DATED 1998
▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and
LOUVRE TRUSTEES LIMITED
and
JAVELIN SYSTEMS, INC.
---------------------------------------------
AGREEMENT
for the sale and purchase of the
entire issued share capital
of RGB TRINET LIMITED
---------------------------------------------
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
The International Financial Centre
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Tel: ▇▇▇▇ ▇▇▇ ▇▇▇▇
Fax: ▇▇▇▇ ▇▇▇ ▇▇▇▇
I N D E X
Page
1. Definitions and Interpretation 1
2. Agreement to Sell and Purchase 5
3. Consideration 5
4. Conditions Precedent 6
5. Pre-emption Rights 6
6. Warranties 6
7. Limitations to the Warranties 8
8. Vendors' obligations prior to Completion 8
9. Purchaser's Remedies 9
10. Release of Guarantees 9
11. Completion 10
12. Restrictive Covenants 10
13. Post-Completion Effect 11
14. Successors and Assigns 11
15. Information and Confidentiality 11
16. Announcements and Publicity 11
17. Costs 11
18. Notices 12
19. Further Assurance 13
20. Waivers 13
21. Entire Agreement 13
22. Variation 14
23. Joint and Several Liability 14
24. Counterparts 14
25. Applicable Law 14
Schedules
---------
1. Particulars of the Vendors
2. Particulars of the Company and Subsidiary
3. Particulars of the Premises
4. Part A - General Warranties
Part B - Taxation Warranties
Part C - Property Warranties
Part D - Intellectual Property Warranties
Part E - Environmental and Health and Safety Warranties
5. Completion Requirements
6. Tax Deed
7. Regulation S certificate and undertaking
8. Additional Limitations to the Warranties and Tax Deed
9. Earnout Agreement
i
AGREEMENT FOR SALE AND PURCHASE OF SHARES
DATE: 1998
PARTIES:
(1) THE PERSONS whose names and addresses are set out in Column 1 of SCHEDULE
1 ("Individual Vendors");
(2) LOUVRE TRUSTEES LIMITED of Kings House, The Grange, St. ▇▇▇▇▇ Port,
Guernsey, Channel Islands ("Trustee Vendor"); and
(3) JAVELIN SYSTEMS, INC. (a Delaware corporation) whose principal place of
business is at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, ▇.▇.▇.
("Purchaser").
OPERATIVE PROVISIONS:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement and (save as provided in Clause 1.6) in the Schedules:-
"Accounting Date" means 30 June 1997 or, if the audited
accounts of the Company for the period
which commenced on 1 July 1997 and
ended on 30 June 1998 are provided to
the Purchaser on or prior to
Completion, 30 June 1998;
"Accounting Period" has the meaning ascribed thereto in
section 12 of the Taxes Act;
"Accounts" means the audited accounts of the
Company comprising a balance sheet as
at the Accounting Date, a profit and
loss account for the period which
commenced on 1 July 1996 or, if the
audited accounts of the Company for
the period which commenced on 1 July
1997 and ended on 30 June 1998 are
provided to the Purchaser on or prior
to Completion, 1 July 1997 and ended
on the Accounting Date, the notes
thereto and the Directors' and
auditors' reports thereon;
"agreed form" means in relation to any document such
document in the form agreed between
the parties and initialled by the
Purchaser and the Vendors for the
purposes of identification;
"Business Day" means any day which is not a Saturday,
a Sunday or a bank or public holiday
in England and Wales;
1
"Change of Control" means, in relation to any company,
where that company ceases to be under
the control of the person or persons
who control such company on the date
of this Agreement and for the purpose
of this definition "control" means a
holding of securities in a company
conferring a majority of the voting
rights in it or the right to appoint
or remove a majority of its board of
directors or the right to participate
in 50% or more of the assets of the
company on its winding up;
"Claim" means any claim for breach of or
non-compliance with this Agreement
(including any Warranty Claim or Tax
Claim);
"Companies Act" means the Companies ▇▇▇ ▇▇▇▇;
"Company" means RGB TRINET LIMITED, particulars
relating to which are set out in
SCHEDULE 2, Part 1;
"Completion" means the completion of the sale and
purchase of the Shares in accordance
with Clause 11 and SCHEDULE 5;
"Completion Date" means the date fixed for Completion
pursuant to Clause 11;
"Connected Person" means a connected person as defined in
section 839 of the Taxes Act;
"Consideration Shares" means such number of Purchaser's
Shares calculated in accordance with
Clause 3.4 as are to be allotted and
issued credited as fully paid in
accordance with Clause 3.3;
"Directors" means the persons listed as directors
of the Company in SCHEDULE 2;
"Disclosed" means fairly disclosed to the
Purchaser expressly for the purposes
of this Agreement in the Disclosure
Letter;
"Disclosure Letter" means a letter of even date from the
Vendors to the Purchaser in the agreed
form;
"Earnout Agreement" means an agreement to be entered into
at Completion between (inter alia) the
Individual Vendors and the Purchaser
in respect of the entitlement and
issue of the Earnout Shares in the
form contained in SCHEDULE 9;
2
"Earnout Shares" means such number of Purchaser's
Shares (if any) calculated, allotted
and issued credited as fully paid in
accordance with the Earnout Agreement;
"Employment Agreements" means the employment agreements in the
agreed form to be entered into at
Completion between the Company and
each of the Individual Vendors;
"Event" means an event as defined in the Tax
Deed;
"Intellectual Property Rights" means intellectual property rights as
defined in Part D of SCHEDULE 4;
"Jade Agreement" means the agreement of even date for
the sale and purchase of the issued
share capital of the Subsidiary not
held by the Company entered into
between (1) ▇. ▇▇▇▇▇▇▇, (2) Contech
Consultants Limited, (3) B. Badminton,
and (4) the Purchaser;
"Management Accounts" means the respective unaudited
management accounts of the Company and
the Subsidiary comprising in each case
a balance sheet and a profit and loss
account for, in respect of the
Company, the period which commenced on
1 July 1998 and ended on 31 August
1998 and, in respect of the
Subsidiary, the period which commenced
on 18 March 1998 and ended on 31
August 1998, a copy of each of which
is to be provided at Completion;
"Premises" means the premises of the Company,
short particulars of which are set out
in SCHEDULE 3;
"Purchaser's Group" means the Purchaser and its subsidiary
undertakings or parent undertakings
for the time being or a subsidiary
undertaking for the time being of a
parent undertaking of the Purchaser
and includes, for the avoidance of
doubt, the Company and the Subsidiary
and references to a "member of the
Purchaser's Group" shall be construed
accordingly;
"Purchaser's Shares" means shares of the common stock,
$0.01 par value, of the Purchaser;
"Relief" means a relief as defined in the Tax
Deed;
"Shares" means the 1,000 ordinary shares of L1
each in the capital of the Company;
"Subsidiary" means JADE COMMUNICATIONS LIMITED,
particulars relating to which are set
out in SCHEDULE 2, Part 2;
3
"Supplemental Disclosure
Letter" means the letter to be provided by the
Vendors at Completion to the Purchaser
in the agreed form disclosing matters
(if any) which have arisen between the
date hereof and the Completion Date
and which are necessary to qualify the
Warranties;
"Tax" means tax as defined in the Tax Deed;
"Tax Claim" means any claim under the Warranties
in SCHEDULE 4, Part B or the Tax Deed;
"Tax Deed" means a deed in the form set out in
SCHEDULE 6;
"Taxes Act" means the Income and Corporation Taxes
▇▇▇ ▇▇▇▇;
"Vendors" means together the Individual Vendors
and the Trustee Vendor;
"Vendors' Solicitors" means Dibb ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇;
"Warranties" means the warranties, representations
and undertakings set out in SCHEDULE
4;
"Warranty Claim" means any claim for breach of or
non-compliance with any of the
Warranties in Parts A, C or D of
SCHEDULE 4.
1.2 The Schedules are deemed to be incorporated in this Agreement, and a
reference to "this Agreement" includes a reference to the Schedules.
1.3 In this Agreement:-
1.3.1 the index and the clause headings are included for convenience only
and shall not affect the construction of this Agreement;
1.3.2 words denoting the singular shall include the plural and vice
versa;
1.3.3 words denoting any gender shall include a reference to each other
gender; and
1.3.4 references to persons shall be deemed to include references to
natural persons, firms, partnerships, companies, corporations,
associations, organisations, foundations and trusts (in each case
whether or not having separate legal personality).
1.4 References in this Agreement to statutory provisions shall (where the
context so admits and unless otherwise expressly provided) be construed as
references to those provisions as respectively amended, consolidated,
extended or re-enacted as at the date of this Agreement and to the
corresponding provisions of any earlier legislation (whether repealed or
not) directly or indirectly amended, consolidated, extended, replaced or
re-enacted thereby and to any orders, regulations, instruments or other
subordinate legislation made under the relevant statute.
4
1.5 Any statement qualified by the expression "to the best of the knowledge,
information and belief of the Vendors" or "so far as the Vendors are
aware" or any similar expression shall be deemed to include an additional
statement that it has been made after due, diligent and careful enquiry by
each of the Vendors of each other, the Directors, the Company's auditors
and the directors of the Subsidiary.
1.6 If any of the words or expressions defined in Clause 1.1 are also defined
in any of the Schedules then for the purposes of interpreting that
relevant Schedule such words and expressions shall have the meaning
ascribed to them in that Schedule.
2. AGREEMENT TO SELL AND PURCHASE
2.1 Each of the Vendors sells such of the Shares as are set out opposite his
name in column 2 of SCHEDULE 1 to the Purchaser and the Purchaser
purchases the Shares.
2.2 Each of the Vendors covenants with the Purchaser that:-
2.2.1 he has the right to sell and transfer the full legal and beneficial
interest in the Shares to the Purchaser on the terms set out in
this Agreement;
2.2.2 the Shares are sold free from all claims, charges, liens,
encumbrances, equities and adverse rights of any description and
together with all rights attached or accruing thereto as at and
from the date of this Agreement; and
2.2.3 he shall (and shall procure that any necessary third party shall),
at his own expense, do, execute and perform all such further acts,
deeds, documents and things as the Purchaser may reasonably request
from time to time as being necessary to vest any of the Shares in
the Purchaser.
2.3 Nothing in this Agreement shall oblige the Purchaser to purchase some only
of the Shares unless the Vendors shall at the same time complete the sale
to the Purchaser of all of the Shares.
3. CONSIDERATION
3.1 Subject to Clause 3.8, the initial consideration payable by the Purchaser
to the Vendors in respect of the sale of the Shares shall be 11,875
Purchaser's Shares and US$2,878,750 which:
3.1.1 in respect of US$2,878,750 shall be satisfied as to the amount of
US$1,492,812.50 in cash and as to US$1,385,937.50 shall be
satisfied by the issue of the Consideration Shares in accordance
with the remainder of this Clause 3; and
3.1.2 if and to the extent that the exchange rate of pounds sterling to
US dollars has increased above the rate of L1 = $1.70 (i.e., an
increase in value in pounds sterling) as at the Completion Date,
the sum of US$2,878,750 shall be increased accordingly by applying
the appropriate percentage thereto. If such exchange rate has
decreased below L1 = $1.70 (i.e., a decrease in value in pounds
sterling), no variation shall be made to the consideration under
this Agreement.
5
3.2 By way of additional consideration of up to US$5,140,625 the Purchaser
will issue to the Vendors the Earnout Shares (if any) calculated in
accordance with the provisions of the Earnout Agreement in the percentages
set out in Column 6 of SCHEDULE 1.
3.3 The consideration referred to in Clause 3.1 shall be satisfied at
Completion by the payment of US$1,492,812.50 in cash to the Vendors'
Solicitors which shall be apportioned between the Vendors as set out in
Column 3 of SCHEDULE 1, by the issue of the 11,875 Purchaser's Shares
which shall be apportioned between the Vendors as set out in Column 4 of
SCHEDULE 1, and by the issue of Consideration Shares to the Vendors which
shall be apportioned between the Vendors as set out in Column 5 of
SCHEDULE 1.
3.4 The number of Consideration Shares to be allotted to the Vendors pursuant
to Clause 3.3 shall be such number of Purchaser's Shares as have an
aggregate value (determined in accordance with Clause 3.5) which is as
near as possible to, but not less than, US$1,385,937.50.
3.5 For the purpose of determining the aggregate value referred to in Clause
3.4, the value of each Purchaser's Share shall be deemed to be an amount
equal to the average of the closing prices of a Purchaser's Share, as
reported on the NASDAQ SmallCap Market System in the ten (10) trading days
immediately prior to the Business Day immediately prior to the Completion
Date.
3.6 No fraction of a Consideration Share shall be issued to the Vendors and
the number of Consideration Shares shall be adjusted accordingly to the
nearest whole number.
3.7 The Consideration Shares, on issue, shall rank pari passu in all respects
with the existing issued Purchaser's Shares.
3.8 By way of possible further consideration, if during November 1999 the
price per Purchaser's Share as reported on the NASDAQ SmallCap Market
shall remain below US$9.00 for five (5) consecutive trading days, then the
number of Consideration Shares to which the Vendors are entitled shall be
increased as follows:-
3.8.1 First, the number of Purchaser's Shares owned by the Vendors as of
1 November 1999 shall be subject to adjustment based on the
following formula:
S x (V1) - S = C
----
(V2)
where S = Number of Purchaser's Shares held by the Vendors
V1 = 9
V2 = US$9.00 or, if lower, the average closing price per
Purchaser's Share during trading on the NASDAQ SmallCap
Market in November 1999
C = the additional number of Consideration Shares to be
issued to the Vendors;
3.8.2 Second, the Purchaser shall issue and allot to the Vendors such
number of additional Consideration Shares as corresponds to the
figure represented by "C" in the above formula in the same
proportions as under Clause 3.3 no later
6
than 31 December 1999 (and otherwise in accordance with the
foregoing provisions of this Clause 3).
3.9 Each of the Vendors agrees that he shall deliver to the Purchaser at
Completion and, if appropriate, upon the issue of Consideration Shares
pursuant to Clause 3.8 a certificate and undertaking substantially in the
form of SCHEDULE 7 making or giving such representations, warranties and
covenants as are necessary or advisable for the qualification of the
issuance of Purchaser's Shares to the Vendors under Regulation S
promulgated under the United States Securities Act of 1933, as amended.
3.10 If the Purchaser at any time proposes to register any of its equity
securities (as defined in the United States Securities Act of 1933 (the
"Act")), other than securities which are convertible into shares of its
common stock, under the Act on Forms ▇-▇, ▇-▇ or S-3 (but not Form S-4 or
S-8) or on any other form upon which may be registered securities similar
to the Consideration Shares, it will at each such time give written notice
at least fifteen (15) days prior to the filing of the registration
statement to the Vendors holding Consideration Shares (each a "Holder") of
its intention so to do. Such notice shall specify the proposed date of
the filing of the registration statement and advise each Holder of its
right to participate therein. Upon the written request of any Holder
given not less than seven (7) days prior to the proposed date of filing
set forth in such notice, the Purchaser will use all reasonable efforts to
cause the Consideration Shares which the Purchaser has been requested to
register by such Holder to be registered under the Act, all to the extent
requisite to permit the sale or other disposition by such of the
Consideration Shares so registered. If such registration statement is
being filed in connection with an underwritten offering, the Consideration
Shares held by the Holder may only be included in such registration if, in
the written opinion of the underwriter or underwriters managing the
offering, the total amount of all securities of the Purchaser to be so
registered will not exceed the maximum amount of securities of the
Purchaser which can then be successfully marketed (1) by the managing
underwriter in its sole reasonable discretion, and (2) without otherwise
materially and adversely affecting the entire offering. To the extent
that the amount of securities to be registered must be reduced in order to
obtain the opinion referred to in the preceding sentence, such reduction
shall be achieved by first eliminating from the registration some or all
of the securities to be offered by persons (including, but not limited to,
any persons or entities that have any registration rights with respect to
any securities) other than the Holder, PROVIDED, HOWEVER, that no such
reduction shall reduce the securities being offered directly by the
Purchaser through such underwriter or underwriters. The right of any
Holder to have its Consideration Shares included in any registration
statement being filed in connection with any underwritten offering shall
be subject to such Holder participating in the underwriting to the extent
required under the Act or any rule thereunder or to the extent reasonably
required by the underwriters and agreeing to be bound by the terms imposed
by the underwriters that such underwriters deem reasonably necessary to
the success of the offering.
