SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report: November 10, 1998
EUROPEAN MICRO HOLDINGS, INC.
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(Exact Name of Registrant as Specified in Charter)
NEVADA 0-23949 65-0803752
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6073 N.W. 167TH STREET, UNIT C-25, MIAMI, FLORIDA 33015
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (305) 825-2458
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 26, 1998, European Micro plc, a wholly-owned subsidiary of
European Micro Holdings, Inc. ("EUROPEAN MICRO HOLDINGS"), completed its
acquisition of all of the outstanding shares of capital stock of Sunbelt (UK)
Limited, a company registered in England and Wales ("SUNBELT"), from the
shareholders of Sunbelt for $1,008,684 and an earn-out based on the attainment
of certain performance criteria. At European Micro Holdings' discretion, the
earn-out will be payable in either cash or shares of common stock of European
Micro Holdings. The amount of consideration to be paid for the shares of Sunbelt
was determined based on a multiple of Sunbelt's net earnings and the attainment
of certain performance criteria. The funds used to acquire the shares of Sunbelt
came from the cash generated from the business operations of European Micro plc.
As a result of the acquisition, Sunbelt is a wholly-owned subsidiary of European
Micro plc.
Sunbelt, formerly privately held, is a distributor of microcomputer
products to dealers, VARs and mass merchants throughout Western Europe.
Sunbelt's trading operations will be integrated with and into the operations of
European Micro plc. Sunbelt's business of distributing its Nova brand products
will operate as a separate business entity consistent with past practice.
Sunbelt was established in 1992 and is based in Wimbledon, England. In the
fiscal year ended June 30, 1998, Sunbelt had total sales of approximately U.S.
$16.5 million and pre-tax earnings of approximately U.S. $742,500.
ITEM 7. FINANCIAL STATEMENT, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) & (b) European Micro Holdings intends to provide the financial
information required by this Item 7 in connection with the acquisition of
Sunbelt by filing an amendment to this Form 8-K. Such amendment will be filed
within sixty days from the date this Report is filed with the Securities and
Exchange Commission.
(c) Attached as Exhibit 2.1 to this Report is the Agreement for the
Acquisition of Sunbelt (UK) Limited by European Micro plc, dated October 26,
1998. Also attached as Exhibit 99.1 to this Report is a copy of the press
release of October 27, 1998 announcing the acquisition of Sunbelt.
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<PAGE>
EXHIBIT INDEX
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EXHIBIT
NO. DESCRIPTION
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2.1 Agreement for the Acquisition of Sunbelt (UK) Limited by
European Micro plc, dated October 26, 1998
99.1 Press Release of October 27, 1998
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EUROPEAN MICRO HOLDINGS, INC.
Date: November 10, 1998 By: /S/ JOHN B. GALLAGHER
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Name: John B. Gallagher
Its: Co-President and Co-Chairman
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EXHIBIT 2.1
DATED: OCTOBER 26, 1998
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AGREEMENT FOR THE
ACQUISITION OF
SUNBELT (UK) LIMITED
BY
EUROPEAN MICRO PLC
PHILIP CONN & CO
LINCOLN HOUSE
1 BRAZENNOSE STREET
MANCHESTER
M2 5FJ
TELE: 0161-833 9494
FAX: 0161-834 4540
REF: TJO/MJM
<PAGE>
CLAUSE
1. INTERPRETATION .......................................................4
2. SALE AND PURCHASE....................................................12
3. CONDITIONS...........................................................16
4. PERIOD TO COMPLETION.................................................17
5. COMPLETION...........................................................18
6. WARRANTIES AND INDEMNITIES...........................................20
7. RESTRICTIONS.........................................................25
8. PENSIONS.............................................................26
9. UNIT 1, SAXON BUSINESS CENTRE........................................28
10. COSTS................................................................28
11. EFFECT OF COMPLETION.................................................28
12. ACKNOWLEDGEMENTS.....................................................29
13. ENTIRE AGREEMENT AND AMENDMENTS......................................29
14. COUNTERPARTS.........................................................29
15. MERGER OF AGREEMENTS.................................................29
16. GENERAL..............................................................30
17. SEVERABILITY.........................................................30
18. LAW AND JURISDICTION.................................................31
<PAGE>
SCHEDULE 1...............................................................32
THE VENDORS
SCHEDULE 2...............................................................33
PARTICULARS RELATING TO THE COMPANY
SCHEDULE 3...............................................................34
THE PROPERTIES
SCHEDULE 4...............................................................35
WARRANTIES
SCHEDULE 5...............................................................78
DEED OF INDEMNITY
ANNEXURE A...............................................................87
Loan Note and Convertible Loan Note
ANNEXURE B...............................................................96
Deed of Waiver
ANNEXURE C...............................................................97
Schedule of Adjustments
ANNEXURE D...............................................................98
Service Contracts
<PAGE>
THIS AGREEMENT is made on 26th day of October 1998
BETWEEN:-
(1) EUROPEAN MICRO PLC a company incorporated in England and whose registered
office is situate at 20-24 Church Street, Altrincham, Cheshire WA14 4DW
(Company Number: 2663964) ("the Purchaser"); and
(2) The persons whose names and addresses are set out in column 1 of
Schedule 1 (together the "Vendors").
RECITALS:
(A) Sunbelt (UK) Limited is a private limited company incorporated in England
under the Companies Acts under number 02743684. Further details relating
to the Company are set out in Schedule 2.
(B) The Vendors are or will be upon Completion, the registered holders of all
of the Shares, the numbers of the Shares of which each of the Vendors is
the registered holder being set out opposite his name in column 2 of
Schedule 1, such Shares comprising in aggregate 100 per cent of the issued
share capital of the Company.
(C) The Vendors have agreed to sell, or procure to be sold, the Shares to the
Purchaser on the terms and subject to the conditions set out in this
agreement free from Encumbrances.
(D) The Vendors have made representations to the Purchaser in the terms of the
Warranties to the intent that the Purchaser should rely on such Warranties
in entering into this agreement.
THE PARTIES AGREE AS FOLLOWS:
1. INTERPRETATION
1.1 The following provisions shall have effect for the interpretation of this
agreement.
1.2 The following words, expressions and abbreviations shall, unless the
context otherwise requires, have the following meanings:
"ACCOUNTS" means financial statements of the Company and each of the
Subsidiaries, comprising the balance sheet of the Company, the consolidated
balance sheet and profit and loss account of the Group and the balance sheet and
profit and loss account of each of the Subsidiaries, together in each case with
the notes thereon as at and for the financial period ending on the Accounts
Date.;
<PAGE>
"ACCOUNTS DATE" means 30th June 1998;
"ACTIVITIES" means any activity, operation or process carried out by the Company
at any Property whether or not currently owned, occupied or used by the Company;
"ADJUSTED PRE-TAX EARNINGS" means pre-tax earnings adjusted in accordance
with clause 2.6;
"AGREED RATE" means 2 per cent above the base rate from time to time of National
Westminster Bank plc;
"AGREED FORM" means the form agreed between the parties on or prior to the date
of this agreement and initialled for the purposes of identification by their
respective solicitors;
"ASIAN SUBSIDIARY" means the company to be incorporated in Singapore as a wholly
owned subsidiary of EMCC which is to carry on its activities within the
territory, such activities to be restricted to purchasing and selling on its own
behalf or acting as commercial agent for the Purchaser's Group within the
territory save in the event that it makes any purchase of stock (inventory) from
any member of the Purchaser Group such purchases to be excluded for any
calculations of turnover so that the Asian Subsidiary shall only be credited
with sales in the territory;
"ASSOCIATE" means as defined in s435 of the Insolvency Act 1986 and
"Associated Company" shall be construed accordingly;
"BUSINESS DAY" means a day (other than Saturday or Sunday) on which banks are
open for business in London;
"BOOK VALUE AMOUNT" means: the Shareholders' Funds of the Company as at 30th
September 1998, reduced by the book value of all Intangible Assets of the
Company except cash and including goodwill, minority interests, research and
development costs, trademarks, trade names, copyrights, patents and franchises,
unamortized debt discounts and expenses, all determined in accordance with
clauses 2.6 and 2.7 .
