiliates of the respective Warrantors has, directly or indirectly, taken any
of the following actions which could prevent SEi from accounting for the
transactions contemplated by this Agreement as a pooling of interests, which
Warrantors acknowledge could prevent SEi from obtaining such pooling accounting
treatment:
(a) acquired or sold, assigned, transferred or otherwise
disposed of, or reduced any risk relative to, any Sale Shares or SEi Stock in
contemplation of the transactions provided for herein;
(b) paid or received any dividends or other distributions with
respect to the share capital of the Company, other than distributions in the
ordinary course of the Company's Business and not in contemplation of the
transactions provided for herein;
(c) altered the relative ownership interests of the Sellers in
the Company in contemplation of the transactions provided for herein;
(d) disposed of any significant part of the assets of the
Company within the nine months preceding the date hereof or in contemplation of
the transactions provided for herein;
(e) become a party to any contract, document, instrument or any
written or oral agreement regarding the sale, assignment, assignation or
transfer of, or allowed to be created any rights or obligations for the sale,
assignment, assignation or transfer of, or explicitly or implicitly agreed to
sell, assign or transfer any of the Sale Shares held by any of the Sellers to
any other Seller or any Affiliate of any other Seller; or
(f) entered into any agreement to do any of the forgoing,
including without limitation, any agreement to distribute or dispose of any
significant part of the assets of the Company upon the consummation of the
transactions provided for herein.
SECTION 4.36. RESTRICTIVE COVENANTS. Except as disclosed in Section 4.36
of the Disclosure Schedule, none of the Company, the Subsidiaries and, to the
knowledge of the Warrantors, the Investments is subject to, or a party to, any
mortgage, lien, lease, license, permit, agreement, contract, instrument, law,
rule, ordinance, regulation, order, judgment or decree, or any other restriction
of any kind or character, which adversely affects its business practices or
operations, which restricts its ability to acquire any property or conduct its
business in any area or which would prevent consummation of
46
the transactions contemplated by this Agreement, compliance by it with the
terms, conditions and provisions hereof or the operation of its business by it
after the date hereof on substantially the same basis as heretofore operated by
it.
SECTION 4.37. PRODUCT LIABILITIES AND WARRANTIES. There are no express or
implied warranties applicable to products or services sold or provided by the
Company, the Subsidiaries or, to the knowledge of the Warrantors, the
Investments except as provided by statute or common law or disclosed in Section
4.37 of the Disclosure Schedule. Section 4.37 of the Disclosure Schedule also
summarizes all product liability claims that have been notified to any of the
Company, any Subsidiary and, to the knowledge of the Warrantors, any Investment
during the three (3) years preceding the date of this Agreement.
SECTION 4.38. DISCLOSURE. To the knowledge of the Warrantors, none of the
representations or warranties by the Warrantors herein, no statement contained
in any certificate, list or other writing furnished to SEi pursuant hereto and
no statement contained in any Section of the Disclosure Schedule, taken as a
whole, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
SECTION 5.1. AUTHORITY; BINDING EFFECT. Each of the Sellers that is a
Shareholder hereby separately makes the following representations and warranties
to SEi with respect to his respective Sale Shares and his execution, delivery
and performance of this Agreement:- (a) that such Seller has all requisite
right, power and authority to execute, deliver and perform this Agreement and
the Related Agreements to which such Seller is a party; (b) that the execution,
delivery and performance by such Seller (if it is not an individual) of this
Agreement and the Related Agreements to which it is a party and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
approved by all necessary corporate or entity action including, without
limitation, all necessary action by such Seller's board of directors or managing
board; and (c) that this Agreement and the Related Agreements to which such
Seller is a party have been duly and validly executed and delivered by such
Seller and, assuming this Agreement has been duly and validly executed and
delivered by SEi, constitute the legal, valid and binding obligations of such
Seller, enforceable against such Seller in accordance with their respective
terms except (such exception applying only to Adobe Incentive Partners and IBJ)
as such enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights and remedies in general,
47
whether now or hereafter in effect, and except (such exception applying only to
Adobe Incentive Partners and IBJ) that enforceability is subject to the effect
of general principles of equity, whether applied by a court of law or equity.
SECTION 5.2. OWNERSHIP OF COMPANY SHARE CAPITAL; TITLE.
Each of the Sellers that is a Shareholder hereby separately makes the
following representations and warranties to SEi with respect to his
respective Sale Shares and his execution, delivery and performance of
this Agreement:- (a) that such Seller is the beneficial and registered
owner of the Sale Shares set forth beside such Seller's name in Part 1 of
the Schedule attached hereto; (b) such Seller has and will have, on the
Closing Date, full right and title to the Sale Shares to be sold by such
Seller hereunder, free and clear of all liens, pledges, encumbrances,
claims, security interests, charges, voting trusts, voting agreements,
other agreements, rights, options, warrants or other restrictions of any
kind, nature or description; (c) the execution, delivery and performance
of this Agreement will convey to SEi at the Closing full right and title
to the Sale Shares to be sold by such Seller hereunder free and clear of
all claims, liens, encumbrances, security interests, charges or
restrictions on transfer of any nature whatsoever, other than those
contained in the Company's Articles of Association or imposed by
applicable United States securities laws; (d) such Seller is not involved
in any proceedings by or against such Seller under any bankruptcy laws or
under any other insolvency or Debtor's Relief Act; and (e) none of the
Sale Shares were, or represent, assets which were the subject of a
transfer at undervalue or a gratuitous alienation (within the meaning of
the Insolvency Xxx 0000, the Bankruptcy (Scotland) Xxx 0000 or the common
law) within the past five years.
SECTION 5.3. OWNERSHIP OF OPTIONS; TITLE. Each of the Sellers that is an
Optionholder hereby separately makes the following representations and
warranties to SEi with respect to his respective Options and his execution,
delivery and performance of this Agreement. Each of the Optionholders is the
beneficial and registered owner of the Options set forth beside such
Optionholder's name in Part 2 of the Schedule attached hereto. Each of the
Optionholders has and will have, on the Closing Date, full right and title to
the Options free and clear of all liens, pledges, encumbrances, claims, security
interests, charges, voting trusts, voting agreements, other agreements, rights,
options, warrants or other restrictions of any kind, nature or description. Each
of the Optionholders has full right and title to release the Options of the
Optionholder as provided in this Agreement. The execution, delivery and
performance of this Agreement will release the Options of all Optionholders and
upon such release no Optionholder will have any rights to require the issuance
or transfer to him of any share capital (whether issued or unissued) of the
Company or any Subsidiary. No Optionholder is involved in any proceedings by or
against such Optionholder under any
48
bankruptcy laws or under any other insolvency or Debtor's Relief Act and none of
the Options were, or represent, assets which were the subject of a transfer at
undervalue or a gratuitous alienation (within the meaning of the Insolvency Xxx
0000, the Bankruptcy (Scotland) Xxx 0000 or the common law) within the past five
years.
SECTION 5.4. SELLERS' CONSENTS AND APPROVALS; NO VIOLATIONS. Each of the
Sellers that is a Shareholder hereby separately represents and warrants to SEi
with respect to his respective Sale Shares and his execution, delivery and
performance of this Agreement that, except as set forth in Section 5.4 of the
Disclosure Schedule, the execution, delivery and performance by such Seller of
this Agreement and the Related Agreements to which he is a party will not (with
or without the giving of notice or the passage of time, or both) (a) breach any
applicable provision of law or any rule or regulation of any national, federal,
state, provincial or local administrative agency or governmental authority
applicable to that Seller, or any order, writ, injunction, interdict, judgment
or decree of any court, administrative agency or governmental authority
applicable to that Seller, (b) violate or require any consent, waiver or
approval under (except for the matters referenced in Section 5.4 of the
Disclosure Schedule), result in a breach, modification or termination of any
provisions of, constitute a default under, affect the rights under or
enforceability of, or result in the imposition of any pledge, security interest
or other encumbrance upon any of the Sale Shares or the share capital of any of
the Subsidiaries or any of the Investments pursuant to, any agreement,
indenture, mortgage, security, charge, deed of trust, lease, license, or other
instrument to which that Seller is a party or by which he is bound, or any
license, permit or certificate held by him including, without limitation, those
listed in the Disclosure Schedule, or (c) require any consent or approval by,
notice to or registration with any governmental authority or other Person which
is applicable to that Seller.
SECTION 5.5. INVESTMENT INTENT; INFORMATION DISCLOSURES.
(a) Each of the Shareholders other than CBE separately
acknowledges that the SEi Stock to be received by such Shareholder will be
acquired for such Shareholder's own account and without any view to the
distribution of any part thereof without registration under applicable federal
and state securities laws, or the delivery to SEi of an opinion of counsel
reasonably satisfactory to SEi that registration is not required in accordance
with Section 5.5(e) hereof. Each Shareholder other than CBE separately
represents that such Shareholder does not have any agreements or arrangements to
sell, transfer or grant a participation with respect to the Purchase Price
Shares or any of them.
(b) Each Shareholder (other than CBE) understands that the
shares of SEi Stock constituting the Purchase Price Shares are not registered
under the United States federal or state securities laws in part on the grounds
that the transactions contemplated hereby are exempt from registration under the
Securities Act of 1933 (the "1933 Act") pursuant to Section 4(2) thereof, and
that SEi's reliance on such exemption
49
is predicated on each Shareholder's representations set forth herein.
(c) Each Shareholder (other than CBE) which is an individual
citizen or resident of, or another Person organized under the laws of, the
United States (collectively, the "United States Shareholders") represents that
such Shareholder has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its investment in
the Purchase Price Shares, and has the ability to bear the economic risks of
such investment. Each United States Shareholder further represents that such
Shareholder (i) has had access, prior to the Closing Date, to the SEi Filings,
and (ii) has been afforded the opportunity to ask questions of, and receive
answer from, SEi concerning SEi and the Purchase Price Shares, and to obtain
additional information (to the extent SEi possessed such information or could
acquire it without unreasonable expense) necessary to verify the accuracy of any
information received or to which such Shareholder had access.
(d) Each Shareholder (other than CBE) understands and agrees
that the Purchase Price Shares may not be sold, transferred or otherwise
disposed of without registration under the 1933 Act and applicable state laws,
unless exemptions from registration requirements are available, and that in the
absence of an effective registration statement covering the Purchase Price
Shares or an available exemption from applicable registration requirements, the
Purchase Price Shares must be held indefinitely. In particular, the Purchase
Price Shares may not be sold pursuant to Rule 144 promulgated under the 1933 Act
unless all of the conditions of such rule are met, and may not sold pursuant to
Regulation S promulgated under the 1933 Act without SEi's prior written consent.
(e) Each Shareholder (other than CBE) agrees that such
Shareholder will not offer, sell, mortgage, pledge or otherwise dispose of any
of the Purchase Price Shares (other than pursuant to an effective registration
statement under the 0000 Xxx) unless and until such Shareholder delivers an
opinion of counsel reasonably satisfactory to SEi, or SEi delivers to such
Shareholder an opinion of counsel, that registration under applicable federal or
state securities laws is not required.
(f) Each of the McQueen Affiliates agrees that such McQueen
Affiliate shall not sell, assign, pledge, encumber or otherwise transfer any of
the Purchase Price Shares (or any interest therein) unless such transfer occurs
after financial results reflecting at least thirty days of post-Closing combined
operations of the Company and SEi have been prepared and published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies.
(g) Each Seller (other than CBE) agrees that that such Seller
shall not sell, assign, pledge, encumber or otherwise transfer any of the
Purchase Price Shares or the SEi Stock ultimately acquired as a result of his
Options (or any interest therein) unless either (A) such transfer occurs after
the first anniversary of the Closing, or (B)
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after giving effect to the transfer, such Seller will continue to own at least
fifty percent (50%) of the Purchase Price Shares issued to him at the Closing
and the SEi Stock ultimately acquired as a result of his Options (in each case
adjusted to account for any additional shares issued in respect of such shares
by way of stock splits, stock dividends or otherwise).