7
4. CONDITIONS PRECEDENT
4.1 This Agreement is conditional upon:
4.1.1 the Purchaser having secured sufficient funds to finance the cash
portion of the consideration stated in Clause 3.1; and
4.1.2 the price per Purchaser's Share as reported on the NASDAQ SmallCap
Market being not less than US$7.50 as at the close of business on
the date preceding the Completion Date.
4.2 If any of the above-mentioned conditions is not satisfied or waived on or
before 13 November 1998, this Agreement shall become null and void (save
for Clauses 15 and 16 which shall continue to have effect) and no party
shall have any claim against any other party arising from or in connection
with this Agreement.
4.3 The Purchaser shall use all reasonable endeavours to ensure the
satisfaction of the conditions set out in Clause 4.1 so far as lies within
its powers so to do.
4.4 Any waiver of the conditions set out in Clause 4.1 shall require the
consent of the Vendors and the Purchaser.
5. PRE-EMPTION RIGHTS
The Vendors irrevocably waive and undertake to procure that any other
person having such rights shall by Completion have irrevocably waived all
and any rights of pre-emption or other restrictions on transfer over or in
respect of the Shares existing by virtue of the articles of association of
the Company or otherwise.
6. WARRANTIES
6.1 The Individual Vendors represent and warrant to the Purchaser for the
benefit of the Purchaser, its successors and assigns in the terms set out
in SCHEDULE 4 and acknowledge that the Purchaser is entering into this
Agreement in reliance on the Warranties and that the Purchaser shall be
entitled to treat them as conditions of this Agreement. It is
acknowledged by the Purchaser that the only representation, warranty and
covenant that the Trustee Vendor shall provide are those set out in Clause
2.2 and paragraph 1.2 of Part A of SCHEDULE 4.
6.2 The Vendors agree with the Purchaser (for itself and as trustee for the
Company and the Subsidiary) that in making and giving the Warranties and
that in compiling and preparing the Disclosure Letter the Vendors have not
relied directly or indirectly on any information or opinions supplied to
them (or any of them) by the Company or the Subsidiary or any of the
officers, employees, servants or agents of the Company or the Subsidiary
and the Vendors waive all and any claims which they (or any of them) have
or may have against all or any of the foregoing in respect of any
information or opinions so supplied or omitted to be so supplied in
connection with any of the Warranties or the Disclosure Letter.
6.3 Each of the Warranties shall be separate and independent and shall not be
limited by reference to any other of the Warranties or any other provision
of this Agreement and no claim in respect or arising out of the same shall
be limited or otherwise affected by
8
any knowledge (actual or constructive) which the Purchaser has or is
deemed to have in relation to the Company or the Subsidiary save for
matters set out in the Disclosure Letter or the Supplementary Disclosure
Letter or the disclosure letter or the supplementary disclosure letter
to the Jade Agreement.
6.4 Each of the Warranties shall be deemed to be given on the date of this
Agreement and shall be deemed to be repeated and given by the Vendors on
each day up to and including the Completion Date.
6.5 Save where any of the Warranties expressly or by clear implication relate
only to the Company, each of the Warranties is given in relation not only
to the Company, but also in relation to the Subsidiary as if the
Warranties had been repeated in full with the substitution of the name of
the Subsidiary for the Company.
6.6 The Purchaser represents and warrants to the Vendors that:
6.6.1 the existing issued ordinary share capital of the Purchaser is the
subject of listing on the NASDAQ exchange;
6.6.2 the Purchaser has sufficient authorised but unissued ordinary share
capital to enable it to issue the Consideration Shares and no
shareholder or other consents are required by the Purchaser prior
to issue of such shares;
6.6.3 the Consideration Shares shall rank pari passu in all respects with
the shares of the common stock of the Purchaser in issue at the
date hereof; and
6.6.4 this Agreement and all other documents to be entered into by the
Purchaser pursuant to this Agreement will when executed constitute
legal, valid and binding obligations of the Purchaser in accordance
with their respective terms.
7. LIMITATIONS TO THE WARRANTIES
7.1 The aggregate liability of the Vendors in respect of all Claims under the
Warranties and under the Tax Deed shall not exceed US$1,700,000.
7.2 The liability of the Vendors in respect of the Warranties and under the
Tax Deed shall be further limited by the provisions of SCHEDULE 8.
8. VENDORS' OBLIGATIONS PRIOR TO COMPLETION
8.1 The Vendors shall not (save as may be necessary to give effect to this
Agreement) and shall procure that neither the Company nor the Subsidiary
shall (save as aforesaid) do or allow or omit to be done before Completion
anything which is or might be a breach of any of the Warranties or which
would or might make any of the Warranties inaccurate or misleading or
which is or might be a breach of or which does or might otherwise give
rise to a claim under any other provision of this Agreement or any
provision of the Tax Deed and in particular (but without prejudice to the
generality of the foregoing) the Vendors shall procure that no breach of
Warranties 3.1 to 3.11 (both inclusive) of Part A of SCHEDULE 4 shall take
place at any time from the date hereof down to the Completion Date (both
dates inclusive).
8.2 The Vendors shall immediately disclose to the Purchaser in writing any
matter or thing which arises or becomes known to them or any of them
before Completion which is or might be a breach of the Warranties or which
would or might make any of
9
the Warranties inaccurate or misleading or which is or might be a
breach of or which does or might otherwise give rise to a claim under
any other provision of this Agreement or any provision of the Tax Deed.
8.3 The Vendors shall procure that until Completion the Purchaser and its
advisers shall be given promptly on request such facilities and
information (including access to employees of the Company and the
Subsidiary) regarding the business, assets, liabilities, contracts and
affairs of the Company and the Subsidiary as they or any of them may
reasonably require.
9. PURCHASER'S REMEDIES
9.1 If it becomes apparent prior to Completion that the Vendors are or will be
in breach of any of the Warranties or any other term of this Agreement
(including any obligation which is to be performed at Completion) or any
provision of the Tax Deed, then the Purchaser, in addition to and without
prejudice to all other rights and remedies available to the Purchaser in
respect thereof, shall be entitled:-
9.1.1 to rescind this Agreement by notice in writing given to the Vendors
at any time prior to Completion, whereupon the Vendors shall
indemnify the Purchaser and keep the Purchaser indemnified in full
for and against all losses, liabilities, damages, costs, claims,
charges and expenses arising from such breach and the consequent
rescission (including but not limited to all legal and other
professional fees and expenses incurred by the Purchaser in
connection with the negotiation and preparation of this Agreement);
or
9.1.2 to complete this Agreement in accordance with Clause 11 and
SCHEDULE 5, provided that the Purchaser shall not thereby be deemed
to have waived or otherwise foregone or be estopped from exercising
any right to compensation, damages or any other right or remedy
available to the Purchaser by reason of such breach.
10. RELEASE OF GUARANTEES
10.1 The Purchaser shall use all reasonable endeavours (short of actual payment
of any monies or the substitution of the guarantees of any person other
than the Purchaser) to procure as soon as reasonably practicable after
Completion the release of each of the Vendors from each of the guarantees
which have been Disclosed and which have been given by them in respect of
any obligations of the Company. Pending such release the Purchaser shall
fully and effectually indemnify and keep indemnified each of the Vendors
from and against any and all costs, claims, demands or liabilities
incurred or arising from any such guarantees.
10.2 The Vendors shall on Completion procure the absolute and unconditional
release of the Company from all guarantees, suretyships, indemnities and
like undertakings given by the Company in respect of any obligations of
any person and shall fully and effectually indemnify and keep indemnified
the Purchaser (as trustee for the Company) from and against any and all
costs, claims, demands or liabilities incurred or arising from any such
guarantees, suretyships, indemnities and like undertakings.
10
11. COMPLETION
Without prejudice to the provisions of Clause 4, Completion will take
place in accordance with SCHEDULE 5 at the offices of Paul, Hastings,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, 19th Floor, The International Financial Centre, Old
Broad Street, London EC2N 1HQ at 12:00 noon on such date as the Vendors
and the Purchaser may agree, but in any event no later than 16 November
1998, when the business described in SCHEDULE 5 will be transacted.
12. RESTRICTIVE COVENANTS
12.1 Each of the Vendors hereby undertakes to and covenants with the Purchaser
(for itself and as trustee for all purchasers of the Shares and as trustee
for the Company) that he will not either on his own account or jointly
with or as manager, agent, officer, employee or otherwise on behalf of any
other person, firm or corporation directly or indirectly (and so that each
undertaking below shall be a further and separate obligation):-
12.1.1 for a period of three years from the date of this Agreement carry
on or be engaged, concerned, or interested in or assist any
business which competes with any business of the Company as carried
on at the Completion Date;
12.1.2 for a period of three years from the date of this Agreement canvass
or solicit business, orders or custom for goods or services
supplied or provided by the Company from any person who at any time
within the period of one year preceding the Completion Date has
been a customer of or in the habit of dealing with the Company for
such goods or services;
12.1.3 for a period of three years from the date of this Agreement solicit
or entice away or endeavour to solicit or entice away from the
Company or employ any person who on the Completion Date or within
the six months prior to the Completion Date is or was a director,
officer, employee or other servant of the Company;
12.1.4 for a period of three years from the date of this Agreement induce
or attempt to induce any person (including without limitation any
agent or independent distributor) who in the six months prior to
the Completion Date has been a supplier of any goods or services to
the Company to cease to supply, or to restrict or vary the terms of
supply, to the Company; or
12.1.5 at any time after the Completion Date use or procure the use in
connection with any business of any corporate or business name
which is identical to or likely to be confused with the corporate
name or any business name of the Company or which might suggest a
connection with the business of the Company.
13. POST-COMPLETION EFFECT
This Agreement shall remain in full force and effect after and
notwithstanding Completion in respect of all obligations, agreements,
covenants, undertakings, conditions, representations, warranties or
indemnities which have not been done, observed or performed at or prior to
Completion.
11
14. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and enure for the benefit of each
party's successors and shall be assignable by the Purchaser to the extent
that the rights and benefits under this Agreement shall enure for the
benefit of the Purchaser's assigns. Save as aforesaid this Agreement
shall not be assignable.
15. INFORMATION AND CONFIDENTIALITY
Each of the Vendors hereby undertakes to the Purchaser:-
15.1 that he will at any time and from time to time after Completion give to
the Purchaser on request all information in his possession concerning the
business, dealings, transactions or affairs of the Company and in
particular, but without prejudice to the generality of the foregoing,
relating to claims made or threatened against the Company and the source
from and consideration for which any assets of the Company were acquired
or derived; and
15.2 that he will not, and will use all reasonable endeavours to ensure that no
other person will, at any time after the date hereof, take away or
(directly or indirectly) make use of, divulge or communicate to any person
(except as may be necessary to comply with any statutory obligation or
order of any court or statutory tribunal of competent jurisdiction) any
confidential information or trade secrets of the Company or of any
supplier, customer or other person who has or who has had dealings with
the Company.
16. ANNOUNCEMENTS AND PUBLICITY
Any announcement or circular or other publicity relating to this Agreement
or any termination thereof shall prior to its publication be approved in
writing by each of the parties as to its content, form and manner of
publication (such approval not to be unreasonably withheld or delayed),
save that any announcement, circular or other publicity required to be
made or issued by the Purchaser pursuant to the regulations of rules
governing the NASDAQ National Market System or other recognised investment
exchange or by law may be made or issued by the Purchaser without such
approval.
17. COSTS
The parties shall pay their own costs and expenses in relation to the
preparation, execution and carrying into effect of this Agreement.
18. NOTICES
18.1 Any notice required to be given under this Agreement shall be sufficiently
given if delivered personally or if sent by first-class recorded delivery
post (express air courier service if sent overseas) or if sent by
facsimile transmission and a copy of such facsimile sent by post.
12
18.2 Any notice which is sent or despatched in accordance with this Clause 18
shall be deemed to have been received by the addressee:-
18.2.1 if delivered personally, at the time of delivery;
18.2.2 in the case of a notice sent by post (or express air courier), 4
Business Days after the envelope containing the notice was
delivered to the postal authorities (or courier service);
18.2.3 in the case of a notice sent by facsimile transmission, if the
notice was sent during the normal business hours of the addressee,
on the day of transmission; otherwise on the next following
Business Day.
18.3 In proving service by post or express air courier, it shall be necessary
to prove only that the notice was sent or despatched and that the notice
was contained in an envelope properly addressed, stamped and delivered to
the postal authorities or courier service in the country from where
despatched. In proving service by facsimile transmission, it shall be
necessary to produce only a legible copy of the confirmation of the
facsimile transmission.
18.4 Any notice required to be given under this Agreement shall be sent:-
18.4.1 to the Vendors c/o ▇▇▇▇ ▇▇▇▇▇ at:
"Trudos"
Heath Ride
▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
With a copy to:
Dibb ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇
Facsimile No: ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
For the attention of: ▇▇▇▇▇ ▇▇▇▇▇
18.4.2 to the Purchaser at:
Javelin Systems, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
U.S.A.
Facsimile No: ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
For the attention of: ▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
The International Financial Centre
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Facsimile No: ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
For the attention of: ▇▇▇ ▇▇▇▇▇▇
13
or to such other address or facsimile number as is notified in
writing from time to time by the Vendors (or any one of them) or the
Purchaser (as the case may be) to the other.
19. FURTHER ASSURANCE
The Vendors shall do, execute and perform and shall procure to be done,
executed and performed all such further acts, deeds, documents and things
as the Purchaser may require from time to time effectively to vest the
beneficial ownership of the Shares in the Purchaser or as it directs free
from all liens, charges, options, encumbrances or adverse rights of
interests of any kind and otherwise to give to the Purchaser the full
benefit of this Agreement.
20. WAIVERS
A failure by any party to exercise and any delay, forbearance or
indulgence by any party in exercising any right, power or remedy under
this Agreement shall not operate as a waiver of that right, power or
remedy or preclude its exercise at any subsequent time or on any
subsequent occasion. The single or partial exercise of any right, power
or remedy shall not preclude any other or further exercise of that right,
power or remedy or the exercise of any other right, power or remedy. No
custom or practice of the parties at variance with the terms of this
Agreement shall constitute a waiver of the rights of any party under this
Agreement.
21. ENTIRE AGREEMENT
21.1 This Agreement and any documents in the agreed form and the Disclosure
Letter (the "Acquisition Documents") constitute the entire agreement
between the parties with respect to the subject matter of this Agreement.
21.2 Except for any misrepresentation or breach of warranty which constitutes
fraud:
21.2.1 the Acquisition Documents supersede and extinguish all previous
agreements between the parties relating to the subject matter
thereof; and
21.2.2 each party hereby irrevocably and unconditionally waives any right
it may have to rescind this Agreement or any of the other
Acquisition Documents by reason of any misrepresentation and/or
warranty not set forth in any such document.
22. VARIATION
No variation of this Agreement shall be effective unless made in writing
and signed by or on behalf of each of the parties.
23. JOINT AND SEVERAL LIABILITY
23.1 All representations, warranties, undertakings, agreements, covenants,
indemnities and obligations made or given or entered into by the Vendors
under or pursuant to this Agreement are made or given or entered into by
the Vendors jointly and severally.
14
23.2 In relation to any two or more persons who are jointly and severally
liable under this Agreement, the liability under this Agreement of any one
or more of such persons shall not be prejudiced or affected in any way by
the giving of time or any forebearance or indulgence granted by the
Purchaser to any other or others of such persons or by the release or
compromise by the Purchaser of any liability under this Agreement of any
other or others of such persons.
24. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, and which together shall constitute one
and the same Agreement. Unless otherwise provided in this Agreement, this
Agreement shall become effective and be dated (and each counterpart shall
be dated) on the date on which this Agreement (or a counterpart of this
Agreement) is signed by the last of the parties to execute this Agreement
or, as the case may be, a counterpart thereof.
25. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with
English law and the parties hereby submit themselves to the non-exclusive
jurisdiction of the English courts.
A S W I T N E S S the hands of the parties hereto or their duly authorised
representatives the day and year first before written.
