SHARE PURCHASE AGREEMENT
This SHARE PURCHASE AGREEMENT (the "Agreement") is dated as of
June 21, 1999 among Vertex Industries Inc., a company organized under the laws
of New Jersey ("Purchaser"), St Georges Trustees Limited, a company organized
under the laws of Jersey, as trustee on behalf of The Xxxx Xxxxx Settlement and
The Xxxxxxx Xxxxx Settlement (the "Trustees"), Xxxx Xxxxx and Xxxxx X. Xxxxxxx,
(collectively the "Shareholders" and individually a "Shareholder") and Xxxxxxx
Xxxxx. Certain capitalized terms used herein are defined in Section 12.13.
W I T N E S E T H:
WHEREAS, immediately prior to Closing, the Shareholders will
own all of the shares listed on Exhibit A which include (i) all of the ordinary
shares of Portable Software Solutions Limited, a company organized under the
laws of England ("PSS"), (ii) all of the ordinary shares of Portable Software
Solutions (Maintenance) Limited, a company organized under the laws of England
("PSSML"), and (iii) all of the ordinary shares of Trend Investments Limited, a
company organized under the laws of the Republic of Ireland ("Trend", and
together with PSS, and PSSML, the "Companies"), constituting all issued and
outstanding share capital of each of the Companies (such shares being referred
to herein as the "Shares"); and
WHEREAS, the Shareholders desire to sell, and Purchaser
desires to purchase, all of the Shares on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and of the
mutual covenants and agreements herein contained and for other good and valuable
consideration, the receipt whereof is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.1 Purchase and Sale. Each of the Shareholders, as legal and
beneficial owner and with full title guarantee, agrees to sell to Purchaser, and
Purchaser agrees to purchase from each of the Shareholders, all of the right,
title and interest of such Shareholder in and to the Shares at the Closing on
the terms and subject to the conditions set forth in this Agreement. Each of the
Shareholders waives or agrees to procure the waiver of any rights or
restrictions conferred upon any of them or any other Person which may exist in
relation to the Shares under the Organizational Documents of the respective
Companies or otherwise.
1.2 Purchase Price. The aggregate purchase price for the
Shares shall be an amount equal to the aggregate of (x) the Closing Payment, (y)
the First Additional Payment, if any, and (z) the Second Additional Payment, if
any, (collectively, the "Purchase Price"), payable in the manner and at the
times provided in Sections 1.3 and 1.5. Notwithstanding the foregoing, the
aggregate amount of the Purchase Price shall be not less than the Closing
Payment Amount nor greater than 'L'13.5 million.
1.3 Closing; Escrow.
(a) Closing. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Milbank, Tweed, Xxxxxx
& XxXxxx, London, England or at such other location as may be agreed upon by the
parties at 10:00 A.M. London time on the Closing Date.
(b) Closing Payment. At the Closing, Purchaser shall (i) pay
by wire transfer of immediately available funds, to the Client Account of Finers
Solicitors, 'L'3.75 million reduced by the Escrow Amount (as defined in
Section 12.13) to be deposited in escrow as set forth below (each Shareholder's
pro rata share of the Closing Payment, the First Additional Payment, the Second
Additional Payment and Escrow Amount is set forth in Exhibit A), and (ii)
deliver a certificate or certificates representing such Shareholder's pro-rata
share of the Closing Shares. On the Closing Date, the Escrow Amount shall be
delivered by Purchaser by wire transfer of immediately available funds to
____________, as escrow agent (the "Escrow Agent") under an escrow agreement to
be entered into on the Closing Date by the Shareholders,
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Purchaser and the Escrow Agent substantially in the form of Exhibit B hereto
(the "Escrow Agreement").
(c) Deferred Consideration (i) Within 15 days following the
First Deferred Consideration Period, Ernst & Young, LLP, as Purchaser's
accounting advisor, shall calculate the First Express Liability Amount based on
the books and records of PSS prepared in a manner consistent with the Audited
Financial Statements and having regard to the contents of the Memorandum dated
16 March, 1999 attached as Exhibit L hereto, and shall deliver such calculation
to the Shareholders' Agent and the Shareholders' advisors. The Shareholders'
Agent and the Shareholders' advisors may participate in and observe the
preparation of the calculation of the First Express Liability Amount.
(ii) Within 15 days following the Second Deferred
Consolidation Period, Ernst & Young, LLP, shall calculate the Second Express
Liability Amount in the manner set forth in Section 1.3(c)(i) above.
(iii) Within seven days following the calculation of
the First Express Liability Amount and the Second Express Liability Amount, the
Purchaser shall pay by wire transfer of immediately available funds to the
Client Account of the Shareholders' Agent an amount equal to the First Express
Liability Amount and Second Express Liability Amount respectively, provided,
that if the First Express Liability Amount or the Second Express Liability
Amount is a negative number the Purchaser shall not make the respective payment
to the Shareholders.
(iv) The reasonable fees of and expenses incurred by
the Ernst & Young, LLP, in connection with the determination of the First
Express Liability Amount and the Second Express Liability Amount shall be
payable by PSS.
1.4 Deliveries/Actions at the Closing.
(a) At the Closing, the Shareholders shall:
(i) deliver certified copies of each of the Company's and its
Subsidiaries' Organizational Documents and corporate
resolutions with respect to the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby;
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(ii) assign and transfer to Purchaser (or a direct or indirect
wholly-owned Subsidiary of Purchaser) all of the
Shareholders' right, title and interest in and to the
Shares by delivering to Purchaser share certificates
representing 100% of all of the issued and outstanding
shares of each of the Companies and transfers in common
form relating to all of the Shares duly executed in favor
of Purchaser(or a direct or indirect wholly-owned
Subsidiary of Purchaser);
(iii) deliver releases or confirmations addressed to the
Purchaser, in form and content satisfactory to Purchaser,
(1) that each Company has paid in full all of the
Indebtedness of such Company and its Subsidiaries, other
than Indebtedness which is included in the calculation of
the Closing Working Capital Amount, (2) that all of the
directors and Shareholders (and their Affiliates) of each
Company have paid in full all of their Indebtedness (if
any) owed to each Company or its Subsidiaries whether or
not such sums are due for repayment, and (3) of the
release and termination of any and all security interests
and other Encumbrances against the assets of each Company
or its Subsidiaries which constitute collateral security
for payment of any Indebtedness of any of the Companies
or their Subsidiaries;
(iv) deliver an opinion of Finers Solicitors, counsel to
Shareholders, dated the date of the Closing Date, in form
and substance reasonably satisfactory to Purchaser;
(v) deliver all necessary approvals and consents required for
the consummation of the transactions contemplated hereby;
(vi) deliver all waivers or consents by members or
shareholders, as applicable, of any of the Companies or
other persons which Purchaser has specified prior to
Closing so as to enable Purchaser or its nominees to be
registered as the holders of the Shares;
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(vii) deliver the written resignations of the auditors of each
of the Companies and its Subsidiaries containing an
acknowledgement that they have no claim against any of
the Companies or their Subsidiaries for compensation for
loss of office, professional fees or otherwise and a
statement under section 394(1) of the United Kingdom's
Companies Xxx 0000;
(viii) deliver the common seals, Organizational Documents and
statutory books, share certificate books and check books
of each of the Companies and its Subsidiaries;
(ix) to the extent not in the possession of any of the
Companies and their Subsidiaries, deliver all books of
account or references as to customers and/or suppliers
and other records and all insurance policies in any way
relating to or concerning the businesses of each of the
Companies and its Subsidiaries;
(x) to the extent not in the possession of any of the
Companies and their Subsidiaries, deliver all licenses,
consents, permits and authorizations obtained by or
issued to any of the Companies or their Subsidiaries or
any other Person in connection with the business carried
on by any of them and such contracts, deeds or other
documents (including assignments of any such licenses) as
shall have been required by Purchaser prior to the date
hereof;
(xi) deliver share certificates relating to all of the issued
shares in the capital of each of the Companies'
Subsidiaries;
(xii) deliver a release in the agreed terms duly executed as a
deed, in a form satisfactory to Purchaser, releasing each
of the Companies and its Subsidiaries and their
respective officers or employees from any Liability
whatsoever (actual or contingent) which may be owing to
the Shareholders or any of their connected persons by any
of the Companies or its Subsidiaries, other than salary
or other renumeration or expenses which may be accrued
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but have not been drawn and which are in the ordinary
course; and
(xiii) deliver an assignment to Purchaser of the benefit of any
confidentiality undertakings given to any of them by any
Person within the last two years in relation to a sale or
potential sale by the Shareholders of the Shares, the
Companies and their Subsidiaries or their assets or any
portion thereof.
(b) At the Closing, Purchaser shall deliver the following:
(i) certified copies of Purchaser's Organizational Documents
and corporate resolutions with respect to the execution,
delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby;
(ii) to each of the Shareholders, the Closing Payment to which
each such Shareholder is entitled under the provisions of
this Agreement, reduced by such Shareholder's pro-rata
share of the Escrow Amount;
(iii) to each of the Shareholders, share certificates
representing the number of Closing Shares to which each
such Shareholder is entitled under the provisions of this
Agreement;
(iv) all necessary approvals and consents required for the
consummation of the transactions contemplated hereby;
(v) to the Escrow Agent, cash representing the Escrow Amount;
and
(vi) an opinion of Milbank, Tweed, Xxxxxx & XxXxxx, counsel to
Purchaser, dated the Closing Date, in form and substance
reasonably satisfactory to the Shareholders, Agent.
(c) At the Closing, the Shareholders and Purchaser shall
deliver or cause to be delivered, the following documents, each duly executed by
the parties thereto:
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(i) the Escrow Agreement, in the form of Exhibit B;
(ii) the Employment Agreements with:
(1) Xxxx Xxxxx, in the form of Exhibit C;
(2) Xxxxx Xxxxxxx, in the form of Exhibit D;
(iii) the Consultancy Agreement with Albion Marketing Services
Limited in the form of Exhibit E;
(iv) the Taxation Deed in the form of Exhibit F;
(v) the Registration Rights Agreement in the form of Exhibit
G.
1.5 Purchase Price Adjustment.
(a) Within 45 days following December 31, 1999, the Group's
income statements for the twelve months ended December 31, 1999 (the "1999
Income Statement", and together with Group's income statements for the twelve
months ended December 31, 1998, a copy of which is contained in Document 76 in
Appendix B of the Disclosure Letter, the "1999 Average EBT Income Statements"),
prepared by Ernst & Young, LLP, in a manner consistent with (using the
accounting policies and bases employed in the preparation of) the Audited
Financial Statements, and taking into account the Calculation Adjustments
defined in Section 1.5(e) below, shall be made available to the Shareholders'
Agent and to Xxx Xxxxxx & Co. If the Shareholders fail to notify Purchaser of
their disagreement with the 1999 Average EBT (as defined in Section 12.13) in
accordance with paragraph (d) of this Section 1.5, the 1999 Average EBT based on
the 1999 Average EBT Income Statements shall be final and binding on the
Shareholders and Purchaser for all purposes of this Agreement. If the First
Additional Payment is greater than zero, then Purchaser shall, within 10 days
following the date the determination of the 1999 Average EBT becomes final and
binding on Shareholders and Purchaser (the "1999 Closing Date"), pay in the
manner set forth in paragraph (c) of this Section 1.5, subject to the
limitations of the last sentence of Section 1.2, such Shareholder's pro rata
share of the First Additional Payment.
(b) Within 45 days following December 31, 2000, the Group's
income statement for the twelve months ended December 31, 2000 (the "2000 Income
Statement", and together with the
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1999 Income Statement, the "2000 Average EBT Income Statements"), prepared by
Ernst & Young, LLP, in a manner consistent with (using the accounting policies
and bases employed in the preparation of) the Audited Financial Statements, and
taking into account the Calculation Adjustments defined in Section 1.5(e) below,
shall be made available to the Shareholders' Agent and to Xxx Xxxxxx & Co. If
the Shareholders fail to notify Purchaser of their disagreement with the 2000
Average EBT (as defined in Section 12.13) in accordance with paragraph (d) of
this Section 1.5, the 2000 Average EBT based on the 2000 Average EBT Income
Statements shall be final and binding on the Shareholders and Purchaser for all
purposes of this Agreement. If the Second Additional Payment is greater than
zero, then Purchaser shall, within 10 days following the date the determination
of the 2000 Average EBT becomes final and binding on Shareholders and Purchaser
(the "2000 Closing Date"), pay such Shareholder's pro rata share of the Second
Additional Payment in the manner set forth in paragraph (c) of this Section 1.5,
subject to the limitations of the last sentence of Section 1.2.
(c) Purchaser shall deliver a written notice ("Purchaser
Notice") to the Shareholders' Agent at least 10 Business Days prior to the 1999
Closing Date or 2000 Closing Date, as the case may be, setting forth the
proportions of the First Additional Payment or the Second Additional Payment, as
the case may be, to be made in cash and shares of VTX Common Stock. Purchaser
shall pay the First Additional Payment or the Second Additional Payment, as the
case may be, by (i) paying by wire transfer of immediately available funds to
such accounts as the Shareholders may reasonably direct by written notice
delivered by the Shareholders Agent to Purchaser at least two Business Days
prior to the 1999 Closing Date or the 2000 Closing Date, as the case may be,
such Shareholder's pro-rata share of the amount in cash designated in such
notice delivered by Purchaser, and (ii) delivering a certificate or certificates
representing such Shareholder's pro-rata share of the First Additional Shares or
the Second Additional Shares, as the case may be. The proportion of cash and
shares of VTX Common Stock for each of the First Additional Payment and the
Second Additional Payment shall be determined by Purchaser in its sole
discretion; provided, however, not less than 25% and not more than 75% of the
First Additional Payment or the Second Additional Payment, as the case may be,
may be made in shares of VTX Common Stock without the written consent of the
Shareholders' Agent.
(d) The Shareholders' Agent and Xxx Xxxxxx & Co. shall notify
Purchaser in writing within 30 days following
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receipt of the 1999 Average EBT Income Statements or the 2000 Average EBT Income
Statements, as the case may be, if they do not agree with the calculations set
forth therein, in which case the Shareholders' Agent and Purchaser will use good
faith efforts during the 10-day period following the date of such written notice
to resolve any differences they may have. Such written notice will identify with
reasonable specificity the calculations with which the Shareholders' Agent and
Xxx Xxxxxx & Co. disagree or other bases for such disagreement; provided that
the Shareholders' Agent and Xxx Xxxxxx & Co. may not set forth any disagreement
with any item on either the 1999 Average EBT Income Statements or the 2000
Average EBT Income Statements to the extent that such item is calculated in a
manner consistent with that employed in the preparation of PSS's Audited
Financial Statements. To the extent that there is any dispute relating to the
accounting policies and bases employed in the preparation of the Audited
Financial Statements, the determination with respect thereto shall be made by
Xxx Xxxxxx & Co. If the Shareholders' Agent and Purchaser cannot reach agreement
during such 10-day period, their disagreements shall be promptly submitted to a
United Kingdom independent accounting firm of recognized stature jointly
selected by the Shareholders' Agent and Purchaser (the "Independent
Accountant"), which shall conduct such additional review as is necessary to
resolve the specific disagreements referred to it and, based thereon and having
due regard for consistency with PSS's Audited Financial Statements, shall
determine the 1999 Average EBT or the 2000 Average EBT, as the case may be. The
review of the Independent Accountant will be restricted as to scope to address
only those matters as to which the Shareholders' Agent and Purchaser have not
reached agreement pursuant to the preceding sentence. The Independent
Accountant's determination of the 1999 Average EBT or the 2000 Average EBT, as
the case may be, shall be completed as promptly as practicable but in no event
later than 25 days following its selection, shall be confirmed by the
Independent Accountant in writing to, and shall be final and binding on, the
Shareholders and Purchaser for purposes of this Section 1.5.