(h) Each Shareholder (other than CBE) agrees that all
certificates for Purchase Price Shares shall bear a legend in substantially the
following form:
"The securities represented by this certificate have not
been registered, qualified, recommended, approved or
disapproved under United States federal securities law or
state securities laws. The shares represented by this
certificate may not be sold, transferred or otherwise
disposed of by an investor without (i) registration under
federal and state securities laws, or (ii) delivery of an
opinion of counsel reasonably satisfactory to the
corporation that neither the sale nor the proposed transfer
constitutes a violation of any United States federal or
state securities law.
The securities represented by this certificate are subject
to certain transfer restrictions set forth in an
Acquisition Agreement dated as of December 31, 1997 (a copy
of which may be obtained from the Company at its principal
executive office), and may not be sold, assigned, pledged,
encumbered or otherwise transferred except in compliance
with the terms and conditions of such agreement."
SECTION 5.6. POOLING OF INTERESTS. Each Seller acknowledges that SEi
intends to account for the acquisition of the Sale Shares as a pooling of
interests, and that qualifying for such accounting treatment is dependent in
part upon actions taken, or not taken, by the Company and the Sellers both
before and after the date hereof. In this regard, and with the understanding
that SEi is relying thereon in making its commitment to enter into this
transaction, each Seller warrants that such Seller and his Affiliates (excluding
Affiliates of CBE) have not, directly or indirectly, taken any of the following
actions which could prevent SEi from accounting for the transactions
contemplated by this Agreement as a pooling of interests, which Sellers
acknowledge could prevent SEi from obtaining such pooling accounting treatment:
(a) acquired or sold, assigned, transferred or otherwise
disposed of, or reduced any risk relative to, any Sale Shares or SEi Stock in
contemplation of the transactions provided for herein;
(b) paid or received any dividends or other distributions with
respect to the share capital of the Company, other than distributions in the
ordinary course of the Company's Business and not in contemplation of the
transactions provided for herein;
51
(c) altered the relative ownership interests of the Sellers in
the Company in contemplation of the transactions provided for herein;
(d) disposed of any significant part of the assets of the
Company within the nine months preceding the date hereof or in contemplation of
the transactions provided for herein;
(e) become a party to any contract, document, instrument or any
written or oral agreement regarding the sale, assignment, assignation or
transfer of, or allowed to be created any rights or obligations for the sale,
assignment, assignation or transfer of, or explicitly or implicitly agreed to
sell, assign or transfer any of the Sale Shares held by any of the Sellers to
any other Seller or any Affiliate of any other Seller; or
(f) entered into any agreement to do any of the forgoing,
including without limitation, any agreement to distribute or dispose of any
significant part of the assets of the Company upon the consummation of the
transactions provided for herein.
There shall be no breach by or inaccuracy in relation to Section 5.6 of this
Agreement by Adobe Incentive Partners, L.P. as a result solely of the transfer
from Adobe Systems Incorporated to Adobe Incentive Partners, L.P. of the Sale
Shares set opposite the name of that person in Part 1 of the Schedule hereto.
Each of the Shareholders waives any pre emption rights he may have under the
Articles of Association of the Company or otherwise in respect of such transfer
and consents to and ratifies the registration of that transfer by the Company.
If, as a result solely of that transfer being consented to by the Shareholders
(whether validly or not) after, rather than before, it was registered, Adobe
Incentive Partners, L.P. is in breach of the warranties and representations made
by it in Section 5.2 in respect of its title to Sale Shares, then the liability
of Adobe Incentive Partners, L.P. shall be limited in respect of that breach to
the value of the Seller's Shares issued to Adobe Incentive Partners, L.P. at
Closing, such value to be calculated by reference to the average SEi Stock
Closing Price for the ten trading days immediately preceding 27 December 1997.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SEI
SEi hereby represents and warrants to the Sellers as follows:
SECTION 6.1. CORPORATE ORGANIZATION. SEi is a corporation duly organized,
validly existing and in good standing under the laws of Florida and has the full
right, power and authority to own, lease and operate all of its properties and
assets and to carry out its business as it is presently conducted.
52
SECTION 6.2. CAPITALIZATION OF SEI.
(a) The authorized capital stock of SEi consists of 200,000,000
shares of SEi Stock and 10,000,000 shares of preferred stock, par value $ 0.01
per share, of which 35,519,969 and 0 shares, respectively, are issued and
outstanding. All issued and outstanding shares of SEi Stock have been duly
authorized and validly issued and are fully paid and nonassessable.
(b) Upon issuance, the Purchase Price Shares will be duly
authorized and validly issued, fully paid and nonassessable. The issuance of the
Purchase Price Shares is not subject to any preemptive right or right of first
refusal that has not or will not be satisfied or waived.
(c) Each of the SEi stock options issued to the Optionholders
pursuant to Section 2.5 ("the SEi Options") shall, upon issuance at the Closing,
have been duly and validly issued under the SEi Stock Option Plan and shall
comply with the terms thereof, shall have been authorised and approved by all
necessary corporate action and duly and validly executed and delivered by SEi
and shall constitute the legal valid and binding obligation of SEi, enforceable
against it in accordance with its terms. The issuance of the shares of SEi stock
issuable upon exercise of the SEi Options is not subject to any preemptive right
or right of first refusal that has not or will not be satisfied or waived. The
shares of SEi Stock issuable upon exercise of the SEi Options will, when issued
in accordance with respective Option Agreement, be duly authorised, validly
issued, fully paid and nonassessable. The issuance of such shares to the
Optionholders is covered by a currently effective registration statement under
the Securities Act of 1933, as amended.
SECTION 6.3. AUTHORITY. SEi has all requisite right, power and authority
to execute, deliver and perform this Agreement. The execution, delivery and
performance of this Agreement and the Related Agreements by SEi have been duly
and validly authorized and approved by all necessary corporate action. This
Agreement and the Related Agreements to which it is a party have been duly and
validly executed and delivered by SEi and, assuming this Agreement has been duly
authorized, executed and delivered by the Sellers, constitutes the legal, valid
and binding obligation of SEi, enforceable against it in accordance with its
terms.
SECTION 6.4. SEI'S CONSENTS AND APPROVALS; NO VIOLATIONS. Except for the
requisite filing pursuant to the requirements of the HSR Act and the expiration
of the waiting period thereunder, the execution, delivery and performance of
this Agreement and the Related Agreements by SEi will not (with or without the
giving of notice or the passage of time, or both), (a) violate any applicable
provision of law or any rule or regulation of any administrative agency or
governmental authority applicable to SEi, or any order, writ, injunction,
judgment or decree of any court, administrative agency or
53
governmental authority applicable to SEi, (b) violate the Articles of
Incorporation or Bylaws of SEi, (c) violate or require any consent, waiver or
approval under, result in a breach, modification or termination of any of any
provisions of, constitute a default under, affect the rights under or
enforceability of, result in the imposition of any pledge, security interest or
other encumbrance pursuant to, give any Person the right to terminate, modify or
renegotiate any provision of, any agreement, indenture, mortgage, deed of trust,
lease, license, or other instrument to which SEi is a party or by which SEi is
bound, or any license, permit or certificate held by SEi, or (d) require any
consent or approval by, notice to, or registration with any governmental
authority or other Person. The Purchase Price Shares will be listed on NASDAQ at
the time of the Closing.
SECTION 6.5. LITIGATION. There are no claims, actions, suits, or
proceedings pending or, to the best knowledge of SEi, threatened against SEi
relating to this Agreement or the transactions contemplated hereby or to the
business or property of SEi, at law or in equity or before or by any national,
federal, state, provincial, local, or foreign court or other governmental
department, commission, board, agency, instrumentality or authority, or any
arbitration proceeding, in each case which are likely to have a SEi Material
Adverse Effect. SEi is not subject to any judgment, order, writ, injunction or
decree of any court or governmental body.
SECTION 6.6. BROKERS AND FINDERS. No agent, broker, investment banker,
Person or firm acting on behalf of SEi or any Affiliate of SEi is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with the
transactions contemplated hereby.
SECTION 6.7. SEI INFORMATION. SEi has delivered to Warrantors true and
complete copies of the SEi Filings. SEi has made all filings required to be made
pursuant to the Securities Exchange Act of 1934 since the date of its most
recent annual report on Form 10-K. At the date hereof, the SEi Filings, taken as
a whole, do not contain any untrue statement of a material fact or omit any
material fact necessary to make the statements contained herein, in light of the
circumstances in which they were made, not misleading.
SECTION 6.8. ABSENCE OF CHANGES. Since September 28, 1997, SEi has
operated only in the ordinary course of its business in all material respects,
and there has not been:
(a) any change or changes in its business, financial condition,
prospects, properties, results of operations or assets or liabilities other than
changes in the ordinary course of such business and other changes, which
singularly or in the aggregate, have not had and will not have an SEi Material
Adverse Effect.
(b) any damage or destruction, loss or other casualty, however
arising and whether or not covered by insurance which has had or will have a SEi
Material Adverse Effect.
54
(c) any amendment or termination of any contract, agreement,
lease, franchise or license which has had or will have a SEi Material Adverse
Effect; or
(d) any amendment of its organizational documents.
SECTION 6.9. UNDISCLOSED LIABILITIES. SEi has no liabilities (absolute,
accrued, contingent or otherwise) required by USGAAP to be reflected or reserved
against in the consolidated statement of assets and liabilities of SEi except
(a) liabilities reflected or reserved against in the Form 10-Q Balance Sheet,
and (b) liabilities incurred since September 28, 1997 in the ordinary course of
business, and which, in the aggregate, do not have a SEi Material Adverse
Effect.
SECTION 6.10. SEI FINANCIAL STATEMENTS. The SEi Filings contain
(i) the audited consolidated balance sheets of SEi as of December 31, 1995 and
December 31, 1996 and the related audited consolidated statements of operations,
changes in shareholders' equity and cash flows (including the notes thereto) of
SEi for the twelve (12) month period ended December 31, 1995 and December 31,
1996 respectively (collectively, the "Audited SEi Financial Statements"), and
(ii) the unaudited balance sheet of SEi dated September 28, 1997 (the "SEi
Interim Balance Sheet") and the related unaudited consolidated statements of
income and cash flows (including the notes thereto) of SEi for the nine (9)
month period ended September 28, 1997 (collectively, the "Unaudited SEi
Financial Statements"). Except as disclosed in the SEi Filings, the Audited SEi
Financial Statements (i) are in accordance with the books and records of SEi in
all material respects, (ii) have been prepared in accordance with generally
accepted accounting principles as then in effect consistently applied throughout
the periods indicated, and (iii) fairly present in all material respects the
financial position of SEi as of the respective dates indicated and the results
of operations and changes in financial position of SEi for the respective
periods indicated. Except as disclosed in the SEI Filings, the Unaudited SEi
Financial Statements (i) are consistent with the books and records of SEi, and
(ii) subject to normal year end adjustments and the absence of fully footnoted
disclosures, fairly present in all material respects the financial position of
SEi as of the date indicated and the results of operations and changes of
financial position of SEi for the period indicated.
SECTION 6.11. COMPLIANCE WITH LAWS. SEi has conducted its business
so as to comply in all material respects with, and is not in violation of, nor
has it received any written notice claiming it is in violation of, any order,
law, ordinance, statute, rule or regulation applicable to it, or to its business
or any of its property or assets including, without limitation, any
environmental or worker safety and protection laws and regulations, except to
the extent that such non-compliance would not have a SEi Material Adverse
Effect. SEi has all material licenses, permits, certificates of occupancy and
authorizations necessary to conduct its business.
