<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
July 10, 1996 (June 28, 1996)
CSG SYSTEMS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-27512 47-0783182
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5251 DTC Parkway, Suite 625, Englewood, Colorado 80111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 796-2850
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 28, 1996, CSG Systems International, Inc. (the "Company") acquired all
of the capital stock of Bytel Limited, an English company ("Bytel"), from Cray
Systems Ltd. ("Cray") and Digital Equipment Company Ltd ("DEC"). The total
purchase price was approximately $4.7 million consisting of cash payments of
approximately $3.1 million and assumption of certain payables owing by Bytel to
DEC of approximately $1.6 million. The cash payments included payment of certain
receivables owing by Bytel to Cray and payments to Cray pursuant to an
Administration and Development Services Agreement between Bytel and Cray entered
into in connection with the acquisition. The cash portion of the purchase price
was paid out of corporate funds. Bytel provides customer management software
systems to the cable and telecommunications industries in the United Kingdom.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial statements of businesses acquired.
Audited financial statements of Bytel for the fiscal year ended April
30, 1996 are currently not available and will be filed as soon as
practicable, but no later than September 11, 1996.
(b) Pro forma financial information.
Pro forma financial information for the Company and Bytel is not
currently available and will be filed as soon as practicable, but no
later than September 11, 1996.
(c) Exhibits.
The following exhibits are included:
2.16 Share Purchase Agreement among Cray Systems Ltd., Digital
Equipment Company Ltd. and CSG Systems International, Inc.
dated June 28, 1996
2.17 Administration and Development Services Agreement between
Cray Systems Ltd. and Bytel Limited dated June 28, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CSG SYSTEMS INTERNATIONAL, INC.
Dated: July 10, 1996 By: /s/ Randy Wiese
-------------- --------------------------------
Randy Wiese
Controller
(Principal Accounting Officer)
<PAGE>
CSG SYSTEMS INTERNATIONAL, INC.
EXHIBIT INDEX
Exhibit
Number Description
- - - ------- -----------
2.16 Share Purchase Agreement among Cray Systems Ltd., Digital Equipment
Company Ltd. and CSG Systems International, Inc. dated June 28, 1996
2.17 Administration and Development Services Agreement between Cray Systems
Ltd. and Bytel Limited dated June 28, 1996
<PAGE>
Exhibit 2.16
DATED 1996
--------------------------------------
(1) CRAY SYSTEMS LTD.
(2) DIGITAL EQUIPMENT COMPANY LTD. and
(3) CSG SYSTEMS INTERNATIONAL, INC.
____________________________
SHARE PURCHASE AGREEMENT
_____________________________
Baker & McKenzie
100 New Bridge Street
London EC4V 6JA
Tel: (0171) 919 1000
Fax: (0171) 919 1999
<PAGE>
Ref: MJEH/NRD
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
<S> <C> <C>
1. DEFINITIONS AND INTERPRETATION................. 1
------------------------------
2. SALE OF SALE SHARES............................ 5
-------------------
3. PREEMPTION RIGHTS.............................. 6
-----------------
4. CONSIDERATION.................................. 6
-------------
5. COMPLETION..................................... 6
----------
6. RESTRICTION OF VENDORS AND PURCHASER........... 8
------------------------------------
7. WARRANTIES..................................... 11
----------
8. VENDOR LIMITATION.............................. 13
-----------------
9. COVENANT IN RESPECT OF TAX..................... 17
--------------------------
10. DEC AND CRAY TRADE RECEIVABLES, TRADE CREDITORS 24
-----------------------------------------------
11. RESTRICTION ON ANNOUNCEMENTS................... 26
----------------------------
12. COSTS.......................................... 26
-----
13. GENERAL........................................ 26
-------
14. NOTICES........................................ 28
-------
15. GOVERNING LAW AND SUBMISSION TO JURISDICTION... 28
--------------------------------------------
SCHEDULE 1........................................... 30
----------
Details of the Company......................... 30
SCHEDULE 2........................................... 31
----------
Cray Invoices.................................. 31
SCHEDULE 3........................................... 32
----------
Warranties..................................... 32
SCHEDULE 4........................................... 38
----------
The Vendors.................................... 38
</TABLE>
<PAGE>
DATE: 1996
PARTIES:
(1) CRAY SYSTEMS LIMITED, a company incorporated in England with registered
number 1721900 whose principal place of business is at 5 Genesis Business
Park, Albert Drive, Woking, Surrey GU21 5RW ("Cray").
(2) DIGITAL EQUIPMENT CO LIMITED, a company incorporated in England with
registered number 800905 whose principal place of business is at Digital
Park, Imperial Way, Reading, Berkshire RG2 0TE England ("DEC").
(3) CSG SYSTEMS INTERNATIONAL, INC., a corporation organized under the laws of
the State of Delaware, USA whose principal place of business is at 5251 DTC
Parkway, Suite 625, Englewood, Colorado 80111, USA (the "Purchaser").
RECITALS:
(A) The Vendors are together the registered holders and beneficial owners of
all of the issued shares in the capital of Bytel Limited ("the Company").
Particulars of the Company are set out in Schedule 1.
(B) The Vendors wish to sell and the Purchaser wishes to purchase the said
shares on the terms and conditions set out in this Agreement.
TERMS AGREED:
1. DEFINITIONS AND INTERPRETATION
------------------------------
1.1 In this Agreement where the context so admits the following words and
expressions shall have the following meanings:
"Accounting Date" April 30, 1996;
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"Accounts" the audited financial statements of the Company
for the accounting reference period which ended
on the Accounting Date (each such financial
statement comprising a balance sheet, profit
and loss account, notes and directors' and
auditors' report) and the profit and loss
account and balance sheet of the Company as at
and for the period ending on the Accounting
Date;
"Administration and the agreement in the approved terms for the
Development Services provision by Cray of specified administration
Agreement" and development services to the Company;
"Associated Companies" in relation to any company, any company which
is its holding company or a subsidiary of it or
of its holding company, as those terms are
defined in Section 736, as supplemented by
Section 736A of the Companies Act 1985;
"Auditors" Arthur Andersen, 1 Surrey Street, London WC2R
2PS;
"Companies Acts" the Companies Act 1985 and the Companies Act
1989;
"Company" Bytel Limited details of which are set out in
Schedule 1;
"Completion" completion of the sale and purchase of the Sale
Shares as specified in Clause 5;
"Completion Date" the date of this Agreement (or such later date
as the parties may agree);
"Consideration" the total consideration for the Sale Shares
being the sum specified in Clause 4;
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"Continuing Director" Mr Chris Musgrave;
"Cray Loan Assignment" an assignment of the Cray Shareholder Loan in
the agreed form;
"Cray Shareholder Loan" the amount of (Pounds)740,000 provided to the
Company as a loan and which is currently due
and owing to Cray;
"Cray Trade Receivables" the trade debts owed by the Company to Cray for
goods, facilities and services provided prior
to the Completion Date;
"DEC Loan Assignment" an assignment of the DEC Shareholder Loan in
the agreed form;
"DEC Shareholder Loan" the amount of (Pounds)740,000 provided to the
Company as a loan and which is currently due
and owing to DEC;
"DEC Trade Receivables" the trade debts of (Pounds)1,031,544 owed by
the Company to DEC for services provided by DEC
prior to the Completion Date;
"Directors" the persons listed as directors of the Company
in Schedule 1;
"Disclosure Letter" the letter of today's date from the Vendors'
Solicitors to the Purchaser in the approved
terms;
"Intellectual Property" includes patents, know-how, trade secrets and
other confidential information, registered
designs, copyrights, design rights, topography
rights, trade marks, service marks and business
names and the goodwill in such marks and names,
registrations of
3
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and applications to register any of the
aforesaid items in any country;
"Purchaser's Solicitors" Baker & McKenzie of 100 New Bridge Street,
London EC4 6JA;
"Sale Shares" the 50,000 A ordinary shares and the 50,000 B
ordinary shares of (Pounds)1 each in the
capital of the Company;
"Tax" all forms of taxation, withholdings, duties,
imposts, levies, social security contributions
and rates imposed by any local, municipal,
governmental, state, federal, or other body in
the United Kingdom or elsewhere and any
interest, penalty, surcharge or fine in
connection therewith;
"Taxes Act" the Income and Corporation Taxes Act 1988;
"Tax Warranties" those warranties contained in paragraph 3 of
Schedule 3;
"Tenancy Agreement" the tenancy agreement in the approved terms
between the Company and Cray;
"Trade Receivables" the DEC Trade Receivables and the Cray Trade
Receivables;
"Vendors" DEC and Cray;
"Vendors' Solicitors" Olswang of 90 Long Acre, London WC2E 9TT;
"Warranties" the warranties contained or referred to in
Clause 7 and Schedule 3.
4
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1.2 Save where the context otherwise requires, words and phrases the
definitions of which are contained or referred to in Part XXVI of the
Companies Act 1985 shall be construed as having the meaning thereby
attributed to them.
1.3 Any references, express or implied, to statutes or statutory provisions
shall be construed as references to those statutes or provisions as
respectively amended or re-enacted or as their application is modified from
time to time by other provisions (whether before or after the date hereof)
and shall include any statutes or provisions of which they are
re-enactments (whether with or without modification) and any orders,
regulations, instruments or other subordinate legislation under the
relevant statute or statutory provision. References to sections of
consolidating legislation shall wherever necessary or appropriate in the
context be construed as including references to the sections of the
previous legislation from which the consolidating legislation has been
prepared.