(e) Notwithstanding anything to the contrary set forth in
Section 1.5(a) and (b) of this Agreement, for the sole purpose of calculating
the 1999 Income Statement, 1999 Average EBT, 2000 Income Statement and 2000
Average EBT (the "Statements"):
(i) management and overhead expenses of VTX and/or any
Subsidiaries of VTX other than the Companies and/or their Subsidiaries
(the "VTX Subsidiaries") will be
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reflected as if charged against the Companies and/or their
Subsidiaries only to the extent such expenses are reasonable in the
aggregate and relate to goods, services and/or functions actually
provided to the Companies and/or their Subsidiaries by VTX and the VTX
Subsidiaries;
(ii) any interest costs or other financing expenses incurred
or allocated to the Companies and/or their Subsidiaries will be
disregarded, except to the extent that the proceeds of such financing
are either (x) applied to the refinancing of third party debt of the
Companies and/or their Subsidiaries outstanding on the Closing Date or
(y) applied to the financing of any of the activities of the Companies
and/or their Subsidiaries;
(iii) the benefit of any interest that would have been earned
by the Companies and/or their Subsidiaries on cash surpluses in
accordance with the policies employed by the Companies and/or their
Subsidiaries as at the time of signing this Agreement, which have been
utilized by VTX and/or the VTX Subsidiaries will be taken into account
when preparing and calculating the Statements;
(iv) any costs incurred by the Companies and/or their
Subsidiaries as a result of an acquisition, or any material expenses
incurred by the Companies and/or their Subsidiaries, at the direction
of VTX, which were objected to at the time by any two of the
Individuals, will be disregarded;
(v) all expenses reasonably and properly incurred by VTX
and/or the VTX Subsidiaries in the operation of the Companies and/or
their Subsidiaries will be taken into account when preparing and
calculating the statements as if such expenses had been incurred by the
Companies and/or their Subsidiaries;
(vi) any accounting charges or effects, which could not have
been incurred but for the consummation of the transactions contemplated
by this Agreement, including without limitation any amortization or
depreciation expenses relating to or resulting from the writeup of
goodwill or assets resulting from the transactions contemplated by this
Agreement, will be disregarded; and
(vii) any transaction (including any transaction contemplated
by clause (i) to (v) above) between any of
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the Companies and/or their Subsidiaries, on the one hand, and VTX and
any of the VTX Subsidiaries on the other, will be reflected as if the
economic or financial terms of such transaction are consistent with
those of an arms-length transaction, regardless of the actual economic
or financial terms of such transaction.
(f) The fees of and expenses incurred by the Independent
Accountant in connection with the determination of the 1999 Average EBT or the
2000 Average EBT shall be payable between the parties as follows: (a) if the
amount determined by the Independent Accountant is within 5% of the amount
notified to the Shareholders' Agent by the Purchaser under the provisions of
Section 1.5(d) the fees and expenses incurred by the Independent Accountant
shall be borne by the Individuals and (b) if the amount determined by the
Independent Accountant is more than 5% of the amount notified to the
Shareholders' Agent by the Purchaser under the provisions of Section 1.5(d) the
fees and expenses incurred by the Independent Accountant shall be borne by the
Purchaser.
1.6 Further Assurances; Post-Closing Cooperation.
(a) At any time or from time to time after the Closing, each
of the Shareholders shall execute and deliver to Purchaser such other documents
and instruments, provide such materials and information and take such other
actions as Purchaser may reasonably request more effectively to vest title to
the Shares in Purchaser and, to the full extent permitted by Law, to put
Purchaser in actual possession and operating control of each Company and its
Subsidiaries and their assets and properties and Books and Records, and
otherwise to cause each of the Shareholders to fulfill its obligations under
this Agreement and the Operative Agreements to which it is a party.
(b) Following the Closing, each party will afford the other
party, its counsel and its accountants, during normal business hours, reasonable
access to the Books and Records in its possession with respect to periods prior
to the Closing and the right to make copies and extracts therefrom, to the
extent that such access may be reasonably required by the requesting party in
connection with (i) the preparation of Tax Returns, (ii) the determination or
enforcement of rights and obligations under this Agreement or the Taxation Deed,
(iii) compliance with the requirements of any Governmental or Regulatory
Authority, (iv) the determination or enforcement of the rights and obligations
of any party to this Agreement or any of the Operative Agreements or (v) in
connection with any
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actual or threatened Action or Proceeding. Further, each party agrees for a
period extending six years after the Closing Date not to destroy or otherwise
dispose of any such Books and Records unless such party shall first offer in
writing to surrender such Books and Records to the other party and such other
party shall not agree in writing to take possession thereof during the 10 day
period after such offer is made.
(c) If, in order properly to prepare its Tax Returns, other
documents or reports required to be filed with Governmental or Regulatory
Authorities or its financial statements or to fulfill its obligations hereunder,
or to review the 1999 Average Income Statement or the 2000 Average Income
Statement, it is necessary that a party be furnished with additional
information, documents or records relating to the Business or Condition of each
Company not referred to in paragraph (b) above, and such information, documents
or records are in the possession or control of the other party, such other party
shall use its best efforts to furnish or make available such information,
documents or records (or copies thereof) at the recipient's request, cost and
expense. Any information obtained by the Shareholders in accordance with this
paragraph shall be held confidential by the Shareholders.
(d) Notwithstanding anything to the contrary contained in this
Section, if the parties are in an adversarial relationship in litigation or
arbitration, the furnishing of information, documents or records in accordance
with any provision of this Section shall be subject to applicable rules relating
to discovery.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE PARTICIPANTS
Each of the Shareholders, and Xxxxxxx Xxxxx (collectively, the
"Participants") severally represents and warrants to Purchaser with respect to
each Company and its Subsidiaries and/or such Participants, as the case may be,
(except as disclosed in the Disclosure Letter either against a particular
subclause or against the representations and warranties generally) as follows:
2.1 Corporate Existence and Qualification. Each Company is a
corporation duly incorporated and validly existing under the Laws of its
jurisdiction, and has full
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corporate power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties. Each Company is
duly qualified, licensed or admitted to do business in those jurisdictions
specified in Section 2.1 of the Disclosure Letter, which are the only
jurisdictions in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for those jurisdictions in which the
adverse effects of all such failures by such Company and its Subsidiaries to be
qualified, licensed or admitted can in the aggregate be eliminated without
material cost or expense by such Company or a Subsidiary, as the case may be,
becoming qualified, licensed or admitted. The Shareholders have prior to the
execution of this Agreement delivered to Purchaser true and complete copies of
the Organizational Documents of each Company as in effect on the date hereof.
2.2 Capital Stock. (a) The authorized share capital of PSS
consists solely of 300,000 ordinary shares of 10p each of which only 251,000
ordinary shares are issued.
(b) The authorized share capital of PSSML consists solely of
100,000 ordinary shares of 'L'1 each of which only 200 ordinary shares are
issued.
(c) The authorized share capital of Trend consists solely of
200,000 "A" ordinary shares of 20p each, 200,000 "B" ordinary shares of 20p
each, and 100,000 "C" ordinary shares of 20p each, of which only 85 "A" ordinary
shares, 85 "B" ordinary shares and 30 "C" ordinary shares are issued.
(d) The Shares comprise the entire issued ordinary shares of
PSS, PSSML and Trend as of Closing.
(e) As of Closing, the Shares will be duly authorized, validly
issued, outstanding, fully paid and nonassessable. As of Closing, the
Shareholders will own the Shares, beneficially and of record, free and clear of
all Encumbrances. There are no outstanding Options with respect to any of the
Companies. The delivery of a certificate or certificates at the Closing
representing the Shares in the manner provided in Section 1.4 will transfer to
Purchaser good and valid title to the Shares, free and clear of all
Encumbrances.
2.3 Subsidiaries. Section 2.3 of the Disclosure Letter lists
the names of each of the Companies' Subsidiaries and all lines of business in
which each Subsidiary is
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participating or engaged. Each Subsidiary is a corporation duly incorporated and
validly existing under the Laws of its jurisdiction of incorporation identified
in Section 2.3 of the Disclosure Letter, and has full corporate power and
authority to conduct its business as and to the extent now conducted and to own,
use and lease its assets and properties. Each Subsidiary is duly qualified,
licensed or admitted to do business in those jurisdictions specified in Section
2.3 of the Disclosure Letter, which are the only jurisdictions in which the
ownership, use or leasing of such Subsidiary's assets and properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for those jurisdictions in which the adverse effects
of all such failures by such Company and its Subsidiaries to be qualified,
licensed or admitted can in the aggregate be eliminated without material cost or
expense by such Company or Subsidiary, as the case may be, becoming qualified,
licensed or admitted. Section 2.3 of the Disclosure Letter lists for each
Subsidiary the amount of its authorized capital stock, the amount of its
outstanding capital stock and the record owners of such outstanding capital
stock. Except as disclosed in Section 2.3 of the Disclosure Letter, all of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable, and are owned,
beneficially and of record, by such Company or Subsidiaries wholly owned by such
Company free and clear of all Encumbrances. There are no outstanding Options
with respect to any Subsidiary. The Shareholders have prior to the execution of
this Agreement delivered to Purchaser true and complete copies of the
Organizational Documents of each of the Subsidiaries as in effect on the date
hereof.
2.4 Authorization. Each Participant has full power and
authority to enter into this Agreement and the Operative Agreements to which it
is a party, and to carry out the transactions contemplated hereby and thereby,
and each of this Agreement and the Operative Agreements is a valid and binding
obligation of each Participant enforceable against such Participant in
accordance with their terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar Laws
relating to or affecting the rights of creditors generally, or by general
equitable principles.
2.5 No Violation. The execution and delivery by each
Participant of this Agreement does not, and the execution and delivery by each
Participant of the Operative Agreements to which it is a party, the performance
by each of the
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Participant of its obligations under this Agreement and such Operative
Agreements and the consummation of the transactions contemplated hereby and
thereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of any the Organizational Documents of the
Trustees, any Company or any Subsidiary;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.5 of the
Disclosure Letter, conflict with or result in a violation or breach of any term
or provision of any Law or Order applicable to any Participant, any Company or
Subsidiary or any of their respective assets and properties; or
(c) except as disclosed in Section 2.5 of the Disclosure
Letter, (i) conflict with or result in a violation or breach of, (ii) constitute
(with or without notice or lapse of time or both) a default under, (iii) require
any Participant, Company or Subsidiary to obtain any consent, approval or action
of, make any filing with or give any notice to any Person as a result or under
the terms of, (iv) result in or give to any Person any right of termination,
cancellation, acceleration or modification in or with respect to, (v) result in
or give to any Person any additional rights or entitlement to increased,
additional, accelerated or guaranteed payments under, or (vi) result in the
creation or imposition of any Encumbrance upon any Participant, Company or
Subsidiary or any of their respective assets and properties under, any Contract
or license to which any Participant, Company or Subsidiary is a party or by
which any of their respective assets and properties is bound.
2.6 Governmental Approvals and Filings. Except as disclosed in
Section 2.6 of the Disclosure Letter, no consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority on the part of any
Shareholder, Company or Subsidiary is required in connection with the execution,
delivery and performance of this Agreement or any of the Operative Agreements to
which it is a party or the consummation of the transactions contemplated hereby
or thereby.
2.7 Books and Records. The minute books and other similar
records of each Company and its Subsidiaries as made available to Purchaser
prior to the execution of this Agreement contain a true and complete record, in
all material
14
respects, of all action taken at all meetings and by all written consents in
lieu of meetings of the stockholders, the boards of directors and committees of
the boards of directors of such Company and its Subsidiaries. The stock transfer
ledgers and other similar records of each Company and its Subsidiaries as made
available to Purchaser prior to the execution of this Agreement accurately
reflect all record transfers prior to the execution of this Agreement in the
capital stock of such Company and its Subsidiaries. Except as set forth in
Section 2.7 of the Disclosure Letter, neither the Companies nor any Subsidiary
has any of its Books and Records recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Companies or its Subsidiaries.
2.8 Financial Statements. (a) Annexed hereto in Section 2.8 of
the Disclosure Letter are true and complete copies of the audited balance sheets
of each Company and its consolidated Subsidiaries as of December 31, 1998, and
the related audited consolidated statements of operations, stockholders' equity
and cash flows for the fiscal year ended December 31, 1998, together with a true
and correct copy of the report on such audited information by Xxx Xxxxxx & Co.,
and all letters from such accountants with respect to the results of such audits
(collectively, the "Audited Financial Statements"); and
(b) Except as set forth in the notes thereto and as disclosed
in Section 2.8 of the Disclosure Letter, all such financial statements (i) were
prepared in accordance with GAAP, (ii) fairly present the consolidated financial
condition and results of operations of such Company and its consolidated
Subsidiaries as of the respective dates thereof and for the respective periods
covered thereby, and (iii) were compiled from the Books and Records of such
Company and its Subsidiaries regularly maintained by management and used to
prepare the financial statements of such Company and its Subsidiaries in
accordance with the principles stated therein. Each Company and its Subsidiaries
have maintained their respective Books and Records in a manner sufficient to
permit the preparation of financial statements in accordance with GAAP. Except
for those Subsidiaries listed in Section 2.8 of the Disclosure Letter, the
financial condition and results of operations of each Subsidiary are, and for
all periods referred to in this Section 2.8 have been, consolidated with those
of the Companies.
15
2.9 Absence of Changes. Except for the execution and delivery
of this Agreement and the transactions to take place pursuant hereto on or prior
to the Closing Date, since the Financial Statement Date there has not been any
material adverse change, or any event or development which, individually or
together with other such events, could reasonably be expected to result in a
material adverse change, in the Business or Condition of the Companies. Without
limiting the foregoing, except as disclosed in Section 2.9 of the Disclosure
Letter, there has not occurred between the Financial Statement Date and the date
hereof:
(i) any declaration, setting aside or payment of any dividend
or other distribution in respect of the capital stock of any Company or
any Subsidiary not wholly owned by a Company, or any direct or indirect
redemption, purchase or other acquisition by any Company or Subsidiary
of any such capital stock of or any Option with respect to any Company
or any Subsidiary not wholly owned by a Company;
(ii) any authorization, issuance, sale or other disposition by
any Company or Subsidiary of any shares of capital stock of or Option
with respect to any Company or Subsidiary, or any modification or
amendment of any right of any holder of any outstanding shares of
capital stock of or Option with respect to any Company or Subsidiary;
(iii) (x) any increase in the salary, wages or other
compensation of any officer, employee or consultant of any Company or
Subsidiary whose annual salary is, or after giving effect to such
change would be, 'L'30,000 or more; (y) any establishment or
modification of (A) targets, goals, pools or similar provisions in
respect of any fiscal year under any benefit plan, employment-related
Contract or other employee compensation arrangement or (B) salary
ranges, increase guidelines or similar provisions in respect of any
benefit plan, employment-related Contract or other employee
compensation arrangement; or (z) any adoption, entering into or
becoming bound by any benefit plan, employment-related Contract or
collective bargaining agreement, or amendment, modification or
termination (partial or complete) of any benefit plan,
employment-related Contract or collective bargaining agreement, except
to the extent required by applicable Law and, in the event compliance
with legal requirements presented options, only to the extent the
option which such Company or
16
Subsidiary reasonably believed to be the least costly was chosen;
(iv) (A) incurrences by any Company or Subsidiary of Indebtedness
in an aggregate principal amount exceeding 'L'25,000 (net of any
amounts discharged during such period), or (B) any voluntary purchase,
cancellation, prepayment or complete or partial discharge in advance of
a scheduled payment date with respect to, or waiver of any right of any
Company or Subsidiary under, any Indebtedness of or owing to any
Company or Subsidiary;
(v) any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the plant, real
or personal property or equipment of any Company or Subsidiary in an
aggregate amount exceeding 'L'10,000;
(vi) any material change in (x) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or
Taxation practice or policy of any Company or Subsidiary, or (y) any
method of calculating any bad debt, contingency or other reserve of any
Company or Subsidiary for accounting, financial reporting or Taxation
purposes, or any change in the fiscal year of any Company or
Subsidiary;
(vii) any write-off or write-down of or any determination to write
off or write down any of the assets and properties of any Company or
Subsidiary in an aggregate amount exceeding 'L'10,000;
(viii) any acquisition or disposition of, or incurrence of a
Encumbrance on, any assets and properties of any Company or Subsidiary,
other than in the ordinary course of business consistent with past
practice;
(ix) any (x) amendment of the Organizational Documents of any
Company or Subsidiary, (y) recapitalization, reorganization,
liquidation or dissolution of any Company or Subsidiary or (z) merger
or other business combination involving any Company or Subsidiary and
any other Person;
(x) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any
consent with respect to (A) any Contract which is required (or had it
been in effect on the date hereof would have been required) to be
disclosed
17
in the Disclosure Letter pursuant to Section 2.18(a) or (B) any
material license held by any Company or Subsidiary;
(xi) capital expenditures or commitments for additions to
property, plant or equipment of any Company or Subsidiary constituting
capital assets in an aggregate amount exceeding 'L'10,000;
(xii) any commencement or termination by any Company or
Subsidiary of any line of business;
(xiii) any transaction by any Company or Subsidiary with any
Shareholder, any officer, director or Affiliate (other than any Company
or Subsidiary) of such Shareholder (A) outside the ordinary course of
business consistent with past practice or (B) other than on an
arm's-length basis, other than pursuant to any Contract in effect on
the Financial Statement Date and disclosed pursuant to Section
2.18(a)(vi) of the Disclosure Letter;
(xiv) any entering into of a Contract to do or engage in any
of the foregoing after the date hereof; or
(xv) any other transaction involving or development affecting
any Company or Subsidiary outside the ordinary course of business
consistent with past practice.