55
ARTICLE VII
FURTHER COVENANTS AND AGREEMENTS
SECTION 7.1. FILINGS. Promptly after the execution of this Agreement,
each of the parties hereto shall prepare and make or cause to be made any
required filings, submissions and notifications as are required to be made by
such party under the laws of any domestic or foreign jurisdictions to the extent
that such filings are necessary for such party to consummate the transactions
contemplated hereby and will use its reasonable efforts to take all other
actions necessary to consummate the transactions contemplated hereby in a manner
consistent with applicable Legal Requirements. Each of the parties hereto will
furnish to the other party such necessary information as such other party may
reasonably request in connection with the foregoing.
SECTION 7.2. EFFECTIVE TIME OF CLOSING AND TRANSFER. The Closing shall be
effective for all purposes as of the close of business on the Closing Date.
SECTION 7.3. ANNOUNCEMENTS. Except as expressly contemplated by this
Agreement, the parties will mutually agree as to the time, form and content
before issuing any press releases or otherwise making any public statements or
statements to third parties prior to the Closing with respect to transactions
contemplated hereby and shall not issue any press release or, except as
necessary to perform their respective obligations hereunder, discuss the
transactions contemplated hereby with any third party prior to reaching mutual
agreement with respect thereto, except as may be required by law.
Notwithstanding the foregoing, in the event prior to the Closing a party hereto
is required by law or the rules of any stock exchange on which such party's
securities are traded to make a statement with respect to the transactions
contemplated herein, such party shall notify in writing the other party hereto
as to the time, form and content of such statement. The parties hereto agree to
prepare and issue mutually acceptable press releases on or promptly after the
Closing announcing the transactions contemplated hereby.
SECTION 7.4. COSTS AND EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, each party hereto shall pay its
own costs and expenses (including legal fees and expenses) incurred in
connection with due diligence reviews, the preparation, negotiation and
execution of this Agreement and all other agreements, certificates, instruments
and documents delivered hereunder, and all other matters relating to the
transactions contemplated hereby. All United Kingdom transfer and intangible
Taxes, if any, arising in connection with the sale of the Sale Shares hereunder
shall be paid by the respective Sellers but that only to the extent that such
Seller is liable for said taxes. All transfer and intangible Taxes, if any, in
connection with the sale and delivery of the Purchase Price Shares hereunder and
the stamp duty on the Sale Shares shall be paid by SEi.
56
SECTION 7.5 FURTHER ASSURANCES. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or prudent under applicable Legal Requirements to
consummate and make effective the transactions contemplated by this Agreement.
If at any time after the Closing Date any further action is necessary or prudent
to carry out the purposes of this Agreement, the parties hereto shall take or
cause to be taken all necessary action including, without limitation, the
execution and delivery of such further instruments and documents as may be
reasonably requested by the other party for such purposes or otherwise to
consummate and give effect to the transactions contemplated hereby. If any
consent or approval required for the consummation of the transactions
contemplated hereby is not obtained prior to Closing, Sellers shall cooperate
with SEi, and attempt in good faith, to obtain such consent or approval.
SECTION 7.6. CERTAIN AGREEMENTS. On or before the Closing Date the
Sellers and SEi will execute the Registration Rights Agreement in the form of
EXHIBIT A (the "Registration Rights Agreement"), and the Company or the relevant
Subsidiary, as the case may be, and Messrs Gray, Hart, Xxxxx, Xxxx and Xxxxxx
(each such individual being a Seller) (the "Key Employees") shall enter into an
employment agreement in the form(s) attached hereto as EXHIBIT B, in each case
to be effective upon the Closing Date. Each of the Warrantors agrees that after
Closing he will use reasonable endeavours to procure that each of the
individuals listed in Exhibit C enters into an employment agreement, in a form
that is reasonably acceptable to SEi (and will include restrictive convenants),
with the Company or the relevant Subsidiary, as the case may be, within one
month of Closing.
SECTION 7.7. NON-DISCLOSURE; COVENANT NOT TO COMPETE.
(a) The parties hereto acknowledge that (i) the covenants
contained in this Section 7.7 are a material inducement to the consummation by
SEi of the transactions contemplated by this Agreement and (ii) SEi would not
have entered into or performed this Agreement but for the covenants herein
contained.
(b) Each of the Warrantors other than Xxxx agrees that, unless
acting with the prior consent of SEi, he will not, either alone or in
conjunction with any other Person, or directly or indirectly through any Person
that he now or in the future controls, for a period of two (2) years from the
Closing Date: (i) employ or solicit the employment of any Person who within the
month preceding the Closing Date had been an employee of the Company, a
Subsidiary or an Investment; (ii) conduct any part of the Business with any
Person that is a customer or a Prospect of , the Company, a Subsidiary or, to
the knowledge of the Warrantors, an Investment as of the Closing Date or (iii)
conduct any part of the Business with any Person that is a customer or Prospect
of SEi as of the Closing Date, which customers and Prospects of SEi are listed
for purposes of this Section 7.7 in a confidential document entitled "SEi
Customer
57
and Prospect List" delivered to the Warrantors at the Closing. Xxxx agrees that,
unless acting with the prior consent of SEi, he will not, either alone or in
conjunction with any other Person, or directly or indirectly through any Person
he now or in the future controls, for a period of three (3) years from the
Closing Date: (i) employ or solicit the employment of any Person who within the
month preceding the Closing Date had been an employee of the Company, a
Subsidiary or an Investment; (ii) conduct any part of the Business with any
Person that is a customer or a Prospect of the Company, a Subsidiary or, to the
knowledge of the Sellers, an Investment as of the Closing Date, (iii) conduct
any part of the Business with any Person that is a customer or a Prospect of SEi
as of the Closing Date, which customers and Prospects of SEi are listed for
purposes of this Section 7.7 in a confidential document entitled "SEi Customer
and Prospect List" delivered to the Warrantors at the Closing; or (iv) engage or
participate, whether as officer, employee, director, agent, consultant,
shareholder, partner, or otherwise, in the ownership, management, marketing or
operation of any enterprise which is engaged in any part of the Business (other
than solely through the ownership of equity securities or equivalent interests
of any Person at a level which does not create the ability to influence or
control management of the Person).
(c) It is stipulated and agreed that the Sellers have become
acquainted with confidential and privileged information of the Company, the
Subsidiaries and the Investments relating to customer files, customer lists,
special customer matters, sales methods and techniques, merchandising concepts
and plans, new site locations, business plans, sources of supply and vendors,
special business relationships with vendors, agents and brokers, promotional
materials and information, financial matters, mergers, acquisitions, selective
personnel matters and confidential processes, designs, formulas, ideas, plans,
devices or materials and other similar matters which are confidential (any and
all such information being referred to herein as the "Confidential
Information"); and that the use of the Confidential Information against the
Company would seriously damage the Business. As a consequence of the above, each
of the Sellers agrees that, unless acting with the prior written consent of SEi,
such Seller shall, whether acting alone, in conjunction with any other Person,
or directly or indirectly through any entity that such Seller now or in the
future controls: not use, divulge, publish or otherwise reveal or allow to be
revealed any aspect of the Confidential Information to any Person other than
such Seller's legal advisor who has agreed to abide by the confidentiality
covenants herein (except that "use" in this context shall not be construed to
apply to the use by CBE or entities controlled by CBE in relation to making and
monitoring investments in the ordinary course of its business); refrain from any
action or conduct which might reasonably or foreseeably be expected to
compromise the confidentiality or proprietary nature of the Confidential
Information; and shall have no right to apply for or to obtain any patent,
copyright, or other form of Intellectual Property protection with regard to the
Confidential Information. The foregoing restrictions shall not apply to any
information relating to customer files, customer lists, special customer
matters, sales methods and techniques, merchandising concepts and plans, new
site locations, business plans, sources of
58
supply and vendors, special business relationships with vendors, agents and
brokers, promotional materials and information, financial matters, mergers,
acquisitions, selective personnel matters and confidential processes, designs,
formulae, ideas, plans, source code, object code, data, know-how, intellectual
property rights, devices or materials and other similar matters which have been
disclosed to the Company or the Subsidiaries by Adobe Systems Incorporated or
any of its subsidiaries to enable the Company or the Subsidiaries to provide
services or comply with contractual obligations owed to Adobe Systems
Incorporated or any of its subsidiaries, including but not limited to the
obligations under the Services Agreement between Aldus Europe Limited and
McQueen Limited (dated 30 September 1994) and any extension thereof, and the
foregoing restrictions shall also not apply to any information produced by the
Company or the Subsidiaries which has been based on or derived from any
information provided by Adobe Systems Incorporated or any of its subsidiaries
pursuant to the said Services Agreement or any other agreement between Adobe
Systems Incorporated or any of its subsidiaries and the Company and any
Subsidiary. For the avoidance of doubt, any and all Intellectual Property which
has been licensed to the Company or the Subsidiaries by Adobe Systems
Incorporated or any of its subsidiaries pursuant to the said Services Agreement,
or any other agreement, shall be excluded from the definition of Confidential
Information for the purposes of this Agreement and this Agreement shall not
supersede the terms of the said Services Agreement.
(d) The parties hereto acknowledge and agree that, in
connection with their due diligence review of SEi, the Company, and certain of
the Sellers (except Adobe Incentive Partners, L.P. and IBJ) have been given
access to confidential and non-public information of SEi. Unless the
transactions contemplated by this Agreement are consummated, for a period of six
(6) months from the date of this Agreement, none of the Company, its officers
and directors and shareholders owning in excess of five percent (5%) of any
class of shares of the Company alone or with others will in any manner without
SEi's consent acquire, agree to acquire, or make any proposal to acquire any
securities (or any direct or indirect rights, warrants or options to acquire any
securities) of SEi.
(e) The parties hereto acknowledge and agree that any remedy at
law for any breach of the provisions of this Section 7.7 would be inadequate and
Sellers hereby consent to the granting by any court of competent jurisdiction of
an injunction, interdict or other suitable relief and without the posting of any
bond or the necessity of actual monetary loss being proved, in order that such
breach may be effectively restrained.
(f) Notwithstanding any provision contained in this Agreement
relating to confidentiality, if there is any provision of this Agreement, or of
any agreement or arrangement of which this Agreement forms part, which causes or
would cause this Agreement or that agreement or arrangement to be subject to
registration under the Restrictive Trade Practices Xxx 0000, SEi shall furnish
to the Director General of Fair Trading the particulars of this Agreement or of
that agreement or arrangement (as the case may be) as are set out in paragraphs
(a) and (b) of Section 24(1) of that Act immediately after Closing and, in any
event, no later than 30 days after Closing.
(g) In the event that SEi fails to carry out its obligation
referred to in Section 7.7(f), any other party to this Agreement may furnish the
particulars referred to in that clause to the Director General of Fair Trading.
(h) All documentation sent to the Director General of Fair
Trading pursuant to either Sections 7.7(f) or (g) shall, at the same time, be
copied to Xxxx.
59
SECTION 7.8 POOLING OF INTERESTS. The Sellers shall not, and,
prior to the Closing, shall not permit the Company, to take, any of the
following actions, each of which could result in the transfer of the Sale Shares
not qualifying to be accounted for as a pooling of interests: (a) acquiring or
transferring any capital interests of the Company or any SEi Stock during the
thirty (30) days prior to the Closing Date, and (b) selling, assigning or
transferring, or agreeing or allowing to be created any rights or obligation for
the sale, assignation or transfer of, any of the Purchase Price Shares or any
other SEi Stock in breach of the restrictions set forth in Section 5.5(f).
