<PAGE> 1
EXHIBIT 2.4
DATED 29 JUNE 1999
(1) DENSITRON INTERNATIONAL PLC
(2) DML MICROWAVE LIMITED
(3) MCE COMPANIES, INC.
A G R E E M E N T
FOR THE SALE AND PURCHASE OF THE
ENTIRE ISSUED SHARE CAPITAL OF
DENSITRON MICROWAVE LIMITED
EVERSHEDS
115 COLMORE ROW
BIRMINGHAM
B3 3AL
TEL: 0121-232 1000
FAX: 0121-232 1900
DX: 13004 BIRMINGHAM
DRAFT NO. 5
DATE: 29.06.99
REF: KSE/36
<PAGE> 2
CONTENTS
1. Interpretation
2. Conditions Precedent
3. Closing
4. Consideration
5. Warranties
6. Restrictive covenants
7. Purchaser's Assurances
8. Purchaser's Undertakings
9. Purchaser's Guarantee
10. Set Off
11. VAT Degrouping
12. Announcements
13. Costs
14. Interest
15. Notices
16. General
SCHEDULE 1
Part I: Details of the Company
Part II: Details of the Subsidiary
SCHEDULE 2
The Property
SCHEDULE 3
Warranties
SCHEDULE 4
Purchaser's Warranties
SCHEDULE 5
Determination of the Net Worth, Trade Debtors and Bad Debts Reserve
SCHEDULE 6
2
<PAGE> 3
Determination of the 1999 Gross Profit, the Bad Debts, the Excluded
Liabilities and the Taxation Reserve
SCHEDULE 7
Agreed Determination Process
SCHEDULE 8
Example Closing Statement
3
<PAGE> 4
THIS AGREEMENT is made on 29 June 1999
BETWEEN:-
(1) DENSITRON INTERNATIONAL PLC (registered number 1982726) whose
registered office is at Unit 4, Airport Trading Estate, Biggin Hill,
Kent, TN16 3BW ("the Vendor"); and
(2) DML MICROWAVE LIMITED (registered number 3719966) whose
registered office is at 115 Colmore Row, Birmingham, B3 3AL
("the Purchaser");
(3) MCE COMPANIES, INC., a Michigan corporation whose address is 310
Depot Street, Ann Arbor, Michigan 48104, United States of America
("the Guarantor")
OPERATIVE CLAUSES
1. INTERPRETATION
In this Agreement:-
1.1 the following expressions have the following meanings unless
inconsistent with the context:-
EXPRESSION MEANING
"the Accounts" audited accounts of the Company for
the fifteen month period which
commenced on 1 January 1998 and ended
on 31 March 1999 comprising the
balance sheet and the profit and loss
account for the said period and the
auditors' and directors' reports
thereon a copy of which is annexed to
the Disclosure Letter
"the Act" The Companies Act 1985
4
<PAGE> 5
"the Additional The additional payment (if any) to the
Payment" Vendor from the Purchaser for the sale
of the Shares as calculated in
accordance with clauses 4.3 to 4.8
inclusive
"Associated Company" Any company which at the relevant time
is
(a) a holding company of the Vendor;
or
(b) a subsidiary or subsidiary
undertaking of the Vendor; or
(c) a subsidiary or subsidiary
undertaking of any such holding
company of the Vendor
and the expressions "holding company",
"subsidiary" and "subsidiary
undertaking" shall have the meanings
given to them by the Act
"the Auditors" The auditors for the time being of the
Company
"the Bad Debts" The amount of the Trade Debtors which
remain outstanding at 31 March 2000
calculated or determined in accordance
with Schedule 6
"the Bad Debts Reserve" The provision for bad debts set out in
the Final Closing Statement
"Business Day" Any day (other than Saturday or
Sunday) on which Clearing Banks are
open for a full range of banking
transactions
5
<PAGE> 6
"Circular" The Circular to be sent by the Vendor
to its shareholders pursuant to the
provisions of clause 3.1.1 to convene
an extraordinary general meeting of
the Vendor's Shareholders to approve
the sale and purchase contemplated
by this Agreement
"Clearing Bank" A bank which is a member of CHAPS
Clearing Company Limited
"Closing" Completion of the sale and purchase
hereby agreed in accordance with
clause 3 and "the Closing Date" shall
be construed as the closing of
business on the date on which Closing
takes place
"Closing Conditions" The conditions precedent to which the
sale and purchase contemplated by this
Agreement are subject, as set out in
clauses 2.1 to 2.3 inclusive
"the Closing Date" 30 July 1999 or such other date as the
Vendor and or Purchaser may agree
"the Company" Densitron Microwave Limited,
registered number 1064744 whose
registered office is at Unit 4,
Airport Trading Estate, Biggin Hill,
Kent, TN16 3BW
"the Consideration" The Provisional Consideration as
adjusted in accordance with clause 4
6
<PAGE> 7
"Consistent" With reference to any particular
asset, liability, income or
expenditure, to the extent not
expressly provided to the contrary in
this Agreement, in accordance with UK
GAAP and, provided the same are in
accordance with UK GAAP, the
accounting principles, policies,
practices and methods consistent with
those used in the preparation of the
Accounts including for the avoidance
of doubt, the internal policies and
procedures used on a consistent basis
by the Company in the preparation of
the Accounts and which are set out in
the Disclosure Letter
"the Deferred Payment Date" 30 Business Days after the date on
which all items required to be known
for the calculation of the payment (if
any) which falls to be paid pursuant
to clause 4.8 have been agreed, deemed
agreed or determined in accordance
with this Agreement
"the Disclosure Letter" The letter prepared or written by the
Vendor to the Purchaser in the agreed
terms setting out qualifications to
and exceptions from the Warranties as
given at the date of this Agreement
and separately as at Closing as
contemplated by clause 5.1.1
7
<PAGE> 8
"the Employment The Employment Agreements between the
Agreements" Company and each of Messrs Kearns,
Meeson, Bonvini, Raven, Dumbell and
Summers to be entered into prior to or
at Closing in such form and containing
such terms and conditions as shall be
agreed by the Purchaser
8
<PAGE> 9
"the Excluded Liabilities" All liabilities and obligations as at
the Closing Date howsoever or whenever
arising and whether actual or
contingent of any member of the Group
in respect of: (a) any indebtedness
for borrowed money or advances from
factors or any obligations for bank
overdrafts (secured or otherwise); (b)
any liabilities of a long-term
nature, being incapable of complete
performance in accordance with their
terms within 6 months after the date
on which such liability was incurred
except for (i) the Leases (ii)
provision for deferred taxation and
(iii) the equipment leases set out in
the Disclosure Letter; (c) any
obligations to the Vendor or any
Associated Company (including, without
limitation, any obligations related to
any accrued but unpaid dividends on
the Ordinary Shares or the Preference
Shares (other than as specified in
this Agreement)), except for bona fide
purchases of inventory and supplies on
terms not less favourable than those
extended to independent third parties;
and (d) any guarantees with respect to
any indebtedness or other obligations
of the Vendor or any Associated
Company
"Final Closing Statement" The meaning given to such term in
Schedule 5
"the Group" Together, the Company and the
subsidiary details of which are set
out in Schedule 1
9
<PAGE> 10
"Group Member" Any company which is a member of the
Group
"the LC Letter" The letter dated the same date as this
Agreement from the Guarantor to the
Vendor relating to, inter alia, the
provision of an irrevocable standby
letter of credit
"the Leases" The lease, underlease and
sub-underleases of the Property
details of which are set out in
Schedule 2
"Net Worth" The aggregate of the amount of the
Company's assets less the aggregate
amount of the Company's liabilities at
Closing as shown in the Final Closing
Statement but excluding the Trade
Debtors and the Taxation Reserve
"Net Worth Deficit" The amount (if any) by which the Net
Worth is less than (pound)720,000
(seven hundred and twenty thousand
pounds)
"Net Worth Surplus" The amount (if any) by which the Net
Worth exceeds (pound)780,000 (seven
hundred and eighty thousand pounds)
"Nominated Director" Cliff Hardcastle or such other person
nominated by the Vendor to be a
director of the Company in accordance
with the provisions of this Agreement
"the Ordinary Shares" The 430,000 Ordinary Shares of(pound)1
each in the capital of the Company
10
<PAGE> 11
"the Preference Shares" The 490,000 10% cumulative preference
shares of(pound)1 each in the capital
of the Company
"the Property" The property specified in Schedule 2
(and, if more than one, each such
property) and each and every part of
such property
"the Provisional The sum of (pound)4,500,000 (four
Consideration" million five Hundred thousand pounds)
to be paid to the Vendor on Closing in
accordance with clause 4.2
"the Purchaser's Accountants" Ernst & Young of Beckett House, 1
Lambeth Palace Road, London ST1 7EU
"the Purchaser's Solicitors" Eversheds of 115 Colmore Row,
Birmingham, B3 3AL
"the Purchaser's Warranties" The warranties of the Purchaser
contained in Schedule 4
"the Shares" The Ordinary Shares and the Preference
Shares
"the Taxation Deed" The taxation deed to be made between
the Vendor and the Purchaser in the
agreed terms
11
<PAGE> 12
"the Taxation Reserve" That part of the amount of corporation
tax payable by the Company which is
provided in the accounts of the
Company prepared in respect of the
year ended on 31 December 1999 which
provision shall be calculated in
accordance with UK GAAP which is
attributable to the profits of the
Company for the period from 1 January
1999 to the Closing Date inclusive
"the Trade Debtors" The amount of the Company's trade
debtors (that is to say, the debtors
of the Company where the debts were
incurred in the ordinary and normal
course of trading) as at the Closing
Date less the amount of the provision
for bad debts as at the Closing Date
as shown in the Final Closing
Statement (being the Bad Debts
Reserve) in each case calculated or
determined on a basis which is
Consistent and in accordance with
Schedule 5
"Transaction Fees" All legal, accounting, tax, consulting
and financial advisory and other fees
and expenses, including any fees and
expenses incurred, paid, or payable by
the Company in connection with the
transactions contemplated hereby, and
not otherwise paid by the Vendor
"UK GAAP" Generally accepted accounting
principles in the United Kingdom as of
the date hereof
"VAT" Value Added Tax
12
<PAGE> 13
"VATA" Value Added Tax Act 1994
"VAT Group" The VAT Group as defined in section 43
VATA of which the Vendor is the
representative member and which has
the number 425282070
"the Vendor's Accountants" Robson Rhodes of 186 City Road, London
EC1V 2NU
"the Vendor's Solicitors" Wellers of Tenison House, 45 Tweedy
Road, Bromley, Kent BR1 3NF
"the Warranties" The warranties, representations and
undertakings set out or referred to in
clause 5 and Schedule 3;
"the 1998 Financial Period" The financial period which commenced
on 1 April 1998 and ended on 31 March
1999
"the 1999 Financial Period" The financial period which commenced
on 1 April 1999 and ending on 31 March
2000
"the 1998 Gross Profit" The gross profits (being sales less
cost of sales) of the Company for the
1998 Financial Period, being
(pound)2,340,917 calculated as
follows:-
<TABLE>
<S> <C>
gross profit for the year to 31st 2,096,122
December 1998
plus gross profit for the three months 742,013
to 31st March 1999 -------
2,838,135
---------
less gross profit for the three months (497,218)
to 31st March 1998
2,340,917
</TABLE>
13
<PAGE> 14
each such gross profit figure being
extracted from the Accounts
"the 1999 Gross Profit" The gross profits (being sales less
cost of sales) of the Company for the
1999 Financial Period, calculated and
determined on a basis which is
Consistent and agreed or determined in
accordance with Schedule 6 and where
Consistent presented in a format
consistent with the format of the 1998
Gross Profit as shown in the Accounts
"the 1999 Gross Profit The amount payable to the Vendor
Amount" determined pursuant to clause 4.5
1.2 references to any statute or statutory provisions will, unless the
context otherwise requires, be construed as including references to
any earlier statute or the corresponding provisions of any earlier
statute, whether repealed or not, directly or indirectly amended,
consolidated, extended or replaced by such statute or provisions, or
re-enacted in such statute or provisions, and to any subsequent
statute or the corresponding provisions of any subsequent statute in
force at any time prior to Closing directly or indirectly amending,
consolidating, extending, replacing or re-enacting the same, and will
include any orders, regulations, instruments or other subordinate
legislation made under the relevant statute or statutory provisions
which are in force prior to Closing;
1.3 references to persons will be construed so as to include bodies
corporate, unincorporated associations and partnerships;
1.4 references to a document being "in the agreed terms" will be construed
as references to that document in the form agreed and initialled by or
on behalf of the Vendor and the Purchaser;
1.5 references to clauses and Schedules are to clauses of and Schedules to
this Agreement, and references to paragraphs are to paragraphs in the
Schedule in which such references appear;
14
<PAGE> 15
1.6 the Schedules form part of this Agreement and will have the same force
and effect as if expressly set out in the body of this Agreement;
1.7 the headings to the clauses of this Agreement and to the paragraphs of
the Schedules (save for headings in Schedules 1 and 2) will not affect
its construction; and
1.8 for the avoidance of any doubt if, in interpreting the expression
"Consistent" as defined above, there is any conflict between UK GAAP
and any other accounting practice policy or procedure whether or not
adopted for the purposes of the Accounts, then UK GAAP shall prevail.
2. CONDITIONS PRECEDENT
2.1 The sale and purchase contemplated by this Agreement and the
respective obligations of the Purchaser and the Vendor to effect the
transactions contemplated in this Agreement are conditional on there
being no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing or
otherwise inhibiting or restraining the consummation of all or any
part of the transactions contemplated by this Agreement and the
absence of any pending or threatened litigation by any third party
seeking to enjoin, prevent or obtain damages in connection with this
Agreement at the time that Closing would, but for the provisions of
this clause 2.1 otherwise have taken place; and
2.2 The sale and purchase contemplated by this Agreement and the
respective obligations of the Purchaser to effect the transactions
contemplated in this Agreement are conditional on:-
2.2.1 the Warranties being true and correct in all respects at
the date of this Agreement and at the time at which
Closing would otherwise have taken place but for the
provisions of this clause 2.2.1 as if such Warranties
were repeated at that time except that a
breach or breaches of any of the Warranties at the date
of this Agreement or the existence of facts or
circumstances which would constitute a breach or breaches
of the Warranties had the same been repeated at Closing
(a "deemed breach") shall only constitute a failure to
satisfy this condition where the consequence of such
breach or breaches or deemed breach or breaches is that
the Purchaser may suffer a loss or losses in respect
thereof equal to or exceeding, in the
aggregate,(pound)100,000;
15
<PAGE> 16
2.2.2 receipt at or prior to Closing of a letter from Barclays
Bank plc in the agreed terms relating to the release of
the Company from the composite accounting system
described in the Disclosure Letter and from any and all
charges and guarantees which may subsist in respect of or
which may have been given by the Company in favour of
Barclays Bank plc;
2.2.3 the execution and delivery at Closing of the Employment
Agreements;
2.2.4 the absence of any material loss or casualty to the
business and assets of any Group Member or any material
adverse change in the business or financial condition or
prospects of either Group Member since 31 March 1999
2.2.5 the performance of or compliance with all covenants and
other obligations of the Vendor required to be performed
or complied with in the period from the date of this
Agreement to Closing or by or as of the Closing Date;
2.2.6 the Vendor having complied in all respects with the
obligations imposed on it pursuant to clause 3.3;
2.2.7 the Purchaser not having the right to make any claim or
claims under the Taxation Deed at Closing (based on the
assumption that the same had been entered into
immediately prior to Closing) except that the right to
make any such claim or claims shall only constitute a
failure to satisfy this condition where the amount
thereof may be equal to or exceed (pound)100,000;
2.2.8 the Vendor's Accountants entering into a letter of
engagement with the Purchaser in a form satisfactory to
the Purchaser; and
2.2.9 the absence of any exceptional, catastrophic and
unforeseeable change in the general economic or financial
conditions in the United States of America or world
markets or the occurrence of any exceptional,
catastrophic and unforeseeable material disruption or
exceptional, catastrophic and unforeseeable adverse
change in world-wide, United States of America or United
Kingdom financial, banking or capital markets which
prevents the Purchaser from closing the transactions
contemplated by this Agreement.
16
<PAGE> 17
2.3 The obligations of the Vendor to effect the transactions
contemplated in this Agreement are conditional on:-
2.3.1 the passing at a general meeting of the Vendor of a
resolution to approve this Agreement;
2.3.2 the Purchaser's Warranties being true and correct in all
respects at the date of this Agreement and there being no
breach of the Purchaser's Warranties at the time at which
Closing would otherwise have taken place but for the
provisions of this clause 2.3.2 as if such Purchaser's
Warranties were repeated at that time; and
2.3.3 the Purchaser having complied in all respects with the
obligations imposed on it pursuant to this Agreement to
be performed by the Purchaser by or at the Closing Date.
2.4 If the Closing Conditions (except for the Closing Condition in clause
2.2.9) shall not have been fulfilled or:-
2.4.1 in the case of the Closing Conditions contained in clause
2.1 waived by the Vendor and the Purchaser; or
2.4.2 in the case of the Closing Conditions contained in
clauses 2.2.1 to 2.2.8 waived by the Purchaser; or
2.4.3 in the case of the Closing Conditions contained in
clauses 2.3.1 to 2.3.3 waived by the Vendor
on or before the Closing Date or such later date as the Vendor and the
Purchaser may agree in writing then the Purchaser (in the case of the
Closing Conditions set forth in clause 2.1 and/or 2.2 (except clause
2.2.9) not being satisfied at Closing) or the Vendor (in the case of
the Closing Conditions set forth in clauses 2.1 and/or 2.3 not being
satisfied at Closing) may rescind this Agreement whereupon this
Agreement shall (except for the provisions of clauses 3.10 to 3.16
inclusive, 3.19, 12 and 13) lapse and be of no further force or effect
and no party shall have any claim against any other party in respect
thereof save in respect of any antecedent breach.
2.5 If on the Closing Date the Closing Condition in clause
2.2.9 shall not have been fulfilled the provisions of
clauses 3.14 and 3.15 will apply.
2.6 Subject to the Closing Conditions, the Vendor shall sell
with full title guarantee, and the Purchaser will buy the
Shares free from all encumbrances and any liens or third
party rights and with all rights attached or accruing to
them including all rights to any dividends or other
distributions declared made or paid after the date of
this Agreement (but subject to the provisions of clause
3.4)
17
<PAGE> 18
3. CLOSING
3.1 The Vendor shall use all reasonable endeavours to procure
that the Closing Conditions insofar as they relate to the
Vendor and/or the Company set out in clauses 2.1 and 2.2
and the Closing Condition in clause 2.3.1 are fulfilled
as soon as practicable following the date of this
Agreement and in any event by the Closing Date and shall
notify the Purchaser forthwith upon becoming aware that
any of the aforesaid Closing Conditions will or may not
become capable of fulfilment by the due time and date.
Without limiting the generality of the foregoing the
Vendor shall:-
3.1.1 send the Circular to the Vendor's
shareholders as soon as reasonably
practicable and in any event by no later
than midnight on 12th July 1999 or such
later time and/or date as the Purchaser may
agree; and
3.1.2 on exchange of this Agreement deliver to
the Purchaser irrevocable undertakings in
the agreed terms to vote in favour of the
resolution set out in the Circular duly
executed by shareholders holding more
than fifty per cent (50%) of the issued
and outstanding shares of the Company
having a right to vote on and approve this
Agreement.
3.2 The Purchaser shall use all reasonable endeavours to
procure that the Closing Conditions, insofar as they
relate to the Purchaser, set out in clauses 2.1, 2.2.9,
2.3.2 and 2.3.3 are fulfilled as soon as practicable
following the date of this Agreement and in any event by
the Closing Date and shall notify the Vendor forthwith
upon becoming aware that any of the aforesaid closing
conditions will or may not become capable of fulfilment
by the due time and date.
3.3 The Vendor shall procure that, between the time of the
execution of this Agreement and the Closing Date, each
Group Member will operate its business in the ordinary
course on a basis consistent with past operations and
practices and will use its best efforts to preserve its
business and assets, as well as the key employees intact.
Without limiting the generality of the foregoing no Group
Member will, without the consent of the Purchaser given
in writing:-
3.3.1 enter into any contract that could have a
material and adverse effect on the
financial position or cash flows of the
Company;
18
<PAGE> 19
3.3.2 incur any expenditure on capital account in
excess of, in the aggregate,(pound)20,000
or enter into any commitment to do so;
3.3.3 dispose of any part of its assets in excess
of, in the aggregate,(pound)10,000 except
inventory in the ordinary course of
trading;
3.3.4 except as contemplated by the arrangements
with Griffin Factors Limited described in
the Disclosure Letter, borrow any money
except under its existing overdraft
facilities (such facilities being described
in the Disclosure Letter) or under any
renewal on substantially similar terms as
its existing overdraft facilities, from its
bankers or make any payments out of or
drawings on its bank account other than
routine payments;
3.3.5 enter into any guarantee or indemnity;
3.3.6 enter into any unusual or abnormal Contract
(as defined in paragraph 1.1 of Schedule 3)
or commitment;
3.3.7 grant any lease or third party right in
respect of the Property or assign or
otherwise dispose of the same (or any part
thereof);
3.3.8 make any loan;
3.3.9 except in respect of an aggregate capital
amount of (pound)20,000, enter into any
leasing, hire purchase or other agreement
or arrangement for payment on deferred
terms;
3.3.10 declare, make or pay any dividend or other
distribution except as included in the
Accounts or as specified in this Agreement;
3.3.11 grant any security (except as the same may
be contemplated by clause 3.3.9);
3.3.12 appoint any additional director;
3.3.13 take on any additional employees or
terminate the employment of any employees
who, in either or any case, are salaried
employees, or who are dismissed for proper
cause and where no more than 5 such hourly
paid employees have been hired or dismissed
since the date of this Agreement or make
any change in the terms or conditions of
employment (including any change to the
amount or rate of employees remuneration)
or pension benefits of any employees;
19
<PAGE> 20
3.3.14 permit any insurance to lapse or do
anything which would make any policy of
insurance void or voidable;
3.3.15 create or issue any class of share or loan
capital;
3.3.16 make any change in its business structure
or organisation;
3.3.17 permit any amendment to the Memorandum or
Articles of Association;
3.3.18 do or omit to do, or cause or allow to be
done or omit to be done, any act or thing
which would result or be likely to result
in breach of any of the Warranties at
Completion; and
3.3.19 promise or agree to do any of the actions
described in the foregoing paragraphs of
this clause 3.3
3.4 Notwithstanding anything in this clause 3 to the
contrary, the Vendor may procure that, the Company will,
prior to the Closing, but subject to it being lawful so
to do and subject always to the Vendor providing to the
Purchaser (before the Company takes any such actions)
evidence which is reasonably satisfactory to the
Purchaser that the proviso to this clause 3.4 has or will
be complied with, take the following actions:-
3.4.1 pay a dividend of 3.33 pence per Preference
Share (total dividend(pound)16,333);
3.4.2 pay to the Vendor management charges of
(pound)12,500 per month and an
administration fee of (pound)1,000 per
month from and in respect of the period
commencing on 1st July to the Closing Date;
and
3.4.3 pay further dividends in respect of the Ordinary Shares
Provided always that (i) any other or additional
dividends which may become due and payable in respect of
the Preference Shares in accordance with the Articles of
Association of the Company shall be for the account of
the Purchaser and (ii) the aggregate of the sums paid by
the Company by way of dividend and/or management charge
and/or administration fee pursuant to the foregoing
provisions of this clause 3.4 shall not exceed the cash
balance in the Company's bank account on the Closing Date
less (i) all unpresented cheques issued up to and
including the Closing Date and (ii) standing orders or
direct debts payable since the date of such bank
statement up to and including the Closing Date.
