SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - June 17, 1996
(Date of Earliest Event Reported)
CHYRON CORPORATION
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation)
1-9014
(Commission File Number)
11-2117385
(I.R.S. Employer
Identification No.)
5 Hub Drive
Melville, New York 11747
(Address of principal executive offices)
Registrant's telephone number, including area code: (516) 845-
2000
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 12, 1996 (the "Closing Date"), Chyron Corporation, a
New York Corporation ("Chyron"), acquired all of the issued and
outstanding capital stock of Pro-Bel Limited, a corporation
organized under the laws of England ("Pro-Bel"), from the
shareholders of Pro-Bel. Chyron purchased all of the issued
and outstanding capital stock of Pro-Bel in exchange for (i)
4,500,071.37 pounds sterling in cash; (ii) promissory notes
(the "Notes") of Chyron in an aggregate principal amount of
3,500,000 pounds sterling; and (iii) 3,146,205 restricted
shares of Chyron Common Stock. The acquisition was made
pursuant to an agreement (the "Agreement"), dated as of April
12, 1996. Payment of principal of the Notes is due on or
before April 15, 1998. Interest on the Notes is payable
quarterly and accrues at a rate equal to one-year LIBOR. Upon
consummation of the exchange, Pro-Bel became a wholly-owned
subsidiary of Chyron.
In connection with the above transaction, Chyron entered into
a Registration Rights Agreement (the "Registration Agreement"),
dated as of April 12, 1996, with Messrs. Bronsens, as
administrator on behalf of each of the shareholders of Pro-Bel
who received shares of Chyron Common Stock under the Agreement.
Pursuant to the Registration Rights Agreement, such
shareholders have, under certain circumstances, incidental
(piggyback) and demand registration rights with respect to the
3,146,205 shares of Common Stock received by them, commencing
12 months and 15 months, respectively, after the Closing Date.
On April 16, 1996, Chyron entered into a term loan agreement
with NatWest Bank, N.A. in the amount of $8 Million. The
proceeds of such loan were used to fund the acquisition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The audited historical financial statements of Pro-Bel Limited
including a quantified reconciliation of the "measurement"
difference between U.K. and U.S. GAAP are attached as Exhibit
III
Pro-Forma financial information required pursuant to Article 11
of Regulation S-X is attached as Exhibit IV.
Item 7(a)(4) of Form 8-K provides for an automatic 60 day
extension of the deadline for filing the financial statements
and pro-forma financial information regarding the acquired
business.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
CHYRON CORPORATION
By: Patricia Lampe
Name: Patricia Lampe
Title: Chief Financial Officer
and Treasurer
Date: June 17, 1996
<PAGE>
EXHIBITS
Exhibit I.
Agreement for the sale and purchase of the entire issued share
capital of Pro-Bel Limited, dated April 12, 1996.
Exhibit II.
Registration Rights Agreement, dated April 12, 1996 and by and
between Chyron Corporation and the shareholders.
Exhibit III
The audited historical financial statements for each of the
years ended October 31, 1995, 1994, and 1993 of Pro-Bel Limited
including a quantified reconciliation of the measurement
difference between U.S. and U.K. GAAP.
Exhibit IV
The unaudited pro-forma consolidated income statement and
balance sheet of Chyron Corporation consolidated with Pro-Bel
Limited as of and for the year ended December 31, 1995 prepared
pursuant to Article 11 of Regulation S.X.
Exhibit V
Letter of Consent - Bronsens Chartered Accountants
<PAGE>
DATED 12TH APRIL 1996
(1) R.W. HARTMAN AND OTHERS
(2) CHYRON CORPORATION
AGREEMENT
for the sale and purchase of the entire share capital of Pro-
Bel Limited
Charles Russell
8-10 New Fetter Lane
London EC4A IRS
Ref: MACM/SJC/19826/1
<PAGE>
INDEX
CLAUSE PAGE
1. DEFINITIONS.............................. 1
2. INTERPRETATION........................... 10
3. SALE OF SHARES........................... 11
4. CONSIDERATION............................ 12
5. CONDITIONS............................... 13
6. COMPLETION............................... 14
7. WARRANTIES AND WAIVER OF RIGHTS.......... 18
8. PURCHASER'S REMEDIES..................... 20
9. PURCHASER'S WARRANTIES AND INDEMNITY..... 21
10. ACTIONS PENDING COMPLETION............. . 22
11. NON-SOLICITATION......................... 27
12. RESTRICTIVE TRADE PRACTICES ACTS......... 29
13. PENSION SCHEMES AND EMPLOYEES............ 29
14. ANNOUNCEMENTS AND CONFIDENTIALITY........ 30
15. FURTHER ASSURANCE........................ 32
16. WAIVER................................... 32
17. ENTIRE AGREEMENT AND VARIATIONS.......... 32
18. PROVISIONS RELATING TO THIS AGREEMENT.... 33
19. PROVISIONS RELATING TO THE VENDORS'
REPRESENTATIVE........................... 34
20. PROVISIONS RELATING TO THE VENDORS'
ADMINISTRATOR............................ 35
21. NOTICES.................................. 36
22. LAWS..................................... 37
The First Schedule........................... 39
Part 1 - The Vendors....................... 39
Part 2 - The Warrantors.................... 55
Part 3 - Relevant Employees................ 56
The Second Schedule.......................... 57
Part 1 - The Company....................... 57
Part 2 - The Subsidiaries.................. 58
The Third Schedule........................... 66
The Pension Schemes........................ 66
The Fourth Schedule.......................... 67
The Properties............................. 67
The Fifth Schedule........................... 70
The Tax Deed............................... 70
The Sixth Schedule........................... 85
The Warranties............................. 85
The Seventh Schedule......................... 129
The Promissory Notes....................... 129
Part 1..................................... 129
Part 2..................................... 138
The Eighth Schedule.......................... 145
Intellectual Property...................... 145
The Ninth Schedule........................... 146
List of people and firms whom Warrantors
should consult............................. 146
The Tenth Schedule........................... 147
Part 1 - Limitations on liability under the
Warranties and the Tax Deed....... 147
Part 2 - Limitations on liability under
the Purchaser's Warranties........ 156
The Eleventh Schedule........................ 161
The Guarantee.............................. 161
EXHIBIT A.................................... 162
Actuary's Letter........................... 162
EXHIBIT B.................................... 163
Registration Rights Agreement.............. 163
EXHIBIT C.................................... 164
Service Agreement Amendments............... 164
EXHIBIT D.................................... 165
Trilogy Acquisition Agreement.............. 165
<PAGE>
THIS AGREEMENT is made the 12th day of April 1966
BETWEEN
(1) THE SEVERAL PERSONS whose names and addresses are set out
in columns 1 and 2 respectively of Part 1 of the First Schedule
("the Vendors"); and
(2) CHYRON CORPORATION, a company incorporated in New York,
United States of America whose principal office is located at
Hub Drive, Melville, New York U.S.A. 11747 ("the Purchaser").
WHEREAS:
(A) Pro-Bel Limited ("the Company") is a private company
limited by shares incorporated in England further information
about which is contained in Part 1 of the Second Schedule.
(B) The Vendors will have immediately prior to Completion full
title guarantee of or are otherwise able to procure the
transfer, free from all liens, charges, and encumbrances, of
all the issued shares in the capital of the Company in the
numbers set opposite their names in column 3 of Part 1 of the
First Schedule.
(C) The Vendors have agreed to sell with full title guarantee
and the Purchaser has agreed to purchase all the issued shares
in the capital of the Company subject to and on the terms and
conditions set forth herein.
(D) In consideration of the Purchaser agreeing to acquire all
the issued shares in the capital of the Company, the Warrantors
have agreed to give the Warranties and to enter into the Tax
Deed.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement the following expressions shall have the
following meanings unless the context requires otherwise:-
"Actuary's Letter" the letter dated 27 March 1996
from the Vendors' Actuary to
the Company annexed hereto
and marked "Exhibit A";
"Administration Agreement" the agreement to be entered
into between the Vendors and
the Vendors' Administrator on
completion of this Agreement;
"the Audited Accounts" the audited consolidated
balance sheet of the Company
and the Subsidiaries made up
as at the Balance Sheet Date
and the audited consolidated
profit and loss account of
the Company and the
Subsidiaries for the year
ended on that date, and
the notes, reports and
other documents which are
or are required by law to
be annexed thereto and
the audited balance sheet
of each of the
Subsidiaries made up as at
the Balance Sheet Date and
the audited profit and
loss account of each of
the Subsidiaries for the
year ended on that date
and the notes, reports
and other documents which
are or are required by
law to be annexed thereto;
"the Balance Sheet Date" 31 October 1995;
"CAA 1990" the Capital Allowances Act
1990;
"the Companies Acts" statues for the time being
regulating the activities of
companies in the United
Kingdom including without
limitation the Companies
Act 1985;
"Completion" completion of the sale and
purchase of the Shares in
accordance with the
provisions of Clause 6;
"the Completion Date" the date upon which
Completion takes place;
"the Conditions" the conditions referred
to in Clause 5;
"the Consideration" the consideration for the
sale and purchase of the
shares;
"Consideration Shares" 3,146,205 restricted shares
of common stock par value
of $0.01 per share in the
capital of the Purchaser
credited as fully paid;
"Covenantors" the Warrantors;
"the Disclosure Letter" a letter of even date
herewith from the
Warrantors to the
Purchaser disclosing
inter alia certain
exceptions to the
Warranties;
"Employee Shares" restricted shares of
common stock par
value of $0.01 per
share in the capital
of the Purchaser
credited as fully
paid;
"Final Date" 11 April 1996 or such
later date as shall
be agreed in writing
between the Vendor's
Representative and
the Purchaser;
"the First Promissory Note" the promissory note
in the form set out
in Part 1 of the
Seventh Schedule;
"Guarantee" a standby letter of
credit given by
NatWest Bank N.A.
in the form set out
in the Eleventh
Schedule;
"Mr. Hartman" Mr Raymond William
Hartman;
"Intellectual Property" any and all, whether
currently existing
or created hereafter
but prior to
Completion:-
(i) technical
information, plans,
drawings, designs,
and documents in
whatever form,
patentable or
otherwise, owned
by or licensed to
the Company and/or
any of the
Subsidiaries,
including, without
limitation,
franchises,
permits, licenses,
and other similar
authority,
processes for the
manufacture,
production, or
utilization of any
product, and
know-how and trade
secrets;
(ii) patents and
patent applications
owned by or licensed
to the Company
and/or any of the
Subsidiaries,
regardless of
whether registered
in the United
Kingdom, the United
States, or elsewhere,
and all
continuations,
extensions, renewals
and continuations-
in-part, and all
rights in connection
therewith, including
all claims against
third parties for
past or present
infringement relating
to any of the
foregoing;
(iii) trade names,
service marks, and
registrations and
registration
applications related
thereto, copyrights
and copyright
registrations and
registration
applications owned
by or licensed to
the Company and/or
any of the
Subsidiaries, and
all goodwill
associated
therewith, and all
continuations,
extensions,
renewals and
continuations-in-
part, and all
rights in
connection
therewith,
including all
claims against
third parties
for past or
present
infringement
relating to any
of the foregoing;
(iv) computer
programs, including,
without limitation,
all source codes,
algorithms, object
codes, program
manuals, and
documentation
developed by, owned
by, or licensed to
the Company and/or
any of the
Subsidiaries
possesses, uses, or
has authority to
possess or use
intangible property
of others, or other
process, use, or
have authority to
possess or use
intangible property
of the Company
and/or any of the
Subsidiaries, and
recorded data of any
kind or nature
regardless of the
medium or recording,
including without
limitation, all
software, writings,
plans, specifications,
and schematics;
"Loan Stock" the 700,000 pounds
sterling Convertible
Cumulative Unsecured
Loan Stock of the
Company issued in
1994;
"Management Accounts" the unaudited accounts
of the Company and the
Subsidiaries for the
period from the
Balance Sheet Date to
29 February 1996,
copies of which are
annexed to the
Disclosure Letter;
"Options" share options granted
pursuant to the 1986
Executive Share Option
Scheme of the Company
and the 1995 Executive
Share Option Scheme
of the Company;
"the Pension Schemes" the pension schemes
short particulars of
which are set out in
the Third Schedule;
"Pre Sale Dividend" the cash dividend
aggregating 608,680
(net of any
associated tax credit)
to be paid on or
prior to Completion
in respect of the
Shares;
"the Promissory Notes" the First Promissory
Note and the Second
Promissory Note;
"the Properties" the properties short
particulars of which
are set out in the
Fourth Schedule;
"Purchaser's Group" the Purchaser and its
subsidiaries from
time to time
(including after
Completion only, the
Company and the
Subsidiaries);
"the Purchaser's Solicitors" Messrs Charles Russell
of 8-10 New Fetter
Lane, London EC4A IRS;
"Purchaser's Warranties" the warranties of the
Purchaser set out in
Part 2 of the Sixth
Schedule;
"Relevant Claim" a claim in respect of
any of the Warranties
(including without
limitation any claim
under subclause 8.1)
and/or any claim
against the
Convenantors under
the Tax Deed;
"the Relevant Employees" the employees listed in
Part 3 of the First
Schedule;
"the Registration Rights the registration rights
Agreement" agreement to be entered
into between the
Purchaser and the
Vendor's Administrator
on behalf of each of
the Vendors, such
registration rights
agreement to be in the
same or substantially
the same form as the
draft agreement annexed
hereto and marked
"EXHIBIT B";
"the Second Promissory Note" the promissory note in
the form set out in
Part 2 of the Seventh
Schedule;
"the Service Agreement the amendments to the
Amendments" service agreements
entered into between
the Company and each
of the Warrantors listed
in Part 2 of the First
Schedule (and marked
with an asterisk), such
amendments to be in the
same or substantially
the same form as the
draft annexed hereto
and marked "EXHIBIT C";
"the Shares" all of the issued shares
in the capital of the
Company immediately
prior to completion,
being the 5,188,685
ordinary shares of 25p
each;
"SSAPs" statements of standard
accounting practice
produced by the
Accounting Standards
Board, including
reporting standards
adopted or issued by
such board or other
relevant body;
"the Subsidiaries" the companies particulars
of which are set out in
Part 2 of the Second
Schedule;
"the Tax Deed" the deed in the form
set out in the Fifth
Schedule;
"Taxation" all forms of taxation,
duties, imposts, and
levies whenever
imposed and whether
of the United Kingdom
or elsewhere and in
particular (but
without prejudice to
the generality of the
foregoing) including
income tax, withholding
taxes, corporation tax,
capital transfer tax,
inheritance tax, value
added tax, custom
duties, excise duties,
stamp duty, stamp duty
reserve tax, national
insurance contributions
and generally any other
taxes, duties, imposts,
levies or other amounts
(whether of a like
nature or not) excluding
for the avoidance of
doubt any general and
water rates and
National Non-Domestic
rate and any interest,
penalty or fine in
connection therewith;
"the Taxes Act 1988" the Income and Corporation
Taxes Act 1988;
"TCGA 1992" the Taxation of Chargeable
Gains Act 1992;
"Trilogy Acquisition the Agreement between (1)
Agreement" Roger Stanwell, Ian
Malcolmson and Timothy
Hardistry and (2) the
Company relating to the
acquisition by the Company
of the remaining shares
of Trilogy Broadcast
Limited not held by the
Company at all date of
this Agreement in the
same or substantially the
same terms as the
agreement annexed hereto
and marked Exhibit "D";
"United States" or "US" the United States of
America, its territories
and possessions;
"VATA 1994" the Value Added Tax 1994;
"the Vendors' Actuary" David Seagul of Punter
Southall and Co of 126
Jermyn Street, London
SW1Y 4UJ or such other
actuary appointed for
the time being by the
Vendors;
"the Vendors' Administrator" Messrs Bronsens of 26
Beaumont Street, Oxford,
OX1 2NP;
"the Vendors' Counsel" Messrs Brobeck Hale and
Dorr International of
Veritas House, 125
Finsbury Pavement,
London EC2A 1NQ;
"the Vendors' Representative" Mr Harman or such other
person as may be
appointed in writing by
a majority of the
Vendors in accordance
with sub-clause 19.2;
"the Warranties" the statements contained
in sub-clauses 7.1, 7.2
and 7.3 and Part 1
of the Sixth Schedule;
"the Warrantors" those persons whose
names and addresses are
set out in Part 2 of the
First Schedule.
1.2 In paragraph 11 of Part 1 of the Sixth Schedule:-
1.2.1 the expressions "waste" and "harm" shall be
defined in accordance with the Environmental Protection
Act 1990 or (if the same are used in the context of any
other applicable Environmental Law such other applicable
Environmental Laws); and;
1.2.2 the following expression shall have the
following meanings unless the context requires otherwise:-
"Dangerous Substance" any natural or artificial
substance (whether in a
solid or liquid form or
in the form of a gas or
vapour and whether alone
or in combination with
any other substance)
(including but not
limited to electricity
or heat) capable of
causing harm to man or
any other living
organism supported by
the Environment, or
polluting or damaging
the Environment or
damaging public health
or welfare, including
but not limited to any
controlled, special,
hazardous, toxic,
radioactive or dangerous
waste and oil, petroleum
and substances derived
from oil or petroleum;
"Environment: all or any of the air,
water and land and air
includes the air within
buildings and the air
within other natural or
man-made structures above
or below ground;
"Environmental Law" all laws, regulations,
directives, treaties,
codes of practice,
circulars, notices,
guidance notes and
the like (whether of
the United Kingdom
Parliament or other
official bodies
having jurisdiction
in relation to such
matters) concerning
the protection of or
harm to human health
or safety or the
Environment including
but not limited to
those relating to:-
(a) the generation,
transportation, storage,
treatment, packaging,
labelling, recycling or
disposal of Dangerous
Substances;
(b) the carrying on of
any activity or process;
(c) civil or criminal
liability in respect of
pollution or contamination
of any description;
(d) discharge or emissions
onto, into or from the
Environment;
(e) noise;
"Environmental License" any permit, license,
authorization, consent or
other approval required by
the Company or any of the
Subsidiaries under any
Environmental Law.
2. INTERPRETATION
In this Agreement where the context so admits:-
2.1 references to statutory provisions shall be construed
as references to those provisions as amended or re-enacted or
as their application is modified by other provisions (before
the date hereof) from time to time and shall include references
to any provisions of which they are re-enactments (whether
with or without modification) before the date hereto but shall
exclude any new provisions enacted after the date hereof to the
extent that any such provisions alter the law as at the date
hereof;
2.2 references to Clauses and Schedules and references
to Clauses hereof and Schedules hereto; references to sub-
clauses are, unless otherwise stated, reference to sub-clauses
of the Clause in which such reference appear; references to
paragraphs, are, unless otherwise stated, to paragraphs in the
Schedule hereto in which such references appear; references to
sub-paragraphs are, unless otherwise stated, to sub-paragraphs
of the paragraph in which such references appear; and reference
to this Agreement include the Schedules;
2.3 the plural includes the singular (and vice versa) and the
masculine includes the feminine;
2.4 the headings in this Agreement are for convenience only
and shall not affect the interpretation hereof;
2.5 the Warranties apply to each of the Subsidiaries (other
than Pro-Bel Inc) as well as to the Company as if the
expression "the Company" when used in the Sixth Schedule was
defined to mean each of the Subsidiaries (other than Pro-Bel
Inc) and the Company;
2.6 if any Warranty is qualified by the expression "so far as
the Warrantors are aware" or the expression "to the best of the
information, knowledge and belief of Warrantors" or any similar
expression, the Warrantors shall be required to make enquiry
with respect thereto only of those persons or firms set out in
the Ninth Schedule;
2.7 references in this Agreement to "pounds sterling" shall
mean pounds sterling and reference to "$" or "Dollars" shall
mean the lawful currency of the United States;
2.8 references to documents "in the agreed form" are
to documents in terms agreed between the parties and signed
(for the purposes of identification only) by the Vendors'
Counsel and the Purchaser's Solicitors;
2.9 words and phrases, the definition of which is contained or
referred to in Part XXVI of the Companies Act 1985, shall be
construed as having the meaning therein attributed to them.
3. SALE OF SHARES
3.1 Subject to sub-clause 3.3, the Vendors shall sell with
full title guarantee for the purposes of the Law of Property
(Miscellaneous Provisions) Act 1994 and the Purchaser shall
purchase with effect from the Completion Date the Shares free
from all charges, liens, encumbrances, options and equities of
any nature whatsoever and together with all rights attaching or
accruing thereto after Completion. For the avoidance of doubt
the Purchaser shall not be entitled to any rights in connection
with the Pe-Sale Dividend.
3.2 The Vendors hereby waive all rights of pre-emption over
any of the shares conferred either by the Articles of
Association of the Company or in any other way.