SECTION 7.9 LEGEND. SEi hereby covenants and agrees that, upon
request by a Seller after the second anniversary of the Closing, SEi shall
exchange certificates representing such Seller's Purchase Price Shares which
bear the foregoing restrictive legend, within a reasonable time after receiving
such certificates, for certificates not bearing such legend.
SECTION 7.10 NO WARRANTY BY THE COMPANY. None of the information
supplied by any of the Company, the Subsidiaries or Investments or their
respective professional advisers prior to Closing to any of the Warrantors, the
Sellers and their agents, representatives, or advisers in connection with the
warranties and representations in Article IV and the contents of the Disclosure
Schedule or otherwise in relation to the business or affairs of any of the
Company, the Subsidiaries, or Investments shall be deemed a representation,
warranty, or guarantee of its accuracy by any of the Company, the Subsidiaries,
or Investments to the Warrantors and Sellers, and the Warrantors and Sellers
waive any claims against the Company, the Subsidiaries, and Investments which
they might otherwise have in respect of it.
SECTION 7.11 POWER OF ATTORNEY Each of the Shareholders by
execution of this Agreement appoints SEi to be its Attorney from and after
Closing in respect of the Shareholder's Sale Shares and hereby grants to SEi
full power on its behalf to exercise all voting and other related rights
(including, but without limitation, any class rights) attaching to the Sale
Shares including in particular, but without prejudice to the foregoing
generality, power:-
(a) to execute a form of proxy in favour of such Person or Persons as SEi may
think fit to attend and vote as the Shareholder's proxy at any general
meeting of the members, or separate class meeting of any class of
members, of the Company in respect of the Sale Shares in such manner as
SEi may decide;
(b) to consent to the convening and holding of any such meeting and the
passing of the resolutions to be submitted at any such meeting on short
notice;
(c) to settle the terms of such resolutions;
(d) generally to procure that SEi or its nominees are duly registered as the
holders of all the Sale Shares (but this power is not granted by Adobe
Incentive Partners, L.P); and
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(e) to sign any resolution pursuant to Section 381A of the Companies Xxx
0000.
Each of the Shareholders hereby ratifies and confirms and hereby undertakes to
ratify and confirm all and whatsoever SEi shall lawfully do or cause to be done
in pursuance of the power of attorney granted by this Section 7.11.
Each of the Shareholders hereby declares that this power of attorney shall be
irrevocable until the later of the date of registration of the transfer of the
Sale Shares in the books of the Company and the expiry of the period of three
months from Closing.
ARTICLE VIII
CONDITIONS TO SEI'S OBLIGATIONS
Each and every obligation of SEi to consummate the transactions described
in this Agreement shall be subject to the fulfillment, or the waiver by SEi on
or before the Closing Date, of the following conditions precedent:
SECTION 8.1. SELLERS' CLOSING DELIVERIES. Sellers shall have delivered,
or caused to be delivered, to SEi at or prior to the Closing, unless
specifically waived by SEi in its sole discretion, each of the following:
(a) the Registration Rights Agreement and the employment
agreements referenced in Section 7.6, in each case executed by the Shareholders,
the Company, a Subsidiary and the Key Employees, as applicable (with the
employment contract for Xx Xxxxxx being executed and delivered in the United
States at Closing);
(b) valid and binding consents of all Persons whose consent or
approval is required to be set forth in Sections 4.6 and 5.4 of the Disclosure
Schedule;
(c) with respect to each Seller which is not an individual, a
certified copy of resolutions of the board of directors or managing board
authorizing the execution, delivery and performance of this Agreement and the
Related Agreements and the consummation of the transactions contemplated hereby
and thereby;
(d) duly executed transfers of the Sale Shares by the
registered holders thereof in favour of SEi or as it may direct together with
the Share Certificates representing the Sale Shares;
(e) any waivers, consents or documents required to vest in SEi
the full beneficial ownership of the Sale Shares and to enable SEi to procure
them to be registered in the name of SEi or its nominee;
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(f) any releases, consents or documents required to release and
cancel fully all rights in respect of the Options;
(g) the Seal, Certificate of Incorporation, Statutory
Registers, Minute Books and Share Certificate Books of the Company and the
Subsidiaries and all unused forms of share certificates and all chequebooks of
the Company and the Subsidiaries in current use;
(h) all documentation relating to the Real Property and the
Leased Real Property made available to SEi prior to Closing;
(i) definitive certificates in respect of the shares in each of
the Subsidiaries and Investments registered in the name of either the Company or
another Subsidiary;
(j) a certified true copy of a Board Minute of the Company, and
each relevant Subsidiary, showing the appointment as additional directors and as
secretaries of such persons as SEi shall nominate together with letters to SEi
(addressed to the relevant company) from such persons, as may be specified by
SEi, retiring from their respective offices with effect from Closing and
acknowledging that the person so retiring has no claim outstanding against the
Company or any Subsidiary, and that the Company and each Subsidiary, is not in
any way obligated or indebted to him;
(k) a duly executed Release Agreement in respect of, inter
alia, the Investment Agreement executed, inter alia, by the Company on 13 April
1995;
(l) written confirmation that none of the Sellers and their
respective Affiliates are indebted to or are owed money by any of the Company, a
Subsidiary, or an Investment except as disclosed to and accepted by SEi;
(m) certified true copies of any powers of attorney relating to
the execution of this Agreement or any Related Agreement; and
(n) a certified true copy of the Board Minutes of the Company
approving (subject only to stamping) the transfers referred to in Section 8.1(d)
for registration.
SECTION 8.2. GOVERNMENTAL CONSENTS AND APPROVALS. All necessary and
appropriate governmental consents, approvals and filings, including, without
limitation, those pursuant to the HSR Act, shall have been obtained or made and
all applicable waiting periods (including any extensions thereof) relating
thereto shall have expired or otherwise terminated.
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SECTION 8.3. NO INJUNCTION OR PROCEEDING. No governmental or regulatory
authority, agency or commission, including courts of competent jurisdiction,
domestic or foreign, shall have issued an order, decree, or ruling or taken
other action, restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby, which order, decree, ruling or other action remains in
effect.
SECTION 8.4 OPINION OF ACCOUNTANTS. SEi shall have received opinions
dated the Closing Date from their accountants and the Company's accountants in
form satisfactory to SEi to the effect that the transactions contemplated by
this Agreement would be properly accounted for as a "pooling of interests" in
accordance with USGAAP and all published rules, regulations, policies of the
SEC, and such opinion shall not have been withdrawn or modified in any material
respect.
ARTICLE IX
CONDITIONS TO SELLERS' OBLIGATIONS
Each and every obligation of Sellers to consummate the transactions
described in this Agreement shall be subject to the fulfillment, or the waiver
by the Sellers, on or before the Closing Date, of the following conditions
precedent:
SECTION 9.1. DELIVERY OF PURCHASE PRICE SHARES. SEi shall have delivered
or caused to be delivered the Purchase Price Shares in accordance with Article
III hereof.
SECTION 9.2. PAYMENT FOR CBE SHARES AND OPTIONS. SEi shall have paid for
the CBE Shares in accordance with Article III hereof and SEi shall have paid for
the release of the Options held by Xxxx X Xxxxxxxxx in accordance with Article
III hereof.
SECTION 9.3. SEI'S CLOSING DELIVERIES. SEi shall deliver, or cause to be
delivered, to the Sellers at the Closing, unless specifically waived by the
Sellers in their sole discretion, each of the following:
(a) to the Optionholders only, an Option Agreement, executed by
SEi;
(b) the Registration Rights Agreement referenced in Section
7.6, executed by SEi; and
(c) a certified copy of the resolutions of the Board of
Directors of SEi authorizing the execution, delivery and performance of this
Agreement and the Related Agreements and the consummation of transactions
contemplated hereby and thereby.
SECTION 9.4. GOVERNMENTAL CONSENTS AND APPROVALS. All necessary and
appropriate governmental consents, approvals and filings, including, without
limitation,
63
those pursuant to the HSR Act, shall have been obtained or made and all
applicable waiting periods (including any extensions thereof) relating thereto
shall have expired or otherwise terminated.
SECTION 9.5. NO INJUNCTION OR PROCEEDING. No governmental or regulatory
authority, agency or commission, including courts of competent jurisdiction,
domestic or foreign, shall have issued an order, decree, or ruling or taken
other action, restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby, which order, decree, ruling or other action remains in
effect.
ARTICLE X
INDEMNIFICATION
SECTION 10.1. INDEMNIFICATION BY SELLERS. Each of the Sellers
(including, without limitation, the Warrantors) agrees to reimburse, indemnify
and hold SEi harmless from and against any and all demands, claims, actions,
suits, liabilities, losses, judgments, costs and expenses (including, without
limitation, reasonable attorneys' fees) but excluding any claims for special,
indirect or consequential damages relating to, resulting from, or arising out of
any breach or inaccuracy of any representations or warranties made hereunder by
such Seller.
SECTION 10.2. INDEMNIFICATION BY WARRANTORS. Subject to Section
10.6, the Warrantors jointly and severally agree to reimburse, indemnify, and
hold SEi, harmless from and against any and all demands, claims, actions, suits,
liabilities, losses, judgments, costs and expenses (including, without
limitation, the cost of any response action and any reasonable consultants' and
attorneys' fees) but excluding any claims for special, indirect or consequential
damages relating to, resulting from, or arising out of:
(i) any breach or inaccuracy of any representations or
warranties made hereunder by the Warrantors; or
(ii) any claim notified to the Company or any Subsidiary prior
to January 1, 2004 for reimbursement of any Grants paid to the Company or the
Subsidiaries prior to the Closing unless solely attributable to post-Closing
actions or omissions of the Company or the Subsidiaries (which shall not include
the consummation of the transactions contemplated hereby).
SECTION 10.3. INDEMNIFICATION BY SEI.
(a) SEi agrees to reimburse, indemnify and hold each of the
Sellers harmless from and against any and all demands, claims, actions, suits,
liabilities,
64
losses, judgments, costs and expenses (including, without limitation, reasonable
attorneys' fees) but excluding any claims for special, indirect or consequential
damages relating to, resulting from or arising out of any breach or inaccuracy
of the representations or warranties made hereunder by SEi.
SECTION 10.4. SURVIVAL OF REPRESENTATIONS. Except for the
representations and warranties contained in Section 4.32, the representations
and warranties made pursuant to this Agreement including, without limitation,
all representations and warranties made in any exhibit or schedule or
certificate delivered thereunder, shall survive and continue in full force and
effect until the first anniversary of the Closing, at which time such
representations and warranties shall expire with respect to claims made after
the first anniversary of the Closing. A claim in respect of any such
representations and warranties made on or before the first anniversary of the
Closing shall (if it has not been previously withdrawn or settled or otherwise
satisfied without resort to arbitration or legal proceedings) be deemed
withdrawn on the second anniversary of the Closing unless arbitration or legal
proceedings in respect of it have been commenced by being served on any one or
more of the Warrantors, Sellers or SEi, as the case may be, before the second
anniversary of the Closing; provided that, notwithstanding the foregoing, a
claim in respect of any representation or warranty under Section 4.9, which
claim is made on or before the first anniversary of Closing, shall (if it has
not been previously withdrawn or settled or otherwise satisfied without resort
to arbitration on legal proceedings) be deemed withdrawn on the fourth
anniversary of the Closing unless arbitration or legal proceedings in respect of
it have been commenced by being served on any one or more of the Warrantors
before the fourth anniversary of the Closing. The representations and warranties
set forth in Section 4.32 of this Agreement shall survive and continue in full
force and effect until January 1, 2004, at which time such representations and
warranties shall expire with respect to claims made after January 1, 2004. A
claim in respect of any representations and warranties set forth in Section 4.32
made on or before January 1, 2004 shall (if it has not been previously withdrawn
or settled or otherwise satisfied without resort to arbitration or legal
proceedings) be deemed withdrawn on January 1, 2005 unless arbitration or legal
proceedings in respect of it have been commenced by being served on any one or
more of the Warrantors before January 1, 2005.