2.10 No Undisclosed Liabilities. Except as reflected or
reserved against in the balance sheet included in the Audited Financial
Statements or in the notes thereto or as disclosed in Section 2.10 of the
Disclosure Letter or any other Section of the Disclosure Letter, there are no
Liabilities against, relating to or affecting any Company or Subsidiary or any
of their respective assets and properties, other than Liabilities (i) incurred
in the ordinary course of business consistent with past practice or (ii) which,
individually or in the aggregate, are not material to the Business or Condition
of such Company.
2.11 Title to Properties; Encumbrances. Except as disclosed in
Section 2.11 of the Disclosure Letter and as sold or disposed of in the ordinary
course of business, each Company has good and valid title to all of the
properties and assets reflected in the Audited Financial Statements and all the
properties and assets purchased or otherwise acquired by each Company since the
Financial Statement Date. Except as set forth on Section 2.11 of the Disclosure
Letter, none of such properties or assets is subject to any Encumbrance. The
18
rights, properties and other assets presently owned, leased or licensed by each
Company include all rights, properties and assets necessary to permit such
Company to conduct its business in the same manner as it has been conducted
heretofore.
2.12 Plant and Equipment. The plants, structures and equipment
of each Company (owned or leased) are adequate for the conduct of the business
of such Company as presently conducted. None of the Companies have received any
notification that it is in violation of any applicable building, anti-pollution,
environmental, health or other Law, ordinance or regulation in respect of its
plants or structures or operations. To the Knowledge of Shareholders, no such
violation exists, and all related material permits, licenses and other
authorizations under such Laws have been obtained and are in effect and complied
with.
2.13 Leases. Section 2.13 of the Disclosure Letter contains an
accurate and complete list of all leases pursuant to which each Company leases
any real property and any material personal property. All such leases are valid,
binding and enforceable in accordance with their terms, and are in full force
and effect; there are no existing material defaults by such Company or, to the
Knowledge of the Shareholders, the other party thereunder; no material event of
default has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a default
thereunder; and all lessors under such leases have consented (where such consent
is necessary) to the consummation of the transactions contemplated by this
Agreement. To the Knowledge of Shareholders, all leased property and
improvements are free of any material defects.
2.14 Bank Accounts. Section 2.14 of the Disclosure Letter sets
forth the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which each Company maintains
safe deposit boxes or accounts of any nature and the names of all persons
authorized to draw thereon, make withdrawals therefrom or otherwise have access
thereto. As at May 26, 1999, the Companies held cash and cash equivalents
aggregating not less than 'L'714,016 in the form and amounts set forth next
to the name of each financial institution on Section 2.14 of the Disclosure
Letter.
19
2.15 Legal Proceedings. Except as disclosed in Section 2.15 of
the Disclosure Letter (with paragraph references corresponding to those set
forth below):
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Shareholders, threatened against, relating to or affecting the
Shareholders, any Company or Subsidiary or any of their respective assets and
properties which (i) could reasonably be expected to result in the issuance of
an Order restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements or otherwise result in a material diminution of the
benefits contemplated by this Agreement or any of the Operative Agreements to
Purchaser, or (ii) if determined adversely to any Shareholder, Company or
Subsidiary, could reasonably be expected to result in (x) any injunction or
other equitable relief against any Company or Subsidiary that would interfere in
any material respect with its business or operations or (y) Losses by any
Company or Subsidiary, individually or in the aggregate with Losses in respect
of other such Actions or Proceedings, exceeding 'L'10,000;
(b) there are no facts or circumstances to the Knowledge of
the Shareholders that could reasonably be expected to give rise to any Action or
Proceeding that would be required to be disclosed pursuant to clause (a) above;
and
(c) there are no Orders outstanding against any Company or
Subsidiary.
Prior to the execution of this Agreement, the Shareholders have delivered to
Purchaser all responses of counsel for each Company and its Subsidiaries to
auditors' requests for information delivered in connection with the Audited
Financial Statements (together with any updates provided by such counsel)
regarding Actions or Proceedings pending or threatened against, relating to or
affecting such Company or Subsidiary.
2.16 Taxes.
2.16.1 PSS and PSSML. (a) All necessary information notices,
computations and returns which are required to have been submitted have been
submitted by or on behalf of PSS and PSSML to the Inland Revenue or other
Taxation Authority (as appropriate) and all information, notices, computations
and Tax Returns submitted are accurate in all material respects and are not at
the date hereof the
20
subject of any material dispute and the Shareholders are unaware of any
circumstances likely to give rise to a dispute.
(b) All Liabilities, whether actual, deferred, contingent or
disputed, of PSS and PSSML for tax measured by reference to actual or deemed
taxable income, profits or gains made or deemed to have been made on or before
the Financial Statement Date or for which PSS and PSSML is liable at the
Financial Statement Date and for any other taxes, duties or other fiscal
impositions of any kind whatsoever (including any interest on any such amounts
and any penalties or charges imposed in relation to such amounts) arising before
the Financial Statement Date whether under the Law of the United Kingdom or any
other part thereof or any Law of any jurisdiction and whether incurred as
principal, agent or trustee, are appropriately provided for, disclosed or noted
in the Audited Financial Statements and proper provision has been made for
deferred tax in accordance with applicable accounting standards.
(c) (i) PSS and PSSML are registered taxable persons for the
purpose of the VAT legislation (as defined below) and no circumstances exist
whereby PSS or PSSML would or might become liable for value added tax as an
agent or otherwise by virtue of Section 47 of VATA or its foreign equivalent.
(ii) PSS and PSSML have complied in all respects with the
requirements and provisions of VATA and all regulations and orders made
thereunder or their foreign equivalents (the "VAT legislation") and has made and
maintained and will pending Closing make and maintain accurate and up to date
records invoices accounts and other documents required by or necessary for the
purposes of the VAT legislation.
(d) All documents in the enforcement of which PSS and PSSML
are or may be interested have been duly stamped (if applicable) and no
transaction has occurred since the Financial Statement Date whereby PSS and
PSSML may be or become liable to stamp duty reserve tax.
(e) Neither PSS nor PSSML is involved in any current dispute
with any Taxation Authority. To the Knowledge of the Shareholders, there is no
planned investigation, audit or non-routine visit by any Taxation Authority
relating to PSS or PSSML.
21
(f) PSS and PSSML have properly operated the P.A.Y.E. system
deducting tax as required by law from all payments to or treated as made to or
benefits provided for employees, ex-employees or independent contractors of PSS
and PSSML (including any such payments within Section 134 TA) and duly accounted
to the Inland Revenue for tax so deducted and has complied with all their
reporting obligations to the Inland Revenue in connection with any such payments
made or benefits provided, and no P.A.Y.E. audit in respect of PSS and PSSML
have been made by the Inland Revenue nor has the Inland Revenue notified that
any such audit will be made.
(g) To the Knowledge of the Shareholders, (i) no transaction
or event outside the normal course of business has occurred since the Financial
Statement Date in consequence of which PSS or PSSML has or may be held liable
for any Taxation or deprived of relief or allowances otherwise available to them
or (ii) no transaction or event has occurred since the Financial Statement Date
in consequence to which PSS or PSSML may otherwise be held liable for or to
indemnify any person in respect of any Taxation for which some other company or
person was primarily liable (whether by reason of any such other company being
or having been a member of the same group of companies or otherwise).
(h) To the Knowledge of the Shareholders, all transactions
entered into by PSS and PSSML on an arm's length basis and the consideration (if
any) charged or received or paid by PSS and PSSML on all transactions entered
into by them has been equal to the consideration which might have been expected
to be charged received or paid (as appropriate) between independent persons
dealing at arm's length and no notice or inquiry pursuant to Section 770 TA has
been made in connection with any of such transactions.
(i) All necessary conditions for all capital allowances (as
defined in section 832(1) TA) claimed by PSS and PSSML were at all material
times satisfied and neither PSS nor PSSML have become liable for any balancing
charge since the Financial Statement Date.
(j) (i) Neither PSS or PSSML have been the lessee under any
leases of plant or machinery save for the leases specified in Section 2.13 of
the Disclosure Letter (the Leases").
(ii) The machinery or plant subject to the Leases has in the
period which is the requisite period in respect of any expenditure thereon by an
owner or lessor for the purposes
22
of Section 39(1) of CAA been used and only been used for a qualifying purpose as
defined by the section.
(iii) No assets subject to the Leases have at any time been
leased by PSS and/or PSSML or its lessees to a person who is not resident in the
United Kingdom and does not use the machinery or plant for the purposes of a
trade carried on there.
(iv) To the Knowledge of the Shareholders, no revenue inquiry
or other circumstance which indicates that any person who is or was a lessor or
owner of equipment subject to any of the Leases will or may be denied the first
year allowances and writing down allowances by reference to which the initial
rental under that Lease was calculated.
(k) In respect of arrangements relating to group relief under
sections 402-413 TA to which PSS and/or PSSML is or have been a party:
(i) all claims by PSS and PSSML for group relief were when
made and are now valid and have been or will be allowed by way of relief from
corporation Taxation;
(ii) neither PSS or PSSML have made or are liable to make any
payment for group relief otherwise than in consideration for the surrender of
group relief allowable to them by way of relief from corporation Taxation;
(iii) PSS and PSSML are not due to receive any payments under
any arrangement or agreement for surrender of group relief by them;
(iv) no such payment exceeds or could exceed the amount
permitted by section 402(6) TA; and
(v) there exist or existed for any period of account in
respect of which a surrender has been made or purports to have been made no
arrangements such as are specified in section 410(1)-(6) TA.
(l) Neither PSS or PSSML have acquired any asset other than
trading stock from any other company belonging at the time of acquisition to the
same group of companies as PSS and PSSML within the meaning of section 170 TCGA
and no member of any group of companies of which PSS and PSSML at any material
time been the principal company (as defined in section 170(2)(b) TCGA) has so
acquired any asset.
23
2.16.2 Trend. (a) All necessary information notices,
computations and returns which are required to have been submitted have been
submitted by or on behalf of Trend to the Revenue Commissioners or other
Taxation Authority (as appropriate) and all information, notices, computations
and Tax Returns submitted are accurate in all material respects and are not at
the date hereof the subject of any material dispute and the Shareholders are
unaware of any circumstances likely to give rise to a dispute.
(b) All Liabilities, whether actual, deferred, contingent or
disputed, of Trend for tax measured by reference to actual or deemed taxable
income, profits or gains made or deemed to have been made on or before the
Financial Statement Date or for which Trend is liable at the Financial Statement
Date and for any other taxes, duties or other fiscal impositions of any kind
whatsoever (including any interest on any such amounts and any penalties or
charges imposed in relation to such amounts) arising before the Financial
Statement Date whether under the Law of the Republic of Ireland or any other
part thereof or any Law of any jurisdiction and whether incurred as principal,
agent or trustee, are appropriately provided for, disclosed or noted in the
Audited Financial Statements and proper provision has been made for deferred tax
in accordance with applicable accounting standards.
(c) (i) Trend is a registered taxable person for the purpose
of the VAT legislation (as defined below) and no circumstances exist whereby
Trend would or might become liable for value added tax as an agent or otherwise
by virtue of Section 37 of VATA or its foreign equivalent.
(ii) Trend has complied in all respects with the requirements
and provisions of VATA and all regulations and orders made thereunder or their
foreign equivalents (the "VAT legislation") and has made and maintained and will
pending Closing make and maintain accurate and up to date records invoices
accounts and other documents required by or necessary for the purposes of the
VAT legislation.
(d) All documents in the enforcement of which Trend is or may
be interested have been duly stamped (if applicable) and no transaction has
occurred since the Financial Statement Date whereby Trend may be or become
liable to stamp duty.
(e) Trend is not involved in any current dispute with any
Taxation Authority. To the Knowledge of the
24
Shareholders, there is no planned investigation, audit or non-routine visit by
any Taxation Authority relating to Trend.
(f) Trend has properly operated the P.A.Y.E. system deducting
tax as required by law from all payments to or treated as made to or benefits
provided for employees, ex-employees or independent contractors of Trend and
duly accounted to the Revenue Commissioners for tax so deducted and has complied
with all their reporting obligations to the Revenue Commissioners in connection
with any such payments made or benefits provided, and no P.A.Y.E. audit in
respect of Trend has been made by the Revenue Commissioners nor have the Revenue
Commissioners notified that any such audit will be made.
(g) To the Knowledge of the Shareholders, (i) no transaction
or event outside the normal course of business has occurred since the Financial
Statement Date in consequence of which Trend has or may be held liable for any
Taxation or deprived of relief or allowances otherwise available to them or (ii)
no transaction or event has occurred since the Financial Statement Date in
consequence of which Trend may otherwise be held liable for or to indemnify any
person in respect of any Taxation for which some other company or person was
primarily liable (whether by reason of any such other company being or having
been a member of the same group of companies or otherwise).
(h) To the Knowledge of the Shareholders, all transactions
entered into by Trend on an arm's length basis and the consideration (if
any) charged or received or paid by Trend on all transactions entered into by
them has been equal to the consideration which might have been expected to be
charged received or paid (as appropriate) between independent persons dealing at
arm's length.
(i) All necessary conditions for all capital allowances (as
defined in section 2 Taxes Consolidation Act 1997 claimed by Trend were at all
material times satisfied and Trend has not become liable for any balancing
charge since the Financial Statement Date.
(j) (i) Trend has not been the lessee under any leases of
plant or machinery save for the leases specified in Section 2.13 of the
Disclosure Letter (the "Leases")
(ii) No assets subject to the Leases have at any time been
leased by Trend or its lessees to a person who is not resident in the Republic
of Ireland and does not use the
25
machinery or plant for the purposes of a trade carried on there.
(iii) To the Knowledge of the Shareholders, no revenue inquiry
or other circumstance which indicates that any person who is or was a lessor or
owner of equipment subject to any of the Leases will or may be denied the first
year allowances and writing down allowances by reference to which the initial
rental under that Lease was calculated.
(k) Trend has never been part of a group for tax purposes.
(l) Trend has not acquired any asset other than trading stock
from any other company belonging at the time of acquisition to the same group of
companies as Trend within the meaning of section 616 Taxes Consolidation Act
1997 and no member of any group of companies of which Trend at any material time
has been the principal company (as defined in section 616 Taxes Consolidation
Act 1997) has so acquired any asset.
(m) All patents held by Trend are qualifying patents within
the meaning of Section 234 of the Taxes Consolidation Xxx 0000.
2.16.3 Portable Software Solutions Incorporated.
(a) PSSI has filed all Tax Returns (or the Tax Returns have
been filed on behalf of PSSI) required to be filed by applicable Law. All Tax
Returns were true, complete and correct and filed on a timely basis. PSSI has
paid all Taxes that are due, or claimed or asserted by any taxing authority to
be due, from PSSI for the periods covered by the Tax Returns.
(b) Except as set forth in Section 2.16.3(b) of the Disclosure
Letter, PSSI has established on its books and records reserves adequate to pay
all Taxes not yet due and payable.
(c) Except as set forth in Section 2.16.3(c) of the Disclosure
Letter, there are no tax liens upon the assets of PSSI except Encumbrances for
Taxes not yet due.
(d) Except as set forth in Section 2.16.3(d) of the Disclosure
Letter, PSSI has not requested (and no request has been made on PSSI's behalf)
any extension of time within which to file any Tax Return.
26
(e) Except as set forth in Section 2.16.3(e) of the Disclosure
Letter, (i) PSSI has not entered into any agreements with any Taxation Authority
extending the statute of limitations for the assessment of Taxes; (ii) there has
been no audit since 31 December, 1997 and there are no ongoing audits or
administrative proceedings with respect to any Taxes of PSSI; and (iii) no
deficiency for any Taxes has been suggested, proposed, asserted or assessed
against PSSI or its Subsidiaries that has not been resolved and paid in full.
(f) Except as set forth in Section 2.16.3(f) of the Disclosure
Letter, no audits or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns of PSSI.
(g) Except as set forth in Section 2.16.3(g) of the Disclosure
Letter, PSSI has not received any written ruling of a Taxation Authority
relating to Taxes or entered into any written and legally binding agreement with
any Taxation Authority relating to Taxes.
(h) Except as set forth in Section 2.16.3(h) of the Disclosure
Letter, PSSI has made available to Purchaser complete and accurate copies of all
Tax Returns and associated work papers filed by or on behalf of PSSI for all
taxable periods ending on or prior to the date of this Agreement.
(i) PSSI is not party or subject to, or bound by, any
agreements relating to the allocation or sharing of Taxes.
(j) All transactions that could give rise to an understatement
of federal income tax (within the meaning of Code 'SS'6661 for Tax Returns filed
on or before December 31, 1989, and within the meaning of Code 'SS'6662 for tax
returns filed after December 31, 1989) by PSSI have been adequately disclosed on
PSSI's Tax Returns in accordance with Code 'SS'6661(b)(2)(B) for Tax Returns
filed on or prior to December 31, 1989, and in accordance with Code
'SS'6662(d)(2)(B) for Tax Returns filed after December 31, 1989.