20
<PAGE> 21
3.5 Prior to the Closing Date, the Vendor will:-
3.5.1 give to such employees of the Purchaser and
the attorneys, accountants, or other
representatives of the Purchaser, upon
reasonable notice, reasonable access to
such of each Group Member's employees as
the Purchaser shall reasonably require so
that discussions may take place and
arrangements made for the orderly transfer
of the Company to the Purchaser on Closing;
3.5.2 in order to enable the Purchaser to (i)
investigate and monitor the requirements of
the Closing Conditions in clauses 2.2.1,
2.2.4, 2.2.5, 2.2.6 and 2.2.7 and to
establish that they have been satisfied)
(ii) update any information provided to the
Purchaser in respect of the Company prior
to the date of this Agreement and (iii)
obtain any information reasonably required
by its financial backers permit the
Purchaser and its attorneys, accountants or
other representatives to undertake such
reasonable inquiries with regard to the
business, assets, financial condition,
prospects, liabilities and employees of
each Group Member as the Purchaser shall
reasonably require and, without limiting
the foregoing, furnish to the Purchaser and
the attorneys, accountants or other
representatives of the Purchaser such
financial and operating data and other
information with respect to each Group
Member as the Purchaser shall from time to
time request, and which has not been
previously provided to the Purchaser or its
advisers, including, but not limited to,
inspecting and reviewing any and all books
and records, contracts, agreements and
other relevant documents and making copies
of any of the foregoing and inspecting and
examining all leased premises, as well as
all machinery, equipment, inventory and
other material business assets;
3.5.3 allow the Purchaser to contact and
interview all key employees and major
suppliers and customers of each Group
Member provided always that the Purchaser
shall co-ordinate such contacts with the
Company so as to reasonably avoid any
disruption to the business of the Group;
and
3.5.4 use its reasonable efforts to cause its
accountants, attorneys, bankers and other
relevant agents and representatives to
co-operate fully with the Purchaser in
connection with the rights of access
contemplated by this clause 3.5.
3.6 In the period between the date of this
Agreement and the Closing Date the Vendor
and the Purchaser will each give prompt
notice to the other upon becoming aware of
(i) any breach of the Warranties or, as the
case may be, the Purchaser Warranties or
(ii) any inability or anticipated
21
<PAGE> 22
inability to repeat the Warranties, or as the case may be, the
Purchaser Warranties as at Closing (iii) any inability or
anticipated inability to satisfy any Closing Condition or (iv)
any failure on the part of the Vendor or the Purchaser, as the
case may be, to comply with or satisfy in any respect any
obligation imposed on it hereunder to be performed, complied
with or satisfied by the Vendor or the Purchaser, as the case
may be, under this Agreement on or prior to the Closing Date.
The Vendor and the Purchaser will use all reasonable efforts
to prevent or promptly remedy any matter which has been or may
be the subject of any such notice. No notice given pursuant to
this clause 3.6 will affect any representations or warranties,
covenants, agreements, obligations or conditions set forth
herein or the limitations, restrictions, qualifications or
conditions to which the same are subject.
3.7 Provided that this Agreement has not been rescinded pursuant
to clause 2.4 or otherwise as provided by this Agreement
Closing will take place on the Closing Date, subject to
satisfaction of all the Closing Conditions, at the offices of
the Vendor's Solicitors at Queen's House, Lincoln's Inn Field,
London, WC2 or at such other place and/or later time as the
Vendor and the Purchaser shall agree.
3.8 Upon Closing the Vendor will:-
3.8.1 produce and deliver to the Purchaser:-
3.8.1.1 duly executed transfers of the Shares in
favour of the Purchaser (or as it will
direct) together with all relevant share
certificates (or in the case of any lost
certificate an indemnity satisfactory to the
Purchaser in relation to it) and together
also with such waivers and consents as the
Purchaser may require to enable the
Purchaser and its nominee(s) to be
registered as the holders of the Shares;
3.8.1.2 written resignations from all of the
directors and the secretary of each Group
Member in the agreed terms;
3.8.1.3 the written resignation of Robson Rhodes as
auditors of each Group Member accompanied by
the statement referred to in section 394 of
the Act;
3.8.1.4 the Taxation Deed duly executed by the
Vendor;
3.8.1.5 the certificate of incorporation, any
certificate(s) of incorporation on change of
name, the common seal and the statutory
books and registers (all entered up to date)
of each Group Member;
22
<PAGE> 23
3.8.1.6 all deeds and documents relating to the
title of any Group Member to the Property;
3.8.1.7 bank statements in respect of each account
of each Group Member as at the close of
business 3 Business Days prior to Closing,
together in each case with a reconciliation
statement prepared by the Vendor to show the
position at Closing (listing unpresented
cheques drawn or received by the relevant
Group Member and standing orders or direct
debits payable since the date of such bank
statements);
3.8.1.8 all licences, certificates or other
documents previously specified in writing by
the Purchaser prior to the date of this
Agreement;
3.8.1.9 all papers, books, records, keys, credit
cards and most recent credit card statements
(together with a reconciliation statement
prepared by each Vendor to show the credit
card balance at Closing) and other property
(if any) of each Group Member which are in
the possession or under the control of the
Vendor or any other person who resigns as an
officer of any Group Member in accordance
with this clause 3;
3.8.1.10 duly executed powers of attorney in the
agreed terms;
3.8.1.11 releases in the agreed terms, duly executed
by each Group Member's bankers of:
(a) any fixed or floating charges over
the assets of each Group Member
held by them; and
(b) any guarantees entered into by any
Group Member in respect of the
obligations of the Vendor and/or
any Associated Company of the
Vendor to such company's bankers
(including any release of all
obligations of any Group Member
under any composite banking
arrangements in favour of the
Vendor and/or any Associated
Companies of the Vendor).
3.8.1.12 duly signed letter from Barclays Bank plc
referred to in clause 2.2.2.
3.8.2 the Vendor will:-
3.8.2.1 repay, and will procure that each Associated
Company of the Vendor will repay, all
amounts owed by it to each Group Member,
whether due for payment or not except any
amounts owed in respect of bona fide
purchases of inventory and supplies which
were supplied on terms no less favourable
than those extended to independent third
parties;
23
<PAGE> 24
3.8.2.2 deliver to the Purchaser a deed in the
agreed terms acknowledging that neither the
Vendor nor any Associated Company of the
Vendor has any claim against any Group
Member and that there is no agreement or
arrangement under which the Company has any
actual, contingent or prospective obligation
(including, but not limited to, any
obligation under any guarantee) to the
Vendor or any Associated Company entered
into by any Group Member; and
3.8.2.3 in respect of any such agreement or
arrangement as is referred to in clause
3.8.2.2 which previously existed deliver to
the Purchaser evidence of the release or
termination of it in form reasonably
satisfactory to the Purchaser;
3.8.3 the Vendor will procure that duly convened meetings
are held at which:-
3.8.3.1 the transfers referred to in clause 3.8.1.1
(subject to stamping if not previously
effected) are approved for registration in
the books of the Company;
3.8.3.2 any persons nominated by the Purchaser and
the Nominated Director are appointed as
additional directors of the specified Group
Member (subject to any maximum number of
directors imposed by the articles of
association of the Company), and any person
nominated by the Purchaser is appointed as
secretary of the specified Group Member; and
3.8.3.3 all existing bank accounts are closed and
all instructions to the bankers of each
Group Member are revoked and new bank
accounts opened and new instructions given
to such bankers as the Purchaser may
nominate, in such form as the Purchaser
directs.
3.8.4 the Vendor will deliver the Employment Agreements
duly executed.
3.8.5 the Vendor will deliver a signed letter of
appointment in respect of the Nominated Director in
the agreed terms;
3.8.6 the Vendor will deliver a duly executed letter of
engagement in the agreed terms in respect of Robson
Rhodes.
24
<PAGE> 25
3.9 On Closing taking place and following compliance by the Vendor
with its obligations to be performed on Closing herein the
Purchaser will:-
3.9.1 pay the Provisional Consideration in accordance with
clause 4.2;
3.9.2 deliver to the Vendor a counterpart of the Taxation
Deed duly executed by the Purchaser; and
3.9.3 deliver to the Vendor the irrevocable standby letter
of credit, in a form reasonably acceptable to the
Vendor, contemplated to be issued at Closing by the
LC Letter
3.10 If in any respect any of the provisions of clause 3.8 are not
complied with by the Vendor on Closing, or if on the Closing
Date any of the Closing Conditions contained in clauses 2.1,
2.2 and 2.3.1 shall not have been satisfied the Purchaser may
3.10.1 defer Closing to a date not more than 14 days after
the Closing Date (so that the provisions of this
Agreement which apply as to Closing shall apply to
Closing as so deferred); or
3.10.2 proceed to Closing so far as is practicable without
prejudice to its rights under this Agreement; or
3.10.3 rescind this Agreement without prejudice to any
rights or remedies available to it under this
Agreement.
3.11 If on the Closing Date any of the Closing Conditions contained
in clauses 2.1, 2.3.2 and 2.3.3 shall not have been satisfied
the Vendor may
3.11.1 defer Closing to a date not more than 14 days after
the Closing Date (so that the provisions of this
Agreement which apply as to Closing shall apply to
Closing as so deferred); or
3.11.2 proceed to Closing so far as is practicable without
prejudice to its rights under this Agreement; or
3.11.3 rescind this Agreement without prejudice to any
rights or remedies available to it under this
Agreement
3.12 If this Agreement is rescinded by the Purchaser pursuant to
the provisions of clause 2.4 or clause 3.10 in respect of a
failure to satisfy any of the Closing Conditions contained in
clauses 2.2.1, 2.2.2, 2.2.4 (where failure to satisfy the
condition contained in clause 2.2.4 is attributable, whether
directly or indirectly, to an act or omission on the part of
the Company and/or the Vendor), 2.2.5 (save only where the
covenant or obligation not performed or complied with is that
contained in clause 3.8.4 above in which event the provisions
of clause 3.19 below apply), 2.2.6 or 2.2.7 or any breach of
any of the provisions of clause 3.8 (other than clause 3.8.4)
then, without prejudice to any other rights which the
Purchaser may have in respect of any antecedent or other
breach of this Agreement, the Vendor shall reimburse to the
25
<PAGE> 26
Purchaser an amount equal to the costs and expenses
(including, but not limited to, attorney's fees, accountant's
fees, adviser's fees and other related costs, but excluding
overhead or lost profits or opportunities) incurred by the
Purchaser in connection with the transaction contemplated by
this Agreement.
3.13 If this Agreement is rescinded by the Vendor pursuant to the
provisions of clause 2.4 or clause 3.11 in respect of a
failure to satisfy any of the Closing Conditions contained in
clauses 2.3.2 or 2.3.3 (save only where the covenant or
obligation not performed or complied with is that contained in
clause 3.9.3 in which event the provisions of clause 3.19
below apply), then, except where the Vendor exercises any
right to rescind it may have which arises by reason of a
failure on the part of the Purchaser to comply with the
provisions of clause 3.9.3 in which event clause 3.19 below
applies, without prejudice to any other rights which the
Vendor may have in respect of any antecedent or other breach
of this Agreement the Purchaser shall reimburse to the Vendor
an amount equal to the costs and expenses (including, but not
limited to, attorney's fees and accountant's fees, adviser's
fees and other related costs, but excluding overhead or lost
profits or opportunities) incurred by the Vendor in connection
with the transaction contemplated by this Agreement.
3.14 If on the Closing Date the Closing Condition contained in
clause 2.2.9 shall not have been satisfied the Purchaser may:-
3.14.1 rescind this Agreement; or
3.14.2 with the consent of the Vendor defer Closing for 30
days (or such longer period as may be agreed) after
the Closing Date (so that the provisions of this
Agreement which apply to Closing shall apply to
Closing as so deferred) provided that the Purchaser
may at the end of such agreed deferred period rescind
this Agreement if the Closing Condition in clause
2.2.9 remains unsatisfied; or
3.14.3 proceed to Closing on the Closing Date or at any time
during the aforesaid agreed deferred period.
3.15 If this Agreement is rescinded by the Purchaser pursuant to
the provisions of clause 3.14 then, without prejudice to any
other rights which the Vendor may have in respect of any
antecedent or other breach of this Agreement, the Purchaser
shall reimburse to the Vendor an amount equal to the costs and
expenses (including, but not limited to, attorney's fees,
accountant's fees, adviser's
26
<PAGE> 27
fees and other related costs, but excluding overhead or lost
profits or opportunities) incurred by the Vendor in connection
with the transaction contemplated by this Agreement or during
the agreed deferred period referred to in clause 3.14.2 above.
3.16 Subject to the provisions of clause 3.19 if any party fails or
refuses to complete the transactions contemplated by this
Agreement in accordance with the provisions hereof upon
satisfaction (or waiver as appropriate) of the Closing
Conditions or any party does not discharge its duties as
required by this Agreement and as a result the Closing
Conditions are not satisfied or not satisfied by the Closing
Date the non-breaching party shall have all rights and
remedies provided under applicable law and equitable
principles and under the terms of this Agreement including
without limitation, rescission, termination, specific
performance and damages (including consequential damages).
These remedies are cumulative and not exclusive of each other
and the non breaching party may seek any and all of these
remedies simultaneously.
3.17 If any party chooses, pursuant to clause 2.4 or otherwise, to
waive any of the Closing Conditions including, without
limitation, any breach of the Warranties or the Purchaser's
Warranties (as the case may be) and proceed to Closing as
contemplated by clause 3.10.2 or 3.11.2 (as the case may be)
such waiver will not affect or prejudice that party's rights
under this Agreement and in particular, but without
limitation, that party's rights to bring a claim under this
Agreement for such breach of Warranty or Purchaser Warranty
(as the case may be).
3.18 The Purchaser agrees with the Vendor that, during the period
commencing on the Closing Date and ending on 31 March 2000,
the Purchaser will procure that each Group Member will:-
3.18.1 continue to operate its business in a manner
substantially consistent with the manner in which
such business was conducted at Closing;
3.18.2 not, without the consent of the Vendor undertake any
reorganisation, reconstruction, amalgamation or
merger except to enable the Company to comply with
the rules, regulations or codes of practice to which
it is subject or otherwise and provided also that the
directors of the Company shall be entitled to take
such action as is necessary to ensure they comply
with their obligations under the Insolvency Act 1986.
27
<PAGE> 28
3.19 The Vendor and the Purchaser agree and acknowledge that,
notwithstanding any provision of this Agreement to the
contrary, if the Vendor or the Purchaser has the right to
rescind this Agreement by reason of (and only by reason of) a
failure on the part of, in the case of rescission by the
Vendor, failure by the Purchaser to deliver on Closing the
irrevocable standby letter of credit referred to in clause
3.9.3, or in the case of rescission by the Purchaser, failure
by the Vendor to deliver on Closing the Employment Agreements
then without prejudice to any other rights which either of
them may have in respect of any antecedent or other breach of
or right to rescind this Agreement, rescission shall be the
only remedy available to them in respect of the failures
referred to in this clause (so that there shall be no
financial remedy available to the parties in respect thereof)
4. CONSIDERATION
4.1 The consideration for the sale of the Shares will be either
(i) the aggregate of the Provisional Consideration and the
Additional Payment or (ii) the Provisional Consideration less
any amount payable to the Purchaser pursuant to clause 4.9.
4.2 The Provisional Consideration will be paid in cash on Closing
by way of a CHAPS transfer from a Clearing Bank to the client
account of the Vendor's Solicitors with MIDLAND BANK PLC, 184
High Street, Bromley, Kent BR1 1HE, sort code 40-15-05,
account number 50853852 or by such other method as may be
agreed between the parties. The Vendor's Solicitors are
authorised to receive the Provisional Consideration on behalf
of the Vendor and payment to them will be a good and
sufficient discharge to the Purchaser and the Purchaser will
not be further concerned as to the application of the moneys
so paid.
4.3 The Purchaser and the Vendor shall procure that as soon as
reasonably practicable following Closing, the Final Closing
Statement is prepared and agreed, or deemed agreed or
determined pursuant to the provisions of Schedule 5.
4.4 [DELETED]
4.5 The following provisions of this clause 4 shall apply
regarding the calculation of the 1999 Gross Profit Amount,
namely:-
4.5.1 the Purchaser shall procure that the 1999 Gross
Profit is calculated and agreed, deemed agreed or
determined pursuant to the provisions of Schedule 6;
28
<PAGE> 29
4.5.2 if the 1999 Gross Profit is equal to or
exceeds(pound)3,500,000 the Purchaser shall, subject
always to the remaining provisions of this clause 4
and clause 10, pay to the Vendor the sum
of(pound)3,500,000 plus an amount, determined on a
pound for pound basis, equal to the difference
between(pound)3,500,000 and the 1999 Gross Profit up
to a maximum of(pound)200,000;
4.5.3 if the 1999 Gross Profit is less than(pound)3,500,000
the Purchaser shall, subject always to the remaining
provisions of this clause 4 and clause 10, pay to the
Vendor a sum determined by applying the following
formula:-
<TABLE>
<S><C>
(1999 Gross Profit - pound sterling 2,340,917)
---------------------------------------------- x pound sterling 3,500,000
(pound sterling 1,159,083)
</TABLE>
4.6 There shall be deducted from the 1999 Gross Profit Amount the
following amounts:-
4.6.1 a sum equal to the Excluded Liabilities; and
4.6.2 a sum equal to the amount by which the Bad Debts
exceed the Bad Debts Reserve by more
than(pound)30,000; and
4.6.3 a sum equal to the Net Worth Deficit (if greater than
zero); and
4.6.4 the amount by which the Trade Debtors are less
than(pound)1,400,000; and
4.6.5 a sum equal to the Taxation Reserve
4.7 A sum equal to the Net Worth Surplus (if greater than zero)
shall be added to the 1999 Gross Profit Amount.
4.8 The 1999 Gross Profit Amount as adjusted pursuant to clauses
4.6 and 4.7, but subject to the provisions of clause 10, shall
(provided the 1999 Gross Profit Amount (as adjusted and
subject to clause 10) is more than zero) be paid in cash, in
the manner specified in clause 4.2, to the Vendor on or before
the Deferred Payment Date.
4.9 If the calculation of the 1999 Gross Profit Amount as
determined and adjusted pursuant to the foregoing provisions
of this clause 4 results in the 1999 Gross Profit Amount as so
determined and adjusted being less than zero the Vendor will,
on or before the Deferred Payment Date, pay to
29
<PAGE> 30
the Purchaser an amount equal to the amount that is required
to return the 1999 Gross Profit Amount, as so determined and
adjusted, to zero provided that any such payment by the Vendor
is to be treated as a reduction of the Provisional
Consideration.
5. WARRANTIES AND INDEMNITIES
5.1 The Vendor:-
5.1.1 hereby warrants, represents and undertakes to the
Purchaser in the terms of the Warranties at the date
of this Agreement and as at the Closing Date by
reference to the facts and circumstances then
existing, provided however that the Purchaser will
not be entitled to claim that any fact or combination
of facts constitutes a breach of any of the
Warranties if and to the extent that (i) such fact or
combination of facts has been fairly disclosed at the
date hereof in the Disclosure Letter; and/or (ii) any
matter, event or circumstance is actually known at
the date of this Agreement by either of John Smucker
or Jon Carlson (and they shall be deemed to have
actual knowledge of the matters events or
circumstances set out in each of (i) the Legal Due
Diligence Report from Eversheds to MCE Companies,
Inc. dated 17 June 1999 (ii) the Limited Scope
Financial Due Diligence Review for MCE Companies,
Inc. prepared by Ernst & Young dated 26 May 1999
(iii) the Phase I Environmental Site Assessment and
Limited Environmental Compliance Assessment Reports
prepared by Dames & Moore dated 17 June 1999 and (iv)
the Report on Dilapidations liability in respect of
the Proposed Acquisition of the Properties in
Shoeburyness, Essex prepared by Lambert Smith Hampton
dated 28 June 1999)and the matter, event or
circumstance is actually known by either of them to
be a breach of a specific Warranty, whether given at
the date of this Agreement or repeated at Closing,
(and the knowledge of the Purchaser for the purposes
of this Agreement shall be deemed to be only the
actual knowledge of such individuals);
5.1.2 will on the Closing Date amend, add to or supplement
the Disclosure Letter for the purposes of qualifying
the Warranties when the same are repeated as at
Closing (in relation to any matter of which the
Vendor becomes aware after the date hereof but prior
to Closing) provided always that disclosure after the
date of this Agreement of any fact matter or
circumstance shall not be effective to:-
5.1.2.1 cure any breach of such Warranties as given
at the date of this Agreement or at the
Closing Date (for which the Vendor shall
remain liable notwithstanding such
disclosure); or
30
<PAGE> 31
5.1.2.2 satisfy the Closing Conditions in clause 2.2
where that Closing Condition would not, but
for the disclosure of such fact matter or
circumstances, have been satisfied;
5.1.3 agrees and confirms that the Purchaser is entering
into this Agreement on the basis:-
5.1.3.1 of the Warranties as given on the date of
this Agreement; and
5.1.3.2 that the Warranties will be repeated on
Closing in the manner specified herein; and
5.1.3.3 that the Purchaser will be entitled to
recover in respect of a breach of any of the
Warranties (whether as given at the date of
this Agreement or as repeated at Closing)
without reference to any disclosure made
(except for those matters fairly disclosed
in the Disclosure Letter) or information
provided by or on behalf of the Vendor
whether before or after the date of this
Agreement or, save as provided in clause
5.1.1 or any information, matter, fact or
circumstance which is or becomes known by
the Purchaser or any adviser acting on
behalf of the Purchaser. No knowledge,
howsoever obtained or disclosure made by the
Vendor (except as aforesaid) whether before
or after the date of this Agreement shall,
in any way, diminish or otherwise affect the
Purchaser's ability to recover in respect of
any breach of the Warranties as given either
at the date of this Agreement or as repeated
on Closing;
5.1.4 agrees and confirms that liability under any Warranty
(whether given on the date of this Agreement or
repeated on Closing) shall not be confined to
breaches discovered before Closing nor in any way be
modified or discharged by Closing;
5.1.5 will indemnify defend and hold harmless the
Purchaser, for itself and as trustee for each Group
Member and their respective employees, directors,
officers, representatives and agents, against any
damage, loss, costs or expenses (including legal
costs) which it or they may incur, either before or
after the commencement of any action, directly or
indirectly as a result of:-
5.1.5.1 any breach or violation of any obligation
covenant or agreement on the part of the
Vendor contained in this Agreement but
excluding any breach or violation of the
Warranties; or
5.1.5.2 the existence of any Excluded Liabilities in
either Group Member (to the extent that the
same have not been reflected in the
Provisional Consideration or deducted from
the Additional Payment);
31
<PAGE> 32
5.1.5.3 any breach or violation of any contractual
arrangement with Long Distance Technologies
arising from facts or circumstances in
existence prior to the Closing Date;
5.1.5.4 the circumstances surrounding Mr Harris'
redundancy to the extent that such
liability, damage, loss, costs or expenses
exceeds(pound)5,000
5.1.5.5 any obligations to repair and decorate the
premises known as 4, Vanguard Way,
Shoeburyness, Essex as demised by an
underlease dated 2 April 1985 and made
between Ricereel Limited (1) and Nore
Microwave Limited (2) for a term of 15 years
from 18 March 1989, including in particular
but without limitation the obligations
regarding maintenance repair and decoration
contained in such lease, provided always
that the Vendor's liability under this
clause 5.1.5.5 shall be one half of the
relevant Group Member's damage, loss, costs
or expenses and in any event shall not
exceed(pound)50,000 plus VAT and any claim
made against any Group Member which gives
rise to the indemnification obligation under
this clause 5.1.5.5 shall be dealt with in
conjunction with the Vendor;
5.1.6 undertakes that, in the event of any claim being made
against the Vendor whether under the Warranties
(whether as given at the date of this Agreement or as
repeated on Closing) or otherwise in connection with
the sale of the Shares to the Purchaser, the Vendor
will not make any claim against any Group Member, or
in the absence of fraud or dishonesty against any
director or employee of any Group Member, on which or
on whom the Vendor may have relied before agreeing to
any term of this Agreement or the Taxation Deed or
authorising any statement in the Disclosure Letter.