1.4 References in this Agreement to Clauses and Schedules are to clauses in and
schedules to this Agreement (unless the context otherwise requires). The
recitals and schedules to this Agreement shall be deemed to form part of
this Agreement.
1.5 Headings are inserted for convenience only and shall not affect the
construction of this Agreement.
1.6 References to "persons" shall include bodies corporate, unincorporated
associations and partnerships (whether or not having separate legal
personality).
1.7 The masculine gender shall include the feminine and neuter and the singular
number shall include the plural and vice versa.
1.8 A document expressed to be "in the approved terms" means a document the
terms of which have been approved by or on behalf of the parties to this
Agreement and a copy of which has been signed for the purposes of
identification by or on behalf of those parties.
2. SALE OF SALE SHARES
-------------------
Subject to the terms of this Agreement, each of the Vendors shall sell with full
title guarantee and the Purchaser shall purchase, free from all liens, charges
and encumbrances and together with all rights now or hereafter attaching to
them, including all rights to any dividend or other distribution declared,
5
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made or paid after the date of this Agreement, the number of Sale Shares set
opposite its name in column 2 of Schedule 5.
3. PREEMPTION RIGHTS
-----------------
Each of the Vendors hereby waives and agrees to procure, with respect to their
respective Sale Shares, the waiver of any restrictions on transfer (including
pre-emption rights) which may exist in relation to the Sale Shares, whether
under the articles of association of the Company or otherwise.
4. CONSIDERATION
-------------
The total consideration payable for the Sale Shares shall be (Pounds)2, of which
(Pounds)1 shall be the consideration for the 50,000 A ordinary shares of
(Pounds)1 each in the capital of the Company and (Pounds)1 shall be the
consideration for the 50,000 B ordinary shares of (Pounds)1 each in the capital
of the Company.
5. COMPLETION
----------
5.1 Completion shall take place on the date of this Agreement at the offices of
the Purchaser's Solicitors when all (but not some only) of the events
described in this Clause 5 shall occur.
5.2 At Completion, the Vendors shall deliver to the Purchaser:
5.2.1 duly executed transfers of all of the Sale Shares in favour of the
Purchaser or its nominees together with the relative share
certificates or indemnities satisfactory to the Purchaser in respect
thereof;
5.2.2 the resignation of the Auditors as the auditors of the Company, such
resignation to contain a statement in accordance with Section 394 of
the Companies Act 1985 that there are no circumstances connected with
their ceasing to hold office which they consider should be brought to
the attention of the members or creditors of the Company;
5.2.3 all the statutory and other books (duly written up to date) of the
Company and its certificate of incorporation, common seal and any
other papers and documents of the Company in its possession or under
its control;
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5.2.4 certified copies of any powers of attorney under which any of the
documents referred to in this Clause 5.2 is executed or evidence
satisfactory to the Purchaser of the authority of any person signing
on behalf of either of the Vendors;
5.2.5 letters of resignation in the approved terms from each of the
Directors (other than the Continuing Directors) and the secretary of
the Company, such resignations to take effect from close of the
meeting of the Directors referred to in Clause 5.3 below;
5.2.6 an executed release under seal, in the approved terms, releasing the
Company from any liability as specified therein;
5.2.7 an executed release, in the approved terms, releasing the Company
from any liability, including any liability as specified therein;
5.2.8 the Administrative and Development Services Agreement and the
Tenancy Agreement, both executed by Cray;
5.2.9 certified copies of the Accounts;
5.2.10 the Cray Loan Assignment and the DEC Loan Assignment duly executed
by Cray and DEC respectively.
5.3 At Completion, the Vendors shall cause the Directors to hold a meeting of
the board of directors the Company at which the Directors shall pass
resolutions in the approved terms (inter alia) to:-
5.3.1 approve the registration of the Purchaser or its nominees as members
of the Company subject only to the production of duly stamped and
completed transfers in respect of the Sale Shares;
5.3.2 appoint such persons as the Purchaser may nominate as directors and
secretary of the Company and accept the resignation of the Directors
(excluding the Continuing Director) and secretary;
7
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5.3.3 revoke all authorities to the bankers of the Company relating to
bank accounts and to give authority to such persons as the Purchaser
may nominate to operate the same; and
5.3.4 approve entry by the Company in to the Administrative and
Development Services Agreement and the Tenancy Agreement.
5.4 At Completion, the Purchaser shall:
5.4.1 pay the Consideration to the Vendors;
5.4.2 that the Company makes payment to Cray of those Cray Trade
Receivables payable on Completion in accordance with the provisions of
Clause 10.1;
5.4.3 enter into the Cray Loan Assignment and the DEC Loan Assignment.
5.5 The Purchaser shall place the Company in funds to make th e payments of the
amounts specified in Clause 5.4.1 to 5.4.3 (inclusive) which shall be by way of
telegraphic transfer to the bank account of the Vendor's Solicitors (whose
conformation of receipt shall be an absolute discharge therefor and the
Purchaser shall not be concerned to see to the distribution of moneys
represented thereby).
5.6 At Completion Cray shall sell (free from all liens, charges and
encumbrances) and the Company shall purchase the Vax Development Machine
(serial number AY 321 V 3041) for the sum of (Pounds)1. In consideration of
the sale the Purchaser agrees to discharge all maintenance obligations in
respect of the machine under a maintenance agreement dated with Digital
numbered 7DZ 21575E except insofar as such obligations should have been
performed before the Completion Date.
6. RESTRICTION OF VENDORS AND PURCHASER
------------------------------------
6.1 Cray hereby undertakes with the Purchaser (for itself and as trustee for
the Company) that, except with the consent in writing of the Purchaser
(such consent not to be unreasonably withheld or delayed) and subject to
the provisions of Clause 6.2, that it shall not and shall procure that
each of its Associated Companies shall not:
8
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6.1.1 for the period of 18 months after the Completion Date, within any
country in which the Company has carried on business during the year
preceding the Completion Date, either on its own account or in
conjunction with or on behalf of any person, firm or company, carry on
or be engaged, concerned or interested, directly or indirectly whether
as shareholder, director, partner, agent or otherwise in carrying on
the businesses set out in clause 6.1.1.1 and 6.1.1.2 (other than as a
holder of not more than 5 percent of the issued shares or debentures
of any company listed on a stock exchange):
6.1.1.1 develop a software based integrated customer care/billing system
designed for use in the cable telecoms market; and
6.1.1.2 market or promote a software based integrated customer
care/billing system designed for use in the cable telecoms
market;
(together "Restricted Business") and for the avoidance of doubt
"cable telecoms" shall mean the provision of telephony and/or
cable television by a cable television operator through its cable
network PROVIDED THAT nothing in this Clause 6.1 shall prevent or
restrict Cray from:
6.1.1.3 developing, selling, supplying or licensing its software product
known as "ABS" (or any version, development or derivative of it)
as a component part of a software product, package or solution
offered by any third party for use in the cable telecoms market
and the telecoms market;
6.1.1.4 providing consultants for use in the cable telecoms market;
6.1.1.5 acquiring any interest or interests in any company or companies
which carry on or are engaged in or have any interest in the
Restricted Business provided that:
(i) the aggregate turnover represented by the Restricted
Business comprises no more than 15% of the total turnover in
any such company or group of companies; and
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(ii) at any subsequent time the Restricted Business does not
account for more than 10% of the aggregate annual turnover
of Cray and any of its associated companies.
6.1.2 for the period of eighteen months after the Completion Date, either
on its own account or in conjunction with or on behalf of any other
person, firm or company, solicit or entice away or attempt to solicit
or entice away from the Company the custom of any person, firm,
company or organisation who shall at any time within the year
preceding the Completion Date have been a customer, or identified
prospective customer, of the Company or in the habit of dealing with
the Company,
6.1.3 for the period of two years after the Completion Date, either on
its own account or in conjunction with or on behalf of any other
person, firm or company, solicit, entice away or attempt to solicit or
entice away from the Company any person who at the date hereof is or
at the date of or within the year preceding such employment,
solicitation, enticement or attempt shall have been an officer,
manager, consultant or employee of the Company, whether or not such
person would commit a breach of contract by reason of leaving such
employment;
6.1.4 at any time hereafter make use of or disclose or divulge to any
person (other than to officers or employees of the Company whose
province it is to know the same) any information (other than any
information properly available to the public or in the public domain
or disclosed or divulged pursuant to an order of a court of competent
jurisdiction [or as requested by any regulatory authority]) relating
to the Company, the identity of its customers and suppliers, its
products, finance, contractual arrangements, business or methods of
business and shall use all reasonable endeavours to prevent the
publication or disclosure of any such information by persons within
its actual control; or
6.1.5 at any time hereafter in relation to any trade, business or company
use a name or trade mark (including, but not limited to, the word
"Bytel" or any word confusingly similar thereto) in such a way as to
be capable of or likely to be confused with the name or any trade mark
of the Company.