15
SCHEDULE 1
PARTICULARS OF THE VENDORS AND OF THE SHARES
TO BE SOLD AND CONSIDERATION TO BE RECEIVED BY EACH OF THEM
(2) (3) (4) (5) (6)
(1) NUMBER OF SHARES CASH ISSUE OF 11,875 NUMBER OF CONSIDERATION PERCENTAGE OF
NAME AND ADDRESS TO BE SOLD CONSIDERATION (US$) PURCHASER'S SHARES SHARES (AS PERCENTAGE) EARNOUT SHARES
---------------- ---------------- ------------------- ----------------- ---------------------- --------------
1. Gary Nigel ▇▇▇▇ ▇▇▇▇▇ 500 NIL 11,875 100% 50%
"Trudos"
Heath Ride
▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
2. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 450 1,343,531.25 NIL NIL 50%
"▇▇▇▇ d'Or"
▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
3. Louvre Trustees Limited 50 149,281.25 NIL NIL NIL
Kings House
The Grange
St. ▇▇▇▇▇ Port
Guernsey
Channel Islands
----------- ---------------- ---------- -------- --------
TOTALS 1,000 1,492,812.50 11,875 100% 100%
----------- ---------------- ---------- -------- --------
16
SCHEDULE 2
1. PARTICULARS CONCERNING THE COMPANY
1. Registered Office: ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
2. Date of Incorporation: 13 June 1990
3. Registered Number: 2511516
4. Directors: ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
5. Secretary: ▇▇▇▇ ▇▇▇▇▇
6. Mortgages and Charges: None.
7. Share Capital: L1,000 divided into 1,000 ordinary
shares of L1 each, all of which have
been issued and are fully paid up.
2. PARTICULARS CONCERNING THE SUBSIDIARY
1. Registered Office: ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
2. Date of Incorporation: 4 August 1993
3. Registered Number: 2842141
4. Directors: ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
5. Secretary: ▇▇▇▇ ▇▇▇▇▇
6. Mortgages and Charges: None, but note Isis Factoring
Agreement in place.
7. Share Capital: L1,000 divided into 1,000 ordinary
shares of L1 each, of which 200 have
been issued and are fully paid up.
8. Shareholder No. of shares held
----------- ------------------
The Company 95
Contech Consultants Limited 95
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 10
---
200
17
SCHEDULE 3
THE PREMISES
I. PART A: PREMISES OWNED AND OCCUPIED BY THE COMPANY
1. FREEHOLD
(NONE)
2. LEASEHOLD/LEASE DETAILS
Lease dated 26 June 1995 between (1) ▇. ▇▇▇▇▇ and R. Scarlett (landlord)
and (2) the Company (tenant) of first floor and part ground floor of
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ for a term of 10
years from 26 June 1995.
3. OTHER
(NONE)
4. DESCRIPTION of all leases, underleases, tenancies, licences and other
agreements subject to and/or with the benefit of which the Premises are
held:
Date Document Parties
---- -------- -------
(NONE)
18
I. PART B: PREMISES OCCUPIED BY THIRD PARTIES
1. FREEHOLD
(NONE)
2. LEASEHOLD/LEASE DETAILS
(NONE)
3. OTHER
(NONE)
4. DESCRIPTION of all leases, underleases, tenancies, licences and other
agreements subject to and/or with the benefit of which the Premises are
held:
Date Document Parties
---- -------- -------
(NONE)
II. PART A: PREMISES OWNED AND OCCUPIED BY THE SUBSIDIARY
The Subsidiary is holding over following the termination of
its leases of ▇▇▇▇▇ ▇▇, ▇▇ ▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ Way, Middleton, Manchester.
19
SCHEDULE 4
PART A
GENERAL WARRANTIES
1. INFORMATION SUPPLIED AND CAPACITY OF VENDORS
1.1 All information contained in this Agreement and all matters contained in
the Disclosure Letter are true and accurate in every respect and there is
no fact or matter which has not been Disclosed which renders any such
matters or information untrue, incomplete or misleading in any material
respect.
1.2 The Vendors have full power and authority to enter into and perform this
Agreement and the Tax Deed, and this Agreement and the Tax Deed, when
executed, will constitute valid and binding obligations on the Vendors in
accordance with the respective terms thereof.
2. ACCOUNTS AND RECORDS
2.1 The Company has at all times properly and accurately maintained all books,
accounts and records of whatever kind required by law to be maintained.
2.2 The books, accounts and records of the Company accurately record all
matters required by law to be entered therein and fairly present and
reflect in accordance with generally accepted accounting principles and
practice the assets and liabilities (actual, prospective and contingent)
of the Company and all transactions to which it is or has been a party.
2.3 The Accounts comply with the requirements of the Companies Act and other
relevant statutes and generally accepted accounting principles, SSAPs and
FRSs and give a true and fair view of and properly reflect the financial
position of the Company as at the Accounting Date and are not affected by
any unusual or non-recurring items.
2.4 The Company has made what the Directors believed when preparing the
Accounts was adequate provision in the Accounts for all Tax liable to be
assessed on the Company or for which it is accountable in respect of
income, profits or gains earned, accrued or received on or before the
Accounting Date including distributions made down to that date.
2.5 The Management Accounts have been properly prepared in accordance with
good accounting practice and on a basis consistent with that previously
adopted and so far as the Vendors are aware fairly reflect levels of
turnover and expenses and provisions, assets and liabilities of the
Company as at 31 August 1998 and the two-month period then ended.
3. BUSINESS SINCE THE ACCOUNTING DATE
Since the Accounting Date:-
20
3.1 the Company has carried on its business in the ordinary and usual course
both as regards the nature, scope and manner of conducting the same and so
as to maintain the same as a going concern;
3.2 the Company has not borrowed, raised or taken any money or any financial
facility;
3.3 the Company has paid its creditors within the times agreed with such
creditors and there are no debts outstanding by the Company which have
been due for more than ninety (90) days;
3.4 the Company has not entered into any capital commitments or any
transaction or agreement for the disposal of any asset or under which it
has incurred or will incur (otherwise than in the ordinary and usual
course of carrying on its business) any liabilities (including contingent
liabilities) not provided for in the Accounts;
3.5 the Company has not entered into any unusual, long-term (that is to say,
incapable of performance in accordance with its terms within six months
after the date on which it was entered into or undertaken) arrangements,
commitments or contracts;
3.6 the business of the Company has not been adversely affected by the loss of
or material reduction in orders from any customer or the loss of or
material reduction in any source of supply or by any abnormal factor not
affecting similar businesses to a like extent and none of the Vendors is
aware of any facts which are likely to give rise to any such adverse
effects;
3.7 no distribution of capital or income (including for the avoidance of
doubt, any dividend) has been declared, made or paid or agreed or resolved
to be declared, made or paid by the Company;
3.8 no loans have been made by the Company and no loan capital or loan has
been or has become liable to be repaid by the Company in whole or in part;
3.9 no sum has been paid or voted to any director or employee (or ex-director
or ex-employee) of the Company by way of remuneration or otherwise in
excess of the rates paid to him by the Company at the Accounting Date and
no new employment agreements have been made by the Company;
3.10 none of the fixed assets of the Company shown in the Accounts and none
acquired by the Company since the Accounting Date has been lost, damaged
or destroyed; and
3.11 there has been no material adverse change in the financial position or
trading prospects or turnover of the Company nor is any such material
change expected.
4. TRADING AND CONTRACTUAL ARRANGEMENTS
4.1 None of the contracts or obligations entered into by the Company is ultra
▇▇▇▇▇ the Company or exceeds the powers of the Directors to bind the
Company and so far as the Vendors are aware the Company is not in default
under any such contracts or obligations.
21
4.2 The Company is not a party to any contract, transaction, obligation,
commitment or liability which, whether by reason of its nature, term,
scope, price or otherwise is or may be material in relation to its
business, profits or assets or which:-
4.2.1 is in any way otherwise than in the ordinary course of the
Company's business;
4.2.2 is of an unusual or abnormal nature, or not fully on an arm's
length basis;
4.2.3 is of a long-term nature (that is to say incapable of performance
in accordance with its terms within six months after the date on
which it was entered into or undertaken);
4.2.4 is incapable of termination in accordance with its terms by the
Company on 60 days' notice or less;
4.2.5 cannot readily be fulfilled or performed by the Company on time
without undue or unusual expenditure of money or effort; or
4.2.6 involves the supply of goods and/or services the aggregate value of
which will represent in excess of five per cent of the budgeted
turnover for the current financial year of the Company.
4.3 No sums of whatever nature are owing by the Company to any of the Vendors
or any of the Directors or any person being a Connected Person of the
Vendors or the Directors or any of them respectively.
4.4 The Company has not been a party to any transaction to which any of the
provisions of sections 320 (substantial property transactions involving
directors, etc.), 322 (liability arising from contravention of section
320), or 330 (general restrictions on loans, etc. to directors and persons
connected with them) of the Companies Act may apply.
4.5 None of the Vendors nor any person being a Connected Person in relation to
any Vendor has any direct or indirect interest with any business which has
a close trading relationship with that of the Company or which is or is
likely to become competitive with the business of the Company.
4.6 There are no outstanding arrangements or understandings (whether legally
binding or not) between the Company and any person who is a shareholder
(or the beneficial owner of any interest in the Company or in any company
in which the Company is interested), or any person who is a Connected
Person of any such person, relating to the management of the Company's
business, or the appointment or removal of the Directors, or the ownership
or transfer of ownership, or the letting of any of the assets of the
Company, or the provision, supply, purchase or finance of goods, services
or other facilities to, by or from the Company or otherwise howsoever in
relation to the Company's affairs.
4.7 The Company is not and has not agreed to become bound by any debenture or
guarantee or contract for indemnity or suretyship or any like undertaking
and there is not now outstanding any guarantee or contract for indemnity
or suretyship or like undertaking given for the accommodation of or in
respect of any obligation on the part of the Company.
4.8 No person is entitled to receive from the Company any finders' fee,
brokerage or commission in connection with the sale of the Shares to the
Purchaser.
22
5. ASSETS (OTHER THAN THE PREMISES)
5.1 The Company was at the Accounting Date the owner with good and marketable
title to all the assets (other than the Premises) included in the Accounts
and now so owns and has in its possession and under its control all such
assets (save for current assets subsequently disposed of in the ordinary
course of its business) and all assets acquired by it after the Accounting
Date and all such assets are the sole and absolute property of the Company
free from any charge, lien, encumbrance or equity and no other person has
or claims any rights in relation to such assets or any of them and in
particular all such assets are free from any hire-purchase, leasing or
rental agreement for payments on deferred terms or ▇▇▇▇ of sale.
5.2 In relation to any asset held by the Company which is the subject of any
hire-purchase, conditional sale, chattel leasing or retention of title
agreement or otherwise belonging to a third party, so far as the Vendors
are aware, no event has occurred which entitles or which upon intervention
or notice by any third party may entitle any such third party to repossess
the asset concerned, or terminate the agreement, or any licence in respect
of the same.
5.3 The stock in trade of the Company is in good condition and us capable of
being sold by the Company in the ordinary course of business within a
period of three months from the Completion Date in accordance with the
Company's current price lists and without rebate or allowance to a
purchaser.
5.4 The fixed and loose plant, machinery, furniture, fixtures, fittings,
equipment, vehicles and other moveable assets used in connection with the
business of the Company are not surplus to requirements and are in good
repair and condition and satisfactory working order.
5.5 Save in respect of the Subsidiary, the Company is not and has never been
the holder or beneficial owner of nor has it agreed to acquire any share
or loan capital of any other body corporate (whether incorporated in the
United Kingdom or elsewhere).
5.6 The Company is not entitled to the benefit of any debt otherwise than as
the original creditor and is not and has not agreed to become a party to
any factoring or discounting arrangement.
5.7 None of the debts due as at the Accounting Date remains unpaid at the date
of this Agreement nor has any debt which has subsequently become due to
the Company (or any part of any such debt) remained unpaid for more than
three months after the due date for payment or been released or written
off or proved to be irrevocable, nor is any such debt now regarded as
irrevocable.
6. EMPLOYEES AND AGENTS
6.1 The names of all employees of the Company together with copies of all
service contracts and contracts for services and full particulars of the
current terms of employment of all officers, employees, consultants and
agents of the Company have been Disclosed.
23
6.2 There is not now outstanding any contract of service or for services
between the Company and any of its officers, employees, consultants or
agents which is not determinable by the Company at any time on three
months' notice or less without compensation (other than under the
Employment Rights Act 1996) or any liability (other than for accrued
salary, wages, commission or pension) on the part of the Company to or for
the benefit of any person who is or has been an officer, employee,
consultant or agent of the Company.
6.3 No present officer, employee, consultant or agent of the Company has given
or received notice terminating his employment or appointment and no such
officer, employee, consultant or agent is entitled nor (so far as any of
the Vendors is aware) intends or is likely as a result of this Agreement
or Completion or otherwise to terminate his employment or appointment with
the Company.
6.4 Particulars have been Disclosed of all loans and other benefits enjoyed by
any officer, employee, consultant or agent of the Company in relation to
the affairs of the Company and of all contracts, transactions and
arrangements made or entered into by the Company and to which any of
sections 330 to 338 of the Companies Act applies.
6.5 The Company is not under any legal or moral liability or obligation to pay
bonuses, pensions, gratuities, superannuation, allowances or the like to
any of its past or present officers or employees or their dependants nor
is it a party to any arrangement or promise to make or in the habit of
making ex gratia or voluntary payments by way of bonus, pension, gratuity,
superannuation, allowance or the like to any such persons and there are no
schemes or arrangements for payment of retirement pension or death benefit
or similar schemes or arrangements in operation or contemplated in
relation to the Company.
6.6 Save to the extent (if any) to which provision or allowance has been made
in the Accounts, no liability has been incurred by the Company to make any
redundancy payments or any protective awards or to pay damages or
compensation for wrongful or unfair dismissal or for failure to comply
with any order for the reinstatement or re-engagement of any employee and
no gratuitous payment has been made or promised by the Company in
connection with the actual or proposed termination or suspension of
employment or variation of any contract of employment of any present or
former director or employee.
6.7 The Company has not recognised any trade union or association of trade
unions or any other organisation of employees in respect of its employees
or any of them.
6.8 The Company has not in existence nor is proposing to introduce any share
incentive scheme, share option scheme or profit sharing scheme or any
other scheme analogous to any of the foregoing schemes for all or any of
its directors, officers or employees.
7. INSURANCE
7.1 The Company is covered by valid insurances against all risks normally
insured against by persons carrying on the same or similar businesses as
those carried on by the Company and in particular all assets are and have
at all material times been insured to the replacement or reinstatement
value advised by its insurers against fire and such other risks as
aforesaid and the Company is, and has at all material times been,
24
covered against accident, damage, injury, third party loss (including
product liability), loss of profits and other risks normally insured
against by persons carrying on the same or similar businesses as those
carried on by the Company as advised by its insurers.
7.2 Particulars of all the Company's insurances have been Disclosed and there
are no outstanding claims or, so far as the Vendors are aware,
circumstances likely to give rise to a claim thereunder and, so far as the
Vendors are aware, nothing has been done or omitted to be done which has
made or could make any policy of insurance void or voidable or whereby the
premiums are likely to be increased.
7.3 None of the said policies is subject to any special or unusual terms or
restrictions or to the payment of any premium in excess of the normal
rate.
8. GRANTS
Particulars have been Disclosed of all investment and other grants and
allowances and of all loans or financial aid of any kind applied for or
received or receivable by the Company from any governmental department,
board, body or agency or any other supranational or national or local
authority, body or agency.
9. BANKING FACILITIES
Details of all overdrafts, loans or other financial facilities outstanding
or available to the Company and of all its bank and deposit accounts and
true and correct copies of all documents relating thereto have been
Disclosed and, so far as the Vendors are aware, none of the Vendors or the
Company has done or omitted to do anything whereby the continuance of any
such facilities in full force and effect might be adversely affected or
prejudiced.
10. DEFECTIVE AND UNSAFE PRODUCTS/SERVICES
10.1 There are no outstanding claims against the Company in respect of defects
in quality or delays in delivery or completion of contracts or
deficiencies of design or performance of equipment or otherwise relating
to liability for goods or services supplied or to be supplied by the
Company and no such claims are threatened or anticipated.
10.2 The Company has no knowledge that any goods or products for which the
Company has responsibility under section 2 of the Consumer Protection Act
1987 ("CPA") or for which the Company assumes responsibility under any
contract of indemnity or otherwise is defective within the meaning of
section 3 of the CPA or that the Company supplies or possesses for supply
any goods or products which are in breach of the general safety
requirement provided by section 10 of the CPA.
11. LITIGATION
Neither the Company nor, so far as the Vendors are aware, any person for
whose acts or omissions it may be vicariously liable is engaged in or
subject to any civil, criminal or arbitration proceedings and, as far as
any of the Vendors are aware, there are no such proceedings pending or
threatened by or against the Company or against any such person and, so
far as the Vendors are aware, there are no facts or circumstances likely
to give rise to any such proceedings.