5.2 The Purchaser shall indemnify, defend and hold harmless the
Vendor and its Associated Companies and their respective
employees, directors, officers, representatives and agents
against any damage, loss, costs or expenses (including legal
costs) which it or they may incur, either before or after the
commencement of any action, directly or indirectly as a result
of:-
5.2.1 any breach or violation of any obligation, covenant
or agreement on the part of the Purchaser contained
in this Agreement; or
5.2.2 any breach or violation of the Purchaser's
Warranties.
32
<PAGE> 33
5.3 Without restricting the rights of the Purchaser or the ability
of the Purchaser to claim damages on any basis available to
it, the Vendor undertakes to the Purchaser that, in the event
of a breach of any of the Warranties (whether as given at the
date of this Agreement or as repeated at Closing), the Vendor
will, forthwith on demand by the Purchaser, pay:-
5.3.1 to the Purchaser or the relevant Group Member (as the
Purchaser directs) or, in the case of a liability to
another person which has not been discharged, the
person to whom the liability has been incurred, the
full amount of any shortfall or diminution in the
value of any assets of the relevant Group Member, or
the full amount of any liability of the relevant
Group Member incurred by it, as a result of or in
relation to any act, matter, thing or circumstance
constituting a breach of any such Warranties; and
5.3.2 to the Purchaser or the relevant Group Member (as the
Purchaser directs and to the extent not already
compensated for by any payment made in respect of the
same breach under clause 5.3.1), the amount by which
the profitability of the relevant Group Member is
less, or its losses greater, than would have been the
case if the Warranty concerned had been true and
correct, calculated on the same basis as if such
reduction in profitability or increase in losses were
suffered as the result of any actionable wrong done
to the relevant Group Member.
5.4 Each of the Warranties will be construed as a separate
Warranty and will not be limited to or restricted by reference
to, or inference from, the terms of any other Warranty or any
other term of this Agreement.
5.5 In this Agreement, unless otherwise specified, where any
Warranty refers to the knowledge, information, belief or
awareness of the Vendor (or similar expression), the Vendor is
deemed to have such knowledge, information, belief or
awareness as the Vendor would have obtained had the Vendor
made due and careful enquiries into the subject matter of that
Warranty.
5.6 If, prior to Closing, it shall be found that any of the
Warranties (whether as given at the date of this Agreement or
as repeated at Closing) is breached or unfulfilled in
circumstances where, in accordance with this Agreement, the
Purchaser is entitled by notice in writing to the Vendors to
rescind this Agreement, then the exercise of or failure to
exercise such right shall not constitute a waiver of any other
rights of the Purchaser arising by reason of any breach of any
of such Warranties and exercise of or failure to exercise such
right shall be without prejudice to any other rights and
remedies the Purchaser may have under or in respect of this
Agreement.
33
<PAGE> 34
5.7 If, following Closing, the Purchaser becomes aware (whether it
does so by reason of any disclosure made pursuant to this
Agreement or otherwise) that there has been any breach of the
Warranties or any other term of this Agreement, the Purchaser
shall not be entitled to treat this Agreement as terminated,
but shall be entitled to claim damages or exercise any other
right power or remedy under this Agreement or as otherwise
provided by law.
5.8 The Purchaser confirms that at the date hereof neither Jon
Carlson nor John Smucker have any actual knowledge of any
matter, event or circumstance which either Jon Carlson or John
Smucker knows gives rise to a claim under the Warranties given
at the date of this Agreement.
5.9 In this clause 5.9 and clause 5.10 "claim" or "claims" means
any claim which would be capable of being made against the
Vendor for breach of the Warranties (whether as given at the
date of this Agreement or as repeated at Closing).
Notwithstanding the foregoing provisions of clause 5:-
5.9.1 the aggregate liability of the Vendor in respect of
all claims will be limited to the Consideration;
5.9.2 the Vendor will be under no liability to make any
payment in respect of any claim unless the amount of
its liability in respect of such claim is (when
aggregated with the Vendor's liability in respect of
any other claim or claims made by the Purchaser or
which would have been made but for the provisions of
this clause 5.9.2) in excess of(pound)50,000 in which
event the Vendor will (subject to the other
provisions of this clause 5.9) be liable for the
amount of such liability in excess of(pound)30,000;
5.9.3 the Vendor will be under no liability to make any
payment in respect of any claim unless written
particulars of the claim (giving details of the
specific matter in respect of which such claim is
made) are given to the Vendor:-
5.9.3.1 in the case of the Warranties, except the
Warranties contained in paragraphs 2.2 to
2.4 inclusive, 14.11, 25 and 32 to 51
inclusive contained in Schedule 3, within
two years from the Closing Date; and
5.9.3.2 in the case of the Warranties contained in
paragraphs 2.2 to 2.4 inclusive, 14.11, 25
and 32 to 51 inclusive of Schedule 3, within
six years from the Closing Date;
34
<PAGE> 35
5.9.4 any claim in respect of which notice shall have been
given in accordance with clause 5.9.3 shall be deemed
to have been irrevocably withdrawn and lapsed (not
having been previously satisfied, settled or
withdrawn) if proceedings in respect of such claim
have not been issued and served on the Vendor not
later than the expiry of the period of 9 months after
the date of such notice provided that in the case of
a claim based upon a liability which is contingent or
otherwise not capable of being quantified the 9 month
period referred to above shall commence on the date
upon which the contingent liability becomes an actual
liability or the liability is capable of being
quantified provided that if the Purchaser shall have
notified the Vendor of a claim in respect of a
contingent liability within the time periods referred
to in clauses 5.9.3.1 and 5.9.3.2 the Purchaser shall
be permitted to bring the claim once the liability
ceases to be contingent and the provisions of this
clause 5.9.4 shall apply so that proceedings must be
issued and served within 9 months of the date the
liability ceases to be contingent;
5.9.5 (save as provided in clause 5.9.6) if the Purchaser
and/or Company is entitled to recover from some other
person any sum in respect of any matter giving rise
to a claim then, subject to the Vendor accepting
liability under the Warranties, (but without
determining the quantum of liability), the Purchaser
shall, provided always that the board of the Company
and the Purchaser have resolved in good faith that to
do so would not damage to any extent honestly
considered by the Purchaser or the Company to be
material the goodwill of the Purchaser and/or the
Company, and subject to the Vendor submitting
reasonable evidence of its ability to pay the
relevant costs procure that reasonable steps are
taken (at the cost of the Vendor and provided that
the Company and/or the Purchaser are indemnified
against all liability, damage, loss, costs and
expenses for which the Company and/or the Purchaser
may become liable) to enforce such recovery and, if
any sum is so recovered, then either the amount
payable by the Vendor in respect of that claim shall
be reduced by an amount equal to the sum so recovered
(less the reasonable costs, expenses and charges
incurred by the Purchaser and/or the Company in
recovering that sum and less an amount equal to any
liability to taxation of the Company and/or the
Purchaser as a result of its receipt) or, (if an
amount shall already have been paid by the Vendor in
respect of that claim), there shall be repaid to the
Vendor an amount equal to the amount so recovered
(less the reasonable costs expenses and charges
incurred by the Purchaser and/or the Company in
recovering that sum and less an amount equal to any
liability to taxation of the Company and/or the
Purchaser as a result of its receipt) or (if less)
the amount paid by the Vendor in respect of that
claim;
35
<PAGE> 36
5.9.6 the Vendor will have no liability in respect of any
claim to the extent of any amount (less costs of
recovery) actually recovered by the Purchaser under
any of its insurance policies, provided that nothing
in this clause shall compel the Purchaser to make a
claim under its insurance policies save to the extent
that the Company has insurance in place at the
Closing Date and to make any such claim would not
have a material adverse effect on the ability of the
Purchaser or the Company to obtain insurance in the
future or would materially and adversely affect the
premiums payable under the then current policies;
5.9.7 the Vendor will have no liability (or such liability
shall be reduced) in respect of any claim;
5.9.7.1 to the extent that an identifiable provision
or reserve has been made in respect thereof
in the Accounts or the Final Closing
Statement, provided that, in the case of
deferred taxation, such limitation shall
only apply to the extent that the provision
concerned was made specifically in respect
of the event giving rise to the claim but
not otherwise;
5.9.7.2 if and to the extent that any such claim
occurs or is increased as a result of (i)
any change in legislation after the Closing
Date (or any legislation not in force and
not on the statute books at the Closing
Date) which takes effect retrospectively or
(ii) the withdrawal after the Closing Date
of any published concession or published
general practice previously made by the
Inland Revenue or other taxing authority
details of which are set out in the
Disclosure Letter;
5.9.7.3 if and to the extent that such claim occurs
or is increased as a result of any increase
in any rate of taxation in force at the
Closing Date where such increase is
announced after Closing;
5.9.7.4 if and to the extent that such claim is
attributable to any voluntary act or
omission or transaction or arrangement
carried out by the Purchaser or the Company
after the Closing Date otherwise than in the
ordinary course of business and where it was
reasonably known by the Purchaser that the
act, omission, transaction or arrangement
concerned would give rise to the claim in
question;
5.9.7.5 if and to the extent that such claim would
not have arisen or would have been reduced
or eliminated but for the failure or
omission on the part of the Purchaser or the
Company to make any claim, election,
surrender or disclaimer or give notice or
consent to do any other thing under the
36
<PAGE> 37
provisions of any enactment or regulation
relating to taxation after the Closing Date,
the making, giving or doing of which was
taken into account in computing the
provision for taxation in the Accounts
provided that the Vendor shall have notified
the Purchaser in the Disclosure Letter of
the need for such claim, election,
surrender, disclaimer, notice or consent as
aforesaid prior to the date of this
Agreement;
5.9.7.6 if and to the extent that such claim relates
to a liability for taxation which would not
have arisen but for any winding up or
cessation after the Closing Date of any
trade or business carried on by the Company;
5.9.7.7 if and to the extent such claim would not
have arisen but for a change of accounting
policy or practice of the Company after the
Closing Date provided that this limitation
shall not apply where the change in
accounting policy or practice of the Company
after the Closing Date results from the fact
that the treatment in the Accounts did not
comply with the relevant UK Statements of
Standard Accounting Practice, Financial
Reporting Statements or any other statement
of accounting practice which should have
been applied;
5.9.8 the amount of any claim shall take into account the
amount of any relief from taxation arising by virtue
of the loss or damage in respect of which the claim
was made to the extent to which such relief reduces
or eliminates a liability of the Company to pay
taxation for which the Purchaser could not make a
claim against the Vendor under the Warranties
contained in paragraphs 32 to 51 of Schedule 3;
5.9.9 if in respect of any claim the liability of the
Vendor is contingent only then the Vendor shall not
be under any obligation to make any payment to the
Purchaser (or the Company) until such time as the
contingent liability ceases to be contingent and
becomes actual provided that the provisions of clause
5.9.4 shall not apply to such claim whilst such
liability remains contingent;
5.9.10 no claim whatever on the part of the Purchaser shall
lie in respect of any breach of the Warranties or the
Taxation Deed if and to the extent that such breach
has arisen in respect of any act or omission
stipulated to be carried out by or omitted to be
undertaken by the Purchaser or the Company pursuant
to the express terms of this Agreement;
5.9.11 the Purchaser shall, as soon as reasonably
practicable, upon it or the Company becoming aware of
any claim, give notice in writing to the Vendor of
the claim;
37
<PAGE> 38
5.9.12 if the Purchaser becomes aware of any written claim
against it or the Company made by a third party which
gives rise to a claim under the Warranties ("a third
party claim") the following provisions shall apply:-
5.9.12.1 subject to the Vendor accepting liability
under the Warranties (but without
determining the quantum of liability), the
Vendor submitting reasonable evidence of its
ability to pay or perform such third party
claim and the Vendor indemnifying the
Purchaser against all liability, loss,
damage, costs and expenses which the
Purchaser and/or the Company may incur
thereby and provided always that the board
of the Company and the Purchaser have
resolved in good faith that to do so would
not damage to any extent honestly considered
by the Purchaser or the Company to be
material the goodwill of the Purchaser
and/or the Company, the Purchaser shall
permit the Vendor to have conduct ("the
Conduct") in the name of the Purchaser
and/or the Company (as appropriate) and to
take any action required to remedy, defend,
mitigate avoid, resist, defeat, compromise
or enforce the third party claim in question
provided that the Vendor shall comply with
the reasonable requests of the Purchaser
with respect to the Conduct; and
5.9.12.2 the Vendor shall keep the Purchaser
reasonably informed of all and any steps or
action taken by the Vendor in connection
with any third party claim and supply the
Purchaser within a reasonable period of
demand with copies of such documents and
correspondence as the Purchaser shall
reasonably request.
5.10 Notwithstanding any other provisions of this
Agreement, the provisions of clause 5.9 shall not
apply to exclude or limit the liability of the Vendor
to the extent that any claim arises by reason of any
fraud or dishonesty by the Vendor.
5.11 For the avoidance of doubt the Purchaser shall not be
entitled to recover damages in respect of any claim
for breach of the Warranties and/or of the covenants
contained in the Taxation Deed where to do so would
involve recovery more than once in respect of the
same loss or damage.
5.12 Any amount payable by the Vendor to the Purchaser in
satisfaction of any claim made under the Warranties
or under the Taxation Deed shall be treated as a
reduction by that amount of the Consideration.
38
<PAGE> 39
6. RESTRICTIVE COVENANTS
6.1 For the purpose of assuring to the Purchaser the full benefit
of each Group Member and in consideration for the Purchaser
agreeing to buy the Shares on the terms of this Agreement, the
Vendor undertakes to the Purchaser that the Vendor will not
and will procure that no Associated Company of the Vendor will
not, and will procure that no person who is a member of the
Vendor at the date of this Agreement will, without the prior
written consent of the Purchaser, whether directly or
indirectly and whether alone or in conjunction with, or on
behalf of, any other person and whether as principal,
shareholder, director, employee, agent, consultant, partner or
otherwise:-
6.1.1 for a period of 3 years immediately following
Closing, canvass, solicit or approach, or cause to be
canvassed, solicited or approached, for orders any
person who at any time during the 24 months
immediately preceding the Closing date is or was:-
6.1.1.1 negotiating with any Group Member for the
supply by any Group Member of goods or
services; or
6.1.1.2 a client or customer of any Group Member; or
6.1.1.3 in the habit of dealing with any Group
Member, where the orders relate to goods
and/or services which are competitive with
or of the type supplied by any Group Member
at any time during the 24 months immediately
preceding the Closing Date;
6.1.2 for a period of 3 years immediately following
Closing, deal or contract with any person who at any
time during the 24 months immediately preceding the
Closing Date is or was:-
6.1.2.1 negotiating with any Group Member for the
supply by any Group Member of goods or
services; or
6.1.2.2 a client or customer of any Group Member; or
6.1.2.3 in the habit of dealing with any Group
Member, where the dealing or contracting
relates to goods and/or services which are
competitive with or of the type supplied by
any Group Member at any time during the 24
months immediately preceding the Closing
Date;
39
<PAGE> 40
6.1.3 for a period of 3 years immediately following
Closing, interfere, or seek to interfere, with the
continuance of supplies to any Group Member from any
supplier who has been supplying goods and/or services
to any Group Member at any time during the 24 months
immediately preceding the Closing Date if such
interference causes or would cause that supplier to
cease supplying, or materially reduce its supply of,
those goods and/or services to any Group Member;
6.1.4 for a period of 12 months immediately following
Closing, solicit or entice (but excluding
advertisements for positions in newspapers,
periodicals and trade press), or endeavour to solicit
or entice, away from any Group Member, or employ, any
person employed in a managerial, supervisory,
technical or sales capacity by, or who is or was a
consultant to, any Group Member at Completion or at
any time during the period of 12 months immediately
preceding the Closing Date;
6.1.5 for a period of 3 years immediately following Closing
be engaged, concerned or interested in, or provide
technical, commercial or professional advice to, any
other business which supplies goods and/or services
which are competitive with or of the type supplied by
any Group Member such advice being in relation to
those competitive goods and/or services at or within
the 24 months immediately preceding Closing; provided
that this restriction does not apply to prevent the
Vendor or any Associated Company of the Vendor at the
date of this Agreement from holding shares or other
securities in any company which are quoted, listed or
otherwise dealt in on a recognised stock exchange or
other securities market and which confer not more
than 1 per cent in aggregate of the votes which could
be cast at a general meeting of such company;
6.1.6 save as provided otherwise by this Agreement use in
connection with any business any name which includes
the name of any Group Member or any colourable
imitation of it apart from the name "Densitron".
40
<PAGE> 41
6.2 The Vendor acknowledges that the Vendor has information in
respect of the business and financing of Group Members and
their dealings, transactions, affairs, plans and proposals,
all of which information is, or may be, secret or confidential
and important to such Group Members. In this clause 6 such
information is called "Confidential Information" and includes,
without limitation, confidential or secret information
relating to each Group Member's trade secrets, know-how,
ideas, business methods, finances, prices, business plans,
marketing plans, development plans, manpower plans, sales
targets, sales statistics, customer lists, customer
relationships, computer systems and computer software. The
Vendor further acknowledges that the disclosure of
Confidential Information (whether directly or indirectly) to
actual or potential competitors of a Group Member would place
that Group Member at a competitive disadvantage and would do
damage (whether financial or otherwise) to its business. The
Vendor accordingly agrees to enter into the restrictions
contained in clause 6.3.
6.3 The Vendor undertakes that the Vendor will not, and will
procure that no Associated Company will, at any time after
Closing:-
6.3.1 disclose to any person except to those authorised by
a Group Member to know;
6.3.2 use for the Vendor's own purposes or for any purposes
other than those of a Group Member; or
6.3.3 through any failure to exercise all due care and
diligence cause or permit any unauthorised disclosure
of,
any Confidential Information of such Group Member,
provided that these restrictions on the Vendor will
cease to apply to information which (otherwise than
through the default of the Vendor) becomes available
to the public generally and except to the extent (if
any) required by law or the regulations of the London
Stock Exchange or as required by any rules,
regulations or codes of practice to which the Vendor
is subject.
6.4 The parties agree that each of the undertakings set out in
this clause 6 is separate and severable and enforceable
accordingly and if any one or more of such undertakings or
part of an undertaking is held to be against the public
interest or unlawful or in any way an unreasonable restraint
of trade, the remaining undertakings or remaining part of the
undertakings will continue in full force and effect and will
bind the Vendor.
6.5 The Vendor acknowledges that, in the event of a breach of any
provision of this clause 6, damages may be an inadequate
remedy and that the Purchaser shall be entitled to all other
rights and remedies including injunctive relief.
41
<PAGE> 42
7. PURCHASER ASSURANCES
7.1 The Purchaser warrants to the Vendor that the Purchaser has
the necessary corporate power and authority, and all
authorisations approvals consents and licences needed by the
Purchaser have been unconditionally and irrevocably obtained
and are in full force and effect, to permit the Purchaser to
enter into and perform this Agreement and the arrangements
herein contemplated and this Agreement has been duly approved
by the directors of the Purchaser at duly convened meetings of
those directors and constitute legally binding obligations of
the Purchaser.
7.2 Subject to such rights as the Purchaser may have under this
Agreement the Purchaser undertakes to the Vendor to procure
that neither the Purchaser nor any Group Member will at any
time after Closing hold itself out as a Subsidiary of or
otherwise connected with the Vendor or use in connection with
any business the name "Densitron Microwave" or any colourable
imitation of it and (without limiting the foregoing but
subject to the remainder of this clause 7.2) to procure that
within a reasonable period the same is deleted from all
printed material including (without limitation) stationery,
compliments slips, invoices, business cards, catalogues,
brochures, sales material and (if relevant and where requested
by the Vendor) from signage at the Property and any other
premises from which any Group Member carries on business or
otherwise operates and from motor vehicles and other tangible
assets used by any Group Member. Notwithstanding anything
contained herein to the contrary, the Purchaser and each Group
Member shall be permitted to continue to use the name
"Densitron Microwave" and any similar or other names used by
each Group Member at the date hereof for a period of at least
ninety (90) days after the Closing Date.
7.3 The Purchaser acknowledges that the Purchaser has information
in respect of the business and financing of the Vendor and its
Associated Companies (which for the purposes of this clause 7
excludes the Company and the Subsidiary) and their dealings,
transactions, affairs, plans and proposals all of which
information is or may be secret or confidential and important
to the Vendor and its Associated Companies. In this clause 7
such information is "Confidential Information" and includes,
without limitation, confidential or secret information
relating to each of the
42
<PAGE> 43
Vendor's and its Associated Companies' trade secrets, know-how, ideas,
business methods, finances, prices, business plans, marketing plans,
development plans, manpower plans, sales targets, sales statistics,
customer lists, customer relationships, computer systems and computer
software. The Purchaser further acknowledges that the disclosure of
Confidential Information (whether directly or indirectly) to actual or
potential competitors of the Vendor and its Associated Companies will
place the Vendor and its Associated Companies at a competitive
disadvantage and would do damage (whether financial or otherwise) to
its business. The Purchaser accordingly agrees to enter into the
restrictions contained in clause 7.4.