3.3 The Purchaser shall not be obliged to complete the
purchase of any of the Shares unless the purchase of all the
Shares is completed simultaneously and the Vendors shall not be
obliged to complete the sale of the Shares unless the Purchaser
complies with all of its obligations under sub-clause 6.4.
4. CONSIDERATION
4.1 Save as deemed reduced herein, the consideration for the
sale and purchase of the Shares shall be:-
4.1.1 the cash sum of 4,500,071.37 pounds;
4.1.2 the issue and delivery of the Promissory Notes for the
aggregate principal sum of 3,500,000 pounds secured by the
Guarantee; and
4.1.3 the allotment and issue of the Consideration Shares.
4.2 The cash sum referred to in sub-clause 4.1.1 shall be
divisible among the Vendors as set out opposite each Vendor's
name in column 4 of Part 1 of the First Schedule and paid on
Completion to the Vendors' Counsel (who are authorized to
receive the same on behalf of the Vendors and payment to whom
shall be a good discharge to the Purchaser).
4.3 The Vendors' Administrator shall have issued and delivered
to him at Completion as trustee for the Vendors the First
Promissory Note and the Second Promissory Note for the
aggregate of the principal sums set out opposite each Vendor's
name in column 5 of Part 1 of the First Schedule and the
delivery to the Vendors' Administrator (who is authorized to
receive the same on behalf of the Vendors) of such Promissory
Notes shall be a good discharge to the Purchaser.
4.4 Each Vendor shall have allotted and issued to him by the
Purchaser at Completion the Consideration Shares set opposite
his name in column 6 of Part 1 of the First Schedule and the
delivery to the Vendors' Administrator (who is authorized to
receive the same on behalf of the Vendors) of share
certificates for such number of Consideration Shares issued to
each such Vendor shall be a good discharge to the Purchaser.
4.5 The Consideration Shares to be delivered hereunder shall
not be registered under the United States Securities Act of
1933, as amended (the "1933 ACT"). The Vendor acknowledgement
that they may not sell or otherwise dispose of such shares in
the absence of either a registration statement under the 1933
Act or an exemption from the registration provisions of the
1933 Act. The certificates representing such shares will
contain a legend substantially to the effect that such shares
have not been registered under the 1933 Act, and may not be
sold or transferred without an effective registration statement
under the 1933 Act or an exemption from the registration
provisions under the 1933 Act. The Consideration Shares to be
delivered to the Vendors pursuant to this Agreement shall be
subject to incidental or "piggyback" registration rights
commencing 12 months after the Completion Date and one demand
registration right commencing 15 months after the Completion
Date, pursuant to the Registration Rights Agreement which shall
be executed and delivered on the Completion Date by the
Purchaser and the Vendors' Administrator.
5. CONDITIONS
5.1 The provisions of Clause 3, 4 and 6 of this Agreement
shall be conditional upon the following having occurred by the
Final Date:-
5.1.1 the obtaining in a form reasonably satisfactory to the
Vendors of clearances in respect of the transactions herein
described pursuant to Section 707 of the Taxes Act 1988 and
Section 138 of the TCGA 1992;
5.1.2 there not having been instituted proceedings for the
liquidation, winding up, dissolution or insolvency of the
Company or any Subsidiary, or the appointment of a liquidator,
receiver, administrator or administrative receiver of the
Company or any Subsidiary or any part of its respective
property; and
5.1.3 there not having been instituted by or against the
Purchaser any proceedings under the United States Bankruptcy
Code or any other federal or state bankruptcy, reorganization,
receivership, insolvency or other similar law affecting the
rights of creditors generally on a composition or an assignment
or trust mortgage for the benefit of creditors.
5.2 The Vendors shall use their reasonable endeavors to
satisfy the Condition in sub-clause 5.1.1.
5.3 If the Condition set out in sub-clause 5.1.2 (in
so far as such sub-clause relates to the Company and the
Subsidiaries) is not satisfied or waived in writing by the
Purchaser or in sub-clauses 5.1.1 and 5.1.3 by the Vendors'
Representative, as the case may be, on or before the Final Date
this Agreement may be terminated by the Purchaser or, as the
case may be the Vendors' Representative, by notice in writing
given to each of the other parties.
5.4 In the event of a termination of this Agreement
as aforesaid, this Agreement shall lapse and shall be null and
void ab initio (other than sub-clauses 10.2, 10.3 and 10.4 and
Clause 14) and no party shall have any claim against any
other in respect thereof, save for any antecedent breach.
6. COMPLETION
Subject as hereinafter provided Completion shall take
place at the office of the Purchaser's Solicitors
immediately following execution by all parties to this
Agreement or at such other place or on such other date
as may be agreed between the Purchaser and the Vendors'
Representative on behalf of the Vendors, whereupon:-
6.1 the Vendors who are holders of the Options shall
exercise their respective Options and the Vendors who are
holders of Loan Stock shall convert their Loan Stock and the
Company shall issue to such Vendors the relevant number of
Shares;
6.2 the Vendors' Representative shall deliver to the
Purchaser:-
6.2.1 duly executed transfers of the shares in favor of the
Purchaser or its nominees together with the relative share
certificates.
6.2.2 shares certificates in the Subsidiaries registered in
the name of the Company;
6.2.3 the Tax Deed duly executed by the Covenantors;
6.2.4 the resignations as a deed of each of John Fergus Graham
Wilson and Kenneth A Olisa as directors of the Company in the
agreed form;
6.2.5 the written resignation of the auditors of the Company
and the Subsidiaries in the agreed form;
6.2.6 all the statutory and other books of the Company and
of the Subsidiaries together with their certificates of
incorporation and common seals;
6.2.7 a letter from Charles Russell in Cheltenham in the
form confirming that they hold the deeds and documents
constituting title to the Properties;
6.2.9 the Registration Rights Agreement duly executed by the
Vendors' Administrator; and
6.2.10 the Service Agreement Amendments duly executed by each
of the relevant Warrantors (in the case of the Service
Agreement Amendment in which he is named as a party);
6.3 The Warrantors shall procure that Board Meetings
of the Company and of the Subsidiaries (as the same may be
required for effecting the following) shall be held at which
it shall be resolved that:-
6.3.1 the transfer in respect of the Shares be approved for
registration and that share certificates in respect thereof
be executed under the common seal of the Company and
delivered to the Purchaser subject only to the said transfer
being duly stamped;
6.3.2 the resignations of the persons whose names are set
out in sub-clause 6.2.4 shall be tabled and approved;
6.3.3 the resignations of the auditors of the Company and
the Subsidiaries shall be tabled and approved;
6.3.4 Messrs Michael Wellesley-Wesley and Isaac Hersly shall
be appointed additional directors of the Company;
6.3.5 Price Waterhouse shall be appointed as auditors of the
Company and of the Subsidiaries;
6.3.6 the execution of the Tax Deed shall be approved and
ratified by the Company and the Subsidiaries;
6.3.7 the Service Agreement Amendments shall be approved and
executed by the Company;
6.4 against compliance with the foregoing provisions,
the Purchaser shall deliver:-
6.4.1 to the Vendors' Counsel:-
6.4.1.1 the sum of 4,500,071.37 pounds by way of telegraphic
transfer in immediately available funds; and
6.4.1.2 the sum of 40,000 pounds way of telegraphic transfer
in immediately available funds,such sum to be divisible among
the Relevant Employees as set out opposite each Relevant
Employee's name in column 3 of Part 3 of the First Schedule;
and
6.4.2 to the Vendors' Representative who is authorized
to receive the same on behalf of the Vendors and the Relevant
Employees, as the case may be, and delivery to whom shall be a
good discharge to the Purchaser:-
6.4.2.1 a counterpart of the Tax Deed, duly executed by the
Purchaser;
6.4.2.2 a written action of the board of the Purchaser in the
agreed from approving the issue of the Consideration Shares
to the Vendors and of the Employee Shares to the Relevant
Employees and authorizing the execution of this Agreement and
all other agreements and documents referred to in this
Agreement to which the Purchaser is a party; and
6.4.2.3 certificates for the number of Employee Shares for
each of the Relevant Employees, set out opposite each Relevant
Employee's name in column 4 of Part 3 of the First Schedule
(such certificates to be delivered as soon as reasonably
practicable and in any event within 5 days after Completion);
6.4.3 to the Vendors' Administrator who is authorized to
receive the same on behalf of the Vendors and the Relevant
Employees, as the case may be, and delivery to whom shall be a
good discharge to the Purchaser:-
6.4.3.1 certificates for the Promissory Notes in the name of
the Vendors' Administrator to hold as trustee for each Vendor
as referred to in sub-clause 4.3;
6.4.3.2 certificates for the Consideration Shares for each
Vendor as referred to in sub-clause 4.4;
6.4.3.3 a counterpart of the Registration Rights Agreement
duly executed by the Purchaser; and
6.4.3.4 the Guarantee duly executed by National Westminster
Bank.
6.5 If for any reason the provisions of sub-clause 6.4
are not fully compiled with, the Vendors shall be
entitled (in addition and without prejudice to any
other right or remedy available to them) to elect (by written
notice to the Purchaser signed by the Vendors'
Representative):-
6.5.1 to rescind this Agreement in which case the Vendors
shall not be obliged to sell or to procure the sale of any of
the Shares; or
6.5.2 to fix a new date for Completion; or
6.5.3 to proceed to Completion so far as practicable, the
Purchaser then being obliged to use its best endeavours to
perform or procure the performance of any of the outstanding
provisions of sub-clause 6.4.
6.6 If for any reason the provisions of sub-clauses 6.2
and 6.3 are not fully compiled with the Purchaser shall be
entitled (in addition and without prejudice to any other right
or remedy available to them) to elect (by written notice to the
Vendors):-
6.6.1 to rescind this Agreement in which case the Purchaser
shall not be obliged to purchase or to procure the purchase of
any of the Shares; or
6.6.2 to fix a new date for Completion; or
6.6.3 to proceed to Completion so far as practicable, the
Vendors then being obliged to use their best endeavors
to perform or procure the performance of any of the outstanding
provisions of sub-clauses 6.1, 6.2 and 6.3.
6.7 For the avoidance of doubt, neither the cash sum
referred to in sub-clause 6.4.1.2 nor the Employees Shares
referred to in sub-clause 6.4.2.3 comprise any part of the
Consideration.
6.8 The Purchaser shall at the next regular scheduled
meeting of its board following Completion appoint Mr Hartman as
an additional director to its board.
7. WARRANTIES AND WAIVER OF RIGHTS
7.1 The Warrantors hereby warrant jointly and severally
to the Purchase that save as disclosed in the Disclosure
Letter:-
7.1.1 the Warranties are at the date hereof and will at
Completion be true accurate and complete in all respects; and
7.1.2 they will forthwith disclose in writing to the Purchaser
any matter or thing which may become known to them after the
date hereof and prior to Completion which is inconsistent with
any of the Warranties.
7.2 Each of the Vendors hereby severally warrants to
the Purchaser that:-
7.2.1 he has full power and authority to enter into and
perform the obligations to be performed by him under this
Agreement;
7.2.2 this Agreement, when executed, will constitute valid and
binding obligations upon him in accordance with its terms;
7.2.3 the execution and delivery of and performance by him of
his obligations under this Agreement will not result in a
breach of any provision of the memorandum and articles of
association of the Company (other than the pre-emption
provisions expressly waived by sub-clause 3.2) or a breach of
any order, judgment or decree of any court to which he is a
party or by which he is bound;
7.2.4 he will at Completion be entitled to sell and transfer
to the Purchaser the ownership with full title guarantee of
the Shares set opposite his name in column 3 of the First
Schedule on the terms of this Agreement without the consent of
any third party;
7.2.5 no person has the right (whether exercisable now or in
the future and whether contingent or not) to call for the sale
of transfer of any of the Shares set opposite his name in
column 3 of the First Schedule under any option or other
agreement (including conversion rights and pre-emption rights)
and there are no claims, charges, liens, equities or
encumbrances of such Shares.
7.3 The Covenantors hereby warrant jointly and severally
to the Purchaser that:-
7.3.1 the Covenantors have full power and authority to enter
into and perform the Tax Deed;
7.3.2 the Tax Deed, when executed, will constitute valid and
binding obligations upon the Covenantors in accordance with its
terms;
7.3.3 the execution and delivery of and performance by the
Covenantors of their obligations under the Tax Deed will not
result in a breach of any provision of the memorandum and
articles of association of the Company or a breach of any
order, judgment or decree of any court to which they are a
party or by which they are bound.
7.4 Any amount payable hereunder by virtue of a breach of
any Warranty or by virtue of sub-clause 7.2 or sub-clause 7.3
or any amounts deducted from sums due under the First
Promissory Note for whatever reason shall be deemed to be a
reduction in the consideration for the relevant Shares.
7.5 The Purchaser may release or comprise the liability
of any of the Warrantors hereunder or grant to any Warrantor
time or other indulgence without affecting the liability of any
other Warrantor hereunder.
7.6 The provisions of Part 1 of the Tenth Schedule shall have
effect in relation to the Warranties.
7.7 Each of the Vendors hereby waivers any rights and actions
he or she has now or may hereafter have against the Company in
respect of:-
7.7.1 the amendments to the Loan Stock proposed to holders of
the Loan Stock in a letter from the Vendors' Counsel dated 15
March 1996 to holders of the Loan Stock to convert their Loan
Stock into ordinary shares of 25p each on terms other than
those set out in the Circular of the Company dated 10 October
1994; and
7.7.2 the variation of the 1995 Executive Share Option Scheme
of the Company.
8. PURCHASER'S REMEDIES
8.1 Subject to Completion taking place and to the provisions
of Part 1 of the Tenth Schedule, eachof the Warrantors hereby
agrees with the Purchaser:-
8.1.1 to pay to the Purchaser within fourteen days of receipt
by the Warrantors of a written demand:-
8.1.1.1 the amount necessary to put the Company and the
Subsidiaries into the position which would have existed but for
any beach of Warranty; and
8.1.1.2 all reasonable cost and expenses incurred bythe
Company or any of the Subsidiaries as a result of such breach
of Warranty;
8.1.2 to indemnify the Purchaser against any costs (including
legal costs on an indemnity basis), or expenses which the
Purchaser may reasonably incur either before or after the
commencement of any action in connection with:-
8.1.2.1 the settlement of any bona fide claim that any of the
Warranties have been breached;
8.1.2.2 any legal proceedings in which the Purchaser claims
that any of the Warranties have been breached and in which
judgment is given for the Purchaser; or
8.1.2.3 the enforcement of any such settlement or judgment.
The rights of the Purchaser referred to in this sub-clause 8.1
shall not restrict any of the rights of the Purchaser or the
ability of the Purchaser to claim damages on any basis
available to it in the event of a breach of any of the
Warranties (or any of them) proving to be untrue, inaccurate or
incomplete.
8.2 The Purchaser shall be entitled to deduct (whether in full
or in part and whether in respect of some or all of the
Vendors) such amounts to which it is entitled in respect of a
Relevant Claim, from payments which are or are to become due
under the First Promissory Note in accordance with and
subject to the terms of such Note. The parties hereto agree
that, to the extent possible, the amount of any liability due
under a Relevant Claim shall be satisfied firstly by setting
off any amounts due to the Vendors under the First Promissory
Note and thereafter by the Warrantors in accordance with this
Agreement. The Vendors acknowledge that any such deduction may
be madeby the Purchaser notwithstanding that the Relevant Claim
shall be against a Warrantor or Warrantors.
8.3 The Purchaser may (without any liability of its part)
rescind this Agreement by notice in writing to the Vendors to
that effect as soon as reasonably practicable after the
Purchase becomes aware of a material breach of Warranty but in
any event prior to completion.
8.4 The rights, including any such rights of rescission
conferred on the Purchaser by this Clause 8, shall be in
addition to and without prejudice to all other rights and
remedies available to the Purchaser.
8.5 No failure to exercise, and no delay in exercising
on the part of the Purchaser any right or remedy in respect of
any Warranty or on the part of the Vendors any right or remedy
in respect of any Purchaser's Warranty, shall operate as a
waiver ofsuch right, remedy or Warranty or any Purchaser's
Warranty (as the case may be) nor shall a single or partial
exercise of such rights or remedy preclude the exercise of such
or any other right or remedy.
9. PURCHASER'S WARRANTIES AND INDEMNITY
9.1 The Purchaser hereby warrants to the Vendors that:-
9.1.1 the Purchaser's Warranties are at the date hereof and
will at Completion be true accurate and complete in all
respects; and
9.1.2 it will forthwith disclose in writing to the Vendors any
matter or thing which may become known to it after the date
hereof and priorto Completion which is inconsistent with any of
the Purchaser's Warranties.
9.2 The provisions of Part 2 of the Tenth Schedule shall
have effect in relation to the Purchasers' Warranties.
9.3 The Vendors may (without any liability on their respective
parts) rescind this Agreement by notice in writing to the
Purchaser to that effect as soon as reasonable practicable
after the Vendors become aware of a material breach of the
Purchaser's Warranties but in any event prior t completion.
9.4 The rights, including any such right of rescission
conferred on the Vendors by this Clause 9 shall be in
additional to and without prejudice to all other rights and
remedies available to the Vendors.
10. ACTIONS PENDING COMPLETION
In the period from the date of this Agreement to
Completion:-
10.1 the Warrantors shall procure that each of the
Company and the Subsidiaries shall:-
10.1.1 continue its business in the ordinary and usual course
and so as to maintain the same as a going concern;
10.1.2 not enter into an contract, transaction or arrangements
with the Vendors or any person connected with the Vendors other
than as contemplated by this Agreement or as set out in the
Disclosure Letter;
10.1.3. not increase or agree to increase the remuneration
(including, without limitation, pension contributions,
bonuses, commissions and benefits in kind) of its directors or
employees (other than minor increases or increases as a result
of normal annual reviews of staff other than directors as
specified in the Disclosure Letter, which the Vendors shall
notify to the Purchaser as soon as reasonably possible) or
provide or agree to provide any gratuitous payment or benefit
to any such person or any of their dependents and no employees
(other than casual employees) shall be engaged (other than as
set out in the business plans of the Company and the
Subsidiaries and as specified in the Disclosure Letter) or
dismissed over their terms of employment altered;
10.1.4 not amend or discontinue any of the Pension Schemes or
communicate to any employee any plan, proposal or
intention to amend or discontinue any o the Pension
Schemes;
10.1.5 not (i) acquire or agree to acquire or (ii) dispose or
agree to dispose of any assets (other than in the normal course
of business) or (iii) (other than in the normal course of
business) enter into any contract or arrangement involving
expenditure or liabilities, in each case in excess of in
the aggregate 100,000 pounds without the prior consent of
the Purchaser (such consent not to be unreasonably withheld or
delayed);
10.1.6 not make any payments out of any bank or deposit
account exceeding in aggregate 5,000 pounds (except for
payments in the normal course of business or other than as
envisaged in the capital expenditure plans of the Company and
the Subsidiaries and as specified in the Disclosure Letter);
10.1.7 not create or agree to create any further security over
or encumber or agree to encumber any of its assets (otherwise
than pursuant to lease arrangements as envisaged in the
business plans of the Company and the Subsidiaries and as
specified in the Disclosure Letter) or redeem or agree to
redeem any existing security or give or agree to give any
guarantees or indemnities, other than any guarantee or
indemnity given in the ordinary course of business in
connection with the sale of goods and provisions of services;
10.1.8 not alter or agree to alter the terms of any existing
borrowing facilities or arrange additional borrowing facilities
(otherwise than pursuant to lease arrangements as envisaged in
the business plans of the Company and the Subsidiaries and as
specified in the Disclosure Letter);
10.1.9 not alter or agree to alter or terminate or agree to
terminate any material agreement to which it is a party without
the prior consent of the Purchaser, such consent not to be
unreasonably withheld ("material meaning for this purpose any
party to such agreement havin to make payment to the other
amounts in excess of, in the aggregate, more than 100,000
pounds;
10.1.10 not enter into any material litigation or arbitration
proceedings without the prior consent of the Purchaser, such
consent not to be unreasonably withheld ("material" meaning
for this purpose proceedings involving a claim of, in the
aggregate, more than 10,000 pounds);
10.1.11 not declare, pay or make any dividend or other
distribution of capital within the meaning of the Taxes Act
1988;
10.1.12 not create, allot or issue any share or loan capital
other than pursuant to the Trilogy Acquisition Agreement, the
exercise of the Options and the conversion of the Loan Stock;
10.1.13 not pass any resolution in general meeting;
10.1.14 continue its insurance policies and do nothing to
render such policies void or voidable;
10.1.15 give all reasonable co-operation to the Purchaser so
as to ensure a smooth, orderly and efficient continuation of
management of the Company and the Subsidiaries after
Completion;
10.1.16 afford the officers, employees, agents, lawyers,
investment bankers, accountants, and other representatives of
the Purchaser reasonable access to the plants, properties,
books and records of the Company and the Subsidiaries
during normal office hours and on receipt of reasonable prior
notice, and permit them to make copies of such books and
records, and shall from time to time furnish the Purchaser with
such additional financial and operating data and other
information as to the financial condition, results of
operations, businesses, properties, assets, liabilities, or
future prospects of the Company and the Subsidiaries as the
Purchaser may from time to time reasonablyrequest.