25
12. INSOLVENCY
12.1 No order has been made, or petition presented, or resolution passed for
the winding-up of the Company and there is not outstanding:-
12.1.1 any petition or order for the winding-up of the Company;
12.1.2 any appointment of a receiver over the whole or any part of the
undertaking or assets of the Company;
12.1.3 any petition or order for the administration of the Company;
12.1.4 any voluntary arrangement between the Company and any of its
creditors;
12.1.5 any distress or execution or other process levied in respect of the
Company, which remains undischarged; or
12.1.6 any unfulfilled or unsatisfied judgment or court order against the
Company.
12.2 The Company is not deemed unable to pay its debts within the meaning of
section 123 of the Insolvency ▇▇▇ ▇▇▇▇.
13. COMPLIANCE
All necessary licences, consents, permits and authorities (public and
private) have been obtained by the Company to enable the Company to carry
on its business effectively in the places and in the manner in which such
business is now carried on and all such licences, consents, permits and
authorities are valid and subsisting and none of the Vendors knows of any
reason why any of them should be suspended, cancelled or revoked or should
not be renewed upon the expiry of their existing term.
14. CHARGES
14.1 No charge in favour of the Company is void or voidable for want of
registration.
14.2 No event has occurred causing, or which upon intervention or notice by any
third party may cause, any floating created by the Company to crystallise
or any charge created by it to become enforceable nor has any such
crystallisation occurred or is such enforcement in process.
15. DIRECTORS AND OFFICERS
The Directors are the only directors of the Company and no person is a
shadow director (within the meaning of section 741 of the Companies Act)
of the Company.
16. CAPITAL OF THE COMPANY
16.1 The authorised and issued share capital of the Company is as set out in
part 1 of SCHEDULE 2.
16.2 The Vendors are the legal and beneficial owners and registered holders of
the Shares which have been issued in proper legal form and are fully paid
or credited as fully paid, and each of the Vendors is entitled to sell
such of the Shares as are set out opposite his name in Column 2 of
SCHEDULE 1 free from all claims, charges, liens, encumbrances, equities
and adverse rights of any description and together with all rights
attached or accruing thereto as at and from the Completion Date.
16.3 There is not now outstanding any loan capital of the Company nor any
agreement, arrangement or option under which any person may now or at any
time hereafter call for the creation, allotment, issue, sale or transfer
of any loan or share capital of the Company or require any loan or share
capital of the Company to be put under option.
26
17. EFFECT OF AGREEMENT
So far as the Vendors are aware, there are no contracts or arrangements
(whether written or oral) to which the Company is a party which will by
their terms be determinable as a result of the provisions of this
Agreement or which will or may be terminated by completion of this
Agreement.
18. SUBSIDIARY
18.1 The Subsidiary is a private company limited by shares incorporated in
England and Wales and has the authorised and issued share capital set out
in part 2 of SCHEDULE 1.
18.2 All the issued shares of the Subsidiary have been issued in proper legal
form and are fully paid or credited as fully paid and the Company is the
legal and beneficial owner of 47.5% of such shares free from any claims,
charges, liens, encumbrances, equities and adverse rights of any
description.
18.3 The Subsidiary does not have any subsidiary as defined in section 736 of
the Companies Act.
18.4 The Subsidiary had not traded and had no assets or liabilities from the
date of its incorporation until its acquisition of its current business on
18 March 1998.
27
SCHEDULE 4
PART B
WARRANTIES RELATING TO TAX
1. ADMINISTRATION AND RETURNS
1.1 The Company has no liability for Tax (whether actual, deferred or
contingent) in respect of any financial period down to and including the
Accounting Date or referable to profits (including income and gains) made
or deemed to have been made on or before the Accounting Date which has not
been provided for or disclosed in the Accounts.
1.2 At the date hereof the Company has duly paid all Tax which it has become
liable to pay.
1.3 The Company is under no liability to pay any interest, penalty, fine or
default surcharge in connection with any Tax nor, so far as the Vendors
are aware, is any such liability likely to arise.
1.4 The Company has properly and duly made all returns and supplied all
notices, accounts and information for the purposes of Tax required to have
been made or supplied to any Tax Authority.
1.5 None of the aforementioned returns, notices, accounts and information has
been or, so far as the Vendors are aware, is likely to be disputed by any
Tax Authority.
1.6 The Company's affairs have not been and, so far as the Vendors are aware,
are not likely to be the subject of any dispute, investigation or
discovery by or with any Tax Authority.
1.7 All claims, disclaimers, elections, appeals or applications which the
Company has made in the last 6 years in respect of Tax have been
Disclosed.
2. ANTI-AVOIDANCE
The Company has not at any time entered into any transaction, series of
transactions, schemes or arrangements of which the main purpose, or one of
the main purposes, was the avoidance of, or a reduction in liability to
Tax and the Company has not at any time entered into a transaction the
main purpose of which was a commercial purpose but into which a step or
series of steps have been inserted with a view to the avoidance of or a
reduction in, or the mitigation of, or the deferral of a liability to Tax.
3. CLOSE COMPANIES
3.1 The Company has not made any distribution prior to Completion within the
meaning of section 418 of the Taxes Act ("distribution" to include certain
expenses of close companies).
3.2 The Company is not and has never been a close investment holding company
within the meaning of section 13A of the Taxes Act.
28
3.3 The Company has not made any loans or advances within the meaning of
section 419 (as extended by section 422) of the Taxes Act (loans to
participators etc.) which are currently outstanding or in respect of which
the Company has any potential liability.
3.4 No transfer of value (as defined in section 3 of the Inheritance Tax Act
1984) has ever been made by the Company so that the provisions of section
94 of the Inheritance Tax Act 1984 (charge on participators) could not
apply.
4. DISTRIBUTIONS
4.1 The Company has not made any distributions within the meaning of sections
209 and 210 of the Taxes Act except for dividends shown in its audited
accounts nor is the Company bound to make any such distributions.
4.2 The Company has not issued any security within the meaning of section 254
of the Taxes Act the interest or other consideration given in respect of
which falls to be taxed under section 209 of the Taxes Act.
4.3 The Company has not redeemed, repaid or purchased any of its own shares or
agreed to redeem, repay or repurchase any of its own shares or converted
or agreed to convert its share capital or capitalised or agreed to
capitalise in the form of redeemable shares or debentures any profits or
reserves of any class or description.
4.4 The Company has not been a party to an exempt distribution within the
meaning of sections 213 to 218 (inclusive) of the Taxes Act within the
last six years (demergers - exempt distributions).
4.5 The Company has not issued any share capital to which the provisions of
section 249 of the Taxes Act (stock dividends treated as income) could
apply nor does it own any such share capital (shares carrying the right to
bonus share capital).
5. EMPLOYMENT TAXES
5.1 At the date hereof the Company has duly paid and accounted for all sums
payable to the Inland Revenue in respect of income assessable to income
tax under Schedule E (including any sums payable in respect of benefits
provided to the Company's employees or former employees) under section 203
of the Taxes Act and all regulations made thereunder.
5.2 At the date hereof the Company has duly paid and accounted for all
National Insurance contributions required of it under the provisions of
the Social Security Contributions and Benefits ▇▇▇ ▇▇▇▇ and regulations
made thereunder.
6. FOREIGN MATTERS
The Company is and has at all times been resident in the United Kingdom
for Tax purposes.
7. INHERITANCE TAX
7.1 No circumstances exist whereby any power within section 212 of the
Inheritance Tax Act 1984 (powers to raise tax) could be exercised in
relation to any shares, securities or other assets of the Company.
29
7.2 There is no Inland Revenue charge outstanding for unpaid inheritance tax
as provided by sections 237 and 238 of the Inheritance Tax Act 1984
(Inland Revenue charge for unpaid tax) over any asset of the Company or in
relation to any shares in the capital of the Company.
8. LOSSES AND RELIEFS
8.1 There has been no change in the ownership of the Company or major change
in the nature or conduct of a trade or business carried on by the Company
and as at the date of this Agreement and so far as the Vendors are aware
no event or series of events which might cause the disallowance of the
carry-forward of losses or excess charges under the provisions of section
768 of the Taxes Act or the disallowance of the carry-forward, set-off or
surrender of advance corporation tax under the provisions of section 245
of the Taxes Act (change of ownership of company; calculation and
treatment of advance corporation tax).
8.2 In relation to all surrenders of group relief under the provisions of
sections 402 to 413 (inclusive) of the Taxes Act (group relief) or under
the provisions of section 240 of the Taxes Act (surrender of advance
corporation tax) to which the Company has been a party, all surrenders
have been validly made, no actions are required and no payments are
outstanding.
9. MATTERS SINCE THE ACCOUNTING DATE
Since the Accounting Date:-
9.1 no Event (as defined in the Tax Deed) has occurred which has given or may
give rise to a Tax liability on the Company other than transactions
entered into in the ordinary course of business; and
9.2 save in relation to entertainment and car leasing expenditure, the Company
has not made any payment either alone or in aggregate with any other
payments of a similar nature which exceed L5,000 which will not be
deductible for the purposes of corporation tax in computing the taxable
profits of the Company.
10. VALUE ADDED TAX
10.1 The Company is a taxable person for the purposes of VAT and has duly
registered with its local Customs and Excise Office.
10.2 The Company has at all times issued correct tax invoices to all persons
properly requiring the same in respect of its taxable supplies either by
way of goods or of services and has likewise requested and received all
appropriate tax invoices from its suppliers and others and has kept all
necessary records and documents required to complete and verify its VAT
returns.
10.3 The Company has in all other material respects complied with the VAT
legislation and all regulations, notices, orders, provisions, directions
and conditions relating to VAT.
10.4 In relation to VAT, the Company is not in arrears with any payments or
returns under such legislation or liable to any abnormal or non-routine
payment or any forfeiture,
30
penalty, interest or surcharge or to the operation of any penal, interest
or surcharge provisions contained therein.
31
SCHEDULE 4
PART C
PROPERTY WARRANTIES
1. APPLICATION
In this Part C of SCHEDULE 4 these warranties apply to each and every one
of the Premises as set out in SCHEDULE 3.
2. THE PREMISES
2.1 The particulars of the Premises (and of any leases, underleases,
tenancies, licences and other agreements subject to and/or with the
benefit of which the same are held) as set out in Part A and Part B of
SCHEDULE 3 are true, complete and accurate.
2.2 The Company does not own, use or occupy any premises other than the
Premises and has no liability (existing or contingent) in respect of any
land or building previously owned, occupied or otherwise used by the
Company or in which it had an interest.
3. TITLE
3.1 The Company is solely entitled at law and in equity to the Premises and
has a good title to the Premises.
3.2 The Company is in physical possession and actual occupation of the whole
of the Premises on an exclusive basis and no right of occupation or
enjoyment has been acquired or is in the course of being acquired by any
third party or has been granted or agreed to be granted to any third
party, save for the rights of occupation of third parties set out in Part
B of SCHEDULE 3.
3.3 All of the title deeds and documents necessary to prove title to the
Premises are in the Company's possession and control, have been properly
stamped and, where necessary, have been duly registered. On Completion
the documents of title to be handed over to the Purchaser will consist of
the original documents or, where appropriate, properly examined abstracts.
3.4 No right, easement, quasi easement, profit, licence or informal
arrangement, public or private, is enjoyed or is in the course of being
acquired by or against the Premises and none has been proposed or is
necessary for the full use and continued beneficial occupation of the
Premises.
4. LEASEHOLD PREMISES
4.1 Each of the leasehold Premises is held under the lease ("Lease") details
of which are correctly set out in Part A of SCHEDULE 3.
4.2 The Lease is a headlease.
4.3 All monies due to the lessor under the Lease (whether or not reserved as
rent) have been paid as and when they became due and none have been
commuted, waived or paid in advance of the due date for payment.
32
4.4 No monies, collateral assurances, undertakings, waivers or concessions
have been made paid or given by any party to the Lease.
4.5 The documents of title to the Premises include all necessary consents for
the grant of the Lease, satisfactory evidence of the reversioner's title
and of the current rent payable, all reversioner's consents required under
the Lease and all assignments.
4.6 The Company has strictly observed and performed all covenants,
restrictions, stipulations and other obligations contained in the Lease
and any deeds or documents supplemental thereto and there has been no
waiver (expressly or impliedly) of or acquiescence to any breach thereof.
5. UNDERLETTINGS
There are no leases, tenancies, licences and agreements to which the
Premises are subject.
6. PLANNING AND USER OF PREMISES
6.1 The current use of the Premises is the permitted use for the purposes of
the Town & Country Planning Acts 1971 to 1990 (the "Planning Acts").
6.2 All necessary consents have been obtained (copies of which have been
Disclosed) for the purposes of the Planning Acts and building regulations
for the current use of the Premises and any and all alterations and
improvements to it.
7. ENCUMBRANCES
7.1 The Premises are free from any mortgage, debenture (whether legal or
equitable and whether fixed or floating), charge, lien or other right in
the nature of security or any option, right of pre-emption or right of
first refusal, nor is there any agreement or commitment to give or create
any of the foregoing.
7.2 There are no covenants, restrictions, stipulations or other encumbrances
(whether of a private or public nature) affecting the Premises which are
of an onerous or unusual nature or affect their value or which conflict
with the current use of the Premises.
7.3 All covenants, restrictions, stipulations and other encumbrances affecting
the Premises (including all covenants under any Lease, underlease, licence
or other agreement or any consent or approval obtained thereunder) have
been strictly observed and performed.
8. COMPLAINTS AND DISPUTES
8.1 No notices, complaints or requirements have been issued or made (whether
formally or informally) by any competent authority or undertaking
exercising statutory or delegated powers in respect of the Premises or the
user thereof or any machinery, plant or equipment therein and the Vendors
do not expect and are not aware of any matter which could lead to any such
notice or complaint or requirement being issued or made.
8.2 No notices, orders or resolutions have been issued, made or passed by any
local, county or other competent authority for the compulsory acquisition,
closing,
33
demolition or clearance of the Premises or any part thereof and the
Vendors do not expect and are not aware of any matter or circumstances
which could lead to any such notice, order or resolution.
8.3 There exists no dispute between the Company and the owner or occupier of
any other premises adjacent to or neighbouring the Premises or with any
lessor, lessee, licensee or other occupier of the Premises and the Vendors
do not expect and are not aware of any circumstances which may give rise
to any such dispute hereafter.
9. VAT STATUS
Where an election under paragraph 2 of Schedule 6A to the VAT ▇▇▇ ▇▇▇▇
(election to waive exemption) has been made in respect of the Premises
such fact is correctly indicated in Part A and Part B of SCHEDULE 3.
34
SCHEDULE 4
PART D
INTELLECTUAL PROPERTY WARRANTIES
1. DEFINITIONS
In this Part D of SCHEDULE 4 and in SCHEDULE 5:-
"Intellectual Property" means patents, registered and
unregistered trade marks, registered
and unregistered service marks,
registered designs, utility models (in
each case for the full period thereof
and all extensions and renewals
thereof), applications for any of the
foregoing and the right to apply for
any of the foregoing in any part of
the world, inventions, confidential
information, know-how, business names,
trade names, brand names, copyright
and rights in the nature of copyright
and design rights and get-up and any
similar rights situated in any
country; and the benefit (subject to
the burden) of any and all agreements,
arrangements and licences in
connection with any of the foregoing;
"Intellectual Property Rights" means all Intellectual Property owned,
used or enjoyed by the Company in
connection with the business carried
on by the Company at Completion and
references to Intellectual Property
Rights shall be construed as including
references to each individual right
and all of them;
2. WARRANTIES
2.1 Details of all of the Intellectual Property Rights have been Disclosed.
2.2 All of the Intellectual Property Rights are in full force and effect.
2.3 The Company is the sole beneficial owner of all the Intellectual Property
which is required for the lawful carrying on of the Company's business as
conducted at Completion.
2.4 To the extent to the Intellectual Property Rights are capable of
registration, they have been registered in the name of the Company as sole
proprietor.
2.5 Complete and accurate details of all licences and/or authorities from any
third party under which any Intellectual Property is used by the Company
have been Disclosed.
2.6 The Company is not a party to any confidentiality agreement or any
agreement which restricts the free use or disclosure by the Company of any
information, documentation or other materials used in the Company's
business.
35
2.7 Details of all corporate, business and trading names owned or used by the
Company have been Disclosed.