7.4 The Purchaser undertakes that the Purchaser will not at any
time after Closing:-
7.4.1 disclose to any person except those authorised by the
Vendor to know;
7.4.2 use for the Purchaser's own purposes or for the
purposes of any Company in the Purchaser's Group; or
7.4.3 through any failure to exercise all due care and
diligence cause or permit any unauthorised disclosure
of
any Confidential Information of the Vendor or Associated
Companies, provided that those restrictions on the Purchaser
will cease to apply to information which (otherwise than
through the default of the Purchaser) becomes available to the
public generally and except to the extent (if any) required by
law or the regulations of the London Stock Exchange or as
required by any rules, regulations or codes of practice to
which the Purchaser is subject.
7.5
7.5.1 The Purchaser hereby warrants to the Vendor in the
terms of Schedule 4 at the date of this Agreement and
at the Closing by reference to the facts and
circumstances then existing.
7.5.2 The Purchaser agrees and confirms that the Vendor is
entering into this Agreement on the basis of the
Purchaser's Warranties as given on the date of this
Agreement and on the basis that they will be repeated
on Closing in the manner specified herein and on the
basis that the Vendor will be entitled to recover
under a Purchaser Warranty (subject to the terms and
conditions of this
43
<PAGE> 44
Agreement) when repeated on Closing without reference
to any disclosure made or information provided by or
on behalf of the Purchaser after the date of this
Agreement. No knowledge howsoever obtained after the
date of this Agreement or disclosure made by the
Purchaser after the date of this Agreement shall in
any way diminish or otherwise affect the Vendor's
ability to recover in respect of the Purchaser
Warranties either as a result of them having been
given on the date of this Agreement or being repeated
on Closing.
7.5.3 Liability under any Purchaser Warranty (whether given
on the date of this Agreement or repeated on Closing)
or for any breach of any obligations of the Purchaser
under this Agreement shall not be confined to
breaches discovered before Closing nor in any way be
modified or discharged by Closing.
8. PURCHASER'S UNDERTAKINGS
8.1 The Purchaser undertakes that it will procure that the
Company:-
8.1.1 will, for the period from the Closing Date until 31st
March 2000, continue to use the Japan based and the
Taiwan based supply arrangements on terms and
conditions substantially the same as those currently
in effect (which terms and conditions are set out in
the Disclosure Letter) provided that such terms and
conditions remain competitive with those offered or
otherwise available to the Company by independent
third parties and the Purchaser agrees to encourage
its other subsidiaries to use such Japan based and
Taiwan based supply arrangements for their respective
supplies provided that such terms and conditions
offered to the subsidiaries are competitive or as
aforesaid, with those offered by independent third
parties;
8.1.2 uses all reasonable endeavours to collect on a basis
which is consistent with past practice all non
factored trade debts and, if a person is indebted to
the Company generally any general payment on account
of its indebtedness shall be applied in or towards
discharging the non factored trade debts in the
chronological order of their indebtedness in priority
to any other debts.
8.1.3 will provide all reasonable assistance and
information (of a type and on a basis which is
consistent with past established practice) to Griffin
Factors Limited where the same is reasonably
requested by them in relation to any factored trade
debtors on request;
44
<PAGE> 45
8.1.4 will provide management accounts of the Company to
the Nominated Director in a format which is
substantially consistent with that prepared by the
Company prior to the Closing Date within 21 days of
each month end;
8.1.5 will deliver to the Vendor on the Closing Date all
cheque books in current use of each Group Member;
8.1.6 will provide all reasonable information and
assistance to the Vendor
8.1.6.1 to enable it to prepare and submit its VAT
returns for the relevant VAT periods;
8.1.6.2 in the preparation of the Vendor's
consolidated financial statements for the 6
months to 31 June 1999
8.2 Subject always to the terms of the letter of appointment in
the Agreed Terms between the Company and the Nominated
Director to be entered into and dated on Closing the Purchaser
undertakes to ensure that the Nominated Director remains as a
director of the Company (i) in the event the Purchaser is
obliged to make a payment to the Vendor pursuant to clause
4.8, until the date the Additional Payment is made, or (ii) in
the event either the Vendor is obliged to make a payment to
the Purchaser pursuant to clause 4.9 or no payment falls to be
made by either the Vendor to the Purchaser or vice versa
pursuant to either clause 4.8 or clause 4.9 respectively,
until the date on which all items required to be known to
determine the operation of clauses 4.8 and/or 4.9 have been
agreed, deemed agreed or determined in accordance with this
Agreement.
8.3 The Purchaser agrees to use and will procure that the Company
uses all reasonable endeavours after Closing, (but without
imposing any undue financial obligation on either of them), to
secure the release of the Vendor from the guarantees and other
contingent liabilities listed in the Disclosure Letter for the
purpose of this clause (offering, where reasonable, its own
covenant in substitution if requested by the Vendor) and shall
in the meantime indemnify the Vendor and keep the Vendor
indemnified against any liability (including costs damages and
expenses) thereunder or which may be incurred in relation
thereto arising from any act or omission of the Company and/or
the Purchaser after the Closing Date provided that the
guarantees and other contingent liabilities in respect of
which indemnification is to be given shall be limited to those
which are expressly described in the Disclosure Letter.
Nothing in this clause 8.3 shall impose any obligation on the
part of the Purchaser to provide any additional information to
the Vendor or the beneficiary of any guarantee to that
provided prior to the date of this Agreement.
45
<PAGE> 46
9. PURCHASER'S GUARANTEE
9.1 In consideration of the Vendor entering into this Agreement
the Guarantor irrevocably and unconditionally:-
9.1.1 guarantees to the Vendor the due payment, observance
and performance by the Purchaser of all of its
liabilities and obligations under or arising out of
this Agreement (including, without limitation, any
liability or obligation to pay damages or other
compensation for any breach of any of the Purchaser's
Warranties);
9.1.2 undertakes with the Vendor that, whenever the
Purchaser shall fail to pay or perform when due any
of the liabilities or obligations referred to in
clause 9.1.1, it will, on demand by the Vendor, from
time to time pay, perform or procure the performance
of any and all of the same.
9.2 This clause 9 is a continuing guarantee and will remain in
full force and effect until all the liabilities and
obligations referred to in clause 9.1.1 have been irrevocably
paid and satisfied in full.
9.3 The Guarantor agrees to indemnify the Vendor against all
losses, damages, costs, claims, demands, liabilities, fees and
expenses incurred or arising as a result of any failure by the
Purchaser to comply with any of the terms of this Agreement.
10. SET OFF
The Vendor irrevocably acknowledges to and agrees with the Purchaser
that:-
10.1 if the Purchaser (whether for itself or, as trustee for any
other person) has a bona fide claim against the Vendor arising
out of or connected with the Warranties (whether as given at
the date of this Agreement or as repeated at Closing), or any
other provision of this Agreement (including without
limitation any indemnities contained herein) or under the
Taxation Deed and, in respect of the Warranties only, the
Purchaser has complied with the requirements of clause 5.9.11
and such claim shall not have been deemed to have been
irrevocably withdrawn and lapsed pursuant to clause 5.9.4, the
Purchaser shall be entitled to retain from any amounts due and
payable by the Purchaser to the Vendor under this Agreement
including, without limitation, the Additional Payment, an
amount equal to the amount of the claim in question ("the
Liability") pending the determination and/or settlement and/or
compromise and/or withdrawal and lapse of the claim in
question; or
46
<PAGE> 47
10.2 if the Vendor is or becomes liable to pay to the Purchaser any
sums in respect of any such claim the Purchaser shall be
entitled (but not obliged) to deduct or set-off the Liability
against any such sums,
strictly without prejudice to the right of the Purchaser to recover
from the Vendor direct the Liability to the extent that it is not
deducted from or set-off against any amounts due and payable by the
Purchaser to the Vendor under this Agreement.
11. VAT DEGROUPING
11.1 The Vendor will make an appropriate application to HM Customs
& Excise to de-group each Group Member from the VAT Group in
accordance with the provisions of section 43(5) Value Added
Tax Act 1994 and prepare and submit the VAT Group VAT returns
for the relevant VAT month up to the Closing Date after the
Closing Date by their proper due dates.
11.2 The Purchaser will make an appropriate application to HM
Customs & Excise to register the Company for VAT purposes
effective from the closing Date.
12. ANNOUNCEMENTS
No announcement concerning the transactions contemplated by this
Agreement or any matter ancillary to it and no disclosure of the terms
of this Agreement will (save as required by law) be made by the Vendor
except with the prior written approval of the Purchaser or by the
Purchaser or the Guarantor except with the prior written approval of
the Vendor and any announcement required by the regulations of the
London Stock Exchange or as required by the rules, regulations or codes
of practice to which either party are subject will only be made after
prior consultation with the other party.
13. COSTS
Except as otherwise expressly provided herein, the parties shall pay
their own fees and expenses, including their own legal and accounting
fees incurred in connection with this Agreement or any transaction
contemplated hereby (including the Transaction Fees), with the Vendor
paying any such fees and expenses of the Company payable but not paid
prior to the Closing Date.
47
<PAGE> 48
14. INTEREST
If the Vendor or the Purchaser becomes liable to pay the other or in
the case of the Vendor any Group Member any sum pursuant to this
Agreement whether a liquidated sum or by way of damages or otherwise,
the Vendor or the Purchaser (as the case may be) will be liable to pay
interest on such sum from the due date for payment at the annual rate
of 4 per cent above the base lending rate from time to time of Barclays
Bank plc, accruing on a daily basis until payment is made, whether
before or after any judgment.
15. NOTICES
15.1 The addresses for service of the parties to this Agreement
shall be:-
15.1.1 in the case of each of the Vendor:-
MCE Companies, Inc.
310 Depot Street, Ann Arbor, Michigan 48104
(Tel: 734 716 8191 Fax: 734 761 1727)
Attention: John L Smucker, President
(e-mail: "[email protected]")
with a copy to:
(1) Eversheds
115 Colmore Row, Birmingham B3 3AL
(Tel: 0121 232 1000 Fax: 0121 232 1900)
Attention: Susan Lewis
(e-mail: "[email protected]")
48
<PAGE> 49
(2) Dykema Gossett PLC
400 Renaissance Center, Detroit, Michigan
48243-1668
Attention: J Michael Bernard Esq
(Tel: 313 568 5374 Fax: 313 568 6832)
(email: "[email protected])
15.1.2 in the case of the Purchaser:-
Densitron International PLC
Unit 4 Airport Trading Estate
Biggin Hill
Westerham Kent TN16 3BW
For the attention of Cliff Hardcastle
with copies:
For the attention of David Philip
and
Wellers
Tenison House 45 Tweedy Road
Bromley Kent BR1 3NF
For the attention of: Tony Summers
15.2 Any notice will be deemed well served on the party to whom it
is addressed if it be served personally or by courier delivery
addressed to such party at its address for service and such
service shall be deemed to be effective upon such personal or
courier delivery taking place.
15.3 Any notice or statement so sent by facsimile process shall be
deemed to have been served at the expiration of 2 hours after
the time of despatch, if despatched before 3.00 pm (local time
at the place of destination) on any Business Day, and in any
other case at 10.00 am (local time at the place of
destination) on the Business Day following the date of
despatch, provided that despatch is evidenced by a
transmission slip and it is followed by a hard copy of the
notice or statement served on the recipient in accordance with
clause 15.2.
49
<PAGE> 50
16. GENERAL
16.1 This Agreement will be binding on and will enure for the
benefit of each party's successors and assigns (as the case
may be).
16.2 Except insofar as the same have been fully performed at the
Closing Date, each of the agreements, covenants, obligations,
warranties, indemnities and undertakings contained in this
Agreement will continue in full force and effect
notwithstanding Closing.
16.3 The parties agree that they will do all such acts and things
and execute all such documents as may be required on or
subsequent to Closing to vest in the Purchaser legal and
beneficial ownership of the Shares in accordance with this
Agreement and otherwise to give effect to its terms.
16.4 Failure or delay by any party in exercising any right or
remedy under this Agreement will not in any circumstances
operate as a waiver of it, nor will any single or partial
exercise of any right or remedy in any circumstances preclude
any other or further exercise of it or the exercise of any
other right or remedy.
16.5 Any waiver of any breach of, or any default under, any of the
terms of this Agreement will not be deemed a waiver of any
subsequent breach or default and will in no way affect the
other terms of this Agreement.
16.6 Nothing in this Agreement shall operate to diminish the
Purchaser's and the Vendor's common law duty to mitigate loss
in respect of the matters dealt with in this Agreement.
16.7 The rights and remedies expressly provided for by this
Agreement will not exclude any rights or remedies provided by
law.
16.8 This Agreement may be executed in any number of counterparts,
and by the parties on separate counterparts, each of which so
executed and delivered will be an original, but all the
counterparts will together constitute one and the same
agreement.
16.9 The formation, existence, construction, performance, validity
and all aspects whatsoever of this Agreement or of any term of
this Agreement shall be governed by English law. The English
Courts shall have exclusive jurisdiction to settle any
disputes which may arise out of or in connection with this
Agreement.
50
<PAGE> 51
16.10 This Agreement and the documents referred to in it contain the
whole agreement between the parties to this agreement relating
to the transactions contemplated by them and supersede all
previous agreements between the parties relating to these
transactions. Each of the parties to this agreement
acknowledges that in agreeing to enter into this agreement and
each of the documents referred to in it has not relied on any
pre-contractual representations or warranties or other
assurances save as set out in this Agreement and the documents
referred to in or executed pursuant to them. Nothing in this
clause 16.10 shall relieve any party from any liability for
representation made fraudulently.
51
<PAGE> 52
SCHEDULE 1
PART 1
DETAILS OF THE COMPANY
Name of the Company: DENSITRON MICROWAVE LIMITED
Registered number: 01064744
Registered office: Unit 4, Airport Trading Estate, Biggin
Hill, Westerham, Kent, TN16 3BW
Date of incorporation: 8 August 1972
Place of incorporation: England and Wales
Status of Company: private limited company
Authorised share capital: (pound)1,000,000 divided into 510,000
ordinary shares of(pound)1 each and
490,000 10% cumulative redeemable
preference shares of(pound)1 each
Issued share capital: (pound)920,000 divided into 430,000
ordinary shares of(pound)1 each and
490,000 10% cumulative redeemable
preference shares of(pound)1 each
Directors' full names: Stuart Charles Bonvini
Clifford Hardcastle
Kevin Peter Kearns
Frederick Raven
Secretary's full name: Ian Daniel Sibson
Accounting reference date: 31 December
Auditors: Robson Rhodes, 186 City Road, London,
EC1V 2NU
Bankers: Barclays Bank Plc, 80 High Street,
Sevenoaks, Kent, TN13 1LR
Description of business: Manufacture of electrical equipment
52
<PAGE> 53
Registered Charges: 1. Guarantee and Debenture dated 28
September 1987 creating a legal
mortgage and fixed and floating charges
over all property and assets in respect
of all monies owing in favour of
Barclays Bank Plc
2. Fixed charge over all debts dated 12
March 1991 in favour of Barclays Bank
Plc
53
<PAGE> 54
PART 2
DETAILS OF OTHER GROUP MEMBERS
Name of Group Member: SOLENT MICROWAVE LIMITED
Registered number: 01854836
Registered office: Unit 4, Airport Trading Estate, Biggin
Hill, Westerham, Kent, TN16 3BW
Date of incorporation: 12 October 1984
Place of incorporation: England and Wales
Status of Company: Private limited company
Authorised share capital: (pound)160,000 divided into 160,000
ordinary shares of(pound)1 each
Issued share capital: (pound)85,000 divided into 85,000
ordinary shares of(pound)1 each
Beneficially owned by the Company: the whole of the issued share capital
Directors' full names: Stuart Charles Bonvini
Clifford Hardcastle
Secretary's full name: Ian Daniel Sibson
Accounting reference date: 31 December
Auditors: Robson Rhodes
Bankers: Barclays Bank Plc
Description of business: Manufacture of electronic components,
TV transmitters, telephony etc.
Registered Charges: Debenture dated 1 October 1992
creating a legal mortgage and charges
over the undertaking and all property
and assets in favour of Barclays Bank
Plc
54
<PAGE> 55
SCHEDULE 2
THE PROPERTY
1. 1 Parkside Centre, Temple Farm Industrial Estate, Southend-on-Sea,
Essex
DATE DOCUMENT PARTIES
24.6.1997 Lease Patrick Burgess, Roger Burgess,
Terence Burgess & Steven
Burgess (1) Densitron Microwave
Limited (2)
2. Unit at Temple Farm Industrial Estate, Chandlers Way, Southend-on-Sea,
Essex
DATE DOCUMENT PARTIES
15.3.1995 Lease Hiross Limited (1) Densitron
Microwave Limited (2) Densitron
International Plc (3)
3. 4 Vanguard Way, Shoeburyness, Essex
DATE DOCUMENT PARTIES
2.4.1995 Underlease Ricereel Limited (1) Nore
Microwave Limited (2) Taylor
Miller Limited (3)
4. 19 The Vanguards, Shoeburyness, Essex
DATE DOCUMENT PARTIES
2.6.1998 Underlease Jack David Linton (1) Ace Neon
Signs Limited (2) George
Francis Kemp & Peter Blanchard
(3)
55
<PAGE> 56
SCHEDULE 3
WARRANTIES
1. INTERPRETATION
In this Schedule 3:-
1.1 the following expressions have the following meanings unless
inconsistent with the context:-
Expression Meaning
"the Accounting Date" 31 March 1999
"Accounting Standards" The statements of standard
accounting practice referred to in
section 256 of the Act issued by
the Accounting Standards Board or
such other body as may be
prescribed thereunder by the
Secretary of State from time to
time, including, without
limitation, the statements of
standard accounting practice
formerly issued by the Accounting
Standards Committee and since
adopted by the Accounting Standards
Board and any financial reporting
standards issued by the Accounting
Standards Board or such other body
as aforesaid
56
<PAGE> 57
"the Accounts" (i) the audited accounts of the
Company for the financial year
ended on 31 December 1998
comprising the balance sheet,
profit and loss account and the
auditors' and directors' reports
thereon; and
(ii) the audited accounts of the
Company for the fifteen month
period which commenced on 1 January
1998 and ended on 31 March 1999
comprising the balance sheet and
the profit and loss account for the
said period and the auditors' and
directors' reports thereon
"ACT" Advance corporation tax
"CAA" Capital Allowances Act 1990
"Company" Notwithstanding the definition
contained in clause 1 of the
Agreement, each company individual
details of which are set out in
Schedule 1 as if the provisions of
this Schedule were set out in full
in respect of each such company
provided that where used other than
in this Schedule "Company" shall
have the meaning given in clause 1
of the Agreement
"Computer Systems" All computer hardware, software,
microprocessors and firmware and
any other items that connect with
any or all of them which in each
case are used in the Company's
business or are in the possession
of the Company
57
<PAGE> 58
"Contract" Any agreement or commitment whether
conditional or unconditional and
whether by deed, under hand, oral
or otherwise, and any arrangement
or understanding whether legally
binding or not
"EMU Entry Date" 1 January 1999 or, if different,
the date on which Economic Monetary
Union will first operate and shall
also include in addition the date
or dates on which the United
Kingdom or any part of it shall
enter into Economic and Monetary
Union
"EMU Systems" All equipment, systems, plant and
machinery used by the Company
including without limitation
calculators, adding machines, cash
registers, weighing equipment,
coins and note operated machinery
and equipment, barcode reading
equipment, price display facilities
and cheque and credit card
facilities
"Economic and Monetary Any system of single or unified
Union currency (whether known as economic
and monetary union or otherwise,
and whether involving a currency
known as the euro or otherwise)
involving any countries within the
European Union
58
<PAGE> 59
"Environment" Any air (including air within
natural or man-made structures
above or below ground); water
(including territorial, coastal and
inland waters and ground water and
water in drains and sewers); and
land (including the seabed or river
bed under any water), surface land
and sub-surface land
"Environmental All or any permits, consents,
Authorisations" licences, approvals, certificates,
and other authorisations required
under Environmental Law and all
terms and conditions thereof
required under any Environmental
Law for the operation of the
business of the Company or the
state or use of any land or
premises in relation to the
business of the Company
"Environmental Law" All or any Laws in force or on the
statute books on or before the
Closing Date with regard to the
pollution or protection of the
Environment or harm to or the
protection of human health and
safety or the health of animals and
plants and for the avoidance of
doubt including part IIA of the
Environmental Protection Act 1990
"Environmental Liability" Criminal or civil liability under
Environmental Law or in relation to
any matter concerning in any way
the Environment
"ERA" The Employment Rights Act 1996
"Euro" The European single currency
59
<PAGE> 60
"FA" Finance Act
"Group Relief" The meaning given to that expression by
section 402 ICTA
"Hazardous Substances" Any matter, whether alone or in
combination with any other matter
capable of causing harm to man or any
other living organism or damaging to the
Environment or public health or welfare,
including without limitation radioactive
matter, ozone depleting substances, and
genetically modified organisms
"ICTA" Income and Corporation Taxes Act 1988
"IHTA" Inheritance Tax Act 1984
"Insider" The Vendor, any present director or
company secretary of the Company, and/or
any person (including any Associated
Company) who is or was at the relevant
time connected with the Vendor or any
such director
"Intellectual Property Rights" Any and all patents, trade marks,
service marks, copyright, moral rights,
rights in a design, know how,
confidential information and all or any
other intellectual or industrial
property rights whether or not
registered or capable of registration
and whether subsisting in the United
Kingdom or any other part of the world
together with all or any goodwill
relating or attached thereto
60
<PAGE> 61
"Laws" All or any applicable law (whether
criminal, civil or administrative),
common law, judgment, court order,
statute, statutory instrument,
regulation, directive, European
Community decision (insofar as legally
binding), bye-law, treaty, government
circular, code of practice and guidance
notes, or instruction or decision of any
competent regulatory body.
"Millennium Compliance Audit" A technical audit of the Computer
Systems to ensure they are Millennium
Compliant
"Millennium Compliant" The meaning set out or referred to in
paragraph 16.1
"Stock" Stocks (as defined in Statement of
Standard Accounting Practice No. 9
adopted by the Accounting Standards
Board) of the Company including but not
limited to raw materials, components,
work in progress, finished goods and
consumables
61
<PAGE> 62
"Taxation" (a) Any tax, duty, impost or levy, past
or present, of the United Kingdom or
elsewhere, whether governmental, state,
provincial, local governmental or
municipal, including but not limited to
income tax (including income tax
required to be deducted or withheld from
or accounted for in respect of any
payment under section 203 ICTA or
otherwise), corporation tax, ACT,
capital gains tax, inheritance tax, VAT,
customs and other import or export
duties, rates, stamp duty, stamp duty
reserve tax, national insurance and
social security contributions; and
(b) Any fine, penalty, surcharge,
interest or other imposition relating to
any tax, duty, impost or levy mentioned
in paragraph (a) of this definition or
to any account, record, form, return or
computation required to be kept,
preserved, maintained or submitted to
any person for the purposes of any such
tax, duty, impost or levy
"Taxation Authority" Any authority, whether of the United
Kingdom or elsewhere, competent to
impose, assess or collect Taxation,
including but not limited to the Board
of Inland Revenue, the Commissioners of
Customs and Excise and the Department of
Social Security
62
<PAGE> 63
"Taxation Statute" Any statute (and all
regulations and other documents having
the force of law under such statute)
published, enacted, issued or coming into
force on or before the date of this
Agreement relating to Taxation
"TCGA" Taxation of Chargeable Gains
Act 1992
"TMA" Taxes Management Act 1970
"VAT" Value added tax
"VATA" Value Added Tax Act 1994;
1.2 a person will be deemed to be a party to a Contract if that person
is, or has agreed to become, entitled to benefit under such
Contract or if that person has obligations or liabilities or has
agreed to assume obligations or liabilities under such Contract,
in each case whether as an original party thereto or by virtue of
assignment, novation or otherwise howsoever; and
1.3 any question as to whether a person is connected with any other
person will be determined in accordance with section 839 ICTA,
which will apply in relation to the Warranties as it applies in
relation to ICTA.