(k) PSSI has made valid elections under section 1362 of the
Code and any similar provision of state or local law, and such elections have
been in full force and effect for all taxable periods of PSSI since January 1,
1987.
2.17 Benefit Plans. There is not in existence, and no proposal
has been announced to establish, any retirement, health, death or disability
benefit scheme for officers or
27
employees or obligation to or in respect of present or former officers or
employees or the dependents of any such person with regard to retirement,
health, death or disability pursuant to which any Company is or may become
liable to make payments and no pension or retirement or sickness gratuity or
payment or benefit in connection with loss of office or employment is currently
being paid or has been promised by any Company to or in respect of any former
officer or former employee or a dependant of any such person.
2.18 Contracts and Commitments; No Default.
(a) Except for Contracts, commitments, plans, agreements,
licenses, leases, sales orders, purchase orders and other matters (written or
oral) set forth on Section 2.18 of the Disclosure Letter:
(i) None of the Companies have an employment agreement with
any officer, employee or agent, or any agreement that contains any severance or
termination pay Liabilities, nor is any Company subject to any Liabilities
relating to severance, termination or vacation pay (apart from normal vacation
allowances);
(ii) None of the Companies have collective bargaining or union
Contracts;
(iii) None of the Companies are restricted by agreement from
carrying on its business, or any part thereof, anywhere in the world, or from
competing with any Person in a line of business similar to any aspect of its
business, nor are any of the Companies the beneficiary of any agreement
restricting any other Person from carrying on its business, or any part thereof,
or from competing with any Company in any line of business;
(iv) None of the Companies have any debt obligation for
borrowed money, including guarantees of or agreements to acquire any such debt
obligation of others;
(v) None of the Companies are subject to any obligation or
requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any Person whether under a loan agreement,
note or otherwise;
(vi) None of the Companies are a party to any Contract or loan
to which any of its officers, directors or
28
shareholders or any Affiliate or Associate of any Company is a party;
(vii) None of the Companies are a party to any purchase or sale
Contract that continues for a period of more than twelve months (including
periods covered by any option to renew by either party);
(viii) None of the Companies are a lessor under any lease
intended as security, an owner participant in any leveraged lease transaction
or a party to a vendor arrangement or conditional sales agreement;
(ix) None of the Companies have given any power of attorney
to any Person for any purpose whatsoever;
(x) There are no outstanding sales or purchase Contracts,
commitments or proposals of any Company that will result in any loss upon
completion or performance thereof, after allowance for direct expenses; and
(xi) None of the Companies are a party to, nor is it subject
to, any other material Contracts, commitments or restrictions.
(b) True and complete copies of all documents (including all
amendments thereto) referred to in Section 2.18(a) have been delivered to
Purchaser. Section 2.18 of the Disclosure Letter contains a list of all
employees of each Company and their annual compensation and job descriptions.
All Contracts commitments or restrictions referred to in Section 2.18(a) are
valid and enforceable in accordance with their respective terms. None of the
Companies are materially in default in the performance of any of its obligations
thereunder; no event has occurred which (whether with or without notice, lapse
of time, or both, or the happening or the occurrence of any other event) would
constitute such a default thereunder; all parties under such Contracts have
consented (where such consent is necessary) to the consummation of the
transactions contemplated by this Agreement; and to the Knowledge of the
Shareholders, all other parties thereto are not in material default thereunder
and have no counterclaims, offsets and defenses with respect thereto.
2.19 Inventory. Each item of inventory of each Company,
whether or not reflected in the Audited Financial Statements, (i) except as set
forth on Section 2.19 of the Disclosure Letter, is owned by such Company and its
29
Subsidiaries free and clear of any Encumbrances, (ii) is in usable and saleable
condition in all respects, and (iii) is valued on the books of such Company in
accordance with GAAP.
2.20 Accounts Receivable. All accounts receivable of each
Company, whether or not reflected in the Audited Financial Statements, (i)
represent sales actually made in the ordinary course of business and (ii) are
valued in accordance with GAAP.
2.21 Orders, Commitments and Returns. As of May 26, 1999, the
aggregate of all accepted and unfulfilled orders for the sale of merchandise and
services entered into by the Companies exceeds 'L'4,964,000 and the
aggregate of all Contracts and commitments for the purchase of inventory by the
Companies does not exceed 'L'2,700,000 All orders for the sale of
merchandise and Contracts and commitments for the purchase of inventory were
made in the ordinary course of business, and no additional orders for the sale
of merchandise or Contracts or commitments for the purchase of inventory have
been entered into by any Company since the date listed above except in the
ordinary course of business. As of May 26, 1999, there are no claims in excess
of 'L'10,000 in the aggregate against any Company to return any of the
merchandise by reason of alleged overshipments, defective or unsuitable
merchandise or otherwise, or of merchandise in the hands of customers under an
understanding that such merchandise would be returnable.
2.22 Customers and Suppliers. Section 2.22 of the Disclosure
Letter sets forth for the twelve-month period ended on December 31, 1998: (a) a
list of the amounts collected from sales to the top 10 customers of each
Company; and (b) a list of the amounts paid to the top five suppliers of each
Company for purchases from such suppliers. As of the date of this Agreement,
there has been no material adverse change in the business relationship of any
Company with any of the customers or suppliers to whom the amounts set forth in
Section 2.22 of the Disclosure Letter relate.
2.23 Permits and Other Operating Rights. Except as set forth
on Section 2.23 of the Disclosure Letter, none of the Companies require the
consent of any third Person to permit it to operate its business in the manner
in which it presently is being conducted, and possess all material permits and
other authorizations from third Persons, including without limitation, federal,
foreign, state and local Governmental or Regulatory Authorities, presently
required by applicable provisions of Law, including statutes, regulations and
existing judicial decisions, and by the property and Contract
30
rights of third Persons, necessary to permit it to operate its business in the
manner in which it presently is being conducted.
2.24 Compliance With Law. Each Company is in material
compliance with all Laws and Orders applicable to it and its properties and
assets. Except as set forth in Section 2.24 of the Disclosure Letter, none of
the Companies have received any notification that it is in violation of any such
Laws or Orders.
2.25 Warranty or Other Claims. Other than for warranty claims
in the ordinary course of business, none of the Shareholders knows or has reason
to know of any existing, threatened, anticipated or contemplated claims,
individually or in the aggregate in excess of 'L'10,000, or any facts upon
which such a claim could be based, against any Company, for products which are
defective or fail to meet any product warranties. No claim has been asserted
against any Company for renegotiation or price redetermination of any material
business transaction and none of the Shareholders have knowledge of any facts
upon which any such claim could be based.
2.26 Intellectual Property. Except as set forth on Section
2.26 of the Disclosure Letter, each Company owns, or is licensed or otherwise
has the full right to use, all Intellectual Property material to, and used in or
necessary for the conduct of, its business as heretofore conducted. Section 2.26
of the Disclosure Letter contains an accurate and complete description of all
such Intellectual Property used or proposed to be used by each Company. Except
as set forth on Section 2.26 of the Disclosure Letter, to the Shareholders' or
Individuals' Knowledge, each Company has the sole and exclusive right to use
such Intellectual Property and the consummation of the transactions contemplated
hereby will not alter or impair any such rights; no claims have been asserted by
any Person to the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any license or agreement relating
to such Intellectual Property, and there is no valid basis for any such claim;
and the use of such Intellectual Property by such Company does not infringe on
the rights of any Person. Each Company has full right, title and interest in and
to, pursuant to existing agreements and/or applicable Law, all material
Intellectual Property developed by or on behalf of any present or past employee
of such Company while so employed, including the Shareholders, and all such
Intellectual Property now used or
31
proposed to be used by such Company is the property of such Company.
2.27 Labor Difficulties. Each Company is and has been in
material compliance with all applicable Laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
including, without limitation, any such Laws respecting employment
discrimination and occupational safety and health requirements, and there is no
organizational effort being made or threatened involving any employees of any
Company. No Actions or Proceedings relating to employment have been brought, are
pending or, to the Knowledge of the Shareholders or the Individuals, are
threatened, by or before any Governmental or Regulatory Authority.
2.28 Hazardous Materials. None of the Companies are in
material violation of any Environmental Laws (as defined in Section 12.13)
applicable to it or its properties, or any material limitations, restrictions,
conditions, standards, obligations or timetables contained in any Environmental
Law or any regulation, code, plan, Order, notice or demand letter issued,
entered, promulgated or approved thereunder. No notice or action alleging such
violation is pending or, to the Shareholders' Knowledge, threatened, and no past
or present condition or practice of the businesses conducted by any Company
would prevent continued compliance with applicable permits or give rise to any
common law or statutory Liability or otherwise form the basis of any claim,
action or proceeding with respect to any Company involving any pollutant or
hazardous or toxic material or waste.
2.29 Insurance. Section 2.29 of the Disclosure Letter contains
an accurate and complete list of all material policies of or binders for
casualty, Liability, worker's compensation and other forms of insurance owned or
held by each Company and its Subsidiaries and all pending or anticipated claims
thereunder. All such policies, or binders therefor, are in full force and
effect, all premiums with respect thereto have been paid and no notice of
cancellation or termination has been received with respect to any such policy or
binder. Such policies or binders will remain in full force and effect through
the respective dates set forth in Section 2.29 of the Disclosure Letter without
the payment of additional premiums, and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by the Agreement.
Except as set forth on Section 2.29 of the Disclosure Letter, none of the
Companies have been refused any insurance with respect to its assets or
32
operations, nor has its coverage been limited, by any insurance carrier to which
it has applied for any such insurance or with which it has carried insurance
during the last five years. Except as set forth on Section 2.29 of the
Disclosure Letter, since May 26, 1999, none of the Companies have received any
notification from any insurer, agent or broker denying or disputing any claim
made by such Company, or any coverage for any such claim or the amount of any
claim, and no such denied or disputed claims made prior to May 26, 1999 are
pending.
2.30 Insider Interests. Except as set forth on Section 2.31 of
the Disclosure Letter, no officer, director or shareholder of any Company has
any interest (other than as a shareholder of such Company) in any property, real
or personal, tangible or intangible, including without limitation Intellectual
Property, used in or pertaining to the business of any Company.
2.31 Employees
(a) Section 2.31 of the Disclosure Letter sets out:
(i) a list of all the employees of the Companies together with
job descriptions and details of their remuneration;
(ii) a copy of the Companies standard terms and conditions of
employment;
(iii) details of the remuneration of the members of the board
of directors of the Companies; and
(iv) a list of all employees of the Companies who are entitled
to any benefit not generally applicable to all employees.
(b) Except as set forth in Section 2.31(b) of the Disclosure
Letter, the Companies, in relation to each of its employees and so far as
relevant to each of its former employees, has complied in all material respects
with all relevant statutes, regulations, codes of conduct, collective
agreements, order and awards relevant to their conditions of service or to the
relations between it and its employees or any recognized trade union. Except as
set forth in Section 2.31(b) of the Disclosure Letter, no "leased employee", as
defined in Section 414(n) of the Code, performs services for PSSI.
33
(c) Except as set forth in Section 2.31(c) of the Disclosure
Letter, there are no schemes in operation in relation to the Companies under
which any employee is entitled to a commission, bonus or other remuneration
calculated by reference to the whole or part of the turnover, profits or sales
of the Companies or by reference to any other formula.
(d) There are no share incentive or share option schemes
proposed or in operation in which any employee of the Companies is entitled to
participate.
(e) Except as set forth in Section 2.31(e) of the Disclosure
Letter, no trade union or other body representing any employee of the Companies
is or has been recognized by the Companies and there are no agreements between
any member of the Companies and any trade union, workers' council or similar
body.
(f) Except as set forth in Section 2.31(f) of the Disclosure
Letter, all employees of each Company are employed solely on the basis of its
standard terms and conditions of employment and there are no other agreements or
arrangements between each Company and any of its employees.
(g) None of the Companies has paid or given any increase or
improvement to the emoluments or benefits of or any bonus to any of its
directors, officers or employees and no Company has made any announcement or
proposal concerning or is under any obligation to increase or improve any such
emoluments, benefits or bonuses with or without retrospective operation.
(h) No past or present director, officer or employee has
notified the Shareholders or Companies or any of their Subsidiaries of any claim
against the Companies or any of their Subsidiaries for loss of office arising
out of termination of his or her office or employment (including any redundancy
payment) and, to the Knowledge of the Shareholders, there is no event which
would or might give rise to any such claim.
(i) Since the Financial Statement Date, none of the Companies
or Subsidiaries has been engaged or involved in any material dispute with any
employee or any labor troubles whether directly involving it or not and, to the
Knowledge of the Shareholders, no event has occurred which could or might give
rise to any such dispute and no industrial action involving employees of any
Company or Subsidiaries, official or unofficial, is now occurring or, to the
Knowledge of the
34
Shareholders, threatened nor has any industrial relations or employment matter
been referred either by the Companies or any Subsidiary or their employees or by
any trade union representing any of its employees to ACAS for advice,
conciliation or arbitration.
(j) Except as set forth in Section 2.31(j) of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation of any transaction contemplated by this Agreement (alone or upon
the occurrence of any additional or further acts or events) will, by virtue of
any plan, Contract, agreement or policy (written or oral) adopted by the
Companies or entered into between any Company and any employee or director of
such Company, (i) entitle any current or former employee or current or former
director of the Companies to severance pay, unemployment compensation, or any
other payment or benefit, (ii) accelerate the time of payment or vesting,
increase the amount of, or require or result in the funding of any compensation
or benefit due any such current or former employee or director, or (iii) with
respect to PSSI, result in any prohibited transaction described in Section 4975
of the Code for which an exemption is not available.
2.32 Purchase for Investment. The shares of VTX Common Stock
to be issued to each of the Shareholders pursuant to this Agreement will be
acquired by each Shareholder for its own account for the purpose of investment,
it being understood that the right to dispose of such shares shall be entirely
within the discretion of such Shareholder.
2.33 Express Liability Amount
(a) As of the Closing Date, the amount of the Express Dairy
Contingent Liability shall not be in excess of 'L'1 million.
(b) As of the end of the First Deferred Consideration Period,
the amount of the Express Dairy Contingent Liability shall not be in excess of
'L'500,000.
(c) As of the end of the Second Deferred Consideration Period,
the amount of the Express Contingent Liability shall be zero.
35
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to each Participant as follows:
3.1 Corporate Existence and Qualification. Purchaser is a
corporation duly incorporated and validly existing under the laws of New Jersey
and has full corporate power and authority to carry on its business as it is now
being conducted and to own, lease and operate its properties and assets.
Purchaser is duly qualified, licensed or admitted to do business in those
jurisdictions specified in Section 3.1 of the Purchaser Disclosure Letter, which
are the only jurisdictions in which the ownership, use or leasing of its assets
and properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for those jurisdictions
in which the adverse effects of all such failures by Purchaser and its
Subsidiaries to be qualified, licensed or admitted can in the aggregate be
eliminated without material cost or expense by Purchaser or a Subsidiary, as the
case may be, becoming qualified or admitted. Purchaser has prior to the
execution of this Agreement delivered to the Shareholders true and complete
copies of the Organizational Documents of Purchaser as in effect on the date
hereof.
3.2 Capitalization. The authorized capital stock of Purchaser
consists solely of twenty million (20,000,000) shares of common stock, par value
$.005 per share, of which 5,226,979 shares are outstanding. All of the foregoing
shares are duly authorized, validly issued, outstanding, fully paid and
nonassessable. There are 1,300,000 outstanding Options with respect to
Purchaser.
3.3 Authorization. The execution and delivery by Purchaser of
this Agreement and the Operative Agreements to which it is a party, and the
performance by Purchaser of its obligations hereunder and thereunder, have been
duly and validly authorized by the Board of Directors of Purchaser, subject to
the approval of this Agreement and the issuance of VTX Common Shares pursuant to
this Agreement by a majority of votes cast at the Purchaser's Stockholders'
Meeting (assuming for such purpose that the votes cast in respect of such
proposal represent a majority of the outstanding VTX Common Stock), which is the
only stockholder vote required for approval of this Agreement by the Purchaser.
This Agreement has been duly and validly executed and delivered by Purchaser
36
and constitutes, and upon the execution and delivery by Purchaser of the
Operative Agreements to which it is a party, such Operative Agreements will
constitute, legal, valid and binding obligations of Purchaser enforceable
against Purchaser in accordance with their terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar Laws relating to or affecting the rights of creditors generally,
or by general equitable principles.
3.4 No Violation. The execution and delivery by Purchaser of
this Agreement do not, and the execution and delivery by Purchaser of the
Operative Agreements to which it is a party, the performance by Purchaser of its
obligations under this Agreement and such Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the Organizational Documents of
Purchaser;
(b) (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under, (iii) require Purchaser to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result or under the
terms of, or (iv) result in the creation or imposition of any Encumbrance upon
Purchaser or any of its assets or properties under, any Contract or license to
which Purchaser is a party or by which any of its assets and properties is
bound.
