SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
Strategia Corporation
(Name of Registrant as Specified in Its Charter)
Strategia Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] No fee required
(1) Title of each class of securities to which
transactions applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price of other underlying value of transaction
computer pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or the
form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
STRATEGIA CORPORATION
Notice of Annual Meeting of Shareholders
To Be Held November 4, 1999
To the Shareholders of Strategia Corporation:
The annual meeting of the shareholders of Strategia Corporation, a
Kentucky corporation, will be held at 10:00 a.m., Eastern Time, on November 4,
1999, at the Company's headquarters at 10301 Linn Station Road, Louisville,
Kentucky for the following purposes:
1. Electing directors to serve for the following year and until their
successors are elected;
2. Voting on the proposed sale of the Company's French subsidiaries; and
3. Transacting any other business that properly comes before the meeting.
Only shareholders of record at the close of business on September 14,
1999, will be entitled to vote at the annual meeting.
Please date and sign the enclosed proxy and return it in the postage-
prepaid envelope enclosed for that purpose. You may attend the meeting in
person even if you send in your proxy; retention of the proxy is not necessary
for admission to or identification at the meeting.
By Order of the Board of Directors
/s/ Richard W. Smith
Richard W. Smith
President
Louisville, Kentucky
October 12, 1999
YOUR VOTE IS IMPORTANT
Please date, sign and promptly return the enclosed
proxy card in the accompanying postage paid envelope.
Strategia Corporation
Proxy Statement
Annual Meeting of Shareholders
The mailing address of the principal executive offices of Strategia
Corporation (the "Company") is P.O. Box 37144, Louisville, Kentucky
40233-7144. This proxy statement is accompanied by a copy of the Company's
1998 Annual Report on Form 10-KSB, Quarterly Reports for the quarters ended
March 31, 1999, and June 30, 1999, and a proxy form. The approximate date
this proxy statement and the accompanying documents are first being sent to
shareholders is October 12, 1999.
Solicitation and Revocability of Proxy
The enclosed proxy is solicited on behalf of the Board of Directors of
the Company, for use at the Annual Meeting
of Shareholders to be held on November 4, 1999, and at any adjournment
thereof. The Company will bear the cost of preparing and mailing the proxy,
proxy statement, and any other material furnished to shareholders by the
Company in connection with the annual meeting. Proxies will be solicited by
use of the mails, and officers and employees of the Company may also solicit
proxies by telephone or personal contact. Copies of solicitation materials
will be furnished to fiduciaries, custodians, and brokerage houses for
forwarding to beneficial owners of the stock held in their names.
Any person giving a proxy in the form accompanying this proxy statement
has the power to revoke it at any time before its exercise. The proxy may be
revoked by filing with the Company, attention John P. Snyder, Secretary, an
instrument of revocation or a duly executed proxy bearing a later date. The
proxy may also be revoked by voting in person at the meeting. A shareholder
who attends the meeting, however, is not required to revoke the proxy and vote
in person. All valid, unrevoked proxies will be voted at the annual meeting
in accordance with the instructions given.
Each holder of Common Stock has one vote per share in all matters coming
before the Annual Meeting, except for the election of directors. In the
election of directors, each shareholder is entitled to vote the number of
shares held on the record date for the Annual Meeting, multiplied by the
number of directors to be elected, and may cast all of those votes for a
single nominee or may distribute the votes among as many nominees as desired.
The Board of Directors is soliciting authority for its proxies to vote shares
in this fashion at the Board's discretion.
Voting Securities and Principal Shareholders
The common stock is the only outstanding authorized voting security of
the Company. The record date for determining holders of common stock
entitled to vote at the annual meeting is September 14, 1999. On that date
there were 4,667,677 shares of common stock outstanding.
The following table sets forth certain information as of September 14,
1999 with respect to the shares of Common Stock owned (i) by each person
known to the Company to own beneficially more than 5% of the outstanding
shares of Common Stock (ii) by each of the Company's directors and executive
officers, and (iii) by all directors and officers as a group.