2 SCHEDULES 1 & 2; CAPITAL
2.1 The information contained in Schedule 1 is true, complete and
accurate in all respects.
2.2 The Shares and the shares of the Group Members (other than the
Company as defined in clause 1 of the Agreement) shown in Schedule
1 are in issue fully paid and are beneficially owned and
registered as set out in Schedule 1 free from any encumbrance,
equity or third party right (including but not limited to any
mortgage, charge, pledge, option or lien), from any Contract to
grant any of the same and from any claim to any of the same.
2.3 The Company has not allotted or issued any share capital other
than the shares shown in Schedule 1 as being issued. There are no
pre-emptive rights or rights of refusal or similar rights in
existence with respect to any shares in the capital of the Company
or the Subsidiary and no
63
<PAGE> 64
such rights arise by virtue of or in connection with the
transactions contemplated hereby. Except as specifically set out
in the Disclosure Letter, there are no outstanding rights,
options, warrants, convertible securities, subscription rights,
conversion rights, exchange rights or other agreement or
commitments of any kind that could require the Company or the
Subsidiary to issue or sell any of its shares or securities
convertible into or exchangeable for its shares.
2.4 No Contract has been entered into which requires or may require
the Company to allot or issue any share or loan capital and the
Company has not allotted or issued any securities which are
convertible into share or loan capital.
2.5 The Company has no interest, and it has not at any time during the
period of six years ended on the date of this Agreement had any
interest, in the share capital of any body corporate save as
specified in Schedule 1.
2.6 The Subsidiary ceased trading in the year to 31 December 1994 and
has not traded since and the only assets and liabilities of the
Subsidiary are those set out in the Subsidiary's audited accounts
for the financial year ended 31 December 1998 a copy of which is
attached to the Disclosure Letter.
VENDOR
3. CAPACITY
The Vendor has, full power and authority to enter into and subject to
shareholder consent, perform this Agreement and the Taxation Deed and all
and any other agreements connected to or contemplated by this Agreement
("the Vendor Delivered Documents"), and this Agreement constitutes and
the Taxation Deed and the Vendor Delivered Documents will when executed
constitute obligations binding on the Vendor in accordance with their
terms.
4. INSIDERS' INTERESTS
4.1 There is not outstanding and there has not at any time during the
period of six years ended on the date of this Agreement been
outstanding:-
64
<PAGE> 65
4.1.1 any loan, guarantee or indemnity given by the Company in
favour of any Insider or in favour of any other person
in respect of any liability of any Insider;
4.1.2 any loan, guarantee or indemnity given by any Insider in
favour of the Company or in favour of any other person
in respect of any liability of the Company; or
4.1.3 any other Contract to which the Company is or was a
party and in which any Insider is or was interested in
any way whatsoever (excluding any Contract of employment
between the Company and any of its directors, full
details of which are set out in the Disclosure Letter).
4.2 No Insider has any interest, direct or indirect, in any trade or
business which competes or is likely to compete with the Company's
business.
5. INFORMATION SUPPLIED TO THE PURCHASER
5.1 The information given in the Disclosure Letter is true, complete
and accurate in all respects and any document expressly referred
to in the Disclosure Letter is a true, complete and accurate copy
of the original (or copy of the original) and neither the
Disclosure Letter nor any document expressly referred to in the
Disclosure Letter is misleading because of any omission or
ambiguity or for any other reason.
5.2 The Vendor is not aware of any fact or matter concerning the
Company and/or its business and affairs which has not been
disclosed in the Disclosure Letter and which could reasonably have
been expected to influence the decision of the Purchaser to enter
into this Agreement.
5.3 There are no Excluded Liabilities and there are no other
liabilities existing as at the date of Closing (whether accrued,
actual, contingent or otherwise) including, without limitation, in
respect of any costs or expenses, except for those in respect of
which full provision, allowance or reserve has been or will be
specifically made in the Accounts or the Final Closing Statement.
ACCOUNTS AND RECORDS
6. THE ACCOUNTS
6.1 The Accounts for the last three financial years (a true copy of
which is enclosed with the Disclosure Letter):-
65
<PAGE> 66
6.1.1 comply with the requirements of the Act;
6.1.2 have been prepared in accordance with the
historical cost convention, with all applicable
Accounting Standards and (to the extent that no
Accounting Standard is applicable) with accounting
principles and practices generally accepted in the
United Kingdom;
6.1.3 have been prepared on bases and principles which
are consistent with those used in the preparation of the
audited statutory accounts of the Company for the
previous three financial years; and
6.1.4 show a true and fair view of the state of affairs
of the Company as at the Accounting Date and of the
results of the Company for the relevant financial period
ended on that date.
6.2 Without prejudice to the generality of the provisions of paragraph
6.1, the Accounts:-
6.2.1 fully provide for all actual liabilities and proper
provision in accordance with generally accepted
accounting principles has been made thereon for all
other liabilities of the Company then outstanding
whether contingent, quantified, disputed or not and
disclose all contingent liabilities which are not
expected to crystallise of the Company as required by
the Act and UK GAAP as at the Accounting Date;
6.2.2 correctly and accurately set forth the capital and
reserves and all the assets of the Company as at the
Accounting Date and the profits (or losses) of the
Company for the financial year which ended on the
Accounting Date;
6.2.3 fully provide for all bad debts as at the
Accounting Date and adequately provide for all doubtful
debts as at that date;
6.2.4 attribute a value to Stock which does not exceed
the lower of cost and net realisable value as at the
Accounting Date after wholly writing off all redundant
or obsolete Stock and appropriately writing down all
slow moving and damaged Stock in accordance with stated
Company policy for writing down Stock full details of
which are set out in the Disclosure Letter; and
6.2.5 are not affected (except as disclosed in the Accounts)
by any extraordinary or exceptional event, circumstance
or item.
6.3 True copies of the Accounts and of the audited accounts for each
financial year of the Company
66
<PAGE> 67
preceding that which ended on the Accounting Date have been laid
before the Company in general meeting and delivered to the
Registrar of Companies in compliance with the Act, and the
auditors' reports thereon were unqualified.
7. MANAGEMENT ACCOUNTS
A true copy of the management accounts of the Vendor relating to the
Company for the period from the Accounting Date to 31 May 1999 is
enclosed with the Disclosure Letter. Such management accounts have
been prepared in accordance with the Company's usual accounting
practices. The Vendor does not consider such management accounts
misleading. Such management accounts reasonably state the results of
operations and the financial condition of the Company as of and for
the periods indicated.
8. PROFITS
The profits of the Company for the three consecutive financial years
ended on 31 December 1998 and for the period from 31 December 1998 to
the Accounting Date as shown by the Accounts (and by the audited
accounts of the Company for previous periods delivered to the
Purchaser) and the trend of profits thereby shown have not (except as
therein disclosed) been affected by inconsistencies of accounting
treatment, by the inclusion of non-recurring items of income or
expenditure, by transactions entered into otherwise than on normal
commercial terms or by any other factors rendering such profits for
all or any of such periods exceptionally high or low.
9. RECORDS
9.1 The accounting records of the Company are up to date and contain
complete and accurate details of all material transactions of the
Company and comply with the provisions of sections 221 and 222 of
the Act.
9.2 The Company's records, systems and information, and the means of
access to them, are exclusively owned by it and under its direct
control.
ASSETS
67
<PAGE> 68
10. UNENCUMBERED TITLE; POSSESSION
10.1 Each asset reflected in the Accounts (save for current assets
disposed of by the Company in the ordinary course of its business
since the Accounting Date) and each asset treated as an asset of
the Company and/or used by the Company at the date of this
Agreement:-
10.1.1 is in the legal and beneficial ownership of the Company;
10.1.2 is free from any encumbrance, equity or third party
right (including but not limited to any mortgage,
charge, pledge, option or lien), from any Contract to
grant any of the same and from any claim to any of the
same; and
10.1.3 is not to any material extent and so far as the Vendor
is aware surplus to requirements.
10.2 The Company has not agreed to acquire any asset on terms that the
property in it does not pass until full payment is made.
10.3 Properly executed originals of all documents which the Company
requires to prove title or entitlement to any assets or rights are
in the possession of the Company.
10.4 Any assets of the Company which are not situated at the Property
at Completion are specified in the Disclosure Letter and are
clearly identified as assets of the Company.
10.5 No charge in favour of the Company is void or voidable for want of
registration.
10.6 The Company owns or has good title to use all of the assets
necessary to continue the business of the Company in the ordinary
course after Closing and none of the assets are shared with or
used by the Vendor or any Associated Company.
11. DEBTORS
11.1 The Company has not made, or entered into any Contract to make,
any loan to, or other arrangement with, any person as a result of
which it is or may be owed any money other than trade debts
incurred in the ordinary course of business and cash at bank.
11.2 The Company is not entitled to the benefit of any debt otherwise
than as the original creditor and has not factored or discounted
any debt or agreed to do so.
68
<PAGE> 69
12. STOCK
12.1 So far as the Vendor is aware the Stock now held by the Company
and not written off (or for which provision has not been made) in
the Accounts:-
12.1.1 is fit for its intended purpose and of satisfactory
quality and accords with any other representation,
condition, warranty or contractual term, express or
implied, which has been given, or which would in the
normal course of its business be given, by the Company
in respect of it;
12.1.2 complies in all material respects and will on sale by
the Company in the ordinary course of its business
comply in all material respects with all applicable
laws, regulations, standards (including without
limitation British and/or European standards),
customers' specifications and specifications laid down
by the Company; and
12.1.3 is not and will not when put to its intended use be
faulty, defective or dangerous.
12.2 Since the Accounting Date:-
12.2.1 there has been no abnormal increase or reduction of
Stock;
12.2.2 none of the Stock reflected in the Accounts has been
realised for an amount less than that reflected in the
Accounts in respect of such Stock; and
12.2.3 the Company has not offered price reductions or
discounts or allowances on disposal of Stock, or sold
Stock at less than cost.
13. PLANT ETC.
The plant and machinery, vehicles, fixtures and fittings, furniture,
tools and other equipment used in connection with the business of the
Company:-
13.1 are so far as the Vendor is aware in a good and safe state of
repair and condition and satisfactory working order and have been
regularly maintained to a commercially reasonable standard and in
accordance with safety regulations usually observed in relation to
them;
13.2 are capable and will (subject to fair wear and tear) be capable
over the periods of time during which they will be written down to
a nil value subject to not becoming obsolete (at the rates adopted
69
<PAGE> 70
in the Accounts) of meeting the needs for which they were designed
and used; and
13.3 are completely and accurately recorded in the plant register a
copy of which is enclosed with the Disclosure Letter.
14. PROPERTY
14.1 The particulars of the Property shown in Schedule 2 (including in
the case of registered land the class of title and title number)
are true, complete and correct.
14.2 The Company has a good and, so far as the Vendor is aware,
marketable title to the Property for the estate or interest stated
in Schedule 2, free from any defects and, where appropriate,
registered at H.M. Land Registry. There is not, and so far as the
Vendor is aware has not been, in force any policy relating to
defective title or restrictive covenant indemnity.
14.3 The Company is not in occupation of or entitled to any estate or
interest in any land or premises save the Property.
14.4 So far as the Vendor is aware the Property is not affected by any
of the following matters:-
14.4.1 any reservation, covenant, restriction, stipulation,
condition, exception, easement, wayleave, licence,
franchise, option, right to acquire, mortgage, charge,
encumbrance or other third party right, or any Contract
to create, or claim made by any person to be entitled
to, any of the foregoing;
14.4.2 any matter which is of an onerous or unusual nature, or
which conflicts with the present use of the Property, or
which would otherwise restrict its continued possession
and enjoyment, or which affects its value;
14.4.3 any document relating to ownership of, or responsibility
for maintenance of, a boundary;
14.4.4 any outstanding breach or alleged breach of covenant or
of any other restriction or condition, or any dispute or
complaint within the three years prior to the date of
this Agreement, whether actual or threatened, with any
neighbour, tenant, landlord or other person relating to
the extent, use, enjoyment or occupation of the Property
or with regard to any actual or alleged agreement,
easement, right, covenant, liability or other matter
affecting or relating to the Property;
14.4.5 any outstanding notice, order, demand, resolution,
proposal, complaint or requirement issued or made, or
70
<PAGE> 71
to the knowledge of the Company intended to be issued or
made, by any local or other competent authority or body
concerning any of the following: compulsory acquisition,
clearance, demolition or closing, the carrying out of
any work (including, without limitation, any work
required by reason of the fact that the Property is a
listed building), the modification of any planning
permission, enforcement of any breach or alleged breach
of planning control, the discontinuance of any use, the
imposition of any building or improvement line or any
other matter which would adversely affect the Property's
value and no notice of any breach of or non-compliance
with building or fire regulations;
14.4.6 any requirement relating to it or its use which although
not registered in the Register of Local Land Charges is
capable of registration in that Register;
14.4.7 any receipt of compensation as a result of any refusal
of any application for planning permission or the
imposition of any restriction in relation to any
planning permission, listed building consent or
conservation area consent;
14.4.8 any outgoings (other than uniform business rates, water
charges and other standard payments to the relevant
water company including, without limitation, insurance
premiums) whether of a periodically recurring nature or
otherwise, and whether payable by the owner or occupier
of the Property; or
14.4.1 any agreement made under section 52 Town and Country
Planning Act 1971 or section 106 Town and Country
Planning Act 1990 or any other form of statutory
agreement relating to the condition and use of the
Property or the services and amenities serving it or any
highway serving it or adjoining it.
14.5 Details of all planning applications and their results, and of all
planning permissions, listed building consents or conservation
area consents, relating to the Property are given in the
Disclosure Letter, and no such permission or consent has been
given on a temporary basis or subject to any unusual or onerous
conditions.
14.6 So far as the Vendor is aware the use of the Property (and the use
of plant and machinery in connection with it) and the construction
and layout of the Property (including any alteration carried out
to it) are the permitted user under and so far as the Vendor is
aware comply with the provisions
71
<PAGE> 72
of all relevant legislation (including but not limited to the
Offices Shops and Railway Premises Act 1963, the Town and
Country Planning Act 1990, the Public Health Acts 1936 to
1961, the Fire Precautions Act 1971, the Health and Safety at
Work etc. Act 1974, the Control of Pollution Act 1974, the
Water Act 1989, the Environmental Protection Act 1990, the
Planning (Listed Buildings and Conservation Areas) Act 1990,
the Planning (Hazardous Substances) Act 1990, the Planning
(Consequential Provisions) Act 1990 and the Planning and
Compensation Act 1991) and regulations made under such
legislation and are in accordance with the requirements of the
local planning, environmental health, building control, fire
and all other competent authorities and all restrictions,
conditions and covenants imposed by or pursuant to such
legislation have been observed and performed.
14.7 There are appurtenant to the Property all rights and easements
necessary for its present use and enjoyment, and in particular:-
14.7.1 the Property is served by drainage, water, electricity and gas
services all of which are connected to the mains by media
located entirely on or under the Property, the passage and
provision of such services are uninterrupted and neither the
Vendor nor the Company knows of any imminent or likely
interruption of such passage or provision;
14.7.2 none of the facilities necessary for the enjoyment and use of
the Property for its current use is enjoyed on terms entitling
any person to terminate or curtail its use; and
14.7.3 there is pedestrian and vehicle access to the Property which
is adequate for its present use and enjoyment and no
restriction on use of such access by anyone whom the Company
may authorise to use the same.
14.8 So far as the Vendor is aware the two properties at Temple Farm
Industrial Estate are in a good and substantial state of repair and
condition (normal wear and tear excepted), and fit for the purposes for
which it is presently used. So far as the Vendor is aware there have
not been used in the Property any substances which are not in
conformity with the relevant British or European standards or codes of
practice or which are generally known to be deleterious to health and
safety or to the durability of buildings and/or other structures and/or
finishes in the particular circumstances in which they are used. There
are no uncompleted works of any description at the Property.
72
<PAGE> 73
14.9 The Disclosure Letter fully and accurately discloses any lease, tenancy
or other right of occupation in respect of the Property, whether
granted by or to the Company, and any Contract in respect of, and all
relevant terms, provisions and other matters relating to, any such
lease, tenancy or other right, including but not limited to:-
14.9.1 all rents, insurance premiums, service charges and other
amounts payable or (as the case may be) receivable by the
Company, all of which are fully paid up to date, and any
agreement or arrangement relating to any review or variation
of any such amount or to the timing of any payment of any such
amount;
14.9.2 all provisions relating to use, alterations, repairs,
decoration, sharing of facilities, assignment, underletting,
parting with or sharing possession, and termination;
14.9.3 any provision requiring the lessee to trade or continue to
trade or carry on its business at the Property;
14.9.4 any unusual or onerous restrictions, covenants or other
provisions;
14.9.5 any breach or alleged breach of any covenant or other
provision, and any exercise of any right of distraint,
forfeiture or entry, whether by the Company or any other
party;
14.9.6 any licence, consent, waiver or approval given by or to the
Company (or its predecessors in title) in respect of any
covenant or other obligation;
14.9.7 any exclusion from the provisions of sections 24 to 28
Landlord and Tenant Act 1954 or any other order under section
38(4) of that Act relating to the Property;
14.9.8 details of any lease superior to that held by the Company, and
of any sub-lease or other right of occupation granted by any
tenant of the Company or other occupant of the Property; and
14.9.9 any waiver, or the reservation of the right of waiver, whether
by the Company or a landlord, of the exempt treatment for
value added tax.
14.10 The rateable value of the Property and the effect of all phasing
provisions with regard to any increase or decrease of the rateable
value are disclosed in the Disclosure Letter, no appeal has been lodged
or is pending in respect of the rateable value and there are no current
proposals for any increase of the rateable value of the Property. All
buildings forming part of the Property have
73
<PAGE> 74
been occupied (within the meaning of section 65(2) Local
Government Finance Act 1988) continuously for at least the
last six months and used for the purpose for which they were
constructed or have been adapted.
14.11 Save for the Properties, the Company has no existing or contingent
liabilities in respect of any properties previously occupied by it or
which it owned or held any interest, including, without limitation,
leasehold premises assigned or otherwise disposed of.
14.12 The replies given by the Vendor's Solicitors to the Purchaser's
Solicitors' written enquiries concerning the Property are so far as the
Vendor is aware true and accurate in all respects.
15. INTELLECTUAL PROPERTY
15.1 The Company has no interest in any Intellectual Property
Rights save for the Intellectual Property Rights details of
which are given in the Disclosure Letter, all of which are
(where applicable) registered in the name of the Company
and/or are otherwise beneficially owned by it; in particular
the Company has not entered into any Contract relating to the
licensing or use (by it or any other person) of any
Intellectual Property Rights.
15.2 The processes employed and the products and services dealt in
by the Company do not use, embody or infringe any Intellectual
Property Rights vested in any other party or in which any
other party has any interest (whether under licence or
otherwise) and do not give rise (contingently or otherwise) to
payment by the Company of any royalty or of any sum in the
nature of a royalty or to liability to pay compensation under
sections 40 and 41 Patents Act 1977 or otherwise.
15.3 The Company has not received any notice, and the Vendor is not
aware, that any person is infringing any of the Company's
Intellectual Property Rights.
15.4 The Company is not passing off any part of its business as and
for the business of any other person and, so far as the Vendor
is aware, no person is passing off its business as and for any
part of the Company's business.
16. MILLENNIUM AND EURO COMPLIANCE
16.1 For the purposes of this Agreement "Millennium Compliant"
means that the Computer Systems are capable of the following
functions before, during and/or after 9 September 1999 and/or
1 January 2000 ("the Relevant Dates"):
74
<PAGE> 75
16.1.1 handling date information involving all and any dates
before, during and/or after the Relevant Dates including,
accepting date input, providing date output and
performing date calculations in whole or part;
16.1.2 operating accurately without interruption on and in
respect of any and all dates before, during and/or after
the Relevant Dates and without any change in performance;
16.1.3 responding to and processing two digit year input without
creating any ambiguity as to the century; and
16.1.4 storing and providing date output information without
creating any ambiguity as to the century.
16.2 Computer Systems are Millennium Compliant.
16.3 The Company has performed a Millennium Compliance Audit, a
copy of which is attached to the Disclosure Letter.
16.4 The Computer Systems will not require any remedial work and/or
replacement to enable them (or any part of them) to continue
functioning accurately before, during and/or after the Relevant
Dates in the manner referred to in paragraph 16.1.
16.5 The Computer Systems and each element of them passes and will
continue to pass date information between each other (and any
third parties' computer systems with which they habitually
communicate) in a way which does not, and will not, create
inaccuracies, errors or problems before, during and/or after the
Relevant Dates.
16.6 The Computer Systems and the EMU Systems:
16.6.1 will not require replacement or any changes to enable
them to handle conversion or redenomination of currency
resulting from Economic and Monetary Union;
16.6.2 have been modified to ensure all financial and monetary
information and all calculations resulting therefrom can
be converted and rounded from Sterling to Euro and Euro
to Sterling in accordance with the rules for conversion
and rounding contained in EU Council Regulation 1103/97;
and
16.6.3 are capable of operating in dual currency (and for these
purposes `dual currency' means Sterling and Euro).
75
<PAGE> 76
EMPLOYEES
17. REMUNERATION AND EMPLOYEES
17.1 Full particulars of the identities, dates of commencement of
employment (or appointment to office) and terms and conditions
of employment (including remuneration and any bonus,
commission or profit sharing arrangement) of all the employees
and officers of the Company as at the date of this Agreement
are fully and accurately set out in the Disclosure Letter, and
copies of all their written service agreements and/or their
contracts of employment or particulars of employment
statements are enclosed with the Disclosure Letter.
17.2 No change has been made since the Accounting Date in the terms
of employment of any person employed by the Company at the
date of this Agreement, and the Company is not party to any
Contract to make any such change.
17.3 There are no amounts owing to any present or former officers
or employees of the Company, other than accrued remuneration
or for reimbursement of normal business expenses incurred, and
none of them is entitled to accrued holiday pay other than in
respect of the Company's current holiday year.
17.4 All Contracts of employment between the Company and its
directors and employees are terminable by the Company without
compensation (except under the ERA) by giving the applicable
minimum period of notice specified in section 86 ERA.