"CAA" means the Capital Allowances Act 1990;
"CGTA" means Capital Gains Tax Act 1979;
"COMPANY" means Sunbelt (UK) Limited which definition shall include any
Subsidiary undertaking wherever the context so admits;
"COMPANY'S ACCOUNTANTS" means Windsor Stebbing Marsh of Pinnacle House, 17-25
Hartfield Road, London SW19 3SE
"COMPANIES ACTS" has the meaning given to it in section 744 of the Companies Act
1985, together with the Companies Act 1989;
<PAGE>
"COMPLETION" means the completion of the sale and purchase of the Shares in
accordance with clause 5;
"COMPLETION DATE" means 26th October 1998 or such other date as the parties
may agree in writing;
"CONDITIONS" means the conditions set out in clause 3 of this agreement;
"CONNECTED PERSON" means as defined in s249 of the Insolvency Act 1986;
"DEED OF INDEMNITY" means a deed of indemnity in the form set out in Schedule
5;
"DISCLOSURE LETTER" means a letter at the Completion Date together with the
attachments thereto addressed by the Vendors' Solicitors on behalf of the
Vendors to the Purchaser's Solicitors on behalf of the Purchaser disclosing
exceptions to the Warranties;
"DISTRIBUTION" means a distribution as defined by sections 209 to 211
(inclusive) of the T.A. and section 418 of the T.A.;
"EMCC" means European Micro Holdings Inc. a company incorporated in the State
of Nevada (United States of America) with the State of Nevada file no.
28914-1997 and having its place of business at 6073 NW 167 Street, Unit C-25,
Miami, Florida 33015 United States of America;
"EMCC SHARES" means the shares of common stock of $0.01 the same being traded or
tradable on NASDAQ, credited as fully paid, in the capital of EMCC to be
allotted to the Vendors at the option of the Purchaser pursuant to clause 2.5,
as part of the consideration
"EMPLOYEES" shall mean the following employees of the Company employed by the
Company at the Completion Date and full particulars of whom are fully and
accurately set out in the Disclosure Letter:-
Dhaliwal, Embers, O'Brien, Patel, Thompson and Upton;
"ENCUMBRANCE" means any mortgage, charge (whether fixed or floating), pledge,
lien, security interest or other third party right or interest (legal or
equitable) over or in respect of the relevant asset, security or right;
"ENVIRONMENT" means any and all living organisms (including without limitation,
man), ecosystems, property and the media of air (including without limitation
air in buildings, natural or manmade structures, below or above ground) water,
(as defined in Section 104(1) of the Water Resources Act 1991 and within drains
and sewers) and land (including under any water as described above and whether
above or below surface);
<PAGE>
"ENVIRONMENTAL CONSENT" means any consent, approval, permit, licence, order,
filing, authorisation, exemption, registration, permission, reporting or notice
requirement and any related agreement required under any Environmental Law;
"ENVIRONMENTAL LAWS" means all international EU, national, federal, state or
local statutes, which for the avoidance of doubt shall include section 57 and
schedule 22 of the Environment Act 1995 and the guidance and regulations adopted
under those provisions, by-laws, orders, regulations or other law or subordinate
legislation or common law, all orders, ordinances decrees or regulatory codes of
practice, circulars, guidance notes and equivalent controls concerning the
protection of human health or which have as a purpose or effect the protection
or prevention of harm to the Environment or health and safety which are binding
in relation to the Properties and/or upon the Company in the relevant
jurisdiction in which the Company has been or is operating (including by the
export of its products, or its waste thereto) on or before Completion and which
for the avoidance of doubt shall specifically include all regulations in
relation to the control of noise;
"FIRST CONTINGENT EARN-OUT AMOUNT" means an amount equal to the product of:-
(i) Adjusted Pre-Tax Earnings of the Company for the fiscal year ended June
30, 1998, multiplied by
(ii) the sum of:
(1) twenty-five percent (25%) if the Nova Gross Profit (as
defined below) for the sale of Nova products by EMCC and its
affiliates during the First Earn-Out Period (as defined below) is at
least (pound)600,000 and the Nova Gross Margin (as defined below)
for such sales is at least twenty percent (20%); plus
(2) twenty-five percent (25%) if the Nova Gross Profit for the
sale of Nova Products by EMCC and its affiliates the First Earn-Out
Period is at least (pound)800,000 and the Nova Gross Margin (as
defined below) for sale of such products is at least twenty percent
(20%); plus
(3) twenty-five percent (25%) if at least four of the
following employees are employed by the Company, the Group or the
Purchaser's Group on the last day of the First Earn-Out Period:
Dhaliwal, O'Brien, Embers, Thompson, Patel and Upton unless such
employees' contracts are unlawfully or unfairly terminated; plus
(4) twenty-five percent (25%) if the Net Asian Revenue is at
least (pound)4,500,000
The First Contingent Earn-Out shall be payable pro rata if the Company achieves
ninety per cent (90%) or more of items (1), (2) and (4) above.
"FIRST EARN-OUT PERIOD" means a period of twelve (12) calendar months
commencing 1st November 1998;
<PAGE>
"GROUP" means the Company and the Subsidiaries;
"GUARANTEED EARN-OUT AMOUNT" means two (2) times the Adjusted Pre-Tax Earnings
of the Company for the financial year ended June 30, 1998.
"I.C.T.A." means the Income and Corporation Taxes Act 1970 and any reference
thereto shall include any enactment repealed or modified thereby as if
section 539 of the I.C.T.A. applied in like manner to this agreement;
"INTANGIBLE ASSETS" means any asset, non-monetary in nature and without
physical substance;
"INTELLECTUAL PROPERTY" means all rights in the nature of patent, trademark,
copyright, registered design, design right wheresoever situate and whether
registered or unregistered, registrable applied for or granted without
limitation;
"I.T.A." means the Inheritance Tax Act 1984 and any reference thereto shall
include any enactment repealed or modified thereby as if section 275 of the
I.T.A. applied in like manner to this agreement;
"KNOW-HOW AND CONFIDENTIAL INFORMATION" means any information known to the
Vendors or the Company which might be of commercial value and which in its
entirety as opposed to its individual components is not in the public domain;
"LOAN NOTE" and "CONVERTIBLE LOAN NOTE" mean the Loan Note and Convertible Loan
Note in the agreed form annexed hereto;
"MANAGEMENT ACCOUNTS" means the accounts prepared by the Company in the agreed
form for the period 30th June 1998 to 30th September 1998;
"NASDAQ" means the Exchange known as the National Association of Securities
Dealers Automated Quotations and recognised by the Securities and Exchange
Commission in the USA;
"NET ASIAN REVENUE" means the turnover of the Asian Subsidiary represented by
the cost of purchases (excluding any Nova Products) and the cost of sales made
in the territory less the costs of any purchases sourced from the Purchaser's
Group unless resold in the territory but so that the value of no item of stock
shall be credited more than once as an item of turnover and for the avoidance of
doubt any purchase or sale (as set out above) shall include any sale or purchase
made directly or indirectly by the Purchaser's Group or any Connected Person or
any of them in the territory except for any made by Big Blue Europe BV;
"NOVA GROSS MARGIN" means a fraction, the numerator of which is Gross Profit and
the denominator of which is net revenue generated for the sale of Nova Products;
"NOVA GROSS PROFIT" means the difference between the net revenue and cost of
sales of the Company including duty and freight;
<PAGE>
"NOVA PRODUCTS" means all micro-computers, micro-computer components or
peripherals excluding any such manufactured by IBM, Compaq, Hewlett-Packard or
Toshiba save where in respect of micro-computer components they are integrated
into a product sold under the Nova badge;
"PER SHARE VALUE" means the average closing price for the EMCC Shares on the
Nasdaq Stock Market during the thirty (30) trading days ending on the last
trading day before the date of issue of the EMCC Shares;
"PRE-TAX EARNINGS" means net income before taxes for the Company computed as
provided herein based on the audited accounts of the Company for the applicable
period;
"PROPERTIES" means the properties described in Schedule 3 or any part or
parts thereof and "Property" means any one of them;
"PURCHASER'S AUDITORS" means KPMG of St. James' Square, Manchester M2 6DS;
"PURCHASER'S GROUP" means the Purchaser, any parent company of the Purchaser and
any subsidiary or subsidiary undertaking of the Purchaser or of any such parent
company;
"PURCHASER'S SOLICITORS" means Philip Conn & Co., Lincoln House, 1 Brazennose
Street, Manchester M2 5FJ;
"SECOND CONTINGENT EARN-OUT AMOUNT" means an amount equal to the product of:-
(i) Adjusted Pre-Tax Earnings of the Company for the fiscal year ended June
30, 1998, multiplied by:
(ii) the sum of :
(1) thirty-three percent (33%) if the Nova Gross Profit for the sale of
Nova Products by EMCC and its affiliates during the Second Earn-Out
Period (as defined below) is at least (pound)1,000,000 and the Nova
Gross Margin for the sale of such products is at least twenty
percent (20%); plus
(2) thirty-three percent (33%) if the Nova Gross Profit for the sale of
Nova products by EMCC and its affiliates during the Second Earn-Out
Period (as defined below) is at least (pound)1,200,000 and the Nova
Gross Margin for the sale of such products is at least twenty
percent (20%); plus
(3) thirty-four percent (34%) if the Asian Net Revenue is at least
(pound)7,000,000, provided that if Mr. Gesner does not reside in
Asia after the end of the First Earn-Out Period, by reason of the
instruction or request of his employer then this sum shall be
payable in any event. For the avoidance of doubt this clause shall
not preclude the parties at any time renegotiating a variation of
this clause.