10.2 the Vendors shall not, and shall not authorize nor
knowingly permit any officer, director, employee, agent,
lawyer, investment banker, accountant, or other representative
or any of them directly or indirectly, to:-
10.2.1 initiate contact with any persons or entity in an
effort to solicit any Takeover Proposal (as hereinafter
defined);
10.2.2 co-operate with, or furnish or cause to be furnished
any confidential information relating to the financial
conditions, results of operations, business, properties,
assets, liabilities, or future prospects of the Company or any
Subsidiary to any person or entity in connection with any
Takeover Proposal;
10.2.3 negotiate with any person or entity with respect to any
Takeover Proposal; or
10.2.4 enter into any agreement or understanding with the
intent to effect a Takeover Proposal;
For the purposes this sub-clause 10.2, "Takeover Proposal"
shall mean any proposal of which the Company, its Directors or
Vendors are aware, other than as contemplated by this
Agreement:-
(i) for a merger, consolidation, reorganization, other
business combination, or recapitalization involving the
Company, for the acquisition of a five per cent. (5%) or
greater interest in the issued share capital or in any class or
series of shares in the capital of the Company, for the
acquisition of the right to hold five per cent. (5%) or more
of the voting rights on any matter with respect to the Company,
or for the acquisition of a substantial portion of any of its
assets other than in the ordinary course of its businesses; or
(ii) the effect of which may be to prohibit, restrict, or
delay the completion of any of the transactions contemplated by
this Agreement;
10.3 the Vendors shall use all their voting rights to which
they are entitled in respect of their shares in the Company to
vote against:-
10.3.1 any merger, consolidation, reorganization, other
business combination, or capitalization involving the Company;
10.3.2 any sale of assets of the Company;
10.3.3 any sub-division of shares; scrip dividend, or reverse
stock split relating to any class or services of the Company's
shares;
10.3.4 any issue of any shares in the capital of the Company,
any option, warrant, or other right calling for the issuance of
any such share, or any security convertible into or
exchangeable for any such share;
10.3.5 any authorization or creation of any other class or
series of share of the Company (except as contemplated herein);
10.3.6 any amendment of the Memorandum and Articles of
Association of the Company (except as contemplated herein);
10.3.7 any other proposition the effect of which may be to
prohibit, restrict, or delay the completion of any of the
transactions contemplated by this Agreement;
PROVIDED THAT nothing in this sub-clause 10.3 shall prevent the
Vendors using their voting rights to vote in favor of the
Resolutions and any resolutions (which have been approved in
writing by the Purchaser) in connection with the exercise of
the Options, the conversion of the Loan Stock and/or the
completion of the Trilogy Acquisition Agreement.
10.4 In the event that any Vendor shall accept another offer
for the purchase of the Shares the Vendors will forthwith pay
to the Purchaser the sum of 400,000 pounds, by telegraphic
transfer of immediately available funds to an account
designated by the Purchaser for such purpose.
11. NON-SOLICITATION
11.1 The Warrantors and each of them hereby undertakes with
the Purchaser that they will not whether directly or indirectly
or whether on their own account or for the account of any other
person, firm or company, or as agent, director, partner,
manager, employee, consultant or shareholder of or in any other
person, firm or company:-
11.1.1 during the period from the date hereof to the second
anniversary of the Completion Date carry on or be engaged
or concerned or interested in any business which is directly or
indirectly in competition with any business of the Company or
of the Subsidiaries (or any of them) carried on at the date
of this Agreement in such countries in which such business is
carried on at the date of this Agreement;
11.1.2. during the period from the date hereof
to the second anniversary of the Completion Date seek in
competition with any business of the Purchaser or the Company
or any of the Subsidiaries to procure orders from or do
business with any person firm or company who has been a
customer of any of them (other than Anna Valley Electronics
Limited provided that such company does not at any relevant
time compete with any business of the Purchaser or the Company
or any of the Subsidiaries) at any time during the period of
twelve months prior to the Completion Date and in this context
the Purchaser shall provide (for information purposes only) a
list of its customers during such period;
11.1.3 during a period from the date hereof o the second
anniversary of the Completion Date, solicit or endeavor to
entice away from or iscourage from being employed by
the Company, or any of the ubsidiaries, any person who is
at the date hereof an employee of he Company or of any of the
Subsidiaries, or whom any of such companies may at the date
hereof have agreed to engage as an employee; or
11.1.4 during the period from the date hereof to the second
anniversary of the Completion Date, attempt to employ or
negotiate or arrange the employment of or engagement by any
other person of, any person who is at the date hereof or at the
Completion Date shall be an employee of the Company or of any
of the Subsidiaries or whom any of such companies may at the
date hereof have agreed to engage as an employee; or
11.1.5 (subject as may otherwise be agreed by the Purchaser
in writing) save for Mr JFG Wilson, during the period from the
date hereof to the second anniversary of the Completion Date,
be employed by or act as a consultant to Annal Valley
Electronics Limited.
11.2 It is agreed by the parties that, whilst the restrictions
set out in sub-clause 11.1 are considered fair and reasonable,
if it should be found that any of the restrictions be void as
going beyond what is fair and reasonable in al the
circumstances and if by deleting part of the wording or
substituting a shorter period of time or a different
geographical limit or more restricted ranges of activities set
out in sub-clause 11.1 it would not be void, then there shall
be substituted such ext less extensive period and/or limit
and/or activities for the period of time, geographical limits
or ranges of activities or such deletions shall be made as
shall render sub-clause 11.1 valid and enforceable.
11.3 Nothing in this Clause 11 shall prohibit any person
subject to the restrictions contained herein from (1) being the
holder of not more than five percent. (5%) of any class of
stock, shares or debentures or other securities in any company
which is listed and/or dealt in on the London Stock Exchange or
Alternative Investment Market of such Stock Exchange or any
recognized securities exchange or (2) being interested as a
shareholder or director only in Anna Valley Electronics Limited
(provided that such company shall at all relevant times not
compete with any business of the Purchaser, the Company or any
of the Subsidiaries) and in any such company as the Purchaser
may from time to time (at its discretion) in writing agree.
For the purposes of this Clause the Purchaser shall be deemed
to have agreed to the Warrantors being interested to the extent
permitted above in companies details of which have been
specifically disclosed to the Purchaser in the Disclosure
Letter.
12. RESTRICTIVE TRADE PRACTICES ACTS
The restrictions contained in Clause 11 shall not take effect
until the day after the day upon which particulars of this
Agreement have been duly furnished to the Director General of
Fair Trading pursuant to Section 24 Restrictive Trade Practices
Act 1976. The parties shall use all reasonable endeavors to
procure the furnishings of such particulars as soon as
reasonable possible after the execution of this Agreement and
any party may request (and the other shall support such a
request) that this Agreement or parts thereof do not become
open to public inspection.
13. PENSION SCHEMES AND EMPLOYEES
13.1 Within one calendar month of Completion, the Purchaser
shall instruct the Vendors' Actuary to carry out an actuarial
valuation of the Pension Schemes as at Completion based on the
methods and assumptions set out in proposed Actuarial Basis 2
of the Actuary's Letter and in accordance with sub-clause 13.5
and to provide a copy of the actuarial valuation to the
Purchaser and the Vendors' Representative.
13.2 If the Purchaser or the Vendors' Representative dispute
the conclusions contained in the actuarial valuation prepared
in accordance with sub-clause 13.1, the issue or issues in
dispute shall be referred for determination to an independent
actuary appointed by agreement between the Vendors'
Representative and the Purchaser or in default of agreement by
the president for the time being of the Institute of Actuaries.
Such actuary shall act as an expert and not an arbitrator and
his decision shall be final and binding (in the absence of
manifest error).
13.3 The Vendors and the Purchaser shall procure that all such
information as the Vendor's Actuary may require for the purpose
of compiling the actuarial valuation for the purposes of sub-
clause 13.1, or as the Purchaser or the Vendors' Representative
or the independent actuary may require for the purposes of sub-
clause 13.2, shall be made available promptly and that all such
information shall be accurate and complete.
13.4 For the purposes of Part 1 of the Tenth Schedule the
Pension Surplus shall mean an amount equal to the lesser of:-
13.4.1 1,000,000 pounds, and
13.4.2. the difference between the actuarial value of the
liabilities and the actuarial value of the assets both
calculated, subject as provided below, in accordance with the
Proposed Actuarial Basis 2 of the Actuary's Letter (for the
purposes of Part 1 of the Tenth Schedule and without prejudice
to Part 1 of he Sixth Schedule, for the avoidance of doubt the
Pension Surplus shall not be less than zero).
13.5.1 For the purpose of determining the actuarial value of
the assets, for the purposes of sub-clauses 13.1 and 13.4.2 the
Purchaser shall instruct Pension Schemes' auditor to compile an
audited schedule of the values of the Pension Schemes' asset as
at Completion.
13.5.2 For the purpose of compiling the audited schedule
referred to in sub-clause 13.5.1:-
(i) each of the Pension Schemes' freehold property investments
shall be valued as at 31 march 1996 by a chartered surveyor
(approved for the purposes of this Clause by the Purchaser) on
an open market valuation basis; and
(ii) other assets of Pension Schemes will be valued in
accordance with the accounting policies used in preparing the
most recent audited accounts for the Pension Schemes.
13.6 All costs relating to the actuarial valuation and any
disputes connected with such valuation shall be met by the
Purchaser of the Company.
13.7 The Purchaser hereby acknowledges that it shall issue and
allot up to a maximum of 47,340 Employee Shares and pay a bonus
of up to a maximum in aggregate of 10,000 pounds, to certain
employees of the Company and Subsidiaries to be agreed, in
accordance with and subject to performance related criteria to
be agreed between the purchaser and the Vendors' Representative
as soon as practicable following Completion.
14. ANNOUNCEMENTS AND CONFIDENTIALITY
14.1 Other than to the extent required by law (including US
law) or by the Rules of the New York Stock Exchange, no
announcement or disclosure concerning the matters provided for
in this Agreement shall be made or issued by or on behalf of
the Vendor or the Purchaser without the prior written approval
of the Purchaser, in the case of the Vendors, or the Vendors'
Representative, in the case of the Purchaser.
14.2 The Vendors shall ensure that all confidential
information which the Vendors, the Company, any of its
respective officers, directors, employees, agents, lawyers,
investment bankers, or accountants, may now possess or may
hereafter create or obtain relating to the financial condition,
results of operation, business, properties, assets,
liabilities, or future prospects of the Purchaser shall not be
published, disclosed, or made accessible by any of them to any
other person or entity at any time or used by any of them
without the prior written consent of the Purchaser PROVIDED
THAT the restrictions contained in this sub-clause shall not
apply (a) as may otherwise be required to be disclosed by law
or relevant regulations (b) as may be necessary or appropriate
in connection with the enforcement of this Agreement, (c) to
the extent the information shall have otherwise become publicly
available or in the public domain at the date of this Agreement
or (d) to information which was lawfully in the possession of
the Vendors or any of their advisers, bankers, employers or
accountants and which was not directly acquired from the
Purchaser or any of its directors, officers, advisers, and
employees.
14.3 In the event of the termination or rescission of this
Agreement, the Purchaser shall ensure that all confidential
information which the Purchaser, any of its respective
Officers, directors, employees, agents, lawyers, investment
bankers, or accountants, may now possess or may hereafter
create or obtain relating to the financial condition, results
of operations, business, properties, assets, liabilities, or
future prospects of the Company and the Subsidiaries shall not
be published, disclosed, or made accessible by it to any other
person or entity at any time or used by it without the prior
written consent of the Vendors' Representative PROVIDED THAT
the restrictions contained in this sub-clause shall not apply
(a) as may otherwise be required to be disclosed by law or
relevant regulations (b) as may be necessary or appropriate in
connection with the enforcement of this Agreement, (c) to the
extent the information shall have otherwise become publicly
available or in the public domain at the date of this Agreement
or (d) to information which was lawfully in the possession of
the purchaser or any of its advisers, bankers, employees or
accountants and which was not directly acquired from the
Vendors or any of their directors, officers, advisers, and
employees.
15. FURTHER ASSURANCE
The Vendors and the Purchasers shall do and execute, and shall
use their respective reasonable endeavors to procure any other
necessary party to do and execute, all such further acts,
things, deeds and documents as may be necessary to give effect
to the terms of this Agreement.
16. WAIVER
No waiver by any of the parties of any of the requirements
hereof or of any of its rights hereunder shall have effect
unless given in writing and signed by such party or, in the
case of the Purchaser, by a director or other duly authorized
officer of such party.
17. ENTIRE AGREEMENT AND VARIATIONS
17.1 This Agreement and any documents in the agreed form
contain the entire agreement and understanding of the parties
in connection with the subject matter thereof and supersede and
extinguish all and any representations and warranties
previously given and/or made and all prior oral and written and
contemporaneous oral negotiations, commitments and
understandings between such parties (including without
limitation the Letter of Intent dated 4th January 1995 between
the Company and the Purchaser) other than those expressly set
forth herein and also other than any misrepresentation or
breach of warranty which constitutes fraud, wilful misconduct
or gross negligence.
17.2 In particular (but without prejudice to the generality of
the other provisions of this Clause) each party acknowledges to
the other (to the intent that the other shall execute this
Agreement and any documents in the agreement from in reliance
upon such acknowledgement) that it has not been induced to
enter into this Agreement and such other documents by nor
relied upon any representation or warranty other than the
representations and/or warranties expressly set forth in this
Agreement or in any document in the agreed form. This
acknowledgement shall not apply to any misrepresentations and
or breaces of warranty which constitute fraud, wilful
misconduct or gross negligence.
17.3 Without prejudice to the generality of the other
provisions of this Cause each party hereby irrevocably and
unconditionally waives any right it may have to claim damages
or to rescind this Agreement and such other documents in the
agreed form by reason of any misrepresentation and/or warranty
not set forth in this Agreement or in any such document (unless
such misrepresentation and/or breach of warranty constitutes
fraud, wilful misconduct or gross negligence).
17.4 It is expressly declared that no variations hereof shall
be effective unless made in writing and signed by each of the
parties or, in the case of the Purchaser, by a director or
other duly authorized officer of such arty or, in the case of
the Vendors, by the Vendors' Representative.
18. PROVISIONS RELATING TO THIS AGREEMENT
18.1 This Agreement shall be binding upon and enure for the
benefit of the successor and permitted assigns of the parties.
18.2 The provisions of this Agreement insofar as the same
shall not have been performed or waived at Completion
(including but not limited to the Warranties and the
Purchaser's Warranties) shall remain in full force and effect
notwithstanding Completion.
18.3 Save where otherwise specifically sated, each party to
this Agreement shall pay its own costs of and incidental to
this Agreement and the sale and purchase hereby agreed to be
made. The Vendors shall on Completion pay the fees of
Broadview Associates in full in cash or by telegraphic transfer
in immediate available funds (or, to the extent already paid by
the Company, reimburse the Company for such fees and Value
Added Tax on Completion) and all fees due and owing as at
Completion to Interregnum Venture Marketing Limited save for
fees payable at the rate of 20,000 pounds per annum for
consultancy services provided by Mr Olisa to the Company. The
fees of Broadview Associates are estimated to be 395,082 pounds
(exclusive of Value Added Tax). In no circumstances shall the
Purchaser or the Company be liable for such fees.
18.4 This Agreement may be entered into in any number of
counterparts and by the parties to it on separate counterparts
each of which when so executed and delivered shall be an
original, but all the counterparts shall together constitute
one and the same instrument.
18.5 The rights of the Purchaser under or arising pursuant to
this Agreement or the Tax Deed or any documents in agreed form
may not be assigned in whole in part other than to a holder for
the time being of the Shares being a Subsidiary of the
Purchaser for so long as it remains such.
18.6 The Purchaser shall be labile for all stamp duty due on
the transfer of the shares.
19. PROVISIONS RELATING TO THE VENDORS' REPRESENTATIVE
19.1 In order to administer efficiently the waiver of any
Condition or any provision of Clause 6 or the obligations of
the Vendors to complete the transactions contemplated hereby,
the Vendors hereby designate the Vendors' Representative s
their representative.
19.2 In the event that the Vendors' Representative dies,
becomes unable to perform his responsibilities hereunder or
resigns from such position, the Vendors holding a majority of
the Shares as set out in the First Schedule shall select
another representative to fill such vacancy and such
substituted representative shall be deemed to be the Vendors'
Representative for all purposes of this Agreement.
19.3 The Purchaser shall be able to rely conclusively on the
instructions and decisions of the Vendors' Representative prior
to or following Completion or any other actions required to be
taken by the Vendors' Representative hereunder prior to
Completion (including, without limitation, the execution and
delivery b the Vendors' Representative of any agreement,
certificate, instrument or other document required hereunder on
behalf of any Vendor), and no party hereunder shall have any
cause of action against the Purchaser for any action taken by
the Purchaser in Reliance upon any instruction or decision of
the Vendors' Representative.
19.4 All actions, decisions and instructions of the Vendors'
Representative (including, without limitation, the execution
and delivery by the Vendors' Representative of any agreement,
certificate, instrument or other document required hereunder on
behalf of any Vendor) shall be conclusive and binding upon all
of the Vendors and no Vendor shall have any cause of action
against the Vendors' Representative for any action taken,
decision made or instruction given by the Vendors'
Representative under this Agreement, provided the Vendors'
Representative acts in good faith.
19.5 The Vendors' Representative is hereby authorized by each
of the Vendors to act in the way contemplated by this Agreement
and to take such decisions as he shall at his entire discretion
determine and, provide he acts in good faith, the Vendors'
Representative shall have and accepts no liability to any of
the Vendors or to any other person (other than the purchaser)
in connection with or as a result of anything which the
Vendors' Representative does, refrains from doing or neglects
or omits to do in connection with any matter relating to the
Agreement.
19.6 The provisions of this Clause 19 shall be binding upon
the executors, heirs, legal representatives and successors of
each Vendor, and any reference in this Agreement to a Vendor or
the Vendors shall mean and include the successors to the
Vendors' rights hereunder, whether pursuant to testamentary
disposition, the laws of descent and distribution or otherwise.
19.7 The Vendors' Representative shall not be required to
expend any of his own money on or in relation to the matters
referred to in this Agreement unless the Vendors'
Representative has been indemnified by the Vendors to his full
satisfaction in respect of the maximum amount of the expenses
and other liabilities of any kind which he considers that he
will or may incur in connection with or as a result of such
proceedings and such indemnity shall be such as to ensure that
the Vendors' Representative has immediate access to all such
funds as he may require in order to meet all such expenses or
other liabilities as the fall due PROVIDED THAT the Vendors'
Representative shall be obliged to bear his proportion of such
expenses and liabilities.
19.8 Subject to the provision to sub-clause 19.7, if the
Vendors' Representative shall expend his own money in relation
to such matters he shall be entitled to be reimbursed by the
Vendors' Administrator from the proceeds (if any) of the
Promissory Note(s) prior to the release thereof by the Vendors'
Administrator to the Vendors Representative shall have and
accepts no liability to any of the Vendors or to any other
persons (other than the Purchaser) in connection with or as a
result of anything which the Vendors' Representative does,
refrain from doing or neglects or omits to do in connection
with any matter relating to the Agreement.
19.6 The provisions of this Clause 19 shall be binding upon
the executors, heirs, legal representatives and successors of
each Vendor, and any references in this Agreement to a Vendor
or the Vendors shall mean and include the successors to the
Vendors' rights hereunder, whether pursuant to testamentary
disposition, the laws of descent and distribution or otherwise.
19.7 The Vendors' Representative shall not be required to
expense any of his own money on or in relation to the matters
referred to in this Agreement unless the Vendors'
Representative has been indemnified by the Vendors to his full
satisfaction in respect of the maximum amount of the expenses
and other liabilities of any kind which he considers that he
will or may incur in connection with or as a result of such
proceedings and such indemnity shall be such as to ensure that
the Vendors' Representative has immediate access to all such
funds as he may require in order to meet all such expenses or
other liabilities as they fall due PROVIDED THAT the Vendors'
Representative shall be obliged to bear his proportion of such
expenses and liabilities.
19.8 Subject to the provision to sub-clause 19.7, if the
Vendors' Representative shall expend his own money in relation
to such matters he shall be entitled to be reimbursed by the
Vendors Administrator from the Proceeds (if any) of the
Promissory Note(s) prior to the release thereof by the Vendors'
Administrator to the Vendors.