<TABLE>
<CAPTION>
Current Directors Number Percent
of Shares(1) of Class(2)
<S> <C> <C>
John P. Snyder
EPI Corporation
9707 Shelbyville Rd.
Louisville, KY 40223 1,410,437(3) 29.1%
Richard W. Smith
10301 Linn Station Road
P. O. Box 37144
Louisville, KY 40233 199,782(4) 4.2%
John A. Brenzel
3501 Graham Rd.
Louisville, KY 40207 84,940(5) 1.8%
Nominees for Director
James E. Buchart
520 Fairfield Drive
Louisville, KY 40206 1,457,691(6) 30.2%
Robert H. Loeffler
229 Sequoya Road
Louisville, KY 40207 1,370,653(7) 28.4%
Non-Director Executive
Officers
James A. Huguenard
10301 Linn Station Road
P. O. Box 37144
Louisville, KY 40233 23,933(8) *
Roland Esnis
Twinsys Dataguard SA
Tour Mirabeau
39/43, Quai Andre Citroen
75015 Paris FRANCE 15,000(9) *
Paul E. Phillips, Jr.
10301 Linn Station Road
P.O. Box 37144
Louisville, KY 40233 5,500(10) *
All current directors and officers
as a group (6 persons) 1,739,592(11) 34.8%
</TABLE>
<TABLE>
<CAPTION>
Number Percent
5% Beneficial Owners of Shares(1) of Class(2)
<S> <C> <C>
TSF Investment Group LLC
9707 Shelbyville Road
Louisville, KY 40223 279,780(12) 5.9%
Barry W. Blank
P.O. Box 32056
Phoenix, AZ 85064 292,700 6.3%
EPI Corporation
9707 Shelbyville Rd.
Louisville, KY 40223 1,364,903(13) 28.3%
EPI Corporation,
John P. Snyder,
Max G. Baumgardner,
James E. Buchart,
Robert H. Loeffler,
Henry A. Schumpf,
Grace W. Wilkins
9707 Shelbyville Rd.
Louisville, KY 40223 1,601,233(14) 32.9%
</TABLE>
* Indicates less than 1%.
(1) Based on information furnished to the Company by the named person, and
information contained in filings with the Securities and Exchange
Commission (the "Commission"). Under the rules of the Commission, a
person is deemed to beneficially own shares over which the person has
or shares voting or investment power or has the right to acquire
beneficial ownership within 60 days. Except as otherwise noted, each
person or entity named in the table has sole voting and investment
power with respect to all shares of Common Stock shown as beneficially
owned.
(2) Shares of Common Stock subject to options or warrants that are or will
become exercisable within 60 days have been deemed outstanding for
computing the percentage of class of the listed person or the group,
but are not deemed outstanding for computing the percentage of class
for any other person.
(3) Includes 1,364,903 shares of Common Stock beneficially owned by EPI
Corporation. (See footnote 14.) Mr. Snyder is President, a director,
and largest single shareholder of EPI Corporation. Mr. Snyder shares
voting and investment power with respect to, and disclaims beneficial
ownership of, the shares owned by EPI Corporation, which are included
once in the shares beneficially owned by all directors and officers as
a group. Mr. Snyder's total also includes 10,500 shares subject to
currently exercisable stock options, and 7,885 shares issuable upon the
exercise of warrants.
(4) Includes 103,094 shares subject to currently exercisable stock options,
3,710 shares issuable upon the conversion of warrants, and 500 shares
owned individually by Mr. Smith's wife.
(5) Includes 10,500 shares subject to currently exercisable stock options,
and 1,855 shares issuable upon the exercise of warrants.
(6) Includes 1,364,903 shares of Common Stock beneficially owned by EPI
Corporation. (See footnote 14.) Mr. Buchart is a member of the Board
of Directors of EPI Corporation and shares voting and investment power
with respect to, and disclaims beneficial ownership of, the shares owned
by EPI Corporation, which are included once in the shares owned by all
directors and officers as a group. Mr. Buchart's total also includes
9,000 shares held by an immediate family member for which Mr. Buchart
disclaims beneficial ownership and 2,788 shares issuable upon exercise
of warrants.
(7) Includes 1,364,903 shares of Common Stock beneficially owned by EPI
Corporation. (See footnote 14.) Mr. Loeffler is a member of the Board
of Directors of EPI Corporation and shares voting and investment power
with respect to, and disclaims beneficial ownership of, the shares owned
by EPI Corporation, which are included once in the shares owned by all
directors and officers as a group. Mr. Loeffler's total also includes
5,000 shares held by an immediate family member for which Mr Loeffler
disclaims beneficial ownership.