<PAGE>
The Second Contingent Earn-Out Amount shall be pro-rated if the Company
achieves ninety percent (90%) or more of items (1), (2) and (3) above.
"SECOND EARN-OUT PERIOD" means a period of twelve (12) months commencing 1st
November 1999;
"SHARES" means together the issued ordinary shares of (pound)1.00 and the `A'
Preference Shares in the capital of the Company registered in the name of the
Vendors in such numbers as is set out opposite their respective names in column
2 of Schedule 1;
"SHAREHOLDERS' FUNDS" means profits available for distribution as defined in
Part VIII of the Companies Act 1985 together with called up shares capital
including any share premium;
"SOFTWARE" means any program specifically written for the Company;
"SUBSIDIARY" means a subsidiary undertaking of the Company, as set out in s
736 of The Companies Act 1985;
"T.A." means the Income and Corporation Taxes Act 1988;
"T.C.G.A." means the Taxation of Chargeable Gains Act 1992 and any reference
thereto shall include any enactment repealed or modified thereby;
"TERRITORY" means throughout Asia and Australasia excluding Middle East,
India, Turkey, Israel, Pakistan, Bangladesh and Russia;
"THE FIRST INSTALMENT" means the amount payable on Completion pursuant to
clause 2.4.1.2;
"THE PENSION SCHEME" means the Sunbelt (UK) Limited Executive Pension Plan
established under Scheme numbers 162-100690-96 and 162-100691-96 with Lincoln;
"THE SECOND INSTALMENT" means the amount payable within ninety (90) days of
the end of the First Earn-Out period;
"THE THIRD INSTALLMENT" means the amount payable within ninety (90) days of
the end of the Second Earn-Out Period;
"V.A.T.A." means the Value Added Tax Act 1994;
"VENDORS' SOLICITORS" means Arnold Fooks Chadwick of 15 Bolton Street,
Piccadilly, London W1Y 8AR;
"VENDORS' SOLICITORS' ACCOUNT" means such account as the Vendors' Solicitors
have notified to the Purchaser for the purposes of this agreement;
<PAGE>
"WARRANTIES" means the representations, warranties, covenants and
undertakings set out in Clause 6 and Schedule 4;
1.3 References to "F.A." followed by a stated year mean the Finance Act of
that year.
1.4 Words, expressions and abbreviations defined in the Deed of Indemnity
shall have the same meanings in this agreement and clause 1.3 of the Deed
of Indemnity shall apply to this agreement.
1.5 References to the parties hereto include the respective successors in
title to substantially the whole of their respective undertakings and, in
the case of individuals, to their respective estates and personal
representatives.
1.6 References to persons shall include bodies corporate and unincorporated,
associations, partnerships and individuals. Words denoting the singular
shall include the plural and words denoting any gender shall include all
genders.
1.7 References to statutes or statutory provisions include references to any
orders or regulations made thereunder and references to any statute,
provision, order or regulation include references to that statute,
provision, order or regulation as amended, modified, re-enacted or
replaced from time to time whether before or after the date hereof
(subject as otherwise expressly provided herein) and to any previous
statute, statutory provision, order or regulation amended, modified,
re-enacted or replaced by such statute, provision, order or regulation.
1.8 Headings to clauses, paragraphs and descriptive notes in brackets relating
to provisions of taxation statutes are for information only and shall not
form part of the operative provisions of this agreement and shall be
ignored in construing the same.
1.9 References to recitals, clauses, Annexures, Schedules are to recitals to,
clauses of, Annexures to and Schedules to this agreement. The recitals,
Annexures and Schedules form part of the operative provisions of this
agreement and references to this agreement shall, unless the context
otherwise requires, include references to the recitals, Annexures and the
Schedules.
1.10 Each of the Warranties in Clause 6 and Schedule 4 expressed to be given
"to the best of the Vendors' knowledge and belief" or "so far as the
Vendors are aware" or otherwise qualified by reference to the knowledge of
the Vendors shall be deemed not to be qualified in the manner stated
unless the Vendors have made all reasonable enquiries of each other, of
the directors, employees and agents of the Company and of the Subsidiaries
and of relevant third parties to establish the truth and accuracy of each
statement.
1.11 The obligations and liabilities of the Vendors under this agreement shall
be joint and several.
<PAGE>
2. SALE AND PURCHASE
2.1 Upon the terms and subject to the conditions of this agreement, the Vendor
with full title guarantee shall sell and the Purchaser shall purchase the
number of Shares of which each of the Vendors is the registered holder
being set out opposite each of the Vendors' names in column 2 of Schedule
1 with effect from the commencement of business on the Completion Date
free from all Encumbrances and together with all accrued benefits and
rights attaching thereto in respect of the Shares save immediately prior
to Completion the Vendors shall as members of the Company declare a final
dividend for the year ending 30th June 1998 of:
2.1.1 (pound)37.153 per share in respect of the Ordinary (pound)1 Shares;
and
2.1.2 (pound)24.31 per share in respect of the `A' Preference Shares;
Further the Vendors shall as members of the Company declare an interim
dividend for the year ending 30th June 1999 of:
2.1.3 (pound)2.227 per share in respect of the Ordinary (pound)1 Shares
save that Gerard Denis Patrick O'Rourke shall absolutely and
irrevocably waive all right and entitlement to the dividend in
respect of all the Ordinary (pound)1 Shares held by him in the terms
of the Deed of Waiver in the agreed form annexed hereto at Annexure
B and
2.1.4 (pound)9.246 per share in respect of the `A' Preference Shares;
together "the Dividends." The Purchaser shall procure (a) that on
Completion the Company repays the Vendors' loan accounts which include the
interim dividends and (b) that a final dividend of at least a sum equal to
the interim dividend is voted.
2.2 The Vendors hereby represent, warrant, covenant and undertake with the
Purchaser (so as to bind them, their personal representatives, successors
and assigns) as follows:-
2.2.1 that each of them has the right to dispose of the Shares which they
purport to sell; and
2.2.2 that each of them is disposing of the Shares free from any mortgage,
charge or pledge, lien, security or other third party right or
interest (legal or equitable) or restriction together with all such
rights now or hereafter attaching thereto, including the right to
all dividends and other distributions (if any) declared, made or
paid after the Accounts Date save as provided in clause 2.1.
2.3 The consideration for the sale of the Shares shall be equal to the sum
of the following:-
2.3.1 the Book Value Amount less the Dividends;
2.3.2 the Guaranteed Earn-Out Amount;
<PAGE>
2.3.3 the First Contingent Earn-Out Amount; and
2.3.4 the Second Contingent Earn-Out Amount.
2.4 The consideration payable shall be to each of the Vendors in such
proportions as is set out against their respective names in column 3 of
Schedule 1 in the following manner:-
2.4.1 at Completion the sum of (pound)600,407.72 on account of the sum
of:-
2.4.1.1 Book Value Amount less the Dividends, plus
2.4.1.2 the product of
(1) sixty percent (60%), multiplied by
(2) the Guaranteed Earn-Out Amount;
the payment due to be made to Mr O'Rourke pursuant to this clause
2.4.1 shall be satisfied by the issue of a Loan Note in the agreed
form by the Purchaser.
