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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Commission
Date of Report (Date of earliest event reported): December 5, 1997
Omtool, Ltd.
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(Exact Name of Registrant as Specified in its Charter)
8 Industrial Way, Salem, New Hampshire
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(Address of Principal Executive Offices)
03079
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(Zip Code)
(603) 898-8900
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Registrant's Telephone Number, Including Area Code
Delaware 0-22871 02-0447481
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS; AND
Item 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
On December 5, 1997, Omtool, Ltd. (the "Company" or "Omtool") acquired
all of the outstanding share capital of CMA Ettworth Limited, a company
organized under the laws of England ("CMA") pursuant to a Share Sale and
Purchase Agreement dated December 5, 1997 (the "Purchase Agreement") by and
among the Company, CMA and the former stockholders of CMA (the "Acquisition").
The purchase price was paid in a combination of 363,637 newly issued
shares of the common stock, $.01 par value ("Common Stock"), of the Company (the
"Shares") and $4,000,000 in cash. The cash used by the Company to fund the
Acquisition was derived primarily from the proceeds of the Company's initial
public offering which became effective on August 7, 1997.
The sale of the Shares in connection with the Acquisition was made in
reliance upon Regulation S of the Securities Act of 1933, as amended (the
"Securities Act"), and in reliance upon information available to the Company on
December 5, 1997, including certain representations and warranties made in the
Purchase Agreement by the purchasers of the Shares (the "Sellers"). Each such
Seller was required to represent and warrant, among other things, that he was
not a "U.S. Person" as defined in Regulation S and was not acquiring the
Company's Common Stock for the account or benefit of any U.S. Person and at all
times relevant to the transaction such Seller had been outside of the U.S. No
underwriters were involved in the sale of the Shares.
The Acquisition will be accounted for as a purchase. The terms of the
transaction and the consideration received by the CMA stockholders were the
result of arm's-length negotiations between the representatives of the Company
and CMA. The terms of the transaction are more fully described in the Purchase
Agreement, a copy of which is filed as Exhibit 2.1 to this Report and is
incorporated herein by reference.
CMA, headquartered in London, England, is a worldwide leader in fax
solutions for the IBM AS/400 market, with approximately 50 employees worldwide.
CMA's existing fax products for the AS/400 will extend Omtool's enterprise
solution capabilities to this important platform and will be sold and supported
in the U.S. and other markets by Omtool. The Acquisition will give Omtool an
immediate and significant presence in Europe, providing both sales and support
coverage for Omtool's growing European reseller base as well as local sales and
support for the full range of Omtool's products.
Certain Factors that May Affect Future Results
Information provided by the Company from time to time, including
statements in this Form 8-K which are not historical facts, constitute forward
looking statements that involve risks and uncertainties and are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and the releases of the Securities and Exchange Commission.
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Actual results of operations in connection with the acquisition of CMA may vary
significantly based on a number of factors, including the integration of the CMA
products with the Company's product line, market acceptance of CMA's products,
successful penetration of new markets for IBM AS/400 customers, the impact of
the Acquisition on the Company's current business, the timely development and
acceptance of new products, and the Company's ability to successfully manage the
integration of the combined companies as well as the initiation and expansion of
its European presence, and other risks discussed from time to time in the
Company's periodic reports and registration statements filed with the Securities
and Exchange Commission, including the Company's final prospectus dated August
8, 1997.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
It is impracticable to provide the financial information required by
Item 7(a) of Form 8-K relating to the business acquired by the Company from CMA
at the time this report is filed. Such required financial information will be
filed as soon as practicable, but not later than February 3, 1998.
(b) Pro Forma Financial Information.
It is impracticable to provide the pro forma financial information
required by Item 7(b) of Form 8-K relating to the business acquired by the
Company from CMA at the time this report is filed. Such required pro forma
financial information will be filed as soon as practicable, but not later than
February 3, 1998.
(c) Exhibits.
EXHIBIT INDEX
Exhibit No. Description
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2.1 Share Sale and Purchase Agreement dated as of December
5, 1997 among the Company, CMA and its former
stockholders (including Schedule 6 and Schedule 7
attached thereto).
The Company will provide the Securities and Exchange Commission, upon
request, a copy of any omitted Schedule or Exhibit to the Exhibit listed above.
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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.
OMTOOL, LTD.
December 19, 1997 By: /s/ Robert L. Voelk
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Robert L. Voelk
Chief Executive Officer
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EXHIBIT INDEX
Exhibit No. Description
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2.1 Share and Sale Purchase Agreement dated as of December
5, 1997 among the Company, CMA and its former
stockholders (including Schedule 6 and Schedule 7
attached thereto).
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Exhibit 2.1
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DATED 5th DECEMBER 1997
SHARE SALE AND PURCHASE AGREEMENT
relating to all the issued share capital of
CMA ETTWORTH LIMITED
THE SELLERS (1)
OMTOOL, LTD. (2)
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INDEX
Page
PARTIES 4
INTRODUCTION 4
OPERATIVE PROVISIONS 4
1 Interpretation 4
2 Sale and purchase of the Shares 8
3 Consideration 8
4 Completion 8
5 Warranties 10
6 Non-disclosure of information and restrictions 13
7 Restrictive Trade Practices Act 1976 14
8 General Provisions 15
SCHEDULE 1 18
The Sellers 18
SCHEDULE 2 19
Part 1 - Particulars of the Company 19
Part 2 - Particulars of the Subsidiaries 20
SCHEDULE 3 23
Provisions relating to the Consideration Shares 23
SCHEDULE 4 27
The Properties 27
SCHEDULE 5 28
Intellectual Property 28
Part 1 - (Licences - Company as licensee) 28
Part 2 - (Licences - Company as licensor) 29
Part 3 - (The Software and Intellectual Property owned by 29
any of the Companies) 29
SCHEDULE 6 30
Warranty Statements 30
1 Information, formal and legal 30
2 Capital, distributions, contracts and liabilities 30
3 The Shares 32
4 Accounts 32
5 Business and Trading 32
6 Stocks, assets and insurance 33
7 Taxation and tax returns 34
8 Employees and agents 35
9 Litigation 36
10 Capital commitments, unusual contracts, guarantees etc. 36
11 Borrowings and lendings 37
12 Continuation of facilities 37
13 Properties and the Environment 37
14 Insolvency 38
15 Intellectual Property 38
16 Competition 40
SCHEDULE 7 41
Deed of Covenant 41
1 Covenant to pay 45
2 Exclusions 45
3 Over-Provisions, Corresponding Savings Etc. 46
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4 Section 767A ICTA: Secondary Liabilities 47
5 Grossing up payments 47
6 Date of payment 48
7 General 48
ATTESTATIONS 49
The agreed form documents referred to in this Agreement
<TABLE>
<S> <C>
1 The Deed of Covenant
2 The Disclosure Letter
3 The Accounts
4 The Management Accounts
5 The Service Agreements
6 The acknowledgements from each of the Sellers referred to in clause 4.2(d)
7 The resignation of the auditors of each of the Companies referred to in clause 4.2(g)
8 The powers of attorney referred to in clause 4.2(h)
9 The certified copies of resolutions of each of the Companies referred to in clause 4.2(k)
10 The articles of association of each of the Companies referred to in clause 4.2(k)
11 The resignation of each of the Directors referred to in clause 4.2(l)
12 The certified copies of board resolutions of each of the Companies referred to in clause 4.2(m)
13 The agreement relating to CMA and CNM referred to in clause 4.2(n)
</TABLE>
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SHARE SALE AND PURCHASE AGREEMENT
DATED
5 December 1997
PARTIES
(1) The persons whose names and addresses appear in column 1 of Schedule 1 ("the
Sellers"); and
(2) OMTOOL, LTD. a corporation organised under the laws of the State of Delaware
whose principal office is at 8 Industrial Way, Salem, NH 03079, United States of
America ("the Buyer").
INTRODUCTION
(A) The Company was incorporated in England on 12 March 1986 under the Companies
Act 1985 and is registered under number 1998843 as a private company limited by
shares. It has at the date of this Agreement an authorised share capital of
pound sterling 1,000 divided into 1,000 ordinary shares of pound sterling 1 each
of which all have been issued and are fully paid or credited as fully paid and
the Sellers are the legal and beneficial owners of the Shares in the proportions
shown in column 2 of Schedule 1 and as such have the right, power and authority
to sell and transfer the Shares free from any claims, charges, liens,
encumbrances or equities.
(B) The business of the Companies is the design, development, marketing,
licensing, distribution and support of computer software products for facsimile
and other communication applications, principally for the IBM midrange market
place, with the respective resale of related third-party hardware products and
the provision of related consulting, customisation, configuration, installation,
maintenance and support services.
(C) The Sellers are willing to sell and the Buyer is willing to purchase the
Shares on the terms and subject to the conditions of this Agreement.