20, PROVISIONS RELATING TO THE VENDORS' ADMINISTRATOR
20.1 Each Vendor irrevocably authorizes the Purchaser to
deposit all share certificates evidencing the Consideration
Shares and any additions and substitutes to the Consideration
Shares and the Promissory Notes with the Vendors' Administrator
to be held by the Vendors' Administrator pursuant to the
Administration Agreement.
20.2 Delivery of any document or payment (other than payments
referred to in sub-clause 6.4.1) required to be made to the
Vendors or any of them under this Agreement may be made to the
Vendors' Administrator whose receipt for such delivery or
payment shall be an absolute discharge of the party making the
same who shall not be concerned as to the application thereof.
20.3 Without prejudice to the generality of the foregoing
provisions of this Clause 20, in order to administer
efficiently the giving or the receiving of notices or other
communications required under the terms of the Promissory
Note(s) or the Registration Rights Agreement, the Vendors
hereby designate and appoint the Vendors' Administrator as the
agent of each Vendor for the sole purpose of giving and
receiving such notices and communications.
20.4 The Purchaser shall be able to rely conclusively on the
instructions and decisions of the Vendors' Administrator after
Completion or any other actions required to be taken by the
Vendors' Administrator hereunder after Completion (including,
without limitation, the execution and delivery by the Vendors'
Administrator of any agreement, certificate, instrument or
other document required hereunder on behalf of any Vendor) in
connection with the Registration Rights Agreement, the
Promissory Notes or the Guaranty, and no party hereunder shall
have any cause of action against the Purchaser for any action
taken by the Purchaser in reliance upon any instruction or
decision of the Vendors' Administrator.
21. NOTICES
21.1 Any notice to be given hereunder shall either be
delivered personally or sent by first class recorded delivery
post or airmail or facsimile to the party to be served (in the
case of Purchaser at 5 Hub Drive, Melville, New York, U.S.A.
11747, for the attention of Chief Executive Officer, with a
copy (which copy shall not constitute notice) to Daniel I.
DeWolf, Esq., Camhy Karlinsky & Stein LLP, 1740 Broadway, 16th
Floor, New York, U.S.A. 10019 and (in the case of the Vendors)
at the address set out opposite his/its name in the First
Schedule or such address as may from time to time be notified
to the other parties hereto for this purpose with a copy (which
copy shall not constitute notice) to Donald J. Guiney Esq.,
Brobeck Hale and Dorr International, Veritas House, 125
Finsbury Pavement, London EC2A 1NQ and to the Vendors'
Representative at the principal offices of the Company at Pro-
Bel House, Danehill, Lower Earley, Reading, Bershire. A notice
shall be deemed to have been served as follows:-
21.1.1 if personally delivered, at the time of delivery;
21.1.2 if posted in England to an address in England by
overland mail at the expiration of two business days after the
envelope containing the same was delivered into the custody of
the posal authorities;
21.1.3 if posted by airmail at the expiration of five business
days after the envelope containing the same was delivered into
the custody of the postal authorities;
21.1.4 if sent by facsimile, at the expiration of one
business day after the same was despatched.
21.1.2 In proving such service it shall be sufficient to prove
that personal delivery was made, or that the envelope
containing such notice was properly addressed and delivered
into the custody of the postal authority as a pre-paid first
class recorded delivery letter, or airmail letter, or that the
facsimile was properly addressed and despatched and the
sender's machine shall have indicated that the message has been
received at the addresee's machine, as the case may be.
22. LAWS
22.1 The constructions, validity and performance of this
Agreement shall be governed by the laws of England. The
parties hereto irrevocably agree to submit to the non-exclusive
jurisdiction of the courts of England and Wales in relation to
disputes arising in connection with this Agreement.
Notwithstanding the foregoing, the parties irrevocably agree to
submit to the non-exclusive jurisdiction of New York
arbitrators (in accordance with the terms of the Promissory
Notes) in respect of any Relevant Claim in relation to which
the Purchaser wishes to exercise its right under this
Agreement.
22.2 The Purchaser hereby appoints Messrs Charles Russell of
8-10 New Fetter Lane, London EC4A IRS to be its agent for
service of proceedings for the purpose of any legal proceedings
before the courts of England and Wales arising out of or in
connection with this Agreement or such other personal having an
address with London, England as the Purchaser may notify to the
other parties in writing in accordance with Clause 19.
IN WITNESS this Agreement has been signed by or on behalf of
each of the parties hereto the day and year first before
written.
ANY EXHIBITS OR SCHEDLES REFERRED TO IN THIS AGREEMENT WILL BE
PROVIDED TO THE S.E.C UPON YOUR REQUEST.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of the 12th of April, 1996, by and between
CHYRON CORPORATION, a New York Corporation (the "Company") and
MESSRS. BRONSENS, as administrator (the "Administrator") on
behalf of each of the parties listed on Schedule A hereto (the
"Shareholders").
RECITALS:
WHEREAS, the Shareholders are acquiring shares of the common
stock, par value $.01 per share, of the Company (the "shares"),
pursuant to the agreement for the sale and purchase of the
entire issued share capital of Pro-Bel Limited, by and among
Chyron Corporation, and all of the Shareholders of Pro-Bel
Limited, dated as of April 12, 1996 (the "Purchase Agreement");
WHEREAS, the Company desires to grant to the Shareholders
certain registration rights relating to the Shares and the
Shareholders desire to obtain such registration rights, subject
to the terms and conditions set forth herein; and
WHEREAS, pursuant to an Administration Agreement, dated April
12, 1996, attached as Exhibit A hereto and incorporated herein,
the Shareholders have appointed the Administrator as their
representative to administer the provisions relating to the
Shareholders under this Agreement; and
NOW, THEREFORE, in consideration of the mutual parties,
representations, warranties and conditions set forth in this
Agreement, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions and References. For purposes of this
Agreement, in addition to the definitions set forth above and
elsewhere herein, the following terms shall have the following
meanings:
(a) The term "Commission" shall mean the Securities and
Exchange Commission and any successor agency.
(b) The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing
a registration statement or similar document in compliance with
the 1933 Act (as herein defined) and the declaration or
ordering of effectiveness of such registration statement or
document.
(c) For purposes of this Agreement, the term "Registrable
Stock" shall mean (i) the Shares, (ii) any shares of the common
stock of the Company, par value $.01 per share (the "Common
Stock") issued as (or issuable upon the conversion or exercise
of any warrant, right, option or other convertible security
which is issued as) a dividend or other distribution with
respect to, or in exchange for, or in replacement of, the
Shares, and (iii) any Common Stock issued by way of a stock
split of the Shares. For purposes of this Agreement, any
Registrable Stock shall cease to be Registrable Stock when (W)
a registration statement covering such Registrable Stock has
been declared effective and such Registrable Stock has been
disposed of pursuant to such effective registration statement,
(x) such Registrable Stock is sold pursuant to Rule 144 (or any
similar provision then in force) under the 1933 Act, (y) such
Registrable Stock has been otherwise transferred, no stop
transfer order affecting such stock is in effect and the
Company has delivered new certificates or other evidences of
ownership for such Registrable Stock not bearing any legend
indicating that such shares have not been registered under the
1933 Act, or (z) such Registrable Stock is sold by a person in
a transaction in which the rights under the provisions of this
Agreement are not assigned.
(d) The term "Holder" shall mean the Shareholders or any
transferee or assignee thereof to whom the rights under this
Agreement are assigned in accordance with Section 10 hereof,
provided that the Shareholders or such transferee or assignee
shall then own the Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act of 1933,
as amended.
(f) AN "affiliate of such Holder" shall mean a person who
controls, is controlled by or is under common control with such
Holder, or the spouse or children (or a trust exclusively for
the benefit of the spouse and/or children) of such Holder, or,
in the case of a Holder that is a partnership, its partners.
(g) The term "Person" shall mean an individual, corporation,
partnership, trust, limited liability company, unincorporated
organization or association or other entity, including any
governmental entity.
(h) The term "Requesting Holders" shall mean a Holder or
Holders of in the aggregate of at least a majority of the
Registrable Stock.
(i) References in this Agreement to any rules, regulations or
forms promulgated by the Commission shall include rules,
regulations and forms succeeding to the functions thereof,
whether or not bearing the same designation.
2. Demand Registration.
(a) Commencing fifteen (15) months after the Completion Date
(as defined in the Purchase Agreement), any Requesting Holders
may make a written request to the Company (specifying that it
is being made pursuant to this Section 2) that the Company file
a registration statement under the 1933 Act (or a similar
document pursuant to any other statute then in effect
corresponding to the 1933 Act) covering the registration of
Registrable Stock. In such event, the Company shall (x) within
ten (10) days thereafter notify in writing all other Holders of
Registrable Stock of such request, and (y) use its best efforts
to cause to be registered under the 1933 Act all Registrable
Stock that the Requesting Holders and such other Holders have,
within thirty (30) days after the Company has given such
notice, requested be registered. Unless a majority in interest
of the Holders requesting to participate in such registration
shall consent in writing, no other party, including the Company
(but excluding another Holder), shall be permitted to offer
securities in connection with such registration.
(b) If the Requesting Holders intend to distribute the
Registrable Stock covered by their request by means of an
underwritten offering, they shall so advise the Company as a
part of their request pursuant to Section 2(a) above, and the
Company shall include such information in the written notice
referred to in clause (x) of Section 2(a) above. In such
event, the Holder's right to include its Registrable Stock in
such registration shall be conditioned upon such Holder's
participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten offering
to the extent provided in this Section 2. All Holders
proposing to distribute Registrable Stock through such
underwritten offering shall enter into an underwriting
agreement in customary form with the underwriter or
underwriters. Such underwriter or underwriters shall be
selected by a majority in interest of the Requesting Holders
and shall be approved by the Company, which approval shall not
be unreasonably withheld; provided, that all of the
representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such
Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting
agreement shall be conditions precedent to the obligations of
such Holders; and provided further, that no Holder shall be
required to make any representations or warranties to or
agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such
Holder, the Registrable Stock of such Holder and such Holder's
intended method of distribution and any other representation
required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2 to
the contrary, if the managing underwriter of an underwritten
offering of the Registrable Stock requested to be registered
pursuant to this Section 2 advises the Requesting Holders in
writing that in its opinion marketing factors require a
limitation of the number of shares to be underwritten, the
Requesting Holders shall so advise all Holders of Registrable
Stock that would otherwise be underwritten pursuant hereto, and
the number of shares of Registrable Stock that may be included
in such underwritten offering shall be allocated among all such
Holders, including the Requesting Holders, in proportion (as
nearly as practicable) to the amount of Registrable Stock
requested to be included in such registration by each Holder at
the time of filing the registration statement; provided, that
in the event of such limitation of the number of shares of
Registrable Stock to be underwritten, the Holders shall be
entitled to an additional demand registration pursuant to this
Section 2. If any Holder of Registrable Stock disapproves of
the terms of the underwriting, such Holder may elect to
withdraw by written notice to the Company, the managing
underwriter and the Requesting Holders. The securities so
withdrawn shall also be withdrawn from registration.
(d) Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be required to effect a
registration pursuant to this Section 2 during the period
starting with the fourteenth (14th) day immediately preceding
the date of an anticipated filing by the Company of, and ending
on a date ninety (90) days following the effective date of, a
registration statement pertaining to a public offering of
securities for the account of the Company; provided, that the
Company shall actively employ in good faith all reasonable
efforts to cause such registration statement to become
effective; and provided further, that the Company's estimate of
the date of filing such registration statement shall be made in
good faith.
(e) The Company shall be obliged to effect and pay for a total
of only one (1) registration pursuant to this Section 2, unless
increased pursuant to Section 2(c) hereof; provided, that a
registration requested pursuant to this Section 2 shall not be
deemed to have been effected for purposes of this Section 2(e),
unless (i) it has been declared effective by the Commission,
(ii) if it is a shelf registration, it has remained effective
for the period set forth in Section 3(b), (iii) the offering of
Registrable Stock pursuant to such registration is not subject
to any stop order, injunction or other order or requirement of
the Commission (other than any such action prompted by any act
or omission of the Holders), and (iv) no limitation of the
number of shares of Registrable Stock to be underwritten has
been required pursuant to Section 2(c) hereof.
3. Obligations of the Company. Whenever required under
Section 2 to use its best efforts to effect the registration of
any Registrable Stock, the Company shall, as expeditiously as
possible:
(a) prepare and file with the Commission, not later than
ninety (90) days after receipt of a request to file a
registration statement with respect to such Registrable Stock,
a registration statement on any form for which the Company then
qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of
such issue of Registrable Stock in accordance with the intended
method of distribution thereof, and use its best efforts to
cause such registration statement to become effective as
promptly as practicable thereafter; provided that before filing
a registration statement or prospectus or any amendments or
supplements thereto, the Company will (i) furnish to one
counsel selected by the Requesting Holders copies of all such
documents proposed to be filed, and (ii) notify each such
Holder of any stop order issued or threatened by the Commission
and take all reasonable actions required to prevent the entry
of such stop order or to remove it if entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than
one hundred twenty (120) days or such shorter period which will
terminate when all Registrable Stock covered by such
registration statement has been sold (but not before the
expiration of the forty (40) or ninety (90) day period referred
to in Section 4(3) of the 1933 Act and Rule 174 thereunder, it
applicable), and comply with the provisions of the 1933 Act
with respect to the disposition of all securities covered by
such registration statement during such period in accordance
with the intended methods of disposition by the sellers thereof
set forth in such registration statement;
(c) furnish to each Holder and any underwriter of Registrable
Stock to be included in a registration statement copies of such
registration statement as filed and each amendment and
supplement thereto (in each case including all exhibits
thereto), the prospectus included in such registration
statement (including each preliminary prospectus) and such
other documents as such Holder may reasonably request in order
to facilitate the disposition of the Registrable Stock owned by
such Holder;
(d) use its best efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws
in such jurisdictions as any selling Holder or any underwriter
of Registrable Stock reasonably requests, and do any and all
other acts which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in such
jurisdiction of the Registrable Stock owned by such Holder;
provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d)
hereof, (ii) subject itself to taxation in any such
jurisdiction, or (iii) consent to general service of process in
any such jurisdiction;
(e) use its best efforts to cause the Registrable Stock
covered by such registration statement to be registered with or
approved by such other governmental agencies or other
authorities as may be necessary by virtue of the business and
operations of the Company to enable the selling Holders thereof
to consummate the disposition of such Registrable Stock;
(f) notify each selling Holder of such Registrable Stock and
any underwriter thereof, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act (even if
such time is after the period referred to in Section 3(b)), of
the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue
statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein in light of the circumstances being made not
misleading, and prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers
of such Registrable Stock, such prospectus will not contain an
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances being
made not misleading.
(g) make available for inspection by any selling Holder, any
underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other
agent retained by any such seller or underwriter (collectively,
the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company
(collectively, the "Records"), and cause the Company's
officers, directors and employees to supply all information
reasonably requested by any such Inspector, as shall be
reasonably necessary to enable them to exercise their due
diligence responsibility, in connection with such registration
statement. Records or other information which the Company
determines, in good faith, to be confidential and which it
notifies the Inspectors are confidential shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records or
other information is necessary to avoid or correct a
misstatement or omission in the registration statement, or (ii)
the release of such Records or other information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction. Each selling Holder shall, upon learning that
disclosure of such Records or other information is sought in a
court of competent jurisdiction, give notice to the Company and
allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records or
other information deemed confidential;
(h) furnish, at the request of any Requesting Holder, on the
date that such shares of Registrable Stock are delivered to the
underwriters for sale pursuant to such registration or, if such
Registrable Stock is not being sold through underwriters, on
the date that the registration statement with respect to such
shares of Registrable Stock becomes effective, (1) a signed
opinion, dated such date, of the legal counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, if any, and if such Registrable Stock is not
being sold through underwriters, then to the Requesting Holders
as to such matters as such underwriters or the Requesting
Holders, as the case may be, may reasonably request and as
would be customary in such a transaction; and (2) a letter
dated such date, from the independent certified public
accountants of the Company, addressed to the underwriters, if
any, and if such Registrable Stock is not being sold through
underwriters, then to the Requesting Holders and, if such
accountants refuse to deliver such letter to such Holder, then
to the Company (i) stating that they are independent certified
public accountants within the meaning of the 1933 Act and that,
in the opinion of such accountants, the financial statements
and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereto, comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act,
and (ii) covering such other financial matters (including
information as to the period ending not more than five (5)
business days prior to the date of such letter) with respect to
the registration in respect of which such letter is being given
as the Requesting Holders may reasonably request and as would
be customary in such a transaction.
(i) enter into customary agreements (including if the method
of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the
disposition of the Registrable Stock to be so included in the
registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably
practicable, but not later than eighteen (18) months after the
effective date of the registration statement, an earnings
statement covering the period of at least twelve (12) months
beginning with the first full month after the effective date of
such registration statement, which earnings statements shall
satisfy the provisions of Section 11(a) of the 1933 Act; and
(k) use its best efforts to cause all such Registrable Stock
to be listed on the New York Stock Exchange and/or any other
securities exchange on which similar securities issued by the
Company are then listed, or traded on the National Association
of Securities Dealers Automated Quotations Systems, if such
listing or trading is then permitted under the rules of such
exchange or system, respectively.
The Company may require each selling Holder of Registrable
Stock as to which any registration is being effected to furnish
to the Company such information regarding the distribution of
such Registrable Stock as the Company may from time to time
reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in
Section 3(f) hereof, such Holder will forthwith discontinue
disposition of Registrable Stock pursuant to the registration
statement covering such Registrable Stock until such Holder's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) hereof, and, if so directed by the
Company, such Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering
such Registrable Stock current at the time of receipt of such
notice. In the event the Company shall give any such notice,
the Company shall extend the period during which such
registration statement shall be maintained effective pursuant
to this Agreement (including the period referred to in Section
3(b)) by the number of days during the period from and
including the date of the giving of such notice pursuant to
Section 3(f) hereof to and including the date when each selling
Holder of Registrable Stock covered by such registration
statement shall have received the copies of the supplemented or
amended prospectus contemplated by Section 3(f) hereof.
4. Incidental Registration. Commencing twelve (12) months
after the Completion Date (as defined in the Purchase
Agreement), if the Company determines that it shall file a
registration statement under the 1933 Act (other than a
registration statement on a Form S-4 or S-8 or filed in
connection with an exchange offer or an offering of securities
solely to the Company's existing stockholders) on any form that
would also permit the registration of the Registrable Stock and
such filing is to be on its behalf and/or on behalf of selling
holders of its securities for the general registration of its
common stock to be sold for cash, at each such time the Company
shall promptly give each Holder written notice of such
determination setting forth the date on which the Company
proposes to file such registration statement, which date shall
be no earlier than forty (40) days from the date of such
notice, and advising each Holder of its right to have
Registrable Stock included in such registration. Upon the
written request of any Holder received by the Company no later
than twenty (20) days after the date of the Company's notice,
the Company shall use its best efforts to cause to be
registered under the 1933 Act all of the Registrable Stock that
each such Holder has so requested to be registered. If, in the
written opinion of the managing underwriter or underwriters
(or, in the case of a non-underwritten offering, in the written
opinion of the placement agent, or if there is none, the
Company), the total amount of such securities to be so
registered, including such Registrable Stock, will exceed the
maximum amount of the Company's securities which can be
marketed (i) at a price reasonably related to the then current
market value of such securities, or (ii) without otherwise
materially and adversely affecting the entire offering, then
the amount of Registrable Stock to be offered for the accounts
of Holders shall be reduced pro rata to the extent necessary to
reduce the total amount of securities to be included in such
offering to the recommended amount; provided, that if
securities are being offered for the amount of other Persons as
well as the Company, such reduction shall not represent a
greater fraction of the number of securities intended to be
offered by Holders than the fraction of similar reductions
imposed on such other Persons other than the Company over the
amount of securities they intended to offer.
5. Holdback Agreement - Restrictions on Public Sale by Holder.
(a) To the extent not inconsistent with applicable law, each
Holder whose Registrable Stock is included in a registration
statement agrees not to effect any public sale or distribution
of the issue being registered or a similar security of the
Company, or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to
Rule 144 under the 1933 Act, during the fourteen (14) days
prior to, and during the ninety (90) day period beginning on,
the effective date of such registration statement (except as
part of the registration), if and to the extent requested by
the Company in the case of a non-underwritten public offering
or if and to the extent requested by the managing underwriter
or underwriters in the case of an underwritten public offering.
(b) Restrictions on Public Sale by the Company and Others.