Any overpayment or underpayment made by the Purchaser pursuant to
this clause shall be adjusted as provided in clause 2 and paid or
repaid or the Loan Note adjusted accordingly as the case may be
within 90 days of the determination thereof or at the next
instalment whichever shall be the sooner.
2.4.2 On the nineteenth day after the end of the First Earn-Out Period, an
amount equal to the sum of :
2.4.2.1 twenty percent (20%) of the Guaranteed Earn-Out
Amount, plus
2.4.2.2 the First Contingent Earn-Out Amount; and
2.4.3 On the nineteenth day after the end of the Second Earn-Out
Period, an amount equal to the sum of
2.4.3.1 twenty percent (20%) of the Guaranteed Earn-Out
Amount, plus
2.4.3.2 the Second Contingent Earn-Out Amount.
2.5.1 Any portion of the Guaranteed Earn-Out Amount not paid at Completion
shall accrue interest at the agreed rate from the Completion Date
until the date payment is made. All amounts payable in cash shall be
paid by electronic transfer in sterling.
2.5.1.1 the Second Instalment and the Third Instalment due to Mr
Gesner shall at the option of the Purchaser be satisfied
in whole or in part by the allotment of EMCC Shares
(subject to clause 2.5.2 below);
<PAGE>
2.5.1.2 The Second Instalment and Third Instalment due to Mr
O'Rourke shall be satisfied by the issue of a
Convertible Loan Note in the agreed form.
2.5.2 Should the Purchaser pursuant to clause 2.5.1 elect to satisfy the
consideration by procuring the allotment of EMCC Shares and the
traded volume of EMCC Shares on NASDAQ in the 30 days prior to the
election being made not being equal to [three] times the number of
shares to be allotted ("the Trading Volume") then the following
conditions shall apply:
2.5.2.1 after 15 days of receipt of the said shares Mr
Gesner shall arrange to sell the shares received as far
as possible in equal lots over the next 40 succeeding
trading days;
2.5.2.2 in the event that the sums realised upon the
sale of the said shares shall be less than the amount
due for either the Second Instalment or the Third
Instalment the Purchaser shall pay to Mr Gesner the
difference in cash within 28 days of being notified of
the amount of any shortfall.
2.5.3 The number of EMCC Shares to be issued in satisfaction of any
portion of the Consideration shall be equal to the amount of the
Consideration so payable divided by the Per Share Value.
2.6 For the purposes of this Agreement the Book Value Amount and Pre Tax
Earnings shall be determined as provided herein and in accordance with
generally accepted accounting principles ("GAAP"), and on the same basis
the Accounts which shall be prepared on a consistent basis and accepted by
the Purchaser or Purchaser's Auditors.
2.7 In determining the Pre-Tax Earnings the following deductions and
adjustments shall be made:-
2.7.1 deducting any accounts receivable (trade debtors) (or any portion
thereof) identified in the Accounts as at the Accounts Date which
are not paid in full, without any set-off except in the case of any
contras of valid and outstanding sales and purchases made in the
ordinary course of business, within one hundred and eighty (180)
days of the Completion Date save where the Company has any valid
Trade Indemnity Insurance Claim in which case the period applicable
shall be two hundred and seventy (270) days, plus
2.7.2 deducting the cost of any stock (inventory) identified in the
Accounts as at the Accounts Date not sold by the Company within one
hundred and eighty (180) days of the Completion Date or if such
stock is sold at less than cost within the appropriate period then
deducting the difference between the cost of the relevant stock and
the sale price thereof.
<PAGE>
2.7.3 those adjustments and notes set out in the Schedule of Adjustments
annexed hereto as Annexure C;
2.7.4 any sums determined as adjustments by the Purchaser's Auditors to
the Pre-Tax Earnings as shown in the Accounts of the Company as at
the Accounts Date whether or not any such adjustment may give rise
to liability upon the Vendors pursuant to the Warranties or the Deed
of Indemnity save that no such adjustment shall be made unless and
until the sum of any such adjustments exceeds (pound)10,000.
Provided that no adjustments shall be made under this clause of
matters adjusted or noted in the Schedule of Adjustments.
2.8 In determining the Book Value Amount the following deductions and
adjustments shall be made:
2.8.1 deducting any accounts receivable (or any portion thereof) created
prior to Completion which are not collected in full, without any
set-off except in the case of any contras of valid and outstanding
sales and purchases made in the ordinary course of business, within
one hundred and eighty (180) days of the Completion Date save where
the Company has any valid Trade Indemnity Insurance Claim in which
case the period applicable shall be two hundred and seventy (270)
days, plus
2.8.2 deducting the cost of any stock (inventory) identified in the books
of the Company as having been purchased by the Company prior to the
Completion Date not sold by the Company within one hundred and
eighty (180) days of the Completion Date or if such stock is sold at
less than cost within the appropriate period then deducting the
difference between the cost of the relevant stock and the sale price
thereof.
2.8.3 those adjustments and notes set out in the Schedule of Adjustments
annexed hereto as Annexure C.
2.8.4 any sums determined as adjustments by the Purchaser's Auditors to
the Book Value Amount or Pre-Tax Earnings as shown in the Accounts
as at the Accounts Date or in the books of the Company as at the
Completion Date by the Purchaser's Auditors upon review of the
Management Accounts, such review to be made within 90 days of the
Completion Date, whether or not any such adjustment may give rise to
liability upon the Vendors pursuant to the Warranties or the Deed of
Indemnity save that no such adjustment shall be made unless and
until the sum of any such adjustments exceeds (pound)10,000.
Provided that no adjustment shall be made under this clause of the
matters noted in the Schedule of Adjustments.
2.9 Any accounts receivable or stock (inventory) which results in a reduction
in Pre-Tax Earnings or in the Book Value Amount under this clause shall be
assigned to the Vendors for the sum of (pound)1.00 if so required by the
Vendors.
<PAGE>
2.10 In the event of any over-payment or under-payment in any sum to be made
under the Agreement whether in cash or EMCC Shares such over-payment shall
be set off and deducted from any payment to be made to the Vendors
pursuant to this Agreement ("deferred consideration") whilst such deferred
consideration remains to be paid. Any under-payment shall be made good on
the next payment date, if any, and when all payments have been made then
any adjustment shall be paid or re-paid within 180 days of determination
of any such adjustment.
2.11 If the Book Value Amount, the Pre Tax Earnings, the amount(s) of any
adjustment relating thereto or of any calculation of the consideration is
not accepted by either party then such dispute shall be resolved by an
independent accountant acting as an expert (in default of agreement whose
appointment shall be made by the President of the Institute of Chartered
Accountants) and whose determination shall, in the absence of manifest
error, be final and binding upon the parties. Any costs of the reference,
including the fees of the independent accountant, shall be allocated and
paid by the Purchaser or the Vendors, or divided among them, on a basis
determined by the independent accountant to be fair taking into account
his award.
2.12 Any payment of cash pursuant to this clause shall be made by means of
telegraphic transfer (or such other means as the Vendors' Solicitors and
the Purchaser's Solicitors shall agree in writing) on Completion and to
the Vendors' Solicitors' Account in accordance with clause 5.6 and receipt
of the Vendors' Solicitors for such sum shall be good discharge to the
Purchaser. Any payment to be made by way of EMCC Shares pursuant to this
clause shall be made by delivering to the Vendors' Solicitors share
certificates in respect of the EMCC Shares and receipt of the Vendors'
Solicitors for such certificates shall be good discharge to the Purchaser.
3. CONDITIONS
3.1 Completion of the purchase of the Shares is conditional upon the
fulfilment of each of the Conditions as follows:-
3.1.1 all necessary resolutions for the approval of the acquisition
contemplated by this agreement being passed at a meeting of the
Board of EMCC of the Purchaser to be held on or before the
Completion Date;
3.1.2 the entry into by EMCC and Michael Gesner of service agreements in
the agreed form annexed hereto
3.1.3 the entry into by the Purchaser and Gerard Patrick O'Rourke of
service agreements in the agreed form annexed hereto
3.2 If all of the Conditions (save for those compliance with which has been
waived in accordance with the terms of this agreement) have not been
<PAGE>
fulfilled on or before the Completion Date the respective obligations of
the parties hereunder shall cease and except in relation to any breach of
any provision of this agreement prior thereto and except in relation to
clause 11 no party shall have any claim against any other party.
3.3 The Purchaser may by notice in writing to the Vendors waive any of the
Conditions contained in clause 3.1 in whole or in part.