OPERATIVE PROVISIONS
1 INTERPRETATION
1.1 In this Agreement (including the Introduction and Schedules), except where a
different interpretation is necessary in the context, the following expressions
shall have the following meanings:
the Accounts the audited consolidated balance
sheet of the Company as at the Accounts
Date and the consolidated profit
and loss account of the Company for the
financial year ended on the Accounts
Date, together with the directors'
reports and other documents required
by law to be annexed thereto
the Accounts Date 31 March 1997
Board(s) the board of directors for the time
being of the Buyer and of any of the
Companies as specifically referred to
the Business the activities of the Companies
described in paragraph (B)
of the Introduction
Business Day any day on which The NASDAQ Stock
Market and the London Stock Exchange
are open for business
the Buyer's Attorneys Testa, Hurwitz & Thibeault, LLP of High
Street Tower, 125 High Street,
Boston, MA 02110
the Buyer's Solicitors S J Berwin & Co of 222 Grays Inn Road,
London WC1X 8HB
Cash Consideration US$4,000,000, being the consideration
for the Shares that is payable in cash
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CMA Computer Manufacturing Associates Limited (registered
number 3210208) whose registered address is at The
Granary, Little Iridge Farm, Silverhill, Hurst
Green, East Sussex TN19 7PX
CNM Communications Network Management Limited
(registered number 3140277) whose registered office
is at Holborn Hall, 100 Grays Inn Road, London WC1X
8BY
the Companies the Company and the Subsidiaries and each of them
or one or more of them as the context requires
or permits
the Company CMA Ettworth Limited of which short particulars are
set out in Part 1 of Schedule 2
Completion completion of the acquisition of the Shares
in accordance with the terms of clause 4
Computer Know-how all confidential information (including, inter alia,
that comprised in or derived from research, ideas,
expressions, procedures, algorithms, structures,
logic flows, menu structures, macro facilities,
programming languages, interfaces, flow charts,
specifications and source codes) recorded in notes,
on paper, disk, tape or in any other form or
otherwise known to the Companies relating to the
Software or to the use or programming of any computer
or peripheral device or relating to the development
of any computer software
Consideration the aggregate of the Cash Consideration and the value
of the Consideration Shares at Completion
Consideration Shares the 363,637 shares of common stock, $0.01 par value
per share, of the Buyer (having the rights and being
subject to the restrictions set out in its Amended
and Restated Certificate of Incorporation,
as amended, and Amended and Restated By-laws
(copies of which have been delivered to the
Sellers) to be issued to the Sellers in accordance
with and subject to the provisions of clause 2
the Deed of Covenant the deed of covenant in the agreed form as set out in
Schedule 7
the Directors the persons specified as directors of the Companies
in Schedule 2 (the expression "Director" meaning any
of them)
the Disclosure Letter a letter in the agreed form from the Sellers to the
Buyer relating to the Warranties
the Employees those persons (including Directors) whose names are
disclosed in the Disclosure Letter as employees
of the Companies
FRS a Financial Reporting Standard in force at the date
hereof, issued by the Accounting Standards Board
GAAP in relation to any jurisdiction, the generally
accepted accounting principles and standards of that
jurisdiction in accordance with all relevant
statutes and regulatory requirements
ICTA the Income and Corporation Taxes Act 1988
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Intellectual Property copyright in the Software (including without
limitation, in the source code, object code,
user and other documentation, in any form
whatever, packaging and all other separately
identifiable copyright comprised in the
Software) Computer Know-how, rights of any
nature in databases, patents, trade marks and
service marks, rights in inventions, designs
and Know-how, trade names, copyrights and
topography rights; whether or not any of these
is registered and including applications for
registration of any such thing and rights
under licences, agreements and consents in
relation to any such thing and all rights,
claims or forms of protection of a similar
nature or having equivalent or similar effect
to any of these which may subsist anywhere in
the world
Know-how all confidential information (including that
comprised in or derived from formulae,
designs, specifications, drawings, components
lists, manuals, instructions and catalogues)
in whatever form held relating to:
(a) the production of goods (including
the Software) or the provision of
services;
(b) the design, selection, procurement,
construction, installation or use of
any plant, machinery or other equipment
or process;
(c) tooling designs;
(d) the repair, service or rectification
of products or plant;
(e) the supply, storage, assembly or
packing of raw materials, components or
partly manufactured or finished product;
and
(f) quality control, testing or
certification
the Management Accounts the consolidated management accounts of the
Companies for the period of six months from
the Accounts Date in the agreed form
the Properties the leasehold properties short particulars of
which appear in Schedule 4, including any part
or parts thereof
Relief the same meaning as in the Deed of Covenant
the Sellers' Solicitors Dickson Minto W.S. of Royal London House,
22/25 Finsbury Square, London EC2A 1DS
the Service Agreements the service agreements in the agreed form to
be entered into on Completion between the
Company and each of Glyn Davies, Nigel
Lothian, Paul Gibbs and Graham Hallett
the Shares the 1,000 issued ordinary shares of(pound
sterling)1 each in the capital of the Company
the Software the computer software developed or written or
being developed or written by or on behalf of
any of the Companies, or acquired or licensed
to one or more of
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the Companies, including but not
limited to that listed or referred to
in Schedule 5
SSAP a statement of Standard Accounting
Practice published by the former
Accounting Standards Committee or the
present Accounting Standards Board
Subsidiaries those companies short particulars of
which appear in Part 2 of Schedule 2,
being all the subsidiaries of the
Company, and the expression
"Subsidiary" shall mean any one of the
Subsidiaries
Taxation the same meaning as in the Deed
of Covenant
US$ United States Dollars
VAT Value Added Tax
the Warranties the warranties, representations and
undertakings given in and pursuant to
clause 5
the Warranty Statements the statements set out in Schedule 6 as
construed in accordance with clause 5.8
1.2 All references to statutory provisions or enactments shall include
references to any amendment, modification or re-enactment of any such provision
or enactment (whether before or after the date of this Agreement) to any
previous enactment which has been replaced or amended and to any regulation or
order made under such provision or enactment.
1.3 References to "the Companies Acts" are to the Companies Acts 1985 and 1989.
1.4 The term "holding company" shall have the meaning attributed to it in
section 736 and 736A of the Companies Act 1985 (as amended) and a company or
other entity shall be a "subsidiary" for the purposes of this Agreement if it
falls within any of the meanings attributed to a "subsidiary" in such sections
or the meaning attributed to the term "subsidiary undertaking" in section 258 of
such Act, and the terms "subsidiaries" and "holding companies" are to be
construed accordingly.
1.5 References to those of the parties who are individuals include references to
their respective legal personal representative(s).
1.6 References to documents "in the agreed form" are to documents in terms
agreed between the parties and signed (for the purpose of identification only)
by the Sellers' Solicitors and the Buyer's Solicitors.
1.7 References in this Agreement and the Schedules to the parties, the
Introduction, Schedules and clauses are references respectively to the parties,
the Introduction and Schedules to and clauses of this Agreement.
1.8 Save where the context specifically requires otherwise, words importing one
gender shall be treated as importing any gender, words importing individuals
shall be treated as importing corporations and vice versa, words importing the
singular shall be treated as importing the plural and vice versa, and words
importing the whole shall be treated as including a reference to any part
thereof.
1.9 Clause and paragraph headings are inserted for ease of reference only and
shall not affect construction.
1.10 Section 839 ICTA is to apply to determine whether a person is connected
with another for the purposes of this Agreement.
1.11 For the purposes of this Agreement, the accounts of a United Kingdom
company for a period or as of a date shall be in a form complying with the
Companies Act 1985, prepared in accordance with the United Kingdom GAAP and the
accounts of any company incorporated in any jurisdiction outside the United
Kingdom shall be a form complying with GAAP of the relevant jurisdiction.
1.12 Where, in this Agreement a reference to any English legal term for any
action, remedy, matter of judicial proceeding, legal document, legal status,
court, official or other legal concept or thing is used, it shall, in respect of
any jurisdiction other than England, be deemed to include the
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legal concept or thing which in that jurisdiction most nearly approximates or
corresponds to the English legal term.
1.13 Except only with regard to the Warranties and the Deed of Covenant which
are given jointly and severally, to the extent set out in clause 5.1(b), the
obligations of the Sellers hereunder shall be several and not joint.
2 SALE AND PURCHASE OF THE SHARES
2.1 Each of the Sellers with full title guarantee shall sell and transfer with
effect from Completion the number of the Shares set out opposite his name in
column 2 of Schedule 1 and the Buyer relying on the Warranties shall purchase
subject to clause 2.2 all of the Shares with any dividends, distributions and
rights declared, paid, created or arising after Completion and free from all
claims, charges, liens, encumbrances, options, rights of pre-emption or
equities.
2.2 The Buyer shall not be obliged to complete the purchase of any of the Shares
unless the purchase of all the Shares is completed simultaneously in accordance
with this Agreement.
3 CONSIDERATION
3.1 In consideration of the sale of the Shares in accordance with the terms of
this Agreement, the Buyer shall pay to the Sellers the Consideration to be paid
and satisfied to the Sellers by the payment on Completion of the Cash
Consideration to the Sellers' Solicitors and the issue on Completion of
Consideration Shares to the Sellers in the proportions shown in columns 3 and 4
of Schedule 1.
3.2 Each of the Sellers agrees that the issue of the Consideration Shares shall
be subject to and conditional upon the representations, warranties, covenants
and other terms and conditions set out in Schedule 3.
4 COMPLETION
4.1 Completion shall take place at the offices of the Buyer's Solicitors (or any
other location agreed upon by the Sellers and the Buyer) immediately following
exchange of this Agreement when the Sellers and the Buyer shall procure that the
Sellers' Solicitors and the Buyer's Solicitors shall sign (for the purposes of
identification only) the documents in the agreed form.
4.2 At Completion the Sellers shall deliver (where appropriate as agent for the
Company or the Subsidiaries) to the Buyer:
(a) transfers in respect of the Shares duly executed by the
registered holders thereof in favour of the Buyer;
(b) certificates for the Shares and any other documents which
may be required to give good title to the Shares and to enable
the Buyer to procure registration of the same in its name;
(c) the Deed of Covenant and the Disclosure Letter duly
executed by the Sellers;
(d) acknowledgements in the agreed form from each of the
Sellers confirming that at and immediately after Completion
nothing is owing nor is there any outstanding claims between
each of the Companies on the one hand and each of the Sellers
on the other (except for emoluments properly due to the
Sellers in their capacity as employees at levels shown in the
Disclosure Letter and, in respect of Graham Hallett, a loan of
not more than pound sterling 19,000) ;
(e) in relation to each of the Companies (to the extent these
are available to the Sellers' Solicitors at Completion)
certificates of incorporation, certificates of incorporation
on change of name (if applicable), common seals, statutory
registers, minute books and share certificate books;
(f) certificates for all shares in the Subsidiaries (excluding
the French Subsidiary) and duly executed transfers in favour
of the Buyer or as it shall direct of all such shares not
registered in the Company's name;
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(g) the resignation of the auditors of each of the Companies in the
agreed form together with a duplicate thereof;
(h) irrevocable powers of attorney in the agreed form executed by each
of the Sellers to enable the Buyer (during the period prior to the
registration of he transfer of the Shares) to exercise all voting and
other rights attaching to the Shares prior to registration and stamping
of the transfers;
(i) the Service Agreements duly executed by each party to them;
(j) a certified true copy of any power of attorney under which any
document required to be delivered under this clause 4.2 has been
executed;
(k) certified copies of resolutions of each of the Companies in the
agreed form adopting new articles of association in the agreed form;
(l) the resignation from office of all the Directors (other than those
requested in writing to remain as directors by the Buyer)
(m) certified copies of board resolutions of each of the Companies in
the agreed form:
(i) approving (subject only to proper stamping) the transfers
of the Shares and any shares in the Subsidiaries delivered
under this Agreement;
(ii) approving the placing on the register of members of the
respective Companies of the names of the transferees for
registration in accordance with the share transfer forms
referred to above and subject to stamping authorising the
issue of appropriate share certificates;
(iii) recording the appointment of such persons as the
directors (within the maximum number permitted by the articles
of association of the relevant company) and auditors of the
respective Companies as the Buyer shall nominate and recording
the resignations of Directors;
(iv) changing the situation of the registered office of the
Companies to such place as the Buyer may direct;
(v) changing the accounting reference date of the Companies to
such date as the Buyer may direct;
(vi) approving the execution of the Deed of Covenant and the
Service Agreements; and
(n) an agreement between the Company, CMA and CNM in the agreed form
terminating their relationship and providing for the transfer of all of
CMA's and CNM's assets (but none of the liabilities) to the Buyer.
4.3 When the Sellers have complied with the terms of clause 4.2 the Buyer shall
procure the delivery:
(a) to the Sellers' Solicitors for the account of the Sellers the
amount of the Cash Consideration by telegraphic transfer for same day
value: the Sellers authorise the Sellers' Solicitors to receive payment
of the Cash Consideration on the Sellers' behalf and the receipt of the
Sellers' Solicitors shall be a sufficient discharge for the Buyer;
(b) to the Sellers' Solicitors for the account of the Sellers' copies
of the certificates in the names of the Sellers for the number of
Consideration Shares set out against their names in column 4 of
Schedule 1, with original certificates to be received not later than 96
hours after Completion or as promptly as reasonably possible thereafter
by courier to the Sellers' Solicitors or the Seller's attorneys, Fried,
Frank, Harris, Shriver & Jacobson; the Sellers authorise the Sellers'
Solicitors or such attorneys to receive delivery of the certificates
for the Consideration Shares on the Sellers' behalf and the receipt of
the Sellers' Solicitors shall be a sufficient discharge for the Buyer;
and
(c) to the Sellers of the counterpart of the Deed of Covenant duly
executed by the Buyer.