The Company agrees (i) not to effect any public sale or
distribution of any securities similar to those being
registered, or any securities convertible into or exchangeable
or exercisable for such securities, during the fourteen (14)
days prior to, and during the ninety (90) day period beginning
on, the effective date of any registration statement in which
Holders are participating (except as part of such
registration), if and to the extent requested by the Holders in
the case of a non-underwritten public offering or if and to the
extent requested by the managing underwriter or underwriters in
the case of an underwritten public offering; and (ii) that any
agreement entered into after the date of this Agreement
pursuant to which the Company issues or agrees to issue any
securities convertible into or exchangeable or exercisable for
such securities (other than pursuant to an effective
registration statement) shall contain a provision under which
holders of such securities agree not to effect any public sale
or distribution of any such securities during the periods
described in (i) above, in each case including a sale pursuant
to Rule 144 under the 1933 Act.
6. Expenses of Registration. All expenses incurred in
connection with each registration pursuant to Sections 2 and 4
of this Agreement, excluding underwriters' discounts and
commissions, but including, without limitation, all
registration, filing and qualification fees, word processing,
duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance),
exchange listing fees or National Association of Securities
Dealers fees, messenger and delivery expenses, all fees and
expenses of complying with securities or blue sky laws, fees
and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one (1) counsel for the
selling Holders shall be paid by the Company. The selling
Holders shall bear and pay the underwriting commissions and
discounts applicable to the Registrable Stock offered for their
account in connection with any registrations, filings and
qualifications made pursuant to this Agreement.
7. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify, to the full extent permitted by law, each Holder,
its officers, directors and agents and each Person who controls
such Holder (within the meaning of the 1933 Act) against all
losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained
in any registration statement, prospectus or preliminary
prospectus or any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statement therein (in case of a prospectus or
preliminary prospectus, in the light of the circumstances under
which they were made) not misleading. The Company will also
indemnify any underwriters of the Registrable Stock, their
officers and directors and each Person who controls such
underwriters (within the meaning of the 1933 Act) to the same
extent as provided above with respect to the indemnification of
the selling Holders.
(b) Indemnification by Holders. In connection with any
registration statement in which a Holder is participating, each
such Holder will furnish to the Company in writing such
information with respect to such Holder as the Company
reasonably requests for use in connection with any such
registration statement or prospectus and agrees to indemnify,
to the extent permitted by law, the Company, its directors and
officers and each Person who controls the Company (within the
meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact or any omission or alleged
omission of a material fact required to be stated in the
registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or necessary to
make the statements therein (in the case of a prospectus or
preliminary prospectus, in the light of the circumstances under
which they were made) not misleading, to the extent, but only
to the extent, that such untrue statement or omission is
contained in any information with respect to such Holder so
furnished in writing by such Holder. Notwithstanding the
foregoing, the liability of each such Holder under this Section
7(b) shall be limited to an amount equal to the initial public
offering price of the Registrable Stock sold by such Holder,
unless such liability arises out of or is based on willful
misconduct of such Holder.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder agrees to give prompt
written notice to the indemnifying party after the receipt by
such Person of any written notice of the commencement of any
action, suit, proceeding or investigation or threat thereof
made in writing for which such Person will claim
indemnification or contribution pursuant to this Agreement and,
unless in the reasonable judgment of such indemnified party, a
conflict of interest may exist between such indemnified party
and the indemnifying party with respect to such claim, permit
the indemnifying party to assume the defense of such claims
with counsel reasonably satisfactory to such indemnified party.
Whether or not such defense is assumed by the indemnifying
party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such
consent will not be unreasonably withheld). Failure by such
Person to provide said notice to the indemnifying party shall
itself not create liability except to the extent of any injury
caused thereby. No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release
from all liability in respect of such claim or litigation. If
the indemnifying party is not entitled to , or elects not to,
assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one (1) counsel with respect
to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any other such indemnified parties with
respect to such claim, in which event the indemnifying party
shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
(d) Contribution. If for any reason the indemnify provided
for in this Section 7 is unavailable to, or is insufficient to
hold harmless, an indemnified party, then the indemnifying
party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages,
liabilities or expenses, (i) in such proportion as is
appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on
the other, (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, or provides a lesser sum to
the indemnified party than the amount hereinafter calculated,
in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party on the one
hand and the indemnified party on the other but also the
relative fault of the indemnifying party and the indemnified
party as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or
indemnified parties; and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as
a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 7(c), any legal or
other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
These parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to
the full extent provided in Sections 7(a) and (b) without
regard to the relative fault of said indemnifying party or
indemnified party or any other equitable consideration provided
for in this Section 7.
8. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless
such Holder (a) agrees to sell such Holder's securities on the
basis provided in any underwriting arrangements approved by the
Holders entitled hereunder to approve such arrangements, and
(b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such
underwriting arrangements.
9. Rule 144. The Company covenants that it will file the
reports required to be filed by it under the 1933 Act and the
Securities Exchange Act of 1934, as amended, and the rules and
regulations adopted by the Commission thereunder; and it will
take such further action as any Holder may reasonably request,
all to the extent required from time to time to enable such
Holder to sell Registrable Stock without registration under the
1933 Act within the limitation of the exemptions provided by
(a) Rule 144 under the 1933 Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any
Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
10. Transfer of Registration Rights. The registration rights
of any Holder under this Agreement with respect to any
Registerable Stock may be transferred to any transferee of such
Registrable Stock; provided that such transfer may otherwise be
effected in accordance with applicable securities laws;
provided further, that the transferring Holder shall give the
Company written notice at or prior to the time of such transfer
stating the name and address of the transferee and identifying
the securities with respect to which the rights under this
Agreement are being transferred; provided further, that such
transferee shall agree in writing, in form and substance
satisfactory to the Company, to be bound as a Holder by the
provisions of this Agreement; and provided further, that such
assignment shall be effective only if immediately following
such transfer the further disposition of such securities by
such transferee is restricted under the 1933 Act. Except as
set forth in this Section 10, no transfer of Registrable Stock
shall cause such Registrable Stock to lose such status.
11. Mergers, Etc. The Company shall not, directly or
indirectly, enter into any merger, consolidation or
reorganization in which the Company shall not be the surviving
corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in
writing to assume the obligations of the Company under this
Agreement, and for that purpose references hereunder to
"Registrable Stock" shall be deemed to be references to the
securities which the Holders would be entitled to receive in
exchange for Registrable Stock under any such merger,
consolidation or reorganization; provided, however, that the
provisions of this Section 11 shall not apply in the event of
any merger, consolidation or reorganization in which the
Company is not the surviving corporation if each Holder is
entitled to receive in exchange for its Registrable Stock
consideration consisting solely of (i) cash, (ii) securities of
the acquiring corporation which may be immediately sold to the
public without registration under the 1933 Act, or (iii)
securities of the acquiring corporation which the acquiring
corporation has agreed to register within ninety (90) days of
completion of the transaction for resale to the public pursuant
to the 1933 Act.
12. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not
hereafter enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the
Holders in this Agreement.
(b) Remedies. Each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive (to the extent permitted by law) the
defense in any action for specific performance that a remedy of
law would be adequate.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or
consents to departures from the provision hereof may not be
given unless the Company has obtained the written consent of
the Holders of at least a majority of the Registrable Stock
then outstanding affected by such amendment, modification,
supplement, waiver or departure.
(d) Successors and Assigns. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to
confer upon any Person other than the parties hereto or their
respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
New York applicable to contracts made and to be performed
wholly within that state, without regard to the conflict of law
rules thereof.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
(g) Headings. The headings in this Agreement are used for
convenience of reference only and are not to be considered in
construing or interpreting this Agreement.
(h) Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be delivered in
person or by telecopy or by overnight courier guaranteeing no
later than second business day delivery, directed to (i) the
Company at the address set forth below its signature hereof or
(ii) a Holder at the address of the Administrator set forth
below its signature hereof. Any party may change its address
for notice by giving ten (10) days advance written notice to
the other parties. Every notice or other communication
hereunder shall be deemed to have been duly given or served on
the date on which personally delivered, or on the date actually
received, if sent by telecopy or overnight courier service,
with receipt acknowledged.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and
of the remaining provisions contained herein shall not be in
any way impaired thereby, it being intended that all of the
rights and privileges of the Holders shall be enforceable to
the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises,
warranties or undertakings other than those set forth or
referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect
to such subject matter.
(k) Enforceability. This Agreement shall remain in full force
and effect notwithstanding any breach or purported breach of,
or relating to, the Purchase Agreement.
(1) Recitals. The recitals are hereby incorporated in the
Agreement as if fully set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
CHYRON CORPORATION
By: Michael Wellesley-Wesley
Chairman and CEO
5 Hub Drive
Melville, New York 11747
U.S.A.
BRONSENS
By: Peter Bronsen
Partner
26 Beaumont Street
Oxford OX1 2NP
ENGLAND
<PAGE>
EXHIBIT III
PRO-BEL LIMITED
DIRECTORS' REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
<PAGE>
PRO-BEL LIMITED
COMPANY INFORMATION
Directors R.W. Hartman (Chairman)
J.F.G. Wilson
D. Owen
D.K. Steel
G.M. Pitman
G.D. Roe
I.R. Henderson
K. Olisa
Secretary R.W. Hartman
Company Number 1316843 (England and Wales)
Registered Office 22, Manor Road
South Hinksey
Oxford
OX1 5AS
Auditors Bronsens
Chartered Accountants
26, Beaumont Street
Oxford
OX1 2NP
Business Address Danehill
Lower Earley
Reading
Berkshire
RG6 4PB
Bankers Barclays Bank plc
Oxford City Office (Old Bank)
P.O. Box 333
Oxford
OX1 3HS
Solicitors Charles Russell
Killowen House
Bayshill Road
Cheltenham
GL50 3AW
<PAGE>
PRO-BEL LIMITED
CONTENTS
Directors' Report 1-2
Auditors' Report 3
Group Profit and Loss Account 4
Group Balance Sheet 5
Company Balance Sheet 6
Group Cash Flow Statement 7-8
Notes to the Financial Statements 9-24
<PAGE>
PRO-BEL LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 OCTOBER 1995
The directors present their report and the financial statements
for the year ended 31 October 1995.
PRINCIPAL ACTIVITIES
The principal activity of the group was that of the
manufacturing and distribution of equipment for the
professional broadcasting industry.
RESULTS AND DIVIDENDS
The results for the year are set out on page 4. The directors
are pleased to report a significant increase in turnover of the
group from 11,669,000 British pounds in 1994 to 18,166,000
British pounds, and an increase in the net profits from 548,000
British pounds in 1994 to 1,129,000 British pounds for the
year. It is proposed that the group profit for the year is
transferred to reserves. The directors do not recommend the
payment of a dividend.
FIXED ASSETS
Detail of the movements in fixed assets during the year are set
out in notes 8 and 9 to the financial statements.
MARKET VALUE OF LAND AND BUILDINGS
The freehold property was revalued in 1993 by the directors,
after seeking professional advice, at a value of 1,400,000
British pounds. In the opinion of the directors, this
valuation remains valid.
RESEARCH AND DEVELOPMENT
All research and development costs are charged to the profit
and loss account in the year in which they are incurred.
DIRECTORS AND THEIR INTERESTS
The directors who served during the year and details of their
interest in the company were as stated below.
Convertible Number of Ordinary
Loan Stock Option Rights 25p Shares
1995 1995 1994 1995 1994
Pounds Number Number Pounds Pounds
R.W. Hartman 55,000 880,000 960,000
J.F.G. Wilson 10,000 240,000 240,000
D. Owen 10,000 100,000 100,000 240,000 240,000
D.K. Steel 10,000 100,000 100,000 240,000 240,000
G.M. Pitman 10,000 100,000 100,000 240,000 240,000
G.D. Roe 10,000 100,000 100,000 240,000 240,000
I.R. Henderson 5,000 80,000 80,000 80,000
K. Olisa (appointed 18.06.95)
<PAGE>
Under an Executive Share Option Scheme, as stated above the
directors acquired the rights to subscribe for ordinary shares
of 25p each in the company. The option is exercisable at any
time after 31 October 1989, but before 31 May 2001, at a price
of fifty pence per share.
Refer to note 14 to the financial statements relating to
conversion of convertible loan stock.
<PAGE>
PRO-BEL LIMITED
DIRECTORS' REPORT
FOR THE FISCAL YEAR ENDED 31 OCTOBER 1995
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare financial
statements for each financial year which give a true and fair
view of the state of the affairs of the company and of the
profit or loss of the company for that period. In preparing
those financial statements, the directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and
prudent;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the company and to enable them to ensure
that the financial statements comply with the Companies Act
1985. They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
This report was approved by the Board on 2 April 1996
Secretary
<PAGE>
PRO-BEL LIMITED
AUDITORS' REPORT
TO THE SHAREHOLDERS OF PRO-BEL LIMITED
We have audited the financial statements on pages 4 to 24,
which have been prepared under the historical cost convention
as modified by the revaluation of certain fixed assets and the
accounting policies set out on page 10 and 11.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 3 the company's directors are responsible
for the preparation of financial statements. It is our
responsibility to form an independent opinion, based on our
audit, on those statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards
issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the
financial statements, and of whether the accounting policies
are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatements, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
UNITED KINGDOM OPINION
In our opinion the financial statements give a true and fair
view of the state of the company's and group's affairs as at 31
October 1995 and of their profit for the year then ended and
have been properly prepared in accordance with the Companies
Act 1985.
UNITED STATES OPINION
In our opinion, the financial statements present fairly, in all
material respects, the financial position of the company and
the group at 31s October 1995, 1994, and 1993 and the results
of its operation and cash flows for each of the three years in
the period ended 31st October 1995 in conformity with
accounting principles generally accepted in the United Kingdom.
Accounting principles generally accepted in the United Kingdom
vary in certain significant respects from accounting principles
generally accepted in the United States. The application of
the latter would have affected the determination of
consolidated net income for each of the three years in the
period ended 31 October 1995 and consolidated shareholders'
equity at 31st October 1995 and 1994 as shown in the summary of
differences between UK and US generally accepted accounting
principles.
BRONSENS
Chartered Accountants
Registered Auditors
26, Beaumont Street
Oxford
OX1 2NP
Dated: 20 June 1996
NOTE: These financial statements have been prepared in
accordance with the Companies Act 1985 of the United Kingdom,
and are in pounds sterling.<PAGE>
PRO-BEL LIMITED
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 1995
1995 1994
'000 '000
NOTE POUNDS POUNDS
Turnover 2 18,165.9 11,668.9
Cost of sales (10,042.7) (6,222.8)
Gross Profit 8,123.2 5,446.1
Administrative expenses (6,702.7) (4,693.9)
Operating Profit 3 1,420.5 752.2
Investment income 4 4.5 0.3
Interest payable and similar charges 5 (295.8) (204.7)
Group Profit on Ordinary Activities
before Taxation 1,129.2 547.8
Tax on profit on ordinary activities 6 (493.8) (217.2)
Group Profit on Ordinary Activities
after Taxation 653.4 330.6
Profit attributable to minority
interests (21.3) (7.5)
Profit Attributable to the Holding
Company 7 614.1 323.1
Dividends
Retained Profit for the year 18 614.1 323.1
There are no recognized gains or losses other than those
passing through the profit and loss account.
<PAGE>
PRO-BEL LIMITED
GROUP BALANCE SHEET
AS AT 31 OCTOBER 1995
1995 1994
'000 '000 '000 '000
Note Pounds Pounds Pounds Pounds
Fixed Assets
Tangible assets 8 1,777.7 1.610.7
Current Assets
Stocks 10 3,317.8 3,174.3
Debtors 11 5,744.0 2,825.5
Cash at bank and in hand 152.8 251.4
9,214.6 6,251.2
Creditors: amounts falling
due within one year 12 (6,025.7) (3,721.3)
Net Current Assets 3,188.9 2,529.9
Total Assets less Current
Liabilities 4,966.6 4,140.6
Creditors: amounts falling
due after more than
one year 12 & 14 (1,328.9) (1,298.3)
Convertible unsecured
loan stock 14 (594.6) (433.0)
Minority interest (27.8) 16.9
3,015.3 2,426.2
Capital and Reserves
Called up share capital 17 806.0 800.2
Reserves 18 2,209.3 1,626.0
Shareholders' Funds 19 3,015.3 2,426.2
<PAGE>
PRO-BEL LIMITED
COMPANY BALANCE SHEET
AS AT 31 OCTOBER 1995
1995 1994
'000 '000 '000 '000
Note Pounds Pounds Pounds Pounds
Fixed Assets
Tangible assets 8 1,572.9 1,539.5
Investments 9 192.0 178.7
1,764.9 1,718.2
Current Assets
Stocks 10 2,785.0 2,566.2
Debtors 11 5,791.3 3,582.2
Cash at bank and in hand 123.2 66.3
8,699.5 6,214.7
Creditors: amounts falling
due within one year 12 (4,783.2) (3,170.6)
Net Current Assets 3,916.3 3,044.1
Total Assets less Current
Liabilities 5,681.2 4,762.3
Creditors: amounts falling
due after more than
one year 12 & 14 (1,319.0) (1,298.3)
Convertible unsecured
loan stock 14 (594.6) (433.0)
3,767.6 3,031.0
Capital and Reserves
Called up share capital 17 806.1 800.2
Reserves 18 2,961.5 2,230.8
Shareholders' Funds 19 3,767.6 3,031.0
<PAGE>
PRO-BEL LIMITED
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 OCTOBER 1995
1995 1994
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Net cash (out)/inflow from
operating activities (377.8) 1,289.7
Returns on investment and
servicing of finance
Interest received 4.5 0.3
Interest paid (287.0) (175.7)
Interest element of finance
lease payments (8.8) (8.0)
Net cash outflow from
returns on Investment and
servicing of finance (291.3) (183.4)
Taxation
U.K. corporation tax and
A.C.T. paid (253.4) (4.3)
Tax paid (253.4) (4.3)
Investment activities
Payments to acquire tangible
assets (207.4) (89.6)
Payments to acquire
investments (15.0)
Receipts from sale of
tangible assets 13.4 22.7
Net cash outflow from
investing activities (209.0) (66.9)
Net cash (out)/inflow before
financing (1,131.5) 1,035.1
Financing
Issue of ordinary share
capital 10.0
Issue of convertible loan
stock 161.6 433.0
Other new short term loans 649.4
Repayment of long term bank
loan (32.3) (461.6)
Capital element of finance
lease and hire purchase
contracts (61.0) (81.0)
Net cash in/(outflow) from
financing 727.7 (109.6)
(De)/Increase in cash and
cash equivalents (403.8) 925.5
<PAGE>
PRO-BEL LIMITED
NOTES TO THE CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 OCTOBER 1995
Reconciliation of operating profit to net cash inflow
from operating activities
1995 1994
Pounds Pounds
Operating profit 1,420.5 752.2
Depreciation charges 206.9 224.4
Profit on sale of fixed assets (13.4) (6.1)
Increase in stocks (143.5) (189.9)
(Decrease)/increase in debtors (2,918.5) 118.9
Increase in creditors 1,066.8 388.7
Adjustment on consolidation 3.4 1.5
(377.8) 1,289.7
Share Short-Term Long-Term Finance
Capital loans loans lease Total
'000 '000 '000 '000 '000
Changes in financing Pounds Pounds Pounds Pounds Pounds
31.10.94 800.5 150.0 1,766.0 21.3 2,737.8
Net cash inflow 649.4 129.3 105.5 884.2
Issue of share capital 10.0 10.0
31.10.95 810.5 799.4 1,895.3 126.8 3,632.0
Cash at
bank and Bank
in hand overdraft Total
'000 '000 '000
Cash and cash equivalent Pounds Pounds Pounds
31.10.94 251.4 (790.8) (539.4)
Net cash outflow (98.6) (305.2) (403.8)
31.10.95 152.8 (1,096.0) (943.2)
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
1. Accounting Policies
1.1 Accounting convention
The financial statements are prepared under the historical cost
convention modified to include the revaluation of freehold land
and buildings, and include the results of the company's
operations as indicated in the directors' report, all of which
are continuing.
1.2 Compliance with and departure from accounting standards
The company has not complied with Statement of Standard
Accounting Practice No. 12 or Companies Act 1985 by not
depreciating the freehold property on the basis that it has
been revalued.
1.3 Turnover
Turnover represents amounts receivable for goods and services
provided by the group both in the UK and overseas net of VAT
and trade discounts.
1.4 Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less depreciation.
Depreciation is provided at rates calculated to write off the
cost less estimated residual value of each asset over its
expected useful life, as follows:
Lease premium - 25% Straight line
Leasehold improvements - 25% Straight line
Fixtures, fittings and equipment - 25% and 33 1/3% Straight Line
Motor vehicles - 33 1/3% Straight line
1.5 Leasing and hire purchase commitments
Rentals payable under operating leases are charged against
income on a straight line basis over the term of the lease.