(8) Includes 23,333 shares subject to currently exercisable stock options.
(9) Includes 15,000 shares subject to currently exercisable stock options.
(10) Includes 5,000 shares subject to stock options currently exercisable.
(11) Includes 167,427 shares subject to currently exercisable stock options
and 166,721 shares issuable upon the exercise of warrants.
(12) Includes 45,403 shares issuable upon exercise of warrants.
(13) Includes 153,271 shares issuable upon the exercise of warrants.
(14) Includes 1,364,903 shares of Common Stock beneficially owned by EPI
Corporation, for which the named individuals, as directors of EPI
Corporation share voting and investment power. Included in the
1,364,903 shares are 153,271 shares issuable subject to exercise of
warrants. The individual members of this group together own the
majority of shares of EPI Corporation. Also includes 20,294 shares
issuable upon the exercise of warrants, and 9,000 shares issuable upon
the exercise of options, respectively, held by group members other than
EPI Corporation. Also includes 14,000 shares held by members of the
immediate family of two of the group members for which beneficial
ownership is disclaimed.
Proposal 1: Election of Directors
The Company's Board of Directors consists of three members, all of whose
terms expire at the Annual Meeting. The Company's three present directors,
John A. Brenzel, Richard W. Smith, and John P. Snyder, have been nominated
for reelection as directors. In addition, James E. Buchart and Robert H.
Loeffler have been nominated for election as directors.
Article 4 of the Company's Articles of Incorporation provides that the
Board of Directors may consist of four to nine directors, the exact number
to be fixed by the Board of Directors or the shareholders. The term of any
director elected by the Board to vacant directorships, whether created by
increasing the number of directors or otherwise, between meetings of the
shareholders to elect directors will expire at the next shareholders meeting
at which the directors are elected.
If any named nominee should refuse or be unable to serve, the Board of
Directors believes the proxy holders will vote the shares represented by the
enclosed proxy card for such substitute nominee, if any, as may be proposed
by the Board of Directors. No circumstances are known, however, that would
prevent any of the nominees from serving. The five candidates receiving the
five highest vote totals under cumulative voting will be elected as directors
at the Annual Meeting. Abstentions and broker non-votes will not be counted
as a vote for any candidate.
Management
The following information is furnished as of the Record Date, with
respect to each person nominated for election as a director at the 1999
Annual Meeting and each of the Company's executive officers who are not
directors. If elected, all directors will hold office until the Company's
next annual meeting of shareholders to be held in 2000, and until their
successors are elected and qualified.
<TABLE>
<CAPTION>
Directors: Age Position with the Company
<S> <C> <C>
John A. Brenzel 59 Director
James E. Buchart 58 Director (Nominee)
Robert H. Loeffler 58 Director (Nominee)
Richard W. Smith 45 President and Director
John P. Snyder 60 Secretary and Director
Executive Officers:
Roland Esnis 32 Vice President-European
Operations, Directeur Generale,
Twinsys Dataguard SA and
Strategia Europe SAS
James A. Huguenard 45 Vice President and Chief
Operating Officer
Paul E. Phillips, Jr. 56 Vice President and Chief
Financial Officer
</TABLE>
John A. Brenzel, a director of the Company since November 1984, is a
business consultant. From January 1991 until June 1994, Mr. Brenzel was
President and Chief Executive Officer of Commonwealth Bank & Trust Company,
Middletown, Kentucky. From 1984 to 1990, he was Chairman and Chief Executive
Officer of Shelby County Trust Bank, Shelbyville, Kentucky.
James E. Buchart is a Vice President with J.J.B. Hilliard, W.L. Lyons,
Inc., a full-service investment banking and securities brokerage firm in
Louisville, Kentucky. Mr. Buchart has been with J.J.B. Hilliard, W.L. Lyons,
Inc. since 1980. Mr. Buchart is a member of the Board of Directors of EPI
Corporation and serves as a board member and Secretary of the Ursuline Campus
Schools Board of Trustees.
Robert H. Loeffler is a private investor and business consultant. Mr.
Loeffler was a cofounder of EPI Corporation, which operates a chain of nursing
homes. Mr. Loeffler is a member of the Board of Directors and serves as
Secretary of EPI Corporation. Prior to 1986 Mr. Loeffler held various
management positions with the Bag Packaging Division of St. Regis Corporation.