3.5 Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any governmental or Regulatory Authority
on the part of Purchaser is required in connection with the execution, delivery
and performance of this Agreement or the Operative Agreements to which it is a
party or the consummation of the transactions contemplated hereby or thereby
other than with respect to a Form 8-K and proxy filing by VTX.
3.6 Legal Proceedings. There are no Actions or Proceedings
pending or, to the knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its assets and properties which could reasonably
be expected to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the Operative Agreements.
37
3.7 Compliance With Law. Purchaser is in material compliance
with all Laws and Orders applicable to it and its properties and assets.
Purchaser has not received any notification that it is in violation of any such
Laws or Orders and no such violation exists.
ARTICLE IV
COVENANTS OF SHAREHOLDERS
Each of the Shareholders covenants and agrees with Purchaser
that, at all times from and after the date hereof until the Closing and, with
respect to any covenant or agreement by its terms to be performed in whole or in
part after the Closing, for the period specified therein or, if no period is
specified therein, indefinitely, the Shareholders will comply with all covenants
and provisions of this Article IV, except to the extent Purchaser may otherwise
consent in writing.
4.1 Regulatory and Other Approvals. Each of the Shareholders
will, and will cause the Companies and their Subsidiaries to, as promptly as
practicable (a) take all commercially reasonable steps necessary or desirable to
obtain all consents, approvals or actions of, make all filings with and give all
notices to Governmental or Regulatory Authorities or any other Person required
of the Shareholders, the Companies or any of their Subsidiaries to consummate
the transactions contemplated hereby and by the Operative Agreements, (b)
provide such other information and communications to such Governmental or
Regulatory Authorities or other Persons as Purchaser or such Governmental or
Regulatory Authorities or other Persons may reasonably request in connection
therewith and (c) cooperate with Purchaser in connection with the performance of
its obligations under Section 5.1. The Shareholders will provide prompt
notification to Purchaser when any such consent, approval, action, filing or
notice referred to in clause (a) above is obtained, taken, made or given, as
applicable, and will advise Purchaser of any communications (and, unless
precluded by Law, provide copies of any such communications that are in writing)
with any Governmental or Regulatory Authority or other Person regarding any of
the transactions contemplated by this Agreement or any of the Operative
Agreements.
38
4.2 Investigation by Purchaser. The Shareholders will, and
will cause each of the Companies and its Subsidiaries to, (a) provide Purchaser
and any Person who is considering providing financing to Purchaser to finance
all or any portion of the Purchase Price and their respective officers,
directors, employees, agents, counsel, accountants, financial advisors,
consultants and other representatives (together "Representatives") with full
access, upon reasonable prior notice and during normal business hours, to all
officers, employees, agents and accountants of each Company and its Subsidiaries
and their assets and properties and Books and Records, and (b) furnish Purchaser
and such other Persons with all such information and data (including without
limitation copies of Contracts and other Books and Records) concerning the
business and operations of the Companies and their Subsidiaries as Purchaser or
any of such other Persons reasonably may request in connection with such
investigation.
4.3 No Solicitations. The Shareholders will not take, nor will
it permit any of the Companies, their Subsidiaries or any Affiliate of the
Shareholders or the Companies (or authorize or permit any investment banker,
financial advisor, attorney, accountant or other Person retained by or acting
for or on behalf of the Shareholders, any Company or Subsidiary or any such
Affiliate) to take, directly or indirectly, any action to solicit, encourage,
receive, negotiate, assist or otherwise facilitate (including by furnishing
confidential information with respect to any Company or Subsidiary or permitting
access to the assets and properties and Books and Records of any Company or
Subsidiary) any offer or inquiry from any Person concerning an Acquisition
Proposal. If any Shareholder, Company or Subsidiary or any such Affiliate (or
any such Person acting for or on their behalf) receives from any Person any
offer, inquiry or informational request referred to above, the Shareholders will
promptly advise such Person, by written notice, of the terms of this Section 4.3
and will promptly, orally and in writing, advise Purchaser of such offer,
inquiry or request and deliver a copy of such notice to Purchaser.
4.4 Conduct of Business. Each of the Shareholders will cause
each Company and its Subsidiaries to conduct business only in the ordinary
course consistent with past practice. Without limiting the generality of the
foregoing, each Shareholder will:
(a) cause each Company and its Subsidiaries to use
commercially reasonable efforts to (i) preserve intact the present business
organization and reputation of such Company
39
and its Subsidiaries, (ii) keep available (subject to dismissals and retirements
in the ordinary course of business consistent with past practice) the services
of the present officers, employees and consultants of such Company and its
Subsidiaries, (iii) maintain the assets and properties of such Company and its
Subsidiaries in good working order and condition, ordinary wear and tear
excepted, (iv) maintain the good will of customers, suppliers, lenders and other
Persons to whom such Company or Subsidiary sells goods or provides services or
with whom such Company or Subsidiary otherwise has significant business
relationships and (v) continue all current sales, marketing and promotional
activities relating to the business and operations of such Company and its
Subsidiaries;
(b) except to the extent required by applicable Law, (i) cause
the Books and Records to be maintained in the usual, regular and ordinary
manner, (ii) not permit any material change in (A) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or Taxation
practice or policy of any Company or Subsidiary, or (B) any method of
calculating any bad debt, contingency or other reserve of any Company or
Subsidiary for accounting, financial reporting or Taxation purposes and (iii)
not permit any change in the fiscal year of any Company or Subsidiary;
(c) (i) use, and will cause each Company and its Subsidiaries
to use, commercially reasonable efforts to maintain in full force and effect
until the Closing substantially the same levels of coverage as the insurance
afforded under the Contracts listed in Section 2.29 of the Disclosure Letter,
(ii) to the extent requested by Purchaser prior to the Closing Date, use all
commercially reasonable efforts to cause such insurance coverage held by any
Person (other than the Companies or their Subsidiaries) for the benefit of any
Company or Subsidiary to continue to be provided at the expense of the Companies
and their Subsidiaries for at least 90 days after the Closing on substantially
the same terms and conditions as provided on the date of this Agreement and
(iii) cause any and all benefits under such Contracts paid or payable (whether
before or after the date of this Agreement) with respect to the business,
operations, employees or assets and properties of each Company and its
Subsidiaries to be paid to such Company and their Subsidiaries; and
(d) cause each of the Companies and its Subsidiaries to
comply, in all material respects, with all Laws and Orders applicable to the
business and operations of
40
such Company and its Subsidiaries, and promptly following receipt thereof to
give Purchaser copies of any notice received from any Governmental or Regulatory
Authority or other Person alleging any violation of any such Law or Order.
4.5 Financial Statements and Reports; Filings.
(a) As promptly as practicable and in any event no later than
45 days after the end of each fiscal quarter ending after the date hereof and
before the Closing Date (other than the fourth quarter) or 90 days after the end
of each fiscal year ending after the date hereof and before the Closing Date, as
the case may be, the Shareholders will deliver to Purchaser true and complete
copies of (in the case of any such fiscal year) the audited and (in the case of
any such fiscal quarter) the unaudited consolidated balance sheet, and the
related audited or unaudited consolidated statements of operations,
stockholders' equity and cash flows, of each Company and its consolidated
Subsidiaries, in each case as of and for the fiscal year then ended or as of and
for each such fiscal quarter and the portion of the fiscal year then ended, as
the case may be, together with the notes, if any, relating thereto, which
financial statements shall be prepared on a basis consistent with the Audited
Financial Statements.
(b) As promptly as practicable, the Shareholders will deliver
to Purchaser true and complete copies of such other financial statements,
reports and analyses as may be prepared or received by the Shareholders, any
Company or Subsidiary relating to the business or operations of any Company or
Subsidiary or as Purchaser may otherwise reasonably request.
(c) As promptly as practicable, the Shareholders will deliver
copies of all license applications and other filings made by any Company or
Subsidiary after the date hereof and before the Closing Date with any
Governmental or Regulatory Authority (other than routine, recurring filings made
in the ordinary course of business consistent with past practice).
4.6 Employee Matters. Except as may be required by Law, each
of the Shareholders will refrain, and will cause the Companies and their
Subsidiaries to refrain, from directly or indirectly:
(a) making any representation or promise, oral or written, to
any officer, employee or consultant of any Company or Subsidiary concerning any
benefit plan, except for
41
statements as to the rights or accrued benefits of any officer, employee or
consultant under the terms of any benefit plan;
(b) making any increase in the salary, wages or other
compensation of any officer, employee or consultant of any Company or Subsidiary
whose annual salary is or, after giving effect to such change, would be
'L'20,000 or more;
(c) adopting, entering into or becoming bound by any benefit
plan, employment-related Contract or collective bargaining agreement, or
amending, modifying or terminating (partially or completely) any benefit plan,
employment-related Contract or collective bargaining agreement, except to the
extent required by applicable Law and, in the event compliance with legal
requirements presents options, only to the extent that the option which any
Company or its Subsidiary reasonably believes to be the least costly is chosen;
or
(d) establishing or modifying any (i) targets, goals, pools or
similar provisions in respect of any fiscal year under any benefit plan,
employment-related Contract or other employee compensation arrangement or (ii)
salary ranges, increase guidelines or similar provisions in respect of any
benefit plan, employment-related Contract or other employee compensation
arrangement.
4.7 Certain Restrictions. Each of the Shareholders will cause
each of the Companies and its Subsidiaries to refrain from:
(a) amending their Organizational Documents or taking any
action with respect to any such amendment or any recapitalization,
reorganization, liquidation or dissolution of any such corporation;
(b) authorizing, issuing, selling or otherwise disposing of
any shares of capital stock of or any Option with respect to any Company or
Subsidiary, or modifying or amending any right of any holder of outstanding
shares of capital stock of or Option with respect to any Company or Subsidiary;
(c) declaring, setting aside or paying any dividend or other
distribution in respect of the capital stock of any Company or Subsidiary not
wholly owned by a Company, or directly or indirectly redeeming, purchasing or
otherwise acquiring any capital stock of or any Option with respect to any
Company or Subsidiary not wholly owned by a Company;
42
(d) acquiring or disposing of, or incurring any Encumbrance
on, any assets and properties, other than in the ordinary course of business
consistent with past practice;
(e) (i) entering into, amending, modifying, terminating
(partially or completely), granting any waiver under or giving any consent with
respect to (A) any Contract that would, if in existence on the date of this
Agreement, be required to be disclosed in the Disclosure Letter pursuant to
Section 2.18(a) or (B) any material license or (ii) granting any irrevocable
powers of attorney;
(f) violating, breaching or defaulting under in any material
respect, or taking or failing to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach of, or
default under, any term or provision of any license held or used by any Company
or Subsidiary or any Contract to which any Company or Subsidiary is a party or
by which any of their respective assets and properties is bound;
(g) (i) incurring Indebtedness in an aggregate principal
amount exceeding 'L'75,000 (net of any amounts of Indebtedness discharged
during such period), or (ii) voluntarily purchasing, canceling, prepaying or
otherwise providing for a complete or partial discharge in advance of a
scheduled payment date with respect to, or waiving any right of any Company or
Subsidiary under, any Indebtedness of or owing to any Company or Subsidiary;
(h) engaging with any Person in any merger or other business
combination;
(i) making capital expenditures or commitments for additions
to property, plant or equipment constituting capital assets in an aggregate
amount exceeding 'L'50,000;
(j) making any change in the lines of business in which they
participate or are engaged;
(k) writing off or writing down any of their assets and
properties outside the ordinary course of business consistent with past
practice; or
(l) entering into any Contract to do or engage in any of the
foregoing.
4.8 Affiliate Transactions. Except as set forth in Section 4.8
of the Disclosure Letter, immediately prior to the
43
Closing, all Indebtedness and other amounts owing under Contracts between the
Shareholders, any officer, director or Affiliate (other than a Company or its
Subsidiaries) of the Shareholders, on the one hand, and any Company or its
Subsidiaries, on the other, will be paid in full, and the Shareholders will
terminate and will cause any such officer, director or Affiliate to terminate
each Contract with such Company or Subsidiary. Prior to the Closing, neither the
Companies nor any Subsidiaries will enter into any Contract or amend or modify
any existing Contract, and will not engage in any transaction outside the
ordinary course of business consistent with past practice or not on an
arm's-length basis (other than pursuant to Contracts disclosed pursuant to
Section 2.18(a)(vi) of the Disclosure Letter), with the Shareholders or any such
officer, director or Affiliate.
4.9 Books and Records. On the Closing Date, the Shareholders
will deliver or make available to Purchaser at the offices of the Companies and
their Subsidiaries all of the Books and Records, and if at any time after the
Closing any Shareholder discovers in its possession or under its control any
other Books and Records, it will forthwith deliver such Books and Records to
Purchaser.
4.10 Notice and Cure. The Shareholders will notify Purchaser
in writing (where appropriate, through updates to the Disclosure Letter) of, and
contemporaneously will provide Purchaser with true and complete copies of any
and all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction or
circumstance, as soon as practicable after it becomes Known to the Shareholders,
occurring after the date of this Agreement that causes or will cause any
covenant or agreement of the Shareholders under this Agreement to be breached or
that renders or will render untrue any representation or warranty of the
Shareholders contained in this Agreement as if the same were made on or as of
the date of such event, transaction or circumstance. No notice given pursuant to
this Section shall have any effect on the representations, warranties, covenants
or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein or shall in any way limit
Purchaser's right to seek indemnity under Article X.
4.11 Fulfillment of Conditions. Each of the Shareholders will
execute and deliver at the Closing each Operative Agreement that such
Shareholder is required hereby to execute and deliver as a condition to the
Closing, will take all commercially reasonable steps necessary or desirable
44
and proceed diligently and in good faith to satisfy each other condition to the
obligations of Purchaser contained in this Agreement and will not, and will not
permit any Company or Subsidiary to, take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with each Shareholder that, at
all times from and after the date hereof until the Closing, Purchaser will
comply with all covenants and provisions of this Article V, except to the extent
the Shareholders' Agent may otherwise consent in writing.
5.1 Regulatory and Other Approvals. Purchaser will as promptly
as practicable (a) take all commercially reasonable steps necessary or desirable
to obtain all consents, approvals or actions of, make all filings with and give
all notices to Governmental or Regulatory Authorities or any other Person
required of Purchaser to consummate the transactions contemplated hereby and by
the Operative Agreements, (b) provide such other information and communications
to such Governmental or Regulatory Authorities or other Persons as the
Shareholders' Agent or such Governmental or Regulatory Authorities or other
Persons may reasonably request in connection therewith and (c) cooperate with
the Shareholders, the Companies and the Subsidiaries in connection with the
performance of their obligations under Section 4.1. Purchaser will provide
prompt notification to the Shareholders' Agent when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise the Shareholders' Agent of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
5.2 Notice and Cure. Purchaser will notify the Shareholders'
Agent in writing of, and contemporaneously will provide the Shareholders' Agent
with true and complete copies of any and all information or documents relating
to, and will use all commercially reasonable efforts to cure before the Closing,
any event, transaction or circumstance, as soon as practicable after it becomes
known to Purchaser, occurring
45
after the date of this Agreement that causes or will cause any covenant or
agreement of Purchaser under this Agreement to be breached or that renders or
will render untrue any representation or warranty of Purchaser contained in this
Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. No notice given pursuant to this Section shall have
any effect on the representations, warranties, covenants or agreements contained
in this Agreement for purposes of determining satisfaction of any condition
contained herein or shall in any way limit the Shareholders' right to seek
indemnity under Article X.
5.3 Fulfillment of Conditions. Purchaser will execute and
deliver at the Closing each Operative Agreement that Purchaser is hereby
required to execute and deliver as a condition to the Closing, will take all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each other condition to the obligations of the
Shareholders contained in this Agreement and will not take or fail to take any
action that could reasonably be expected to result in the nonfulfillment of any
such condition.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase and pay for
the Shares are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in part
by Purchaser in its sole discretion):
6.1 Representations and Warranties. Each of the
representations and warranties made by the Participants in this Agreement (other
than those made as of a specified date earlier than the Closing Date) shall be
true and correct in all material respects on and as of the Closing Date as
though such representation or warranty was made on and as of the Closing Date,
and any representation or warranty made as of a specified date earlier than the
Closing Date shall have been true and correct in all material respects on and as
of such earlier date.
6.2 Performance. Each of the Shareholders shall have performed
and complied with, in all material respects, each agreement, covenant and
obligation required by this
46
Agreement to be so performed or complied with by the Shareholders, as the case
may be, at or before the Closing.
6.3 Shareholders' Agent's Certificate; Secretary Certificates.
The Shareholders shall have delivered to Purchaser a certificate, dated the
Closing Date and executed by the Shareholders' Agent, substantially in the form
and to the effect of Exhibit I hereto, and a certificate, dated the Closing Date
and executed by the Secretary or any Assistant Secretary of each Company,
substantially in the form and to the effect of Exhibit J hereto.