36
SCHEDULE 4
PART E
ENVIRONMENTAL AND HEALTH AND SAFETY WARRANTIES
PART 1 - ENVIRONMENTAL WARRANTIES
1. DEFINITIONS
"Environment" means all or any of the air, water and
land including air within buildings
and other natural or man-made
structures above or below ground;
"Environmental Reports" means all surveys, audits,
investigations and reports relating to
the Premises and the extent to which
the Premises and the Company comply
with Environmental Law, the likelihood
of Harm arising out of the condition
of the Premises, noise, the
Environment, or the impact on the
Environment of any current, prior or
proposed use of the Premises;
"Environmental Authorisations" means any permits, licences, consents
or other authorisations required under
any Environmental Law for the carrying
on the Company's operations or the
occupation or use of the Premises by
the Company;
"Environmental Law" means all applicable statutes,
statutory instruments, common law,
treaties, regulations, directives,
codes of practice, circulars, guidance
notes and the like and other measures
imposed by any relevant body to which
the Company or the Premises is or has
been subject which relate to the
pollution or protection of the
Environment or the protection of the
health of humans, animals or plants;
"Harm" means harm to the health of living
organisms or other interference
with the ecological systems of
which they form part and, in the
case of man, includes offence
caused to any of his senses or harm
to his property and "harmful" has a
corresponding meaning.
2. WARRANTIES
2.1 The Company complies and has complied at all times in all material
respects with all conditions, limitations, obligations, prohibitions and
requirements contained in or imposed by any Environmental Law and there
are no facts or circumstances which may give rise to any liability under
Environmental Law.
37
2.2 All Environmental Authorisations have been obtained and maintained in full
force and effect and there are no facts or circumstances which have led or
so far as the Vendors are aware which may give rise to any breach,
revocation, modification, amendment, variation or suspension of them or
any of them or which have resulted or may result in any Environmental
Authorisation not being extended, renewed, granted or (where necessary)
transferred.
2.3 So far as the Vendors are aware, no work or expenditure is required under
any Environmental Law or Environmental Authorisation or in order to carry
on lawfully the business of the Company.
2.4 No claims, investigations or other proceedings have been brought or so far
as the Vendors are aware threatened by or against the Company or any of
its directors, officers or employees nor has the Company received any
complaints from any third party in respect of Harm to the Environment or
to human health caused by or as a result of occupation of the Premises or
occupation by the Company of any property formerly owned or occupied by
the Company whether under Environmental Law or otherwise and so far as the
Vendors are aware there are no facts or circumstances which may lead to
any such claims, investigations or proceedings or complaints.
2.5 Copies of all Environmental Authorisations and Environmental Reports
together with all assessments required to be carried out pursuant to the
Control of Substances Hazardous to Health Regulations 1994 have been
supplied to the Purchaser.
2.6 All information provided by and on behalf of the Company to any statutory
authority and all records and data required to be maintained by the
Company under the provisions of any Environmental Legislation regarding
the operation of the business of the Company including any processes
carried on at or emissions and discharges from the Premises is complete
and accurate.
38
PART 2 - HEALTH AND SAFETY WARRANTIES
1. DEFINITIONS
"Health and Safety Legislation" means all applicable statutes,
statutory instruments, common law,
treaties, regulations, directives,
codes of practice, guidance notes
including (but without limitation) the
Fire Precautions ▇▇▇ ▇▇▇▇, the Health
and Safety at Work etc. ▇▇▇ ▇▇▇▇, the
Management of Health and Safety at
Work Regulations 1992 and the
Workplace (Health Safety & Welfare)
Regulations 1992 concerning the health
and safety of those who work for the
Company, whether as employees or
otherwise, visit the Premises or are
in any way affected by the undertaking
of the Company or by persons working
for the Company;
"Health and Safety Studies" means all reports, audits,
investigations or assessments required
to be carried out by the Company to
comply with Health and Safety
Legislation.
2. WARRANTIES
2.1 The Company has complied and continues to comply in all material respects
with all conditions, limitations, obligations, prohibitions and
requirements contained in any Health and Safety Legislation and so far as
the Vendors are aware there are no facts or circumstances which may lead
to any breach of any Health and Safety Legislation.
2.2 The Company has carried out all Health and Safety Studies and they have
been considered by the Vendors in giving these warranties.
2.3 There have been no claims, investigations or proceedings against or
threatened against the Company or any of its directors, officers or
employees in respect of accidents, injuries, illness, disease or any other
harm to the health and safety of employees, contractors or any other
persons caused by breaches of Health and Safety Legislation or otherwise
and so far as the Vendors are aware there are no facts or circumstances
which may lead to any such claims, investigations or proceedings.
2.4 The Company has and has maintained employers' liability and public
liability insurance cover having regard to the activities carried out by
the Company as recommended by its insurers. No claims in respect of
health and safety have been made or so far as the Vendors are aware are
contemplated under such insurance policies.
39
SCHEDULE 5
COMPLETION REQUIREMENTS
1. OBLIGATIONS OF THE VENDORS
1.1 At Completion the Vendors shall deliver to the Purchaser:-
1.1.1 the Tax Deed duly executed as a deed by the parties thereto (other
than the Purchaser);
1.1.2 duly executed transfers of the Shares in favour of the Purchaser or
its nominees and the share certificates in respect of the Shares,
together with any power of attorney or other authority under which
such transfers have been executed and an indemnity in the agreed
form in relation to any missing certificates.
1.1.3 subject to paragraph 2.1.4 below, a release executed as a deed by
each of the Vendors in the agreed form releasing the Company from
all claims (actual or contingent) which he has or may have or might
thereafter have on account of or in relation to any act, matter,
cause or thing down to and inclusive of the Completion Date;
1.1.4 the statutory and other books duly written up to date, the
Certificate of Incorporation, Certificate(s) of Incorporation on
Change of Name and common seal of the Company;
1.1.5 the title deeds relating to the Premises and all insurance
policies, premium receipts, maintenance contracts and other
documents relating to the Premises;
1.1.6 all books of account and other books and records and copies of the
memorandum and articles of association of the Company;
1.1.7 all documents of title, certificates, deeds, licenses, agreements
and other documents relating to the Company's Intellectual Property
Rights and all manuals, drawings, plans, documents and other
materials and media on which the Company's know-how is recorded;
1.1.8 the Employment Agreements duly executed by each of the Individual
Vendors;
1.1.9 the certificate and undertaking as to Regulation "S" in the form
contained in SCHEDULE 7 duly executed by each of the Vendors; and
1.1.10 the Earnout Agreement in the form contained in SCHEDULE 9 duly
executed by each of the Individual Vendors and the Vendors under
the Jade Agreement.
1.2 At Completion the Vendors shall procure that:-
1.2.1 a board meeting of the Company be held at which:-
(a) it shall be resolved that the said transfers in respect of
the Shares be passed for registration subject only to
their being re-presented duly stamped;
(b) all existing bank mandates shall be revoked and new
instructions to banks shall be given in such form as the
Purchaser may require;
(c) ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ shall be appointed
directors and ▇▇▇▇▇▇▇ Badminton shall be appointed
chairman of the Company; and
(d) the Employment Agreements shall be approved and executed
on behalf of the Company;
40
1.2.2 all amounts owing to the Company by any of the Vendors or any of
the Directors or any Connected Person in relation to the Vendors,
the Directors or any of them shall be repaid in full; and
1.2.3 all the papers, books, records (in whatever medium) and all other
assets of the Company which are within the possession or under the
control of the Vendors, the Directors or any of them, or any
Connected Person of the Vendors the Directors of any of them are
delivered to the Company.
2. OBLIGATIONS OF THE PURCHASER
2.1 On Completion the Purchaser shall:-
2.1.1 deliver to the Vendors a counterpart of the Tax Deed duly executed
by the Purchaser;
2.1.2 deliver to the Vendors a counterpart of the Earnout Agreement duly
executed by the Purchaser;
2.1.3 satisfy the consideration for the Shares as provided in Clause 3 of
this Agreement by the payment of the sum of US$1,492,812.50 by
electronic funds transfer to the Vendors' Solicitors and by the
delivery of stock certificates in the names of the Vendors in
respect of the relevant 11,875 Purchaser's Shares and Consideration
Shares; and
2.1.4 procure that the Company repays the loans outstanding to the
Company from the Vendors as specified in the Disclosure Letter.
41
SCHEDULE 6
TAX DEED
DATE: [ ] 1998
PARTIES:
(1) THE PERSONS whose names and addresses are set out in the Schedule
hereto ("Covenantors"); and
(2) JAVELIN SYSTEMS, INC. (a Delaware corporation) whose principal place
of business is at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, U.S.A.
("Purchaser").
RECITAL
Pursuant to an agreement of today's date ("Agreement") the Purchaser has today
completed the purchase of the whole of the issued share capital of RGB Trinet
Limited in reliance (inter alia) upon the undertaking of the Covenantors to
enter into this Deed and the undertakings and covenants by the Covenantors
hereinafter contained.
NOW THIS DEED WITNESSES as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Deed (including the Schedule):-
"Accounts Relief" means any Relief arising prior to Completion
which has been taken into account in
computing, or in obviating the need for,
any provision for deferred tax in the
Accounts but which is not available to the
Company;
"Assessment" means any claim, assessment, notice, demand,
letter, counterclaim or other document
issued or made, or action taken, by or on
behalf of any Tax Authority (or any other
person, including the Company) by virtue of
which the Company has, or is alleged to
have, a Liability to Tax, or from which it
appears that the Company has, or will or
may have, a Liability to Tax, or from which
it is sought to impose upon the Company a
Liability to Tax;
"Claim" means any claim by the Purchaser against the
Covenantors pursuant to Clause 2;
"Deemed Tax Liability" has the meaning ascribed to that expression
in Clause 1.4;
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"Event" means any transaction (including entry into
the Agreement or the purchase or sale of an
asset), act (including Completion, the
migration of a company or the inclusion of
a company within a group of companies for
any purpose), omission, receipt,
distribution and failure to make sufficient
distributions to avoid an apportionment or
deemed distribution of income and any
combination of two or more such occurrences;
"Liability to Tax" means (i) a liability to pay Tax and (ii)
such sums treated as being a liability to tax
by Clause 1.3;
"Post Completion Relief" means any Relief which arises by reference to
an Event occurring after Completion;
"Relief" means any relief, loss, allowance, exemption,
set-off, deduction or credit in respect of
any Tax, or any set-off or deduction in
computing income, profits or gains for the
purpose of any Tax;
"Tax" means all taxes, and all duties, levies,
imposts, charges and withholdings of any
nature whatsoever, whether created or
imposed in the United Kingdom or elsewhere
and at whatever time created or imposed
which are collected and administered by any
Tax Authority, in all cases together with
all incidental or supplemental penalties,
charges, interest, fines and default
surcharges and costs;
"Tax Authority" means any taxing or other authority (whether
within or outside the United Kingdom)
competent to impose, administer or collect
any Tax.
1.2 In this Deed:-
1.2.1 references to the loss of a Relief or of a right to repayment of
Tax include references to the loss, withdrawal, nullifying or
cancellation of a Relief or of a right to repayment of Tax;
1.2.2 references to the utilisation of a Relief or of a right to
repayment of Tax include references to the utilisation or setting
off of a Relief or of a right to repayment of Tax; and
1.2.3 references to the loss or utilisation of a Relief shall be
construed accordingly.
1.3 Subject to Clause 1.4 there shall be treated as an amount equal to a
"Liability to Tax" which arises as a result of an Event occurring on or
before Completion:-
1.3.1 any amount of any Accounts Relief which is not available to the
Company;
1.3.2 the value of all or any part of a right to repayment of Tax which
has been treated as an asset of the Company in the Accounts or
which has been taken
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into account in computing, or in obviating the need for, any
provision for deferred tax in the Accounts which is not available
to the Company;
1.3.3 the value of all or any part of a right to repayment of Tax arising
after Completion which is used to set against any liability to make
an actual payment of Tax in circumstances where the Purchaser would
(but for such utilisation or set off) have been entitled to make a
Claim by virtue of such liability to make an actual payment of Tax;
1.3.4 the amount of any Accounts Relief or Post Completion Relief which
is used to relieve income, profits or gains in circumstances where
(but for such utilisation) the Purchaser would have been entitled
to make a Claim by virtue of such income, profits or gains; and
1.3.5 any amount the Company is obliged to pay by way of reimbursement,
recharge, indemnity or damages in relation to Tax:-
(a) in respect of or arising from any Event effected or demand
made effected on or before Completion; or
(b) by reference to any profits earned, accrued or received on or
before Completion.
1.4 In any case falling within Clause 1.3 the amount that is to be treated for
the purposes of this Deed as a Liability to Tax of the Company ("Deemed
Tax Liability") shall be determined as follows:-
1.4.1 in a case which falls within Clause 1.3.1 or Clause 1.3.4 where the
relevant Relief consisted of a deduction from or offset against
Tax, the Deemed Tax Liability shall be the amount of that deduction
or offset;
1.4.2 in a case which falls within Clause 1.3.1 or Clause 1.3.4 where the
relevant Relief consisted of a deduction from or offset against
income, profits or gains, the Deemed Tax Liability shall be:-
(a) if the Relief is not available, the amount of Tax which would,
on the basis of the rates of tax current at Completion, have
been saved had such Relief been available (assuming sufficient
income, profits or gains to be able fully to utilise the
Relief and all other Reliefs available to the Company); or
(b) if the Relief was the subject of such a utilisation, the
amount of tax which has been saved in consequence of the
utilisation;
1.4.3 in a case falling within Clause 1.3.2 or Clause 1.3.3 the Deemed
Tax Liability shall be the amount of such repayment of Tax or part
thereof;
1.4.4 in a case falling within Clause 1.3.5 the Deemed Tax Liability
shall be the amount which the Company is required to pay.
1.5 In this Deed references to an Event occurring on or before any date or on
or before other Events shall be deemed to include any combination of two
or more Events the first of which has taken place or took place on or
before that date or on or before that other Event.
1.6 Words and expressions (if any) which are defined in the Agreement and
which are not expressly defined in this Deed, and rules of interpretation
which are provided for in the Agreement and which are not otherwise
expressly provided for in this Deed, shall have the same meaning in and
shall apply to this Deed and shall be deemed to be incorporated in this
Deed.
44
1.7 Words and expressions (if any) neither defined in this Deed nor in the
Agreement but which are defined or used in any legislation relating to Tax
which is relevant in the context shall have the same meaning in this Deed
as they have in such legislation.
1.8 In this Deed:-
1.8.1 references to income, profits or gains accrued, or being earned or
received, on or before a particular date or in respect of a
particular period shall include any profits deemed for Tax purposes
to have accrued, or to have been earned or received, on or before
that date or in respect of that period; and
1.8.2 references to "income, profits or gains" shall include receipts,
value and any other criterion used in establishing the incidence of
any Tax or measure in establishing the amount of any Liability to
Tax.
2. COVENANT
2.1 Subject as hereinafter provided the Covenantors hereby jointly and
severally covenant with the Purchaser as follows:-
2.1.1 to pay to the Purchaser an amount equal to any Liability to Tax of
the Company which arises as a consequence of or by reference to:
(a) any Event occurring on or before Completion; or
(b) any income, profits or gains which accrued, or which were
earned or received, on or before Completion or in respect of a
period ending on or before Completion,
in each case whether or not such Liability to Tax is also
chargeable against or attributable to any other person; and
2.1.2 to pay to the Purchaser from time to time amounts equal to any
costs and expenses reasonably incurred by the Purchaser or the
Company in connection with any Liability to Tax as is referred to
in Clause 2.1.1 and in respect of which the Covenantors are liable
to make payment under this Deed or in successfully (wholly or
partly) taking or defending any action against the Covenantors
pursuant to this Deed.
2.2 Each of the covenants contained in paragraphs (a) and (b) of Clause 2.1.1
shall be construed as giving rise to a separate and independent obligation
and shall not be restricted by the other, save that (for the avoidance of
doubt) any payment by the Covenantors in respect of a liability under one
covenant shall pro tanto discharge any liability under the other so far as
it arises from the same subject matter.