17.5 No employee whose salary exceeds(pound Sterling)40,000 has
been engaged by the Company since the Accounting Date and no
person employed by the Company at or since the Accounting Date
whose salary exceeds(pound Sterling)40,000 has ceased, or
given or received notice to cease, to be so employed.
17.6 There is no person previously employed by the Company who now
has or may have a right to return to work or a right to be
re-instated or re-engaged by the Company under the provisions
of the ERA.
17.7 The Company has not recognised, or done any act which might be
construed as recognition of, a trade union and the Company is
not a party to any collective agreement with any trade union
or organisation of workers.
76
<PAGE> 77
17.8 The Company is not involved, and has not during the 12 months
prior to the date of this Agreement been involved, in any
strike, lock-out, industrial or trade dispute or any
negotiations with any trade union or body of employees.
17.9 The Company neither has introduced nor intends to introduce
any share incentive scheme or arrangement, share option scheme
or arrangement or any other scheme or arrangement relating to
the acquisition of any interest in any shares in the Company
for all or any of its directors or employees.
17.10 There are no job share arrangements, flexitime arrangements or
early retirement schemes applicable to any employees of the
Company. There are no schemes or programmes for the employment
or training of people by the Company other than under the
Company's full control.
17.11 The Company neither has introduced nor intends to introduce
any short time working scheme or any redundancy scheme under
which payments greater than those required by statute are
payable.
17.12 None of the products or services supplied by the Company are
produced or provided by outworkers, agency or other
self-employed persons, contracted labour or agents.
17.13 The Company has in relation to all present employees and so
far as the Vendor is aware has in relation to all former
employees complied in all material respects with all statutes,
regulations, orders and codes of conduct relating to
employment and relations with employees and trade unions and
has maintained adequate and suitable records regarding the
service of each of its employees and complied with all
agreements for the time being having effect as regards such
relations or the conditions of service of its employees
(whether collectively or individually).
17.14 No employee has been given or promised any payment, in cash or
otherwise, by the Company or the Vendor over and above their
usual remuneration, which is in any way connected to or
related to the successful completion of the transactions
contemplated by this Agreement.
77
<PAGE> 78
18. PENSIONS
There are no:-
18.1 agreements or arrangements for the provision of any
relevant benefits (as defined in section 612(1) ICTA) or
similar benefit (including any pension, annuity, lump
sum, gratuity or other like benefit) to be given on
retirement, or in anticipation of retirement or after
retirement in connection with past service, or to be
given on or in anticipation of or in connection with any
change in the nature of the service of the person in
question or on death or disability; or
18.2 informal or ex-gratia pension arrangements, customs or
practices (whether or not legally enforceable) or schemes
involving the Company for the provision of such benefits,
for any employee or officer or former employee or officer
of the Company or for any dependants of any such person.
CONTRACTS
19. INSURANCE
19.1 All assets of the Company of an insurable nature are, and have
at all material times been, insured in amounts equal to their
full replacement or reinstatement value against fire and other
risks normally insured against by persons carrying on the same
classes of business as the Company.
19.2 The Company is, and has at all material times been,
adequately covered against employer's liability, public
liability and product liability.
19.3 All premiums due in relation to the Company's insurances have
been paid, or will on receipt of the relevant invoice be paid,
and nothing has been done or omitted to be done which would make
any policy of insurance of the Company void or voidable or which
is likely to result in an increase in premium or which would
release any insurer from any of its obligations under any policy
of insurance of the Company.
19.4 There is no insurance claim pending or outstanding and, as far
as the Vendor is aware, there are no circumstances likely to
give rise to any such claim.
19.5 No claims have been made by employees in respect of industrial
injury in the 2 years prior to the date of this Agreement.
19.6 A detailed summary of all the Company's insurances are set out
in or enclosed with the Disclosure Letter.
78
<PAGE> 79
20. FINANCING AND WORKING CAPITAL
20.1 The amount borrowed by the Company from each of its bankers
does not exceed the facility agreed with each such banker and
the total amount borrowed by the Company from any source
whatsoever does not exceed any limitation on its borrowing
contained in its articles of association or in any debenture
or loan stock trust deed or any other document.
20.2 The Company has not engaged in any borrowing or financing not
required to be reflected in its statutory accounts.
20.3 Full and accurate details of all overdrafts, loans or other
financial facilities outstanding at the date of this Agreement
are contained in the Disclosure Letter; true and correct
copies of all documents relating to such facilities are
enclosed with the Disclosure Letter; nothing has been done or
omitted to be done whereby the continuance of any such
facility in full force and effect might be affected or
prejudiced except the matters contemplated by this Agreement.
20.4 No person other than the Company, the Vendor and Associated
Companies has given any guarantee of or security for any
overdraft, loan or other financial facility granted to the
Company.
20.5 No indebtedness of the Company is due and payable and no
security over any of the assets of the Company is now
enforceable, whether by virtue of the stated maturity date of
the indebtedness having been reached or otherwise, and the
Company has not received any formal or informal notice (whose
terms have not been fully complied with and/or carried out)
from any creditor of the Company, requiring any payment to be
made and/or intimating the enforcement of any security which
it may hold over any assets of the Company.
20.6 The Company has not applied for or received any grant,
subsidy, payment or allowance from any government, authority,
body or agency (whether supra-national, national, regional or
local) which may at any time be or become repaid or repayable.
21. MATERIAL CONTRACTS
21.1 The Company is not, and has not since the Accounting Date
been, a party to or subject to any Contract which:-
79
<PAGE> 80
21.1.1 involves agency, distributorship, franchising,
Intellectual Property Rights licensing, marketing rights,
information sharing, manufacturing rights, consultancy,
servicing, maintenance, inspection or testing;
21.1.2 involves partnership, joint venture, consortium, joint
development, shareholders or similar arrangements;
21.1.3 involves hire purchase, conditional sale, credit sale,
leasing, hiring or similar arrangements;
21.1.4 since the Accounting Date commits the Company to capital
expenditure;
21.1.5 is of a long-term nature, being incapable of complete
performance in accordance with its terms within 6 months
after the date on which it was entered into;
21.1.6 cannot readily be fulfilled or performed by the Company
on time and without undue or unusual expenditure of money
or effort;
21.1.7 the Vendor believes may result in a loss to the Company;
21.1.8 involves or is likely to involve the receipt or payment
of a price materially above or below the market price
ruling at the date of this Agreement or any other
obligation, restriction, expenditure or receipt of an
unusual, onerous or exceptional nature, or which is of
uncertain magnitude;
21.1.9 involves or is likely to involve an aggregate
consideration payable by or to the Company in excess
of(pound)30,000;
21.1.10 requires the Company to pay any commission, finder's fee,
royalty or the like;
21.1.11 is for the supply of goods by or to the Company on a sale
or return basis or on a consignment stock basis;
21.1.12 is for the supply of goods and/or services by or to the
Company on terms under which retrospective or future
discounts, price reductions or other financial incentives
are given by or to the Company dependent on the level of
purchases or any other factor;
21.1.13 is for the supply of goods and/or services by the Company
which is not on the current standard terms and conditions
of supply, copies of which are attached to the Disclosure
Letter;
21.1.14 is for the supply of goods and/or services to the Company
which is not on the standard terms and conditions on
which the Company buys or contracts for goods and/or
services from its suppliers, copies of which are attached
to the Disclosure Letter;
80
<PAGE> 81
21.1.15 involves the forward purchase or sale of any currency,
commodity, precious metal or other asset;
21.1.16 involves delegation of any power under a power of
attorney or authorisation of any person (as agent or
otherwise) to bind or commit the Company to any
obligation;
21.1.17 restricts the freedom of the Company to provide or take
goods or services by such means and to and from such
persons as it may from time to time think fit; 21.1.18
involves conditions, warranties, indemnities or
representations given in connection with a sale of shares
or assets, of a capital nature or is a guarantee or
indemnity in respect of the obligations of a third party
under which any liability or contingent liability is
outstanding;
21.1.19 involves the Company in any actual or contingent
liability in respect of any land or premises previously
occupied by it or in which it had any interest, including
but not limited to any liability in respect of any
leasehold property at any time assigned or otherwise
disposed of by it;
21.1.20 so far as the Vendor is aware includes a term which is
not, or may not be, binding on the Company or any other
party in consequence of the Unfair Terms in Consumer
Contracts Regulations 1994;
21.1.21 is an outstanding offer, tender or the like which if
accepted may result in a loss to the Company; or
21.1.22 is not on arm's length terms or is in any way otherwise
than in the ordinary and proper course of the Company's
business.
21.2 The Company has not within the last 12 months agreed in
principle or made any offer capable of acceptance which
has not been accepted or revoked or entered any
negotiation to enter into any of the arrangements set out
in paragraph 21.1 above other than those disclosed
pursuant to paragraph 21.1 above.
22. OTHER BUSINESS MATTERS
22.1 During the 12 months ended on the date of this Agreement
there has been no substantial change in the basis or terms
on which any person is prepared to do business with the
Company (apart from normal price changes), and no
substantial customer or supplier of the Company has ceased
or substantially reduced its business with the Company, and
so far as the Vendor is aware no indication has been
received by the Company or the Vendor that there will or
may be any such change, cessation or reduction.
81
<PAGE> 82
22.2 The Company does not carry on business under or use on its
letterhead, sales material, invoices or vehicles or otherwise
any name other than its own corporate name or any name
specified in the Disclosure Letter as being a name under which
it does business and there are no circumstances which might
prevent the Company from continuing to carry on business under
any such name except as provided for in this Agreement.
22.3 No code of practice has been issued by any government
department, association or similar body which relates to the
Company's business.
22.4 (Apart from statutory instruments and in accordance with the
directions of H.M. Customs & Excise) no order or notice has
been made, given or published affecting the prices which may
be charged for any goods or services supplied by the Company
and no notification has been received or published of any
intention to make such an order or to give such a notice.
COMPLIANCE; DISPUTES
23. COMPANY LAW MATTERS
23.1 Compliance has been made with all legal requirements in
connection with the formation of the Company and all issues
and grants of shares, debentures, notes, mortgages or other
securities of the Company.
23.2 The copy of the memorandum and articles of association of the
Company enclosed with the Disclosure Letter is true and
complete and has attached to it copies of all such resolutions
and agreements as have been or ought to have been filed with
the Registrar of Companies in the six years prior to this
Agreement and so far as the Vendor is aware has attached to it
copies of all such resolutions and agreements as have been or
ought to have been filed with the Registrar of Companies since
the Company's incorporation . Neither the Company nor any
class of its members has passed any other resolution (except
for resolutions relating to business at annual general
meetings which was not special business).
82
<PAGE> 83
23.3 In the six years prior to this Agreement and, so far as the
Vendor is aware for the period before that date, all returns,
particulars, resolutions and other documents required to be
filed with or delivered to the Registrar of Companies by the
Company or any of its officers have been correctly and
properly prepared and so filed and delivered, and no such
returns, particulars, resolutions or other documents have been
so filed or delivered during the period of 14 days ending with
the date of this Agreement.
23.4 The statutory books (including all registers and minute books)
of the Company have been properly kept and contain an accurate
and complete record of the matters which should be dealt with
in those books and no notice or allegation that any of them is
incorrect or should be rectified has been received.
23.5 None of the activities of the Company is ultra vires the
Company.
24. GENERAL LEGAL COMPLIANCE
24.1 So far as the Vendor is aware all necessary licences,
consents, permits and authorities (public and private) have
been obtained by the Company to enable the Company to carry on
its business effectively in the places and in the manner in
which such business is now carried on. All such licences,
consents, permits and authorities are valid and subsisting and
have been complied with in all material respects and there is
no reason so far as the Vendor is aware why any of them should
be suspended, cancelled or revoked. Enclosed with the
Disclosure Letter are copies of all such licences, consents,
permits and authorities.
24.2 All vehicles owned, leased or hired by the Company have
current road fund licences and Department of Transport test
certificates (where necessary) and, where appropriate, the
Company holds current operators' licences in respect of them.
24.3 The Company has conducted its business in all material
respects in accordance with all applicable laws and
regulations of the United Kingdom (including but not limited
to the Consumer Credit Act 1974 and the Data Protection Act
1984) and of any relevant foreign country. There is no order,
decree or judgment of any court or governmental agency of the
United Kingdom or any foreign country outstanding against the
Company or which may have an adverse effect upon the assets or
business of the Company.
83
<PAGE> 84
24.4 So far as the Vendor is aware none of the Company's officers,
agents or employees (during the course of his duties in
relation to the Company) has committed or omitted to do any
act or thing in contravention of any law, order, regulation or
the like in the United Kingdom or elsewhere.
24.5 There is not pending, so far as the Vendor is aware or in
existence, any investigation or enquiry by, or on behalf of,
any governmental or other body in respect of the affairs of
the Company.
25. ENVIRONMENTAL MATTERS
25.1 ENVIRONMENTAL AUTHORISATIONS
25.1.1 The Company has lawfully obtained all Environmental
Authorisations and each such authorisation is in full force
and effect and the Company has complied at all times in all
material respects with and can continue to comply in the
foreseeable future with all conditions of such authorisations.
25.1.2 True copies of Environmental Authorisations obtained by the
Company (including any variation notices applicable thereto)
are attached to the Disclosure Letter.
25.1.3 No works or costs are necessary or so far as the Vendor is
aware will be necessary to obtain or secure compliance with or
maintain any Environmental Authorisations or otherwise to
comply with Environmental Law.
25.1.4 The Company has received no communication in any form in
respect of any Environmental Authorisation varying, modifying,
revoking, suspending or cancelling the same or indicating an
intention or threatening so to do and there are no facts or
circumstances so far as the Vendor is aware which may result
in any Environmental Authorisation being varied, modified,
revoked, suspended or which may prejudice their renewal.
25.2 COMPLIANCE WITH ENVIRONMENTAL LAW
25.2.1 The Company and its officers, agents and employees comply and
so far as the Vendor is aware have at all times complied with
Environmental Law.
25.2.2 The Company has not received any communication in any form
from any relevant authority from which it appears that it may
be or is alleged to be in breach of any Environmental Law, or
failure to comply with which could constitute a breach of any
Environmental Law, or compliance with
84
<PAGE> 85
which could be secured by further proceedings. There are no
circumstances which might give rise to such a communication
being received and the Vendor is not aware of any intention on
the part of any such authority to give such notice.
25.2.3 No proceedings or other action, claim or investigation are or
have been in existence or so far as the Vendor is aware are
pending or threatened against the Company arising from or in
relation to any Environmental Authorisations or otherwise
concerning Environmental Law.
25.3 LIABILITY
25.3.1 There are no facts or circumstances so far as the Vendor is
aware which may give rise to any actual or potential
Environmental Liability on the part of the Company.
25.3.2 The Company has not received any notice or intimation of any
complaint or claim from any person in respect of any matter
concerning the Environment.
25.3.3 The Company is not and has not been engaged in any action,
litigation, arbitration or dispute resolution proceedings
relating to or concerning any actual or potential
Environmental Liability and the Vendor is not aware of any
such matters pending or being threatened or of any
circumstances or facts likely to give rise to any such
matters.
25.3.4 The Company is not and has not been subject to any injunction
or similar remedy or order by a court of competent
jurisdiction, or to any undertaking given to such court in
respect of any matters relating to or concerning the
Environment.
25.4 CONTAMINATION OF LAND
25.4.1 All sites now or formerly owned or occupied by the Company are
free from any Hazardous Substances so far as the Vendor is
aware which could give rise (whether on the relevant site or
elsewhere) to any actual or potential Environmental Liability.
25.4.2 There are no circumstances of which the Vendor is aware which
may require expenditure (whether by the Company or by any
other person or authority) in cleaning up or decontaminating
or otherwise on any sites now or formerly owned or occupied by
the Company in order to comply with Environmental Law or
otherwise for the protection of the Environment.
85
<PAGE> 86
25.5 ENVIRONMENTAL INFORMATION
25.5.1 The Company has at all times properly supplied to the
competent authorities such information required by
Environmental Law to be supplied; all such information
given (whether under a legal obligation or otherwise)
was so far as the Vendor is aware correct at the time
the information was supplied and all information
contained on public registers relating to such matters
is correct.
25.5.2 Full details of any remedial work carried out at any
sites now or formerly owned or occupied by the Company
and of any environmental assessment, audit, review or
investigation conducted by or on behalf of the Company
or otherwise in relation to any such sites are contained
in or annexed to the Disclosure Letter.
26. FAIR TRADING
26.1 No agreement, transaction, practice or arrangement carried on or
proposed to be carried on by the Company (or by any person for
whose acts or defaults the Company may be liable), whether
unilaterally or with others, or to which the Company (or any such
person) is or proposes to become a party, and no state of affairs
applicable to the Company of which the Vendor is aware (or any
such person):-
26.1.1 is or ought to be or ought to have been registered in
accordance with the provisions of the Restrictive Trade
Practices Acts 1976 and 1977 or contravenes the
provisions of the Resale Prices Act 1976 or is or has
been the subject of any enquiry, investigation or
proceeding under any such legislation;
26.1.2 is or has been the subject of an enquiry, investigation,
reference or report under the Fair Trading Act 1973 (or
any other legislation relating to monopolies or mergers)
or the Competition Act 1980;
26.1.3 infringes or falls within the scope of Article 85 of the
Treaty establishing the European Union, or constitutes
an abuse of dominant position contrary to Article 86 of
the said Treaty, or infringes or falls within the scope
of any regulation or other enactment made under Article
87 of the said Treaty, or is or has been the subject of
any enquiry, investigation or proceeding in respect of
any thereof;
86
<PAGE> 87
26.1.4 infringes or falls within the scope of any
other competition, anti-restrictive trade
practice, anti-trust or consumer protection
law or legislation applicable in the United
Kingdom or elsewhere where the Company trades
and not specifically mentioned in this
paragraph 26; or
26.1.5 contravenes the provisions of the Trade
Descriptions Act 1968,
and there are no circumstances of which the
Vendor is aware indicating that any such
enquiry, investigation, proceeding, reference
or report relating to any such matter is
likely to be made.
26.2 The Company has not made or threatened to make any
complaint against any other person to any relevant
authority under any law or legislation referred to in
this paragraph 26.
26.3 The Company has not given any assurance or undertaking
to the Restrictive Practices Court, the Director General
of Fair Trading, the Secretary of State for Trade and
Industry, the Commission or Court of First Instance or
Court of Justice of the European Union, or any other
court, person or body, and is not subject to any act,
decision, regulation, order or other instrument
(statutory or otherwise) made by any of them relating to
any matter referred to in this paragraph 26.
26.4 The Company is not in default or in contravention so far
as the Vendor is aware of any article, act, decision,
regulation, order or other instrument or of any
assurance or undertaking relating to any matter referred
to in this paragraph 26.
27. LITIGATION
27.1 Neither the Company nor any person for whose acts or
defaults the Company may be contractually or vicariously
liable is involved (whether as plaintiff, defendant or
any other party) in any civil, criminal, tribunal or
arbitration proceedings, so far as the Vendor is aware
no such proceedings are pending or threatened by or
against the Company, and so far as the Vendor is aware
there are no facts likely to give rise to any such
proceedings.
27.2 There is no unsatisfied judgment or unfulfilled order
outstanding against the Company and the Company is not
party to any undertaking or assurance given to a court,
tribunal or any other person in connection with the
determination or settlement of any claim or proceedings.
87
<PAGE> 88
28. DEFAULT
28.1 The Company has not sold, supplied or provided any product or
service which did not, does not or so far as the Vendor is
aware will not comply fully with all applicable laws,
regulations, standards (including British and/or European
Community standards) and customers' specifications or which
was, is or so far as the Vendor is aware will be faulty,
defective or dangerous or not in accordance with any
representation, condition, warranty or contractual term,
express or implied, given in respect of or relating to it.
28.2 The Company is not in material breach of any Contract to which
it is a party, and no other party to any such Contract is so
far as the Vendor is aware in breach of it. All agreements,
rights, commitments, obligations, arrangements and
understandings to which the Company is a party are valid and
enforceable. The Vendor is not aware of any grounds for the
termination, rescission, avoidance or repudiation of any
Contract by the Company or any other party to any such
Contract.
29. INSOLVENCY
29.1 No petition has been presented, no order has been made and no
resolution has been passed for the winding-up of the Company,
no administrative receiver, receiver and/or manager has been
appointed of the whole or any part of the property of the
Company, no administration order has been made appointing an
administrator in respect of the Company and no petition has
been presented for an administration order in respect of the
Company.
29.2 No voluntary arrangement has been approved under Part I
Insolvency Act 1986 and no compromise or arrangement has been
sanctioned under section 425 of the Act in respect of the
Company.
29.3 No distress, execution or other process which remains
undischarged has been levied on the assets of the Company, the
Company has not stopped the payment of its debts or received a
written demand pursuant to section 123(1) (a) Insolvency Act
1986 and it is not unable to pay its debts within the meaning
of section 123 Insolvency Act 1986 nor could it be deemed to
be unable to pay its debts within the meaning of section 123
Insolvency Act 1986.
29.4 No disqualification order has at any time been made pursuant
to the provisions of the Company Directors Disqualification
Act 1986 against any officer or so far as the vendor is aware
employee of the Company or any person who is now such an
officer or employee.
88
<PAGE> 89
29.5 There are no facts known to the Vendor which could give rise
to any of the events or circumstances referred to in this
paragraph 29.
30. EVENTS SINCE THE ACCOUNTING DATE
Since the Accounting Date:-
30.1 the Company has not acquired, or agreed to acquire, any
tangible asset, interest in any single Intellectual Property
Right or investment having a value in excess of(pound)30,000
or tangible assets (excluding Stock), interests in
Intellectual Property Rights or investments having an
aggregate value in excess of(pound)30,000;
30.2 the Company has not disposed of, or agreed to dispose of, any
tangible asset (excluding Stock), interest in any single
Intellectual Property Right or investment either having a
value reflected in the Accounts in excess of (pound)30,000 or
acquired since the Accounting Date;
30.3 no loan made by the Company which remains outstanding has
become due and payable in whole or in part to the Company;
30.4 the Company has not borrowed or raised any money or taken up
any financial facilities;
30.5 no dividend or other payment which is, or could be treated as,
a distribution for the purposes of Part VI ICTA or section 418
ICTA has been declared, paid or made by the Company other than
provided for in this Agreement;
30.6 the trade and business of the Company has been carried on in
the ordinary and normal course;
30.7 there has been no material adverse change in the financial or
trading position or so far as the Vendor is aware prospects of
the Company including, but not limited to, any adverse change
in respect of turnover, profits, margins of profitability,
liabilities (actual or contingent) or expenses (direct or
indirect) of the Company;
30.8 no resolution of the shareholders of the Company has been
passed;
30.9 the Company's accounting reference date has not been changed;
89
<PAGE> 90
30.10 the Company has not paid any costs, fees, commission or other
charges of any professional adviser, agent or other person
(not being an employee) who has provided services to the
Company which will not be wholly deductible in computing its
taxable profits, the Company has not received any bill in
respect of any of the same which remains unpaid and no work
has been carried out by any such person for the Company
(whether or not in connection with this Agreement or the
transaction effected by it) in respect of which the Company
has not received a bill;
30.11 no management or similar charge has become payable or been
paid by the Company other than provided for in this Agreement;
and
30.12 save for bona fide purchases of inventory and supplies on
terms not less favourable than those extended to independent
third parties no payment has been made by the Company to, or
benefit conferred (directly or indirectly) by the Company on,
the Vendor or any Insider, save as specified in the Disclosure
Letter.