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4.4 If for any reason the provisions of clause 4.2 are not fully complied with,
the Buyer shall be entitled (in addition and without prejudice to any other
right or remedy available to it) to elect within 4 Business Days:
(a) to rescind this Agreement in which case the Buyer shall not be
obliged to purchase any of the Shares or pay any of the Cash
Consideration or issue any of the Consideration Shares; or
(b) to complete the purchase of the Shares or some of the Shares (at
the Buyer's option) in which case the Sellers shall be bound to
complete the sale of all or part of the Shares accordingly and the
Buyer shall be entitled to pay only the amount of the Cash
Consideration and issue the number of the Consideration Shares due for
the Shares it is acquiring; or
(c) to fix a new date for Completion (not being longer than 14 Business
Days from the original date for Completion); or
(d) to proceed to Completion so far as practicable, the Sellers then
being obliged to use their best endeavours to perform or procure the
performance of any of the outstanding provisions of clause 4.2.
4.5 Except pursuant to clause 4.4(a), the Buyer shall have no right to rescind
this Agreement.
5 WARRANTIES
5.1 The Sellers hereby:
(a) acknowledge that the Buyer has been induced to enter into this
Agreement and to purchase the Shares on the basis of the Warranty
Statements and the agreements in the agreed form; and
(b) jointly and severally warrant, represent and undertake to the Buyer
that each and every Warranty Statement is true, correct, accurate and
not misleading at the date of this Agreement, subject only to:
(i) the matters fairly stated in the Disclosure Letter and the
Disclosure Documents annexed thereto; and
(ii) this clause 5.
5.2 The Warranties are separate and independent warranties, representations and
undertakings in relation to each of the Warranty Statements and no Warranty
Statement shall be limited by reference to any other Warranty Statement or by
the other terms of this Agreement.
5.3 Subject to clauses 5.18 and 5.20, no proceedings shall be commenced in
respect of any claim for breach of the Warranties or under the Deed of Covenant,
except in the case of fraud or willful non-disclosure and except in the case of
a breach of the Warranty Statements contained in paragraph 3 of Schedule 6 when
the limitations in this clause 5.3 shall not apply, unless:
(a) notice giving reasonable details of the claim:
(i) shall, in the case of any claim other than a claim
relating to Taxation or Intellectual Property (Warranty
Statement 15), have been delivered to the Sellers by the Buyer
not later than the date which is 18 months after the date of
Completion;
(ii) insofar as such claim relates to Intellectual Property
(Warranty Statement 15) shall have been delivered to the
Sellers by the Buyer not later than the date which is 24
months after the date of Completion; and
(iii) insofar as such claim relates to Taxation, shall have
been delivered to the Sellers by the Buyer within six years
from the end of the accounting period of each of the Companies
current at the date of Completion; and
(b) the liability of the Sellers in respect of that claim when
aggregated with the liability of the Sellers in respect of all other
claims and claims under the Deed of Covenant exceeds US$300,000 in
which event the whole of such claims (and not merely the excess) may be
claimed under legal proceedings.
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5.4 The total amount of the liability of the Sellers for damages for breach of
the Warranties and in respect of amounts recoverable under the Deed of Covenant
shall, except in the case of fraud or willful non-disclosure, be limited to
US$4,800,000.
5.5 The rights and remedies of the Buyer in respect of any breach of the
Warranties shall not be affected by Completion, by any investigation made by or
on behalf of the Buyer into the affairs of the Companies, or by any other event
or matter whatsoever which otherwise might have affected such rights and
remedies except a specific and duly authorised written waiver or release.
5.6 The Sellers shall immediately give written notice to the Buyer of any of the
Seller's awareness or knowledge of any occurrence of any event which results or
may reasonably be expected to result in a liability arising under the Deed of
Covenant or of any of the Warranty Statements being untrue, incorrect,
inaccurate or misleading giving sufficient details of the event.
5.7 Any information supplied by the Companies, their officers or employees to
the Sellers, their agents, representatives or advisers in connection with, or to
form the basis of, the due diligence undertaken by the Buyer, the Warranties or
a Warranty Statement or any matter covered in the Disclosure Letter, or for any
other reason, shall be deemed not to include or have included a representation,
warranty or guarantee of its accuracy to the Sellers and shall not constitute a
defence to the Sellers to any claim made by the Buyer. The Sellers waive any and
all claims against the Companies, their officers or employees in respect of any
information so supplied.
5.8 For the purposes of the Warranties and the Warranty Statements and in the
Deed of Covenant references to "the Company" shall where appropriate be deemed
to extend both to the Company and to each of the Subsidiaries to the effect that
each of the Warranty Statements shall be deemed to be repeated (save where the
context otherwise requires) in respect of each of the Subsidiaries as if the
expression "the Company" had been replaced by the name of the Subsidiary
concerned throughout and the provisions of the Deed of Covenant shall apply in
respect of each of the Companies.
5.9 References to the awareness or knowledge of the Sellers in a Warranty
Statement in Schedule 7 shall be deemed to include such awareness or knowledge
each Seller would have had if he had made reasonable enquiry of each other
Seller, their professional advisers Dickson Minto W.S. and/or (in relation only
to the Warranty Statements relating to Taxation or the Accounts or Management
Accounts of the Company) Arram Berlyn Gardner and Charles Hammond to ascertain
if the relevant information is true.
5.10 If, subsequent to any payment to the Buyer in respect of any Warranty claim
or under the Deed of Covenant, any of the Companies or the Buyer receives any
payment from any third party in respect of the loss suffered by any of the
Companies which resulted in the claim, the Buyer shall reimburse to each of the
Sellers an amount equal to the amount paid by such Seller to the Buyer less the
costs and expenses (including legal fees) incurred by the Buyer in connection
with recovering such payment from the third party.
5.11 No liability of the Sellers in respect of any breach of the Warranties
shall arise:
(a) if such breach occurs by reason of any matter which would not have
arisen but for the coming into force of any legislation not in force at
the date of Completion or by reason of any change to Inland Revenue
practice occurring after the date of Completion;
(b) to the extent that a note or allowance, provision or reserve has
been made in the Accounts or in the Management Accounts in respect of
the matter to which such liability relates;
(c) to the extent that such breach or claim arises as a result of any
change following Completion in the accounting bases or policies in
accordance with which any of the Companies values its assets or
calculate its liabilities or any other change in accounting practice
from the treatment or application of the same used in preparing the
Accounts (save to the extent that such changes are required to correct
errors or
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because relevant generally accepted accounting principles have not been
complied with).
5.12 The Sellers shall not be liable in respect of any
breach of the Warranties if and to the extent that the loss giving rise to the
claim shall have been recovered under the Deed of Covenant and vice versa.
5.13 Subject to clause 5.6, if any matter comes to the notice of the Board of
the Buyer or of the Companies in respect of which the Board of the Buyer or of
the Companies is aware that any of the Sellers may be or become liable under any
of the Warranties or pursuant to the Deed of Covenant the Buyer shall and
(insofar as it is reasonably able) shall procure that the Companies shall:
(a) not make any admission of liability, agreement or compromise to or
with any person in relation thereto without using reasonable effort to
first consult with the Sellers; and
(b) except with respect to any claim or matter relating to Intellectual
Property or Know-how which is material to the Business, permit the
Sellers a reasonable opportunity to avoid, dispute, resist, appeal or
compromise any claim in respect of which the Sellers may be or become
liable under any of the Warranties subject to:
(i) the Buyer and the Companies being indemnified by the
Sellers to the reasonable satisfaction of the Buyer against
all costs, expenses and liabilities which the Buyer or any of
the Companies may incur by reason of such action;
(ii) the commercial interests of the Buyer or any of its
subsidiaries not in the reasonable opinion of the Buyer being
likely to be prejudiced by any such action; and
(iii) the Sellers acknowledging any such action is without
prejudice to the Buyer's rights to claim under and enforce any
of the Warranties and/or the Deed of Covenant.
5.14 Subject to clause 5.6, the Buyer shall as soon as is reasonably practical
after a matter coming to the attention of the Board of the Buyer or of the
Companies:
(a) inform the Sellers in writing of any fact, matter, event or
circumstance which comes to its notice whereby it appears to the Buyer
that the Sellers are or may be liable to make any payment in respect of
any claim under the Warranties or under the Deed of Covenant or whereby
it appears the Buyer shall become or may become entitled to recover
from some other person a sum which is referable to a payment already
made by the Sellers or is otherwise referable to any claim for breach
of Warranty; and
(b) thereafter keep the Sellers regularly informed to a reasonable
extent of all material developments in relation thereto.
5.15 The Buyer shall not be entitled to recover damages or otherwise obtain
reimbursement or restitution more than once in respect of specific loss arising
from any individual breach of any of the Warranties.
5.16 The Sellers shall not be liable for breach of any of the Warranties to the
extent that the subject of the claim has been or is made good or is otherwise
compensated for without cost or diminution in value to the Buyer.
5.17 A claim notified and not satisfied, settled or withdrawn shall cease to be
enforceable against the Sellers on the expiry of the period of six months
starting on the date that a claim is made, unless proceedings in respect of the
claim have been issued and served on a Seller.
5.18 No liability (whether in contract, tort or otherwise) shall attach to a
Seller in respect of any claim under the Warranties to the extent that the claim
is based upon a liability which is contingent only, unless and until such
contingent liability becomes an actual liability, save that the time limits set
out in clause 5.3(a) shall be extended in
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relation to such a claim until 60 Business Days after the liability has become
an actual liability.
5.19 No liability in respect of any claim under paragraph 7 of Schedule 6 shall
become payable where such claim involves the loss of or reduction in a right to
repayment of Taxation or a payment of Taxation, prior to the day on which any
repayment, payment or increased repayment of Taxation should have been due.
5.20 (a) If, in respect of any matter which would give rise to a claim under
the Warranties, the Buyer is entitled to claim under any policy of
insurance, then no such matter shall be the subject of a claim under
the Warranties unless and until the Buyer shall have made a claim
against its insurers and used reasonable endeavours to pursue such
claim and any such insurance claim shall then reduce by the amount or
extinguish any such claims (in each case net of all costs and expenses
(including legal fees) in relation to the claim and the amount (in the
Buyer's reasonable opinion) of any increases in premiums resulting from
the claim) under the Warranties, subject to the time limits set out in
clause 5.3(a) being extended in relation to such a claim until 60
Business Days after the Buyer becomes aware of the outcome of such
insurance claim.
(b) Where the Buyer is at any time entitled to recover from some other
person than is contemplated by clause 5.20(a) any sum in respect of any
matter giving rise to a claim under the Warranties the Buyer shall take
reasonable steps to enforce such recovery prior to taking action
against the Sellers and, in the event that the Buyer shall recover any
amount from such other person, the amount of the claim against the
Sellers shall be reduced by the amount recovered net of all costs and
expenses (including legal fees) incurred by the Buyer in recovering
such payment from the third party).
5.21 The Buyer warrants to the Sellers that:
(a) the Buyer has the requisite power and authority to enter into and
perform this Agreement and the other documents which are to be executed
by the Buyer at Completion (the "Completion Documents ");
(b) this Agreement constitutes and the Completion Documents will, when
executed by the Buyer, constitute binding obligations of the Buyer in
accordance with their respective terms;
(c) the execution and delivery of, and the performance by the Buyer of
its obligations under this agreement and the Completion Documents will
not:
(i) result in a breach of any provision of the Amended and
Restated Certificate of Incorporation of the Buyer;
(ii) result in a breach of, or constitute a default under, any
instrument or agreement to which the Buyer is party or by
which the Buyer is bound and which is material in the context
of the transactions contemplated by this agreement;
(d) at Completion, the Consideration Shares will be validly issued,
fully paid and non-assessable.
5.22 The Warranties shall continue to be enforceable by any permitted assignee
of the buyer's of the benefit of this Agreement, subject to the exceptions,
limitations and restrictions expressly set out in or provided for under this
Agreement as if such Assignee were party to this Agreement as the Buyer and
liabilities shall be calculated accordingly provided that the Sellers shall have
no greater liability to any such assignee than they would have had under this
Agreement to the Buyer.