SECTION 10.5. INDEMNIFICATION CLAIMS PROCEDURES. All claims for
indemnification by any party seeking indemnification (the "Indemnified Party")
from another party (the "Indemnifying Party") under Sections 10.1, 10.2, and
10.3 shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which the
Indemnifying Party would be liable to any Indemnified Party hereunder is
notified to or sought to be collected from any Indemnified Party by a third
party, the Indemnified Party shall
65
promptly notify (and, where the matter relates to Taxes, if practicable in
adequate time to enable any appeal to be made) the Indemnifying Party (and any
known pertinent insurance carrier) in reasonable detail of such claim or demand
and the amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such claim and
demand) (the "Claim Notice"). The Indemnifying Party shall have thirty (30) days
from the personal delivery or mailing of the Claim Notice (the "Notice Period")
to notify the Indemnified Party whether or not the Indemnifying Party desires to
defend the Indemnified Party against such claim or demand. All costs and
expenses incurred by the Indemnifying Party in defending such claim or demand
shall be a liability of, and shall be paid by, the Indemnifying Party. In the
event that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against such claim
or demand and except as hereinafter provided, the Indemnifying Party shall have
the right to defend the Indemnified Party by counsel of the Indemnifying Party's
own choosing, either in the Indemnifying Party's name, or the Indemnified
Party's name by appropriate proceedings. If any Indemnified Party desires to
participate in, but not control, any such defense or settlement it may do so at
its sole cost and expense and, in any event, the Indemnified Party shall
cooperate with the Indemnifying Party and such counsel. To the extent the
Indemnifying Party shall control or participate in the defense or settlement of
any third party claim or demand, the Indemnified Party shall give to the
Indemnifying Party and its counsel access to, during normal business hours, the
relevant business records and other documents, and shall permit them to consult
with the employees and counsel of the Indemnified Party to the extent consistent
with the application of relevant evidentiary privileges. The Indemnifying Party
shall keep the Indemnified Party reasonably apprised of the course of any
negotiations or proceedings and the Indemnifying Party shall not settle any
claim or demand without the consent of the affected Indemnified Party, which
consent shall not be unreasonably withheld or unduly delayed. As soon as
reasonably practicable after the Indemnifying Party has reached a final decision
as to whether or not all or any portion of the obligations related to such claim
or demand are obligations for which the Indemnifying Party is required to
indemnify such Indemnified Party hereunder and, in any event, prior to entering
into any such settlement or other final resolution of any claim or demand, the
Indemnifying Party shall notify the Indemnified Party in writing of its position
as to whether or not all or any portion of the obligations related to such claim
or demand are obligations for which the Indemnifying Party is required to
indemnify such Indemnified Party in accordance with this Article X.
(b) If the Indemnifying Party elects or is deemed to have
elected not to take over the defense of any such claim or demand, the
Indemnified Party shall have the right to defend, compromise and settle such
claim or demand on such terms as the Indemnified Party in his discretion may
determine, subject to the prior consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or unduly delayed, and the Indemnifying Party
shall continue to be bound to indemnify the Indemnified Party in accordance with
and to the extent provided under the terms of this
66
Article X. The Indemnified Party shall or shall direct in writing its counsel to
deliver to the Indemnifying Party copies of all correspondence and other matters
relating to such claim or demand. Notwithstanding the foregoing, to the extent
that the claim or demand involves or could result in claims against, or
potential liability of, the Indemnifying Party the extent or nature of which
were not known by the Indemnifying Party as of the date the Indemnifying Party
elects or is deemed to have elected not to take over the defense of such claim
or demand, the Indemnifying Party shall, by written notice to the Indemnified
Party, be entitled to take over the defense of such claim or demand.
(c) In the event an Indemnified Party should have a claim
against the Indemnifying Party hereunder which does not involve a claim or
demand being notified to or sought to be collected from it by a third party, the
Indemnified Party shall promptly send a Claim Notice with respect to such claim
to the Indemnifying Party.
(d) The Indemnified Party's failure to give reasonably prompt
notice to the Indemnifying Party of any actual, threatened or possible claim or
demand which may give rise to a right of indemnification hereunder shall not
relieve the Indemnifying Party of any liability which it may have to an
Indemnified Party except to the extent the failure to give such notice
prejudiced the Indemnifying Party.
(e) For purpose of determining the appropriate amount of
indemnification under Section 10.2 (other than as provided in paragraph (f)
below), in the event that any claim or demand against an Indemnifying Party is a
consequence of any breach or inaccuracy of the representations or warranties
made hereunder by the Warrantors and:
(i) the value of the Company, any of the Subsidiaries,
or of any asset (including any right, whether under contract or otherwise) is
less than it would have been at Closing in the absence of the breach or
inaccuracy; or
(ii) the Company or any of the Subsidiaries incurs a
liability which it would not have incurred or which exceeds the liability it
would have incurred, had matters been as represented or warranted; or
(iii) as a result of the breach or inaccuracy or of
matters not being as represented or warranted, SEi, the Company or any of the
Subsidiaries suffers loss, costs, or expenses;
then the Indemnifying Party's obligation to indemnify shall require payment to
SEi (or, at the option of SEi, to the Company or any Subsidiary) of an amount
equal to the resulting diminution of value or the liability or excess liability
and the loss, costs, and expenses.
(f) For the purpose of determining the appropriate amount of
indemnification under 10.2, in the event that:
67
(i) any claim or demand for which the
Indemnifying Party would be liable to any Indemnified Party hereunder relates to
Taxes and is sought to be collected from any Indemnified Party by a third party
which is a Taxing authority; and
(ii) such claim or demand is a consequence of any
breach or inaccuracy of the representations or warranties made hereunder by the
Warrantors,
then the Indemnifying Party's obligation to indemnify shall require payment to
SEi (or, at the option of SEi, to the Company or any of the Subsidiaries or
Investments) of:
(aa) either (at the option of SEi) any
Liability to Taxation of the Company or any of the Subsidiaries or any depletion
in the value of the assets of the Company or any of the Subsidiaries arising by
reason of or in consequence of or in connection with any Liability to Taxation;
(bb) any settlement of a Claim for
Taxation; and
(cc) the costs incurred by the Company or
any Subsidiary (or any of the Investments) in relation to any demands, actions,
proceedings, and claims in respect of Liabilities to Taxation or Claims for
Taxation.
Where the Liability to Taxation is of any of the Investments, the depletion in
the value of the assets is of any of the Investments, the Claim for Taxation
relates to any of the Investments or the costs are incurred by any of the
Investments, then the Indemnifying Party's obligation to indemnify for the
purpose of this Section 10.5(f) shall be limited to the same percentage of the
Liability to Taxation, depletion in the value of the assets, the Claim for
Taxation or the costs, as the case may be, as the percentage of the issued
equity share capital of the relevant Investment as is owned by the Company or,
as the case may be, any of the Subsidiaries.
Subject to the foregoing, any such claim for indemnification shall be notified
and resolved mutatis mutandis in the manner described in this Section 10.5.
For the purposes of this Section and Section 4.9, the following words and
expressions shall have the following meanings:
"Claim for Taxation" includes any notice, demand, assessment,
letter, or other document issued or action taken by or on behalf of the Inland
Revenue or Customs & Excise authorities or any other statutory or governmental
authority or body whatsoever in any part of the world whereby it appears that
the Company and/or any of the Subsidiaries or Investments is, or is likely to
be, found to be subject to a Liability to Taxation (whether or not it is
primarily payable by the Company or any of its Subsidiaries or Investments and
whether or not the Company or any of its
68
Subsidiaries or Investments has or may have any right of reimbursement).
"Liability to Taxation" means any liability of the Company or any
of the Subsidiaries or the Investments to make any payment of or in respect of
Taxes and also means and includes:
(i) the loss of a right to repayment of Taxes (and any
repayment supplement) which has been treated as an asset of the Company or the
relevant Subsidiary or Investment in preparing the Audited Accounts or the
setting off of any such right to repayment of tax against any actual Liability
to Taxation in respect of which SEi would, but for that setting off, have been
able to make a claim against the Warrantors as a result of a breach of Section
4.9; and
(ii) the setting off against any income, profits or gains which
were earned, accrued or received on or before Closing or in respect of a period
ended on or before Closing of any Relief which arises as a consequence of or by
reference to an event occurring (or deemed to occur) after Closing or in respect
of a period commencing after Closing and not as a consequence of or by reference
to any event occurring (or deemed to occur) on or before Closing or in respect
of a period on or before Closing in circumstances where, but for such setting
off, the Company or the relevant Subsidiary or Investment would have had an
actual Liability to Taxation in respect of which SEi would have been able to
make a claim against the Warrantors as a result of a breach of Section 4.9; and
(iii) the loss, or setting off against income, profits or gains
earned, accrued or received on or before Closing, of any Relief arising in
respect of an event occurring on or before Closing which Relief would (were it
not for the said loss or setting off) have been available to the Company or the
relevant Subsidiary or Investment and which has been taken into account in
computing (and so reducing) any deferred tax liability which appears in the
Audited Accounts (or which would have appeared in the Audited Accounts but for
the presumed availability of such Relief).
In the cases mentioned immediately above, the amount that is to be
treated as a Liability to Taxation of the Company or the relevant
Subsidiary or Investment (the "Notional Tax Liability") shall be
determined as follows:
(a) in a case which falls within paragraph (i), the Notional Tax
Liability shall be the amount of the repayment that would have
been obtained but for the loss or setting off mentioned in that
paragraph;
(b) in a case which falls within paragraphs (i) or (ii) and where the
Relief that was the subject of the loss or setting off mentioned
in those paragraphs was a deduction from or offset against Tax,
the Notional Tax Liability shall be the amount of the Relief;
69
(c) in a case which falls within paragraphs (ii) or (iii) and where
the Relief that was the subject of the loss or setting off
mentioned in those paragraphs was a deduction from or offset
against income, profits or gains, the Notional Tax Liability shall
be:
(x) if the Relief was the subject of such a setting off, the
amount of Taxes which has been saved in consequence of the
setting off; or
(y) if the Relief was the subject of such a loss, the amount of
Taxes which, but for such loss, would have been saved by
virtue of the Relief, on the basis of the rates of tax
current at the first occasion on which but for such loss
the Relief could have been used, assuming that the Company
or any relevant Subsidiaries or Investment had sufficient
profits against which such Relief might be set or given.
The Liability to Taxation shall be deemed to be due and payable and
discharged by the Company or any of the relevant Subsidiaries or
Investment on the date ascertained as follows:
(a) if the Liability to Taxation giving rise to a claim as a result of
a breach of Section 4.9 involves an actual payment of Taxes by the
Company and/or any of the Subsidiaries or Investments, the date
which is the last day on which those Taxes may be paid by the
Company or the relevant Subsidiary or Investments to the relevant
Taxes authority in accordance with the relevant Taxes legislation
without incurring a liability to interest or a charge or penalty
in respect of the non-payment of that Liability to Taxation;
(b) if the Liability to Taxation giving rise to a claim as a result of
a breach of Section 4.9 does not involve an actual payment of
Taxes:-
(x) if involving the denial or loss or setting off in whole or
in part of a right to repayment of Taxes, the date on which
such Taxes would otherwise have been repaid in accordance
with the relevant Taxes legislation or (where the repayment
was depended upon the making of an application or the
satisfaction of some other condition) the earliest date
upon which the application could have been made or the
condition satisfied; or
(y) if involving the denial or loss or setting off in whole or
in part of any Relief, the date on which the Taxes saved
thereby would otherwise have become fully due and payable
to the relevant Taxes authorities in accordance with the
relevant Taxes legislation; or
(z) in any case other than as referred to in the immediately
preceding paragraphs (x) and (y), the date falling 7 days
after the date when the
70
Warrantors have been notified by SEi that the auditors for
the time being of the Company or the Subsidiary or
Investment concerned have certified, at the request of SEi
that the Warrantors have a liability for a determinable
amount in terms of this paragraph (z);
(c) in the case of the costs referred to in paragraph (cc), 14
Business Days after the date on which SEi produces receipted
invoices or other proof of payment in respect thereof to the
Warrantors.