6.4 Orders and Laws. There shall not be in effect on the
Closing Date any Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to Purchaser, and there shall not be pending or threatened on the Closing Date
any Action or Proceeding or any other action in, before or by any Governmental
or Regulatory Authority which could reasonably be expected to result in the
issuance of any such order or the enactment, promulgation or deemed
applicability to Purchaser or the transactions contemplated by this Agreement or
any of the Operative Agreements of any such Law.
6.5 Consents. Prior to the Closing, the Shareholders shall
have obtained and shall have delivered to Purchaser the approvals and consents
required for the consummation of the transactions contemplated hereby by the
Shareholders listed in Section 6.5 of the Disclosure Letter. The costs of
obtaining any such approvals or consents shall be borne by the Shareholders.
6.6 Stockholder Approval. The stockholders of Purchaser shall
have approved this Agreement, the issuance of VTX Common Shares, and the
consummation of the transactions contemplated hereby, as and to the extent
required by Law or the provisions of any governing instruments.
6.7 VTX Closing. The VTX Closing shall have occurred.
6.8 Other Actions. Each of the Shareholders shall have
fulfilled each of its obligations set forth in Section 1.4(a) and (c).
47
6.9 Proceedings. All proceedings to be taken on the part of
the Shareholders in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably satisfactory in
form and substance to Purchaser, and Purchaser shall have received executed
copies of all such documents and other evidences as Purchaser may reasonably
request in order to establish the consummation of such transactions and the
taking of all proceedings in connection therewith.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS
The obligations of the Shareholders hereunder to sell the
Shares are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
the Shareholders' Agent in its sole discretion):
7.1 Representations and Warranties. Each of the
representations and warranties made by Purchaser in this Agreement shall be true
and correct in all material respects on and as of the Closing Date as though
such representation or warranty was made on and as of the Closing Date.
7.2 Performance. Purchaser shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Purchaser at or before
the Closing.
7.3 Officers' Certificates. Purchaser shall have delivered to
the Shareholders a certificate, dated the Closing Date and executed by the
Chairman of the Board, the President or any Vice President of Purchaser,
substantially in the form and to the effect of Exhibit K hereto, and a
certificate, dated the Closing Date and executed by the Secretary or any
Assistant Secretary of Purchaser, substantially in the form and to the effect of
Exhibit L hereto.
7.4 VTX Closing. The VTX Closing shall have occurred.
7.5 Other Actions. Purchaser shall have fulfilled each of its
obligations set forth in Section 1.4(b) and (c).
48
7.6 Proceedings. All proceedings to be taken on the part of
Purchaser in connection with the transactions contemplated by this Agreement and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Shareholders' Agent, and the Shareholders' Agent shall have
received executed copies of all such documents and other evidences as the
Shareholders' Agent may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
ARTICLE VIII
ADDITIONAL AGREEMENTS OF THE PARTIES
8.1 Sale of Shares of VTX Common Stock. Each of the
Shareholders agrees not to, directly or indirectly, offer, sell, assign, pledge,
hypothecate or otherwise transfer (a "Transfer") any of its Closing Shares after
the Closing Date; provided, however, the foregoing restriction shall terminate
as follows:(i) 25% of the number of Closing Shares received by such Shareholder
at the Closing may be sold at any time after six months from the Closing, (ii)
50% of the number of Closing Shares received by such Shareholder at the Closing
may be sold at any time after 12 months from the Closing, (iii) 75% of the
number of Closing Shares received by Shareholder at the Closing may be sold at
any time after 18 months from the Closing, and (iv) 100% of the number of
Closing Shares received by such Shareholder at the Closing may be sold at any
time after 24 months from the Closing; provided, further, that the restrictions
set forth in this Section 8.1 shall not apply to: (i) any Transfer (for
consideration or as a gift) by a Shareholder to any spouse, child, parent,
sibling or grandchild of such Shareholder, or by any of such relatives to such
Shareholder or to any one or more of such relatives to a trust of which there
are no principal beneficiaries other than one or more of such relatives; (ii)
any Transfer to a legal representative in the event any Shareholder becomes
mentally incompetent; or (iii) any Transfer by will or the laws of descent;
provided that in each of the clauses (i) through (iii) each transferee, donee,
distributee or pledgee agrees to take subject to and comply with the provisions
of this Section 8.1.
8.2 Press Releases. The Shareholders covenant and agree with
Purchaser that no press release or other public announcement or public
disclosure related to this Agreement, the terms hereof, the transactions
contemplated hereby or any information disclosed in connection herewith will be
issued by
49
any party hereto without the approval of Purchaser and Shareholders' Agent.
8.3 Sale of shares of VTX Common Stock. Each Shareholder will
refrain from transferring or otherwise disposing of any of such shares of VTX
Common Stock, in such manner as to cause VTX to be in violation of the
registration requirements of the Securities Act of 1933, as amended, and the
rules and regulations thereof (the "Securities Act") or applicable state
securities or blue sky laws.
8.4 Legend on Certificates Each Shareholder acknowledges that
each certificate representing shares of VTX Common Stock issued pursuant to this
Agreement shall be imprinted with a legend in the following form until such time
(subject to the provisions of the final sentence of this Section 8.4) as all
restrictions on the disposition of such shares are terminated:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE,
OR ANY FOREIGN SECURITIES LAWS, AND MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF UNLESS THEY ARE REGISTERED OR
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
Each Shareholder acknowledges that each certificate
representing Closing Shares shall also be imprinted with a legend in the
following form:
"THESE SHARES MAY ONLY BE TRANSFERRED PURSUANT TO THE
PROVISIONS OF ARTICLE VIII OF A CERTAIN AGREEMENT DATED AS OF
May __1999, BY AND AMONG THE COMPANY AND OTHER ENTITIES AND
INDIVIDUALS LISTED ON THE SIGNATURE PAGES THERETO, COPIES OF
WHICH AGREEMENT ARE ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY."
The Purchaser shall not (i) give effect on its books to an
attempted transfer of any Shares which shall have been Transferred in violation
of any provisions of this Agreement, or (ii) treat any transferee who obtains
any Shares in violation of the provisions of this Agreement as the owner of such
Shares or accord any transferee thereof the right to vote or receive dividends
in respect of such Shares. The Purchaser will issue new certificates not
imprinted with the foregoing legends to any holder of Shares not subject to the
restrictions on Transfer contained in this Agreement; provided that the
Purchaser may require an opinion of counsel
50
reasonably satisfactory to it to the effect that no legend is required under the
Securities Act of 1933, as amended, or applicable state securities or blue sky
laws.
8.5. Exchange Listing. Purchaser shall use its reasonable
efforts to cause the Shares to be listed or qualified for trading on the
principal national securities exchange or quotation service on which the
outstanding shares of VTX Common Stock are listed or quoted.
8.6 Non-Compete. Xxxx Xxxxx, Xxxxxxx Xxxxx and Xxxxx X.
Xxxxxxx (the "Individuals") each hereby covenants and agrees with the Purchaser
that:
(a) Each Individual undertakes to the Purchaser that each
Individual will not without the prior written consent of the Purchaser, directly
or indirectly, whether alone or in conjunction with, or on behalf of any other
business, concern or Person and whether as a principal, shareholder, director,
employee, agent, consultant, partner or otherwise:
(i) During the Covered Period (as defined in Section 12.13),
canvass, solicit, or approach or cause to be canvassed, solicited or approached
for orders any Person who was a customer of PSS or any Restricted Business (as
defined in Section 12.13) of any Associated Company (as defined in Section
12.13) at any time during the 12 months preceding the commencement of the
Covered Period for the supply of goods and/or services which are competitive
with those supplied by PSS or any Restricted Business of any Associated Company
at any time during the 12 months immediately preceding the commencement of the
Covered Period.
(ii) During the Covered Period, deal or contract with any
Person who was a customer or proposed customer of PSS or any Restricted Business
of any Associated Company at any time during the 12 months preceding the
commencement of the Covered Period for the purpose of supplying goods and/or
services which are competitive with those supplied by PSS or the Restricted
Business of any Associated Company at any time during the 12 months immediately
preceding the commencement of the Covered Period.
(iii) During the Covered Period, solicit or entice away any
supplier to PSS or any Restricted Business of any Associated Company who has
supplied goods and/or services to PSS or any Restricted Business of any
Associated Company at any time during the 12 months immediately preceding the
51
commencement of the Covered Period, if such solicitation or enticement causes or
could reasonably be expected to cause such supplier to cease supplying, reduce
its supply of, or alter the terms upon which it is supplying those goods and/or
services to PSS or the Restricted Business of any Associated Company.
(iv) During the Covered Period, work or be engaged, concerned,
or (save as the holder of shares or other securities in any company which is
quoted, listed or otherwise dealt with on a recognised stock exchange or other
securities market and which confers not more than 5% of the votes which could be
cast at a General Meeting of the company concerned) interested in any trade or
business which competes in North America or Europe with any trade or business
carried on, or proposed to be carried on, by PSSL or any Restricted Business of
any Associated Company as of the commencement of the Covered Period, provided,
however, that in the case of Xxxxx Xxxxxxx, he shall, notwithstanding the
provisions of this subsection, be prevented only from working with or being
engaged in or concerned with or interested in any competing trade or business
whose primary activity is the development or supply of software or hardware to
users of hand-held terminals.
(v) During the Covered Period, solicit or entice away from PSS
or any Associated Company any employee of PSS or any Associated Company employed
in a senior or key managerial, supervisory, technical, sales, marketing or
administrative post in the 12 months prior to the commencement of the Covered
Period.
(vi) Use in connection with any trade or business any name
which includes the name of PSS or any Restricted Business of any Associated
Company or any colourable imitation of it.
(vii) Attempt to knowingly assist or procure any other person
to do any of the foregoing things.
(b) The Purchaser and each Individual agree that each of the
undertakings set out in each of the preceding section separate and severable and
enforceable accordingly, and if any one or more of such undertakings or part of
an undertaking is held to be against the public interest or unlawful or in any
way an unreasonable restraint on trade, the remaining undertakings or remaining
part of the undertaking shall continue in full force and effect and shall bind
each Individual.
52
(c) Each Individual agrees that if during the continuation in
force of the restrictions set out in this Section 8.6 he receives an offer of
employment from any person he will immediately provide that person with a
complete and accurate copy of this Agreement.
8.7 Liquidation of Companies. The Purchaser hereby covenants
and agrees with the Shareholders that during the period between the Closing Date
and December 31, 2000 it will not voluntarily commence any bankruptcy or
insolvency proceeding in relation to the Companies.
8.8 Board of Directors. It is hereby acknowledged and agreed
that during the period between the Closing Date and December 31, 2000, (i) the
Board of Directors of the Companies will be comprised of Xxxxx Xxxxxxx, Xxxx
Xxxxx, Xxxx Xxxxxxx and Xxxxxxxx Xxxx, assuming in the case of Xxxxx Xxxxxxx and
Xxxx Xxxxx that they are employed by the Companies and/or their Subsidiaries
during such period and (ii) at any time, VTX may appoint a majority of the Board
of Directors of the Companies.
8.9 Material Transactions. It is hereby acknowledged and
agreed that during the period between the Closing Date and December 31, 2000,
(i) all material transactions by or involving the Companies and/or their
Subsidiaries shall be subject to the prior approval of the Board of Directors of
the Companies and/or their Subsidiaries, respectively, and (ii) all transactions
by the Companies and/or their Subsidiaries that are material to VTX shall be
subject to the prior approval of the Board of Directors of VTX.
8.10 Services of Individuals. It is hereby acknowledged and
agreed that during the period between the Closing Date and December 31, 2000,
the Individuals shall not, without their written consent, be responsible for any
material functions, responsibilities or duties relating to VTX or any of the VTX
Subsidiaries other than the Company and/or their Subsidiaries.
ARTICLE IX
TAX MATTERS
9.1 Transfer Taxes. Save for the stamp duty in the case of the
transfer of the Shares to Purchaser, the Shareholders shall pay all sales, use,
transfer, real property
53
transfer, recording, gains, stock transfer and other similar taxes and fees,
including without limitation any United Kingdom, Republic of Ireland or United
States capital gains or transfer taxes (collectively, "Transfer Taxes") arising
out of or in connection with the transactions effected pursuant to this
Agreement, and shall indemnify, defend, and hold harmless the Purchaser and each
Company and its Subsidiaries on an after-Taxation basis with respect to such
Transfer Taxes. The Shareholders shall timely file all necessary documentation
and Tax Returns with respect to such Transfer Taxes.
9.2 Tax Cooperation. After the date hereof, the Shareholders
and Purchaser will cooperate in the preparation of all Tax Returns and will
provide to each other (or cause to be provided) any records and other
information requested, and will provide access to, and the cooperation of their
respective auditors. The Shareholders and Purchaser will cooperate with each
other in connection with any Taxation investigation, audit or other processing.
ARTICLE X
LIMITATIONS ON LIABILITY UNDER
REPRESENTATIONS AND WARRANTIES
The provisions of this Article shall operate, inter alia, to
limit or reduce the liability of the Purchaser and Participants (the
"Warrantors") in respect of claims by the Purchaser or Participants (a
"Claimant") under the Representations and Warranties (the "Warranties") and,
where specified, the Taxation Deed. The parties agree as follows:
10.1 Action for Damages. A breach by the Warrantors of any of
the Warranties shall give rise only to an action for damages by the
non-breaching party and shall not entitle the non-breaching party to rescind or
repudiate this Agreement.
10.2 Escrow Fund. In the event that the Purchaser shall make a
Claim (as defined in Section 10.3) for a breach by the Participants of any of
the Warranties, such Claim shall be dealt with first by way of a claim against
the Escrow Fund in accordance with Section 4 of the Escrow Agreement.
10.3 Amount of Liability.
(a) No liability shall attach to the Warrantors in respect of
claims under the Warranties or the Taxation Deed
54
("Claims") unless the aggregate amount of the liability in respect of all Claims
shall exceed 'L'50,000 in which event the Warrantors shall be liable for the
whole of such liability and not merely the excess, provided that such limitation
shall not apply to any Claim which arises as a result of the fraud or wilful
misconduct or wilful concealment of any Warrantor, and provided that the
foregoing limitation does not apply to any Claim for breach of the
representations and warranties contained in Section 2.9 and Section 2.33.
(b) The aggregate liability of the Warrantors in respect of
all Claims shall not exceed the Cash Closing Payment Amount plus the First
Additional Payment and Second Additional Payment if received, provided, however,
that, to the extent any Claim shall exceed the Cash Closing Payment, the
Participants shall have the right to elect to satisfy the Claim by delivering
Shares valued at the higher of (i) the then market value or (ii) the market
value of the Shares upon issuance; except that in the event of a Claim being
paid by a Warrantor and then repaid under the provisions of Section 10.6 hereof
then such claim shall not constitute a Claim for the purpose of this Section
10.3 with effect from the date of repayment to the Warrantors.
(c) The Warrantors shall not be liable for any individual
Claim unless the amount of such Claim exceeds 'L'2,500.
10.4 Making of a Claim. (a) Claims shall be wholly barred and
unenforceable unless written particulars thereof (giving reasonable details of
the specific matter or claim in respect of which such Claim is made) shall have
been given by a Claimant to the Warrantors within a period of six years from the
end of the corporation tax accounting period current at the date of this
Agreement (in the case of any Claim under the Taxation Deed) or 18 months from
the Closing (in the case of any other Claim under the Warranties). Any such
Claim shall (if it has not been previously satisfied, settled or withdrawn) be
deemed to have been withdrawn after the expiration of six months after the
expiration of such period of six years from the end of the corporation tax
accounting period current at the date of this Agreement (in the case of any
Claim under the Taxation Deeds) or 18 months from the Closing (in the case of
any other Claim under the Warranties) unless legal proceedings in respect of it
have been commenced by being both issued and served and for this purpose the
Participants irrevocably appoint the Shareholders' Solicitors as their agents to
receive service of process.
55
(b) Any of the Warranties to the extent remediable if breached
shall not entitle a Claimant to compensation unless the Warrantors are given
written notice of such breach and such breach is not remedied to the reasonable
satisfaction of the Claimant within 45 days after the date such notice is
served.
10.5 Limitations of Individuals. Subject to Section 10.12, the
amount of any Claim by the Purchaser against a Participant shall be limited in
the case of: the Trustee of the Xxxx Xxxxx Settlement and Xxxx Xxxxx together to
42.5 per cent; the Trustee of the Xxxxxxx Xxxxx Settlement and Xxxxxxx Xxxxx
together to 42.5 per cent and; Xxxxx Xxxxxxx to 15 per cent of the amount which,
but for this Section 10.5, the Purchaser would be entitled to recover in respect
thereof.