6 NON-DISCLOSURE OF INFORMATION AND RESTRICTIONS
6.1 Save in the proper performance of their duties, each of the Sellers hereby
agrees to keep secret and confidential and not to use, disclose or divulge to
any third party or knowingly enable or
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<PAGE> 14
knowingly cause any person to become aware of any confidential information
relating to any of the Companies including but not limited to the Intellectual
Property (whether owned or licensed by any of the Companies), lists of
customers, reports, notes, memoranda and all other documentary records
pertaining to the Companies or their business affairs, finances, suppliers,
customers or contractual or other arrangements provided always that the
restrictions contained in this clause 6.1 shall not apply to any confidential
information which:
(a) is required to be disclosed by law or an order of a court or
tribunal of competent jurisdiction or the London Stock Exchange, the
SEC or NASDAQ (provided that the Buyer is given prior written notice of
such intended disclosure); or
(b) comes into the public domain otherwise than as a result of its
wrongful disclosure by such Seller; or
(c) is disclosed to professional advisers who owe a duty of
confidentiality to the Sellers or the Companies.
6.2 To ensure that the Buyer receives the full benefit of the goodwill of the
business of each of the Companies, each of the Sellers hereby represents and
undertakes that they will not for a period of three years from Completion either
alone or together, with or as agent, officer or employee of any other person,
firm or company or through the medium of any company directly or indirectly:
(a) solicit, interfere with or attempt to entice away from any of the
Companies any person who (i) is at the date hereof or (ii) was within
the previous 12 months or (iii) is at any time subsequent to the date
hereof while such Seller remains an employee of the Company, an
employee or agent of any of the Companies, or who is reasonably
considered by any of the Companies to be or have been a regular client
or customer of or supplier to the Companies on the date of this
Agreement or during the 12 months immediately preceding the date of
this Agreement or at any time subsequent to the date hereof while such
Seller remains an employee of the Company; or
(b) interfere or attempt to interfere with the supply or continued
supply of goods or services to or by the Companies; or
(c) from or within, in whole or part, the United Kingdom or any other
member state of the European Union from time to time, carry on or be
engaged, concerned, interested or hold shares or other securities in
any company or businesses which compete with the Business at the date
of this Agreement, provided that nothing in this clause shall restrict
any of the Sellers from owning less than 3 per cent of the shares of
any company whose shares are quoted or traded on a recognised
investment exchange.
6.3 Each of the restrictions contained in each paragraph of clause 6.2 is a
separate and distinct restriction and is to be construed separately from the
other restrictions. Each of the Sellers acknowledges that the restrictions are
reasonable when taken together as well as individually, that the duration,
extent and application of each restriction are no greater than is necessary for
the protection of the goodwill of the businesses of the Companies and that the
consideration paid by the Buyer for the Shares takes into account and provides
adequate compensation for the restraints and restrictions imposed. Should any
restriction be found to be void or unenforceable without the deletion of some
part of it or the reduction in area or duration specified, that restriction
shall apply with such modification as may be necessary to make it valid.
7 RESTRICTIVE TRADE PRACTICES ACT 1976
No provision of this Agreement or of any agreement or arrangement of
which it forms part (or any modification, amendment or variation to any of the
same) by virtue of which this Agreement or the relevant agreement or arrangement
of which it forms part is subject to registration under the Restrictive Trade
Practices Act 1976 shall take effect until the day after the day on which
particulars
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<PAGE> 15
of this Agreement or such agreement or arrangement are furnished to the Director
General of Fair Trading for registration under the said Act.
8 GENERAL PROVISIONS
8.1 The waiver by the Buyer of any right or breach, default or omission by
another party of any of the terms of this Agreement or any of the agreements in
the agreed form shall not take effect unless in writing and shall not constitute
a continuing waiver of the right waived or apply to, or operate as a waiver of,
any other breach, default or omission and any forbearance in enforcing any right
shall not constitute a waiver.
8.2 The Buyer may assign in whole or in part the benefit of this Agreement to
any company being a wholly owned subsidiary of the Buyer, provided that if such
subsidiary ceases to be a wholly owned subsidiary of the Buyer, the benefit
shall be assigned back to the Buyer. Otherwise no assignment shall be made.
8.3 No Seller shall divulge to any third party (other than his professional
advisers or insurers) the fact that this Agreement or any of the documents in
the agreed form has been entered into or any information regarding its terms or
any matters contemplated by this transaction or make any announcement relating
to it without the prior agreement (not to be unreasonably withheld or delayed)
of the Buyer unless such announcement is required by law or the Inland Revenue
and/or a court of competent jurisdiction or by the London Stock Exchange, the
SEC or NASDAQ in which event the other parties shall be given prior written
notice of such intended announcement. Any such announcement shall in any event
be made or issued only in a form approved by the Buyer and with the consent of
the Sellers (not to be unreasonably withheld or delayed). Provided that the
Sellers shall not be restricted by this clause 8.3 from divulging such
information as is reasonably necessary to perform their duties to the Company in
the ordinary course or from divulging the information contained in the legend
set forth on the certificates for their Consideration Shares in order to sell
such shares in accordance with the relevant provisions in Schedule 3.
8.4 The Sellers shall ensure that the Buyer, its agents, advisers (including
legal advisers or insurers) and representatives are given promptly on request
full access to all accounting and other records of the Companies and any other
facilities and information regarding the business, assets, liabilities,
contracts and arrangements of the Companies which it may request and which are
within the possession or the control of the Sellers.
8.5 Each party shall pay its own legal, accountancy and other costs, charges and
expenses incurred in connection with this Agreement. The Sellers shall pay any
and all broker's, finder's, financial advisor and investment banking fees and
expenses incurred by the Company or any of the Sellers, including without
limitation any amount payable to The Corum Group Ltd.
8.6 This Agreement, together with any document expressly referred to in any of
its terms, contains the entire agreement between the parties relating to the
subject-matter covered. No oral explanation or oral information given by any
party shall alter the interpretation of this Agreement. It is agreed that:
(a) none of the parties has entered into this Agreement in reliance
upon any representation, warranty or undertaking which is not set out
in this Agreement or any other such document;
(b) in the absence of fraud, none of the parties will have any remedy
in respect of any untrue statement made to it or its agents upon which
it relied which is not contained in this Agreement and such party's
only remedy will be for breach of contract;
(c) in the absence of fraud this clause 8.8 shall not exclude liability
for fraudulent misrepresentation.
8.7 Each of the Sellers hereby undertakes with the Buyer at the request of the
Buyer and at the expense of the Sellers to do or procure to be done all such
further acts and things and execute or
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<PAGE> 16
procure to be executed all such further deeds and documents as may be reasonably
necessary or desirable fully and effectively to vest in the Buyer the legal and
beneficial ownership of the Shares.
8.8 Each communication to be made hereunder shall be made in writing and, unless
otherwise stated, shall be made by fax or letter. Any communication or document
to be made or delivered by one person to another pursuant to this Agreement
shall (unless that other person has by not less than 14 days' written notice to
the other specified another address) be made or delivered to that other person
at the address identified below and shall be deemed to have been made or
delivered when despatched (in the case of any communication made by fax) or (in
the case of any communication made by letter) when left at the address or (as
the case may be) three days after being deposited in the post or postage prepaid
or with an international courier in an envelope addressed to it at that address.
Sellers' address for Notices:
Attention: Graham White
Dickson Minto W.S.
Royal London House
22/25 Finsbury Square
London EC2A 1DS
Facsimile: +44 171-628 0027
Buyer's address for Notices:
Attention: Darioush Mardan
Omtool, Ltd.
8 Industrial Way
Salem, NH 03079
Facsimile: +1 603-890-1925
Copies to: John A. Meltaus
Testa Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Facsimile: +1 617 248 7000
8.9 This Agreement is governed by and is to be construed in accordance with
English law.
8.10 Each of the parties hereby irrevocably accepts that the courts of England
shall have jurisdiction to hear and determine any suit, action or proceedings
and to settle any disputes arising out of or in connection with this Agreement
and for such purposes irrevocably submits to the jurisdiction of such courts.
Each of the parties waives any objection which it may nor or hereafter have to
the English Courts being nominated as the forum to hear and determine any such
proceedings and to settle any such disputes and agrees not to claim that any
such court is not a convenient or appropriate forum.
8.11 The submission to the jurisdiction of the English courts shall not (and
shall not be construed so as to) limit the right of the parties to the
proceedings in any other court of competent jurisdiction nor shall the taking
proceedings in any one or more jurisdictions preclude the taking of proceedings
in any other jurisdiction (whether concurrently or not) if and to the extent
permitted by applicable law.
8.12 Any provisions of this Agreement shall, so far as they are capable of being
performed or observed, continue in full force and effect notwithstanding
Completion except in respect of those matters already performed.
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<PAGE> 17
8.13 This Agreement may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one and the same
instrument.
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<PAGE> 18
SCHEDULE 6
WARRANTY STATEMENTS
1 INFORMATION, FORMAL AND LEGAL
1.1 The information contained or referred to in Schedules 1, 2, 4 and 5
is true and accurate and not misleading and the Subsidiaries are the only
subsidiaries of the Company.
1.2 All information contained or referred to in the Disclosure Letter
(not including for this purpose the Disclosure Documents annexed thereto or any
deemed to be disclosed pursuant thereto) is true and accurate in all material
respects.
1.3 So far as the Sellers are aware, all statutory, municipal,
governmental, court and other requirements applicable to the formation,
continuance in existence, creation and issue of securities, management, property
or operations of the Company, and all licences and consents (including planning
consents) involved in the carrying on of the business of the Company, have been
obtained and complied with in all material respects and the Sellers are not
aware of any contemplated revocation of any such licence or consent.
1.4 No consent, approval, authorisation or order of any court or
government or local agency or body or any other person is required by any of the
Sellers or the Company for the execution or implementation of this Agreement and
the agreements in the agreed form and compliance with the terms of this
Agreement and each of the agreements in the agreed form does not and will not:
(a) conflict with, result in the breach of or constitute a default
under any obligation by which the Company may be bound or any
provision of the Memorandum or Articles of Association of the
Company;
(b) so far as the Sellers are aware, relieve any person from any
material obligation to the Company or provide grounds of the
termination by any party of any agreement with the Company or the
cessation of any licence or permission; or
(c) result in the creation, imposition, crystallisation or
enforcement of any encumbrance on any of the assets of the Company.
1.5 The statutory books and registers of the Company are duly entered up
and maintained in accordance with all legal requirements applicable thereto and
contain true, full and accurate records of all matters required to be dealt with
therein and all such books and all records and documents (including, without
limitation, all documents of title, accounts, books, ledgers and contracts to
which it is a party) which are the property of the Company are in its possession
or under its control and all accounts, documents, returns and forms required to
be delivered or made to the Registrar of Companies and any relevant foreign
equivalent have been duly and correctly delivered or made.
1.6 The Company has not committed and is not liable for any criminal,
illegal, unlawful, ultra vires or unauthorised act or so far as the Sellers are
aware any breach of covenant, contract or statutory duty and there is no
violation of, or default with respect to, any statute, regulation, order, decree
or judgment of any court or central or local government agency of the United
Kingdom or any foreign country which in any case or in the aggregate has or
could reasonably be expected to have a material adverse effect upon the assets,
business or profitability of the Company.
1.7 The Company does not trade and has never traded under any name other
than its corporate name.