3. LIMITATIONS
3.1 The Covenantors shall not be liable under Clause 2 in relation to any
Liability to Tax of the Company:-
3.1.1 if and to the extent that specific provision or reserve in respect
of such Liability to Tax was made in the Accounts or discharged
prior to Completion;
3.1.2 if and to the extent that provision or reserve made in the Accounts
is insufficient only by reason of any increase in rates of Tax or
change in the law introduced after the date of the Agreement with
retrospective effect;
3.1.3 if that Liability to Tax arises as a result of an Event effected by
the Company in the ordinary course of its business occurring
between the Accounting Date and Completion;
3.1.4 if the Purchase or the Company have recovered an amount in respect
of such Liability to Tax from a person or persons other than the
Covenantors;
45
3.1.5 if any Relief (other than an Accounts Relief or Post-Completion
Relief) is available to the Company (including by way of surrender
from another company) to set against or otherwise mitigate the
Liability to Tax;
3.1.6 if such Liability to Tax arises or is increased as a consequence of
any reduced entitlement to the small companies' rate of corporation
tax (section 13, Taxes Act) where such reduced entitlement results
solely from the Company becoming associated with a company or
companies at or following Completion; or
3.1.7 if such Liability to Tax would not have arisen but for the fact
that the accounting treatment of any asset or liability in the
future accounts of the Company is different from the treatment in
the Accounts and such difference does not arise so as to procure
that the said accounts comply with all relevant laws and generally
accepted accounting principles.
3.2 For the avoidance of doubt the following shall not be regarded as Tax
which arises in the ordinary course of business for the purposes of Clause
3.1.3:-
3.2.1 any Tax arising as a result of the application either of any
anti-avoidance provisions contained in any Tax legislation or of
any principles established in case law concerning anti-avoidance;
3.2.2 any Tax arising as a result of any dividend, distribution or deemed
distribution;
3.2.3 any Tax arising in respect of the acquisition, disposal or supply
or the deemed acquisition, disposal or supply of any assets, goods,
services or business facility of any kind (including a loan of
money or the letting, hiring or licensing of any tangible or
intangible property) for a consideration deemed for Tax purposes to
be different from that (if any) actually received, but only insofar
as such Tax is attributable to the difference between the
consideration actually received and the consideration deemed for
Tax purposes to have been received;
3.2.4 any Tax arising as a result of a failure duly to deduct, charge,
recover or account for Tax; or
3.2.5 any amount payable to HM Customs and Excise by the Subsidiary as a
result of Part XV of the Value Added Tax Regulations 1995 or
equivalent provisions in any other relevant jurisdiction.
4. CONDUCT OF CLAIMS
4.1 Upon the Purchaser becoming aware of any Assessment which does or may give
rise to a Claim the Purchaser shall as soon as reasonably practicable give
notice of such Assessment to the Covenantors PROVIDED THAT the giving of
such notice shall not be a condition precedent to the liability of the
Covenantors under this Deed.
4.2 If the Covenantors shall indemnify and secure the Company and the
Purchaser to their reasonable satisfaction against any Tax, additional
Tax, losses, fines, penalties, interest, charges, costs and expenses which
arise as a consequence thereof, the Purchaser shall and shall procure that
the Company shall take such action as the Covenantors may reasonably
request to avoid, dispute, resist, appeal, compromise, or defend such
Assessment ("the Covenantors' Action").
4.3 Neither the Purchaser nor the Company shall be obliged to appeal against
any Assessment if, having given the Covenantors notice of the receipt of
that Assessment,
46
it has not within ten Business Days received instructions in writing from
the Covenantors in accordance with the preceding provisions of this
Clause to make that appeal.
4.4 Neither the Purchaser nor the Company shall be obliged to take any action
or further action in respect of any Assessment if it appears to the
Purchaser that either the Covenantors or the Company, prior to its being
in the ownership of the Purchaser, have committed acts or omissions which
may constitute fraud, misfeasance or negligence.
4.5 Neither the Purchaser nor the Company shall be required to take any action
which either interferes with the normal course of its business or which in
its opinion is likely to prejudice its business or its relationship with
any Tax Authority or result in the Purchaser or any Company which forms
part of the Purchaser's group incurring a Liability to Tax or an increased
Liability to Tax.
4.6 Neither the Purchaser nor the Company shall be obliged to take any action
pursuant to this Clause 4 which includes continuing the Covenantors'
Action or contesting an Assessment beyond the first appellate body
(excluding the Tax Authority demanding the Tax in question) in the
jurisdiction concerned.
4.7 Neither the Purchaser nor the Company shall be obliged to take any action
under this Clause 4 which involves continuing the Covenantors' Action or
contesting any Assessment before any court or other appellate body
(excluding the Tax Authority demanding the Tax in question) unless the
Covenantors furnish the Purchaser with the written opinion of leading Tax
counsel to the effect that an appeal against the Assessment in question
will, on the balance of probabilities, be won.
4.8 The Purchaser and the Company shall be at liberty without reference to the
Covenantors to admit, compromise, settle, discharge or otherwise deal with
any Assessment after whichever is the earliest of:-
4.8.1 the Purchaser or the Company being notified by the Covenantors that
they consider the Assessment should no longer be resisted;
4.8.2 the expiry of a period of seven Business Days following the service
of a notice by the Purchaser or the Company on the Covenantors,
requiring the Covenantors to clarify or explain the terms of any
request made under Clause 4.2 during which period no such
clarification or explanation has been received by the Purchaser or
the Company; and
4.8.3 if appropriate, the expiration of any period prescribed by
applicable legislation for the making of an appeal against either
the Assessment or the decision of any court or tribunal in respect
of any such Assessment, as the case may be.
4.9 The Covenantors shall be bound to accept for the purposes of this Deed any
admission, compromise, settlement or discharge of any Assessment and the
outcome of any proceedings relating thereto made or arrived at in
accordance with the provisions of this Clause 4.
4.10 None of the Purchaser's or Company's obligations under this Clause 4 shall
constitute a pre-condition to any payment due under Clause 2.
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5. DUE DATE FOR PAYMENT
5.1 Where the Covenantors become liable to make any payment pursuant to Clause
2, the due date for the making of that payment shall be:-
5.1.1 in a case that involves an actual payment of Tax by the Company,
the later of three Business Days after service of a notice on the
Covenantors in relation thereto and the date that is three Business
Days immediately before the last date on which the Company would
have had to have paid to the relevant Tax Authority the Tax that
has given rise to the Covenantors' liability under this Deed in
order to avoid incurring a liability to interest or a charge or
penalty in respect of that Liability to Tax;
5.1.2 in a case falling within Clause 1.3.1 the later of three Business
Days following service by the Purchaser of a written demand
therefor and the date on which the Accounts Relief would otherwise
have been used but for such non-availability;
5.1.3 in a case falling within Clause 1.3.2 or Clause 1.3.3, the later of
three Business Days after the Purchaser has served a written demand
therefor and the date on which repayment of Tax would have actually
been received or on which the liability to make an actual payment
of Tax would have fallen due but for such setting-off (as
appropriate); or
5.1.4 in a case falling within Clause 1.3.4, the later of three Business
Days following the service by the Purchaser of a written demand
therefor or the date on which an actual liability to make a payment
of Tax by the Company would have fallen due but for such
setting-off.
5.2 If any payment required to be made by the Covenantors under this Deed is
not made by the due date then that payment shall carry interest from that
due date until the date when the payment is actually made at the rate of 4
per cent above the base rate from time to time of National Westminster
Bank PLC.
6. DEDUCTIONS FROM PAYMENTS
6.1 All sums payable by the Covenantors to the Purchaser under this Deed shall
be paid free and clear of all deductions or withholdings whatsoever, save
only as may be required by law.
6.2 If any deduction or withholding in respect of Tax or otherwise is required
by law to be made from any of the sums payable as mentioned in Clause 5.1,
the Covenantors shall be obliged to pay to the Purchaser such greater sum
as will, after such deduction or withholding as is required to be made has
been made, leave the Purchaser with the same amount as it would have been
entitled to receive in the absence of any such requirement to make a
deduction or withholding.
7. OVER PROVISIONS AND RELIEFS
7.1 If the auditors of the Company certify that any provision for Tax in the
Accounts proves to be an over-provision, then the amount of such
over-provision shall be dealt with in accordance with Clause 7.3.
7.2 If any Liability to Tax which has resulted in a payment having been made
or becoming due from the Covenantors under this Deed will give rise to a
Relief or right to repayment of Tax for the Company which would not
otherwise have arisen, then as and when liability of the Company to make
an actual payment of or in respect of Tax
48
is reduced by reason of that Relief or repayment of Tax is received the
amount by which that liability is so reduced or the value of the repayment
shall be dealt with in accordance with Clause 7.3.
7.3 Where it is provided under Clause 7.1 or 7.2 that any amount (the
"Relevant Amount") is to be dealt with in accordance with this Clause
7.3:-
7.3.1 the Relevant Amount shall first be set off against any payment then
due from the Covenantors under this Deed; and
7.3.2 to the extent that there is an excess, a refund shall forthwith be
made to the Covenantors of any previous payment or payments made by
the Covenantors under this Deed and not previously refunded under
this clause up to the amount of such excess; and
7.3.3 to the extent that the excess referred to in Clause 7.3.2 is not
exhausted under that paragraph, the remainder of that excess shall
be carried forward and set off against any figure payment or
payments which become due from the Covenantors under this Deed.
8. MITIGATION
Where the Company is entitled to recover from any other person any sum in
respect of any matter for which the Covenantors have or are liable to make
payment under this Deed, the Purchaser shall, or shall procure that the
Company shall (if requested by, and at the expense of the Covenantors and
upon the Covenantors indemnifying the Purchaser to the reasonable
satisfaction of the Purchaser, against all costs or expenses which may
thereby be incurred) take such action as the Covenantors shall reasonably
request to enforce such recovery against the person in question provided
that the Purchaser and the Company shall not be obliged to take action
which it is reasonable to consider prejudicial to the Purchaser's or the
Company's Tax position or business PROVIDED THAT the taking of action
hereunder shall not be a pre-condition to the obligation to make payment
of any amount under Clause 2. The Purchaser shall forthwith account to
the Covenantors for any sums so recovered (including any interest or
repayment supplement (as defined in section 825 Taxes Act) paid by such a
person) net of Tax (if any) on such sum up to an amount not exceeding the
amount paid by the Covenantors under this Deed in relation thereto.
9. COVENANT BY THE PURCHASER
9.1 The Purchaser covenants with the Covenantors to pay forthwith to the
Covenantors an amount equal to any Tax which is assessed on the
Covenantors pursuant to section 767AA of the Taxes Act by reason of Tax
assessed on the Company remaining unpaid, save that this clause shall not
apply in respect of Tax for which the Covenantors are otherwise liable to
the Purchaser under this Deed.
9.2 The covenant contained in Clause 9.1 will apply to (and hence give rise to
a liability upon the Purchaser to pay to the Covenantors an amount equal
to) any costs and expenses properly incurred by the Covenantors in
connection with any Tax assessed on the Covenantors.
9.3 The Purchaser's covenant contained in Clause 9.1 shall not be a
pre-condition to any obligation to make payment under Clause 2.
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10. GOVERNING LAW
This Deed shall be governed by and construed in all respects in accordance
with the laws of England and the parties hereby submit themselves to the
non-exclusive jurisdiction of the English courts for such purpose.
11. NOTICES
The provisions as to service of notices contained in the Agreement shall
apply for the purposes of this Deed.
IN WITNESS whereof this Deed has been duly executed the day and year first
before written.
THE SCHEDULE
Names and Addresses of the Covenantors
(the Individual Vendors)
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SCHEDULE 7
CERTIFICATE AS TO REGULATION S
INVESTMENT INTENT LETTER
This Investment Intent Letter (this "Agreement") dated as of
_______________, 1998, is entered into by and among the persons whose names
appear on the signature pages hereto as "Vendors" (collectively the
"Vendors") and Javelin Systems, Inc., a Delaware corporation ("Purchaser").
Unless otherwise defined herein, all capitalized terms used herein shall have
the meanings assigned to them in the Purchase Agreement (as defined below).
RECITALS
A. Vendors own all of the issued and outstanding ordinary shares
(the "Company Stock") of RGB Trinet Limited, a limited company organized
under the laws of England and Wales (the "Company").
B. Pursuant to the terms and conditions of that certain Agreement
for Sale and Purchase of Shares (the "Purchase Agreement") dated of even date
herewith by and among Purchaser and Vendors, Purchaser is acquiring all the
Company Stock.
C. In connection with the Purchase Agreement, the Vendors will be
issued shares of common stock, $.01 par value, of Purchaser (the "Purchaser's
Shares") in partial exchange for their shares of Company Stock (and the
Purchaser's Shares issued to the Vendors are herein referred to as the
"Consideration Shares").
D. The Vendors desire to make certain representations and
warranties to Purchaser to satisfy various United States federal and state
securities laws.
AGREEMENT
NOW THEREFORE, in consideration of the respective covenants and
promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. SHAREHOLDER REPRESENTATIONS AND WARRANTIES. As a condition
to the receipt of the Consideration Shares, each of the Vendors represents
and warrants to, and covenants with, Purchaser as follows:
(a) Such Vendor is aware of Purchaser's business affairs and has
acquired sufficient information about Purchaser to reach an informed and
knowledgeable decision to acquire the Consideration Shares. Such Shareholder
has been furnished by Purchaser with a copy of Purchaser's Form 10-KSB for
its fiscal year ended June 30, 1998, Purchaser's Form 10-QSBs for its fiscal
quarters ended September 30, 1997, December 31, 1997 and March 31, 1998, and
such Vendor has read such reports and understands and has evaluated the risks
of making an investment in the Purchaser's Shares. Such Vendor has been
afforded access to
51
information concerning Purchaser and to its executive officers and has been
afforded the opportunity to ask questions of, and receive answers from,
Purchaser.
(b) Such Vendor is generally familiar with the open system,
touch-screen computer for point-of-sale applications industry since such
Vendor has either been employed in such industry or has invested in business
entities engaged in such industry.
(c) Such Vendor is taking the Consideration Shares for investment
for such Vendor's own account only and not with a view to, or for resale in
connection with, any unregistered "distribution" thereof within the meaning
of the Securities Act of 1933, as amended (the "ACT").
(d) Such Vendor understands that no United States federal or state
agency has passed on, or made any recommendation or endorsement of, the
Consideration Shares.
(e) Such Vendor understands that the Consideration Shares are being
offered and sold to it in reliance on specific exemptions from or
non-application of the registration requirements of federal and state
securities laws and that Purchaser is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgements and
understandings of such Vendor set forth herein in order to determine the
applicability of such exemptions and the suitability of such Vendor acquiring
the Consideration Shares.
(f) Vendor certifies that he, she or it is neither a citizen nor a
resident of the United States and that his, her or its address set forth in
the Purchase Agreement is correct.
(g) No public offer or solicitation of the Consideration Shares was
made to such Vendor and no offer of the Purchaser's Shares was made to such
Vendor while such Vendor was present in the United States.
(h) At the time any buy order for the Consideration Shares was
originated, such Vendor was located outside the United States and is outside
the United States on the date of the execution and delivery of this Agreement
and will be outside the United States on the Completion Date.
(i) Such Vendor is aware that the Consideration Shares have not been
registered under the Act and may only be offered or sold pursuant to
registration under the Act or an available exemption therefrom, and such
Vendor has not, and will not, engage in any public offering or distribution
of the Consideration Shares or engage in any hedging transaction with respect
thereto, except in accordance with the registration or exemptive provisions
of the Act.
(j) Except to the extent the Consideration Shares have been
registered under the Act, such Vendor (i) will not, during the period
commencing on the Completion Date and ending one year after the Completion
Date (the "Distribution Compliance Period"), offer or sell or agree to sell
the Consideration Shares in the United States, to a U.S. Person or for the
account or benefit of a U.S. Person other than in accordance with Regulation
S and (ii) will, after the expiration of the Distribution Compliance Period,
offer, sell, pledge or otherwise transfer the Consideration Shares only
pursuant to registration under the Act or an available exemption therefrom
and, in any case, in accordance with applicable United States federal and
state securities laws.
52
(k) Such Vendor has been advised of, and is familiar with, has
complied, and will comply, with the offering restrictions, and any other
requirements, of Regulation S.
(l) The transactions contemplated by this Agreement (i) have not
been pre-arranged by such Vendor with a purchaser located in the United
States which is a U.S. Person, and (ii) are not part of a plan or scheme by
such Vendor to evade the registration provisions of the Act.
(m) Neither such Vendor nor any of his, her or its affiliates has
entered, has the intention of entering, or will during the Distribution
Compliance Period enter into, with any U.S. Person, any put option, short
position or other similar instrument or position with respect to the
Purchaser's Shares or participate in any other attempt designed to lower the
trading prices of Purchaser's Shares stock.