10.6 Recovery from Third Parties. (a) Where a Claimant is or
becomes entitled (whether under any insurance or by way of payment, discount,
credit, set off, counterclaim or otherwise) to recover from any third party
(including any fiscal or taxation authority or body) any sum in respect of
Taxation or any other loss, damage, or liability which is or may be the subject
of a Claim, the Claimant shall, if so required by the Warrantors and subject to
paragraph (b) of this Section 10.6, take or procure (and, if the Claimant is the
Purchaser, procure the Companies in the Group) to take all such steps or
proceedings as the Warrantors may reasonably require to enforce such recovery.
(b) All such steps and proceedings shall be taken at the
Warrantors' cost and expense and the Claimant shall not be under any obligation
to take them or procure them to be taken unless the Warrantors shall have
provided indemnities to the reasonable satisfaction of the Claimant in respect
of all costs and expenses likely to be incurred.
(c) If any such sum as is referred to in Section 10.6(a) shall
be recovered by the Claimant from the third party, any claim by the Claimant in
respect of any Taxation or other loss, damage or liability to which the sum
relates shall be limited (without prejudice to any other limitations on the
liability of the Warrantors referred to in this Article X) to the amount (if
any) by which the amount of such Taxation or other loss, damage or liability
exceeds the aggregate of:
(i) the sum recovered less all reasonable costs, charges
and expenses incurred by the Claimant in recovering the
sum from the third party; and
56
(ii) any sum or sums previously paid by the Warrantors to
the Claimant in respect of such Taxation or other loss,
damage or liability.
(c) If the aggregate of the sums referred to in Section
10.6(c)(i) and (ii) exceeds the amount of the Taxation or other loss, damage or
liability to which the sum recovered relates the Claimant shall forthwith pay to
the Warrantors the amount of the excess.
10.7 Right of Recovery. Where the Warrantors are liable in
respect of any Claim and have satisfied such Claim and a Claimant has a right of
reimbursement or recovery (in whole or in part) against any other person, the
Claimant shall at the request of the Warrantors assign or procure to be assigned
to them for no consideration the benefit of each such right.
10.8 Taxation Deed. (a) Payment of any Claim under the
Warranties or the Taxation Deed shall pro tanto satisfy and discharge any other
Claim thereunder which is capable of being made in respect of the same subject
matter.
(b) If any person is entitled to make a Claim in respect of
any act, event or default both under any of the Warranties and also under the
Taxation Deed such Claim shall first be made under the Taxation Deed and any
amount payable under the Warranties shall be reduced to the extent of such
claim. Any amount paid by the Warrantors to the Purchaser in respect of a Claim
shall be treated as a reduction pro-rata in the Purchase Price.
(c) If there shall be any inconsistency between the provisions
of this Article and the other provisions of this Agreement of the Taxation Deed
then the provisions of this Article shall prevail.
10.9 Resistance of Claim. If a Claimant shall become aware of
a Claim under the Warranties it shall promptly give written notice thereof to
the Warrantors and shall, so long as the Warrantors shall indemnify and secure
the Claimant (and, if the Claimant is the Purchaser, the Group) to the
Purchaser's reasonable satisfaction against any liability, costs, damages or
expenses which may be incurred thereby, take such action and provide such
information and documentation (and, if the Claimant is the Purchaser, procure
that the Companies in the Group shall take such action) as the Warrantors may
reasonably request to defend, avoid, resist or compromise the matter giving rise
to the Claim. If the
57
Warrantors shall not request the Claimant to take any such action, or shall fail
to indemnify and secure the liabilities, costs, damages and expenses as
aforesaid within 30 days after notice shall have been given to the Warrantors
then the Claimant shall be free to pay or settle the matter giving rise to the
Claim on such terms as it shall in its absolute discretion think fit.
10.10 Insurance Limitation of Purchaser. The Purchaser shall
not be entitled to recover the amount of any Claim to the extent that such
amount would be recoverable from insurers if the policies of insurance of the
Group were maintained on the same terms as those existing at the date hereof or
to the extent that such Claim or the event giving rise to such claim is covered
by any other insurance maintained by the Purchaser.
10.11 Limitation in Relation to Consideration. Without
prejudice to their several liability hereunder, the liability of each of the
Warrantors in respect of any Claim shall not in any event exceed that amount of
the consideration received by each Warrantor hereunder less any amounts already
paid by the Warrantor in respect of any other Claim.
10.12 Liability of Trustee. (a) The aggregate liability of
each of the Trustees under the Warranties and the Taxation Deed shall be limited
to the net value from time to time of the capital of the trust subject to which
they now hold those of the Shares registered in their names after deduction of
sums due to the Inland Revenue and costs and fees properly chargeable against
the capital of the said trust, and the Trustee hereby undertakes with the
Purchaser that they will not distribute any of the capital of the said trust,
other than for payment of such sums, costs and fees, whilst a Claim is
outstanding or prior to the expiration of any time limit for the making of a
Claim unless (i) an undertaking in favour of the Purchaser is obtained from a
beneficiary, in a form reasonably satisfactory to the Purchaser, whereby the
beneficiary accepts liability to the extent of the value of the distribution and
(ii) the distribution would not be prejudicial to the Purchaser's rights and
ability to recover the amount of any Claim.
(b) The Trustees hereby covenant with the Purchaser that if
they or any of them retire or are discharged from any of the Trusts subject to
which they now hold the Shares, they will procure that their successors as
trustee of the Trusts enter into a deed of novation with the Purchaser by which
the new trustee accepts the liability of the retiring Trustee on
58
the same terms as set out in this Section 10.12 and thereupon the retiring
Trustee shall be discharged from liability under the Warranties and the Taxation
Deed.
10.13 Additional Agreements. (a) The parties confirm that in
entering into this Agreement they have not relied on any representation,
warranty or undertaking save as expressly set out in this Agreement or in any
document referred to herein. The parties irrevocably and unconditionally waive
any right they may have to claim damages for any misrepresentation not contained
in this Agreement or for breach of warranty not contained in this Agreement
unless such misrepresentation or warranty was made fraudulently.
(b) The parties agree and acknowledge that, absent fraud,
misconduct or wilful concealment, the only right and remedy which shall be
available to the parties in connection with or arising out of or related to any
of the statements contained in the Warranties shall be damages in contract for
breach of this Agreement and not rescission of this Agreement, nor damages in
tort or under statute (whether under the Xxxxxxxxxxxxxxxxx Xxx 0000 or
otherwise), nor any other remedy.
(c) The parties confirm that they do not have actual knowledge
as of the date hereof of any Claim but hereby waive any claim they may have
under the Warranties or the Taxation Deeds in respect of any Claim of which they
have actual knowledge as of the date hereof.
10.14 Survival of Representations, Warranties, Covenants and
Agreements. The representations and warranties of the Warrantors shall survive
the consummation of the transactions contemplated herein and expire on November
__, 2000; provided, that the representations and warranties contained in
Sections 2.2, 2.3, 2.4, 3.3 and 12.1 shall not expire and shall remain in full
force and effect indefinitely; and provided, further that the representations
and warranties contained in Section 2.16 shall survive the consummation of the
transactions contemplated herein and expire sixty (60) days after the expiration
of all applicable statutes of limitation (including all periods of extension,
whether automatic or permissive). The representations, warranties, covenants and
agreements of the Shareholders contained in the Taxation Deed shall survive the
consummation of the transactions contemplated herein and expire six years from
the end of each Companies' current tax accounting period. Any claims for
indemnification timely asserted under this Article X shall survive until such
claim is resolved.
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ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of the Shareholders' Agent and Purchaser;
(b) at any time before the Closing, by the Shareholders' Agent
or Purchaser, in the event (i) of a material breach hereof by the
non-terminating party if such non-terminating party fails to cure such breach
within five Business Days following notification thereof by the terminating
party or (ii) upon notification of the non-terminating party by the terminating
party that the satisfaction of any condition to the terminating party's
obligations under this Agreement becomes impossible or impracticable with the
use of commercially reasonable efforts if the failure of such condition to be
satisfied is not caused by a breach hereof by the terminating party; or
(c) at any time after 30 November, 1999 by the Shareholders'
Agent or Purchaser upon notification of the non-terminating party by the
terminating party if the Closing shall not have occurred on or before such date
and such failure to consummate is not caused by a breach of this Agreement by
the terminating party.
11.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 11.1, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of the
Shareholders or Purchaser (or any of their respective officers, directors,
employees, agents or other representatives or Affiliates), except as provided in
the next succeeding sentence and except that the provisions with respect to
expenses in Section 12.5 will continue to apply following any such termination.
Notwithstanding any other provision in this Agreement to the contrary, upon
termination of this Agreement pursuant to Section 11.1(b), or (c), the
Shareholders will remain liable to Purchaser for any breach of this Agreement by
the Shareholders existing at the time of such termination, and Purchaser will
remain liable to the Shareholders for any
60
breach of this Agreement by Purchaser existing at the time of such termination,
and the Shareholders or Purchaser may seek such remedies, including damages and
fees of attorneys, against the other with respect to any such breach as are
provided in this Agreement or as are otherwise available at Law or in equity.
ARTICLE XII
MISCELLANEOUS
12.1 Finders and Brokers. Each party hereby represents and
warrants to the others that save in the case of Capital Resource Associates (the
costs of which are to be paid by the Shareholders) which act on behalf of the
Shareholders neither it nor its representatives have made any arrangements for
the payment of any finders' fees, brokerage fees, agents' commissions, or like
payments in connection with the transactions contemplated hereby. Each party
shall indemnify and hold harmless the others from any claim that is asserted by
any Person for a finder's or broker's fee or like payment with respect to this
Agreement arising from any act, representation or promise of the indemnifying
party or its representative
12.2 Shareholders' Agent. By the execution and delivery of
this Agreement, each Shareholder irrevocably constitutes and appoints Xxxxx Xxx
of Finers Solicitors of 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxx X0X 0XX, or such of
his partners in Finers as he may nominate (the "Shareholders' Agent") as such
Shareholder's true and lawful attorney-in-fact, with full powers of substitution
to act in such Shareholder's name, place and stead with respect to the subject
matter of this Agreement, as amended, and all matters related thereto. Purchaser
and each Company, as the case may be, and all third parties may conclusively and
absolutely rely, without inquiry, upon the action of the Shareholders' Agent as
the act of the Shareholders in connection with the subject matter of this
Agreement. Notice of any change in the identity of the Shareholders' Agent shall
be given to Purchaser over the signature of each Shareholder, and Purchaser
shall not be required to recognize the resignation or replacement of the
Shareholders' Agent until such notice is received by Purchaser. Each Shareholder
ratifies and confirms all that the Shareholders' Agent shall do or cause to be
done by virtue of his appointment as the Shareholders' Agent hereunder.
Purchaser and each Shareholder acknowledges and agrees that, so long as he acts
in his own best judgment, the Shareholder's Agent
61
shall not incur Liability, other than the Liability he incurs as a Shareholder
hereunder, by agreeing to act and acting as the Shareholders' Agent. Each
Shareholder agrees to indemnify and hold harmless the Shareholders' Agent from
and against all Losses to the extent arising out of or incident to his agreeing
to act and acting as the Shareholders' Agent hereunder.
12.3 Amendment. Subject to applicable Law, this Agreement may
only be amended or supplemented by written agreement of Purchaser and the
Shareholders.
12.4 Waiver of Compliance. Any failure of the Shareholders, on
the one hand, or Purchaser, on the other, to comply with any provision of this
Agreement may be expressly waived in writing by Purchaser or the Shareholders'
Agent, respectively, but such waiver or failure to insist upon strict compliance
with such provision shall not operate as a waiver of, or estoppel with respect
to, any subsequent or other failure. No failure to exercise and no delay in
exercising any right, remedy, or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, or power provided herein or by Law or in equity. The waiver
by any party of the time for performance of any act or condition hereunder does
not constitute a waiver of the act or condition itself.
12.5 Expenses; Attorneys, Fees. Except as otherwise expressly
set forth herein, each party shall pay all expenses incurred by it or on its
behalf in connection with this Agreement or any transaction contemplated hereby.
If any legal action, arbitration or other proceeding is brought to interpret or
enforce the terms of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and any other costs incurred in that
proceeding, in addition to any other relief to which it is entitled.
12.6 Notices. All notices, demands, and other communications
required or permitted hereunder shall be made in writing and shall be deemed to
have been duly given if delivered by hand, against receipt, or mailed, postage
prepaid, certified or registered mail, return receipt requested, and addressed
as follows:
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to the Shareholders' Agent at:
Finers Solicitors
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxx X0X 0XX
Attn: Xxxxx Xxx
Facsimile: 011-44-171-344-5602
to Purchaser at:
Edwardstone & Company Incorporated
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxx X.X. Xxxx
Facsimile: (000) 000-0000
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx
Dashwood House
00 Xxx Xxxxx Xxxxxx
Xxxxxx XX0X 0XX Xxxxxxx
Attn: Xxxxxxx Xxxxxx
Facsimile: 011-44-171-448-3029
and
Milbank, Tweed, Xxxxxx & XxXxxx
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. X'Xxxxxx
Facsimile: (000) 000-0000
Notice of change of address shall be effective only when notice thereof is given
in accordance with this Section. All notices complying with this Section shall
be deemed to have been received on the date of delivery or on the third Business
Day after mailing.
12.7 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties and their respective heirs,
successors and permitted assigns. A Shareholder may assign his or her respective
rights and obligations under this Agreement by delivering to Purchaser a notice
of such assignment together with an executed copy of the instrument of
assignment wherein the assignee agrees to be bound by the terms and provisions
of this Agreement as fully as if the assignee were a party hereto. Purchaser may
assign
63
its rights and obligations under this Agreement to a wholly-owned Subsidiary by
delivering to the Shareholders' Agent a notice of assignment together with an
executed copy of the instrument of assignment whereon the wholly-owned
Subsidiary agrees to be bound by the terms and provisions of this Agreement as
fully as if the wholly-owned Subsidiary was a party hereto and such wholly-owned
Subsidiary shall be "Purchaser" for the purposes of this Agreement.
12.8 Governing Law and Jurisdiction. This Agreement is
governed by and shall be construed in accordance with English law. The parties
hereto irrevocably submit to the non- exclusive jurisdiction of the High Court
of Justice in London for the purpose of hearing and determining any dispute
arising out of this Agreement and for the purpose of enforcement of any
judgement against their respective assets.
12.9 Counterparts. This Agreement may be executed in any
number of counterparts each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.10 Headings. The headings of the Sections and Articles of
this Agreement are for reference purposes only and shall not constitute a part
hereof or affect the meaning or interpretation of this Agreement.
12.11 Entire Agreement. This Agreement shall be the final
expression of the parties' agreement with respect to the subject matter hereof
and may not be contradicted by evidence of any prior or contemporaneous
agreement. This Agreement shall constitute the complete and exclusive statement
of its terms and no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding involving this Agreement.
12.12 Disclosure Letter. The Disclosure Letter shall be
divided into sections corresponding to the sections of this Agreement. The
representations and warranties contained herein are given subject to the matters
fairly and accurately disclosed in the Disclosure Letter. Each disclosure in the
Disclosure Letters shall be made with specific reference to and shall provide
fair and accurate details of the nature and extent of the particular exception
to the representations and warranties the subject thereof. Each of the
representations and warranties shall be construed separately and none of the
representations and warranties shall limit or govern the extent, application or
construction of any other of them.
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12.13 Certain Definitions.
12.13.1 In this Agreement, the following words, expressions
and abbreviations have the following meanings, unless the context otherwise
requires.
"1999 Average EBT" means an amount equal to the quotient
obtained by dividing (a) the sum of (x) the Group's EBT for the twelve months
ended December 31, 1998, and (y) the Group's EBT for the twelve months ended
December 31, 1999, by (b) two (2).
"1999 Average EBT Income Statements" has the meaning ascribed
to it in Section 1.5(a).
"1999 Closing Date" has the meaning ascribed to it in Section
1.5(a).
"1999 Income Statement" has the meaning ascribed to it in
Section 1.5(a).
"2000 Average EBT" means an amount equal to the quotient
obtained by dividing (a) the sum of (x) the Group's EBT for the twelve months
ended December 31, 1999, and (y) the Group's EBT for the twelve months ended
December 31, 2000, by (b) two (2).
"2000 Average EBT Income Statements" has the meaning ascribed
to it in Section 1.5(b).
"2000 Closing Date" has the meaning ascribed to it in Section
1.5(b).
"2000 Income Statement" has the meaning ascribed to it in
Section 1.5(b).
"A.C.A.S." shall mean the Advisory Conciliation and
Arbitration Service.
"Acquisition Proposal" means any proposal for a merger or
other business combination to which any Company or Subsidiary is a party or the
acquisition of any equity interest in, or a substantial portion of the assets
of, any Company or Subsidiary, other than the transactions contemplated by this
Agreement.
65
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" or "Associate" shall have the meaning assigned
thereto in Rule 405, as presently promulgated under the Securities Act of 1933,
as amended.
"Agreement" has the meaning ascribed to it in the forepart of
this Agreement.