2 CAPITAL, DISTRIBUTIONS, CONTRACTS AND LIABILITIES
2.1 The Company has not at any time:-
(a) repaid, redeemed or purchased or agreed to repay, redeem or
purchase any securities or shares of any class of its share capital
or otherwise reduced or agreed to reduce its issued share capital or
any class thereof; or
(b) directly or indirectly provided any financial assistance
(as defined in Section 151 of the Companies Act 1985) for the
purpose of the acquisition of shares of the
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Company or of any holding company of the Company or for the purpose
of reducing or discharging any liability incurred in any such
acquisition whether pursuant to Section 155 of the Companies Act
1985 or otherwise; or
(c) capitalised or agreed to capitalise in the form of shares,
debentures or any other securities or in paying up any amounts
unpaid on any shares, debentures or other securities any profits or
reserves of any class or description or passed or agreed to pass any
resolutions to do so.
2.2 The Company has not received a distribution from any company in
contravention of Section 263 of the Companies Act 1985.
2.3 There is not outstanding any indebtedness or other liability (of
whatsoever nature, whether present or future, actual or contingent) owing:
(a) by the Company to any of the Sellers (except in their
capacity of employees) or to any director or former director of the
Company or to any independent contractor providing the services of
any such persons or to any person connected with the Company or with
any of the Sellers or with any such director, former director or
contractor; or
(b) to the Company by any of the Sellers or by any such
director, former director or contractor or by any person connected
with the Company or with any of the Sellers or with any such
director, former director or contractor.
2.4 There are no existing contracts (including, without limitation,
customer and supply contracts) to which the Company is a party and in which any
of the Sellers or any director or shareholder of the Company or any person
connected with any of them is interested (and for the purposes of this paragraph
a person shall be deemed to be interested in a contract in accordance with the
provisions of Section 317 of the Companies Act 1985).
2.5 No customer of the Company is responsible for in excess of 10% of the
Company's trade, turnover or profitability in the last two financial years and
no supplier supplies in excess of 10% of the Company's supplies in the last two
financial years (as quantified by payments to all suppliers in that year).
2.6 So far as each of the Sellers is aware, as a result of the acquisition of
the Shares by the Buyer:
(a) no material supplier of the Company will cease or reduce or be
entitled to cease or reduce its supplies to the Company;
(b) no material customer of the Company will, or will be entitled to,
cease dealing with or reduce the level of business done with the
Company; and
(c) no officer or senior employee of the Company will leave.
2.7 No person is entitled to receive from any of the Companies any
finder's fee, brokerage or other commission in connection with the sale and
purchase of the Shares.
2.8 All distribution and/or sub-licence agreements for the resale or
sub-licence of the Company's products except for the agreement with IBM comprise
only the Company's standard form agreement and no amendments, variation or
additions to that agreement have been made or agreed by the Company save for
changes which, individually and in the aggregate, have not and will not have a
material adverse effect on the Companies. The standard form is that between the
Company and Intermec Systems Limited. End users of the Company's products are
licensed only on the terms of the Company's standard Software Product Licence
Agreement and no amendments or variations to that agreement have been made or
agreed by the Company save for changes which, individually and in the aggregate,
have not and will not have a material adverse effect on the Companies. The
standard form is that between the Company and International Supply Chain
Limited.
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<PAGE> 20
3 THE SHARES
3.1 The Shares constitute the whole of the issued and allotted share capital of
the Company and are fully paid or credited as fully paid and there are no
options over or other rights (whether exercisable now or in the future and
whether contingent or not) to acquire any shares or subscribe shares in the
capital of the Company.
3.2 Each Seller is the legal and beneficial owner of those of the Shares set
opposite his name in Column 2 of Schedule 1.
3.3 There is no pledge, lien, option, warrant, charge or encumbrance on, over or
affecting any of the Shares or any of the shares in the Subsidiaries, no
agreement to create such pledge, lien, option, warrant, charge or encumbrance
has been made and no claim has been made that any person is entitled to any such
pledge, lien, charge or encumbrance.
4 ACCOUNTS
4.1 The Accounts have been prepared in accordance with the applicable
requirements of the Companies Acts and in accordance with all statements of
standard accounting and financial reporting standards and UK GAAP and give a
true and fair view of the state of affairs of the Company and its Subsidiaries
at the Accounts Date and of the profits and losses for the financial year ended
on the Accounts Date.
4.2 None of the Sellers is aware that any debt owing to any of the Companies is
subject to any set-off or counter-claim.
4.3 The profits (or losses) shown in the Accounts have not to a material extent
been affected (except as disclosed therein) by any extraordinary or exceptional
event or circumstance (as defined in FRS3).
4.4 None of the book debts included in the Accounts and the Management Accounts
or which have subsequently arisen have been outstanding for more than two months
from their due dates for payment and all such debts have realised or, so far as
the Sellers are aware, will realise in the normal course of collection their
full value as included in the Accounts or the Management Accounts.
4.5 The Management Accounts have been properly prepared on a basis consistent
with the Accounts and the Sellers have no reason to believe that they do not
reasonably reflect the financial position of the Company for the period to which
they relate.
5 BUSINESS AND TRADING
5.1 Since the Accounts Date:
(a) no members' resolution of the Company of any kind has been
passed other than resolutions relating to business at annual general
meetings which was not special business;
(b) the Company has carried on its business in the ordinary course;
(c) except as reflected in the Management Accounts, the Company has
not acquired or disposed of or agreed to acquire or dispose of any
business or any asset (other than trading stock in the ordinary
course of business) or assumed or acquired any material liability
(including any contingent liability) other than in the ordinary
course of business on commercial terms for the benefit of the
Company;
(d) the Company has paid its creditors in accordance with its
normal practice;
(e) the Company's business and turnover (excluding seasonal
variations) have not so far as the Sellers are aware, deteriorated
or been adversely affected to a material extent by any act or
omission of the Company or by the loss of any important employee,
customer or supplier or by any abnormal factor and none of the
Sellers is aware of any facts or circumstances likely to give rise
to any such loss or factor having or likely to have such effect;
(f) no dividend or other distribution has been declared, made or
paid by the Company except as provided for in the Accounts and all
dividends or distributions
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<PAGE> 21
declared, made or paid by the Company have been made, paid or
declared in accordance with its Articles of Association and the
provisions of any applicable legislation;
(g) no change has been made in the emoluments or other terms of
employment of any of the Company's employees who are in receipt of
remuneration in excess of pound sterling 20,000 per annum or of any
of the Directors and the Company has not paid any bonus or special
remuneration to any such employee or any Director;
(h) all amounts received by the Company have been paid into the
relevant bank account and appear in the appropriate books of
account;
(i) the Company has not repaid any loan, loan capital or other
debenture by reason of its default;
(j) so far as the Sellers are aware, the Companies have not
suffered, incurred or acquired any material liabilities (including
actual, contingent, unquantified or disputed liabilities insofar as
such liabilities are required to be disclosed by the Companies Acts
or GAAP) except those reflected in the Accounts or the Management
Accounts or arising in the ordinary course of business since 30
September 1997
(k) no debtor has been released by the Company for less than the
book value of any debt and no debt owing to the Company has been
deferred, subordinated or written off or has proved to be
irrecoverable to any extent and no debt owed by the Company has been
released by the Company in circumstances which give rise or could
give rise to a liability to Taxation; and
(l) except in the ordinary course of business, no material
commission has been paid and no material discount has been allowed
by the Company at a rate or otherwise on terms different from those
upon which commissions and discounts were paid or allowed for in the
accounting period ended on the Accounts Date.
5.2 All the Company's assets and all debts due to it which are included in the
Accounts were at the Accounts Date its absolute property and (save for those
subsequently disposed of or realised in the ordinary course of the business
carried on by it) all such assets and debts and all assets and debts which have
subsequently been acquired or arisen are now its absolute property and none is
the subject of any encumbrance (excepting only liens arising in the normal
course of trading) or the subject of any leasing, hire, hire-purchase, retention
of title, conditional sale or credit sale agreement.
6 STOCKS, ASSETS AND INSURANCE
6.1 The Company owns or has on lease or hire purchase (as referred to) no motor
vehicles save for those fully and accurately listed (including details of the
make, model, registration number and driver) in the Disclosure Letter.
6.2 So far as the Sellers are aware no expenditure is required to be spent
(other than amounts identified in the Accounts, Management Accounts or the
Company budgets as disclosed to the Buyer prior to the date of this Agreement)
in respect of the repair or upgrading of any of its plant, machinery, vehicles
and other equipment.
6.3 Maintenance contracts are in full force and effect in respect of all
material assets which the Company is obliged to maintain or repair under any
leasing or similar agreement and in respect of all material assets which it is
necessary to have maintained by outside or specialist contractors.
6.4 The asset register of the Company comprises a complete and accurate record
of all plant, machinery, vehicles and equipment owned by the Company.
6.5 So far as the Sellers are aware the Company has not sold or distributed any
products or supplied any services which were, are or will become defective or
which do not comply in any respect with and express or implied warranties or
representations made by any person or with all applicable regulations, standards
and requirements. The Company does not give and has not given
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express warranties, representations, guarantees or indemnities as to the fitness
for purpose, quality or otherwise of any of its products or services.
6.6 There has been no exercise or purported exercise of, or any claim for, any
charge, lien, encumbrance or equity over any of the fixed assets of the
Companies which is still outstanding.
6.7 All the assets of the Company which are of an insurable nature have been at
all material times and are at the date of this Agreement insured to their full
replacement value against fire and other risks normally insured against by
companies carrying on similar businesses or owning property of a similar nature
and the Company has at all times been and is adequately covered against
accident, employer's liability, third party products liability, loss of 6
months' profits, environmental liability and other risks normally insured
against by such companies for the full replacement value of such assets and in
respect of its business for such amounts as would in the circumstances be
prudent for such similar businesses; and in respect of all such insurances:
(a) all premiums have been duly paid to date;
(b) so far as the Sellers are aware, all the policies are in full
force and effect and are not voidable on account of any act,
omission or non-disclosure on the part of the insured party;
(c) particulars are contained in the Disclosure Letter;
(d) there are no circumstances known to the Sellers which may be
reasonably expected to give rise to any claim and no insurance claim
is outstanding; and
(e) all policies are held in the name of the Company.
7 TAXATION AND TAX RETURNS
7.1 So far as the Sellers are aware, the Company has duly and properly made all
returns and given or delivered all notices, accounts and information which ought
to have been made to and is not involved in any dispute with the Inland Revenue
or other authority concerning any matter likely to affect in any way the
liability (whether accrued, contingent or future) of it to Taxation of any
nature whatsoever or other sums imposed, charged, assessed, levied or payable
under the provisions of any Taxation statute or regulations relating to Taxation
and the Sellers are not aware of any matter which may lead to such dispute.
7.2 So far as the Sellers are aware, there are no circumstances in which
surcharges, interest or penalties in respect of Taxation not duly paid could be
charged against it in respect of any period prior to Completion.
7.3 The Company has not entered into or been a party to any schemes or
arrangements designed partly or wholly for the purpose of it or any other person
avoiding Taxation.
7.4 All documents in the possession of the Company or to the production of which
it is entitled and which attract stamp or transfer duty in the United Kingdom or
elsewhere have been properly stamped.
7.5 The Company has duly and punctually paid all Taxation for which it is or has
been liable to the appropriate Taxation authority.
7.6 The Company has not been resident or within the charge to Taxation in any
jurisdiction other than the jurisdiction in which it is at the date hereof
incorporated.