6.2 While the restrictions contained in this Clause are considered by the
parties to be reasonable in all the circumstances, it is recognised that
restrictions of the nature in
10
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question may fail for technical reasons and accordingly it is hereby agreed
and declared that if any of such restrictions shall be adjudged to be void
as going beyond what is reasonable in all the circumstances for the
protection of the interests of the Purchaser but would be valid if part of
the wording thereof were deleted or the periods thereof reduced or the
range of activities or area dealt with thereby reduced in scope the said
restriction shall apply with such modifications as may be necessary to make
it valid and effective.
6.3 Other than in respect of offers to Bytel Development Employees as defined
in the Administration and Development Services Agreement for the period of
two years after the Completion Date, the Purchaser shall not and shall
procure that the Company shall not for its own account or for any person,
firm or company directly or indirectly solicit or entice away or endeavour
to solicit or entice away any person who has during the 12 months prior to
Completion been an employee of Cray.
7. WARRANTIES
----------
7.1 Cray hereby warrants to and with the Purchaser that each of the statements
set out in Schedule 3 is true and accurate.
7.2 DEC hereby warrants to and with the Purchaser that the statements set out
in paragraphs 1.2 and 3.2 in Schedule 3 are true and accurate.
7.3 The Warranties are given subject to:
7.3.1 matters disclosed in reasonable detail in the Disclosure Letter (and
documents attached thereto). Subject as expressly provided in this
Agreement no letter, document or other communication shall be deemed
to constitute a disclosure for the purposes of this Agreement no other
information relating to the Company of which the Purchaser has
knowledge (actual or constructive) and no investigation by or on
behalf of the Purchaser shall prejudice any claim made by the
Purchaser under the Warranties or operate to reduce any amount
recoverable;
7.3.2 matters disclosed in reasonable detail in written material Cray can
prove beyond reasonable doubt was provided by the Vendors to the
Purchaser prior to Completion; and
11
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7.3.3 all matters which Cray can prove beyond reasonable doubt that the
Purchaser was aware of at Completion which were a result of its
discussions with any one or more of the Company's customers.
7.4 The Vendors acknowledge that the Purchaser has entered into this Agreement
in reliance upon the Warranties respectively given by them. The
Purchaser confirms that so far as it is aware none of the Company's
customers have prior to the date of this Agreement provided information
to the Purchaser which would constitute a breach of any of the
Warranties.
7.5 Without restricting the rights of the Purchaser or otherwise affecting the
ability of the Purchaser to claim damages on any other basis available to
it, in the event that any of the Warranties given by Cray or DEC is
broken or (as the case may be) proves to be untrue or misleading, DEC or
Cray (as the case may be) shall, pay to the Purchaser or, at the
Purchaser's direction (provided that the amount to be paid shall not be
increased by reason of any such direction or omission to make such
direction) the Company:
7.5.1 the amount reasonably necessary to put the Company into the position
which would have existed if the Warranties had not been broken or (as
the case may be) had been true and not misleading; and
7.5.2 all reasonable costs and expenses properly incurred by the
Purchaser, and the Company as a result of such breach and any
reasonable costs (including reasonable legal costs), expenses or other
liabilities which any of them may properly and reasonably incur after
the commencement of any action in connection with (i) any legal
proceedings in which the Purchaser claims that any of the Warranties
has been broken or is untrue or misleading and in which judgment is
given for the Purchaser or (ii) the enforcement of any settlement of,
or judgment in respect of, such claim. Cray shall be entitled, at its
expense, to take full conduct of (without limitation) determining the
existence and nature of, commencing, handling, negotiating, issuing
proceedings in respect of, settling or obtaining and enforcing
judgment for all claims against any third party in the Company's name
upon the provision by the Purchaser of such reasonable assistance as
Cray may require provided that Cray shall indemnify the Purchaser for
any reasonable costs, claims, expenses, losses or damages incurred by
the Purchaser in providing such assistance.
12
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7.6 Each of the Warranties shall be separate and independent and, save as
expressly provided to the contrary, shall not be limited by reference to
or inference from any other Warranty or any other term of this Agreement.
7.7 Where any statement in the Cray Warranties is qualified by the expression
"so far as Cray is aware" or "to the best of Cray's knowledge and belief"
or any similar expression, that statement shall be deemed to include the
knowledge of any directors of Cray and shall be deemed to include an
additional statement that Cray has made due and careful enquiry of Chris
Musgrave and (so far as the warranties at paragraphs 5, 6 and 7 of
Schedule 3 only) Lawrence Green.
7.8 Each of the Vendors hereby agrees with the Purchaser (for itself and as
trustee for the Company) to waive any rights which it may have in respect
of any misrepresentation or inaccuracy in, or omission from, any
information or advice supplied or given by the Company or any of its
employees or advisers in connection with the giving of the
Warranties and the preparation of the Disclosure Letter.
7.9 If any sum payable by the Vendors under this Clause 7 is subject to Tax
(whether by way of deduction or withholding or direct assessment of the
person entitled thereto) such payment shall be increased by such an
amount as shall ensure that after deduction, withholding or payment of
such Tax and after taking into account any savings, deductions, reliefs
or reclaims available to the Purchaser or the Company by reason of the
claim in respect of which the payment is being made the recipient shall
have received a net amount equal to the payment otherwise required hereby
to be made.
8. VENDOR LIMITATION
-----------------
8.1 The liabilities of Cray under the Cray Warranties:-
8.1.1 shall, save in relation to the Tax Warranties cease on the second
anniversary of the Completion Date except in respect of matters which
have been the subject of a bona fide written claim specifying the
subject matter and nature of the claim made before such date by the
Purchaser or the Purchaser's Solicitors to either of the Vendors or
the Vendors' Solicitors;
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8.1.2 shall in relation to the Tax Warranties cease on the seventh
anniversary of the Completion Date except in respect of matters which
have been the subject of a bona fide written claim made before such
date by the Purchaser or the Purchaser's Solicitors to either of the
Vendors or the Vendors' Solicitors.
8.2 The liability of Cray for breach of the Cray Warranties and for breach of
the covenants contained in Clause 9 shall be limited to a maximum aggregate
amount of (Pounds)800,000, unless in each case the relevant claim or claims
has arisen by reason of fraud, wilful concealment, dishonesty or deliberate
non-disclosure on the part of Cray, or on the part of any officer,
employee, adviser or representative of the Company prior to the date of
this Agreement, in which event there shall be no limit on the amount
recoverable by the Purchaser from Cray in respect of such claim or claims
or the time period within which such claims may be brought and none of the
limitations set forth in this Clause 8 shall apply.
8.3 Cray shall not be liable for breach of the Cray Warranties or pursuant to
the covenants contained in Clause 9:
8.3.1 unless the liability of Cray for all claims (or what would be such
liability apart from this Clause) exceeds in the aggregate
(Pounds)50,000 and in that event Cray shall be liable for the whole
amount and not merely the excess;
8.3.2 in respect of a claim for less than (Pounds)5,000.
8.4 If Cray is liable to the Purchaser under the Cray Warranties or pursuant to
the covenants contained in Clause 9 by reason of an obligation of the
Company to pay advance corporation tax or any sum recoverable from the
Company as if it were advance corporation tax the liability of the Vendors
shall be reduced and the amount paid to the Purchaser in respect of such
liability shall be refunded when and to the extent that the Company obtains
the benefit of a reduction in liability to mainstream corporation tax by
reason of such payment and the Purchaser shall procure that the Company
makes all such claims and elections as will result in such benefit being
obtained as soon as reasonably possible.
8.5 If Cray is liable to the Purchaser under the Cray Warranties or pursuant to
the covenants contained in Clause 9 in respect of an obligation of the
Company to pay tax under the
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provisions of Section 419 ICTA 1988 the liability of Cray shall be reduced
and any amounts paid to the Purchaser in respect of such liability shall be
refunded when and to the extent that the Company is entitled to relief
under sub-section (4) of that section and the Purchaser shall procure that
the Company makes all necessary claims under that sub-section as soon as
reasonably possible.
8.6 If Cray pays to the Purchaser or the Company an amount pursuant to a claim
in respect of Cray Warranties other than the Tax Warranties and the
Purchaser or the Company subsequently recovers from a third party an amount
which is referable to that claim the Purchaser shall or shall procure that
the Company shall immediately repay to Cray so much of the amount paid by
Cray as does not exceed the amount recovered from the third party less all
costs, charges and expenses incurred by the Purchaser or the Company in
obtaining that payment and in recovering that amount from the third party
and any applicable tax.
8.7 The Vendors shall be entitled to settle any claim under this Agreement and
Warranties or pursuant to the covenants contained in Clause 9 by
payment to the Company in cash.
8.8 Any payment made to the Purchaser by the Vendors pursuant to any breach of
this Agreement or the Warranties and/or to the Company pursuant to the
covenants contained in Clause 9 shall constitute a reduction in the
purchase price of the Sale Shares.
8.9 The Purchaser shall not be entitled to recover twice in respect of the same
subject matter under both the Tax Warranties and the covenants contained
in Clause 9.