3.4 The Vendors undertake to procure the fulfilment of the Conditions in
clause 3.1 by the Completion Date. If the Purchaser shall waive compliance
with all or any of such Conditions, such waiver shall only, except as
specifically other agreed by the Purchaser, operate so as to enable
Completion to take place and accordingly, if and to the extent that the
Purchaser waives compliance with any such Conditions, the Vendors shall be
and remain under an obligation to the Purchaser to use all reasonable
endeavours to procure fulfilment of such Conditions as soon as possible
after Completion or within such period for fulfilment (if any) as shall
have been agreed between the Purchaser and the Vendors at or prior to
Completion. Pending fulfilment of such Conditions as aforesaid, the
Vendors shall indemnify and keep indemnified the Purchaser and the Company
and each of the Subsidiaries from and against all claims, demands,
proceedings, losses, damages, costs and expenses which may be asserted
against or incurred by the Purchaser or the Company or the Subsidiaries
arising under or by virtue of or in connection with the subject matter of
such Conditions or the non-fulfilment of such Conditions.
4. PERIOD TO COMPLETION
4.1 The Vendors covenant with the Purchaser to procure that the business and
activities of the Company and the Subsidiaries shall be conducted in the
ordinary course and in such a manner between the date hereof and the
Completion Date as to ensure that no act or event shall occur during the
period which would or might result in a breach of the Warranties upon the
repetition at Completion.
4.2 If at any time prior to Completion:-
4.2.1 a breach of any of the Warranties occurring prior to the date hereof
shall come to the notice of the Purchaser; or
4.2.2 there shall occur any act or event after the date hereof which upon
Completion would or might constitute a breach of any of the
Warranties; or
4.2.3 there is any breach or non-fulfilment by any of the Vendors of his
obligations hereunder.
Which in any such case is incapable of remedy or, if capable of remedy, is
not remedied by the Vendors by the date scheduled for Completion hereunder
or (if earlier) within seven days after notice thereof from the Purchaser
requiring the same to be remedied then in any such case the Purchaser
shall be entitled (in addition and without prejudice to any other right or
<PAGE>
remedies it may have against the Vendors under this agreement or
otherwise) to elect by notice in writing to the Vendors not to complete
the purchase of the Shares, in which event the agreement to buy and sell
the Shares contained in clause 2 shall be of no effect.
4.3 If the Purchaser elects not to complete the purchase of the Shares
pursuant to clause 4.2 then (in addition and without prejudice to any
other rights or remedies the Purchaser may have against the Vendors) the
Vendors shall indemnify the Purchaser against all costs, charges and
expenses incurred by it in connection with the negotiation, preparation,
performance and termination of this agreement.
5. COMPLETION
5.1 Completion shall take place at the offices of the Purchaser's Solicitors
on the Completion Date.
5.2 On Completion the Vendors shall deliver to or, if the Purchaser shall so
require, make available to the Purchaser:-
5.2.1 transfers in common form relating to all the Shares duly executed in
favour of the Purchaser (or as it may direct);
5.2.2 share certificates relating to the Shares;
5.2.3 any waivers or consents by members of the Company or the
Subsidiaries or other persons which the Purchaser may reasonably
require so as to enable the Purchaser or its nominees to be
registered as the holders of the Shares and any shares of
Subsidiaries;
5.2.4 the common seals, certificates of incorporation and statutory books,
share certificate books, cheque books and all copies of the
memorandum and articles of association of the Company and the
Subsidiaries;
5.2.5 the Deed of Indemnity duly executed by the Vendors;
5.2.6 all land certificates, charge certificates, leases, title deeds and
other documents relating to the Properties (save to the extent that
the same are in the possession of mortgagees thereof disclosed by or
on behalf of the Vendors to the Purchaser or its representatives and
those for which a certificate of title is to be produced as referred
to in clause 5.2.7) and all copies thereof;
5.2.7 a certificate from the Vendors' Solicitors in the agreed terms as to
the title of the Company to the Property;
<PAGE>
5.2.8 All books of account or reference as to customers and other records
and all insurance policies in any way relating to or concerning the
respective businesses of the Company and the Subsidiaries;
5.2.9 all licences, consents, permits and authorisations obtained by or
issued to the Company or the Subsidiaries or any other person in
connection with the business carried on by it and them and such
contracts, deeds or other documents (including assignments of any
such licences) as shall have been required by the Purchaser's
Solicitors prior to the date hereof;
5.2.10duly executed transfers of each share in the Subsidiaries not
registered in the name of the Company or the Subsidiaries in favour
of the Purchaser or as it may direct;
5.2.11Share certificates relating to all of the issued shares of each of
the Subsidiaries;
5.2.12a release duly executed as a deed, in a form satisfactory to the
Purchaser, releasing the Company and the Subsidiaries from any
liability whatsoever (actual or contingent) which may be owing to
the Vendors by the Company or any of the Subsidiaries other than any
balance on the directors loan accounts;
5.2.13an assignment in the agreed form of any trade marks, copyrights and
other intellectual property rights whether registered or not.
5.3 At Completion the parties shall procure the passing of board resolutions
of the Company and each of the Subsidiaries:-
5.3.1 sanctioning for registration (subject where necessary to due
stamping) the transfers in respect of the Shares and any shares to
which clause 5.2.9 refers;
5.3.2 appointing such persons as the Purchaser may nominate to be the
directors of the Company and the Subsidiaries, being initially Harry
Daniel Shields, John Bartholomew Gallagher, Laurence Martin Gilbert
(as chairman of the Company) and Bernadette Mary
Spofforth;
5.3.3 revoking all mandates to bankers and giving authority in favour of
the directors appointed under paragraph (b) above or such other
persons as the Purchaser may nominate to operate the bank accounts
thereof;
5.3.4 approving the Deed of Indemnity and resolving the same be executed
as a deed by the Company and the Subsidiaries;
5.3.5 accepting the resignation of AFC Corporate Services Limited as
Company Secretary of the Company on the terms of the deed in the
agreed form made out in favour of the Company acknowleding that he
has no outstanding claims in respect of such office or employment;
<PAGE>
5.3.6 resolving that Messrs. Gesner and O'Rourke enter into service
agreements in the agreed form.
5.4 On or prior to Completion the Vendors shall procure the repayment of all
sums (if any) owing to or from the Company or the Subsidiaries by or to
any of the Vendors or the directors of the Company or the Subsidiaries or
any of them or any spouse of any such Vendor or director of any company
directly or indirectly controlled by such persons or is connected with
them (as defined in section 346 of the Act) or any of them or any
partnership in which such persons or company is a partner and whether or
not such sums are due for repayment.
5.5 On or prior to Completion the Vendors shall if required by the Purchaser
procure that all potential beneficiaries under the Pension Scheme shall
irrevocably waive all and any claims and rights of action whatsoever or
howsoever arising against the Company and/or the Subsidiaries .
5.6 Upon compliance by the Vendors with the provisions of clauses 5.2, 5.3,
5.4 and 5.5 the Purchaser shall:-
5.6.1 deliver to the Vendors' Solicitors a duly executed counterpart of
the Deed of Indemnity; and
5.6.2 pay or cause to be paid by way of telegraphic transfer to the
Vendors' Solicitors' Account and the receipt of the Vendors'
Solicitors therefore shall be a good discharge to the Purchaser:-
5.6.2.1 by way of loan to the Company to pay the Dividends the
sum of (pound)708,140.88;
5.6.2.2 in payment of the consideration due on Completion the sum
of (pound)360,262.63
For the avoidance of doubt the Vendors' Solicitors have authority to
pay the Dividends to the Shareholders in accordance with their
respective entitlements.
5.6.3 deliver to the Vendors' Solicitors the duly executed Loan Note.
6. WARRANTIES AND INDEMNITIES
6.1 The Vendors represent and warrant to and covenant and undertake with the
Purchaser in the terms of the Warranties and so that the remedies of the
Purchaser in respect of any breach of any of the Warranties shall continue
to subsist notwithstanding Completion of the sale and purchase hereunder.
<PAGE>
6.2 Any information supplied by or on behalf of the Company or the
Subsidiaries to the Vendors or their agents or accountants, solicitors or
other advisers in connection with the Warranties, the Disclosure Letter or
otherwise in relation to the business and affairs of the Company or the
Subsidiaries shall not constitute a representation or warranty or
guarantee as to the accuracy thereof by the Company or any of the
Subsidiaries and each of the Vendors hereby waive any and all claims which
they might otherwise have against the Company or the Subsidiaries or any
of their respective agents or employees in respect thereof.