7.7 None of the assets of the Company qualify or have qualified for capital or
depreciation allowances.
7.8 The expenditure allowable as a deduction for the purposes of computing any
chargeable gain attributable to any asset of the Company for the purposes of
Taxation on chargeable gains is not less than the value of that asset as shown
in the Accounts.
7.9 No chargeable gain or other taxable receipt will accrue to the Company on
the disposal of any debt owed to the Company for proceeds equal to the value of
the debt as shown in the Accounts.
7.10 The Company is not and never has been a close company.
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<PAGE> 23
7.11 The Company has not at any time been treated as a member or representative
member of a group of companies for the purposes of VAT.
7.12 Paragraphs 7.1 to 7.11 of this Schedule 6 shall apply mutatis mutandis to
Taxation outside the United Kingdom and all references to Taxation, Relief or
any statutory provision or regulation relating to Taxation shall be construed
accordingly.
8 EMPLOYEES AND AGENTS
8.1 The Employees are all the employees of any of the Companies as at Completion
and the names, current weekly wage and other emoluments, date of birth, the date
of commencement of the respective periods deemed to be their period of
continuous employment with the Companies and job descriptions of the Employees
are fully and accurately set out in the Disclosure Letter.
8.2 The Disclosure Letter also includes full and accurate details of all
employee share schemes, employee share option schemes, profit related pay
schemes or other employee benefit schemes of any kind of the Companies now in
force or capable of being in force.
8.3 There is no legally binding liability whatsoever or moral commitment to make
any payment to or for the benefit of any of the Employees or the wife or widow
or any other relative of any of the Employees in respect of past service or the
termination of the employment of that or any other person by way of pension
contribution, pension retirement benefit or otherwise and the Company has no
superannuation fund, retirement benefit or other pension schemes or arrangements
to provide benefits to past or present employees or directors (or their
dependants) by reason of retirement, death, disability or sickness or otherwise.
8.4 No assurances or undertakings (whether legally binding or not) have been
given to any of the Employees as to the continuance or introduction or increase
or improvement of any retirement, death, sickness or disability scheme.
8.5 There is no outstanding commitment (whether legally binding or not) to
increase the remuneration of any Employee.
8.6 All contracts of service or consultancy or for services with directors or
employees or consultants or independent contractors providing the services of
individual personnel of the Company can be terminated by three months' notice or
less without giving rise to any claim for damages or compensation (other than a
statutory redundancy payment or statutory compensation for unfair dismissal, if
applicable).
8.7 Except where any provision or allowance is made in the Accounts:
(a) no liability (actual or contingent) has been incurred in the 12
months prior to Completion by the Company for breach of any contract
of service or consultancy, for redundancy payments (including
protective awards), for compensation for wrongful dismissal or
unfair dismissal or loss of office or for failure to comply with any
order for the reinstatement or re-engagement of any officer or
employee; and
(b) no payment has been made or promised by the Company in
connection with the termination, suspension or variation of any
contract of service or consultancy or for services of any present or
former officer or employee and no bonus or special remuneration has
been paid or agreed to be paid to any such officer or employee.
8.8 So far as the Sellers are aware the Company has in relation to each of the
Employees and its former employees complied in all material respects with all
material obligations imposed on it by all contracts, statutes, orders,
regulations, collective agreements, awards and codes of conduct and practice
relevant to conditions of service and to the relations between it and the
Employees and former employees and has in all material respects maintained
adequate and suitable records regarding the service of the Employees and former
employees.
8.9 The Company has not entered into any recognition agreement with any trade
union nor has it done any act which could be construed as an act of recognition
and the Company is not involved in and so far as the Sellers are aware there are
no present circumstances which are likely to give rise to
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<PAGE> 24
any industrial or trade dispute or any dispute or negotiation regarding a claim
of material importance with any trade union or association of trade unions or
organisation or body of employees.
8.10 In the 12 months prior to Completion, the Company has not given notice of
any redundancies to the Secretary of State for Employment or started
consultations with any trade union or unions under the provisions of Part 2 of
the Trade Union and Labour Relations (Consolidations) Act 1992 and the Company
has not failed to comply with any such obligations under Part 2.
9 LITIGATION
9.1 The Company is not and no person for whose acts and defaults it may be
vicariously liable is at present engaged whether as plaintiff, defendant or
otherwise in any legal action, proceeding or arbitration which is either in
progress, has been threatened in writing or so far as the Sellers are aware is
pending (other than as plaintiff in the collection of debts arising in the
ordinary course of the business carried on by it none of which exceeds pound
sterling 1,000 and which do not exceed pound sterling 5,000 in aggregate) or is
being prosecuted for any criminal offence and no written notice of any claim in
damages or for an injunction has been received by the Company and so far as the
Sellers are aware, no governmental or official investigation or inquiry
concerning the Company is in progress of pending.
9.2 There are no circumstances known to any of the Sellers likely to lead to any
such claim or legal action, proceeding or arbitration, prosecution,
investigation or enquiry.
9.3 No distress, execution or other process has been levied in respect of the
Company which is outstanding nor is there any judgment or court order
outstanding against the Company.
9.4 No act, transaction or omission has occurred as a result of which the
Companies are or may be held liable to refund in whole or in part any investment
grant (or other grant or loan received from any governmental department or
agency or any local or other authority by virtue of any statute) or any such
grant or loan for which application has been made by them will or may not be
paid or will or may be reduced.
10 CAPITAL COMMITMENTS, UNUSUAL CONTRACTS, GUARANTEES ETC.
The Company:
(a) except as reflected in the Management Accounts has no capital
commitments which individually exceed pound sterling 5,000 or in
aggregate exceed pound sterling 50,000;
(b) is not a party to any contract, arrangement or commitment (whether
in respect of capital expenditure or otherwise) which was entered into
otherwise than on terms determined on an arms' length basis, is of an
unusual or abnormal nature or outside the ordinary course of business;
(c) has not delegated any powers under a power of attorney (other than
as an incidental part of a larger transaction) which remains in effect
and has appointed any agent under an authority which has not been
revoked and other than any ostensible or implied authorities to
directors or employees and consultants to enter into routine contracts
in the normal course of their duties;
(d) has not, by reason of its default, become bound, and no person has
become entitled (or with the giving of notice and/or the issue of a
certificate will become entitled) to require it, to repay prior to its
stipulated due date any loan capital or other debenture, redeemable
preference share capital or borrowed money and no notice has been
received since the Accounts Date of such liability having arisen for
any other reason;
(e) save pursuant to standard terms of trading annexed to the
Disclosure Letter has not entered into and is not bound by any
guarantee or indemnity under which any liability or contingent
liability is outstanding;
(f) has not at any time acquired, assigned or otherwise disposed of any
leasehold property in such a way that it retains any residual
liability;
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<PAGE> 25
(g) is not and has never been party (to the extent that a liability
is still outstanding or obligation or duty owed) to any joint
venture, consortium, partnership or profit sharing arrangement or
agreement; and
(i) so far as the Sellers are aware, is not in default under any
written agreement or covenant to which it is a party, nor under any
other written obligation binding on it being a default which in each
case would have a materially adverse affect on the business of the
Company.
11 BORROWINGS AND LENDINGS
11.1 Full details of all limits on the Companies' bank overdraft facilities are
accurately set out in the Disclosure Letter and the total amount borrowed by
each of the Companies from their respective bankers does not exceed their
respective overdraft facilities.
11.2 The total amount borrowed by the Company does not exceed any limitation on
its borrowing powers contained in its Articles of Association, or in any
debenture or other deed or document binding on it.
11.3 The Company does not have outstanding, nor has agreed to create or issue,
any loan capital, nor has it factored any of its debts, or engaged in financing
of a type which would not require to be shown or reflected in the Accounts, or
borrowed any money which it has not repaid, except for borrowings not exceeding
the amounts shown in the Accounts.
11.4 Other than in the ordinary course of business, the Company has not lent any
money which has not been repaid.
12 CONTINUATION OF FACILITIES
12.1 In relation to all debentures, acceptance credits, overdrafts, loans or
other financial facilities outstanding or available to the Companies or any of
them (referred to in this Warranty Statement as "Facilities"):
(a) there are attached to the Disclosure Letter full and complete
copies of all documents relating to the Facilities;
(b) none of the Companies is in contravention of, or non-compliance
with, any provision of any document relating to any of the
Facilities;
(c) no steps for the early repayment of any indebtedness have been
taken or threatened in writing;
(d) so far as each of the Sellers is aware no circumstances exist or
have arisen as a result of which the continuation of any of the
Facilities might cease or be prejudiced, or which may give rise to
any alteration in the terms and conditions of any of the Facilities;
(e) none of the Facilities is dependent on the guarantee or
indemnity of, or any security provided by, any party other than any
of the Companies; and
(f) none of the Facilities may according to its terms be terminated
or mature prior to their stated maturity as a result of the
acquisition of the Shares (or any of the Shares) by the Buyer.
12.2 All charges in favour of the Company have where appropriate been registered
in accordance with the provisions of section 395 of the Companies Act 1985.
13 PROPERTIES AND THE ENVIRONMENT
13.1 The Properties comprise all the properties owned or occupied by the
Companies and the Companies are in sole and exclusive occupation of all of the
Properties.
13.2 The Sellers have no reason to believe that the Companies will lose the
right to occupy any Property (other than by expiry of the term of any lease or
licence) and in the event that a Company were to receive not less than three
months notice to quit a Property, the Sellers believe that a similar
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<PAGE> 26
replacement property can be rented without any material disruption to the
Business on terms not substantially less favourable than those under which the
relevant Property is occupied.
13.3 None of the Companies has a liability in respect of a property which is
not a Property.
13.4 So far as the Sellers are aware each of the Properties is in a good and
substantial state of repair; the Company is not aware of any structural problems
in respect thereof; so far as the Sellers are aware no deleterious substances
not approved by any relevant Code of Practice have been used in the construction
of the Properties; none of the Company and its agents and employees has to the
knowledge of the Sellers during the Company's occupation of the Properties
caused any hazardous substances to be present or contained at any of the
Properties or caused any contamination on or at any of the Properties.
13.5 All rent and outgoings (including rates) have been duly paid and all the
Properties are insured in accordance with the terms of the relevant lease.
13.6 No compulsory purchase orders or resolutions affecting any of the
Properties have been served on the Company and there is no proposal for such an
order or resolution of which the Sellers are aware.
13.7 All deeds and documents necessary to prove the Company's title to each of
the Properties are in the possession of the Company and have been or will at or
before Completion be duly stamped.
14 INSOLVENCY
14.1 No administrator, administrative receiver, receiver, manager of assets,
liquidator or any other similar officer has ever been appointed in respect of
the whole or any part of the assets or undertaking of the Company and no order
has been made, petition presented or resolution passed for the purpose of the
making of any order in relation to administration, administrative receivership,
receivership, liquidation, management of assets or any other similar situation
of the Company.
14.2 The Company is neither insolvent nor unable to pay its debts as they fall
due (as such expression is defined in either sub-section (1)(a) to (d)
(inclusive) or sub-section (2) of Section 123 of the Insolvency Act 1986).
14.3 No voluntary arrangement (as referred to in the Insolvency Act 1986) or
scheme of arrangement as regards its creditors has been proposed by the
Directors or is in operation in relation to the Company.
14.4 The Company has not entered into any transaction nor been given a
preference to which Sections 238, 239 or 423 of the Insolvency Act 1986 apply or
which may otherwise be liable to be set aside or avoided for any reason.