8.10 Cray shall not be liable in respect of any claim for breach of the Cray
Warranties if such claim::
8.10.1 occurs or arises as a result of any change or changes in legislation
made after the date of this Agreement or the withdrawal of any extra-
statutory concession made by the Inland Revenue which has
retrospective effect;
8.10.2 ccurs or arises as a result of or is otherwise attributable to a
voluntary act or omission occurring after Completion of the Purchaser
or the Company (other than pursuant to a legally binding commitment
created before Completion) and which is
15
<PAGE>
otherwise than in the ordinary course of business and such act or
omission could have reasonably been avoided;
8.10.3 arises as a result only of any changes in the accounting policies of
the Company adopted after Completion;
8.10.4 arises as a result of any provision or reserve made in respect of it
in the Accounts being insufficient by reason of any increase in the
rates of taxation made after the date of this Agreement having
retrospective effect or arises as a result of the retrospective
imposition of taxation as a consequence of a change in the law enacted
after the date of this Agreement;
8.10.5 would not have arisen but for any claim, election, surrender or
disclaimer made or omitted to be made or notice or consent given or
omitted to be done by the Company or the Purchaser otherwise than at
the request of the Vendors, particulars of which are set out in the
Disclosure Letter, under the provisions of any enactment relating to
Tax, after Completion;
8.11 The Purchaser shall procure that upon service of any notice to the Vendors
of any claim to which any of the Warranties or the covenants contained in
Clause 9 may relate the Company shall take such action as the Vendors may
reasonably request to avoid, dispute, resist, appeal, compromise or defend
a claim in relation to a third party subject to the Company and the
Purchaser being indemnified and secured to its reasonable satisfaction by
the Vendors against all losses, costs, damages and expenses thereby
incurred.
8.12 The Purchaser shall take or procure that the Company shall take all
reasonable steps necessary to mitigate any loss in relation to any such
action or claim.
8.13 The provisions of this Clause 8 shall apply to limit the liabilities of DEC
under the DEC Warranties and the covenants contained in Clause 9 mutatis
mutandis.
16
<PAGE>
9. COVENANT IN RESPECT OF TAX
--------------------------
9.1 In this clause unless the context otherwise requires:
9.1.1 "event" means any omission, event, action or transaction whether or
not the Company is a party thereto, the death of any person, a change
in the residence of any person for any Tax purpose, a failure to make
sufficient dividend payments to avoid an apportionment or deemed
distribution of income and the entering into and completion of this
Agreement and references to the result of events on or before the
Completion Date shall include the combined result of two or more
events one or more of which shall have taken place on or before the
Completion Date; PROVIDED THAT with respect to the event or events
which take or takes place after the Completion Date neither the
Purchaser or the Company could have reasonably foreseen that the event
could give rise to a claim under this Deed but this proviso shall not
apply to the extent that the event taking place after the Completion
Date was carried out pursuant to an obligation of the Company entered
into before Completion or was carried out with the approval,
concurrence or assistance or at the request or direction of the
Vendors.
9.1.2 "relief" means any relief, allowance, credit, set off, deduction or
exemption for any Tax purpose;
9.1.3 reference to income or profits or gains earned, accrued or received
shall include income or profits or gains deemed to have been or
treated as or regarded as earned, accrued or received for the purposes
of any legislation;
9.1.4 reference to any Tax liability shall include not only any liability to
make actual payments of or in respect of Tax but shall also include:
9.1.4.1 the loss or reduction in the amount of, or the setting off
against any Tax liability for which no provision has been made in
preparing the Accounts, of a right to repayment of Tax which has
been treated as an asset of the Company in preparing the
Accounts; and
17
<PAGE>
9.1.4.2 the loss or reduction in the amount of, or the setting off
against income, profits or gains earned, accrued or received on
or before Completion, or against any Tax liability of any relief
which is not available before Completion but which arises in
respect of an event occurring after Completion in circumstances
where, but for such loss, reduction or setting off, the Company
would have had a Tax liability in respect of which the Purchaser
would have been able to make a claim under this clause 9;
and in such a case the amount of Tax which would otherwise be payable
but for the relief so lost, reduced or set off or the amount of
repayment which would otherwise have been obtained shall be treated as
the amount of a Tax liability which has arisen;
9.1.5 reference to a payment in respect of Tax includes (without limitation)
a payment for the surrender of losses or other amounts by way of group
relief (within the meaning of Section 402 of the Taxes Act) or for the
surrender of advance corporation tax or for the transfer of any other
relief and a repayment of any such payment.
9.2 Subject as hereinafter provided, the Vendors hereby severally covenant with
and undertake to pay to the Purchaser a sum equal to the amount of:
9.2.1 any Tax liability of the Company resulting from or by reference to any
income, profits or gains earned accrued or received on or before the
Completion Date or any event on or before the Completion Date and
whether or not such Tax is chargeable against or attributable to any
other person;
9.2.2 any Tax liability of the Company that arises after Completion as a
result of an act, omission or transaction by a person other than the
Company and which liability to Tax falls upon the Company as a result
of its having been in the same group for Tax purposes as that person
at any time before Completion; and
9.2.3 all costs and expenses which are reasonably incurred by the Purchaser
or the Company in connection with any claim under this clause 9
(including, without prejudice to the generality of the foregoing, all
legal and other professional fees and disbursements).
9.3 The covenants contained in clause 9.2 do not apply to any liability:
18
<PAGE>
9.3.1 to the extent that provision or reserve in respect thereof has been
made in the Accounts or to the extent that payment or discharge of
such liability has been taken into account therein; or
9.3.2 in respect of which provision or reserve has been made in the Accounts
which is insufficient only by reason of any increase in rates of Tax
made after the Completion Date with retrospective effect; or
9.3.3 to the extent that it was discharged (whether by payment or by the
utilisation of any relief) prior to Completion and details of such
discharge have been provided to the Purchaser prior to Completion; or
9.3.4 which arises or is increased as a result only of any change in
applicable law or published Inland Revenue practice made after the
date of this Agreement which takes effect retrospectively; or
9.3.5 where recovery has been made in respect of the matter giving rise to
such liability by the Purchaser under the warranties contained in this
Agreement; or
9.3.6 to the extent that such liability would not have arisen but for, or is
increased by, any voluntary act or transaction which could reasonably
have been avoided and which was not carried out pursuant to an
obligation entered into before Completion, of the Company after
Completion otherwise than in the ordinary course of business and which
the Purchaser was aware or ought reasonably to have been aware could
give rise to such a claim, but this exclusion shall not extend to any
voluntary act carried out with the approval, concurrence or assistance
or at the request or direction of the Vendors; or
9.3.7 to the extent that such liability would not have arisen but for, or
has been increased by:
(a) a disclaimer, claim or election made or notice or consent given
after Completion by the Purchaser or the Company otherwise than
at the request of the Vendors under the provisions of this
Agreement; or
19
<PAGE>
(b) a failure or omission by the Company to make any claim, election,
surrender or disclaimer or give any notice or consent or do any
other thing under the provisions of any enactment relating to
Tax, particulars of which are set out in the Disclosure Letter
with reference to this clause 9.3.6, after Completion the making,
giving or doing of which was taken into account in computing the
provision for Tax in the Accounts; or
9.3.8 to the extent that such liability arises as a result only of any
changes in the accounting policies of the Company adopted after
Completion save where the change in the treatment is effected as a
result of the prior treatment not being in accordance with generally
accepted accounting principles; or
9.3.9 to the extent that the liability is in respect of VAT which has been
charged and a tax invoice issued but which has not yet been accounted
for to HM Customs & Excise, and details of which have been provided to
the Purchaser; or
9.3.10 which arises in the ordinary course of business of the Company since
the Accounting Date.
9.4 If the Purchaser becomes aware of any assessment, notice, demand or other
document issued or action taken by or on behalf of any person, authority or
body from which it appears that the Company has or may have a liability in
respect of which a claim could be made under this clause 9, it shall give
written notice thereof to the Vendors, as soon as reasonably practicable,
or if an assessment has been issued within 10 business days and shall (if
the Vendors shall indemnify the Purchaser and the Company to the
Purchaser's reasonable satisfaction against any liabilities, costs, damages
or expenses which may be incurred thereby) take such action and procure
that the Company shall take such action as the Vendors may reasonably
request to dispute, resist or compromise the liability; provided that
neither the Company nor the Purchaser shall be required to take any such
action unless the Vendors shall have produced to them the opinion of
leading Counsel practising in the relevant area of law that such action is
reasonable.
9.5 The liability of the Vendors under this clause shall cease on the seventh
anniversary of the Completion Date except in respect of matters which have
been the subject of a written claim made within the said period by the
Purchaser to either of the Vendors or the
20
<PAGE>
Vendors' Solicitors unless the claim in question has arisen by reason of
fraud, wilful concealment, dishonesty or deliberate nondisclosure on the
part of either or both of the Vendors or the Company whilst under the
control of the Vendors or on the part of any officer, employee, adviser or
representative of the Company whilst under the control of the Vendors or of
either or both of the Vendors, in which event there shall be no contractual
limit on the time period within which such claim may be brought.