If there is a reasonable prospect immediately prior to the first
anniversary of Closing of the Warrantors being liable under any of the
foregoing paragraphs in respect of Reliefs and that liability is likely
to be excluded by virtue of the provisions of Section 10.4 then the
provisions of that Section shall not operate to exclude that liability
which shall continue until either there remains no prospect of the
Warrantors being so liable or the claim in respect of the liability is
withdrawn, settled or otherwise satisfied.
"Relief" includes any relief from Taxes, allowance, exemption,
set-off or deduction in computing or against profits, income or gains of any
description or from any source or credit against Taxes granted by or pursuant to
any legislation or otherwise for Taxes purposes.
(g) The parties stipulate and all agree that for purposes of
Article X all demands, claims, actions and suits against, and all liabilities,
losses, judgements, costs and expenses incurred by, any of the Company, a
Subsidiary or an Investment shall be deemed an equivalent demand, claim, action
or suit against, or liability, loss, judgement, cost or expense incurred by SEi
such that SEi shall be entitled to full indemnity hereunder.
(h) Payment of the amount of established claims for indemnity
shall be due and payable by the Indemnifying Party to the Indemnified Party not
later than the fifteenth Business Day immediately following the date of the
amount of the valid claim for indemnification hereunder is established by mutual
agreement of the Indemnifying Party and the Indemnified Party or by arbitration,
as the case may be.
(i) In respect of the tax returns and relative tax computations
of the Company for the tax year in which the Closing occurs, SEi shall procure
that the Warrantors are given a reasonable opportunity to comment thereon before
they are submitted to the Inland Revenue and that any reasonable modifications
requested by the Warrantors, which do not prejudice the Company or any of the
Subsidiaries, are made before those returns and computations are so submitted.
(j) Nothing in Article X shall be construed to entitle any
Indemnified Party to recover and be indemnified against the identical liability,
loss, judgment, cost or expense more than once.
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(k) All recoveries pursuant to this Article X shall be reduced
to the extent of any net tax benefits, insurance proceeds, settlements or other
offset received by an Indemnified Party relating to a liability, loss, judgment,
cost or expense.
SECTION 10.6. LIMITATION OF LIABILITY. Notwithstanding any other
provision of this Agreement, the liability of the Warrantors hereunder for
claims for indemnity shall be limited as follows:
(a) The Warrantors shall not have any responsibility for claims
asserted under Section 10.2 unless the aggregate amount of all valid claims
asserted under Section 10.2 against the Warrantors exceeds $1 million, in which
event the Warrantors shall be liable only for the excess over that amount;
(b) The aggregate liability of the Warrantors for claims
asserted under Section 10.2 shall not exceed $5,799,096. The total liability of
Xxxx in respect of any and all claims asserted under Section 10.2 shall be
limited to $4,758, 738. The total liability of Xxxx X.X. Xxxxx in respect of any
and all claims asserted under Section 10.2 shall be limited to $364,763. The
total liability of Xxxxxx X Xxxx in respect of any and all claims asserted under
Section 10.2 shall be limited to $423,914. The total liability of Xxxxx X Xxxxxx
in respect of any and all claims asserted under Section 10.2 shall be limited to
$251,681.
(c) To the extent that any Warrantor becomes liable for a claim
notified under this Agreement before a sufficient number of such Warrantor's
Seller's Shares to fund the claim become eligible for resale in accordance with
Section 5.5 and the Registration Rights Agreement, his obligation to make
payments shall be deferred until the date such Seller's Shares are so eligible
for resale.
(d) To the extent that an Indemnifying Party has made a payment
to an Indemnified Party as a consequence of a breach of the warranties and
representations in Section 4.9 in respect of a liability of the Company or any
of the Subsidiaries to pay Taxes (such liability to pay Taxes being a "Tax
Payment") and the Tax Payment is repaid or some other liability of the Company
or any of the Subsidiaries to pay Taxes is reduced as a result of the Tax
Payment the amount paid by the Indemnifying Party in respect of the liability
shall be refunded, when and to the extent that, the Company or any of its
Subsidiaries obtains benefit of the repayment or reduction in liability and
provided such benefit is not offset by any other increase in any liability,
subject to any additional claims such Indemnified Party may have had against the
Indemnifying Party.
(e) To the extent an Indemnified Party recovers from any
Person, other than an Indemnifying Party, some or all of a loss against which
such Indemnified Party has been indemnified by one or more Indemnifying Parties,
such Indemnified Party
72
shall refund an appropriate (based upon the relative amounts of the claim paid
by such Indemnifying Parties) amount of such recovery (less reasonable costs,
charges and expenses of the recovery) to the Indemnifying Parties, subject to
any additional claims such Indemnified Party may have had against the
Indemnifying Parties.
(f) The net payments by a Seller of any claims under this
Article X shall be deemed a reduction in the price paid by SEi for the Sale
Shares owned by such Seller.
(g) The Warrantors shall not be liable in respect of a claim
under this Agreement if such claim (i) would not have arisen but for a change or
changes in legislation or FRSs after the Closing Date, or (ii) arose out of a
matter which the subject of a post-Closing waiver in writing by SEi.
(h) SEi acknowledges that it is not entering into this
Agreement with the present intention of suing the Warrantors for any breach of
any representation or warranty reflected in Article IV.
(i) SEi agrees with the Warrantors that the disclosures in each
section, or subdivision thereof, of the Disclosure Schedule have the effect of
limiting or modifying the liability of the Warrantors (or any of them) under or
by virtue of the warranties and representations set out in the corresponding
section, or subdivision thereof, in Article IV of this Agreement.
(j) The Warrantors shall have no liability if the claim under
or by virtue of the warranties in Section 4.9 arises directly from a change in
the accounting reference date of the Company on or after the Closing Date.
(k) The Warrantors shall have no liability under or by virtue
of the warranties in Section 4.9 in respect of any matter arising from or
connected with any change of accounting policy or practice of the Company
adopted by the Company after the Closing Date on the written instructions of, or
at the instigation of, SEi.
(l) The Warrantors shall not be liable in respect of a claim
under or by virtue of the warranties in Section 4.9 if such claim would not have
arisen but for a change or changes in legislation made after the Closing Date.
(m) If the Warrantors are liable to SEi under or by virtue of
the warranties in Section 4.9 in respect of any obligation of the Company to pay
advance corporation tax, or any sum recoverable from the Company as if it were
advance corporation tax, the liability of the Warrantors shall be reduced, and
any amount paid to SEi in respect of such liability shall be refunded, when and
to the extent that the Company obtains the benefit of the reduction in liability
to mainstream corporation tax by reason of such payment, and SEi shall procure
that the Company makes all such claims and elections as will result in such
benefit being obtained as soon as reasonably practicable.
73
SECTION 10.7. EXCLUSIVE REMEDY. Subject to Section 7.7(e), the
parties acknowledge and agree that the provisions of this Article X shall be the
exclusive remedy of the Sellers and SEi for a breach by the Sellers, the
Warrantors, SEi or any of them of a representation or warranty contained in this
Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be governed by and construed in
accordance with the laws of Scotland.
SECTION 11.2. ARBITRATION.
(a) If any dispute or difference under or in respect of any matter arising
out of this Agreement ("a Dispute") shall arise between two or more of
the parties, the parties hereby agree that those parties to the Dispute,
or their respective legal advisers, shall meet informally and promptly in
an effort to discuss and resolve such Dispute(s).
(b) In the event of the parties having failed to meet or in the event of such
meeting(s) having failed to resolve the Dispute within 30 days of a party
having sought in writing a meeting then the Dispute is hereby referred to
arbitration by a sole arbitrator. The seat of the arbitration shall be
London and the then prevailing Rules of the London Court of International
Arbitration ("the Rules") or such other arbitration rules as the parties
may agree mutually shall apply save insofar as they are inconsistent with
the terms of this Clause in which event the terms of this Clause shall
prevail. Any arbitration shall be conducted in English. The award of the
arbitrator shall be final and binding on the parties.
(c) Any party to the Dispute may refer the Dispute to arbitration by issuing
to the other party to the Dispute a notice to concur in the appointment
of an arbitrator. Following the issue of a notice to concur in the
appointment of an arbitrator the parties to the Dispute shall endeavour
in good faith to agree mutually an arbitrator. The parties shall
endeavour to appoint or have appointed as an arbitrator a person
experienced in a discipline which most closely accords to the Dispute
overall. In the event that the subject matter of the Dispute is the same
or similar to any Dispute previously submitted to an arbitrator the
parties will endeavour to appoint the same arbitrator appointed
previously to determine the earlier Dispute, provided that any failure to
so appoint shall not be a basis for avoiding, setting aside or altering
the Arbitrator's award. In the event that within 10 days of issue of the
notice to concur no such agreement has been reached any party to the
Dispute may apply to the London Court of International Arbitration for an
arbitrator to be appointed pursuant to the Rules.
74
(d) The parties hereby agree it shall be a provision of the arbitrator's
appointment that:-
(i) the arbitrator shall not be entitled in the award to find in a
manner whereby compliance with the award will result in violation
by any party of any obligations which may be incumbent upon such
party hereunder;
(ii) in the event that there are two or more arbitrations before the
same arbitrator, the arbitrator may in his discretion consolidate
any or all of the arbitrations or terminate any such
consolidation. Notwithstanding the foregoing, if the arbitrator
considers it would be more effective to consolidate such
arbitrations than to continue them separately then the arbitrator
shall consolidate them if:-
(a) there are matters of fact/or law that are common to the
arbitrations to be consolidated; or
(b) there are related payment and performance obligations
considered in the arbitration to be consolidated; or
(c) there is a danger of inconsistent awards.
(e) Under Article 22.1(h) of the Rules, in the event that a party makes
application for one or more of the other parties to this Agreement to be
joined in the arbitration as a party, the parties hereby agree that they
shall within 14 days of any written request from a party to the
arbitration confirm to the applicant party in writing their consent. In
the absence of such consent the parties hereby reserve their rights to
make the application to any Court having jurisdiction for specific
implement of the said obligations.
(f) The parties shall take any and all action as is necessary to implement
any arbitral award. The arbitral award may be submitted for enforcement
to any court having appropriate jurisdiction. Where the arbitrator's
award involves performance of an obligation other than the payment of
money, the party having the obligation to perform pursuant to the
arbitral award shall render such performance within the time period
specified in the arbitrator's award or, if no time period is specified,
then as expeditiously as is reasonably practical. In the event that
payment or performance is not made within the time period provided, the
party(s) in whose favour the arbitrator's award has been made shall have
the right to commence an action in any court sitting in Scotland, in any
applicable federal or state court in the United States or in any other
court having appropriate jurisdiction to have the arbitrator's award
enforced. In the event that such an a action is issued, the costs of such
action (including reasonable legal fees) shall be borne by the party
against whom such enforcement is sought.
75
(g) Except to the extent required by law, no party, arbitrator,
representative, counsel or witness shall disclose or confirm to any
Person not present at the arbitration hearings, any information about the
hearings, including the names of the parties and the arbitrators, the
nature and amount of the claims, the financial condition of any party,
the expected date of hearing or the arbitrators award.