Richard W. Smith has been President and a director of the Company since
its inception in September 1984. Mr. Smith previously served as General
Manager of PDW Computer Systems, Inc., which marketed computer systems.
John P. Snyder has been a director of the Company since November 1984 and
Secretary since 1985. During the past five years, Mr. Snyder has served as
President and Chairman of EPI Corporation, which operates a chain of nursing
homes.
Roland Esnis has served as Vice President-European Operations since
December 1997 and Directeur Generale of both Twinsys Dataguard S.A.
("Twinsys"), since August 1995 and Strategia Europe S.A.S. ("Strategia
Europe") since it was formed in 1997. Both Twinsys and Strategia Europe
are French subsidiaries of the Company. Mr. Esnis joined Twinsys in a
marketing position when it was established in February 1995. From July 1993
to February 1995 he held a similar position with Twinsys S.A., an unrelated
computer services firm whose operating assets were acquired by Twinsys.
Prior to July 1993, Mr. Esnis held marketing positions with Systar, a
software company, and with the disaster recovery division of Telesystemes, a
computer services affiliate of France Telecom.
James A. Huguenard has served as Vice President and Chief Operating
Officer of the Corportion since October 1998. From August 1997 to October
1998 Mr. Huguenard served the Company as Vice President and General Counsel.
Prior to August 1997, Mr. Huguenard was a member of the law firm Brown, Todd
& Heyburn PLLC, where he had practiced since 1983.
Paul E. Phillips, Jr. has served as Vice President and Chief Financial
Officer since July 6, 1998. From February 1996 to March 1998 Mr. Phillips
served as Vice President - Finance of Royal Ten Cate (USA), Inc., the U.S.
holding company for Royal Ten Cate NV, a Dutch company with operations in
textiles, plastics and rubber roller products, and its wholly owned
subsidiary, Nicolon Corporation, a company that principally manufactures
specialty textiles. From March 1995 to December 1995 Mr. Phillips served
as President of National Fire Hose Corporation, a wholly owned subsidiary of
Royal Ten Cate (USA), Inc., and a manufacturer of fire hoses for municipal
and industrial fire suppression markets, and from September 1993 to February
1995 as Vice President - Finance and Administration of National Fire Hose
Corporation. Prior to September 1993, Mr. Phillips held senior financial
and accounting positions with other organizations.
Meetings and Committees
The Company's Board of Directors has three standing committees, the
Audit Committee, the Executive Compensation Committee, and the Stock Option
Committee. The members of each of these committees are John A. Brenzel and
John P. Snyder. The Audit Committee had one meeting in 1998. This committee
reviews the audit plans and the results of audits performed by its
independent certified public accountants. The Executive Compensation
Committee, which determines the compensation of the Company's executive
officers, met three times in 1998. The Stock Option Committee, which
administers the 1988 Stock Option Plan and the 1990 Stock Grant Plan, did
not meet in 1998.
The Company's Board of Directors had seven meetings during 1998. All
directors attended at least 75% of the total number of meetings of the Board
of Directors and the committees on which he served.
The Board of Directors considers the nomination of directors but does
not have a standing committee. The following is the provision in the
Company's Bylaws regarding the nomination of directors by shareholders:
2.4 Nominations for election to the Board of Directors may be
made by the Board of Directors or by any shareholder. Any
shareholder who intends to nominate or to cause to have
nominated any candidate for election to the Board of
Directors (other than a candidate nominated by the Board of
Directors) shall deliver or mail written notification of
the nomination to the Secretary of the Corporation not less
than three days after the giving of the notice of the
meeting nor more than fifty days before any meeting of
shareholders held for the election of directors. Any such
notification shall contain the following information to the
extent known to the notifying shareholder or shareholders:
(a) the name and address of each proposed nominee;
(b) the principal occupation of each proposed nominee;
(c) the total number of shares that to the knowledge
of the notifying shareholder or shareholders will
be voted for each proposed nominee;
(d) the name and residence address of each notifying
shareholder; and
(e) the number of shares owned by each notifying
shareholder.
The chairman of any meeting of shareholders held for the election of
directors may in his discretion disregard any votes cast for any nominee
whose nomination was not made in accordance with these nomination provisions.