"Associated Company" means any company which for the time
being is (a) a company having an ordinary share capital (as defined in Section
832 of the Income and Corporation Taxes Act 1988) of which not less than 25% is
owned directly or indirectly by PSS or its holding company, as defined by
provisions 838 of the Income and Corporation Taxes Act 1988 and the
determination of ownership; (b) a holding company (as defined in Section 736 of
the Companies Act 1985) of PSS; (c) a subsidiary (as defined in Section 736 of
the Companies Act 1985) of any such holding company other than PSS; (d) any
other company on behalf of which the Executive carries out duties at the request
of PSS; and/or (e) any other company which has been agreed by PSS and the
Individuals to be an Associated Company for the purposes of this Agreement;
"Audited Financial Statements" has the meaning ascribed to it
in Section 2.8.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of each Company,
including without limitation financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental studies
and plans.
"Business Day" means a day (excluding Saturdays) on which
banks are generally opened in London for the transaction of normal banking
business.
"Business or Condition of the Companies" means the business,
condition (financial or otherwise), results of operations, assets and properties
and prospects of the Companies and their Subsidiaries taken as a whole.
66
"Business or Condition of Purchaser" means the business,
condition (financial or otherwise), results of operations, assets and properties
and prospects of Purchaser and its Subsidiaries taken as a whole.
"CAA" means the United Kingdom Capital Allowances Xxx 0000.
"Cash Closing Payment" means an amount equal to 'L'3.75
million and the amount of any Deferred Consideration paid out or payable to the
Shareholders within 12 months of Closing.
"Closing" has the meaning ascribed to it in Section 1.3(a).
"Closing Date" means (a) the fifth Business Day after the day
on which the last of the consents, approvals, actions, filings, notices or
waiting periods described in or related to the conditions described in Sections
6.4 through 6.6 and Section 7.4 has been obtained, made or given or has expired,
as applicable, or (b) such other date as Purchaser and the Shareholders' Agent
mutually agree upon in writing.
"Closing Payment" means the Cash Closing Payment and the
Closing Shares.
"Closing Payment Amount" means an amount equal to 'L'6.25
million.
"Closing Shares" means 1,207,500 shares of VTX Common Stock.
"Code" means the Internal Revenue Code of 1986, as amended.
"Companies" has the meaning ascribed to it in the forepart of
this Agreement.
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"Covered Period" means the period commencing on the date of
termination of the Individual's employment or consultancy agreement with PSS and
ending upon the later of (x) the second anniversary of the date of such
termination of employment or (y) the third anniversary of the date of this
Agreement.
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"Deferred Consideration" means an amount of up to 'L'1
million payable in accordance with the provisions of Section 1.3(c).
"Disclosure Letter" shall mean a schedule delivered by the
Shareholders prior to the execution and delivery of this Agreement, as further
described in Section 12.12.
"EBT" means (i) in respect of the twelve months ended December
31, 1998, the amount of 'L'633,854 and (ii) in respect of subsequent
periods, the amount of "Pre-Tax Income" of the Group as set forth in the Group's
Audited Financial Statements excluding exceptional items or expenses incurred as
a result of the sale of the Companies which are not reasonably incurred in the
operation of the business (including, but not limited to legal, accounting, and
investment banking expenses) as defined in accordance with UKGAAP.
"Encumbrance" means any mortgage, charge (fixed or floating),
pledge, lien, hypothecation, trust, right of set-off or other third party right
or interest (legal or equitable) including any rights of pre-emption, assignment
by way of security, reservation of title or any other security interest of any
kind however created or arising or any other agreement or arrangement (including
a sale and re-purchase arrangement) having similar effect.
"Environmental Laws" means all Laws and regulations relating
to pollution or protection of the environment, including Laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
"Escrow Agent" has the meaning ascribed to it in Section
1.3(b).
"Escrow Agreement" has the meaning ascribed to it in Section
1.3(b).
"Escrow Amount" means with respect to the Closing Payment, an
amount equal to 'L'375,000.
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"Express Dairies Contingent Liability" means the contingent
liability of PSS to Express Dairies Limited, pursuant to the terms of the
Express Dairies Contract, owed by PSS if Express Dairies Limited were to
terminate the Express Dairies Contract as of such date, as specified in the
Express Dairies Contract, or any such other or similar contingent liability of
PSS to Express Dairies Limited as reflected in Exhibit L annexed hereto.
"Express Dairies Contract" means the Procurement Agreement
dated as of 17 August, 1998, by and between PSS and Express Dairies Limited, as
amended from time to time.
"Express Repaid Amount" means (a) with respect to the
calculation of the First Express Liability Amount, any amounts paid, or payable,
by PSS to Express Dairies Limited in respect of the Express Dairy Contingent
Liability since the Closing Date, and (b) with respect to the Second Express
Liability Amount, any amounts paid, or payable, by PSS to Express Dairies
Limited in respect of the Express Dairy Contingent Liability since the
calculation of the First Express Liability Amount, plus the amount of the
Express Repaid Amount paid during the First Deferred Consideration Period in
excess of 'L'500,000.
"Financial Statement Date" means December 31, 1998.
"First Additional Payment" means an amount equal to the result
obtained by subtracting (a) the product of the 1999 Average EBT times seven,
minus (b) 'L'4.75 million. Notwithstanding the foregoing, if such result
equals a negative number then the "First Additional Payment" shall be equal to
zero.
"First Additional Shares" means that number of shares of VTX
Common Stock equal to the quotient obtained by dividing the United States dollar
amount (at a currency exchange rate as reported in the Financial Times on the
fifth Trading Day before the 1999 Closing Date) of shares of VTX Common Stock
set forth in Purchaser's Notice by the Per Share Formula ending on and including
the fifth Trading Day before the 1999 Closing Date.
"First Deferred Consideration Period" means six months after
the Closing Date.
"First Express Liability Amount" means 'L'500,000 minus
the Express Repaid Amount as of such date.
69
"GAAP" means generally accepted accounting principles in the
United Kingdom, the Republic of Ireland, or the United States, as applicable,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"General Meeting" means the annual general meeting of a
Company.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United Kingdom (with respect to PSS and PSSML), the
Republic of Ireland (with respect to Trend), the United States (with respect to
PSSI), any foreign country or any domestic or foreign state, county, city or
other political subdivision.
"Group" means the Companies and their Subsidiaries, on a
consolidated basis.
"ICTA" means the Income and Corporation Taxes Xxx 0000.
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals to third parties incurred in the ordinary
course of business), (iv) in the nature of guarantees of the obligations
described in clauses (i) through (iii) above of any other Person, provided,
however, "Indebtedness" shall not include any Indebtedness between any of the
Companies or any of their wholly-owned Subsidiaries.
"Independent Accountant" has the meaning ascribed to it in
Section 1.5(d).
"Individuals" means Xxxx Xxxxx, Xxxxx X. Xxxxxxx and Xxxxxxx
Xxxxx.
"Intellectual Property" means all intangible property,
including without limitation all trade names, trademarks, patents, patent
applications, licenses, copyrights, shop rights, technical information,
know-how, proprietary information, processes and trade secrets.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
Kingdom, the Republic of Ireland, the United
70
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Leases" has the meaning ascribed to it in Section 2.13.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Operative Agreements" means the Escrow Agreement, the
Employment Agreements and the Consultancy Agreement attached hereto as Exhibits
C, D and E and the Taxation Deed attached hereto as Exhibit F.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive or exercise any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock of such Person, including
any rights to participate in the equity or income of such Person or to
participate in or direct the election of any directors or officers of such
Person or the manner in which any shares of capital stock of such Person are
voted.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"Organizational Documents" means the memorandum of
association, the articles of association, the articles of incorporation and the
By-laws or any other comparable corporate charter documents of any company or
the Trustees.
"Participants" means the Shareholders, Xxxx Xxxxx and Xxxxxxx
Xxxxx.
"Person" shall include any individual, partnership, joint
venture, corporation, trust, unincorporated organization, any other entity and
any government or any department or agency thereof, whether acting in an
individual, fiduciary, or other capacity.
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"PSS" has the meaning ascribed to it in the forepart of this
Agreement.
"PSSI" means Portable Software Solutions Incorporated, a
company organized under the laws of Florida.
"PSSML" has the meaning ascribed to it in the forepart of this
Agreement.
"Purchaser" has the meaning ascribed to it in the forepart of
this Agreement.
"Purchaser Disclosure Letter" means a schedule delivered by
the Purchaser prior to the execution and delivery of this Agreement
"Purchaser Notice" has the meaning ascribed to it in Section
1.5(c).
"Purchase Price" has the meaning ascribed to it in Section
1.2.
"Representatives" has the meaning ascribed to it in Section
4.2.
"Restricted Business" means, in respect of any Associated
Company, any division, operation or business on behalf of which the Individual
carries out duties at the request of PSS or the Board of Directors of PSS or
with which the Individual otherwise becomes, directly or indirectly, involved in
any material respect at any time on or before the date of termination of the
Individual's employment or consultancy agreement with PSS.
"Second Additional Payment" means an amount equal to the
result obtained by subtracting (a) the product of the 2000 Average EBT times
seven, minus (b) 'L'4.75 million and the First Additional Payment, if any.
Notwithstanding the foregoing, if such result equals a negative number then the
"Second Additional Payment" shall be equal to zero.
"Second Additional Shares" means that number of shares of VTX
Common Stock equal to the quotient obtained by dividing the United States dollar
amount (at a currency exchange rate as reported in the Financial Times on the
fifth Trading Day before the 2000 Closing Date) of shares of VTX Common Stock
set forth in Purchaser's Notice by the Per Share
72
Formula ending on and including the fifth Trading Day before the 2000 Closing
Date.
"Second Deferred Consideration Period" means 12 months after
the Closing Date.
"Second Express Liability Amount" means 'L'500,000 minus
the Express Repaid Amount as of such date.
"Shareholder" has the meaning ascribed to it in the forepart
of this Agreement.
"Shareholders' Agent" has the meaning ascribed to it in
Section 12.2.
"Shareholders' Solicitors" means Finers Solicitors.
"Shares" has the meaning ascribed to in the forepart of this
Agreement.
"Subsidiary" means any Person in which any Company or
Purchaser, as the case may be, directly or indirectly through Subsidiaries or
otherwise, beneficially owns more than fifty percent (50%) of either the equity
interests in, or the voting control of, such Person.
"T.A." means The Taxes Xxx 0000.
"Taxation" means any tax, duty, impost or levy, past or
present, of the United Kingdom or the Republic of Ireland, or elsewhere, whether
governmental, state, provincial, local governmental or municipal, including, but
not limited to, income tax (including income tax required to be deducted or
withheld from or accounted for in respect of any payment under section 203 ICTA
or otherwise), corporation tax, advance corporation tax, capital gains tax,
development land tax, estate duty, capital transfer tax, inheritance tax, value
added tax, customs and other import or export duties, rates, stamp duty, stamp
duty reserve tax, capital duty, national insurance and social security
contributions; and any fine, penalty, charge or interest relating to any such
tax, duty, impost or levy or to any form or return required to be submitted to
any competent authority for the purposes of any such tax, duty, impost or levy.
"Taxation Authority" means any taxing or other authority,
whether of the United Kingdom, the Republic of Ireland, the United States or
elsewhere, competent to impose any liability in respect of Taxation.
73
"Taxes" shall mean any United States federal, state, county,
local or foreign taxes, charges, fees, levies, other assessments, or withholding
taxes or charges imposed by any governmental entity, and includes any interest
and penalties (civil or criminal) on or additions to any taxes and any expenses
incurred in connection with the determination, settlement or litigation of any
Tax liability.
"Tax Return" means a report, return or other information
(including any amendments) required to be supplied to a Governmental or
Regulatory Authority by any Company and its Subsidiaries with respect to
Taxation including, where permitted or required, combined or consolidated
returns for any group of entities that includes any Company or its subsidiaries.
"TCGA" means the United Kingdom Taxation of Chargeable Gains
Act of 1992.
"to the Knowledge of the Shareholders" or "Known to the
Shareholders" means the actual knowledge of any of Messrs. Xxxx Xxxxx, Xxxxxxx
Xxxxx, or Xxxxx Xxxxxxx, after due inquiry of all officers, executives and key
employees of each Company.
"Trading Day" means any day on which securities are traded on
the Over The Counter Market.
"Transfer" has the meaning ascribed to it in Section 8.1.
"Transfer Taxes" has the meaning ascribed to it in Section
9.1.
"Trend" has the meaning ascribed to it in the forepart of this
Agreement.
"Trustee" has the meaning ascribed to it in the forepart of
this Agreement.
"Trusts" means The Xxxx Xxxxx Settlement and The Xxxxxxx Xxxxx
Settlement.
"VATA" means the United Kingdom Value Added Tax Xxx 0000.
"VAT legislation" has the meaning ascribed to it in Section
2.16.1(c)(ii).
74
"VTX" means Vertex Industries Inc., a New Jersey Corporation.
"VTX Closing" means the closing of the transactions
contemplated by the Subscription Agreement, dated as of May __, 1999, by and
among VTX, Edwardstone & Company Incorporated and Midmark Associates, Inc.
"VTX Common Stock" means the common stock, par value $.005 per
share, of VTX.
"Warrantors" means the Participants and the Purchaser.
12.13.2 In this Agreement unless otherwise specified,
reference to:
(a) a document in the "agreed terms" is a reference to
that document in the form approved and for the
purposes of identification signed by or on behalf of
each party;
(b) "includes" and "including" shall mean including
without limitation;
(c) a "party" means a party to this Agreement and
includes its assignees (if any) and/or the successors
in title to substantially the whole of its
undertaking and, in the case of an individual, to his
or her estate and personal representatives; and
(d) words denoting the singular shall include the plural
and vice versa and words denoting any gender shall
include all genders.
75
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
VERTEX INDUSTRIES INC.
By: /s/ Xxxxxx X. Xxxx
---------------------------
Name: Xxxxxx X. Xxxx
Title: President, CEO
/s/ Xxxxx Xxxxxx Xxxxxxx
/s/ Xxxxxx Philippe Xxxxx
-----------------------------
ST XXXXXX TRUSTEES LIMITED
on behalf of
The Xxxx Xxxxx Settlement
/s/ Xxxxx Xxxxxx Xxxxxxx
/s/ Xxxxxx Philippe Xxxxx
-----------------------------
ST XXXXXX TRUSTEES LIMITED
on behalf of
The Xxxxxxx Xxxxx Settlement
/s/ Xxxxx X. Xxxxxxx
-----------------------------
XXXXX X. XXXXXXX
/s/ Xxxx Xxxxx
-----------------------------
XXXX XXXXX
/s/ Xxxxxxx Xxxxx
-----------------------------
XXXXXXX XXXXX
EXHIBIT A
---------------------------------------------------------------------------------------------------------------------------------
Company Name Authorised share capital Issued share capital Number of Shares Shareholder
---------------------------------------------------------------------------------------------------------------------------------
Portable Software 'L'30,000 divided into 'L'24,900 being 249,000 105,675 St Xxxxxx Trustees
Solutions Limited* 300,000 ordinary shares of ordinary shares of 10 xxxxx Limited for The Xxxx
10 xxxxx each each Xxxxx Settlement**
-----------------------------------------------
105,675 St Xxxxxx Trustees
Limited for The
Xxxxxxx Xxxxx Settlement***
------------------------------------------------
37,650 Xxxxx X. Xxxxxxx
----------------------------------------------------------------------------------------------------------------------------------
Trend Investments IR'L'100,000 divided IR'L'40 being 200 ordinary 85 "B" shares Xxxx Xxxxx
Limited into 200,000 ordinary "A" shares of 20p each
shares of 20 xxxxx each,
200,000 ordinary "B"
shares of 20 xxxxx each
and 100,000 ordinary "C"
shares of 20 xxxxx each
------------------------------------------------
85 "A" shares St Xxxxxx Trustees for The
Xxxxxxx Xxxxx Settlement
------------------------------------------------
30 "C" shares Xxxxx X Xxxxxxx
----------------------------------------------------------------------------------------------------------------------------------
Portable Software 'L'100,000 divided 'L'200 divided into 200 85 St Xxxxxx Trustees Limited
Solutions into 100,000 ordinary shares of 'L'1 for The Xxxx Xxxxx Settlement
Maintenance Limited shares of 'L'1 each ------------------------------------------------
85 The Xxxxxxx Xxxxx Settlement
------------------------------------------------
30 Xxxxx X. Xxxxxxx
----------------------------------------------------------------------------------------------------------------------------------
----------------------
* The division of the issued share capital as shown above in PSS is the
anticipated shareholding after the buy-back of the shares held by R and
S Duckham in PSS is completed. It is anticipated that this will be
completed before Closing.
** The Xxxx Xxxxx Settlement is a trust based in St Helier, Jersey.
*** The Xxxxxxx Xxxxx Settlement is a trust based in St Helier, Jersey.