Assets obtained under hire purchase contracts and finance
leases are capitalized as tangible assets and depreciated in
accordance with the policy stated above. Obligations under
such agreements are included in creditors net of finance
charges allocated to future periods. The finance element of
the rental payments is charged to the profit and loss account
so as to produce a constant periodic rate of charge on the net
obligation outstanding in each period.
1.6 Investments
Fixed asset investments are stated at cost less provision for
diminution in value.
1.7 Stock and work in progress
Stock and work in progress are valued at the lower of cost and
net realisable value.
<PAGE>
1.8 Pensions
The pension costs charged in the financial statements represent
the contributions payable by the company during the year in
accordance with SSAP 24.
1.9 Deferred taxation
Provision is made for deferred taxation using the liability
method to take account of timing differences between the
incidence of income and expenditure for taxation and accounting
purposes except to the extent that the directors consider that
a liability to taxation is unlikely to crystallize.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
1. Accounting Policies (continued)
1.10 Basis of consolidation
The group accounts comprised a consolidation of the accounts of
the parent company and all its subsidiary undertakings. A
dormant subsidiary undertaking has been excluded on the grounds
that the amounts involved are not significant. Intra-group
profits are eliminated on consolidation. Profits and losses of
companies entering or leaving the group are included from the
date of acquisition or up to the date of disposal. The net
assets of subsidiaries acquired are included on the basis of
their fair value at the date of acquisition, being the earlier
of the date consideration passes or an offer is declared
unconditional.
1.11 Research and development
Research and development expenditure is charged to the profit
and loss account in the year in which it is incurred.
1.12 Goodwill
Acquired goodwill, including goodwill relating to the
acquisition of subsidiary and associated undertakings, is
charged directly against reserves.
1.13 Foreign currency translation
Monetary assets and liabilities denominated in foreign
currencies are translated into sterling at rates of exchange
ruling at the accounting date. Transactions in foreign
currencies are recorded at an average rate ruling for the year.
All differences are taken to profit and loss account.
2. Turnover
The turnover of the group for the year has been derived from
its principal activity.
The directors consider the disclosure of turnover by activity
and geographical area to be detrimental to the group.
3. Operating Profit 1995 1995
'000 '000
Operating profit is stated after charging: Pounds Pounds
Auditors' remuneration 48.0 23.5
Hire of plant and machinery 12.7 15.9
Operating lease rentals
- Plant and machinery 78.3 46.4
- Land and buildings 126.0 123.4
Depreciation of tangible assets 202.0 224.4
Research and development 305.6
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
1995 1995
'000 '000
4. Income from Investments Pounds Pounds
Bank interest receivable 4.5 0.3
1995 1995
'000 '000
5. Interest Payable Pounds Pounds
On bank loans and overdrafts and other
loans wholly repayable within five years 174.0 85.8
On other loans repayable after five years 111.4 110.9
Finance leases and hire purchase contracts 8.8 8.0
Other interest 1.6
295.8 204.7
1995 1994
'000 '000
6. Taxation Pounds Pounds
Group
U.K. Current year taxation
U.K. Corporation tax at 33% (1994:33%) 475.3 (217.2)
Prior years 18.5
493.8 (217.2)
1995 1994
7. Results of the Year Attributable to '000 '000
Members of Pro-Bel Limited Pounds Pounds
Dealt with in the accounts of the holding
company 713.3 442.2
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
8. Tangible Assets
Leasehold
Fixtures, Premium &
Freehold Motor Fittings & Improve-
Property Vehicles Equipment ments Total
'000 '000 '000 '000 '000
Pounds Pounds Pounds Pounds Pounds
Group
Cost or Valuation
1 November 1994 1,400.0 57.7 2,799.7 138.5 4,395.9
Additions 35.0 340.6 375.6
Disposals (41.0) (41.0)
31 October 1995 1,400.0 51.7 3,140.3 138.5 4,730.5
Depreciation
1 November 1994 57.7 2,590.7 138.5 2,786.9
Charge for year 8.9 198.0 206.9
Disposals (41.0) (41.0)
31 October 1995 25.6 2,788.7 138.5 2,952.8
Net book values 1,400.0 26.1 351.6 1,777.7
31 October 1995
31 October 1994 1,400.00 209.0 1,610.7
Included within fixed assets are motor vehicles and equipment
with a net book value of 124,881 British pounds (1994: 51,173
British pounds) which are being financed under hire purchase
agreements, the depreciation of which amounted to 41,626 British
pounds (1994: 55,564 British pounds).
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
8. Tangible Assets (continued)
Leasehold
Fixtures, premium &
Freehold Motor Fittings & Improve-
Property Vehicles Equipment ments Total
'000 '000 '000 '000 '000
Pounds Pounds Pounds Pounds Pounds
Company
Cost or Valuation
1 November 1994 1,400.0 16.6 2,557.4 135.0 4,109.0
Additions 9.5 149.4 158.9
31 October 1995 1,400.0 26.1 2,706.8 135.0 4,267.9
Depreciation
1 November 1994 16.6 2,417.9 135.0 2,569.5
Charge for year 2.6 122.9 125.5
31 October 1995 19.2 2,540.8 135.0 2,695.0
Net book values
31 October 1995 1,400.0 6.9 166.0 1,572.9
31 October 1994 1,400.0 139.5 1,539.5
Included within fixed assets are motor vehicles and equipment
with a net book value of 105,751 British pounds (1994: 51,173
British pounds which are being financed under hire purchase
agreements, the depreciation of which amounted to 35,250 British
pounds (1994: 55,564 British pounds).
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
9. Fixed Asset Investments 1995 1994
'000 '000
Pounds Pounds
Subsidiary undertakings 192.0 178.7
Investment in subsidiary undertakings Shares
'000
Pounds
Cost
1 November 1994 178.7
Additions 15.0
31 October 1995 193.7
Provisions for diminution in value
Movement 1.7
31 October 1995 1.7
Net Book Value
31 October 1995 192.0
31 October 1994 178.7
In the opinion of the directors the aggregate value of the
company's investment in subsidiary undertakings is not less
than the amount included in the company balance sheet.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
9. Fixed Asset Investments (continued)
Holdings of more than 10%
The company holds more than 10% of the share capital of the
following companies:
COMPANY
SUBSIDIARY UNDERTAKINGS
COUNTRY OF REGISTRATION SHARES HELD
OR INCORPORATION CLASS % NATURE OF BUSINESS
Trading companies
Cadniques Ltd.
England and Wales Ordinary 100.00 PCB design
Trilogy Broadcast Ltd.
England and Wales Ordinary 75.00 Manufacturing of
broadcast
equipment
Pro-Bel Enterprises Ltd.
England and Wales Ordinary 100.00 Management
services
Pro-Bel Software Ltd.
England and Wales Ordinary 100.00 Software design
Xebec Electronic Production Services Ltd.
England and Wales Ordinary 100.00 PCB production
Pro-Bel Incorporated
United States of America Common Stock 100.00 Sale of Broadcast
equipment
Dormant companies
Pro-Bel Developments Ltd.
England and Wales Ordinary 87.65
(not included within the consolidation)
The country of registration or incorporation is also the
principal area of operation for each of the above group
undertakings.
10. Stock and Work in Progress
Group Company
1995 1994 1995 1994
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Raw materials and consumables 1,269.5 1,070.5 939.9 799.0
Work in progress 855.3 857.9 789.3 798.7
Finished goods and goods for
resale 1,193.0 1,245.9 1,055.8 968.5
3,317.8 3,174.3 2,785.0 2,566.2
11. Debtors
Group Company
1995 1994 1995 1994
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Trade debtors 5,388.9 2,433.1 3,854.7 1,991.7
Amounts owed by group
undertakings 1,672.7 1,284.0
Other debtors 272.6 267.7 209.1 190.3
Prepayments and accrued
income 80.6 122.8 54.8 116.2
Corporation tax 1.9 1.9
5,744.0 2,825.5 5,791.3 3,582.2
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
12. Creditors
Group Company
1995 1994 1995 1994
'000 '000 '000 '000
Note Pounds Pounds Pounds Pounds
Amounts falling due
within one year
Loans 14 848.2 184.7 848.2 184.7
Bank overdrafts 13 1,096.0 790.8 785.6 637.6
Amounts owed to group
undertakings 16.0
Payments received on
account 147.2 200.4 43.9 200.4
Trade creditors 2,395.3 1,901.3 1,948.0 1,625.2
Corporation tax 456.9 216.5 401.2 186.8
Other taxes and social
security 243.6 71.9 63.4 65.2
Other creditors 108.4 50.5
Accruals and deferred
income 788.7 226.0 632.8 198.9
Net obligations under
finance
leases and hire
purchase contracts 49.8 21.3 44.1 21.3
6,025.7 3,721.3 4,783.2 3,170.6
Amounts falling due
after more than one
year
Loans 14 1,251.9 1,298.3 1,251.9 1,298.3
Finance leases 77.0 67.1
Convertible unsecured
loan stock 14 594.6 433.0 594.6 433.0
1,923.5 1,731.3 1,913.6 1,731.3
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
12. Creditors (continued)
Obligations under finance leases and hire purchase contracts
are repayable over varying periods by monthly installments as
follows:
1995 1994
'000 '000
Pounds Pounds
Group
Repayable within one year 61.8 21.8
Repayable between one and five years 84.2
Repayable after more than five years
Finance charges and interest allocated
to future accounting periods (19.2) (0.5)
126.8 21.3
Included in current liabilities (49.8) (21.3)
77.0
Company
Repayable within one year 53.7 21.8
Repayable between one and five years 72.4
Repayable after more than five years
126.1 21.8
Finance charges and interest allocated
to future accounting periods (14.9) (0.5)
Included in current liabilities 111.2 21.3
(44.1) (21.3)
67.1
13. Bank Loans and Overdrafts
Group and Company
The bank overdraft is secured by a fixed and floating charge
over the assets of the company. The company is also party to
a composite account guarantee with other group companies.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
14. Loans
Group Company
1995 1994 1995 1994
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Not wholly repayable within
five years by installments:
Commercial mortgage 1,300.7 1,333.0 1,300.7 1,333.0
Wholly repayable within five
years 799.4 150.0 799.4 150.0
2,100.1 1,483.0 2,100.1 1,483.0
Included in current
liabilities (848.2) (184.7) (848.2) (184.7)
1,251.9 1,298.3 1,251.9 1,298.3
Wholly repayable within five
years:
Company pension fund 179.4 150.0 179.4 150.0
Bank loans 620.0 620.0
799.4 150.0 799.4 150.0
The company pension fund loan bears interest at current market
rates, is unsecured, and repayable on demand.
The commercial mortgage with Barclays Bank plc is secured by a
first legal charge over the freehold land at Cutbush Lane, Lower
Earley, Reading, Berkshire. The loan bears interest at 2% over
base rate and is repayable in quarterly installments over a period
of 20 years.
At the balance sheet date, the company had issued 594,600 British
pounds of cumulative unsecured convertible loan stock with
interest payable thereon at the rate of 10% p.a. gross. This
loan stock is convertible at the request of the holder at the
rate of 87.5 pence for each 25p ordinary share, on 30 September
in any year from 1995 to 1998, any loan stock still in issue on
30 September 1999 will be repaid at par.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
15. Provisions for Liabilities and Charges
Deferred tax is provided at 33% (1994: 33%) analyzed over the
following timing differences.
1995 1994
Potential Potential
liability/ liability/
Provision (asset) Provision (asset)
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Group
Corporation tax
deferred by:
Accelerated capital
allowances 89.5 57.3
Other timing
differences (125.9) (41.6)
(36.4) 15.7
Company
Corporation tax
deferred by:
Accelerated capital
allowances 101.2 75.4
Other timing
differences (117.2) (40.1)
(16.0) 35.3
Deferred taxation has not be included in the accounts on the
basis that no material liability or (asset) is likely to
crystallize in the foreseeable future.
16. Pension Costs
The company operates a non-contributory defined benefit pension
scheme covering its permanent employees. The scheme funds are
administered by trustees and are independent of the company's
finances. The scheme is fully funded and contributions are
paid to the scheme in accordance with the recommendations of
independent actuaries. The contributions are determined by a
qualified actuary on the basis of triennial valuations using
the projected unit method. The most recent valuation was at 1
September 1994. The assumptions which have the most
significant effect on the results of the valuation are those
relating to the rate of return on investments and the rate of
increase in salaries and pensions. It was assumed that the
investments returns would exceed salary increases by an average
of 1% per annum and that present and future pensions would
increase at the rate of 5% per annum.
The actuarial valuation showed that the market value of the
scheme's assets a 1 September 1994 was 3.465M British pounds
and that the actuarial value of these assets represented
101.56% of the benefits that had accrued to members after
allowing for expected future increases in earnings. The
recommended future contributions of the company are 15% per
annum.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
17. Share Capital
1995 1994
No. No.
Authorised
4,000,000 Ordinary shares of 25p each 4,000,000 4,000,000
Allotted, called up and fully paid
3,224,300 Ordinary shares of 25p each 3,224,300 3,201,100
During the year 23,200 ordinary shares of 25p each were
allotted and fully paid at a premium for cash consideration to
provide additional working capital.
18. Reserves
Retained Revaluation Share
profit reserve premium Total
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Group
1 November 1994 1,510.7 259.9 0.3 1,770.9
Prior year adjustment (144.9) (144.9)
Balance brought forward
as restated 1,365.8 259.9 0.3 1,626.0
Movement for the year 614.1 4.2 618.3
Goodwill on consolidation
written off (35.0) (35.0)
31 October 1995 1,944.9 259.9 4.5 2,209.3
Prior Year Adjustment
The prior year adjustment relates to the previous consolidation
of Pro-Bel Developments Limited, which ceased to trade during
the year ended 31 October 1993.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
18. Reserves (continued)
Retained Revaluation Share
profit reserve premium Total
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Company
1 November 1994 1,970.6 259.9 0.3 2,230.8
Movements for the year 726.5 4.2 730.7
31 October 1995 2,967.1 259.9 4.5 2,961.5
Share premium
During the year the company issued 23,200 shares at a premium
of 18.1p each.
Revaluation reserve
The freehold property at Cutbush Lane, Lower Early was revalued
by the directors after seeking professional advice at 1,400,000
British pounds during the year ended 31 October 1993. The
deficit then arising was debited to the revaluation reserve.
19. Reconciliation of Movements in Shareholders' Funds
1995 1994
'000 '000
Pounds Pounds
Group
Profit for the year 614.1 323.1
Goodwill on consolidation written off (35.0)
Proceeds of issue of equity shares 10.0
Opening shareholders' funds
(as restated - note 18) 2,426.2 2,103.1
Closing shareholders' funds 3,015.3 2,426.2
Company
Profit for the financial year 726.6 442.2
Proceeds of issue of equity shares 10.0
Opening shareholders' funds 3,031.0 2,588.8
Closing shareholders' funds 3,767.6 3,031.0
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
20. Capital Commitments and Contingent Liabilities
Details of capital commitments at the accounting date are
as follows:
1995 1994
'000 '000
Pounds Pounds
Authorised but not contracted for 100.0
At the balance sheet date, expenditure had been authorised in
relation to the development of new products.
There is a bank guarantee of 60,000 British pounds to H.M.
Customs & Excise.
21. Guarantees and other Financial Commitments
Financial commitments under non-cancelable operating leases
will result in the following payments falling due in the
year to 31 October 1995:
1995 1994
Land and Land and
buildings Other buildings Other
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Group
Expiring:
Within one year 11.4 7.2
Within one to five years 0.4 61.2
After five years 131.9 139.9
143.7 68.4 139.9
Company
Expiring:
Within one year 6.7
Within one to five years 36.2
After five years 111.8 111.8
111.8 42.9 111.8
The company has provided a guarantee to the value of 50,000
British pounds in respect of the banking facilities of
Trilogy Broadcast Limited.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
22. Directors' Interests
Messrs. Wilson, Owen, Steel, Pitman, Roe and Hartman hold
collectively a controlling interest in Anna Valley Electronics
Limited. In addition, R.W. Hartman holds a controlling
interest in The Nosebag Restaurant Limited. Any transactions
during the year with these companies have been carried out on
a normal commercial basis.
During the year, the company purchased services from
"Interregnum Venture Marketing Limited", a strategic marketing
organisation in which K. Olisa has an interest. This contract
was negotiated on a normal commercial basis.
23. Directors and Employees
Total group staff costs, including directors' emoluments
1995 1994
'000 '000
Pounds Pounds
Wages and salaries 2,717.6 2,642.5
Social security costs 332.0 241.4
Other pension costs 23.6 8.9
Medical insurance 20.0
Compensation for loss of office 54.5
3,073.2 2,967.3
Average number employed by the
group, including executive
directors Number Number
Management and administration 80 92
Development 51 14
Manufacturing 57 36
188 142
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1995
24. Parent Company Directors
1995 1994
'000 '000
Pounds Pounds
Emoluments
As executives 341.7 311.5
As directors 1.3
343.0 311.5
Emoluments, excluding pension contributions
Chairman 50.3 44.0
Highest paid director 60.4 54.9
Other directors Number Number
0 pounds - 5,000 pounds 2 1
10,001 pounds - 15,000 pounds
50,001 pounds - 55,000 pounds 4
55,001 pounds - 60,000 pounds 4
<PAGE>
PRO-BEL LIMITED
DIRECTORS' REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
COMPANY NO. 1316843 (England and Wales)
<PAGE>
PRO-BEL LIMITED
COMPANY INFORMATION
Directors R.W. Hartman (Chairman)
J.F.G. Wilson
D. Owen
D.K. Steel
G.M. Pitman
G.D. Roe
I.R. Henderson
Secretary R.W. Hartman
Company Number 1316843 (England and Wales)
Registered Office 22, Manor Road
South Hinksey
Oxford
OX1 5AS
Auditors Bronsens
Chartered Accountants
26, Beaumont Street
Oxford
OX1 2NP
Business Address Danehill
Lower Earley
Reading
Berkshire
RG6 4PB
Bankers Barclays Bank plc
Oxford City Office (Old Bank)
P.O. Box 333
Oxford
OX1 3HS
Solicitors Charles Russell
Killowen House
Bayshill Road
Cheltenham
GL50 3AW
<PAGE>
PRO-BEL LIMITED
CONTENTS
Page
Chairman's Statement 1
Directors' Report 2 - 3
Statement of Directors' Responsibilities 4
Auditors' Report 5
Group Profit and Loss Account 6
Group Balance Sheet 7
Company Balance Sheet 8
Group Cash Flow Statement 9 - 10
Notes to the Financial Statements 11 - 24
<PAGE>
PRO-BEL LIMITED
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 OCTOBER 1994
I am pleased to be able to report that the year to 31 October
1994 saw the Group return to profit with a pre-tax profit of
547,000 British pounds against last year's loss of 111,000
British pounds achieved on turnover up marginally from
11,344,000 British pounds to 11,669,000 British pounds. It is
good to be in profit after two years of losses but, that said,
there is still much to do both to improve profit margins and to
ensure that the Group remains cash generative.
Once again Pro-Bel Limited, the main company in the Group,
provided the bulk of turnover and profit. Its profit increased
from 473,000 British pounds to 673,000 British pounds, a marked
improvement but less good than we had hoped with margins coming
under pressure in the second half of the year.
As forecast last year, Trilogy Broadcast Limited showed a
substantial increase in turnover from 864,000 British pounds to
1,456,000 British pounds and turned last year's loss of 198,000
British pounds into a profit of 70,000 British pounds.
Improvements to the company's Master range of test equipment
have improved its strength in its niche market and the
Commander talkback system, despite some teething problems, has
achieved significant and improving market penetration.
Substantial further growth both in sales and profits are
anticipated for 1994/95.
While the expansion of Procion ICS sales was less rapid than
had been hoped, sales of 344,000 British pounds represented a
substantial advance on the previous year's 75,000 British
pounds and the loss was reduced from 199,000 British pounds to
43,000 British pounds.
The cost base has been contained and new management appointed
to the Group's US marketing subsidiary, Pro-Bel Inc. Sales
have, however, remained disappointing and this company
continues to suffer losses. Its position is kept under careful
and regular review.
In line with the clear objective of reducing dependence on
short term finance, the directors made an offer to shareholders
and a limited number of private investors of 700,000 British
pounds Convertible Unsecured Loan Stock. On their behalf I
would like to express our gratitude for the support received
from staff, distributors and friends towards making this issue
a success.
During the year it became apparent that the technologies being
developed by Pro-Bel Limited's software department to provide
large scale highly customised automation systems were
converging with those being used by Procion ICS for its smaller
software control tools, and it was decided to merge the two
software teams under the corporate name Pro-Bel Software
Limited while retaining the Procion brand name. Pro-Bel
Software Limited enters 1994/95 with the launch of Compass - a
standardised high level automation system based on custom work
undertaken for Scottish Television and Yorkshire Television.
We believe that this product has outstanding prospects.