15 INTELLECTUAL PROPERTY
15.1 Details of all the Software and rights in any registered (and applications
for registration of) Intellectual Property owned or used by the Company in
connection with its business are set out in Schedule 5. Neither the French nor
the U.S. Subsidiary has carried out any product development (other than
translation and customer tailoring).
15.2 The Software and all rights in the Computer Know-how and all Intellectual
Property, owned or used by the Companies (whether or not set out in Schedule 5)
are vested in or so far as the Sellers are aware validly granted to one of the
Companies (and such Company has all right title and interest therein) and are
not restricted in any way and all renewal fees and steps required for their
maintenance or protection have been paid and taken. None of the Companies has
agreed to indemnify any person for or against any infringement of any
Intellectual Property right. The Software and any previous versions were
developed and the Computer Know-how was conceived by employees of the Companies
in their capacities as such and without reliance on or use by them of the trade
secrets, copyright or proprietary information of another.
15.3 Where Software is owned by any of the Companies, the Company concerned has
sole possession of the source code and has not granted any rights whatsoever in
or over the source code to any person or entity. In the case of any Software
(except freely available commercial off the shelf
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<PAGE> 27
software) licensed to a Company, that Company has full rights of access to and
use of the source code to the Software in the event of any insolvency,
receivership, administration or bankruptcy (or equivalent event in any relevant
jurisdiction) or breach by the owner of the Software of the relevant licence.
15.4 Other than in the ordinary course of business in conformity with Warranty
Statement 2.8 the Company has not granted, nor is it obliged to grant, any
licence, sub-licence or assignment in respect of any Intellectual Property owned
or used by it or has disclosed or is obliged to disclose any Know-how or
Computer Know-how to any person, other than its employees or those of any of the
Companies for the purpose of carrying on its business.
15.5 The Company is not in breach of any licence, sub-licence or assignment
granted to it in respect of any Intellectual Property or of any agreement under
which any Know-how or Computer Know-how was or is to be made available to the
Company.
15.6 The processes and methods employed, the services provided, the businesses
conducted and the products manufactured, sold, licensed or marketed by the
Company do not, and at the time of being employed, provided, conducted,
manufactured, sold, licensed or marketed did not, infringe the rights of any
other person in and no claims have been made or threatened by third parties (nor
is there any basis therefor) and so far as the Sellers are aware no applications
for registration made by third parties are pending which, if pursued or granted,
might be material to this Warranty 15.6.
15.7 Neither the Company nor the Sellers have knowingly acquiesced in nor are
they aware of the unauthorised use by any person of any of the Intellectual
Property, Know-how or Computer Know-how of any of the Companies or of any
infringement of the rights of the Companies in such rights or information.
15.8 Except in the ordinary course of business and not such as to have a
material adverse effect, the Company is not a party to any confidentiality
agreement, or any agreement which restricts the free use or disclosure of any
information.
15.9 The Company has taken all steps necessary or desirable for the fullest
protection of all Intellectual Property, Know-how and Computer Know-how owned or
used by the Company including, without limitation, applying for and maintaining
in force all patents, copyrights, trade mark registrations and registered
designs in all relevant countries.
15.10 No item of equipment or related software used by the Company in the course
of the Business has been supplied under any limited licences and all such
equipment and related software may be freely used or disposed of by the Company
on such terms as they think fit.
15.11 All pending applications for United Kingdom and foreign patents,
registered designs and trade marks and for registration of any other
Intellectual Property has been made by or on behalf of one of the Companies.
15.12 So far as the Sellers are aware, the licences, agreements and arrangements
listed or referred to in Parts 1 and/or 2 of Schedule 5 are in full force and
effect, have not expired and no written notice has been given on either side to
terminate them or amendment made or accepted to their terms, the obligations of
the Company and so far as the Sellers are aware the other parties thereto been
fully complied with and no disputes exist or are anticipated in respect of them.
15.13 Save as indicated in Schedule 5 or in the Disclosure Letter the Company
does not require any software for the operation of any part of the Business as
presently carried on, and no such operations infringe any right of any kind
vested in any other party or will or may give rise to payment by the Company of
any royalty or of any sum in the nature of a royalty or to liability to pay
compensation pursuant to section 40 of the Patents Act 1977.
15.14 The appropriate copyright notices have been placed on all copies of the
Software which have been distributed to the public. The appropriate restricted
rights legend required under the Federal Acquisition Regulation to reserve the
Company's full ownership rights has been placed on all copies of the Software
which have been distributed to agencies or instrumentalities of the United
States government.
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<PAGE> 28
15.15 The Software conforms and performs in all material functions to the
specifications set out in the user manuals and other documentation written for
and/or supplied with the Software and any defects, bugs or faults of any
description whatever in any code for the Software are not more extensive or
damaging to the performance or functioning of the Software than can reasonably
be expected given the nature of computer software; none of the Companies nor the
Sellers are aware of any defect in any code for the Software that has a material
adverse effect on the performance, functionality or commercial viability of the
Software or future developments and enhancements of the Software.
15.16 The Company does not operate as a computer bureau, as that term is defined
in the Data Protection Act 1984, in the United Kingdom or elsewhere in the
world; and no notice of any kind has been served on the Company under any
provision under any part of that Act or any analogous legislation in any part of
the world. Insofar as the Company is a "Data User" under the Act or in an
equivalent position under any analogous legislation in any other country:
(a) all necessary applications for registration have been duly made
and are listed in Part 3 of Schedule 6; and
(b) the details supplied to the Registrar, or other official
concerned, in relation to each application are accurate and
complete.
15.17 So far as the Sellers are aware, the software, hardware and firmware
referred to in the licences, agreements and arrangements listed or referred to
in Schedule 5 is able, without upgrade or alteration and without loss of
performance or functionality or loss of or adverse effect on any data to
correctly receive, process and provide information regarding or containing:
(a) dates prior to, during and after the year 2000; and
(b) currencies now used or due to be implemented throughout the
European Union.
16 COMPETITION
So far as the Sellers are aware., the Company has not done anything which,
and is not a member or party to any agreement or arrangement which, contravenes
or requires registration or notification under any of the provisions of the Fair
Trading Act 1973, the Restrictive Trade Practices Acts, the Resale Prices Act
1976, the Treaty of Rome; or the Competition Act 1980 or any other anti-trust,
anti-monopoly or anti-cartel legislation or regulation in any country of the
world in which or with which it does business.
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<PAGE> 29
SCHEDULE 7
DEED OF COVENANT
DATED 1997
DEED OF COVENANT
relating to
CMA Ettworth Limited
THE SELLERS (1)
OMTOOL, LTD. (2)
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<PAGE> 30
INDEX
PARTIES 2
INTERPRETATION 2
Deed of Covenant 4
1 Covenant to pay 4
2 Exclusions 5
3 Over-Provisions, Corresponding Savings Etc. 6
4 Section 767A ICTA: Secondary Liabilities 7
5 Grossing up payments 7
6 Date of payment 8
7 General 8
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<PAGE> 31
DEED OF COVENANT
DATE
1997
PARTIES
(1) The individuals whose names and addresses appear in the Schedule to this
Deed ("the Sellers").
(2) OMTOOL, LTD. a corporation organised under the laws of the state of
Delaware whose principal office is at 8 Industrial Way, Salem, NH 03079,
United States of America ("the Buyer").
INTRODUCTION
(A) This Deed is supplemental to an agreement of even date herewith ("the
Agreement") made between the Sellers and the Buyer, whereby (inter alia) the
Buyer agreed to purchase from the Sellers the whole of the issued shares in CMA
Ettworth Limited.
(B) Pursuant to the Agreement, the Sellers are required on Completion to deliver
to the Buyer a duly executed deed of covenant in the form of this Deed.
INTERPRETATION
(1) In this Deed, unless the context otherwise requires, words and expressions
not expressly defined in paragraph (2) below shall have the respective meanings
given to them in the Agreement.
(2) The following expressions shall have the following meanings:
Relief any loss, relief, allowance, exemption, set
off, deduction or credit in computing or
against income, profits, gains or Taxation
and any right to a repayment of Taxation;
Taxation all forms of taxation, duties, rates,
levies, contributions, withholdings,
deductions, charges and imposts imposed in
the United Kingdom or overseas, including
but not limited to:
(a) in the United Kingdom, income tax to
which the Pay as You Earn system
applies, advance corporation tax, any
liability arising under Sections 203F,
419 or 601 ICTA, national insurance
contributions, value added tax and input
tax within the meaning of Section 24
VATA; and
(b) all penalties, charges, surcharges,
costs and interest relating to any of
the above.
Transaction any transaction, act, omission, scheme,
arrangement or event whatsoever (including,
but not limited to, entering into the
Agreement, Completion, any change in the
residence of any person or the death,
winding up or dissolution of any person) and
any reference to the occurrence of a
Transaction on or before a particular date
shall include a Transaction which is deemed
to have, or is regarded as having, occurred
or existed on or before that date for
Taxation purposes.
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<PAGE> 32
Taxation Liability not only a liability to make any payment
(or increased payment) of or in respect of
Taxation (whether or not such payment is
primarily payable by the Buyer or the
Company and whether or not the Buyer or the
Company has or may have any right of
reimbursement from any other person) but
also includes:
(a) the loss of any Relief arising in
respect of any Transaction occurring on
or before Completion where such Relief
was taken in account in reducing the
provision for Taxation in the Accounts
or was otherwise treated as an asset in
the Accounts;
(b) the use or set off of any Relief which
arises after Completion where the use or
set off of that Relief has the effect of
reducing or eliminating any liability to
Taxation which would otherwise have
arisen and have constituted a Taxation
Liability for the purposes of this Deed;
(c) any repayment of a payment for group
relief or for the surrender of advance
corporation tax or for a transferred tax
refund received by the Company which was
treated as an asset in the Accounts;
PROVIDED THAT:
(i) in any case falling within paragraph (a) above, the
Taxation Liability shall be treated as being equal to the
amount of Taxation which becomes payable which would not
have been payable had the Relief not been lost;
(ii) in any case falling within paragraph (b) above, the
Taxation Liability shall be treated as being equal to the
amount of the Taxation which would have been payable but
for the use or set off of the Relief; and
(iii) in any case falling within paragraph (c) above, the
Taxation Liability shall be treated as being equal to the
amount of the payment required to be repaid.
(3) In this Deed:
(a) except where otherwise stated, any reference to a clause
is a reference to a clause of this Deed;
(b) any reference to a statute or a statutory provision
includes a reference to that statute or statutory provision as
amended, re-enacted or replaced from time to time;
(c) the clause headings are for ease of reference only and
shall not in any way effect the interpretation of this Deed;
(d) any reference to any form of Taxation or Relief in the
United Kingdom shall include a reference to the equivalent or
substantially equivalent form of Taxation or Relief in any
other relevant taxing jurisdiction; and
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(e) any reference to income, profits or gains arising,
earned, accrued, received or payable on or before a particular
date shall include income, profits or gains which are deemed
to have arisen or are deemed to have been earned, accrued,
received or payable on or before that date.