(n) Such Vendor (individually or together with such Vendor's
investor representative who is not affiliated with Purchaser) has such
knowledge and experience in financial, tax and business matters that such
Vendor is capable of evaluating the merits and risks of receiving the
Consideration Shares and of making an informed investment decision with
respect thereto.
(o) Such Vendor has determined that the Consideration Shares are a
suitable investment.
(p) Such Vendor acknowledges receipt of Purchaser's ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Policy and agrees to abide by its terms, and further agrees to execute such
Policy upon the request of Purchaser.
(q) The certificates representing the Consideration Shares shall
bear the following legend:
"The securities represented hereby have been issued pursuant to
Regulation S ("Regulation S") promulgated under the Securities Act of
1933, as amended (the "1933 Act"), and have not been registered under
the 1933 Act. Unless so registered, such securities may not be
transferred, offered, hedged or sold prior to the end of the one-year
distribution compliance period prescribed by Regulation S unless such
transfer, offer, hedge or sale is made in an "offshore transaction" and
not to or for the account of or benefit of a "U.S. person" (as such
terms are defined in Regulation S) and is otherwise in accordance with
the requirements of Regulation S. Following expiration of any such
one-year distribution compliance period, the securities represented
hereby may not be offered, hedged, sold or otherwise transferred in the
United States or to a U.S. person unless the securities are registered
under the 1933 Act and applicable state securities laws, or such
offers, sales and transfers are made pursuant to an available exemption
from the registration requirements of those laws."
(r) Such Vendor shall indemnify Purchaser against any loss, cost or
damages (including reasonable attorneys' fees and expenses) directly incurred
as a result of such Vendor's breach of any representation, warranty, covenant
or agreement in this Agreement.
53
SECTION 2. MISCELLANEOUS.
(a) AMENDMENTS, WAIVERS AND CONSENTS. No amendment or modification
of this Agreement, nor any termination or waiver of any provision of this
Agreement or consent to any departure by any party hereto therefrom, shall in
any event be effective without the written concurrence of the parties hereto.
(b) NOTICES. Notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed given
(i) if delivered personally, upon delivery, (ii) if delivered by courier,
then upon receipt, or (iii) if given by telecopy, upon confirmation of
transmission by telecopy (or, if such confirmation does not occur during
normal business hours on a Business Day (as defined in the Purchase
Agreement), then on the next Business Day), in each case to the parties at
the address for notice set forth on Schedule 1 to the Purchase Agreement.
(c) APPLICABLE LAW. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of
California, United States of America and the United States federal securities
laws without reference to any choice of law rules that would require the
application of the laws of any other jurisdiction.
(d) SEVERABILITY. The provisions of this Agreement are severable,
and if any clause or provision shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision of this
Agreement in any jurisdiction.
(e) INTERPRETATION. Time is of the essence of each provision of
this Agreement of which time is an element.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors, heirs and assigns.
(g) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
54
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
VENDORS:
---------------------------------
▇▇▇▇ ▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
LOUVRE TRUSTEES LIMITED
JAVELIN SYSTEMS, INC.
a Delaware corporation
By:
-----------------------------
An Authorized Representative
55
SCHEDULE 8
ADDITIONAL LIMITATIONS TO THE WARRANTIES AND TAX DEED
1. ACKNOWLEDGEMENT
The Purchaser:
1.1 admits and acknowledges that it has not entered into this Agreement
in reliance upon any warranties, representations, covenants,
undertakings, indemnities or other statements whatsoever other than
those expressly set out in this Agreement and the Tax Deed; and
1.2 subject and without prejudice to Clause 9 of this Agreement, agrees
that rescission shall not be available as a remedy for any breach
of this Agreement and agrees not to claim that remedy.
2. DISCLOSURE
The Purchaser shall not be entitled to make a Claim if and to the extent
that the facts or information upon which it is based have been Disclosed.
3. DURATION AND EXTENT
3.1 The aggregate liability of each Vendor in respect of all Claims under the
Warranties and the Tax Deed shall not exceed the amount of the total
consideration paid under this Agreement.
3.2 No amount shall be payable by the Vendors in respect of any Claim under
the Warranties:
3.2.1 unless the amount of the liability in respect of each such Claim
exceeds US$1,000; and
3.2.2 unless and until the aggregate cumulative liability of the Vendors
in respect of all such Claims exceeds US$250,000 in which case the
Vendors shall be liable for both the initial US$250,000 and the
excess.
3.3 The Vendors shall not be liable for any Claim unless the Vendors are given
notice in writing of that Claim stating in reasonable detail the nature of
the Claim and, if practicable, the amount claimed on or before the first
anniversary of Completion and unless legal proceedings shall have been
served in respect of any such Claim within six months of the Vendors being
notified of any such Claim.
3.4 Without prejudice to the parties' rights or obligations under the Jade
Agreement, where any Claim relates to the Subsidiary:
3.4.1 save in respect of the warranty in paragraph 18.4 of Part A of
SCHEDULE 4, for which the Vendors shall be 100% liable, the Vendors
shall not be liable for more than 47.5% of such Claim; and
3.4.2 no Claim shall be made to the extent the matters giving rise to the
Claim arise out of events or circumstances prior to 18 March 1998,
save for breach of the warranty in paragraph 18.4 of Part A of
SCHEDULE 4.
4. LIMITATIONS
No Claim shall be admissible and the Vendors shall not be liable under any
of the Warranties or under the Tax Deed:
56
4.1 to the extent that provision, reserve or allowance has been made in the
Accounts or in the Management Accounts or was specifically referred to in
the notes to the Accounts or the Management Accounts in respect thereof or
to the extent that payment or discharge thereof has been taken into
account therein or in accordance with generally accepted accounting
principles has not been so taken account of, or referred to; or
4.2 to the extent that provision, reserve or allowance made in the Accounts or
the Management Accounts for any Liability to Tax proves to be insufficient
by reason only of any increase in the rates of taxation or variation in
the method of applying, or calculating, the rate of taxation made after
Completion whether or not with retrospective effect; or
4.3 to the extent that such liability arises or is increased as a result of
any change or changes in legislation (primary or delegated) including
without limitation any increase in rates of taxation or the introduction
of any changes or new form of taxation or in the practice of the Inland
Revenue or HM Customs and Excise or any other relevant authority (in the
United Kingdom or elsewhere) occurring after Completion whether or not
with retrospective effect; or
4.4 to the extent that the liability would not have arisen or would have been
reduced but for the fact that the treatment of any assets or liabilities
or of the taxation attributable to timing differences (including capital
allowances and stock relief) in future accounts of the Company or any
Subsidiary is different from the treatment in the Accounts or the
Management Accounts; or
4.5 to the extent that the liability would not have arisen or would have been
reduced or eliminated but for a failure or omission after Completion, on
the part of the Company or the Subsidiary or the Purchaser or any of them
to make any claim, election, surrender or disclaimer or to give any notice
or consent or to do any other thing under any enactment or regulation
relating to Tax, the making, giving or doing of which was taken into
account in computing the provision for Tax in the Accounts or in the
Management Accounts; or
4.6 to the extent that such liability would not have arisen but for any claim,
disclaimer or election made (including, without limitation, a disclaimer
of or a revision to a claim for capital allowances claimed before
Completion or assumed to be claimed in preparing the Accounts) where such
claim or disclaimer or election or revision is caused or made by the
Purchaser or the Company or the Subsidiary after Completion; or
4.7 to the extent that such liability occurs or arises as a result of or is
otherwise attributable wholly or partly to any voluntary act, transaction
or omission of the Company or the Subsidiaries or the Purchaser or their
respective directors, employees or agents on or after Completion otherwise
than in the ordinary and proper course of business or pursuant to a
legally binding commitment created on or before Completion by the Company
or the Subsidiary.
57
5. SET-OFF
5.1 If the Vendors shall be liable in respect of any Claim, credit shall be
given to the Vendors against such liability for the following amounts
(each a "Relevant Amount") which shall be dealt with in accordance with
paragraph 5.3:
5.1.1 the amount by which any Tax for which the Company or the Subsidiary
is or may be liable is reduced or extinguished as a result of any
such liability and/or Claim;
5.1.2 the amount by which any provision for Tax (including deferred
taxation) or bad or doubtful debts contingent or other liabilities
(including deferred liabilities) contained in the Accounts proves
to be an over provision; or
5.1.3 the amount by which any repayment of Tax to the Company or to the
Subsidiary by the Inland Revenue or any other Tax Authority
contained in the Accounts proves to be an under-provision or no
provision is made as a result of any overpayment of Tax made prior
to Completion by any person.
5.2 If there shall be a dispute between any of the parties as to any Relevant
Amount, the Vendors or the Purchaser shall be entitled to request that the
Purchaser's Accountants are instructed to give a certificate as to the
Relevant Amount and in so doing the Purchaser's Accountants shall act as
experts and not as arbitrators and in the absence of manifest error and
subject to paragraphs 5.4 and 5.5 their decision shall be final and
binding on the parties hereto.
5.3 Where it is provided under paragraph 5.1 that any Relevant Amount is to be
dealt with in accordance with this paragraph 5.3:
5.3.1 the Relevant Amount shall first be set off against any payment then
due from the Vendors under the Warranties or the Tax Deed; and
5.3.2 to the extent there is an excess of the Relevant Amount after any
amounts have been set off under paragraph 5.3.1 a refund shall be
made to the Vendors of any previous payment or payments made by the
Vendors under the Warranties or the Tax Deed and not previously
refunded under this paragraph up to the amount of such excess; and
5.3.3 to the extent that the excess referred to in paragraph 5.3.2 is not
exhausted under that paragraph, the remainder of that excess shall
be carried forward and set off against any future payment or
payments which become due from the Vendors under the Warranties or
the Tax Deed.
5.4 In the event that the Purchaser's Accountants shall be unable or unwilling
to provide any certification requested under this paragraph 5, any
certification shall be effected by an independent firm of chartered
accountants to be agreed between the Purchaser and the Vendors or failing
agreement to be nominated by the President for the time being of the
Institute of Chartered Accountants in England and Wales (the "Independent
Accountants"). The proper and reasonable costs incurred by the
Purchaser's Accountants or the Independent Accountants in respect of any
certification required under this paragraph 5 shall be paid and borne as
such accountants shall consider just and equitable.
6. THIRD PARTY CLAIMS
6.1 Where the Purchaser and/or the Company and/or the Subsidiary are entitled
to recover from some other person (including any Tax Authority) any sum in
respect of any matter giving rise to a Claim the Purchaser shall and shall
procure that the Company
58
or the Subsidiary shall take all reasonable steps to enforce such
recovery prior to taking any action against the Vendors (other than
notifying the Vendors of the Claim) and in the event that the Purchaser
or the Company or the Subsidiary shall recover any amount from such
other person the amount of the Claim against the Vendors shall be
reduced by the amount recovered (including any repayment supplement)
less all costs, charges and expenses incurred by the Purchaser or the
Company or the Subsidiary in recovering that sum from such other person.
6.2 If the Vendors pay to the Purchaser or to the Company or to the Subsidiary
an amount pursuant to a Claim and the Purchaser or the Company or the
Subsidiary within six months of such payment becomes entitled to recover
from some other person any material sum in respect of such Claim the
Purchaser shall and shall procure that the Company or the Subsidiary shall
take all reasonable steps to enforce such recovery and upon such recovery
shall forthwith repay to the Vendors so much of the amount paid by them to
the Purchaser or the Company or the Subsidiary as does not exceed the sum
recovered from such other person less all costs, charges and expenses
incurred by the Purchaser or the Company or the Subsidiary in recovering
that sum from such other person.
6.3 If any amount is repaid to the Vendors by the Purchaser or the Company or
the Subsidiary pursuant to paragraph 6.2 above an amount equal to the
amount so repaid shall be deemed never to have been paid by the Vendors
for the purposes of paragraph 3.2 and accordingly shall not be treated as
an amount in respect of which any liability has been incurred.
7. CONDUCT OF CLAIMS
7.1 The Vendors hereby appoint Mr. ▇▇▇▇ ▇▇▇▇▇ as their representative for the
purposes of this paragraph (the "Vendors' Representative") and any action
taken or authorised by and any notice or document given to the Vendors'
Representative shall be deemed to be taken or authorised by or given to
each of the Vendors and shall be binding on each of them.
7.2 If the Purchaser becomes aware of a matter which might give rise to a
Claim the Purchaser shall (or shall procure that the Company or the
Subsidiary shall) as soon as reasonably practicable give written notice to
the Vendors' Representative of the matter and shall consult with the
Vendors' Representative with respect to such matter but such notice shall
not be a condition precedent to the liability of the Vendors.
8. MISCELLANEOUS
8.1 Any payment to the Purchaser or the Company or the Subsidiary under the
Warranties or under the Tax Deed shall be deemed to be a reduction of the
total consideration payable hereunder for the Shares.
8.2 Payment of any Claim whether under the Warranties or under the Tax Deed
shall pro tanto satisfy and discharge any other Claim which is capable of
being made in respect of the same subject matter and the Purchaser shall
at all times procure that there is no duplication of any Claim or Claims
relating to the same subject matter.
59
SCHEDULE 9
EARNOUT AGREEMENT
THIS AGREEMENT is made the _______ day of ___________________ 1998
BETWEEN:
(1) THE PERSONS whose names and addresses are set out in Column 1 of SCHEDULE
1 ("Vendors"); and
(2) JAVELIN SYSTEMS, INC. (a Delaware corporation) whose principal place of
business is at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, U.S.A.
("Purchaser").
WHEREAS:
(A) The Vendors and the Purchaser have on the date hereof entered into two
agreements (the "Purchase Agreements") for the sale and purchase of,
respectively, the entire issued share capital of RGB Trinet Limited (the
"Company") and 47.5% of Jade Communications Limited, and of the remaining
52.5% of Jade Communications Limited (the "Subsidiary").
(B) Pursuant to the provisions of each of the Purchase Agreements, the Vendors
and the Purchaser have agreed to enter into this Agreement for the purpose
of agreeing the Vendors' entitlement to further shares of the common stock
of the Purchaser as part of possible further consideration under the
Purchase Agreements.
IT IS AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement and in the Schedules:-
"Budget" the budget and business plan for the
Company and the Subsidiary for the
Earnout Period in the agreed form;
"Change of Control" means, in relation to any company,
where that company ceases to be under
the control of the person or persons
who control such company on the date
of this Agreement and for the purpose
of this definition "control" means a
holding of securities in a company
conferring a majority of the voting
rights in it or the right to appoint
or remove a majority of its board of
directors or the right to participate
in 50% or more of the assets of the
company on its winding up;
"Earnout Period" means the period of two years
commencing on 1 October 1998;
60
"Pre-Tax Profits" means the pre-tax profits of the
Company and the Subsidiary as
calculated in accordance with SCHEDULE
2 for each three-month period during
the period commencing on 1 October
1998 and ending on 30 September 2000
as shown in unaudited management
accounts (comprising in each case a
balance sheet and a profit and loss
account) of the Company and the
Subsidiary;
"Quarterly Profit Estimate" means any of the estimates made in
respect of anticipated Pre-Tax Profits
for a particular financial quarter of
the Company, particulars of which are
continued in SCHEDULE 3.
1.2 The Schedules are deemed to be incorporated in this Agreement, and a
reference to "this Agreement" includes a reference to the Schedules.
1.3 In this Agreement:-
1.3.1 the index and the clause headings are included for convenience only
and shall not affect the construction of this Agreement;
1.3.2 words denoting the singular shall include the plural and vice
versa;
1.3.3 words denoting any gender shall include a reference to each other
gender; and
1.3.4 references to persons shall be deemed to include references to
natural persons, firms, partnerships, companies, corporations,
associations, organisations, foundations and trusts (in each case
whether or not having separate legal personality).
1.4 Words and expressions (if any) which are defined in the Purchase
Agreements and which are not expressly defined in this Agreement shall
have the same meaning in and shall apply to this Agreement as if expressly
defined herein.
2. CONSIDERATION
2.1 By way of additional consideration under the Purchase Agreements of up to
US$8,225,000, the Purchaser will issue to the Vendors the Earnout Shares
(if any) calculated in accordance with the following provisions of this
Agreement.
2.2 The consideration referred to in Clause 2.1 shall be apportioned between
the Vendors as set out in Column 2 of SCHEDULE 1.