Executive Compensation
The following table sets forth the cash compensation earned by the
Company's executive officers for each of the last three fiscal years.
<TABLE>
<CAPTION>
Annual Compensation
Long-Term
Compensation
Awards
Other Stock
Name and Annual Underlying
Principal Position Year Salary Bonus Compensation Options (#)
<S> <C> <C> <C> <C> <C>
Richard W. Smith, 1998 $199,046 $ 0 $ 6,000 0
President (Chief 1997 $156,585 $33,182 $ 6,000 0
Executive Officer) 1996 $117,000 $ 0 $ 6,000 75,664
James A. Huguenard, 1998 $146,160 $ 0 $ 0 0
Vice President and 1997 $ 50,500 $ 0 $ 0 35,000
Chief Operating Officer*
Roland Esnis 1998 $113,312 $18,720 $ 0 0
Directeur Generale, 1997 $ 64,844 $42,647 $ 0 0
Twinsys Dataguard 1996 $ 68,716 $40,647 $ 0 15,000
SA and Strategia Europe SAS
Paul E. Phillips, Jr. 1998 $ 59,111 $ 0 $ 0 15,000
Vice President and
Chief Financial Officer**
</TABLE>
* Mr. Huguenard joined Strategia Corporation in August 1997.
** Mr. Phillips joined Strategia Corporation July 6, 1998.
*** Perquisites and other personal benefits paid to the named executive
officers did not exceed 10% of the total salary and bonus.
The Company implemented a 401 (K) and Profit Sharing Plan ("Plan")
effective December 1, 1998. There were no contributions made to the Plan by
the Company on behalf of its officers and employees during 1998.
Stock Option Grants in Last Fiscal Year
The following table sets forth as of December 31, 1998 the value of
unexercised options granted to the Company's executive officers named in the
summary compensation table pursuant to the Company's 1988 Stock Option Plan
(the "1988 Plan"). In 1998, no options were awarded to or exercised by the
named executive officers under the 1988 Plan except for shares awarded to Mr.
Phillips upon joining the Company in July 1998. The average of the closing
Bid and asked price of the Common Stock on December 31, 1998 was $ .75 per
share.
<TABLE>
<CAPTION>
Value of
Number of Shares Subject Unexercised
To Unexercised Options In-the-Money Options
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Richard W. Smith 110,000 0 $ 0 $ 0
James A. Huguenard 11,667 23,333 $ 0 $ 0
Roland Esnis 15,000 0 $ 0 $ 0
Paul E. Phillips, Jr. 0 15,000 $ 0 $ 0
</TABLE>
Director Compensation
The Strategia 1988 Stock Option Plan (as amended by stockholders in 1989
and 1997) provides automatic grants of stock options to the Company's
directors who are not employees. Beginning in the second quarter of 1997,
options to purchase 1,000 shares of common stock have been granted quarterly
to each nonemployee director. In addition, each nonemployee director who was
first elected after May 15, 1989 will automatically be granted an option for
2,500 shares of common stock on May 15 following his initial election.
Options for nonemployee directors are granted at the fair market value of the
common stock on the grant date and vest in one-third increments beginning on
the first anniversary of the grant date.
In 1998, Mr. Brenzel and Mr. Snyder each were granted options for 4,000
shares of Common Stock. The option exercise prices ranged from $1.0625 to
$8.25 per share. No options were exercised in 1998.
In addition to the issuance of stock options, the Company paid its
directors $750.00 per meeting for attendance at each board meeting and
committee meeting in 1998.
Certain Relationships and Related Transactions
Effective as of July 1996, Twinsys began offering disaster recovery and
other services to users of Unix-based computer systems in France through
Twin-X SA, a newly organized subsidiary. Twinsys holds a 60% interest in
Twin-X, and Roland Esnis and Francois Domine, Directeur Generale and Sales
Manager of Twinsys, respectively, each holds an approximate 20% interest in
Twin-X. Twinsys and Messrs. Esnis and Domine made proportional cash
contributions to Twin-X for their respective interests in Twin-X. (See
Proposal 2: Sale of the Company's French Subsidiaries concerning the option
to purchase the 40% minority interest in Twin-X .)
It is the Company's policy that all material affiliated transactions and
loans will be made or entered into on terms that are no less favorable to the
Company than those that can be obtained from unaffiliated third parties. All
future material affiliated transactions and loans must be approved by a
majority of the independent directors who do not have an interest in the
transactions.