31. EFFECTS OF AGREEMENT
31.1 The customers, suppliers and employees of the Company have not
been informed that the Shares may or will be sold to the
Purchaser, but, so far as the Vendor is aware (without having
made due enquiry), the acquisition of the Shares by the
Purchaser will not, and will not be likely to, affect the
relationship between the Company and any of its customers,
suppliers or employees.
31.2 The execution of this Agreement and the Vendor Delivered
Documents and the observance and performance of their
respective provisions will not and will not be likely to:-
31.2.1 result in a breach of any Contract, law, regulation, order,
judgment, injunction, undertaking, decree or other like
imposition to or by which the Company and/or the Vendor are
party or are bound, or entitle any person to terminate or
avoid any Contract to which the Company and/or the Vendor are
party, or have any material effect on any such Contract;
31.2.2 result in the loss or impairment of or any default under any
licence, authorisation or consent required by the Company for
the purposes of its business;
90
<PAGE> 91
31.2.3 result in the creation, imposition, crystallisation or
enforcement of any encumbrance whatsoever on any of the assets
of the Company; or
31.2.4 result in any present or future indebtedness of the Company
becoming due and payable, or capable of being declared due and
payable, prior to its stated maturity date.
31.3 There is no Contract to which the Company is party which
depends on the continuation of the connection (whether as an
officer of the Company or otherwise) of any person with the
Company.
TAX WARRANTIES
32. RETURNS, DISPUTES AND CLEARANCES
32.1 All notices, returns, computations, registrations and payments
which should have been made by the Company for any Taxation
purpose have been made within the requisite periods and are
up-to-date, correct and on a proper basis and none of them is,
or so far as the Vendor is aware is likely to be, the subject
of any dispute with any Taxation Authority.
32.2 The Company is not involved in any dispute with any Taxation
Authority concerning any matter likely to affect in any way
the liability of the Company to Taxation and there are no
circumstances which so far as the Vendor is aware are likely
to give rise to any such dispute.
32.3 The Taxation affairs of the Company have never been the
subject of any investigation or enquiry by any Taxation
Authority (other than routine questions), no Taxation
Authority has indicated that it intends to investigate the
Taxation affairs of the Company and there are no circumstances
so far as the Vendor is aware which are likely to give rise to
any such investigation.
32.4 The Company has punctually supplied all information requested
by any Taxation Authority for any Taxation purpose.
32.5 All particulars furnished to the Inland Revenue or any other
Taxation Authority in connection with the application for any
consent or clearance made on behalf of or affecting the
Company fully and accurately disclosed all facts,
circumstances and (where appropriate) law material to the
decision of the Inland Revenue or such other Taxation
Authority and any such consent or clearance given remains
valid and effective and any transaction for which such consent
or
91
<PAGE> 92
clearance has previously been obtained has been carried into
effect (if at all) only in accordance with the terms of the
relevant application, consent or clearance.
32.6 The Disclosure Letter contains details so far as they affect
the Company of all concessions, arrangements and agreements
(whether formal or informal) negotiated with any Taxation
Authority and no action has been taken by or on behalf of the
Company which has had or so far as the Vendor is aware is
likely to have the result of altering, prejudicing or in any
way disturbing any such concession, arrangement or agreement.
33. PENALTIES AND INTEREST
33.1 The Company has not since the Accounting Date paid, and is not
liable to pay, any fine, penalty, charge, surcharge or
interest charged by virtue of any of the provisions of TMA or
any other Taxation Statute and has not since the Accounting
Date become subject to any forfeiture by virtue of any such
provisions or the operation of any penal provisions contained
in any Taxation Statute.
33.2 There are no circumstances so far as the Vendor is aware which
are likely to cause the Company to become liable to pay any
fine, penalty, charge, surcharge or interest, or become
subject to any forfeiture, as mentioned in paragraph 32.1.
34. TAXATION CLAIMS, LIABILITIES AND RELIEFS
34.1 The Company has sufficient records to calculate the liability
to Taxation or relief arising on the disposal of any asset
owned at the Accounting Date or acquired since the Accounting
Date but before Completion.
34.2 The Company has duly and properly made all Taxation claims,
disclaimers, elections and surrenders and given all notices
and consents and done all other things in respect of Taxation
the making, giving or doing of which was assumed to have been
made for the purposes of the Balance Sheet, all such claims,
disclaimers, elections, surrenders, notices, consents and
other things have been accepted as valid by the relevant
Taxation Authorities and none has been revoked or otherwise
withdrawn.
92
<PAGE> 93
34.3 The Company has neither made nor is entitled to make any claim
under sections 23, 24, 48, 242, 279 or 280 TCGA or section 584
ICTA.
34.4 The Company is not, and so far as the Vendor is aware will not
become, liable to pay, or make reimbursement or indemnity in
respect of, any Taxation (or amounts corresponding to any
Taxation) payable by or chargeable on or attributable to any
other person, whether in consequence of the failure by that
person to discharge that Taxation within any specified period
or otherwise, where such Taxation relates to a profit, income
or gain, transaction, event, omission or circumstance arising,
occurring or deemed to arise or occur (whether wholly or
partly) on or prior to Completion.
34.5 No relief (whether by way of deduction, reduction, set off,
exemption, repayment or allowance or otherwise) from, against
or in respect of any Taxation has been claimed by and/or given
to the Company which would or might be effectively withdrawn,
postponed, restricted or otherwise lost as a result of any
act, omission, event or circumstance arising, occurring or
effected after Completion.
34.6 The Company has not received a notice under the provisions of
section 23 ICTA.
35. DISTRIBUTIONS AND PAYMENTS
35.1 The Company has deducted and properly accounted to the
appropriate Taxation Authority for all amounts which it has
been obliged to deduct in respect of Taxation, has complied
fully with all reporting requirements relating to all such
amounts and has (where required by the applicable Taxation
Statute) duly provided certificates of deduction of tax to the
recipients of payments from which deductions have been made.
35.2 The Company has not at any time declared, paid or made any
dividend or other payment which is, or could be treated as, a
distribution for the purposes of Part VI ICTA or section 418
ICTA except any dividend disclosed in its audited statutory
accounts nor is it bound to make such a distribution other
than provided for in this Agreement.
35.3 There are no securities (within the meaning of section 254(1)
ICTA) of the Company in issue or which the Company has agreed
to issue any payment in respect of which falls to be treated
as a distribution for the purposes of section 209 ICTA.
93
<PAGE> 94
35.4 The Company has not at any time issued or agreed to issue any
share capital as paid up otherwise than by the receipt of new
consideration, after repaying any share capital, as mentioned
in section 210 ICTA.
35.5 The Company has not made or received any exempt distribution
within the meaning of section 213 ICTA, and has at no time
been a relevant company in relation to an exempt distribution
for the purposes of that section or concerned in an exempt
distribution for the purposes of section 214 ICTA.
35.6 The Company has not at any time received a capital
distribution to which section 189 TCGA could apply.
35.7 No rents, interest, annual payments or other sums of an income
nature paid or payable by the Company since the Accounting
Date, or which the Company is under an obligation to pay, will
be wholly or partially disallowable as deductions or charges
in computing the profits of the Company for the purposes of
corporation tax, whether by virtue of the provisions of
section 74, 79, 125, 338, 577, 779 to 786 (inclusive) or 787
ICTA or otherwise.
35.8 The Company has not since the Accounting Date made any payment
to, or provided any benefit for, any present or former
director, employee or officer which is wholly or partially
disallowable as a deduction in computing the profits of the
Company for the purposes of corporation tax, and is under no
obligation to make any such payment or provide any such
benefit.
35.9 The Company is not and never has been a party to any interest
rate contract or option, or currency contract or option which
is or may become a qualifying contract as described in Chapter
II Part IV FA 1994.
35.10 The Company has no assets or liabilities to which Chapter II
Part II FA 1993 could apply.
35.11 The Company has not elected that any dividend it has paid be
treated as a foreign income dividend as described in Chapter
VA Part VI ICTA.
35.12 The Company has not paid any dividend to which section 246T
ICTA has applied.
94
<PAGE> 95
36. EMPLOYEE BENEFITS
36.1 Without prejudice to the generality of paragraph 34.1, the
Company has properly operated the Pay As You Earn system, by
making deductions, as required by the applicable Taxation
Statute, from all payments made, or treated as made, to its
directors, employees or officers or former directors,
employees or officers or any persons required to be treated as
such, and accounting to the Inland Revenue for all Taxation so
deducted and for all Taxation chargeable on the Company on
benefits provided for its directors, employees or officers, or
former directors, employees or officers.
36.2 The Company has complied fully with all reporting
requirements, and proper records have been maintained,
relating to all payments and benefits made or provided, or
treated as made or provided, to its directors, employees or
officers or former directors, employees or officers.
36.3 The Disclosure Letter contains full details of all
dispensations granted to the Company by the Inland Revenue
under section 166 ICTA or otherwise relating to payments and
benefits made or provided, or treated as made or provided, to
its directors, employees or officers or former directors,
employees or officers or any persons required to be treated as
such, and the reporting requirements mentioned in relation to
such payments and benefits in paragraph 35.2.
36.4 The Company has complied fully with its obligations under the
provisions of sections 136(6) and 139(5) ICTA and section 85
FA 1988.
36.5 The Disclosure Letter contains full details of all share
option schemes and profit sharing schemes established by the
Company whether approved by the Inland Revenue under the
provisions of Schedule 9 ICTA or otherwise.
36.6 The Company has not established a qualifying employee share
ownership trust within the meaning of section 74 and Schedule
5 FA 1989 and no chargeable event within the meaning of
section 69 FA 1989 has occurred.
36.7 The Disclosure Letter contains full details of all
profit-related pay schemes providing for the payment to any
employee of the Company of emoluments calculated by reference
to profits, which have ever been registered under Chapter III
Part V ICTA.
36.8 The Company has complied fully with its obligations under
Chapter IV Part XIII ICTA.
95
<PAGE> 96
36.9 The Company has complied fully with all its obligations
relating to Class 1 and Class 1A National Insurance
Contributions, both primary and secondary.
37. CLOSE COMPANIES
The Company is not, and has never been, a close company as
defined in section 414 ICTA.
38. GROUP TRANSACTIONS
The Company has not at any time within the last six years:-
38.1 acquired any asset from any company which at the time of the
acquisition was a member of the same group of companies as
defined in section 170 TCGA except for bona fide purchases of
inventory and supplies on terms not less favourable than those
extended to independent third parties;
38.2 entered into or been otherwise involved in any transaction to
which section 774 ICTA applies;
38.3 surrendered or claimed or agreed or arranged to surrender or
claim (and prior to Completion will not surrender or claim or
agree or arrange to surrender or claim) any amount by way of
Group Relief pursuant to sections 402 to 413 (inclusive) ICTA
and has not made or received and is not liable to make or
entitled to receive a payment for Group Relief;
38.4 surrendered or claimed or agreed or arranged to surrender or
claim (and prior to Completion will not surrender or claim or
agree or arrange to surrender or claim) any amount of ACT
pursuant to section 240 ICTA and has not made or received and
is not liable to make or receive a payment for surrender of
ACT;
38.5 joined in the making of any election pursuant to section 247
ICTA or paid any dividend without paying ACT or made any
payment without deduction of income tax in circumstances such
that ACT ought to have been paid or income tax ought to have
been deducted as mentioned in section 247(6) ICTA;
38.6 been a party to any such reconstruction as is described in
section 343 ICTA;
38.7 been the subject of or otherwise involved in any arrangements
as are referred to in section 240(11) or 410 ICTA;
96
<PAGE> 97
38.8 acquired an asset as trading stock from a member of the same
group where the asset did not form part of the trading stock
of any trade carried on by the other member, as mentioned in
section 173(1) TCGA, or disposed of an asset which formed part
of the trading stock of any trade carried on by the Company to
another member of the same group which acquired the asset
otherwise than as trading stock of a trade carried on by the
other member, as mentioned in section 173(2) TCGA;
38.9 been, and there are no circumstances by virtue of which the
Company could be, assessed or charged to corporation tax by
virtue of the provisions of section 178(9), 179(11), 190 or
191 TCGA and is not entitled to recover or liable to have
recovered from it any sums paid pursuant to any of those
sections; or
38.10 ceased to be a member of a group of companies in such
circumstances that a profit or gain was deemed to accrue to
the Company by virtue of section 178 or 179 TCGA or at a time
when it held an interest in land which could have been
chargeable to Taxation under section 21 Development Land Tax
Act 1976 and neither the execution of this Agreement nor
Completion will result in any profit or gain being deemed to
accrue to the Company for any Taxation purpose whether
pursuant to section 178 or 179 TCGA or otherwise.
39. GIFTS
39.1 There is no outstanding Inland Revenue charge (as defined in
section 237 IHTA) over any asset of the Company or over any of
the Shares.
39.2 There are in existence no circumstances by virtue of which any
such power as is mentioned in section 212 IHTA could be
exercised in relation to any asset of the Company or to any of
the Shares or by virtue of which any such power could be
exercised but for the provisions of section 204(6) IHTA.
39.3 The Company has not been a party to associated operations in
relation to a transfer of value within the meaning of section
268 IHTA.
39.4 The Company has not received any asset by way of gift as
mentioned in section 282 TCGA.
97
<PAGE> 98
39.5 No expenditure incurred by the Company on the acquisition of
any shares is liable to be reduced under the provisions of
section 125 TCGA.
40. TAX AVOIDANCE
The Company has not entered into or been a party to any scheme,
arrangement or transaction designed partly or wholly or containing
steps or stages designed partly or wholly for the purpose of avoiding
or deferring Taxation or reducing a liability to Taxation and in
particular, but without limitation, has not entered into or been a
party to any scheme, arrangement or transaction to which the provisions
of any of sections 34 to 37 (inclusive), 56 and 398, 395, 399, 703 to
709 (inclusive), 713, 714, 729 to 737 (inclusive), 770, 775, 776, 779
to 786 (inclusive), 787 and 798 ICTA could apply.
41. BASE VALUES AND ACQUISITION COSTS
41.1 If each of the capital assets of the Company owned at the
Accounting Date was disposed of for a consideration equal to
the book value of that asset in, or adopted for the purpose
of, the Balance Sheet, or in the case of assets acquired since
the Accounting Date, equal to the consideration given on
acquisition (except as provided for in the Accounts), no
liability to corporation tax on chargeable gains or balancing
charge under the CAA would arise (and for this purpose there
will be disregarded any relief or allowance available to the
Company other than amounts falling to be deducted from the
consideration receivable under section 38 TCGA).
41.2 The Company does not own any wasting asset within the meaning
of section 44 TCGA which does not qualify in full for capital
allowances as described in section 47(1) TCGA.
42. CAPITAL GAINS
The Company has not at any time:-
42.1 made a claim under sections 152 to 158 (inclusive) or 175 or
247 TCGA which affects the amount of the chargeable gain or
allowable loss which would, but for such claim, have arisen
upon a disposal of any asset or acquired any asset or any
interest in any asset in circumstances in
98
<PAGE> 99
which another company has made a claim under section 175 TCGA
which affects for the purposes of the TCGA the amount or value
of the consideration given for such asset or interest;
42.2 been a party to, involved in, or connected with any disposal
of assets within the meaning of section 29 TCGA or any scheme
or arrangement such as are mentioned in section 30 TCGA;
42.3 been a party to, involved in, or connected with any exchange
of securities whether or not (by virtue of section 135 TCGA)
section 127 TCGA applied to the exchange;
42.4 carried out or been involved in or connected with any
reorganisation or scheme of reconstruction or amalgamation
whether or not (by virtue of section 126 or 136 TCGA) section
127 TCGA applied to such reorganisation or scheme of
reconstruction or amalgamation;
42.5 carried out or been involved in or connected with any scheme
of reconstruction or amalgamation involving a transfer of
business assets whether or not section 139 TCGA applied to the
transfer;
42.6 been a party to, involved in, or connected with, any
deprecatory transaction to which section 176 TCGA applied
(including any transaction to which that section applied by
virtue of section 177 TCGA);
42.7 acquired or disposed of any asset or entered into any
transaction or arrangement whatsoever otherwise than by way of
bargain at arm's length or in respect of which there may be
substituted for the actual consideration given or received by
the Company a different consideration for any Taxation
purpose;
42.8 realised a loss to which section 18(3) TCGA applied;
42.9 realised a pre-entry loss or acquired any pre-entry asset as
defined in Schedule 7A TCGA;
42.10 disposed of any chargeable asset for a consideration not
payable wholly in cash on completion of the disposal;
42.11 acquired any debt (other than a debt on a security (as defined
in section 132 TCGA)) in respect of which it is not the
original creditor;
99
<PAGE> 100
42.12 made an election under paragraph 4 Schedule 2 TCGA and no
asset owned by the Company is subject to a deemed disposal and
re-acquisition under paragraphs 16, 19 or 20 Schedule 2 TCGA;
42.13 made an election under section 35(5) TCGA nor has the Company
made its first relevant disposal for the purposes of section
35(6) TCGA;
42.14 acquired any policy of assurance or contract for a deferred
annuity or interest in any such policy or contract in
circumstances such that a chargeable gain could arise on
disposal under section 210 TCGA;
42.15 transferred a trade carried on by it outside the United
Kingdom through a branch or agency in circumstances such that
a chargeable gain could be deemed to arise at a date after
such transfer under section 140 TCGA;
42.16 made any claim or election under section 161(3) TCGA;
42.17 made any claim under section 253 or 254 TCGA and no chargeable
gain has arisen or is likely to arise under section 253 or 254
TCGA.
43. CAPITAL ALLOWANCES
43.1 All capital expenditure incurred by the Company since the
Accounting Date and all capital expenditure which may be
incurred by the Company under any existing contract has
qualified or will be capable of qualifying for capital
allowances.
43.2 There are set out in the Disclosure Letter details of all
capital allowances claimed in respect of the accounting period
of the Company ended on the Accounting Date in respect of each
asset or pool of assets in respect of which separate
computations for capital allowances are required to be made
or, as a result of any election, are made.
43.3 Nothing has occurred since the Accounting Date as a result of
which the Company could be required to bring a disposal value
into account or suffer a balancing charge for the purpose of
capital allowances under sections 4, 24, 87, 100 or 128 CAA or
a withdrawal of first year allowances or a recovery of excess
relief under section 46 or 47 CAA.
43.4 The Company has not incurred any expenditure on the provision
of any capital allowance bearing asset for leasing.
100
<PAGE> 101
43.5 The Company has not made any election under section 37 CAA nor
is it taken to have made any such election under section
37(8)(c) CAA.
43.6 The Company has not obtained any capital allowances under
Chapter VI Part II CAA.
44. VAT: GENERAL
44.1 The Company:-
44.1.1 is duly registered and is a taxable person for the
purposes of VAT and such registration is not subject
to any conditions imposed by or agreed with the
Commissioners of Customs and Excise;
44.1.2 has complied in all material respects with all
statutory requirements, orders, provisions,
directions or conditions relating to value added tax;
44.1.3 maintains complete, correct and up-to-date records
for the purposes of all legislation relating to VAT
and is not subject to any condition imposed by the
Commissioners of Customs and Excise under paragraph 6
Schedule 11 VATA;
44.1.4 is not in arrears with any payment or returns under
legislation relating to VAT or excise duties, or
liable to any abnormal or non-routine payment of VAT,
or any forfeiture or penalty, or to the operation of
any penal provision;
44.1.5 has not within the two years ending on the date of
this Agreement been served with any penalty liability
notice under section 64 VATA or any surcharge
liability notice under section 59 VATA or been issued
with any written warning under section 76(2) VATA;
44.1.6 has not been required by the Commissioners of Customs
and Excise to give security under paragraph 4
Schedule 11 VATA;
44.1.7 has not been or applied for treatment as a member of
a group for VAT purposes under section 43 VATA and no
transaction has been effected in consequence of which
the Company is or may be held liable for any VAT
arising from supplies made by another company;
44.1.8 has no interest and has not at any time within the
period of ten years preceding the date of this
Agreement had any interest in any assets to which
Part XV of the Value Added Tax Regulations 1995
apply; and
101
<PAGE> 102
44.1.9 is not, and has not agreed to become, an agent,
manager or factor for the purposes of section 47 VATA
of any person who is not resident in the United
Kingdom.
44.2 All supplies of goods and services made by the Company are
taxable supplies for the purposes of the VATA and the Company
has not been and will not be denied credit for any input tax
by reason of the operation of section 26 VATA or otherwise.
44.3 All goods or services supplied to the Company, or goods
imported by the Company, in respect of which the Company has
claimed credit for input tax under section 25 VATA, are used
or to be used wholly for the purposes of the Company's
business.
44.4 The Company has never disposed of or acquired any business or
assets in the circumstances mentioned in section 49 VATA or
Article 5 of the Value Added Tax (Special Provisions) Order
1995.
44.5 The Company has never been registered for the purposes of VAT
by reason of its intention to make taxable supplies (within
the meaning of section 4 VATA).
44.6 There are set out in the Disclosure Letter details of all
outstanding claims made by the Company under section 22 Value
Added Tax Act 1983 and section 36 VATA.
44.7 The Company has not been a party to any transaction or
arrangement as a result of which a direction has been or may
be given under Schedule 9A VATA.
45. VAT: PROPERTY TRANSACTIONS
45.1 The Company has not incurred any liability in respect of VAT
(whether to H.M. Customs and Excise or to any other person) by
reason of the provisions of paragraph 2(1) Schedule 10 VATA
and there are no circumstances whereby the Company could
become so liable as a result of a person making an election
under that paragraph.
45.2 Neither the Company nor any relevant associate (within the
meaning of paragraph 3(7) Schedule 10 VATA) has made any
election under paragraph 2(1) Schedule 10 VATA in respect of
any land in, over or in respect of which the Company has any
interest, right or license to occupy and the Company is not
aware of any intention to make such an election.
102
<PAGE> 103
45.3 The Company does not own the fee simple in any building or
work such as is referred to in Item 1(a) Group 1 Schedule 9
VATA.
45.4 No interest in or right over land or any license to occupy
land of the Company constitutes or is subject to a
developmental tenancy, developmental lease or developmental
license such as is referred to in Item 1(b) Group 1 Schedule 9
VATA.
45.5 The Company has not incurred any liability under the
provisions of paragraph 6 Schedule 10 VATA or the Value Added
Tax (Self Supply of Construction Services) Order 1989 and
there are no circumstances in existence at the date of this
Agreement whereby the Company would become so liable on the
occurrence of any of the events mentioned in paragraph 5(1)(a)
or 5(1)(b) Schedule 10 VATA or paragraph 3 of the Value Added
Tax (Self Supply of Construction Services) Order 1989.