To complement Compass, Pro-Bel Limited has developed the TX220
- standard Master Control Switcher, also based on customised
work undertaken for major UK television companies which
maintains its product portfolio at the forefront of broadcast
technology. We believe that Compass and the TX220 give the two
Pro-Bel companies an edge and the prospect of a good 1994/95.
At the moment the broadcasting industry is buoyant worldwide
and the company has recently won major orders in Germany,
Spain, mainland China and Malaysia. The excitement of a strong
order book and a very high level of enquiries is tempered by
continuing pressure on margins and costs. We anticipate a good
and improved result for 1994/95 but it is one that will only be
achieved through a great deal of hard work and determination.
In that context and on behalf of all the directors, I express
heartfelt thanks to staff who have shown great dedication and
loyalty.
Ray Hartman
Chairman
<PAGE>
PRO-BEL LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 OCTOBER 1994
The directors present their report and the financial statements
for the year ended 31 October 1994.
Principal Activities
The principal activity of the group was that of the
manufacturing and distribution of equipment for the
professional broadcasting industry.
Result and Dividends
The results for the year are set out on page 6. It is proposed
that the group profit for the year is transferred to reserve.
The directors do not recommend the payment of a dividend.
Fixed Assets
Details of the movements in fixed assets during the year are
set out in notes 8 and 9 to the financial statements.
Market Value of Land and Buildings
The freehold property was revalued in 1993 by the directors
after seeking professional advice at a value of 1,400,000
British pounds.
Research and Development
All research and development costs are charged to the profit
and loss account in the year in which they are incurred.
Directors and their Interests
The directors who served during the year and details of their
interest in the company were as stated below.
Convertible Number of Ordinary
Loan Stock 25p shares
1994 1994 1993
Pounds Pounds Pounds
R.W. Hartman 55,000 960,000 960,000
J.F.G. Wilson 240,000 240,000
D. Owen 10,000 240,000 240,000
D.K. Steel 240,000 240,000
G.M. Pitman 240,000 240,000
G.D. Roe 10,000 240,000 240,000
I.R. Henderson 5,000
<PAGE>
Under an Executive Share Option Scheme, Messrs. Owen, Steel,
Pitman, Roe and Henderson were granted options to subscribe for
ordinary shares of 25p each in the company. The option is
exercisable at any time after 31 October 1989, but before 31
May 2001, at the price of fifty pence per share.
Refer to note 14 to the financial statements relating to
conversion of convertible loan stock.
Messrs. Wilson, Steel and Pitman have each subscribed to 10,000
British pounds of convertible loan stock since the balance
sheet date.
<PAGE>
PRO-BEL LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 OCTOBER 1994
Auditors
In accordance with Section 385 of the Companies Act 1985, a
resolution proposing that Bronsens be reappointed as auditors
of the company will be put to the Annual General Meeting.
This report was approved by the Board on 28, March 1995.
Secretary
<PAGE>
PRO-BEL LIMITED
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare financial
statements for each financial year which give a true and fair
view of the state of the affairs of the company and of the
profit or loss of the company for that period. In preparing
those financial statements, the directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and
prudent;
- prepare the financial statements of the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the company and to enable them to ensure
that the financial statements comply with the Companies Act
1985. They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
<PAGE>
PRO-BEL LIMITED
AUDITORS' REPORT
TO THE SHAREHOLDERS OF PRO-BEL LIMITED
We have audited the financial statements on pages 6 to 24,
which have been prepared under the historical cost convention
as modified by the revaluation of certain fixed assets and the
accounting policies set out on page 11 and 12.
Respective responsibilities of directors and auditors
As described on page 4 the company's directors are responsible
for the preparation of financial statements. It is our
responsibility to form an independent opinion, based on our
audit, on those statements and to report our opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards
issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the
financial statements, and of whether the accounting policies
are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion the financial statements give a true and fair
view of the state of the company's and group's affairs as at 31
October 1994 and of their profit for the period then ended and
have been properly prepared in accordance with the Companies
Act 1985.
BRONSENS
Chartered Accountants Date: 29 March 1995
Registered Auditors
26, Beaumont Street
Oxford
OX1 2NP
NOTE: These financial statements have been prepared in
accordance with the Companies Act 1895 of the United
Kingdom, and are in pounds sterling.<PAGE>
PRO-BEL LIMITED
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 1994
1994 1993
'000 '000
Note Pounds Pounds
Turnover 2 11,668.9 11,342.2
Cost of Sales (6,222.8) (6,238.7)
Gross Profit 5,446.1 5,103.5
Administrative expenses (4,693.9) (4,930.4)
Operating Profit 3 752.2 173.1
Investment income 4 0.3
Interest payable and similar charges 5 (204.7) (284.0)
Group Profit/(Loss) on Ordinary
Activities before taxation 547.8 (110.9)
Tax on profit on ordinary activities 6 (217.2) (7.1)
Group Profit/(Loss) on Ordinary
Activities after Taxation 330.6 (118.0)
(Profit)/Loss attributable to minority
interests (7.5) 44.5
Profit/(Loss) Attributable to the
Holding Company 7 323.1 (73.5)
Dividends
Retained Profit/(Loss) for the year 18 323.1 (73.5)
Statement of Total Recognized Gains and
Losses
Profit/(loss) for the financial year 323.1 (73.5)
Unrealized loss on revaluation of
properties (1,150.5)
Total profits/losses recognized since
last annual report 323.1 (1,224.0)
<PAGE>
PRO-BEL LIMITED
GROUP BALANCE SHEET
AS AT 31 OCTOBER 1994
1994 1993
'000 '000 '000 '000
Note Pounds Pounds Pounds Pounds
Fixed Assets
Tangible assets 8 1,610.7 1,762.1
Current Assets
Stocks 10 3,174.3 2,984.4
Debtors 11 2,825.5 2,932.9
Cash at bank and
in hand 251.4 89.5
6,251.2 6,006.8
Creditors: amounts
falling due within
one year 12 (3,721.3) (3,874.4)
Net Current Assets 2,529.9 2,132.4
Total Assets less
Current liabilities 4,140.6 3,894.5
Creditors: amounts
falling due after
more than one year 12&14 (1,731.3) (1,815.8)
Minority interest 161.8 169.3
2,571.1 2,248.0
Capital and Reserves
Called up shares
capital 17 800.2 800.2
Reserves 18 1,770.9 1,447.8
Shareholders' Funds 19 2,571.1 2,248.0
<PAGE>
PRO-BEL LIMITED
COMPANY BALANCE SHEET
AS AT 31 OCTOBER 1994
1994 1993
'000 '000 '000 '000
Note Pounds Pounds Pounds Pounds
Fixed Assets
Tangible assets 8 1,539.6 1,651.2
Investments 9 178.7 118.7
1,718.3 1,769.9
Current Assets
Stocks 10 2,566.2 2,545.0
Debtors 11 3,582.2 3,355.2
Cash at bank and
in hand 66.3 12.8
6,214.7 5,913.0
Creditors: amounts
falling due within
one year 12 (3,170.7) (3,278.3)
Net Current Assets 3,044.0 2,634.7
Total Assets
less Current
Liabilities 4,762.3 4,404.6
Creditors: amounts
falling due after
more than one year 12&14 (1,731.3) (1,815.8)
3,031.0 2,588.8
Capital and Reserves
Called up shares
capital 17 800.2 800.2
Profit and loss
account 18 2,230.8 1,788.6
Shareholders' Funds 19 3,031.0 2,588.8
<PAGE>
PRO-BEL LIMITED
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 OCTOBER 1994
1994 1993
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Net cash (out)/inflow from
operating activities 1,289.7 (299.6)
Returns on investment and
servicing of finance
Interest received 0.3
Interest paid (175.7) (274.0)
Interest element of finance
lease payments (8.0)
Net cash outflow from returns on
investment and servicing of
finance (183.4) (274.0)
Taxation
U.K. corporation tax and A.C.T.
paid (4.3) (3.0)
U.K. corporation tax refunded 168.7
Investing activities (4.3) 165.7
Purchase of tangible fixed assets (89.6) (151.6)
Sale of plant and machinery 22.7 21.6
Net cash outflow from investing
activities (66.9) (130.0)
Net cash in/(outflow) before
financing 1,035.1 (537.9)
Financing
Increase in long term loans 433.0
Repayment of long term loans (461.6) (117.3)
Capital element of finance lease
payments (81.0) (85.4)
Net cash outflow from financing (109.6) (202.7)
In/(decrease) in cash and cash
equivalents 925.5 (740.6)
<PAGE>
PRO-BEL LIMITED
NOTES TO THE CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 OCTOBER 1994
1994 1993
Reconciliation of operating profit to '000 '000
net cash inflow from operating activities Pounds Pounds
Operating profit 752.2 163.1
Depreciation charges 224.4 303.9
Profit on sales of fixed assets (6.1) (7.4)
Increase in stocks (189.9) (25.1)
Decrease/(increase) in debtors 118.9 (297.1)
Increase/(decrease) in creditors 388.7 (447.5)
Exceptional items 10.5
Exchange differences 1.5
1,289.7 (299.6)
Short-term Long-term Finance
loans loans lease Total
'000 '000 '000 '000
Change in financing Pounds Pounds Pounds Pounds
31.10.93 150.0 1,794.5 102.3 2,046.8
Issue of convertible
loan stock 433.0 433.0
Cash outflows (461.6) (81.0) (542.6)
31.10.94 150.0 1,765.9 21.3 1,937.2
Cash and cash equivalents
Cash at
bank and Bank
in hand overdraft Total
'000 '000 '000
Pounds Pounds Pounds
31.10.93 89.5 (1,554.4)(1,464.9)
Net Cash 161.9 763.6 925.5
31.10.94 251.4 (790.8) (539.4)
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
1. Accounting Policies
1.1 Accounting convention
The financial statements are prepared under the historical cost
convention modified to include the revaluation of freehold land
and buildings, and include the results of the company's
operations as indicated in the directors' report, all of which
are continuing.
1.2 Compliance with and departure from accounting standards
The company has not complied with Statement of Standards
Accounting Practice No. 12 or Companies Act 1985 by not
depreciating the freehold property on the basis that it has
been revalued.
1.3 Turnover
Turnover represents amounts receivable for goods and services
provided by the group both in the UK and overseas net of VAT
and trade discounts.
1.4 Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less depreciation.
Depreciation is provided at rates calculated to write off the
cost less estimated residual value of each asset over its
expected useful life, as follows:
Lease premium - 25% Straight line
Leasehold improvements - 25% Straight line
Fixtures, fittings and equipment - 25% Straight line
Motor vehicles - 33 1/3% Straight line
1.5 Leasing and hire purchase commitments
Rentals payable under operating leases are charged against
income on a straight line basis over the lease term.
Assets obtained under hire purchase contracts and finance
leases are capitalized as tangible assets and depreciation in
accordance with the policy stated above. Obligations under
such agreements are included in creditors net of finance
charges allocated to future periods. The finance element of
the rental payments is charged to the profit and loss accounts
so as to produce a constant periodic rate of charge on the net
obligation outstanding in each period.
1.6 Investments
Fixed assets investments are stated at cost less provision for
diminution in value.
1.7 Stock and work in progress
Stock and work in progress are valued at the lower of cost and
net realizable value.
<PAGE>
1.8 Pensions
The pension costs charged in the financial statements represent
the contributions payable by the company during the year in
accordance with SSAP 24.
1.9 Deferred taxation
Provision is made for deferred taxation using the liability
method to take account of timing differences between the
incidence of income and expenditure for taxation and accounting
purposes except to the extent that the directors consider that
a liability to taxation is unlikely to crystallize.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
1. Accounting Policies (continued)
1.10 Basis of consolidation
The group accounts consolidate the accounts of the company and
its subsidiary undertakings. Intra-group profits are
eliminated on consolidation. Profits and losses of companies
entering or leaving the group are included from the date of
acquisition or up to the date of disposal. The net assets of
subsidiaries acquired are included on the basis of their fair
value at the date of acquisition, being the earlier of the date
consideration passes or an offer is declared unconditional.
1.11 Research and development
Research and development expenditure is charged to the profit
and loss account in the year in which it is incurred.
1.12 Goodwill
Purchased goodwill, including goodwill relating to the
acquisition of subsidiary and associated undertakings, is set-
off directly against reserves.
1.13 Foreign currency translation
Monetary assets and liabilities denominated in foreign
currencies are translated into sterling at the rates of
exchange ruling at the accounting date. Transactions in
foreign currencies are recorded at the rate ruling at the date
of the transaction. All differences are taken to profit and
loss account.
2. Turnover
The directors consider the disclosure of turnover by activity
and geographical area to be detrimental to the company.
3. Operating Profit
Operating profit is stated after charging:
1994 1993
'000 '000
Pounds Pounds
Auditors' remuneration 23.5 28.2
Hire of plant and machinery 15.9
Operating lease rentals
- Plan and machinery 46.4 127.7
- Land and buildings 123.4 147.9
Depreciation of tangible assets 224.4 303.9
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
4. Income from Investments
1994 1993
'000 '000
Pounds Pounds
Income from fixed asset investment
Interest receivable 0.3
0.3
5. Interest Payable 1994 1993
'000 '000
Pounds Pounds
Our bank loans and overdrafts and
other loans wholly repayable
within five years 85.8 104.6
On other loans repayable after
five years 110.9 161.7
Finance leases and hire purchase
contracts 8.0 17.7
Other interest
204.7 284.0
6. Taxation 1994 1993
'000 '000
Pounds Pounds
Group
U.K. Current year taxation
U.K. Corporation tax at 33%
(1993: 25%) (217.2) (7.2)
Prior years 0.1
(217.2) (7.1)
7. Results of the Year 1994 1993
Attributable to Members of '000 '000
Probel Limited Pounds Pounds
Dealt with in the accounts of the 442.2 350.4
holding company
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
8. Tangible Assets
Leasehold &
Fixtures, premium &
Freehold Motor fittings & improve-
property vehicles equipment ments Total
'000 '000 '000 '000 '000
Pounds Pounds Pounds Pounds Pounds
Group
Cost
1 November 1993 1,400.0 71.2 2,777.7 138.5 4,387.4
Additions 89.6 89.6
Disposals (13.5) (70.8) (84.3)
Adjustment in
revaluation
31 October 1994 1,400.0 57.7 2,796.5 138.5 4,392.7
Depreciation
1 November 1993 62.7 2,424.1 138.5 2,625.3
Charge for year 8.5 215.9 224.4
Disposals (13.5) (54.2) (67.7)
31 October 1994 57.7 2,585.8 138.5 2,782.0
Net book values
31 October 1994 1,400.0 210.7 1,610.7
31 October 1993 1,400.0 8.5 353.6 1,762.1
Included within fixed assets are motor vehicles and equipment
with a net book value of 51,173 British pounds (1993: 106,737
British pounds) which are being financed under hire purchase
agreements, the depreciation of which amounted to 55,564 British
pounds (1993: 55,565 British pounds).
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
8. Tangible Assets (continued)
Leasehold &
Fixtures, premium &
Freehold Motor fittings & improve
property vehicles equipment ments Total
'000 '000 '000 '000 '000
Pounds Pounds Pounds Pounds Pounds
Group
Cost
1 November 1993 1,400.0 30.1 2,502.2 135.0 4,067.3
Additions 55.5 55.5
Disposals (13.5) (5.0) (18.5)
Adjustment in
revaluation
31 October 1994 1,400.0 16.6 2,552.7 135.0 4,104.0
Depreciation
1 November 1993 25.8 2.255.3 135.0 2,416.1
Charge for year 4.3 162.8 167.1
Disposals (13.5) (5.0) (18.5)
31 October 1994 16.6 2,413.1 135.0 2,564.5
Net book values
31 October 1994 1,400.0 139.6 1,539.6
31 October 1993 1,400.0 4.3 246.9 1,651.2
Included within fixed assets are motor vehicles and equipment
with a net book value of 51,173 British pounds (1993: 106,737
British pounds) which are being financed under hire purchase
agreements, the depreciation of which amounted to 55,564 British
pounds (1993: 55,565 British pounds).
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
9. Fixed Asset Investments 1994 1993
'000 '000
Pounds Pounds
Subsidiary undertakings 178.7 118.7
Investment in subsidiary undertakings Shares
'000
Pounds
Cost
1 November 1993 118.7
Additions 60.0
31 October 1994 178.7
Net Book Values
31 October 1994 178.7
31 October 1993 118.7
In the opinion of the directors the aggregate value of the
company's investment in subsidiary undertakings is not less
than the amount included in the company balance sheet.
Holdings of more than 10%
The company holds more than 10% of the share capital of the
following companies:
Company
Subsidiary undertakings
Country of registration Shares held
or incorporation Class %
Trading Companies
Cadniques Ltd.
England and Wales Ordinary 100.00
Trilogy Broadcast Ltd.
England and Wales Ordinary 75.00
Pro-Bel Enterprises Ltd.
England and Wales Ordinary 100.00
Procion Innovative Control
Solutions Ltd.
England and Wales Ordinary 90.00
Pro-Bel Incorporated
United States of America Common Stock 100.00
Dormant companies
Pro-Bel Developments Ltd.
England and Wales Ordinary 87.65
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
10. Stock and Work in Progress
Group Company
1994 1993 1994 1993
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Raw materials and
consumables 1,070.5 791.9 799.0 607.4
Work in progress 857.9 1,387.5 798.7 1,342.5
Finished goods and goods
for resale 1,245.9 805.0 968.5 595.1
3,174.3 2,984.4 2,566.2 2,545.0
11. Debtors
Group Company
1994 1993 1994 1993
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Trade debtors 2,433.1 2,671.5 1,991.7 2,101.0
Amounts owed by group
undertakings 1,284.0 1,055.1
Other debtors 269.6 133.1 190.3 88.7
Prepayments and accrued
income 122.8 125.3 116.2 107.4
Corporation tax 3.0 3.0
2,825.5 2,932.9 3,582.2 3,355.2
Included in the group trade debtors is an amount of 14,102
British pounds which is recoverable in more than one year.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
12. Creditors
Group Company
1994 1993 1994 1993
'000 '000 '000 '000
Notes Pounds Pounds Pounds Pounds
Amounts falling due
within one year
Loans 14 184.6 150.0 184.6 150.0
Bank overdrafts 13 790.8 1,554.4 637.6 1,421.7
Amounts owed to group
undertakings 3.8
Payment received on
accounts 200.4 465.2 200.4 452.6
Trade creditors 1,901.3 1,246.6 1,625.2 889.3
Corporation tax 216.5 7.0 186.8 7.0
Other taxes and social
security 71.9 113.2 65.2 107.0
Other creditors 108.4 88.7 50.5 0.5
Accruals and deferred
income 226.1 168.3 199.1 165.4
Net obligations under
finance leases and hire
purchase contracts 21.3 81.0 21.3 81.0
3,721.3 3,874.4 3,170.7 3,278.3
Amounts falling due after
more than one year
Loans 14 1,731.3 1,815.8 1,731.3 1,815.8
Obligations under finance leases and hire purchase contracts
are repayable over varying periods by monthly installments
as follows:
1994 1993
'000 '000
Pounds Pounds
Group
In the next year 21.3 81.0
In the second to fifth year 21.3
After the fifth year
Company
In the next year 21.3 81.0
In the second to fifth year 21.3
After the fifth year
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
13. Bank Loans and Overdrafts
Group and Company
The bank overdraft is secured by a fixed and floating charge
over the assets of the company. The company is also party to
a composite account guarantee with other group companies.
14. Loans
Group Company
1994 1993 1994 1993
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
The aggregate amounts of
loans and bank overdrafts
were as follows:
Falling due within one year:
Company pension fund 150.0 150.0 150.0 150.0
Bank loan 34.6 34.6
Finance leases 21.3 81.0 21.3 81.0
205.9 231.0 205.9 231.0
Falling due after more
than one year:
Bank loan 1,298.3 1,794.5 1,298.3 1,794.5
Loan stock 433.0 433.0
Finance leases 21.3 21.3
1,731.3 1,815.8 1,731.3 1,815.8
The company pension fund loan bears interest at current market
rates, is unsecured, and repayable on demand.
The loan with Barclays Bank plc is secured by a first legal
charge over the freehold land at Cutbush Lane, Lower Earley,
Reading, Berkshire. The loan bears interest at 2% over base
rate and is repayable in quarterly installments over a period
of 20 years.
During the year the company issued 433,000 British pounds of
cumulative unsecured convertible loan stock with interest
payable thereon at the rate of 10% p.a. gross. This loan stock
is convertible at the request of the holder at the rate of 8.75
for each 25p ordinary share, on 30 September in any year from
1995 to 1998, any loan stock still in issue on 30 September
1999 will be repaid at par.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
15. Provisions for Liabilities and Charges
Deferred tax is provided at 33% (1993: 33%) analyzed over the
following timing differences.