(h) The right to state a case for the opinion of the Court of Session on any
question of law arising in the arbitration, provided by Section 3 of the
Administration of Justice (Scotland) Xxx 0000, shall not apply.
SECTION 11.3. ENTIRE UNDERSTANDING, WAIVER, ETC. This Agreement
sets forth the entire understanding of the parties and supersedes any and all
prior or contemporaneous agreements, arrangements and understandings relating to
the subject matter hereof, and the provisions hereof may not be changed,
modified, waived or altered except by an agreement in writing signed by the
party entitled to the benefit of the provision(s) to be waived hereto. A waiver
by any party of any of the terms or conditions of this Agreement, or of any
breach thereof, shall not be deemed a waiver of such term or condition for the
future, or of any other term or condition hereof, or of any subsequent breach
thereof.
SECTION 11.4. SEVERABILITY. If any provision of this Agreement or
the application of such provision shall be held by a court of competent
jurisdiction to be unenforceable, or otherwise be or become invalid or
unenforceable, the remaining provisions of this Agreement shall remain in full
force and effect.
SECTION 11.5. CAPTIONS. The captions herein are for convenience
only and shall not be considered a part of this Agreement for any purpose,
including, without limitation, the constructions or interpretation of any
provision hereof.
SECTION 11.6. NOTICES. All notices, requests, demands and other
communications (collectively, "Notices") that are required or may be given under
this Agreement shall be in writing. All Notices shall be deemed to have been
duly given or made: if by hand, immediately upon delivery; if by telecopier or
similar device, immediately upon sending, provided notice is sent on a Business
Day during the hours of 9:00 a.m. and 6:00 p.m. at the location of the party
receiving the Notice, but if not, then immediately upon the beginning of the
first Business Day after being sent; if by FedEx, Express Mail or any other
reputable overnight delivery service, three Business Days after being placed in
the exclusive custody and control of said courier; and if mailed by certified
mail, return receipt requested or by another method of mailing which provides
reasonable evidence of the date of posting and of the address of the addressee,
ten (10) Business Days after mailing. Notwithstanding the foregoing, with
respect to any Notice given or made by telecopier or similar device, such Notice
shall not be effective unless and until (i) the telecopier or similar device
being used prints a written confirmation of the successful completion of such
communication by the party
76
sending the Notice, and (ii) a copy of such Notice is deposited in first class
mail to the appropriate address for the party to whom the Notice is sent. In
addition, notwithstanding the foregoing, a Notice of a change of address by a
party hereto shall not be effective until received by the party to whom such
Notice of a change of address is sent. All Notices are to be given or made to
the parties at the following addresses (or to such other address as either party
may designate by Notice in accordance with the provisions of this Section):
(a) IF TO A SELLER OR WARRANTOR:
To the address set forth for such Seller in Part 1 or
Part 2 of the Schedule attached to the Agreement.
(b) IF TO SEI:
Xxxxx Enterprises, Incorporated
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Vice President-Finance
Telephone: 000 (000) 000-0000
Facsimile: 000 (000) 000-0000
WITH A COPY TO:
Parker, Poe, Xxxxx & Xxxxxxxxx, L.L.P.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: 000 (000) 000-0000
Facsimile: 001 (704) 334-4706
SECTION 11.7. SUCCESSORS AND ASSIGNEES. Neither this Agreement nor
any of the rights or obligations arising hereunder shall be assignable by any
party without the prior written consent of the other parties hereto; provided,
however, that notwithstanding the foregoing SEi may assign its rights and
obligations under this Agreement to any wholly owned subsidiary of SEi which
agrees in writing to be bound by and to perform fully all of SEi's obligations
hereunder and, provided that in the event of any such assignation by SEi, SEi
shall remain liable hereunder for the performance of SEi's obligations hereunder
notwithstanding such assignation.
SECTION 11.8. IBJ. There shall be no breach of this Agreement with
respect to Sections 5.6, 7.8 or otherwise, as a result solely of either or both
(a) IBJ becoming the registered owner of the A1, A2, B and C Notes specified in
Section 2.6
77
and the D Share and (b) IBJ converting the C Note into C Ordinary Shares. IBJ
Xxxxxxxx Bank & Trust Company enters into this Agreement and undertakes all
obligations hereunder on behalf of the Rand XxXxxxx Earn-out Trust dated
November 6, 1997 only in its capacity as Trustee under such trust and without
personal liability of any kind.
SECTION 11.9. PARTIES IN INTEREST. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors, personal representatives, executors, and permitted assignees.
Nothing in this Agreement, express or implied, shall confer upon any Person,
other than the parties hereto, and their successors and permitted assignees, any
rights or remedies under or by reason of this Agreement.
SECTION 11.10 CONSTRUCTION OF TERMS. The parties to this Agreement
acknowledge that each party and counsel to each party has participated in the
drafting of this Agreement and agree that this Agreement shall not be
interpreted against one party or the other based upon who drafted it. IN WITNESS
WHEREOF these presents consisting of this and the 64 preceding pages and the
Schedule in 3 parts attached hereto are executed all together at Edinburgh on 31
December 1997 as follows:-
/s/
------------------------------------------
Xxxxxxx Xxxxxxx Xxxx
/s/
------------------------------------------
Trustees of Xxxxxxx Xxxxxxx Xxxx under a
Deed of Trust dated 22 August 1996
/s/
------------------------------------------
On behalf of Adobe Systems
Incorporated as General Partner of
Adobe Incentive Partners, L.P.
/s/
------------------------------------------
Clydesdale Bank Equity Limited
78
/s/
------------------------------------------
Xxxx Xxxxxxx XxxXxxxxx Xxxxx
/s/
------------------------------------------
Xxxxxx X. Xxxx
/s/
------------------------------------------
McQueen ESOT Trustees Limited
/s/
------------------------------------------
Xxxxx X Xxxx
/s/
------------------------------------------
Xxxx X Xxxx
/s/
------------------------------------------
Xxxxxxxx Xxxx Xxxx
/s/
------------------------------------------
IBJ Xxxxxxxx Bank and Trust Company
As trustee of the Rand XxXxxxx Earn Out
Trust
/s/
------------------------------------------
Xxxxx X. Xxxxxx
/s/
------------------------------------------
Trustees under the X X Xxxx'x 1997 Liferent
Trust
/s/
------------------------------------------
Trustees under the X X Xxxx Children's Trust
79
/s/
------------------------------------------
Trustees under the X X Xxxx'x 1997
Liferent Trust
/s/
------------------------------------------
Trustees under The Xxxxx Family Trust
/s/
------------------------------------------
Trustees under the A C M Xxxxx'x 1997
Liferent Trust
/s/
------------------------------------------
Stephane Roussier
/s/
------------------------------------------
Xxxxx Xxxxxx
/s/
------------------------------------------
Xxx Xxxxxxxxxx
/s/
------------------------------------------
Xxx Xxxx
/s/
------------------------------------------
Xxxxxxxxx Xxxxxxxxxx
/s/
------------------------------------------
Xxxxxxxx Xxxxxx
/s/
------------------------------------------
Xxxx Xxxxxxx
/s/
------------------------------------------
Xxxxxxx Xxxxx
80
/s/
------------------------------------------
Graeme Sandie
/s/
------------------------------------------
Xxxx Xxxxxxxxxxx
/s/
------------------------------------------
Xxxxx Xxxxx
/s/
------------------------------------------
Xxxxxxxxx Xxxx
/s/
------------------------------------------
Xxxxx Xxxxxxx
/s/
------------------------------------------
Xxxxx Xxxx
/s/
------------------------------------------
Xxxxxx Xxxxxx
/s/
------------------------------------------
Xxxx Xxxxxxxxxx
/s/
------------------------------------------
Xxxx Xxxxxxxxxx
/s/
------------------------------------------
Xxxxx Xxxxx
81
/s/
------------------------------------------
Xxxxx Xxxxxxx
/s/
------------------------------------------
Mairie Xxxxxxx
/s/
------------------------------------------
Xxxx XxXxxxxxxx
/s/
------------------------------------------
Xxx Le Coz
/s/
------------------------------------------
Xxxx Xxxxxxxxx
/s/
------------------------------------------
Xxxxxx Xxxxx
/s/
------------------------------------------
Xxx Xxxxx
/s/
------------------------------------------
Xxxx Xxxxxxxxx
/s/
------------------------------------------
Xxxxxxx van Gelooven
/s/
------------------------------------------
Xxxxx Xxxxx
/s/
------------------------------------------
Xxxxx Xxxxxxx
82
/s/
------------------------------------------
Xxxxxx Xxxxxx
/s/
------------------------------------------
Xxxxxxx Xxxxxxxx
/s/
------------------------------------------
Xxxxxxxxx Xxxxxxx
/s/
------------------------------------------
Xxx Xxxxxxx
/s/
------------------------------------------
Xxxxxxxxx Xxxx
/s/
------------------------------------------
Xxxxxx Xxxxxxxxxx
/s/
------------------------------------------
Xxxxxx Xx Xxxxx
/s/
------------------------------------------
Xxxxxx Xxxxxxx
/s/
------------------------------------------
Xxxx Xxxxxxx
/s/
------------------------------------------
Xxxxxx Xxxxxxx
/s/
------------------------------------------
Xxxxx Xxxxxxxx
83
/s/
------------------------------------------
Xxxxxx Xxxxxx
/s/
------------------------------------------
Xxx Xxxxx
/s/
------------------------------------------
Xxxxx Xxxxxx
/s/
------------------------------------------
Xxxxx Xxxxxx
/s/
------------------------------------------
Xxxxxxx Xxxxx
/s/
------------------------------------------
Xxxx Xxxxxx
/s/
------------------------------------------
Xxxx Xxxxx
/s/
------------------------------------------
Xxx Xxxxxx
/s/
------------------------------------------
Xxxxxx Xxxxxxx
/s/
------------------------------------------
Xxxxx Xxxxxxxx
/s/
------------------------------------------
Teb Xxxxxxxx
84
/s/
------------------------------------------
Xxxx X Xxxxxxxxx
/s/
------------------------------------------
Aert Xxxxxxxx
00
SEI:
XXXXX ENTERPRISES, INCORPORATED
/s/
--------------------------------
Julian C A Xxxx as attorney Xxxxx
Enterprises, Inc
/s/
..........................................
Witness to all of the foregoing
signatures
Xxxxxx Xxx Xxxxxx
.......................................... Full Name
00 Xxxxxxxx Xxxxxx
.......................................... Address
Xxxxxxxxx XX0 0XX
..........................................