45.6 The Company has not issued any certificate such as is
mentioned in paragraph 13(4)(f) Schedule 3 FA 1989 and has not
constructed any building or work (or reconstructed any
building) in circumstances in which such a certificate could
have been issued.
46. STAMP DUTY AND STAMP DUTY RESERVE TAX
46.1 All documents which are liable to stamp duty and which confer
any right upon the Company have been duly stamped and no
document which confers any right upon the Company and which is
outside the United Kingdom would attract stamp duty if it were
brought into the United Kingdom and there is no liability to
any penalty in respect of such duty or circumstances which may
give rise to such a penalty.
46.2 The Company has never incurred or otherwise been under a
liability to stamp duty reserve tax and there are no
circumstances which may result in the Company being so liable.
46.3 Within the five years ending on the date of this Agreement,
the Company has not made any claim for relief or exemption
under section 42 FA 1930 or section 75, 76 or 77 FA 1986.
103
<PAGE> 104
47. RESIDENCE AND OFFSHORE INTERESTS
47.1 The Company is and has at all times been resident in the
United Kingdom for the purposes of all Taxation Statutes and
has not at any time been resident outside the United Kingdom
for the purposes of any Taxation Statute or any double
taxation arrangements.
47.2 The Company is not, and has never been, a dual-resident
investing company within the meaning of section 404 ICTA.
47.3 The Company has not at any time entered into any transaction
falling within section 765 ICTA or failed to comply with the
requirements of section 765A ICTA.
47.4 The Company has not at any time been subject to Taxation in
any jurisdiction outside the United Kingdom or had a branch
outside the United Kingdom or any permanent establishment (as
that expression is defined in the respective double taxation
relief orders current at the date of this Agreement) outside
the United Kingdom.
47.5 The Company does not own and has not at any time owned a
material interest in an offshore fund which is or has at any
material time been a non-qualifying offshore fund within the
meaning of section 760 ICTA.
47.6 The Company does not own and has not at any time owned any
interest in a controlled foreign company within the meaning of
sections 747 and 752 ICTA.
47.7 The Company is not, and has not at any time since 1st April
1985 been, a company which has, or an associated company of a
company which has, a qualifying presence in a unitary state
for the purposes of sections 812 to 814 ICTA.
47.8 The Company is not assessable and has not at any time been
assessed to tax under section 78 TMA.
47.9 The Company does not and has at no time held shares in a
company which is not resident in the United Kingdom and which
would be a close company if it were resident in the United
Kingdom, in circumstances such that a chargeable gain accruing
to that other company could be apportioned to the Company
under section 13 TCGA.
104
<PAGE> 105
48. THE BALANCE SHEET
The balance sheet comprised in the Accounts fully provides for all
Taxation (on the
basis of the rates applicable to the financial year which ended on the
Accounting Date) liable to be assessed on or in respect of or by
reference to:-
48.1 the profits, gains, income and earnings (whether actual or
deemed) for any period ended on or before the Accounting Date;
or
48.2 any distributions (within the meaning of Part VI or section
418 ICTA) made or deemed to be made on or before the
Accounting Date; or
48.3 any other transaction entered into or deemed to be entered
into on or before the Accounting Date.
49. POST-ACCOUNTING DATE
Since the Accounting Date:-
49.1 the Company has not incurred and has not become liable to
incur expenditure which will not be wholly deductible in
computing its taxable profits, except for expenditure on the
acquisition of an asset to be held otherwise than as Stock and
expenditure for entertainment details of which are, in each
case, set out in the Disclosure Letter;
49.2 no event has occurred which has given rise or will or may give
rise to a liability to Taxation on the Company in respect of
deemed (as opposed to actual) income, profits or gains or
which has resulted or will or may result in the Company
becoming liable to Taxation directly or primarily chargeable
against or attributable to another person;
49.3 the Company has not entered into any transaction which has
given rise or may give rise to a Liability to Taxation on a
chargeable gain; and
49.4 no event has occurred as a result of which the Company could
be required to bring a disposal value into account or suffer a
balancing charge for the purposes of capital allowances under
section 4, 24, 87, 100 or 128 CAA or a withdrawal of first
year allowances or a recovery of excess relief under section
46 or 47 CAA.
50. LOSSES AND ACT
50.1 Within the period of three years ending on the date of this
Agreement there has been no major change in the nature or
conduct of a trade or business carried on by the Company
within the meaning of section 245, 245A or 768 ICTA.
105
<PAGE> 106
50.2 There has at no time been a change in the ownership of the
Company (otherwise than pursuant to this Agreement) such that
section 245B, 768 or 768A ICTA has been or may be applied to
deny relief in respect of any ACT or loss or losses or excess
charges on income of the Company.
51. SHARES AND SECURITIES
51.1 The Company has not at any time:-
51.1.1 purchased or agreed to purchase, repaid or agreed to
repay or redeemed or agreed to redeem any shares of
any class of its share capital or any amount paid up
on any of its shares;
51.1.2 capitalised or agreed to capitalise in the form of
redeemable shares or debentures any profits or
reserves of any class or description or passed or
agreed to pass any resolution to do so; or
51.1.3 provided capital to any company on terms whereby the
company so capitalised has in consideration of the
provision of capital issued loan stock or other
securities on terms which were otherwise than by way
of a bargain made at arm's length.
51.2 The Company does not hold or have in issue:-
51.2.1 any quoted Eurobond within the meaning of section 124
ICTA;
51.2.2 any shares or securities (as defined in section
132(3)(b) TCGA) other than the Shares;
51.2.3 any qualifying corporate bond (as defined in section
117 TCGA);
51.2.4 any deep discount security (as defined in paragraph 1
Schedule 4 ICTA);
51.2.5 any deep gain security (as defined in paragraph 1
Schedule 11 FA 1989);
51.2.6 any qualifying indexed security (as defined in
paragraph 2 Schedule 11 FA 1989);
51.2.7 any qualifying convertible security (as defined in
paragraph 2 Schedule 10 FA 1990);
51.2.8 any gilt-edged security falling within paragraph 20
Schedule 11 FA 1989 or any non-gilt-edged security
falling within paragraph 21 Schedule 11 FA 1989;
51.2.9 any security as defined in section 710 ICTA and has
not made any transfer to which sections 711 to 728
(inclusive) ICTA could apply; or
51.2.10 any debt which is a qualifying debt as defined in
section 61 FA 1993.
106
<PAGE> 107
SCHEDULE 4
PURCHASER'S WARRANTIES
1. ORGANISATION
The Purchaser is a corporate entity organised and validly existing and
has all requisite corporate power and authority to own, lease and
operate its properties and business as presently conducted and to enter
into and perform its obligations under this Agreement.
2. CORPORATE AUTHORITY
The execution, delivery and performance of this Agreement by the
Purchaser and the consummation by the Purchaser of the transactions
contemplated herein have been duly authorised by all requisite
corporate action on the part of the Purchaser. This Agreement has been
or will be duly executed and delivered by the Purchaser and constitute
the legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors
rights generally and subject to general principles of equity.
3. EQUITY
The Purchaser is entitled to do business as a foreign corporation in
and is in good standing under the laws of each jurisdiction in which
the conduct of its business or the ownership of its assets requires
such qualification, except where the failure so to qualify would not
have an adverse effect on its business, assets or financial condition.
4. NO CONFLICT
Neither the execution nor the delivery of this Agreement by the
Purchaser nor the consummation of the transactions contemplated hereby
will conflict with or result in a breach of any of the provisions of,
or constitute a default under, the charter, by-laws or Memorandum or
Articles of Association of the Purchaser as amended to date, or result
in any material breach of any agreement, or any breach of any mortgage,
107
<PAGE> 108
indenture, lease or other instrument to which the Purchaser is a party
or by which the Purchaser or its property is bound, or result in the
violation of any law, rule, regulation, order, judgment or decree to
which the Purchaser or its property is subject.
5. CONSENTS
No consent, approval or authorisation of, or declaration or filing
with, any governmental authority is required on the part of the
Purchaser in connection with the execution, delivery or performance of
this Agreement and save, for those approvals, consents or authorisation
required pursuant to this Agreement at or prior to Closing and save for
those approvals, consents or authorisations required by the Guarantor's
financing sources no approval, consent or authorisation of any lender,
lessor or other person is required in order for the Purchaser to
consummate the transactions contemplated by this Agreement.
6. BROKER
No broker, investment banker, financial adviser or other person is
entitled to any broker's, finders, financial advisers or other similar
fee or commission in connection with the transaction contemplated by
this Agreement based upon arrangements made by or on behalf of the
Purchaser.
108
<PAGE> 109
SCHEDULE 5
DETERMINATION OF THE NET WORTH, TRADE DEBTORS AND BAD DEBTS RESERVE
1. CLOSING ACCOUNTS
The following provisions of this Schedule 5 shall apply regarding the
ascertainment of the Net Worth and the calculation of the amount of the
Trade Debtors and the Bad Debts Reserve, namely:-
1.1 the Vendor and the Purchaser shall procure that if not done
immediately before then on the day of, or no later than during
the 3 Business Days immediately following Closing, there is
carried out a stock-take of the Company's Stock;
1.2 the Purchaser will, as soon as reasonably practicable after
Closing, procure the preparation of the draft Closing
Statements (defined and referred to in paragraph 2 below);
1.3 the Net Worth, amount of the Trade Debtors and Bad Debts
Reserve shall be determined and calculated on a basis which is
Consistent. The Net Worth (determined as aforesaid) will be
arithmetically calculated on the same basis as that set out in
the Example Closing Statement set out in Schedule 8;
1.4 without prejudice to paragraph 1.3, in determining the Net
Worth:-
1.4.1 on the Closing Date or as soon as reasonably
practicable thereafter but in any event within 10
Business Days, the Company will prepare and deliver
to the Purchaser and the Vendor a valuation (before
any provision for obsolete, slow moving or damaged
stock), of the Stock on hand as at the Closing Date
and a calculation of a provision for obsolete, slow
moving or damaged stock at that date, in each case on
a basis which is Consistent. The Purchaser will, at
the cost of the Vendor, instruct the Purchaser's
Accountants, to consider such valuation and
calculation and to confirm that, in their view, the
same have been prepared on a basis which is
Consistent. The valuation and calculation as produced
by the Company (bearing any adjustments required to
be made by the Purchaser's Accountants);will be
included in the Final Closing Statement;
1.4.2 an amount of(pound)787,812 will be included in
respect of capitalised design and development costs;
109
<PAGE> 110
1.4.3 a reserve of(pound)50,000 (before corporation tax
benefit) will be included in respect of accrued
management bonuses;
1.4.4 without prejudice to any claim which the Purchaser
may have against the Vendor under the Taxation Deed,
no provision will be made in respect of corporation
tax; and
1.4.5 Solent Microwave Limited shall be treated in the same
way as in the Example Closing Statement set out in
Schedule 8.
2. PROCEDURE
2.1 Within 60 days following Closing, the Net Worth shall be
ascertained by the Purchaser and the Purchaser shall serve a
written statement ("the draft Closing Statement") on the
Vendor within such period showing the Net Worth, the amount
attributable to the Trade Debtors and the Bad Debt Reserve.
The draft Closing Statement shall adopt the format used in the
Example Closing Statement set out in Schedule 8.
2.2 Unless the Vendor shall notify the Purchaser within 60 days
after its receipt of the draft Closing Statement that it does
not accept and agree with its contents then the Vendor shall
be deemed to have accepted and agreed the contents of the
draft Closing Statement for the purposes of this Agreement.
2.3 If within the aforesaid period of 60 days the Vendor shall
notify the Purchaser in writing that it does not accept and
agree with the contents of the draft Closing Statement
specifying each individual objection with respect thereto,
showing in each case the amount in dispute, the reason why the
same is in dispute and identifying why the treatment of issue
giving rise to the dispute in question is not in accordance
with paragraph 1.3 above, then the Purchaser and the Vendor
shall endeavour to reach agreement upon adjustments to the
draft Closing Statement to meet the Vendor's objections.
2.4 If the Vendor and the Purchaser are unable to reach agreement
as aforesaid within 30 days of the Vendor giving to the
Purchaser the written notification contemplated by paragraph
2.3 or within such later time as the Purchaser and the Vendor
may agree then any unresolved disputes shall be forthwith
submitted by the Vendor or the Purchaser to the Independent
Accountant for resolution in accordance with the provisions of
Schedule 7.
110
<PAGE> 111
3. FINAL CLOSING STATEMENT
3.1 For the purposes of this Agreement the expression "the Final
Closing Statement" shall mean:-
3.1.1 the draft Closing Statement which the Vendor is
deemed to have accepted and agreed pursuant to
paragraph 2.2 or with which the Vendor indicates its
acceptance and agreement within the 60 day period
referred to in paragraph 2.2 whereupon (in either
event) the contents of the same shall become and be
final and binding on the Vendor and the Purchaser for
the purposes of this Agreement; or
3.1.2 the draft Closing Statement bearing any adjustment
made pursuant to paragraph 2.3, if paragraph 2.3
applies and agreement is reached between the Vendor
and the Purchaser as contemplated therein whereupon
the contents of the same shall become and be final
and binding on the Vendor and the Purchaser for the
purpose of this Agreement; or
3.1.3 the draft Closing Statement as resolved by the
Independent Accountant pursuant to Schedule 7 the
contents thereof shall become and be final and
binding upon the Vendor and the Purchaser for the
purposes of this Agreement.
3.2 For the purposes of determining the Net Worth and all other
matters contemplated as being determined in this Agreement by
reference to the Final Closing Statement (including, without
limitation, the Trade Debtors and the Bad Debt Reserve), the
Final Closing Statement and the contents thereof shall (save
in the case of manifest error) be final and binding on the
Vendor and the Purchaser.
4. GENERAL
Any costs incurred by the Purchaser or the Vendor in acting in the
manner contemplated by this schedule 5 including, without limitation,
any professional costs and expenses, shall be borne by the party which
incurs them save as contemplated by Schedule 7 if that Schedule
applies. It is agreed and declared that in any event no provision for
such or any costs shall be contained in the Final Closing Statement.
The Vendor will, forthwith on demand by the Purchaser, pay to the
Purchaser the reasonable and proper costs of the Purchaser's
Accountants as referred to in paragraph 1.4.1 above.
111
<PAGE> 112
5. ACCESS
The Vendor and their professional advisers shall have such reasonable
access to the books and accounts of the Company and such other relevant
information as shall be reasonably requested by the Vendor or its
professional advisers to enable them to assess the calculations in the
statement referred to in this Schedule which relevant information shall
include but not be limited to all working papers of the Company, the
Company's accountants and auditors in connection with the Accounts
and/or the draft Closing Statement.
112
<PAGE> 113
SCHEDULE 6
DETERMINATION OF 1999 GROSS PROFIT, THE BAD DEBTS, AND THE EXCLUDED LIABILITIES
The following provisions of this Schedule 6 apply regarding the calculation of
the amount of the 1999 Gross Profit, the amount of the Bad Debts, the level of
the Taxation Reserve and the aggregate amount of the Excluded Liabilities,
namely:-
1. The Purchaser's Accountants will, as soon as reasonably practicable,
following the 1999 Financial Period and in any event within 60 days of
31 March 2000, at the expense of the Purchaser, undertake whatever work
they consider to be reasonable and appropriate so as to enable them to
prepare and they shall so prepare, on a basis which is Consistent, and
deliver to the Vendor and the Purchaser audited accounts of the Company
in respect of the year which commenced on 1st April 1999 and ending on
31 March 2000 (the "31 March 2000 Accounts"). Based upon the 31 March
2000 Accounts, the Purchaser will deliver to the Vendor a calculation
of (i) the 1999 Gross Profit (ii) the Bad Debts and (iii) the Excluded
Liabilities. In addition, the Purchaser will deliver to the Vendor a
statement as to the Taxation Reserve. Such calculations and statement
shall be accompanied by a further statement showing the amount of the
Additional Payment (if any) payable pursuant to the provisions of
clause 4 or the amount, if any, due from the Vendor to the Purchaser
pursuant to clause 4.9 of the Agreement ("the Total Statement").
2. Unless the Vendor notifies the Purchaser within 60 days of receipt of
whichever is the last to be served of the calculations and the
statements and Total Statement referred to above that it does not
accept and agree that all or any of such calculations or amounts
contained in any statement or the Total Statement has been prepared in
accordance with paragraph 1 above and/or that the amount payable by way
of Additional Payment (or the sum payable by the Vendor to the
Purchaser as contemplated by clause 4.9) contained in the Total
Statement has been calculated in accordance with the provisions of this
Agreement then the Vendor shall be deemed to have agreed and accepted
each such calculation, statement and the contents of the Total
Statement.
113
<PAGE> 114
3. If within such period of 60 days the Vendor shall have notified the
Purchaser in writing that it does not accept and agree that such
calculations or statements have been prepared in accordance with
paragraph 1 above or disagreeing with the contents of any of them,
specifying in the case of each objection the amount in dispute, the
reason for the dispute and identifying why the treatment is not in
accordance with paragraph 1 above or otherwise in accordance with this
Agreement, then the Vendor and the Purchaser shall endeavour to resolve
the differences between them thereby agreeing the amount of the 1999
Gross Profit, the amount of the Taxation Reserve and the amount of the
Bad Debts and the amount of the Excluded Liabilities and the amount of
the payment due to or from the Vendor.
4. In the absence of agreement between the Vendor and the Purchaser as
aforesaid within 30 days after the Purchaser received the objections of
the Vendor as aforesaid, either the Purchaser or the Vendor may by
notice in writing to the other require any unresolved issues between
them to be submitted to the Independent Accountant for resolution in
accordance with the provisions of Schedule 7.
5. The Vendor and their professional advisers shall have such reasonable
access to the books and accounts of the Company and such other relevant
information as shall be reasonably requested by the Vendor to enable
them to assess the calculations, statements and the Total Statement
referred to in this Schedule which shall include but not be limited to
all working papers of the Company, the Company's accountants and
auditors in connection with:-
5.1 the preparation of the 31 March 2000 Accounts; and
5.2 the Accounts;
5.3 the calculation of the Taxation Reserve; and
5.4 the draft and Final Closing Statements.
114
<PAGE> 115
SCHEDULE 7
AGREED DETERMINATION PROCESS
1. Any dispute or unresolved issue between the parties submitted to the
Independent Accountant pursuant to any provision of this Agreement will
be dealt with by the Independent Accountant in accordance with this
Schedule 7.
2. For the purposes of this Agreement "Independent Accountant" shall mean
a single independent chartered accountant or an independent firm of
chartered accountants to be agreed upon by the Vendor and the Purchaser
or (in default of agreement within 10 Business Days of the first
nomination) to be selected at the instance of either of them by the
President for the time being of the Institute of Chartered Accountants
in England and Wales and any such chartered accountant or firm of
chartered accountants (whose costs shall be paid as he or they shall in
their absolute discretion direct) will act as experts and not as
arbitrators
3. The Independent Accountant shall be asked to resolve any outstanding
issues referred to him so that the treatment of the same is Consistent
and/or is calculated in accordance with the provisions of this
Agreement.
4. Any decision of the Independent Accountant shall be binding on the
parties to this Agreement.
5. The parties shall co-operate and use all reasonable endeavours to
procure that the Independent Accountant shall, as expeditiously as
practicable, resolve all such outstanding issues (the issues to be so
resolved so that the treatment of them is Consistent and/or in
accordance with the provisions of this Agreement) and to produce and
submit in writing to each of the Vendor and the Purchaser a statement
as to the same.
6. The Independent Accountant shall resolve any disputes solely on
presentation by the Vendor and the Purchaser and not by independent
review. In resolving any dispute the Independent Accountant may not
assign a value to an item greater than the greatest value claimed by
any party or less than the smallest value for such item claimed by any
party.
115
<PAGE> 116
7. The parties intend that resort to the Independent Account shall be the
sole recourse and remedy of the parties against each other with respect
to any dispute arising out of determination of any amounts required to
be determined pursuant to this Agreement and the Independent
Accountant's determination shall be enforceable in a court of law.
8. For the purpose of the work of the Independent Accountant he shall be
allowed reasonable access by the Vendor and the Purchaser to all
relevant accounting and other relevant records.
116
<PAGE> 117
SCHEDULE 8
EXAMPLE CLOSING STATEMENT
<TABLE>
<CAPTION>
AUDIT - 31ST MARCH 99
-----------------------
<S> <C> <C>
NET FIXED ASSETS
Leasehold Property 87,632
Plant and Machinery 607,142
Motor Vehicles 40,906
Design and Development 787,812
Solent Microwave 85,000 1,608,492
------------
STOCKS
Raw Materials (adjusted by provision for - 702,447
illustration) - 441,937
Work in Progress - 8,046
Goods for Resale 1,152,430
Provision of Obsolete Stock ------------
OTHER CURRENT ASSETS
Trade debtors 512,459
Group - Densitron America 393
Prepayments 33,943
Corporate Taxation Recoverable -
ACT Recoverable -
VAT Recoverable 68,962
Other Debtors 719
Cash - Net of Outstanding Checks 119,305 735,781
------------
CREDITORS - FALLING DUE WITHIN ONE YEAR
External -1,552,628
Group - Densitron International -140,125
Group - Densitron Japan -94,420
Group - Densitron Taiwan -
Group - Solent Microwave -85,000
Hire Purchase (Lease) Payables -81,175
Taxation and Social Security -64,208
Other Creditors -3,750
Provision for Warranty/Rework Claims -
Corporation Tax -78,745
Accruals and Other Deferred Income -54,720 -2,154,771
------------
CREDITORS - FALLING DUE AFTER ONE YEAR
Hire Purchase (Lease) Payables -90,378
Deferred Taxation -13,019
Sub-Let Property Lease Payments - Net of Future Rent -28,918 -132,315
------------
TOTAL NET ASSETS 1,209,617
============
LESS Trade Debtors -512,459
ADD Corporation Tax + 78,745
------------
775,903
</TABLE>
EXAMPLE NET WORTH (CALCULATED IN ACCORDANCE WITH THE TERMS OF THIS
AGREEMENT BASED ON THE AUDITED ACCOUNTS AS AT 31 MARCH 1999)
117
<PAGE> 118
SIGNED by Clifford Hardcastle )
duly authorised to sign for and on behalf )/s/ Clifford Hardcastle
of DENSITRON INTERNATIONAL PLC )
in the presence of:- )
Witness's signature: /s/ Benjamin Daniels
Name: Mr. Benjamin Daniels
Address: 82 Shortlands Road, Bramley, Kent
Occupation: Photographer
SIGNED by John L. Smucker )
duly authorised to sign for and on behalf )
of /s/ John L. Smucker
DML MICROWAVE LIMITED )
in the presence of:- )
Witness's signature: /s/ Steven E. Smith
Name: Steven E. Smith
Address: 310 Depot St.
Ann Arbor, MI 48104
Occupation: Financial Analyst
SIGNED by John L. Smucker )
duly authorised to sign for and on behalf of ) /s/ John L.Smucker
MCE COMPANIES, INC. )
in the presence of:-
Witness's signature: /s/Steven E. Smith
Name: Steven E. Smith
Address: 310 Depot St.
Ann Arbor, MI 48104
Occupation: Financial Analyst
118