6.3 Each of the Warranties shall be construed as a separate representation,
warranty, covenant or undertaking (as the case may be) and (save as
expressly provided to the contrary) shall not be limited by the terms of
any of the other Warranties or by any other term of this agreement.
6.4 The Vendors further undertake with the Purchaser as follows: -
6.4.1 that they will disclose forthwith in writing to the Purchaser any
matter or thing which may arise or become known to any of them after
the date of the Disclosure Letter which is inconsistent with any of
the Warranties, or which is sufficiently material as to be likely to
affect the judgment of a purchaser for value of the Shares;
6.4.2 that pending Completion neither they nor the Company nor the
Subsidiaries will do or omit to do or suffer to he done anything
whereby the Warranties would, upon their repetition at Completion ,
be then untrue; and
6.4.3 that no event has occurred nor pending Completion will occur which
would or might give rise to a claim under the Deed of Indemnity upon
or after execution thereof;
6.5 The Vendors shall be under no liability under the Warranties in relation
to any matter forming the subject matter of a claim thereunder to the
extent that the same or circumstances giving rise thereto are fairly
disclosed in the Disclosure Letter or expressly provided for or stated to
be exceptions under the terms of this agreement. No letter, document or
other communication shall be deemed to constitute a disclosure for the
purposes of the Warranties unless the same is accepted as such by the
Purchaser and is expressly included in the Disclosure Letter.
6.6 Save in the case of fraud or wilful non-disclosure by the Vendors, the
Vendors shall be under no liability in respect of any claim under the
Warranties or the Deed of Indemnity unless written notice of such claim
setting out details of the event or circumstance giving rise to the
breach, the basis upon which the Purchaser is making a claim and the total
amount of the liability which results shall have been served upon the
Vendors by the Purchaser within 3 years of the Completion date:
<PAGE>
6.6.1 the amount payable in respect of the relevant claim has been agreed
by the Vendors within twelve months of the date of such written
notice; or
6.6.2 legal proceedings have been instituted in respect of such claim by
the due service of process on the Vendors within twelve months of
the later of: -
6.6.2.1 the date of such written notice; and
6.6.2.2 in the event that the Vendors shall make in
respect thereof a request pursuant to clause
6.12(a)(ii) of the Deed of Indemnity at Schedule 5
herein, the date on which in respect of such
proceedings as shall have been instituted by the
Purchaser pursuant to such request judgment is given
by a court of competent jurisdiction or the date
settlement is reached in such third party proceedings
with the consent of the Vendors or on which the
Vendors and the Purchaser agree that proceedings or
other action against the third party shall be
abandoned.
6.7 The Vendors shall be under no liability in respect of any claim under the
Warranties or the Deed of Indemnity unless and until the liability in
respect of that claim when aggregated with the liability of the Vendors in
respect of all such other claims shall exceed (pound)10,000.00.
6.8 The aggregate liability of all Vendors in respect of any claim under the
Warranties and the Deed of Indemnity shall not save in the case of fraud
or wilful non-disclosure exceed the value of the Consideration pursuant to
clause 2.3 hereof and the Purchaser shall have the right to treat as
forfeit to the Purchaser such number of the EMCC Shares issued to the
Vendors or either of them pursuant to this Agreement which is equal in
value at the time of issue or time of forfeit whichever is the greater to
the liability of the Purchasers. Upon the occurrence of such an event the
Purchaser shall notify the Vendors in writing setting forth the amount of
the liability and the number of shares to be forfeit. Unless the Vendors
or either of them shall object in writing within 15 days the shares shall
be sold and the proceeds applied to extinguish the claim.
6.9 No liability shall attach to the Vendors in respect of any claim under the
Warranties or the Deed of Indemnity to the extent that the claim or the
events giving rise to the claim would not have arisen but for an act,
omission or transaction of the Group otherwise than in the ordinary and
proper course of the business of the Group as at present carried on.
6.10 The Vendors hereby covenant to pay to the Purchaser or the Purchaser's
Group any sums in respect of taxation (including any interest or
penalties) which the Purchaser or the Purchaser's Group is or becomes
liable to pay by virtue of any scheme or arrangement entered into prior to
Completion by the Vendors or the Company designed wholly or partly for the
purpose of avoiding or deferring tax.
<PAGE>
6.11 In assessing any liabilities, damages or other amounts recoverable by the
Purchaser as a result of any claim under the Warranties and/or the Deed of
Indemnity there shall be taken into account by way of set-off any benefit
accruing to the Purchaser's Group in respect of any amount of tax relief
obtained by the Purchaser's Group and any amounts by which any taxation
for which the Purchaser's Group is assessed or accountable is reduced or
extinguished, arising directly or indirectly in consequence of the matter
which gives rise to such a claim.
6.11.1 This clause shall apply in circumstances where:-
6.11.1.1 any claim is made against the Purchaser's Group which
may give rise to a claim against the Vendors under the
Warranties or the Deed of Indemnity; or
6.11.1.2 the Purchaser's Group is entitled to make recovery from
some other person any sum in respect of any facts or
circumstances by reference to which a claim may be made
against the Vendors under the Warranties or the Deed of
Indemnity; or
6.11.1.3 the Vendors shall have paid to the Purchaser's Group an
amount in respect of the claim under the Warranties or
the Deed of Indemnity and subsequent to the making of
such a payment the Purchaser's Group becomes entitled to
recover from some other person a sum which is referrable
to that payment.
6.11.2 The Purchaser shall and shall procure that the Purchaser's
Group shall:-
6.11.2.1 (prior to taking any action against the Vendors under
the Warranties or the Deed of Indemnity in the case
of clause 6.12(a)(i) and clause 6.12(a)(ii), and
subject to the Purchaser's Group being indemnified
and secured to the satisfaction of the Purchaser by
the Vendors against all reasonable costs and expenses
which may properly be incurred by reason of such
action) take all such action as the majority of the
Vendors may reasonably request to avoid, dispute,
resist, compromise, defend or appeal against such
claim against the Purchaser's Group as is referred to
in clause 6.12(a)(i) of the Deed of Indemnity or to
make such recovery by the Purchaser's Group as
referred to in clause 6.12(a)(ii) or clause
6.12(a)(iii) of the Deed of Indemnity, as the case
may be; and
6.11.2.2 in the case of said clause 6.12(a)(iii) only, repay to
the Vendors an amount equal to the amount so recovered
or, if lower, the amount paid by the Vendors to the
Purchaser.
6.12 The Purchaser shall as soon as reasonably practicable : -
<PAGE>
6.12.1inform the Vendors in writing of any fact, matter, event or
circumstance which comes to its notice whereby it appears that the
Vendors are liable to make any payment in respect of any claim under
the Warranties and/or the Deed of Indemnity or whereby it appears
the Purchaser's Group shall become entitled to recover from some
other person a sum which is referable to a payment already made by
the Vendors in respect of such a claim; and
6.12.2thereafter keep the Vendors informed of all material developments
in relation to thereto.
6.13 No information relating to the Company or the Subsidiaries of which the
Purchaser has knowledge (actual or constructive) other than that contained
in or referred to in this agreement and/or included in the Disclosure
Letter and no investigation by or on behalf of the Purchaser shall
prejudice any claim by the Purchaser under the Warranties or operate to
reduce any amount recoverable thereunder.
6.14 If the Purchasers or the Group or any of them are entitled to make a claim
in respect of any act, event or default both under the Warranties and
under the Deed of Indemnity the claim shall be made first under the
Warranties and any amount payable to the Purchasers or the Group or any of
them under the Deed of Indemnity shall be reduced to the extent of the
claim.
6.15 The Vendors further agree to defend the Company against any action or
proceedings relating to any such losses as are mentioned in Clauses 9.15
to 9.16 inclusive to permit the Purchasers (at its option) to become party
to any such action or proceedings and to indemnify the Purchasers against
all costs (including legal costs) arising from such defence.
6.16 The Vendors acknowledge that the Purchaser has entered into this agreement
in reliance upon the Warranties and each of them.