Potential Potential
Provision liability Provision liability
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Group
Corporation tax
deferred by
Capital allowances 141.1 56.6
Revaluation surplus 85.5 85.5
226.6 142.1
Company
Capital allowances 140.6 56.6
Revaluation surplus 85.5 85.5
236.1 142.1
No deferred taxation has been provided on the basis that no
liability is likely to crystallize in the foreseeable future.
16. Pension Costs
The company operates a non-contributory defined benefit pension
scheme covering its permanent employees. The scheme funds are
administered by trustees and are independent of the company's
finances. The scheme is fully funded and contributions are
paid to the scheme in accordance with the recommendations of
independent actuaries. No contributions were outstanding at
the year end. The contributions are determined by a qualified
actuary on the basis of triennial valuations using the
projected unit method. The most recent valuation was at 1
September 1993. The assumptions which have the most significant
effect on the results of the valuation are those relating to
the rate of return on investments and the rate of increase in
salaries and pensions. It was assumed that the investment
returns would exceed salary increases by an average of 1% per
annum and that present and future pensions would increase at
the rate of 5% per annum.
The actuarial valuation showed that the market value of the
scheme's assets at 1 September 1993 was 3,100,000 British
pounds and that the actuarial value of these assets represented
103% of the benefits that had accrued to members after allowing
for expected future increases in earnings. The recommended
future contributions of the company are 15% per annum.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
17. Share Capital
1994 1993
No. No.
Athorised
4,000,000 Ordinary shares of 25p each 4,000,000 4,000,000
Allotted, called up and fully paid
3,201,100 Ordinary shares of 25p each 3,201,100 3,201,100
18. Reserves
Retained
profits Revaluation Share
Group reserve premium Total
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Group
1 November 1993 1,187.6 259.9 0.3 1,447.8
Movements for the year 323.1 323.1
31 October 1994 1,510.7 259.9 0.3 1,770.9
Company
1 November 1993 1,528.4 259.9 0.3 1,788.6
Movements for the year 442.2 442.2
31 October 1994 1,970.6 259.9 0.3 2,230.8
Share premium
The share premium represents monies received by the company in
respect of an Executive Share Option Scheme which was adopted
by 4 October 1985. The option scheme relates to the remaining
unissued 798,000 ordinary shares of 25p each. The option price
was 50p in respect of each option granted. The scheme is
exercisable between 31 October 1989 and 31 May 2001.
Revaluation reserve
The freehold property at Cutbush Lane, Lower Earley has been
revalued by the directors after seeking professional advice at
1,400,000 British pounds. The deficit has been debited to the
revaluation reserve.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
19. Reconciliation of Movements in Shareholders' Fund
Group
1994 1993
'000 '000
Pounds Pounds
Profit/(loss) for the financial year 323.1 (73.5)
Loss on revaluation of freehold property (1,150.0)
Opening shareholders' fund 2,248.0 3,471.5
Closing shareholders' funds 2,571.1 2,248.0
Company
Profit for the financial year 442.2 350.1
Loss on revaluation of freehold property (1,150.0)
Opening shareholders' funds 2,588.8 3,388.7
Closing shareholders' funds 3,031.0 2,588.8
20. Capital Commitments and Contingent Liabilities
There were no capital commitments at the balance sheet date.
There is a bank guarantee of 60,000 British pounds to H.M.
Customs & Excise.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
21. Guarantees and other Financial Committments
Financial commitments under non-cancelable operating leases
will result in the following payments falling due in the year
to 31 October 1994:
1994 1993
Land and Land and
buildings other buildings other
'000 '000 '000 '000
Pounds Pounds Pounds Pounds
Group
Expiring
Within one year 3.0
Within one to five years 4.8
After five years 139.9 139.9
139.9 142.9 4.8
Company
Expiring
Within one year
Within one to five years
After five years 111.8 111.8
111.8 111.8
The company has provided a guarantee to the value of 50,000
British pounds in respect of the banking facilities of Trilogy
Broadcast Limited.
22. Directors' Interests
Messrs. Wilson, Owen, Steel, Pitman, Roe and Hartman hold
collectively a controlling interest in Anna Valley Electronics
Limited. In addition, R.W. Hartman holds a controlling
interest in The Nosebag Restaurant Limited. Any transactions
during the year with these companies have been carried out on
normal commercial basis.
<PAGE>
PRO-BEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 1994
23. Directors and Employees
Total group staff costs, including
directors' emoluments
1994 1993
'000 '000
Pounds Pounds
Wages and salaries 2,642.5 3,037.4
Social security costs 241.4 306.3
Other pension costs 8.9 (14.4)
Medical insurance 20.0 31.4
Compensation for loss of office 54.5 67.4
2,967.3 3,428.1
Average number employed by the
group, including executive
directors Number Number
Management and administration 92 85
Development 14 30
Manufacturing 36 50
142 165
24. Parent Company Directors
1994 1993
'000 '000
Pounds Pounds
Emoluments
As executives 311.5 304.7
As directors 0.5
311.5 305.2
Emoluments, excluding pension
contributions
Chairman 44.0 44.3
Highest paid director 54.9 53.9
Other directors Number Number
0 pounds - 5,000 pounds 1 1
40,001 pounds - 45,000 pounds
45,001 pounds - 50,000 pounds
50,001 pounds - 55,000 pounds 4 4
<PAGE>
PRO-BEL LIMITED
DETAILED TRADING AND PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 1994
1994 1993
Pounds Pounds Pounds Pounds
Turnover 9,763,696 10,258,055
Cost of sales (5,642,468) (5,887,755)
Gross profit 4,121,228 4,370,300
Development
Design engineers,
office and
materials 361,418 508,211
Depreciation 25,000 25,000
(386,418) (533,211)
Overheads
Salaries 1,552,005 1,547,104
General 1,215,672 1,365,088
Depreciation 142,247 207,946
Profit on
disposal of
fixed assets (5,500) (9,300)
(2,904,424) (3,112,675)
Operating profit 830,386 724,414
Finance costs
Bank interest 69,797 65,183
Loan interest 15,847 24,804
Mortgage interest 110,911 161,722
Interest on
taxation 726
Finance lease
interest 8,013 17,681
204,568 270,116
Interest receivable (51,636) (30,416)
Bad debts 152,932 239,700
4,723 12,033
(157,655) (251,733)
Profit before tax 672,731 472,681
Exceptional items (955) 10,582
Tax (232,618) (133,095)
Retained profit for
for the year 440,133 350,168
<PAGE>
PRO-BEL LIMITED
DETAILED TRADING AND PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 1994
1994 1993
Pounds Pounds Pounds Pounds
Premises
Rent and rates 149,800 149,017
Heat and light 29,807 23,560
Maintenance, cleaning and
security 38,359 44,282
217,966 216,859
Drawing office
Quotes, Training and
project costs 1,406 6,812
Microfilming 2,198 3,137
Subcontract layout 113,348 174,705
Materials 4,102 5,473
121,054 190,127
Advertising, exhibitions
and marketing 181,694 230,597
Telephone and mail 58,306 58,214
Car running expenses
Licenses and insurance 9,105 10,336
Maintenance and repair 18,529 20,469
Petrol 29,870 23,693
57,504 54,498
Travel, subsistence and
entertainment 137,678 129,497
Other
Legal, professional and
consultancy 88,527 83,737
Audit 16,750 15,304
Print and stationary 31,323 26,353
Packing materials 13,376
Insurance 27,892 18,243
Indirect materials 293
Tools 5,144 11,173
Canteen 4,833 1,951
Equipment maintenance
and contracts 55,817 55,459
Equipment, repair &
renewals 26,924 19,968
Equipment and vehicle
hire 71,883 95,654
Training 24,297 45,536
Staff recruitment 6,558 4,080
Sports and social 3,670 3,704
Sundry expenses 29,352 18,053
Bank charges 12,878 11,687
Quality initiative 35,622 60,725
441,470 485,296
Total general expenses 1,215,672 1,365,088
<PAGE>
PRO-BEL LTD. GROUP ACCOUNTS
MEASUREMENT OF MATERIAL VARIATIONS IN ACCOUNTING METHODS USED IN
COMPUTING NET INCOME
UNDER U.K. GAAP VERSUS U.S. GAAP
IN POUNDS STERLING
FOR THE YEARS ENDED OCTOBER 31,
(IN THOUSANDS)
1995 1994 1993
Group profit (loss) on ordinary activities after taxation as
reported in the audited financial statements of Pro-Bel
Ltd. under U.K. GAAP
635.4 330.6 (118)
Item 1-Difference in depreciation expense as computed under
U.S. GAAP vs U.K. GAAP
(146.5) (71.7) 18.7
Item 2-Capitalized Software costs net of amortization under
U.S. GAAP
105 0 0
Item 3-Difference in tax provision (assumes initial
implementation of FAS 109 in 1993 and an effective tax rate
of 33%)
158.4 160.7 (123.9)
Group profit (loss) on ordinary activities after taxation
as reported in the audited financial statements of Pro-Bel
Ltd. under U.S. GAAP.
752.3 419.6 (223.2)
<PAGE>
PRO-BEL LTD. GROUP ACCOUNTS
MEASUREMENT OF MATERIAL VARIATION IN ACCOUNTING METHODS USED
UNDER U.K. GAAP VERSUS U.S. GAAP
ON BALANCE SHEET ACCOUNTS
IN POUNDS STERLING
AS OF OCTOBER 31,
(IN THOUSANDS)
U.K.GAAP U.S.GAAP U.K.GAAP U.S.GAAP
Amount Amount 1995 Amount Amount 1994
1995 1995 Difference 1994 1994 Difference
Asset Affected
Item 1-Tangible Assets, net
1777.7 2489.5 711.8 1610.7 2472.5 861.8
Item 2-Deferred Software, net
0 105 105 0 0 0
Item 3 - Defered Tax Asset, net
0 195.2 195.2 0 36.8 36.8
Total Assets Affected
1777.7 2789.7 1012.0 1610.7 2509.3 898,6
Liabilities Affected
Item 4-Accrued Vacation
0 48.7 48.7 0 48.7 48.7
Total Liabilities Affected
0 48.7 48.7 0 48.7 48.7
Net
1777.7 2741.0 963.3 1610.7 2460.6 849.9
Net Equity
3015.3 3978.6 963.3 2426.2 3276.1 849.9
<PAGE>
PRO-BEL LTD. GROUP ACCOUNTS
QUANTITATIVE RECONCILIATION OF FINANCIAL STATEMENTS
PREPARED ON A COMPREHENSIVE BASIS OTHER THAN U.S. GAAP
Item 1 - The estimated useful lives of tangible fixed assets
differ under U.S. GAAP versus U.K. GAAP. Accordingly,
depreciation expense for each of the three years ended October
31, 1995, 1994 and 1993 has been recalculated under different
useful lives resulting in a difference in depreciation expense
for each of those years as reflected in the attached
reconciliation between U.K. GAAP and U.S. GAAP of net income.
Additionally, the net book value of tangible fixed assets has
been recalculated to reflect the net undepreciated remaining
cost value using the estimated useful lives under U.S. GAAP.
The attached reconciliation of the balance sheet accounts
affected by differences between U.K. GAAP and U.S. GAAP shows
the difference at each balance sheet date.
Item 2 - Under U.S. GAAP - FAS No. 86 - "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed" - software development costs of a product are
capitalized once technological feasibility has been reached and
the amount capitalized is amortized over the estimated saleable
life of the product commencing upon the product's availability
for sale. Under U.K. GAAP all development costs are expensed
when incurred. Accordingly, the estimated amount of
capitalizable software development costs incurred, net of
amortization expense, has been reflected as a reconciling item
on the attached reconciliation of net income under U.K. GAAP
and U.S. GAAP and reconciliation of balance sheet accounts
affected.
Item 3 - Under U.S. GAAP-FAS No. 109-"Accounting for Income
Taxes" - a deferred tax liability or asset is determined based
on the difference between the financial reporting and tax bases
of the asset and enacted tax rates in effect in the years in
which the differences are expected to reverse. Accordingly,
the estimated deferred tax asset or liability determined under
FAS-109 as it would be reflected on the balance sheet and the
impact on the provision for income taxes in the income
statement is reflected in the attached reconciliation between
U.K. GAAP and U.S. GAAP.
Item 4 - Under U.S. GAAP unused vacation and other
compensatory time is recorded as an accrued liability. Under
U.K. GAAP no accrual is made. Accordingly, the accrued
vacation time is shown as a reconciling item in the attached
reconciliation of balance sheet accounts affected by
differences between U.K. GAAP and U.S. GAAP. The affect on the
income statement is immaterial due to the fact that the
difference in the amount accrued year to year is consistent.
<PAGE>
PRO-BEL LTD.
MEASUREMENT OF MATERIAL VARIATIONS IN ACCOUNTING
METHODS USED IN THE PRESENTING
A CASH FLOW STATEMENT
IN POUNDS STERLING
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
There are no material differences in the Group Cash Flow
Statement presented for Pro-Bel Ltd. for the years ended
October 31, 1995, 1994 and 1993 as presented under U.K. GAAP
(FRS 1) and U.S. GAAP FAS. No. 95- "Statement of Cash Flows...
The principal differences relate to classification.
<PAGE>
EXHIBIT IV
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma financial statements give
effect to the acquisition by Chyron Corporation ("Chyron") of
Pro Bel Limited ("Pro Bel"), located in the United Kingdom, in
a transaction to be accounted for as a purchase. The unaudited
pro forma balance sheet is based on the individual consolidated
balance sheets of Chyron as of December 31, 1995 and ProBel as
of October 31, 1995 and has been prepared to reflect the
acquisition as of December 31, 1995. The unaudited pro forma
statement of income is based on the individual consolidated
statements of income of Chyron and ProBel and combined the
results of Chyron's operations for the year ended December 31,
1995 with the results of ProBel's operations for the year ended
October 31, 1995 as if the acquisition had occurred on January
1, 1995.
The unaudited pro forma consolidated financial information is
based upon preliminary fair value allocation related to the
purchase of ProBel. These allocations are subject to revision
after more detailed analyses, appraisals and evaluations are
completed. Differences between the allocation of purchase
price used for pro forma purposes and the final allocation of
purchase price will arise from activity between the pro forma
dates presented and the actual purchase date of April 12, 1996,
and fluctuations in the exchange rate over the period. Pro
forma financial statements presented were converted at a rate
of $1.58/pound. The pro forma financial statements were
prepared in accordance with U.S. GAAP.
The pro forma information presented is for illustrative
purposes only and is not necessarily indicative of the
operating results that would have occurred if the acquisition
had occurred on the dates indicated or which may be obtained in
the future. The pro forma statements should be read in
conjunction with the audited financial statement of ProBel and
the related notes thereto contained elsewhere in this document
and the audited financial statements of Chyron and the related
notes thereto filed in its report on Form 10-K for the year
ended December 31, 1995.
<PAGE>
CHYRON CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Pro Forma
Adjust
Pro-Bel Chyron -ments Consolidated
Net Sales $28,763 $53,971 $82,734
Cost and Expenses:
Manufacturing 15,902 22,746 698(a) 39,346
selling, general and
administrative 9,064 17,066 230(b) 26,360
Research and development 1,548 4,105 (167)(c) 5,486
Management fee 2,911 2,911
Intangible amortization 511(d) 511
West Cost restructuring
(recapture) (1,339) (1,339)
Total costs and expenses 26,514 45,489 1,272 73,275
Operating income (loss) 2,249 8,482 (1,272) 9,459
Interest expense, net 461 536 1,052(e) 2,049
Income (loss) before
provision for income
taxes 1,788 7,946 (2,324) 7,410
Income taxes/equivalent
provision 782 470 (373)(f) 879
Income after tax 1,006 7,476 (1,951) 6,531
Minority Interest 34 (34)(g) 0
Net Income (loss) $972 $7,476 ($1,917) $6,531
Earnings per share $.08 $ .07
Weighted Average Shares
Outstanding 91,148 94,294
Notes to Pro Forma Consolidated Statement of Income
(a) Reflects the increase in depreciation expense for the step
up in basis of property, plant and equipment acquired and the
increase in cost of goods sold for the step up in basis of
inventory acquired.
(b) Reflects the increase in depreciation expense for the step
up in basis of property, plant and equipment acquired.
(c) Reflects the decrease in research and development expense
due to the capitalization of certain of ProBel's software
developments costs, net of the amortization of such costs for
the year.
(d) Reflects the amortization expense of goodwill and
tradename acquired recorded in connection with the acquisition
of Pro Bel.
(e) Reflects interest expense on indebtedness incurred in
connection with the acquisition of Pro Bel. See further
explanation below in note (d) to the Pro Forma Consolidated
Balance Sheet.
(f) Reflects the estimated income tax effect on the
acquisition financing.
(g) Reflects the elimination of minority interest of Pro Bel.
<PAGE>
CHYRON CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Pro Forma Consoli
Pro-Bel Chyron Adjustments -idated
Cash and cash equivalents $ 242 $ 5,012 $ (620)(a) $ 4,634
Accounts and notes
receivable 8,519 13,967 22,486
Inventories 5,244 11,645 607(b) 17,496
Prepaid expenses 127 578 705
Deferred tax asset 6,457 6,457
Total current assets 14,132 37,659 (13) 51,778
Property and Equipment 2,810 3,300 4,535(b) 10,645
Pension plan asset 1,571(b) 1,571
Software development
costs 1,716 250(b) 1,966
Goodwill 5,225(b) 5,225
Tradename 2,500(b) 2,500
Deferred tax asset 1,403 308(b) 1,711
Other assets 434 254 688
Total assets $17,376 $44,332 $14,376 $76,084
Accounts payable and
accrued expense $6,373 $8,120 $ 77(b) $14,570
Management fee payable 1,000 1,000
Reserve for west cost
restructuring 158 158
Loans and bank overdrafts 3,073 3,073
Term loan payable 2,000(d) 2,000
Capital lease obligations 79 160 239
Total current liabilities 9,525 9,438 2,077 21,040
Revolving loan payable 1,979 4,741 (1,168)(d) 5,552
Due to Pro Bel Shareholders 5,349(d) 5,349
Term loan payable 6,000(d) 6,000
Convertible notes 940 (940)(c) 0
Minority interest 44 (44)(c)
Estimated loss on leases 1,000(b) 1,000
Capital lease obligations 122 170 292
Total liabilities 12,610 14,349 12,274 39,233
Common Stock 1,274 901 (1,243)(b)(d) 932
Additional paid in capital 7 27,739 6,830(b)(d) 34,576
Cumulative translation
adjustment 55 (55)(b) 0
Retained earnings 3,430 1,343 (3,430)(b) 1,343
Total liabilities and
shareholders equity $17,376 $44,332 $14,376 $76,084
<PAGE>
The pro forma balance sheet has been prepared to reflect the
acquisition of ProBel by Chyron for an aggregate price of
$19,156,000, payable in cash of $6,939,000, notes of $5,349,000
payable on or before April 15, 1998 and 3,146,205 restricted
shares of Chyron common stock valued at $6,868,000.
(a) Reflects proceeds from loans incurred in connection with
the acquisition of ProBel net of cash paid to ProBel
shareholders and for legal and accounting expenses incurred.
(b) Reflects the following preliminary purchase accounting
adjustments resulting from the acquisition of ProBel,
determined as if the acquisition occurred on December 31, 1995.
(in thousands):
Step-up in basis of inventory $ 607
Step-up in basis of property, plant and equip. 4,535
Recognition of additional pension plan asset 1,571
Capitalization of software development costs 250
Goodwill on acquisition 5,225
Recognition of value of ProBel tradename 2,500
Recognition of additional deferred tax asset 308
Recognition of vacation accrual 77
Estimated loss on leases 1,000
Elimination of common stock of ProBel 1,274
Elimination of additional paid in capital
of Pro Bel 7
Elimination of cumulative translation
adjustment 55
Elimination of retained earnings of ProBel 3,430
(c) Reflects the elimination of convertible note and minority
interest of Pro Bel.
(d) Reflects the indebtedness incurred, reduction of
indebtedness from the related proceeds and the Chyron common
stock issued pursuant to the purchase of Pro Bel as follows (in
thousands):
Term Loan, payable in quarterly
installments of $500,000 commencing
the first quarter following the loan
closing date 8,000
Repayment of revolving letter of credit
from term loan proceeds 1,168
Note due to ProBel shareholders 5,349
Par value of common stock issued 31
Additional paid in capital related to
common shares issued 6,837
<PAGE>
EXHIBIT V
We hereby consent to the inclusion in the Form 8-K/A of Chyron
Corporation dated 21st June 1996 our reports dated 5th April
1996 and 29th March 1995 relating to the consolidated financial
statements of Pro Bel Limited for the years ended October 31,
1995 and 1994 and 1993, respectively.
Dated: 20th June 1996
Bronsens
Chartered Accountants
Registered Auditors