Proposal 2: Sale of the Company's French Subsidiaries
Summary of Proposed Transaction
The Company provides a variety of information technology services
including Year 2000 consulting, disaster recovery, and outsourcing services
in the United States and, through its French subsidiaries, in Europe. The
two operations function quite separately, address separate geographical
markets and provide little in terms of operating synergies. In addition,
the Company has experienced some difficulty in allocating available
management and cash resources to both businesses and, therefore, has
concluded that the shareholders would be best served by allowing the Company
to focus on a single market. Since December 1998, management has been
investigating the potential sale of the European business. In January 1999,
the Company retained FAC/Equities, a division of First Albany Corporation,
to find a suitable purchaser and, on May 26, 1999, the Company signed a
letter of intent with Guardian iT plc ("Guardian") outlining the proposed
transaction (the "Sale"). On August 10, 1999, the Company and Guardian
executed a definitive Share Sale and Purchase Agreement (the "Agreement")
providing for the Sale. A copy of the Agreement is attached hereto as
Appendix B.
The French subsidiaries are Twinsys and Strategia Europe S.A.S., which
are wholly-owned subsidiaries of the Company, and Twin-X S.A. ("Twin-X"),
which is 60% owned by Twinsys. The remaining 40% minority interest in Twin-X
is owned by Roland Esnis, the Directeur General of Twinsys, and Francois
Domine, the Sales Manager of Twinsys, and their spouses. Messrs. Esnis and
Domine and their spouses have entered into an agreement with the Company (the
"Shareholder Agreement") a copy of which is attached hereto as Appendix C.
The Shareholder Agreement, among other things, gives the Company an option to
purchase the 40% minority interest in Twin-X for fifteen percent of the
Adjusted Purchase Price (defined in the Shareholder Agreement to be the gross
proceeds in the Sale minus $200,000 and subject to certain other adjustments),
provided that the minority interest will be acquired at a price that will not
be less than 6,000,000 French Francs ("FRF") nor more than FRF 7,000,000.
The exchange rate as of September 30, 1999, was FRF 6.1359 equal U.S. $1.00.
The Agreement provides for the purchase of the French subsidiaries
(including both the equity and the debt owed by the French subsidiaries to
the Company (the "Debt")) for $7.15 million plus FRF 5.5 million in cash
(including $1,275,000 to be paid into an escrow account), adjusted up or
down for the difference between (i) the combined net asset value of the French
subsidiaries (adjusted upward to eliminate the Debt) as of the closing date
and (ii) FRF11,825,401. Concurrently with the Sale, the Twin-X minority
shares will be acquired by the Company as described in the preceding
paragraph and included in the shares sold to Guardian. The obligations of
the parties under the Agreement is subject to certain conditions, including,
among others, the accuracy of certain representations and warranties both
when made and as if made again at the closing, the approval by stockholders
holding a majority of the Company's shares and compliance with certain
covenants. If the Sale is consummated, the Company will remain liable for
certain breaches of its representations and warranties if a claim therefor
is made by April 30, 2001 (or for a claim relating to taxation, by the end
of the relevant French statutory limitations period plus one month) up to an
aggregate maximum amount of $5.5 million. However, in the case of fraud or
willful misconduct or willful concealment, claims may be made later and there
is no maximum amount.
If consummated, the Sale will provide the Company with approximately
$6.2 million of additional cash (this represents the aggregate purchase
price net of payments to Messrs. Esnis and Domine and transaction expenses
estimated to be approximately $568 thousand) and would permit management to
focus on its United States operations. At this time the Company has not
adopted any plans for specific uses of the net proceeds.