3. EARNOUT PROVISIONS
3.1 The entitlement to Earnout Shares referred to in Clause 2.1 shall be
calculated in accordance with the following provisions:-
3.1.1 if the Pre-Tax Profits shall equal 100% of the relevant Quarterly
Profit Estimate, then the Purchaser shall in respect of that
quarter issue to the Vendors the Earnout Shares that are equivalent
in value to US$822,500 (the "Base Earnout Figure");
3.1.2 if the Pre-Tax Profits shall be at or between 50% and 125% of the
relevant Quarterly Profit Estimate, then the Purchaser shall issue
to the Vendors a number of Earnout Shares equivalent in value to a
percentage of the Base Earnout Figure, such percentage being the
same percentage as the Pre-Tax
61
Profits are in relation to the relevant Quarterly Profit
Estimate, subject in all cases to a minimum of 50% and maximum
of 125% of the Base Earnout Figure. By way of illustration
only, if the Pre-Tax Profits are 110% of the Quarterly Profit
Estimate, then Earnout Shares equivalent in value to 110% of the
Base Earnout Figure shall be issued;
3.1.3 if the Pre-Tax Profits shall be below 50% of the relevant Quarterly
Profit Estimate, then (subject to Clause 3.1.4) no Earnout Shares
shall be issued in respect of that quarter;
3.1.4 if the Pre-Tax Profits exceed 125% of the relevant Quarterly Profit
Estimate, then after applying the provisions of Clause 3.1.2, the
Pre-Tax Profit in excess (the "Excess Profit") may be carried
forward or carried back to other financial quarters as follows:
3.1.4.1 the Excess Profit shall first be carried back and
applied to each previous quarter(s) in which the
Pre-Tax Profits were less than 125% of the relevant
Quarterly Profit Estimate. The Excess Profit shall be
applied in full to the earliest quarter first so as
notionally to raise the Pre-Tax Profits in such
quarter up to a maximum of 125%, and then any
remaining Excess Profit shall be applied to subsequent
quarters consecutively, in the same manner;
3.1.4.2 by applying the Excess Profit thereto, for each
quarter in which the entitlement to Earnout Shares is
created or increased by virtue of applying the
provisions of Clause 3.1.2, Javelin shall issue
further Earnout Shares to the Vendors in accordance
with the provisions of Clause 3.1.2;
3.1.4.3 if, after applying the Excess Profit to all earlier
quarters in accordance with Clauses 3.1.4.1, any of
the Excess Profit remains to be applied, it may be
carried forward to be applied in the same manner to
each subsequent quarter (next quarter first) in which
Pre-Tax Profits are below 125% of the relevant
Quarterly Profit Estimate.
3.1.5 For the avoidance of doubt, the maximum number of Earnout Shares
that can be issued in relation to any financial quarter of the
Company pursuant to Clauses 3.1.1 to 3.1.4 is a number equivalent
in value to 125% of the Base Earnout Figure (or US$1,028,125 in
Purchaser's Shares by value for each quarter).
3.2 Pursuant to Clause 3.1, the number of Earnout Shares to be allotted and
issued (if any) to the Vendors will be such number of Purchaser's Shares
as have an aggregate value which is as near as possible to, but not less
than, the Base Earnout Figure, as it may be adjusted in accordance with
Clause 3.1. The Earnout Shares shall be issued in the proportions
specified under Clause 2.2.
3.3 For the purpose of determining the aggregate value referred to in Clause
3.2:
3.3.1 the value of each Purchaser's Share shall be deemed to be an amount
equal to the average of the closing prices of a Purchaser's Share,
as reported on the NASDAQ SmallCap Market System, on the five (5)
trading days immediately prior to the end of the financial quarter
in question and on the first five (5) trading days after the end of
such quarter; and
3.3.2 where there is any carry-back or carry-forward pursuant to Clause
3.1.4, the valuation under Clause 4.3.1 shall be made in respect of
the relevant ten (10)
62
trading days in the most recent quarters instead of the
quarter(s) to which the carry-back or carry-forward was made.
3.4 The verification and allotment of all Earnout Shares shall be completed no
later than forty-five (45) days after the end of each financial quarter.
A statement showing the Pre-Tax Profits and the number of Earnout Shares
to be issued (if any) to the Vendors pursuant to Clause 3.3 shall be
agreed by the Vendors and the Purchaser prior to the expiry of this 45-day
period, PROVIDED THAT failing such agreement the relevant Pre-Tax Profits
and the said number of Earnout Shares (if any) shall be ascertained and
certified by an independent firm of chartered accountants appointed by
agreement between the parties or in default of agreement on the
application of either party by the President for the time being of the
Institute of Chartered Accountants in England and Wales. The decision of
such expert shall be final and binding on the parties. The expert shall
be deemed to act as an expert and not as an arbitrator and the provisions
of the Arbitration ▇▇▇ ▇▇▇▇ shall not apply. The cost of the reference to
such expert shall be payable as determined by the expert.
3.5 No fraction of an Earnout Share shall be issued to the Vendors and the
number of Earnout Shares shall be adjusted accordingly to the nearest
whole number.
3.6 The Earnout Shares, on issue, shall rank pari passu in all respects with
the existing issued Purchaser's Shares.
3.7 Each of the Vendors agrees that he shall deliver to the Purchaser upon
issue of the Earnout Shares a certificate and undertaking substantially in
the form of Schedule 7 to the Purchase Agreements making or giving such
representations, warranties and covenants as are necessary or advisable
for the qualification of the issuance of Purchaser's Shares to the Vendors
under Regulation S promulgated under the United States Securities Act of
1933, as amended.
3.8 In the event of there being any Change of Control of the Purchaser prior
to 30 October 2000, immediately prior to such Change of Control and in
full and final satisfaction of the Purchaser's obligations pursuant to
this Agreement, the Purchaser shall issue to the Vendors such Purchaser's
Shares as are equal to US$822,500 in value (adopting the same valuation
method as in Clause 3.4) multiplied by the number of financial quarters
remaining in the Earnout Period including the period in which the Change
of Control takes place.
3.9 During the Earnout Period until all sums (if any) due under this Agreement
have been paid or satisfied the Purchaser shall and shall procure that the
Company and the Subsidiary comply with the provisions of SCHEDULE 2.
4. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and enure for the benefit of each
party's successors but shall not be assignable by either party.
5. VARIATION
No variation of this Agreement shall be effective unless made in writing
and signed by or on behalf of each of the parties.
63
6. COUNTERPARTS
This Agreement may be executed in two or more counterparts each of which
shall be deemed to be an original, and which together shall constitute one
and the same agreement.
7. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with
English law and the parties hereby submit themselves to the non-exclusive
jurisdiction of the English courts.
AT WITNESS the hands of the parties hereto or their duly authorised
representatives the day and year first before written.
64
SCHEDULE 1
PARTICULARS OF THE VENDORS AND OF THE EARNOUT SHARES
TO BE RECEIVED BY EACH OF THEM
(1) NAME AND ADDRESS (2) EARNOUT SHARES EXPRESSED AS PERCENTAGE
OF TOTAL NUMBER ISSUED
1. ▇▇▇▇ ▇▇▇▇▇ 31.25
"Trudos"
Heath Ride
▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
2. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 31.25
"▇▇▇▇ d'Or"
▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
3. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 3.75
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
4. Contech Consultants Limited 33.75
▇/▇ ▇▇ ▇▇▇▇▇▇▇▇'▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇
------
100%
------
65
SCHEDULE 2
EARNOUT PROTECTIONS
PART 1
CALCULATION OF PRE-TAX PROFITS ("ELIGIBLE PROFIT")
1. The Eligible Profit for any financial quarter is (to the nearest L1) the
net pre-tax profit of the Company as shown in the Management Accounts for
the relevant financial period prepared in accordance with generally
accepted accounting principles, SSAPs and FRSs and adjusted as follows:
1.1 by adding back any payment or provision for Tax;
1.2 adding back any provision for or payment of any dividend or other
distribution by the Company or the Subsidiary;
1.3 adding back any sum specified as or proposed to be transferred to
reserves;
1.4 adding back any management (or similar) charges to the Purchaser
paid or provided for work carried out for the benefit of the
Company charged at the same rates as applied in respect of other
members of the Purchaser's Group;
1.5 adding back a charge by way of interest on any sums lent by the
Purchaser's Group to the Company or the Subsidiary in excess of
that rate of 1.5 per cent above the base rate of National
Westminster Bank plc;
1.6 adding a sum by way of interest on any sums lent by the Company or
the Subsidiary to the Purchaser at the rate of 3 per cent above the
base rate of National Westminster Bank plc;
1.7 adding in relation to any transactions entered into by the Company
or the Subsidiary on less than arms-length terms (in terms of
reward to the Company or the Subsidiary) a reasonable sum as profit
which might reasonably have been expected to accrue to the Company
or the Subsidiary had the transaction been on arms-length terms;
1.8 by adding back any amount written off in respect of goodwill or
other intangible assets;
1.9 by adding back audit fees in excess of L12,000 per annum and any
fees attributable to the tax affairs of the Purchaser; and
1.10 by adding back any sum deducted from gross profit in respect of the
emoluments paid or payable to or for the benefit of any person
appointed to the board of the Company by the Purchaser except as
arms' length consideration for services rendered to the Company or
the Subsidiary.
66
PART 2
ACCOUNTING POLICIES TO BE USED IN CALCULATING THE ELIGIBLE PROFIT
TURNOVER
Turnover represents the amount derived from the provision of goods and services
to third party customers based on invoiced sales adjusted by an amount to
reflect the stage of completion of major contracts, less any returns or
allowances.
DEPRECIATION
Depreciation is provided to write off the cost less the estimated residual value
of tangible fixed assets by equal instalments over their estimated usual
economic lives as follows:
Leasehold improvements - 3 years
Computer and Test Equipment - 3 years
Fixtures and fittings - 3 years
Plant and Equipment - 3 years
Motor Vehicles - 3 years
STOCK AND WORK IN PROGRESS
(a) Stocks and work in progress
Stocks are stated at the lower of cost and net realisable value. In determining
the cost of raw materials, consumables and goods purchased for resale, the FIFO
method is used (cost is taken as production cost, which includes an appropriate
proportion of attributable overheads).
Work in progress is valued at the lower of cost and net realisable value and
costs include material cost, direct labour cost and other direct costs.
(b) Project work in progress
Projects are valued as per the contract ledger as follows:
Actual revenue recognised to date is compared with total budget revenue to
calculate the "stage of completion rate". "Stage of completion rate" is applied
to the total budget costs to calculate the cost of sales. Calculated cost of
sales is then compared to actual costs incurred to date. Where actual costs
incurred to date exceed calculated cost of sales a work in progress balance is
recognised (subject to making provision for future losses on contracts). Where
calculated cost of sales exceeds actual costs incurred to date, a cost of sales
accrual is recognised.
(c) Long term contracts
The amount of profit attributable to the stage of completion of a long term
contract is recognised when the outcome of the contract can be foreseen with
reasonable certainty. Turnover for such contracts is stated at cost appropriate
to their stage of completion plus
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attributable profits, less amounts recognised in previous years. Provision
is made for any losses as soon as they are foreseen.
Contract work in progress is stated at costs incurred, less those transferred
to the profit and loss account, after deducting foreseeable losses and
payments on account not matched with turnover. Amounts recoverable on
contracts are included in debtors and represents turnover recognised in
excess of payments on account.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to profits as incurred.
TAXATION
No charge for taxation will be made in the calculation of eligible profit.
FINANCE LEASES
Assets acquired under finance leases are capitalised and the outstanding
future lease obligations are shown in creditors.
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PART 3
VENDOR PROTECTION
The Purchaser acknowledges that (having regard to the manner in which the
Consideration for the Shares has been calculated) the Vendors have a
legitimate interest in ensuring that the Eligible Profit of the Company for
the Earnout Period is as high as may fairly and reasonably be achieved by the
Company and the Subsidiary (in this Part 3 jointly referred to as the
"Company") in those years (having due regard to the Purchaser's legitimate
interest in establishing a stable and secure business for the Company in the
long term). Accordingly, but subject in all cases to Clause 15 of this Part
3 of this Schedule, the Purchaser undertakes with the Vendors that during the
Earnout Period:
1. it will use its best endeavours to promote the business of the Company;
2. it will not do anything with the intention of adversely affecting the
Eligible Profit;
3. it will not develop or seek to develop any business competitive with that
of any material business of the Company carried on at Completion or at any
time during the Earnout Period;
4. it will not transfer, divert or direct the custom of any or any potential
customer or client of the Company elsewhere or seek to do so;
5. it will not seek to transfer or divert or direct elsewhere any orders or
enquiries for products or services available from the Company;
6. it will use its best endeavours to maintain the operations of the Company
in terms of fixed assets (including premises, plant and equipment) and
financial facilities to a standard being not less suitable for the
purposes of the business of the Company than that maintained by the
Company prior to Completion;
7. it will provide the Company with access to the financial management and
other facilities of the Purchaser's Group on a basis no less beneficial to
the conduct of the Company's business than that provided to any other
members of the Purchaser's Group.
8. it will not sell or procure the sale or otherwise dispose of the whole or
any substantial part of the business, undertaking or assets (other than
current assets disposed of in the normal course of business) of the
Company;
9. to procure that the Company does not pass any resolution to go into
voluntary liquidation (except if a relevant company is at that time
insolvent and a registered insolvency practitioner advises liquidation by
reason of insolvency);
10. to procure that the Company makes no material adverse alteration in the
nature, scope or conduct of its business;
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11. to procure that Eligible Profits are not adversely affected by any
service, management or similar charge (save as provided for in Part 1 of
this Schedule) or by any transaction or arrangement which is not a bona
fide commercial transaction or arrangement on arms-length terms;
12. it will not materially alter the number of employees of the Company or
make any increase in the emoluments of the employees of the Company
(including without limitation any employers contribution to pensions or in
benefits provided hours of work or holiday entitlement) which would have a
material adverse effect on Eligible Profit;
13. not to procure or permit any capital expenditure in relation to the
Company except;
13.1 in accordance with the Budget in agreed terms for the period
covered by the Earnout Period;
13.2 as is required to comply with the provisions in the legal
obligations (including the terms of any lease) of the Premises
occupied by the Company;
13.3 as is required to replace plant and equipment as it comes to the
end of its useful working life and in accordance with the policy
adopted by the Company immediately prior to Completion.
13.4 to procure that any goods or services provided to or in respect of
the Company whether by the Purchaser's Group or any third party are
provided on terms no less beneficial to the recipient than any
similar goods or services are provided to any other member of the
Purchaser's Group;
13.5 to procure that the Company does not depart from the ordinary
course of the conduct of its business as conducted in the financial
year ending on the Accounting Date;
14. The Purchaser further undertakes with the Vendors that the Company will:
14.1 not enter into any material abnormal contract or commitment or any
contract or commitment involving an aggregate expenditure by the
Company (in accordance with its normal accounting policies at
Completion) of more than L5,000 unless agreed by the Vendors;
14.2 not declare, make or pay any dividend or other distribution;
14.3 not create or agree to create any encumbrance or redeem or agree to
redeem any encumbrance (other than trade guarantees or indemnities
in the ordinary course of its business) of the type and scale given
in the financial year ending on the Accounting Date; and
14.4 not permit any of its insurance policies to lapse, become void or
voidable or do anything adversely to affect their renewal on the
insurers standard (or, if different, the existing) terms.
15. The Purchaser shall be obliged to comply with its undertakings in Clauses
1 to 14 above only if and for so long as the Company's Pre-Tax Profits
continue to meet the Quarterly Profit Estimates, such that if the
Company's Pre-Tax Profits fail to meet two consecutive Quarterly Profit
Estimates by 50% or more and the aggregate of any preceding Quarterly
Profit Estimates is below 50% of estimate the Purchaser shall henceforth
be released from all and any of its obligations under this Part 3 of this
Schedule.
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16. The Purchaser shall not give any direction to the trustee of the employee
benefit trust established by the Company without the consent of the
Vendors.
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SCHEDULE 3
QUARTERLY PROFIT ESTIMATES
PERIOD PROFIT ESTIMATE L('000)
------ -----------------------
October - December 1998 112
January - March 1999 141
April - June 1999 205
July - September 1999 350
October - December 1999 313
January - March 2000 309
April - June 2000 213
July - September 2000 419
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SIGNED BY ▇▇▇▇ ▇▇▇▇▇ )
in the presence of: )
SIGNED BY ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ )
in the presence of: )
SIGNED BY: _________________ )
duly authorised and on )
behalf of LOUVRE TRUSTEES )
LIMITED )
in the presence of: )
SIGNED BY: _________________ )
duly authorised and on )
behalf of JAVELIN SYSTEMS, INC. )
in the presence of: )
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