OPERATIVE PROVISIONS
1 COVENANT TO PAY
1.1 The Sellers jointly and severally covenant to pay to the Buyer an
amount from time to time equal to:
(a) any Taxation Liability of any kind whatsoever for which the
Company is at any time liable in respect of any Transactions on or
prior to and including Completion;
(b) any Taxation Liability which is also a Taxation Liability of
another person and which is payable by the Company by virtue of:
(i) the other person failing to discharge such Taxation
Liability; and
(ii) the Company being at any time on or prior to
Completion a member of the same group as such other person or
otherwise connected with or related to such other person for
any Taxation purposes on or prior to Completion;
(c) any Taxation Liability of the Company arising in respect of or by
reference to or in consequence of any of the following:
(i) the Company being treated for VAT purposes as a member of
the same group as any other body corporate during any
prescribed accounting period of that group ending on or before
or within 90 days after Completion; or
(ii) any direction made pursuant to Schedule 9A VATA to the
extent that it relates to a date falling on or before
Completion; and
(d) all reasonable costs and expenses incurred by the Company or the
Buyer in connection with any liability for which the Sellers are liable
under this Deed or in investigating, assessing, contesting,
compromising, defending, appealing or settling the same to the extent
that recovery is made under this Deed in respect of such liability.
1.2 Any amount paid to the Buyer pursuant to this Deed shall be deemed to
constitute a reduction first in the Cash Consideration and to the extent of any
excess in the Consideration Shares.
2 EXCLUSIONS
The Sellers shall be under no liability under this Deed in respect of any
Taxation to the extent that:
(a) specific provision, allowance or reserve in respect of the
Taxation Liability has been made in the Accounts or in the Management
Accounts;
(b) it arises out of a Transaction undertaken after the Accounts Date
but before Completion by the Company in the ordinary course of its day
to day business operations; for the purpose of this Deed, a Transaction
undertaken outside the ordinary course of the day to day business
operations of the Company shall include, but not be limited to, the
following:
(i) anything which involves, or leads directly or indirectly
to, the receipt by the Company of a demand notice assessment
or letter in respect of any Taxation Liability of, or properly
attributable to, another person;
(ii)anything which relates to or involves the acquisition or
disposal of an asset or the supply of services (including the
lending of money, or the hiring or licensing of tangible or
intangible property) in respect of a Transaction
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<PAGE> 34
which is not entered into at arm's length but only in so far
as such Taxation is attributable to the difference between
the consideration (if any) actually received and the
consideration deemed for Taxation purposes to have been
received;
(iii) anything which relates to or involves the making of a
distribution for Taxation purposes, the creation,
cancellation or reorganisation of share or loan capital
(including any purchase of own shares by the Company), the
creation, cancellation or repayment of any intra-group debt
or any company becoming or ceasing or being treated as
ceasing to be a member of a group of companies or as
becoming or ceasing to be associated or connected with any
other person for any Taxation purpose; or
(iv) anything which relates to a transaction which includes,
or a series of transactions which includes, any step or
steps having no commercial or business purpose apart from
the reduction, avoidance or deferral of a Taxation
Liability.
(c) such Taxation Liability arises or is increased only by reason of
any increase in rates of Taxation, imposition of new Taxation
legislation, variation in the method of applying or calculating the
rate of Taxation or other changes in law or published Taxation
authority practice or standard accounting practices made after
Completion with retrospective effect;
(d) such Taxation Liability would not have arisen but for a
voluntary act, omission or transaction of the Buyer or of the
Company or their respective successors in title effected after
Completion outside the ordinary course of their day to day business
operations;
(e) such Taxation Liability would not have arisen but for a
cessation of trade, or a change in the nature or conduct of the
trade, by the Company on or after Completion;
(f) such Taxation Liability arises by virtue of any claim, election,
surrender or disclaimer made or notice or consent given (including
the disclaimer or disallowance of industrial building or other
capital allowance) under the provisions of any Taxation statute
which has the effect of increasing the Taxation Liability of the
Company in respect of any period ending on or before the Accounts
Date;
(g) the Taxation Liability arises or is increased as a consequence
of the failure of the Buyer to comply with or procure the compliance
of the Company with their respective obligations under clause 5.14
of the Agreement;
(h) recovery has been made by the Buyer or the Company under the
Warranties in respect of or arising from the same Taxation
Liability;
(i) such Taxation Liability is a penalty, fine, surcharge or
interest attributable to the unreasonable delay or default of the
Company or the Buyer after Completion.
3 OVER-PROVISIONS, CORRESPONDING SAVINGS ETC.
3.1 If the auditors for the time being of the Company shall certify (at the
request and expense of the Sellers) either:
(a) that any provision for Taxation in the Accounts has proved to be an
over-provision; or
(b) that there was a Relief which was available to be utilised as at the
Accounts Date and which was not taken into account in computing the provision or
reserve for Taxation (including deferred tax) in the Accounts but which could
have been so taken into account under applicable accounting principles had such
a provision been made in the Accounts;
then the amount of such over-provision or such Relief shall be dealt with in
accordance with sub-clause 3.3 of this clause.
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3.2 If the auditors for the time being of the Company shall certify (at the
request and expense of the Sellers) that any Taxation Liability which has
resulted in a payment having been made by the Sellers under this Deed will give
rise to a corresponding saving for the Company which would not otherwise have
arisen, then, as and when the liability of the Company to make an actual payment
of or in respect of Taxation is reduced by reason of the utilisation of that
corresponding saving the amount by which that Taxation Liability is so reduced
shall be dealt with in accordance with sub-clause 3.3 of this clause.
3.3 Where it is provided under sub-clause 3.1 or 3.2 above that any amount (the
"Relevant Amount") is to be dealt with in accordance with this sub-clause:
(a) the Relevant Amount shall first be set off against any payment then
due from the Sellers under this Deed; and
(b) to the extent there is an excess, a refund shall be made to the
Sellers of any previous payment or payments made by the Sellers under this Deed
and not previously refunded under this clause up to the amount of such excess;
and
(c) to the extent that the excess referred to in paragraph (b) above is
not exhausted under that paragraph, the remainder of that excess shall be
carried forward and set off against any future payment or payments which become
due from the Sellers under this Deed.
3.4 If any dispute shall arise under this clause 3 as to whether there is or has
been any over-provision, Relief or corresponding saving such dispute shall be
referred for determination to a firm of chartered accountants agreed between the
Sellers and the Buyer and, failing such agreement, a firm of independent
accountants shall be nominated by the President for the time being of the
Institute of Chartered Accountants in England and Wales who in making such
determination shall act as expert (the "Expert") and not arbitrator, whose
decision shall be final and binding on the parties. The Expert may make such
enquiries as he shall think fit in order to make such determination and shall
also determine how the costs of obtaining his opinion should be paid and borne
by the parties.
3.5 The Buyer undertakes to supply, and undertakes to procure that the Company
shall supply, to the Sellers and subsequently to any firm of accountants
nominated to deal with any such notices, such papers and other necessary
information in its possession as may be reasonably required for the purpose of
making the determination as to whether there is or has been any over-provision,
Relief or corresponding saving for the purposes of this clause 3.
4 SECTION 767A ICTA: SECONDARY LIABILITIES
4.1 The Buyer hereby covenants with the Sellers to pay to the Sellers, as
appropriate, by way of increase in the consideration for the sale of the Shares,
an amount equivalent to any Taxation for which the Sellers, or any other person
falling within section 767A(2) of ICTA by virtue of a relationship which he, she
or it has with the Sellers, becomes liable by virtue of the operation of section
767A and 767B of ICTA in circumstances where the taxpayer company (as referred
to in section 767A(1)) is the Company.
4.2 The covenant contained in clause 4.1 shall:
(a) extend to any costs incurred by the Sellers or such other person in
connection with such Taxation or claim under clause 4.1;
(b) not apply to the extent that the Buyer could claim payment in respect
of such Taxation under clause 1.
4.3 Clauses 5 and 6 (gross up and due date for payment) shall apply to the
covenant contained in clause 4.1 as they apply to the covenants contained in
clause 1, replacing references to the Sellers by the Buyer (and vice versa) and
making any other necessary modifications.
5 GROSSING UP PAYMENTS
5.1 All sums payable by the Sellers to the Buyer pursuant to this Deed shall be
paid free and clear of all deductions or withholdings whatsoever (except as may
be required by law) such that if
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<PAGE> 36
any deductions or withholdings are required by law, the Sellers shall be obliged
to pay to the Buyer such sum as will, after the deduction or withholding has
been made, leave the Buyer with the same amount as it would have been entitled
to receive in the absence of any such deduction or withholding.
5.2 If Taxation is payable on any sum paid by the Sellers to any person pursuant
to this Deed, the sum otherwise so payable shall be grossed up by such amount as
will ensure that, after payment of any Taxation charged on or in respect of such
payment, there shall be left a sum equal to that which would otherwise be
payable pursuant to this Deed.
6 DATE OF PAYMENT
Where the Sellers become liable to make a payment pursuant to this Deed
the due date for the making of that payment shall be:
(a) where the payment relates to a liability on the part of the
Company to make an actual payment of Taxation, the first Business
Day prior to the date when the amount has to be paid to the
appropriate authority;
(b) where the payment relates to a liability under paragraph (a) of
the definition of Taxation Liability, the day when Taxation becomes
payable which would not have become payable but for the loss of the
Relief in question;
(c) where the payment relates to a liability under paragraph (b) of
the definition of Taxation Liability, the day when Taxation would
have been payable but for the utilisation or set off of the Relief;
(d) where the payment relates to a liability under paragraph (c) of
the definition of Taxation Liability, the first Business Day prior
to the date when the amount has to be repaid to the appropriate
person; and
(e) in all other cases, ten Business Days after the date on which
the Sellers have been notified of the amount of such liability by
the Buyer.
7 GENERAL
7.1 The rights under this Deed of the Buyer and the Company shall be without
prejudice to their respective rights and remedies under, pursuant to or
resulting from the Agreement and shall continue to be of full force and effect
notwithstanding Completion.
7.2 The provisions of clauses 5.3(a)(iii), 5.3(b), 5.4, 5.8, 5.10, 5.11(c),
5.13, 5.14, 8.2, 8.8, 8.9, 8.10, 8.11 and 8.12 of the Agreement shall apply as
if expressly set out in full in this Deed with references therein to "the
Agreement" being construed as references to "this Deed".
IN WITNESS whereof this document has been duly executed as a Deed the day
and year first above written.
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<PAGE> 37
ATTESTATIONS
Signed by the said )
GLYN CRAWFORD DAVIES ) /s/ Glyn Crawford Davies
in the presence of: )
Name: Andrew Lowe
Address: 48 Spirit Quay, Wapping
Occupation: Solicitor
Signed by the said )
PAUL VICTOR GIBBS ) /s/ Paul Victor Gibbs
in the presence of: )
Name: Andrew Lowe
Address: 48 Spirit Quay, Wapping
Occupation: Solicitor
Signed by the said )
DAVID SCHOFIELD ) /s/ David Schofield
in the presence of: )
Name: Andrew Lowe
Address: 48 Spirit Quay, Wapping
Occupation: Solicitor
Signed by the said )
NIGEL CRAIG LOTHIAN ) /s/ Nigel Craig Lothian
in the presence of: )
Name: Andrew Lowe
Address: 48 Spirit Quay, Wapping
Occupation: Solicitor
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<PAGE> 38
Signed by the said )
JOHN NORTHROP ) /s/ John Northrop
in the presence of: )
Name: Andrew Lowe
Address: 48 Spirit Quay, Wapping
Occupation: Solicitor
Signed by the said )
GRAHAM HALLETT ) /s/ Graham Hallett
in the presence of: )
Name: Andrew Lowe
Address: 48 Spirit Quay, Wapping
Occupation: Solicitor
Signed by )
ROBERT L VOELK and ) /s/ Robert L Voelk
DARIOUSH MARDAN )
for and on behalf of )
OMTOOL, LTD. ) /s/ Darioush Mardan
in the presence of: )
Name: Kira Christenson
Address: 8 Industrial Way
Occupation: Controller
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