9.6 The due date for the making of payments under this clause 9 shall be:-
9.6.1 where the payment relates to a liability of the Company to make an
actual payment of or in respect of Tax, the date which is four days
before the date on which such actual payment is due to be made to the
relevant authority;
9.6.2 where the payment relates to a matter falling within clause 9.1.4.2,
the date falling seven days after the Vendors have been notified by
the Purchaser that the auditors for the time being of the Company have
certified at the request of the Purchaser or the Company that the
Vendors have a liability for a determinable amount under Clause 9.2;
and
9.6.3 where the payment relates to a matter falling within Clause 9.1.4.1
the date on which the repayment of Tax would otherwise have been due
to be made; and
9.6.4 in the case of costs and expenses within Clause 9.2.3 the date on
which such costs and expenses are incurred.
9.7 If any payment due to be made under this Clause 9 is not made on the due
date for payment thereof the same shall carry interest from such due date
of payment until actual payment at the rate of 2 per cent above the base
rate from time to time of Lloyds Bank PLC, compounded on the last days of
March, June, September and December in each year.
9.8 If any sum payable under this clause 9 (other than interest under clause
9.7) is subject to Tax (whether by way of deduction or withholding or
direct assessment of the person entitled thereto) such payment shall be
increased by such an amount as shall ensure that after deduction,
withholding or payment of such Tax the recipient shall have received a net
amount equal to the payment otherwise required hereby to be made.
21
<PAGE>
9.9 The Vendors shall give all such assistance and provide such information as
the Purchaser shall reasonably request from time to time for the purpose of
enabling the Purchaser or the Company to make returns and provide
information as required to any Tax authority and to negotiate any liability
to Tax.
9.10 The Purchaser undertakes that it shall not, after Completion, take any
action or enter into any transaction relating to the business, assets or
undertaking of the Company, the effect of which will or may be to render
the Company unable to meet any corporation tax liability to the extent that
provision or reserve in respect thereof has been made in the Accounts and
the Purchasers agrees to indemnify the Vendors against any liability of the
Vendors under Section 767A of the Taxes Act for such corporation tax (any
related interest, penalties or expenses) incurred as a result of the
Company being unable to meet any such corporation tax liability for which
provision or reserve has been made as aforesaid.
9.11.1 If the auditors for the time being of the Company shall certify (at the
request and expense of the Vendors) that any provision for Tax in the
Accounts (excluding any provision for deferred tax) has proved to be an
over-provision (including, without prejudice to the generality of the
foregoing, any case where the Company receives any payment of any Tax
that was paid by it in respect of any period ending on or before
Completion, then the amount of such over-provision shall be dealt with
in accordance with clause 9.11.3 except in so far as such over-provision
is attributable to the effect of a change in rates of Tax after the date
hereof.
9.11.2 If the auditors for the time being of the Company shall certify (at the
request and expense of the Vendors) that any Tax liability which has
resulted in a payment having been made or becoming due from the Vendors
under this Deed will give rise to a relief for the Company which would
not otherwise have arisen, and shall further certify the value of that
relief (taking account of timing differences), the amount so certified
shall be dealt with in accordance with clause 9.11.3.
9.11.3 Where it is provided under clause 9.11.1 or 9.11.2 that any amount (the
"Relevant Amount") is to be dealt with in accordance with this clause:
9.11.3.1 the Relevant Amount shall first be set against any payment then due
from the Vendors under clause 9 of this Agreement; and
22
<PAGE>
9.11.3.2 to the extent that there is an excess, a refund shall be made to the
Vendors of any previous payment or payments made by the Vendors under
clause 9 of this Agreement and not previously refunded under this
clause 9 up to the amount of such excess; and
9.11.3.3 to the extent that the excess referred to in clause 9.10.3.2 is not
exhausted under that clause, the remainder of that excess shall be
carried forward and set against any future payment or payments which
become due from the Vendors under clause 9 of this Agreement.
9.11.4 When any such certification as is mentioned in clause 9.11.1 or 9.11.2
has been made, the Vendors or the Purchaser or the Company may request
the auditors for the time being of the Company to review such
certification in the light of all relevant circumstances, including
any facts which have become known only since such certification, and
to certify whether such certification remains correct or whether, in
the light of those circumstances, the amount which was the subject of
such certification should be amended.
9.11.5 If the auditors certify under this clause 9.11 that an amount
previously certified should be amended, that amended amount shall be
substituted for the purposes of clause 9.11.3 as the Relevant Amount
in respect of the certification in question in place of the amount
originally certified and such adjusting payment (if any) as may be
required by virtue of that substitution shall be made as soon as
practicable by the Vendors to the Purchaser or (as the case may be) by
the Purchaser to the Vendors.
9.12 If the Vendors shall become liable to make any payment under this clause 9
the Vendors may at their option and wholly or partly instead of making a
payment under clause 9.2 of this Deed surrender or procure the surrender
(without payment) to the Company of consortium relief (as defined in
Section 402 of the Taxes Act) or advance corporation tax in order to
eliminate or reduce the liability to make the payment of Tax which has
given rise to the claim. The Purchaser shall procure that the Company
shall, at the Vendors' expense, take without delay (and in any event within
any applicable statutory time limit) all such steps as may reasonably be
required by the Vendors to facilitate or permit the surrender of consortium
relief or advance corporation tax mentioned above provided always that such
steps shall be taken before any claim is made by the Company under
23
<PAGE>
Section 393A of the Taxes Act in respect of any relief which is not
available before Completion but which arises in respect of an event which
arises after Completion.
9.13 If the Vendors shall have paid an amount under this clause 9 and the
Company or the Purchaser is entitled or may be entitled either immediately
or at some subsequent date to recover from some other person (including any
taxing or other competent authority but not including the Purchaser or the
Company) any sum in respect of any Tax as is mentioned in this clause 9 the
Purchaser shall or shall procure that the Company shall notify the Vendors
within a reasonable period of that fact and (if so required by the Vendors
and at the Vendors' expense) take all appropriate steps to enforce such
recovery (keeping the Vendors fully informed of the progress of any action
taken). The Purchaser shall pay within 10 business days to the Vendors any
amount equal to any amount so recovered (so far as it does not exceed the
amount paid by the Vendors hereunder in respect of the aforementioned
liability under this clause 9) plus any interest or repayment supplement
paid by the taxing or other competent authority or other person on or in
respect thereof.
9.14 The provisions of this clause 9 shall apply (mutatis mutandis) to claims
under the Tax Warranties.
10. DEC AND CRAY TRADE RECEIVABLES, TRADE CREDITORS
-----------------------------------------------
10.1 The Purchaser shall procure that the Company pay to Cray the amount of the
Cray Trade Receivables. The Purchaser shall procure payment by the Company
on the Completion Date of the sum of (Pounds)972,584 (being the amount
represented by those invoices listed in Schedule 2 which are dated on or
before 30 April 1996). The Purchaser shall procure that the Company pay the
remaining Cray Trade Receivables (up to a maximum, after the payment
referred to above of (Pounds)1 million) within 30 days of the relevant
invoice date.
10.2 Notwithstanding Clause 10.1, the Purchaser reserves the right, at any time,
to require reasonable written evidence from Cray to support the amount of
any Cray Trade Receivable invoices and the Purchaser shall not be required
to settle any such invoice which is not in connection with goods,
facilities or services provided in the ordinary course of business between
Cray and the Company and in accordance with prior practice.
10.3 The Purchaser shall procure that the Company pay to DEC the amount of the
DEC Trade Receivables, such amount to be paid in 12 equal monthly
instalments of (Pounds)85,962 with the
24
<PAGE>
first instalment being paid on the day 30 days from the Completion Date and
then on the same day in each month for the following 11 months. If payment
of any instalment is not paid within 7 days of its due date then all
outstanding amounts in respect of the DEC Trade Receivables shall become
immediately payable by the Company.
10.4 Without prejudice to its obligations under Clauses 10.1 and 10.3 the
Purchaser shall exercise all its powers in relation to the Company so as to
procure that the trade creditors (other than DEC and Cray) of the Company
at the Completion Date are paid when due subject only to the prudent
conduct of the Company's business. Without prejudice as aforesaid nothing
in this Clause 10.4 shall be deemed to require the Purchaser to subscribe
for additional shares in the Company, to make any loan to the Company or to
give any guarantee to any third party in respect of any obligation of the
Company.
10.5 Cray covenants with the Purchaser that the Cray Shareholder Loan is not a
debt the release of which will or may give rise to a liability to Tax under
section 94 Taxes Act.
10.6 DEC covenants with the Purchaser that the DEC Shareholder Loan is not a
debt the release of which will or may give rise to a liability to Tax under
section 94 Taxes Act.
10.7 Cray and the Purchaser hereby agree that forthwith upon the grant of an
Order pursuant to Section 38(4) of the Landlord and Tenant Act 1954 (as
amended) authorising the same they will procure the execution and
completion by Autofile Limited and the Company respectively of a Tenancy
Agreement in respect of premises at 712 Banbury Road Slough Berkshire in
the form agreed engrossments of which have been issued to a the parties and
that pending the completion of such Tenancy Agreement the Company will be
permitted to remain in occupation of the said premises as licensee on the
terms and conditions set out in the said Tenancy Agreement and in the event
that for any reason such Court Order is not made within three months of the
date of this Agreement such licence shall determine and the Purchaser shall
procure that the Company vacates the said premises within ten working days
of being requested so to do by Autofile Limited.