Trainee Solicitor
.......................................... Occupation
86
This is the Schedule (in 3 parts) referred to in the foregoing Agreement
dated 31 December 1997 among Xxxxx Enterprises, Incorporated and the persons
listed in Part 1 ("the Shareholders") and Part 2 ("the Optionholders")
of this Schedule
Part 1
Shareholders
NAME AND ADDRESS OF SHAREHOLDER DESIGNATION & NO OF THE
NO OF SALE PURCHASE
SHARES MAKING PRICE SHARES
UP THE SHARES TO BE ISSUED
OWNERSHIP
Xxxxxxx Xxxxxxx Xxxx 'A' Ords 205,772 1,107,421
Glenpark, 00 Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 'B' Ords 4,800 25,832
'A' Prefs 966,076 91,337
Trustees of Xxxxxxx Xxxxxxx Xxxx being 'A' Ords 36,000 193,744
Xxxxxxx Xxxxxxx Xxxx and Xxxxxxxx Xxxx Xxxx, Xxxxxxx 'A' Prefs 600,000 56,726
White and Xxxxxx X Xxxxxxx as Trustees under
Deed of Trust dated 22 August 1996
Xxxxxxxx X Xxxx 'A' Prefs 800,000 75,635
Glenpark, 00 Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx Prefs 49,932 4,720
Xxxx Xxxx Prefs 21,098 1,994
Glenpark, 00 Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 'A' Prefs 21,098 1,994
Xxxxx Xxxx Prefs 21,098 1,994
Glenpark, 00 Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 'A' Prefs 21,098 1,994
IBJ Xxxxxxxx Bank and Trust Company Deferred 1 1
(as trustee of the Rand XxXxxxx Earn Out Trust) C Ord 64,888 349,212
0 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, XXX (Attn Xxxxxx
XxXxxxxxxx)
Adobe Incentive Partners, L.P. Prefs 540,673 51,117
000 Xxxx Xxxxxx, Xxx Xxxx, Xxxxxxxxxx, XXX Ords 80,932 435,559
Clydesdale Bank Equity Limited CPPO 44,114 0
00 Xx Xxxxxxx Xxxxx, Xxxxxxx X0 0XX
Xxxx Xxxxxxx XxxXxxxxx Xxxxx 'B' Ords 9,534 51,309
00 Xxxxxxxxxx Xxxx, Xxxxxxxxx XX0 0XX
Xxxxxx X Xxxx 'B' Ords 11,178 60,157
00x Xxxxx X' Xxxx Xxxxxxx, Xxxxxxxxx XX00 0XX
Xxxxx X Xxxxxx 'B' Ords 16,000 86,108
000 Xxxxxxx Xxxx, Xxxxxxxxx, XX 00000, XXX
Xxxxxx Xxxx Xxxx and Mrs Xxxx Xxxx 'B' Ords 6,000 32,290
as Trustees under the XX Xxxx Children's Trust
Xxxxxx Xxxx Xxxx and Mrs Xxxx Xxxx 'B' Ords 10,765 57,934
as Trustees under the XX Xxxx'x 1997 Liferent Trust
87
Xxxx Xxxxxxx Xxxxxxxxx Xxxxx and Mrs Xxxxxxx Xxxxxxxx 'B' Ords 3,000 16,145
Xxxxx as Trustees under The Xxxxx Family Trust
Xxxx Xxxxxxx Xxxxxxxxx Xxxxx and Mrs Xxxxxxx Xxxxxxxx 'B' Ords 11,299 60,808
Xxxxx as Trustees under the A C M Xxxxx'x 1997 Liferent
Trust
Xxxxxxx Xxxxxxx Xxxx and Xxxxxxxx Xxxx Xxxx 'A' Ords 120,000 645,814
as Trustees under the X X Xxxx'x 1997 Liferent Trust
McQueen ESOT Trustees Limited Ords 21,553 115,993
Nether Road 'B' Ords 2,238 12,044
Galashiels
For the purpose of the above:-
Prefs are 5% Cumulative Redeemable Preference Shares of (pound)1 each
A Prefs are 5% Cumulative Convertible Participating Preference Shares of
(pound)1 each
A Ords are A Ordinary Shares of 10p each
B Ords are B Ordinary Shares of 10p each
C Ords are C Ordinary Shares of 10p each
Deferred is a Deferred Share of (pound)1
Ords are Ordinary Shares of 10p each
CPPO are Cumulative Convertible Participating Preferred Ordinary Shares of
10p each
88
Part 2
Optionholders
NAME AND ADDRESS TOTAL OPTIONS NO OF SEI
OUTSTANDING SHARES SUBJECT
TO OPTION
Xxxxxx X Xxxx
00X Xxxxx X'Xxxx Xxxxxxx, Xxxxxxxxx 0000 8,073
Xxxx X X Xxxxx
00 Xxxxxxxxxx Xxxx, Xxxxxxxxx 0000 8,073
Stephane Roussier
0 Xxx xx xx Xxxxxxxx,
00000 Xxxxxxxx en Vexin, Paris 4016 21,614
Xxxxx Xxxxxx
Xxxxxxxxxxx, 00 Xxxxxxxxx Xxxxxxx,
Xxxxxxxxxx 0000 24,219
Xxx Xxxxxxxxxx
00 Xxxxxxxx Xxxxx, Xxxxxxxxx 0000 29,601
Xxx Xxxx
0 Xxxxxxxxx Xxxxxxxx, Xxxxxxxxx, Xxxxxxx 0000 18,837
Xxxxxxxxx Xxxxxxxxxx
00 Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxx 0000 13,455
Xxxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxx, Xxxxxxx 0000 10,764
Xxxx Xxxxxxx
0 Xxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxx 0000 16,146
Xxxxxxx Xxxxx
Edelweiss, Wylies Brae, Galashiels 600 3,230
Graeme Sandie
Fairways, 00 Xxxxxxxxx Xxxxxxxx,
Xxxxxxxxxx 150 809
89
Xxxx Xxxxxxxxxxx
000 Xxxxxxxxx (0X0), Xxxxxxxxx 150 809
Xxxxx Xxxxx
00 Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxxx 50 270
Xxxxxxxxx Xxxx
0 XX Xxxxxx Xxxxxxx, 00000 Xxxxxxxx,
Xxxxxx Xxxxx, Xxxxx 000 3,230
Xxxxx Xxxxxxx
0 Xxxxxx Xxxxx, Xxxxxxxxxxx, Galashiels 200 1,078
Xxxxx Xxxx
0 Xxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxx 50 270
Xxxxxx Xxxxxx
00 Xxxxxxxxxx Xxxxx, Xxxxxxxxx 000 2,692
Xxxx Xxxxxxxxxx
22BD Kelferman, 95160 Mont Xxxxxxx,
Xxxxx 600 3,230
Xxxx Xxxxxxxxxx
Xxxxxx Xxxxx, Xxxx Xxxxxx, Xxxxxxxxxx,
Melrose 150 809
Xxxxx Xxxxx
00 Xxxxxx Xxxxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxxx 100 539
Xxxxx Xxxxxxx
000x Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx 150 808
Mairie Xxxxxxx
00 Xxxxx Xxxxx, Xxxxxxxxx, XX0 0XX 150 809
Xxxx XxXxxxxxxx
000 xxx xx xx Xxxxxxxx, 00000 Xxxxxxxx
en Vexin, Paris 50 270
Xxx Le Coz
00 xxx Xxxxxx, 00000 Xxxxxxxxx, Xxxxxx 50 270
90
Xxxx Xxxxxxxxx
Xxx Xxxxxxx, 0 Xxxxxx Xxxxx, Xxxxxxxxx 200 1,078
Xxxxxx Xxxxx
00 Xxxxxxx Xxxx, Xxxxx, Xxxxxxxxx 100 539
Xxx Xxxxx
Xxxx 000, Xxxxxxxxxxx 0000, Xxxxxxx Xxx
Xxxxx Xxxx, Xxxxxx 100 539
Xxxx Xxxxxxxxx
00 XxXxxxx Xxxxx, Xxxxxx 50 270
Xxxxxxx van Gelooven
J Xxxxxxx 0, 0000 XX Xxxxxxxxxx,
Xxx Xxxxxxxxxxx 150 809
Xxxxx Xxxxx
Ashlyn, 0 Xxxxx Xxxxxxxx, Xxxxxxxxxx 50 270
Xxxxx Xxxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxx Xxxx, Xx Xxxxxxxx 00 270
Xxxxxx Xxxxxx
00 Xxxxxxxx Xxxxxxx (0XX), Xxxxxxxxx 50 270
Xxxxxxx Xxxxxxxx
0 Xxxxxxxxxx Xxx, Xxxxxxxxx 150 809
Xxxxxxxxx Xxxxxxx
00 Xxxxxxxxxxxx Xxxxxx, Xxxxxxxx 000 1,615
Xxx Xxxxxxx
0 Xxxxxx Xxxx, Xxxxxxxxx 300 1,615
Xxxxxxxxx Xxxx
4R Fair-a-Far, Cramond, Edinburgh 150 809
Xxxxxx Xxxxxxxxxx
00 Xxxxxx Xxxxxxx, Xxxxxxxxx 50 270
Xxxxxx Xx Xxxxx
00 Xxx xx Xxxxxxxxx, 00000, Xxxxx 1058 5,695
Xxxxxx Xxxxxxx
00 xxx Xxxx Xxxxxxxx, 00000 Xxxxxxx, Xxxxxx 100 539
91
Xxxx Xxxxxxx
0 Xxxxxxxx Xxxxxxxx, Xxxxxxx 200 1,078
Xxxxxx Xxxxxxx
0 Xxxxxxx Xxxxxx, Xxxxxxxxxx 150 000
Xxxxx Xxxxxxxx
Xxxxxxxxxx, 00 Xxxxxxx Xxxx, Xxxxxxxxxx 400 2,154
Xxxxxx Xxxxxx
00 Xxxxxxxxx Xxxxxxxx, Xxxxxxxxxx 150 000
Xxx Xxxxx
Xxxxxxxxx, Xxxx Xxxxxxx Place, Hawick 150 809
Xxxxx Xxxxxx
00 Xxxxx Xxxxxxxx, Xxxxxxxxxx 50 270
Xxxxx Xxxxxx
00 Xxxxxxxxx Xxxxxxx, Xxxxxxxxxx 400 2,154
Xxxxx X Xxxxxx
000 Xxxxxxx Xxxx, Xxxxxxxxx, XX00000, XXX 1500 8,073
Xxxxxxx Xxxxx
00 Xxxxxxxxxx, Xxxxxx, Xxxxxxxx, Xxxxxxx 500 2,691
Xxxx Xxxxxx
0000 Xxxxx Xxxxx, Xxxxxxxx, XX00000, XXX 500 2,691
Xxxx Xxxxx
0000 Xxxxxxx Xxxxx, Xxxxx Xxxx, XX00000, XXX 500 2,691
Xxx Xxxxxx
0000 Xxxxx Xxxx Xxxx, Xxxxxxxxx, XX00000,
XXX 500 2,691
Xxxxxx Xxxxxxx
000 Xxxxxxxxx Xxx, Xxxxxxxxx, XX00000, XXX 500 2,691
Xxxxx Xxxxxxxx
0000 Xxxxxx Xxxx, Xxx Xxxx, XX00000, XXX 500 2,691
92
Teb Xxxxxxxx
000 Xxxxx Xxxxx, Xx. Xxxxxx, XX00000, XXX 500 2,691
Xxxx X Xxxxxxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxxxxxx Xxxx,
Xxxxxxxx Xxxx, Xxxxxxxx 0000 nil
Aert Xxxxxxxx
X.X. Xxxxxxxxxx 00, 0000 XX Heemstede,
The Netherlands 3000 16,146
------ -------
44,924 236,441
93
Part 3 - Section 4.15(d) - McQUEEN CONSOLIDATED REVENUE SCHEDULE
1997/98 YTD - (POUND)M UNDER COMMENT
8 months ending CONTRACT
31/10/97 (C) / VERBAL
(V)
Adobe 13.302 C & V Services Agreement terminated 12/31/97. Extension
for Call Centre Services agreed 'til 3/31/98.
Negotiations for new Services Agreement ongoing.
Netscape 4.137 C Contract terminates 12/31/97. RENEWAL VERY
QUESTIONABLE.
Microsoft Press 1.980 V
Motorola 1.781 V
Attachmate 1.628 C Contract not signed by Attachmate but Amendment 1
is signed by both parties.
Creative Labs 1.562 C
SCO 1.334 C
HP 1.233 V
Caere 1.210 C
3 Com 1.196 V
Intel 1.169 C
Pro CD .830 V
Insignia .716 V
ALPS .712 V
Sprint .666 C
Others 13.026
TOTAL 46.482