The French business has accounted for 63.2%, 44.8% and 48.8% of
consolidated revenues in 1997, 1998 and the first six months of 1999,
respectively. It accounted for 6.8% and 22.9% of the consolidated pretax
net loss in 1997 and 1998, respectively, and 17% of the pretax income in the
first six months of 1999, respectively. The following table provides certain
actual and pro forma information concerning the historical results of
operations of the Company for the year ended December 31, 1998 and the six
months ended June 30, 1999, and the actual and pro forma balance sheet as of
June 30, 1999 (the pro forma operating results do not include any pro forma
interest income from investment of any proceeds on the sale):
<TABLE>
<CAPTION>
Year ended Six Months ended
December 31, 1998 June 30, 1999
Actual Pro forma Actual Pro forma
<S> <C> <C> <C> <C>
Service revenues $21,622 $11,942 $12,574 $ 6,433
Operating income (loss) $(2,093) $(1,875) $ 1,095 $ 739
Net income (loss) $(2,414) $(1,970) $ 840 $ 664
Net income (loss)
per share $ (0.52) $ (0.42) $ .18 $ .14
Weighted average
shares outstanding 4,668 4,668 4,668 4,668
</TABLE>
The following table provides certain balance sheet information as of June
30, 1999 and at that date on a pro forma basis as if the Sale had been
consummated on that date:
<TABLE>
<CAPTION>
June 30, 1999
(in thousands)
Actual Pro forma
<S> <C> <C>
Current assets $ 7,553 $ 9,812
Property and equipment $ 4,597 $ 3,035
Total assets $12,456 $12,968
Current liabilities $ 4,102 $ 1,933
Total liabilities $ 6,516 $ 2,820
Stockholders' equity $ 5,940 $10,148
</TABLE>
Background of the Sale
In late 1998, management decided to explore the possibility of selling
its French subsidiaries. In January 1999, the Company retained FAC/Equities,
a division of First Albany Corporation, to (i) advise it in considering the
desirability of selling the French subsidiaries, (ii) assist in developing
a strategy for accomplishing a sale, (iii) advise and assist the Company in
identifying and contacting potential buyers, (vi) assist in preparing a
summary memorandum describing the French subsidiaries and their businesses,
(v) assist in negotiating a sale and (vi) provide certain other related
services. FAC/Equities developed a list of prospective purchasers based on
its own knowledge and research and on input from the Company. FAC/Equities
then contacted each of the prospects to determine whether it was interested.
Those that expressed interest were provided with a form of confidentiality
agreement. On receipt of the signed agreement, FAC/Equities provided the
prospect with certain financial and other information concerning the French
subsidiaries. After this process, the Company received expressions of
interest (including a price range that the prospect would be willing to pay)
from three prospects. Guardian's was the most attractive and the Company,
along with FAC/Equities, commenced negotiations both on price and other
terms. At the conclusion of the negotiations and with FAC/Equities'
recommendation, on May 26, 1999, the Company signed a letter of intent with
Guardian outlining the Sale. Guardian then commenced an extensive due
diligence process. It also drafted a proposed form of the Agreement and
commenced negotiating it with the Company. The Company received advice and
assistance in the due diligence and negotiating process from FAC/Equities
and French and United Kingdom legal counsel. On August 10, 1999, the
Company and Guardian executed a definitive Share Sale and Purchase Agreement
(the "Agreement") providing for the Sale.
Reasons for the Sale
The Company made the decision to sell the French subsidiaries so that it
can focus its management and financial resources on its U.S. operations. The
French operation was more difficult to effectively manage because of the
distance, language, legal, time zone, cultural and other barriers. Part of
the impetus for exploring the sale at this time is the current trend of
consolidation in the European disaster recovery market. The French
subsidiaries represent a relatively small share of the European market.
They were threatened with becoming dwarfed by larger companies which would
have a number of competitive advantages such as multiple locations across
Europe, greater marketing strength, and greater access to capital. The
consolidation trend also presents an opportunity to sell because a number of
companies in the disaster recovery business appear to be aggressively
acquiring smaller companies to build market share.
Disposing of the French subsidiaries allows management to
concentrate on its U.S. businesses. In addition, the Sale potentially
provides additional resources for development of new products and services
in the United States, the acquisition of businesses, the initiation of a share
repurchase program, etc.
The Company formed Twinsys in February 1995 and acquired certain assets
of Twinsys S.A.("TSA"), a Paris, France disaster recovery provider then in
bankruptcy proceedings under French law. Although the bankruptcy decree
effectively terminated the former TSA customers' obligations, Twinsys was
able to negotiate and enter into new backup services arrangements with more
than 30 former TSA customers as well as several new clients. Twinsys
primarily provides disaster recovery services to users of large-scale Bull
computers. In 1996, Twin-X was formed to provide disaster recovery services
to users of Unix-based computer systems, and in 1997 Strategia Europe was
formed to provide Year 2000 renovation and other services in France.