10.8.1 Subject to clause 10.8.2, DEC shall continue, on its standard terms,
to make available to the Company and authorise the Company to continue
to use in its business (but not in connection with or for supply to
third parties) all hardware and associated operating systems
originally supplied to the Company by DEC, whether the rights to such
hardware or operating systems are owned by DEC or DEC has the right to
25
<PAGE>
licence the same ("DEC Hardware"), and to facilitate such continued
use, DEC shall offer to provide maintenance and support in respect of
the DEC Hardware on its standard terms.
10.8.2 In the case of the products or services which the Company is
authorised to supply to third parties under the Digital Systems Value
Added Reseller Agreement dated 29 May 1996 ("DEC VAR Agreement"), DEC
shall continue to provide the products and any maintenance and support
provided for under the DEC VAR Agreement in accordance with the terms
of that agreement as amended or supplemented as agreed by the Company
and DEC.
10.9 The Vendors hereby represent and warrant to the Purchaser that the
Accounts shall be in exactly the same form and content as the draft
accounts of the Company for the financial year ending on the
Accounting Date as annexed to the Disclosure Letter.
11. RESTRICTION ON ANNOUNCEMENTS
----------------------------
Each of the parties to this Agreement undertakes that it will not (save as
required by law or by any securities exchange or any supervisory or regulatory
body to whose rules any party to this Agreement is subject) make any
announcement in connection with this Agreement unless the other parties shall
have given their respective consents to such announcement (which consents may
not be unreasonably withheld or delayed and may be given either generally or in
a specific case or cases and may be subject to conditions).
12. COSTS
-----
12.1 Each party to this Agreement shall pay its own costs of and incidental
to this Agreement and the sale and purchase hereby agreed to be made.
12.2 The Vendors jointly and severally confirm that no expense of whatever
nature relating to the sale of the Sale Shares has been or is to be
borne by the Company.
13. GENERAL
-------
13.1 This Agreement shall be binding upon and enure for the benefit of the
successors of the parties.
26
<PAGE>
13.2 This Agreement (together with any documents referred to herein or executed
contemporaneously by the parties in connection herewith) constitutes the
whole agreement between the parties hereto and supersedes any previous
agreements or arrangements between them relating to the subject matter
hereof; it is expressly declared that no variations hereof shall be
effective unless made in writing signed by duly authorised representatives
of the parties.
13.3 All of the provisions of this Agreement shall remain in full force and
effect notwithstanding Completion (except insofar as they set out
obligations which have been fully performed at Completion).
13.4 If any provision or part of a provision of this Agreement shall be, or be
found by any authority or court of competent jurisdiction to be, invalid or
unenforceable, such invalidity or unenforceability shall not affect the
other provisions or parts of such provisions of this Agreement, all of
which shall remain in full force and effect.
13.5 If any liability of one but not both of the Vendors shall be or become
illegal, invalid or unenforceable in any respect, such circumstance shall
not affect or impair the liabilities of the other Vendor under this
Agreement.
13.6 The Purchaser may release or compromise the liability of either of the
Vendors hereunder or grant to either Vendor time or other indulgence
without affecting the liability of the other Vendor hereunder.
13.7 No failure of any party to exercise, and no delay or forbearance in
exercising, any right or remedy against any other party in respect of any
provision of this Agreement shall operate as a waiver of such right or
remedy.
13.8 Upon and after Completion the Vendors shall do and execute or procure to be
done and executed all such further acts, deeds, documents and things as may
be [reasonably] necessary to give effect to the terms of this Agreement and
to place control of the Company in the hands of the Purchaser and pending
the doing of such acts, deeds, documents and things the Vendors shall as
from Completion hold the legal estate in the Sale Shares in trust for the
Purchaser.
27
<PAGE>
13.9 This Agreement may be executed in one or more counterparts, and by the
parties on separate counterparts, but shall not be effective until each
party has executed at least one counterpart and each such counterpart shall
constitute an original of this Agreement but all the counterparts shall
together constitute one and the same instrument.
14. NOTICES
-------
Any notice required to be given by any party hereto to any other shall be deemed
validly served by hand or courier or by first class registered delivery post to
its address given herein or such other address as may from time to time be
notified for this purpose and any notice served by hand or courier shall be
deemed to have been served on delivery, and if posted, at 10 am on the second
business day after the date of the registered delivery receipt. In proving
service it shall be sufficient to prove that the notice was properly addressed
and delivered or posted as a first class registered letter.
15. GOVERNING LAW AND SUBMISSION TO JURISDICTION
--------------------------------------------
This Agreement shall be governed by and construed in accordance with English law
and the parties hereto submit to the non-exclusive jurisdiction of the English
courts for the purpose of enforcing any claim arising hereunder.
28
<PAGE>
DULY EXECUTED
SIGNED by )
Geoffrey Cox ) /s/ Geoffrey Cox
for and on behalf of )
CRAY SYSTEMS LTD )
SIGNED by )
Robert McMicking ) /s/ Robert McMicking
for and on behalf of )
DIGITAL EQUIPMENT )
COMPANY LTD )
SIGNED by )
David Brenner ) /s/ David Brenner
for and on behalf of )
CSG SYSTEMS )
INTERNATIONAL, INC. )
29
<PAGE>
SCHEDULE 1
----------
DETAILS OF THE COMPANY
----------------------
<TABLE>
<CAPTION>
THE COMPANY
- - - -----------
<S> <C> <C>
1. Registered number: 2722892
2. Address of registered office: 161 Fleet Road, Fleet, Hampshire GU13 8PD
3. Date and place of incorporation: June 15, 1992 - England.
4. Authorised share capital: 500,000 A ordinary shares of
(Pounds)1 each and 500,000 B ordinary
shares of (Pounds)1 each.
5. Issued share capital: 50,000 A ordinary shares of (Pounds)1
each and 50,000 B ordinary shares of
(Pounds)1 each.
6. Directors: C. Musgrave, M. L. Shone, R. McMicking.
7. Secretary: D.P.C. Tidsall.
8. Accounting Reference Date: April 30.
9. Auditors: Arthur Andersen.
10. VAT number: GB 578347592
</TABLE>
30
<PAGE>
SCHEDULE 2
----------
CRAY INVOICES
-------------
See attached
31
<PAGE>
SCHEDULE 3
----------
WARRANTIES
----------
Each and every Warranty contained in this Schedule 3 is given by Cray. The
Warranties in paragraphs 1.2 and 3.2 of this Schedule are given severally by
Cray and DEC.
1. CORPORATE
---------
1.1 The Company has been duly incorporated and is validly existing and the
Company has not received notice that an order has been made or petition
presented for the winding up or the administration of the Company nor has
the Company passed a resolution for its winding up and so far as Cray is
aware, no distress, execution or other process has been levied on any of
the Company's assets. No administrative receiver or receiver or receiver
and manager has been appointed by any person of its business or assets or
any part thereof and, so far as Cray is aware, no power to make any such
appointment has arisen.
1.2 The Vendors are the registered holders and beneficial owners of the Sale
Shares set opposite their names in column 2 of Schedule 5, free and clear
of any lien, charge, option, right of pre-emption or other encumbrance or
third party right whatsoever. There is no outstanding call on any of the
Sale Shares and all of the Sale Shares are fully paid.
1.3 The Sale Shares constitute all the issued shares in the capital of the
Company.
1.4 All statutory books and records of the Company are up to date, and contain
no material inaccuracies, and the Company has not received any application
or request for rectification of any of its statutory registers.
1.5 The Memorandum and Articles of Association of the Company filed at the
Companies Registry are accurate and complete in all respects.
2. ACCOUNTS
--------
2.1 The Accounts have been prepared in accordance with the requirements of all
relevant statutes and with good and generally accepted accountancy
principles and practice in the United Kingdom and are complete and
accurate in all respects and show a true and fair
32
<PAGE>
view of the state of the affairs of the Company as at the Accounting Date
and of its profits and losses for the financial period ending on the
Accounting Date.
2.2 Since the Accounting Date, the Company has carried on its business in the
ordinary course and has not entered into any transaction which is outside
the ordinary course of the Company's business. Since the Accounting Date
the Company has traded within, and to date its financial position is in
line with, the budget of the Company for the fiscal year 1996/7 dated 7
April 1996 and attached to the Disclosure Letter.
2.3 The provision of (Pounds)105,000 shown in the Accounts in respect of normal
accounting practices regarding fixed price contracts of the Company under
a contract with Telewest dated 12 April 1996 has been maintained in the
accounts and financial records of the Company. Notwithstanding any
contrary provisions contained elsewhere in the Agreement, Cray's
liability for breach of this Warranty shall not be limited by reference
to any other provisions of this Agreement, including the provisions of
Clause 8.
3. TAXATION
--------
3.1 The Company has made all returns and given or delivered all notices,
accounts and computations which it is required by law to make for Tax
purposes. There is no dispute or question with the Inland Revenue or HM
Customs & Excise or other taxation authority and, so far as the Vendors are
aware, no such dispute or question is likely. The Company has duly paid all
Tax which it has become liable to and the Company has not been notified of
any liability to pay any penalty, interest, fine or default surcharge in
connection with any claim for Tax. The Company has deducted and accounted
for all Tax required to be deducted under PAYE and all other payments made
by the Company which are required to be made under deduction or withholding
of Tax have been so made and the relevant sum accounted for to the relevant
authority.