6.17 The Purchaser shall indemnify the Vendors against any liability to
taxation arising under ICTA s767A (change in company ownership corporation
tax)
6.18 The Purchaser undertakes that until the end of the Second Earn Out Period
to afford all reasonable assistance to enable the Company to run their
businesses in a manner consistent with the way it has been run prior to
the date hereof and in respect of the Asian Subsidiary to run its
business, with a view to enabling the Company and the Asian Subsidiary to
retain at all times sufficient working capital for the reasonable
requirements of their businesses.
6.19 If the Service Agreements to be entered into by Mr O'Rourke or Mr Gesner
are terminated in circumstances which any Court or Tribunal shall find to
amount to wrongful or unfair dismissal, including constructive dismissal,
then notwithstanding that the minimum gross profit targets provided for in
the First Contingent Earn Out Amount and Second Contingent Earn Out Amount
<PAGE>
are not reached then payment shall be made by the Purchaser to the Vendors
as if those targets had been achieved.
6.20 If a matter or event is taken into account in determining the
consideration for the Shares then and to the extent that is taken into
account, it shall not give rise to a claim under the Warranties.
<PAGE>
7. RESTRICTIONS
The Vendors undertake they shall not:
7.1.1 for a period of 3 years from the Completion Date, canvass, solicit
or approach or cause to be canvassed, solicited or approached for
orders of any person, firm or company who at any time during the six
months immediately preceding the Completion Date is or was in
connection with the Business:
7.1.1.1 negotiating with the Company for the supply of
goods or services;
7.1.1.2 a client or customer of the Company; and/or
7.1.1.3 in the habit of dealing with the Company.
where the orders relate to goods and/or services which are competitive
with or of the type supplied by the Company in respect of the supply of
which the Vendors (or any other employee on their behalf or under their
instruction) was engaged or concerned in the last six months immediately
preceding the Completion Date and where the Vendors (or any other employee
on their behalf or under their instruction) dealt or had contact with that
person;
7.1.2 for a period of 3 years immediately following the Completion Date be
engaged, concerned or interested in or provide technical, commercial
or professional advice to any other business which supplies or is
likely to supply goods and/or services which are competitive with or
of the same type as the Business at the Completion Date and in
respect of the supply of which the Vendors were engaged or concerned
in the last six months immediately preceding the Completion Date;
7.1.3 for a period of 3 years from the Completion Date approach, solicit,
endeavour to entice away, employ, offer employment to or procure the
employment of any person who, at the Completion Date, is employed in
a managerial, supervisory, technical sales, executive or
administrative capacity or engaged as a consultant by the Company at
the Completion Date;
7.1.4 interfere or seek to interfere with the continuance, or any of the
terms, of the supply of goods or services to the Company from any
supplier who has been supplying goods and/or services to the Company
during the calendar year immediately preceding the Completion Date;
or
7.1.5 represent himself as being in any way connected with or interested
in the business of the Company (other than a consultant or a member
if such be the case) or use any name which is identical or similar
to or likely to be confused with the name of the Company or any
product or service produced or provided by the Company or which
might suggest a connection with the Company.
<PAGE>
7.2 The Vendors agree that the covenants and undertakings contained in this
clause 7 are reasonable and are entered into for the purpose of protecting
the goodwill of the business of the Company and that accordingly the
benefit of the covenants and undertakings may be assigned by the Purchaser
and its successors in title without the consent of the Vendors.
7.3 Each covenant and/or undertaking contained in this clause 7shall be
construed as a separate covenant and/or undertaking and if one or more of
the covenants and/or undertakings contained in this clause is held to be
against the public interest or unlawful or in any way an unreasonable
restraint of trade the remaining covenants and/or undertakings shall
continue to bind the Vendors.
7.4 If any covenant or undertaking contained in this clause 7 would be void as
drawn but would be valid if the period of application were reduced or if
some part of the covenant or undertaking were deleted the covenant or
undertaking in question shall apply with such modification as may be
necessary to make it valid and effective.
7.5 No provision of this agreement, by virtue of which this agreement is
subject to registration (if such be the case) under the Restrictive Trade
Practices Act 1976, shall take effect until the day after particulars of
this agreement have been furnished to the Director General of Fair Trading
pursuant to section 24 of that Act. For this purpose the expression this
"agreement" includes any agreement or arrangement of which this agreement
forms part and which is registrable or by virtue of which this agreement
is registrable.
7.6 Nothing in this clause 7 shall prevent the continued business of PC Wise
Inc. in the USA provided that business is continued in a manner consistent
with the way that business has been run prior to the date hereof.
8. PENSIONS
8.1. As soon as practicable (and in any event not later than 14 days after
Completion) the Vendors shall (provided that the Purchaser, at the
Vendors' expense, assists so far as may reasonably be necessary):-
8.1.1 take all necessary actions and enter into all necessary
documentation to ensure that the Company is not or does not remain a
trustee or the principal employer or a participating employer or
retains any other liabilities of any nature in respect of any of the
Pension Scheme.
8.1.2 deliver to the Purchaser such copy documentation and other evidence
as it shall reasonably require of substitution of parties other than
the Company as trustee and principal employer in respect of the
Pension Scheme.
<PAGE>
8.2 Without prejudice to the entitlement of the Purchaser to claim damages
upon any other basis available to it (whether by virtue of any other
provision of this Agreement or otherwise) the Vendors jointly and
severally agree to indemnify and keep indemnified the Purchaser (on its
own behalf and as trustee on behalf all members of the Purchaser's Group)
against all and any liabilities, costs (including legal costs on a full
indemnity basis), claims, contributions, fees, demands, penalties,
taxation and other outgoings of whatsoever nature (whether suffered by the
Purchaser or any member of the Purchaser's Group and whensoever arising)
in relation to or by reference to:-
8.2.1 the Pension Scheme or the cessation of any of the Company's
liabilities in relation thereto whether pursuant to any existing
obligation of the Company under the terms of any contract of
employment or the provisions of any statute or regulation or
otherwise;
8.2.2 any breach of the provisions of paragraphs 12.1 to 12.4 inclusive of
Schedule 4 to this Agreement;
8.2.3 any obligation to make any payment for or in connection with the
provision of relevant benefits (as defined in section 612(1) ICTA);
8.2.4 For the avoidance of doubt the provisions of clauses 6.6 and 6.7 of
this Agreement shall not apply to or limit or restrict the indemnity
provided by this clause 8.
8.3 Notwithstanding the above the parties shall procure the payment of all
instalments due under Mr O'Rourke's present contract of employment with
the Company from 30th June 1998 to the Completion Date.
8.4 No objection shall be taken to any lawful pension payments made by the
Company (whether or not they are in excess of or under any contractual
entitlement).
<PAGE>
9. UNIT 1, SAXON BUSINESS CENTRE
9.1 Without prejudice to the entitlement of the Purchaser to claim damages
upon any other basis available to it (whether by virtue of any other
provision of this Agreement or otherwise) the Vendors jointly and
severally agree to indemnify and keep indemnified the Purchaser (on its
own behalf and as trustee on behalf all members of the Purchaser's Group)
against all and any liabilities, costs (including legal costs on a full
indemnity basis), claims, contributions, fees and demands (whether
suffered by the Purchaser or any member of the Purchaser's Group and
whensoever arising) in relation to or by reference to any rent or sum
payable as rent for any period after 23rd October 1998 or for any breach
of any repairing covenant arising out of a lease ("the Lease") dated the
9th June 1995 and entered into between (1) the Company and (2) John and
May Quigley for the office premises known as Unit 1, Saxon Business
Centre, Windsor Avenue, Wimbledon, London ("the Premises").
9.2 For the avoidance of doubt the provisions of clauses 6.6 and 6.7 of this
Agreement shall not apply to or limit or restrict the indemnity provided
by this clause 9.
10. COSTS
Each party agrees to pay, without right of reimbursement from the other
party and regardless of whether or not the transaction is consummated, the
costs incurred by it in connection with this transaction, including legal
fees and other costs incidental to the negotiation of the terms of the
transaction and the preparation of related documentation and none of such
fees shall be charged to the Company. Each party represents to the others
that it has dealt with no finder or broker in connection with this
transaction. Each party will indemnify and holder the others harmless from
any loss, liability or expense (including, without limitation, legal fees)
resulting from the indemnifying party's breach of the representations and
agreements.
11. EFFECT OF COMPLETION
11.1 The terms of this agreement shall in so far as not performed at Completion
and subject as specifically otherwise provided in this agreement continue
in force after and notwithstanding Completion.