3.2 The Company has not surrendered any of the trading losses shown in the
Accounts or any of the trading losses incurred since the Accounting Date
(which are available to be carried forward under Section 393 Taxes Act) and
there is no agreement or arrangement in existence for the surrender of any
such losses.
33
<PAGE>
4. TRADING AND GENERAL COMMERCIAL MATTERS
--------------------------------------
4.1 The bundle of documents attached to the Disclosure Letter contains copies
of each material contract to which the Company is a party and which are
still open for performance by either party thereto (the "Disclosed
Contracts").
4.2 To the best of the Cray's knowledge and belief, the Company has not
received any written notice to terminate any of the Disclosed Contracts.
4.3 The Cray Trade Receivables are represented by goods, facilities or services
provided to the Company and are in accordance with the agreements between
Cray and the Company as summarised in the Disclosure Letter. The Cray Trade
Receivables have been properly incurred in the ordinary course of business.
Any VAT payable on any of the Trade Receivables shall be recoverable by the
Company as input tax.
4.4 So far as Cray is aware there are no guarantees or charges over the Company
or its assets other than charges created by operation of law in the
ordinary course of business.
5. CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY
--------------------------------------------------
5.1.1 In this paragraph 5.1, "Confidential Information" means all know-
how, lists of customers or suppliers, trade secrets, technical
processes or other confidential information belonging to the Company
or to any third party.
5.1.2 So far as Cray is aware, the Company does not use any processes and
is not engaged in any activities which involve the misuse of any
Confidential Information belonging to any third party.
5.1.3 So far as Cray is aware, the Company is not in breach of any
agreement or arrangement under which Confidential Information
belonging to any third party is made available to the Company and is
not aware of the existence of any circumstances under which its right
to use such Confidential Information may be terminated.
34
<PAGE>
5.2 The Company is the sole owner and, where registered, the sole registered
proprietor, capable of transferring the same with full title guarantee, of
all the Intellectual Property of a material nature (excluding Intellectual
Property licensed to the Company by any third party) which is used in its
business ("the Company's Intellectual Property"). Payment of all renewal
fees for registration of the Company's Intellectual Property due on or
before Completion is up to date.
5.3 All material agreements entered into by the Company for the licensing, or
otherwise permitting the use or exploitation, of the Company's Intellectual
Property are included in the bundle of documents referred to in the
Disclosure Letter.
5.4 So far as Cray is aware, the Company is not engaged in any activities which
infringe any Intellectual Property belonging to any third party and there
are no proceedings or threatened proceedings against the Company or by the
Company against any third party for infringement of Intellectual Property.
5.5 All material agreements under which the Intellectual Property belonging to
any third party is licensed to the Company other than agreements for the
day-to-day running of the Company's internal office equipment, development
tools and administration services are set out in the Disclosure Letter so
far as Cray is aware, and the Company is not in breach of any such
agreement or arrangement and is not aware of the existence of any
circumstances under which its right to use such Intellectual Property may
be terminated.
6. SOFTWARE DEVELOPMENT
--------------------
With respect to all contracts, commitments, arrangements and understandings
which are material to the Company's business for the design, writing,
programming, development, supply or installation of computer software or the
like to which the Company is party or by which it is bound and which are still
open for performance:
6.1 particulars of all such contracts, commitments, arrangements and
understandings are included in the bundle of documents referred to in the
Disclosure Letter; and
6.2 as far as Cray is aware, the Company has not received any notice of breach
or termination or had court action commenced in respect of any such
contract, commitment, arrangement or understanding.
35
<PAGE>
7. SOFTWARE
--------
7.1 In this paragraph 7, the expression "the Software" means all of the
computer programs identified and briefly described in Schedule 5.
7.2 The Software includes all computer programs, software and software systems,
whether in source code, object code or human readable form used or supplied
in or in connection with the business of the Company or currently in
development (whether owned by the Company, licensed to the Company by a
third party or sub-licensed by the Company pursuant to a licence agreement
from a third party) which are material to the development of products for
sale or licensing to customers, but excluding software relating to day-to-
day running of the Company's internal office equipment, development tools
and administration services.
7.3 The Company has absolute title and right to and copyright in each item of
the Software described in Part I of Schedule 5 including source code and
object code, all relevant documents, media and confidential information
free of all encumbrances and adverse claims and all material agreements
under which the property rights of the Company in such Software have been
assigned or licensed to any party are included in the bundle of documents
referred to in the Disclosure Letter.
7.4 Copies of all agreements under which the software described in Part I of
Schedule 5 is held in escrow are included in the bundle of documents
referred to in the Disclosure Letter.
7.5 The Company is entitled to use and, where indicated, to grant sub-licences
to third parties to use the Software described in Part II of Schedule 3
pursuant to licences and/or consents granted to the Company by the owner or
licensee of such Software, true and complete copies of such licences having
been included in the bundle of documents referred to in the Disclosure
Letter, and being in full force and effect. Subject to matters shown in the
Disclosure Letter, all royalties and other payments have been paid when due
and there has been no act or default by the Company or, to the actual
knowledge of Cray where appropriate, its sub-licensees or any other person
which may in any way result in such licences being terminated or the
Company being unable to obtain any benefit under such licences.
36
<PAGE>
8. PROPERTY
--------
Other than the existing arrangement with Cray, whereby the Company uses part of
the Cray business premises, the Company has no interest in any freehold or
leasehold property and no continuing or contingent liability in respect of any
freehold or leasehold property in which it formerly had any estate or interest
and the Company has not at any time guaranteed the performance by any person of
any obligation in respect of any freehold or leasehold property.
9. LITIGATION
----------
The Company is not engaged whether as plaintiff or defendant or otherwise in any
civil, criminal or arbitration proceedings or any proceedings before any
tribunal and so far as Cray is aware, there are no proceedings threatened or
pending against the Company and so far as Cray is aware there are no facts which
are likely to give rise to any such litigation or proceedings. There are no
unfulfilled or unsatisfied judgments or orders against the Company or any of its
assets.
10. EMPLOYMENT AND PENSION MATTERS
------------------------------
10.1 Full details of the terms of employment or engagement of all directors,
employees, and consultants of the Company have been disclosed in writing
to the Purchaser.
10.2 So far as Cray is aware, there is no existing or threatened or pending
industrial or trade dispute involving the Company and any of its
employees.
10.3 Save as disclosed in the Disclosure Letter, there are no pension, share
option, share incentive, life insurance, disability or similar schemes,
arrangements or obligations for any employees or directors of the
Company.
11. INFORMATION PROVIDED
--------------------
Cray has not knowingly withheld from the Purchaser any information which could
reasonably be expected to be material concerning the Company and its affairs.
37
<PAGE>
SCHEDULE 4
----------
THE VENDORS
-----------
<TABLE>
<CAPTION>
<S> <C>
(1) (2)
NAME AND ADDRESS OF VENDOR NUMBER OF SALE SHARES
Cray Systems Limited 50,000 B Ordinary Shares
5 Genesis Business Park
Albert Drive
Woking,
Surrey GU21 5RW
Digital Equipment Co. Limited 50,000 A Ordinary Shares
P.O. Box 54
Twyford
Reading
Berkshire RG10 9FE
</TABLE>
38
<PAGE>
Exhibit 2.17
DATED 28th June 1996
- - - --------------------
(1) CRAY SYSTEMS LIMITED
(2) BYTEL LIMITED
----------------------------------------
ADMINISTRATION AND DEVELOPMENT
SERVICES AGREEMENT
----------------------------------------
OLSWANG
90 Long Acre
London WC2E 9TT
Tel. 0171-208 8888
Fax: 0171-208 8800
email: [email protected]
Ref: ECM/C3223-85/Draft 4
<PAGE>
THIS AGREEMENT is dated 28th June 1996
BETWEEN
(1) CRAY SYSTEMS LIMITED (registered no 1721900) whose registered office is at
161 Fleet Road, Fleet, Hampshire GU13 8PD ("Cray")
(2) BYTEL LIMITED (Registered no 2722892) whose registered office is at 161
Fleet Road, Fleet, Hampshire GU13 8PD ("Bytel")
RECITALS
A. During the period in which Cray was a shareholder of Bytel it provided on a
commercial basis certain services to Bytel.
B. Cray has agreed to make certain services available to Bytel on reduced
terms and subject to the conditions set out below.
WHEREBY IT IS AGREED as follows:
1. SERVICES TO BE PROVIDED
1.1 Subject to Clause 1.3 Cray shall provide to Bytel administrative services
in relation to the operation of Bytel's payroll and provision of an
accounting system as described in Schedule 2 ("Administration Services")
from the date hereof for a period of 12 months unless terminated by either
party pursuant to Clause 4.
1.2 The extent of the Administration Services to be provided by Cray pursuant
to Clause 1.1 shall be agreed between the parties from time to time.
1
<PAGE>
1.3 The obligation of Cray to provide the Administration Services shall
terminate, in any event, upon Bytel ceasing to occupy the premises at 712
Banbury Avenue, Slough.