11.2 Each and every provision of this Agreement shall wherever it may be
necessary to give full force and effect be deemed to be a continuing
obligation from the date of signature to the Date of Completion and each
and every obligation of the Vendors shall be repeated as at Completion.
<PAGE>
12. ACKNOWLEDGMENTS
The Purchaser acknowledges that it has not been induced to enter into this
agreement by any representation or warranty express, implied, oral or
written and that all representations or warranties being given to the
Purchaser are limited to those contained in this Agreement and the
Disclosure Letter.
13. ENTIRE AGREEMENT AND AMENDMENTS
This Agreement, including the Schedules and Annexures referred to herein
as a part hereof, contains the entire understanding of the parties hereto
with respect to the subject matter herein and may be amended only by
instrument executed by the Vendors and the Purchaser or their respective
successors or assigns. There are no restrictions, promises, warranties,
conveyance, or undertakings other than those expressly set forth herein.
The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
will be deemed an original but all of which together shall constitute one
and the same instrument.
15. MERGER OF AGREEMENTS
All representations, warranties, agreements and other inducements to this
Agreement or the transaction contemplated hereby, whether oral or written,
prior to the execution and delivery hereof between the parties hereto have
been included herein, or in the exhibits, Annexures and Schedules or
Disclosure Letter hereto, and shall be deemed to have been fully performed
and discharged to the extent not included herein or therein. This
Agreement including the exhibits, Annexures and Schedules and Disclosure
Letter hereto sets forth all rights, remedies, obligations and liabilities
of the parties, and no term or provision hereof or thereof, including,
without limitation, the terms and provisions contained in this sentence,
shall be waived, modified or altered so as to impose any additional right
or remedy, and no custom, payment, act, knowledge, extension of time,
favour or indulgence, gratuitous or otherwise, or words or silence at any
time, shall impose any additional obligation, or grant any additional
right or remedy, or be deemed a waiver or release of any obligation,
liability, right or remedy except as set forth in a written instrument
properly executed and delivered by the parties sought to be charged,
expressly stating that it is, intended to be so effected, no assent,
expressed or implied, by either party to or of, any breach of any term or
any provision of this agreement or of the exhibits, Annexures or Schedules
shall be deemed to be an assent or waiver to or of such or any succeeding
breach of the same or any other such term or provision.
<PAGE>
16. GENERAL
16.1 If this agreement ceases to have effect the Purchaser will release and
return to the Company all documents concerning it provided to the
Purchaser or its advisers in connection with this agreement and will not
use or make available to any other person any information which it or its
advisers have been given in respect of the Company and which is not in the
public domain and each party shall continue to be bound by the terms of a
Confidentiality Letter entered into between the parties and dated 4th
September 1998
16.2 This agreement shall be binding upon each party's successors and assigns
and personal representatives (as the case may be).
16.3 Time shall be of the essence of this agreement, both as regards the dates
and periods specifically mentioned and as to any dates and periods which
may by agreement in writing between or on behalf of the Vendors and the
Purchaser be substituted for them.
16.4 Any notice required to be given by any of the parties under this agreement
may be sent by registered or certified mail prepaid to the address of the
addressee as set out in this agreement or to such other address as the
addressee may from time to time have notified for the purpose of this
clause. Communications sent by post shall be deemed to have been received
ninety-six hours after posting. In proving service by post it shall only
be necessary to prove that the communication was contained in an envelope
which was duly addressed and posted in accordance with this clause.
16.5 This Agreement is personal to the parties and shall not be assignable save
that the Purchaser may at any time assign all or any part of its rights
and benefits under this Agreement, including the Warranties and any cause
of action arising under or in respect of any of them, to any transferee of
the share capital of the Company or to any member of the Purchaser's
Group, or to any affiliate of the Purchaser who may enforce them as if it
had also been named in this Agreement as the Purchaser.16.5At any time
after the date hereof the Vendors shall, at the request of the Purchaser,
execute or procure the execution of such documents and do or procure the
doing of such acts and things as the Purchaser may reasonably require for
the purposes of vesting the Shares in the Purchaser or its nominees and of
giving to the Purchaser the full benefit of all the provisions of this
Agreement.
17. SEVERABILITY
If at any time one or more of the provisions hereof is or becomes invalid,
illegal or unenforceable in any respect under any law, the validity,
legality and enforceability or the remaining provisions hereof shall not
be in any way affected or impaired thereby.
<PAGE>
18. LAW AND JURISDICTION
This Agreement shall be governed by and construed in accordance with the
laws of England and the parties irrevocably agree that the Courts of
England shall have -exclusive jurisdiction to hear and determine any suit,
action or proceeding and to settle any disputes which may arise under
and/or out of and/or relating to and/or in connection with this Agreement
and such purposes irrevocably submit to the jurisdiction of such courts.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement on the
date first above written
SIGNED as a DEED and delivered )
by MICHAEL CHARLES GESNER ) /S/ MICHAEL CHARLES GESNER
)
)
SIGNED as a DEED and delivered )
by GERARD DENIS PATRICK O'ROURKE ) /S/ GERARD O'ROURKE
)
)
SIGNED as a DEED and delivered )
by LAURENCE MARTIN GILBERT ) /S/ LAURENCE GILBERT
for and on behalf of )
EUROPEAN MICRO HOLDINGS PLC )
EXHIBIT 99.1
EXHIBIT 99.1
CONTACT: -OR- EMCC INVESTOR RELATIONS COUNSEL:
European Micro Holdings, Inc. The Equity Group Inc.
Frank Cruz, Operations Devin Sullivan (212) 836-9608
(305) 825-2458 Tom Ennis (212) 836-9607
FOR IMMEDIATE RELEASE
EUROPEAN MICRO HOLDINGS ACQUIRES SUNBELT (UK) LTD.
Miami, FL - October 27, 1998 - EUROPEAN MICRO HOLDINGS, INC. (NASDAQ NATIONAL
MARKET: EMCC) ("European Micro") today announced that it has completed the
purchase of Sunbelt (UK) Ltd. ("Sunbelt") for an undisclosed sum of cash and an
earn out based on the attainment of certain performance criteria. Established in
1992 and located in Wimbledon, England, Sunbelt is a privately held distributor
of microcomputer products to dealers, VARs and mass merchants throughout Western
Europe. Sunbelt had 1997 revenues of approximately U.S. $16.5 million and
pre-tax profits of approximately U.S. $742,500. Based on the current value of
EMCC common stock, European Micro expects that the acquisition will be accretive
to earnings in its 1999 fiscal year, which began July 1, 1998.
John B. Gallagher and Harry D. Shields, Co-Chairmen and Co-Presidents of
European Micro, commented, "The acquisition of Sunbelt solidifies our position
as a leading independent, focused distributor in the growing global computer
products distribution industry. This acquisition will increase our customer base
and significantly strengthen our executive and sales teams. Moreover, the
addition of Sunbelt's well-respected, private label Nova brand of information
technology products will broaden the range of products we offer our customers
throughout the world."
European Micro Holdings, Inc. is a growing, international focused distributor of
microcomputer products to more than 375 value-added resellers, corporate
resellers, retailers, direct marketers and distributors. The Company monitors
and capitalizes on worldwide market-price disparities of in-demand microcomputer
products and quickly and efficiently sources these products to its customer
base. Substantially all of the products sold by European Micro are manufactured
by well-recognized companies such as IBM, Compaq and Hewlett-Packard.
<PAGE>
Page 2
European Micro Holdings, Inc. News Release
October 27, 1998
Statements contained in this news release regarding expected financial results
of the Company and Sunbelt and other planned events are forward-looking
statements, subject to uncertainties and risks, many of which are beyond the
Company's control, including, but not limited to, reliance on key markets,
suppliers, and products, currency fluctuations, the Company's ability to
integrate Sunbelt's operations with the rest of the Company, dependence on key
personnel and trade restrictions, each of which may be impacted, among other
things, by economic, competitive or regulatory conditions. These and other
applicable risks are summarized under the caption "Risk Factors" in the
Company's prospectus dated April 6, 1998 and in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1998 as filed with the Securities
and Exchange Commission. Forward-looking statements by their nature involve
substantial risks and uncertainties. As a result, actual results may differ
materially depending on many factors, including those described above. The
Company cautions that historical results are not necessarily indicative of the
Company's future performance.
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