1.4 Cray shall on request provide to Bytel (so far as it is able) the services
of such of Cray's development contractors as are set out in Schedule 1
("Development Contractors") to the extent agreed between the parties from
time to time from the date hereof until the delivery of the development of
Vax Version 27.1 of the Bytel software product SMS to Telewest or 31st
October 1996, whichever is the later. For the avoidance of doubt Cray shall
be under no obligation to procure the provision of services by any such
Development Contractors who cease to be Cray contractors. Cray shall not
without the consent of Bytel (such consent not to be unreasonably withheld)
give notice to terminate the contract of any such Development Contractors
which shall end during a period in which the services of the relevant
Development Contractor are required by Bytel pursuant to this Clause,
provided that if Bytel shall no longer require the services of the relevant
Development Contractor it shall give written notice to Cray of the date
when such services are no longer required. The period between the giving of
such notice and the date the services are no longer required shall be no
less than the notice period required to be given by Cray to terminate the
relevant Development Contractor's contract.
1.5 Cray shall, on request of Bytel, continue to make those employees listed in
Schedule 2 ("Bytel Development Employees") who have not become employees of
Bytel available to Bytel from the date hereof until the delivery of the
development of Vax Version 27.1 of the Bytel software product SMS to
Telewest plc or 31st October 1996 whichever is the earlier. For the
avoidance of doubt Cray shall be under no obligation to procure the
provision of services by any such Bytel
2
<PAGE>
Development Employees who cease to be employed by Cray or any of its
Associated Companies. An Associated Company shall in relation to Cray mean
any company which is Cray's holding company or subsidiary of it or of its
holding company, as those terms are defined in Section 736 and 736A of the
Companies Act 1985.
1.6 Upon any of the Bytel Development Employees becoming an employee of Bytel
such persons shall cease to be Bytel Development Employees for the purposes
of this Agreement.
1.7 Cray shall discharge its obligations under this Agreement in relation to
the operation of Bytel's payroll in a timely manner.
1.8 Each of Cray and Bytel shall ensure that when their staff or
representatives are present on the premises of the other party that they
comply with such rules and regulations as are notified to them by the
resident party.
2. EMPLOYEES
2.1 Bytel has made or will make written offers of employment to certain of the
Bytel Development Employees.
2.2 Cray hereby undertakes that it shall not prejudice or impede any approach
made by Bytel to the Bytel Development Employees.
2.3 Cray hereby agrees and undertakes to waive its rights to oblige the Bytel
Development Employees to complete their contractual notice period with
Cray.
2.4 Cray agrees and undertakes to indemnify at all times from and against all
actions, proceedings, costs, claims, damages, demands, expenses and
liabilities:
3
<PAGE>
arising out of or in any way connected with the Bytel Development Employees
during the period when they were Cray employees, including without
prejudice to the generality of the foregoing;
any breach by Cray of any obligation under or in connection with their
contracts of employment; and
any breach by Cray of any other obligation or any duty (whether statutory
or otherwise) owed by Cray to any of the Bytel Development Employees or to
any trade union(s) or employee representatives recognized in respect of the
Bytel Development Employees.
2.5 Such sums which are payable by Cray in respect of any salaries, wages,
accrued holiday pay entitlement and other emoluments including but not
limited to PAYE, income tax, National Insurance contributions and any
contributions to Retirement Benefit Schemes which relate to the employment
of the Bytel Development Employees by Cray while they are employees of Cray
shall be borne by Cray, without prejudice to Bytel's payment obligations
under Clause 3.2.3.
2.6 Without prejudice to Clause 2.4, Cray agrees and undertakes to indemnify
Bytel at all times (and for the avoidance of doubt whether before, on or
after the Completion Date) against all actions, proceedings, costs
reasonably incurred, claims, damages, demands, expenses reasonably incurred
and liabilities arising out of or in any way connected with Cray's
employment of the Bytel Development Employees except in respect of the
performance by the Bytel Development Employees of services for the benefit
of Bytel.
4
<PAGE>
3. PAYMENT
3.1 In consideration of the provision of the Administration Services, Bytel
shall pay to Cray in advance on the first day of each calendar month a
monthly fee as follows:
the aggregate of:
(a) (Pounds)500 per month in respect of the provision of an accounting
system plus VAT; and
(b) (Pounds)5 per person processed per month in respect of the payroll
system plus VAT.
3.2 In consideration of agreeing to provide the Development Contractors and the
services of the Bytel Development Employees, Bytel shall pay to Cray:
3.2.1 on the date of this Agreement (in each case plus VAT):
(a) (Pounds)150,000 in respect of the procurement of the
services of the Development Contractors and Bytel
Development Employees;
(b) (Pounds)108,000 in respect of a recruitment fee for those
Bytel Development Employees who join Bytel;
(c) (Pounds)90,000 in releasing the Bytel Development Employees
from their contracts with Cray;
(d) (Pounds)270,000 in respect of loss of profit to Cray arising
out of the procurement of the services
5
<PAGE>
of the Bytel Development Employees and the Development
Contractors to Bytel; and
(e) (Pounds)172,000 in respect of time and inconvenience to Cray
in relation to the arrangements contemplated by this
Agreement.
3.2.2 in arrears on the first day of such calendar month, an amount by
way of reimbursement to Cray of the costs to Cray of the
Development Contractors plus VAT;
3.2.3 in arrears on the first day of each calendar month, an amount
equal to the salary benefits (plus National Insurance
Contributions) and other emoluments of the Bytel Development
Employees plus VAT.
3.3 The payments to be made by Bytel pursuant to Clause 3.2.2 and 3.2.3 shall
be calculated on a pro-rata basis for the period of time during which
services are provided to Bytel.
3.4 At the request of Bytel, Cray shall promptly provide written evidence to
support to the reasonable satisfaction of Bytel, any fee charged to Bytel
pursuant to Clause 3.2.2 and 3.2.3.
4. TERMINATION
4.1 Cray may terminate this Agreement forthwith by notice in writing to Bytel
if Bytel fails to make any payment under Clauses 3.1 and 3.2 within seven
days from the date of receipt of an invoice for such payment, provided
that, in the case of an invoice rendered in respect of payments due
pursuant to Clause 3.2, Bytel has received from Cray (where requested)
6
<PAGE>
evidence to support to the reasonable satisfaction of Bytel the fee charged
pursuant to that Clause.
4.2 Either party may terminate this Agreement (excluding the services provided
pursuant to Clauses 1.4 and 1.5) by giving to the other one month's advance
written notice of its intention to do so.
4.3 Either party may terminate this Agreement immediately by notice in writing
to the other if:
4.3.1 the other party is in material breach of this Agreement and such
breach, if capable of remedy, has not been remedied within 30
days following receipt of written notice of the breach from the
party wishing to terminate.
4.4 Termination of this Agreement for whatever reason shall be without
prejudice to any pre-existing rights of the parties.
5. GENERAL
5.1 The parties to this Agreement shall keep the terms of this Agreement and
any information derived from or contained in the payroll to be operated by
Cray and accounts systems to be provided by Cray pursuant to Clause 1
confidential.
5.2 Bytel shall indemnify Cray in full in respect of any third party claims
arising out of the performance by Cray of its obligations under this
Agreement to operate Bytel's payroll. This indemnity shall not apply where
Cray is in breach of its obligations in respect of the operation of Bytel's
payroll.
7
<PAGE>
6. WAIVER
6.1 The failure of any party to assert, enforce or exercise, at any time or for
any period of time, any term of or any right arising pursuant to this
Agreement does not constitute, and shall not be construed as, a waiver of
such term or right and shall in no way affect that party's right later to
assert, enforce or exercise it.
7. SEVERABILITY
7.1 If at any time any provision or part of a provision hereof is or becomes
illegal, invalid or unenforceable in any respect, such illegality,
invalidity or unenforceability shall not affect the other provisions or
parts of such provisions of this Agreement which shall remain in full force
and effect.
8. ASSIGNMENT
8.1 Neither party may assign this Agreement or otherwise part with any right or
obligation under it without the other party's prior written consent (which
is not to be unreasonably withheld).
9. INDEPENDENT CONTRACTORS
9.1 The relationship of the parties is that of independent contractors. Except
as set out in this Agreement, nothing shall:
9.1.1 constitute the parties as partners, joint venturers or co-owners;
9.1.2 constitute either party as the agent, employee, attorney-in-fact
or representative of the other; or
8
<PAGE>
9.1.3 empower either party to act for, bind or otherwise create or assume
any obligation on behalf of the other.
10. VARIATION
10.1 No amendment or variation of this Agreement shall be effective unless in
writing and signed by a duly authorised representative of each of the
parties.
11. GOVERNING LAW AND SUBMISSION TO JURISDICTION
11.1 This agreement shall be governed and construed in accordance with English
law and the parties hereto submit to the exclusive jurisdiction of the
courts of England for the purpose of enforcing any claims arising
hereunder.
9
<PAGE>
IN WITNESS the hands of the parties or their duly authorised representatives the
date first above written
SIGNED by Geoffrey Cox )
duly authorised for and on behalf ) /s/ Geoffrey Cox
of CRAY SYSTEMS LIMITED )
in the presence of: )
Witness signature:
Witness Name:
Address:
Occupation:
SIGNED by Christopher M. Musgrave )
duly authorised for and on behalf ) /s/ Christopher M. Musgrave
of BYTEL LIMITED )
in the presence of: )
Witness signature:
Witness Name:
Address:
Occupation:
10