The Sale
The following description of the terms of the Agreement is intended to
outline certain major provisions of the Agreement. Shareholders are urged
to refer to the Agreement itself for the actual terms. The Agreement is
attached as Appendix B to this proxy statement.
Under the Agreement, the Company will sell its Debt and shares in the
French subsidiaries, including the minority shares to be acquired, to
Guardian for cash consideration of $7,150,000 plus FRF 5,500,000. Of this
amount, the sum of U.S. $1,275,000 will be paid into an escrow account (the
"Escrow Account"). The consideration will be increased or reduced by an
amount equal to the difference between FRF 11,825,401 and the combined net
asset value of the French subsidiaries (increased by eliminating the Debt)
("NAV") as shown in the audited financial statements (using French
accounting principles) as of the closing date. (The NAV was FRF 8,480,748
at December 31, 1998, and is estimated by the parties to approach
FRF 11,825,401 at closing.) Guardian or the Company will be paid any such
increase or decrease in the consideration on the fifth day following the
determination of the NAV in accordance with the terms of the Agreement.
The Company will pay the Twin-X minority shareholders an amount equal to
15% of the Adjusted Purchase Price (defined in the Shareholder Agreement to
be the gross proceeds of the sale minus $200,000 and subject to other
adjustments). This amount will be paid as the Company receives the
consideration (i.e., 15% of the closing proceeds and 15% of each escrow
release), provided that the minority shareholders will receive at least FRF
6,000,000 at the closing and no more than FRF 7,000,000 in the aggregate
The Escrow Account will be in the joint name of Guardian's Solicitors
and the Company's Solicitors. Payments shall be made from the Escrow Account
in accordance with provisions of the Agreement as follows:
(a) subject to any deductions in accordance with provisions of the Agreement
and in relation to any Claim, the following amounts shall be paid to the
Company on the following dates:
i. on March 31, 2000, the amount of the balance in the Escrow Account in
excess of U.S. $637,500; and
ii. on September 30, 2000 (the "Payment Date") the balance then remaining
in the Escrow Account;
(b) if Guardian notifies the Company of a claim under or pursuant to the
warranty provisions of the Agreement (a "Relevant Claim") prior to the
Payment Date, an amount equal to the Relevant Claim will be retained in the
Escrow Account and not paid to the Company until the claim is resolved; upon
resolution, any amount of the claim to which Guardian is entitled will be
paid to Guardian and those funds in excess of the claims, as finally resolved,
will be paid to the Company
Any payment made by the Company (including payments out of the Escrow
Account) in respect of any Relevant Claim will reduce the purchase price to
the extent of such payment.
Completion of the Agreement is subject to the satisfaction of the
following conditions on or before the closing:
(a) the approval of the Sale by the Company's shareholders;
(b) the purchase by the Company of the minority shares in Twin-X held by
Roland Esnis and Francois Domine;
(c) no material breach of provisions providing for the operation of the
business pending completion of the Sale, as set forth in Schedule 4 to
the Agreement;
(d) the warranties provided by the Company being materially true and accurate
as at the date of signing the Agreement and as if repeated at closing; and
(e) no governmental, regulatory or other competition authority having
statutory or regulatory competence in any jurisdiction having decided to
take or initiate any action, proceeding or investigation the effect of
which would prohibit or delay closing beyond November 15, 1999 (or such
other date as may be agreed in writing by the parties).
The closing is to be within 7 days of shareholder approval of
the Sale as described in this Proxy Statement and in any event no later than
November 15, 1999, or such later date as agreed to by the parties. Should
the Sale not be completed because of a failure of the Company's shareholders
to approve the Sale or the failure to acquire the shares from the minority
shareholders of Twin-X, the Company must reimburse Guardian for reasonable
legal, accountancy and other professional costs and expense not to exceed
150,000 pounds sterling (approximately $247,000 as of September 30, 1999).
A Relevant Claim may be made by Guardian pursuant to the warranties
provided by the Company in the Agreement. Warranties provided by the
Company include statements relative to form and legal structure of the
French subsidiaries, contracts and liabilities, assets and insurance,
taxation and tax returns, employees, agents and pensions, litigation and a
number of other matters in connection with the status of the French
subsidiaries and how they have conducted business. One of the warranties
will allow Guardian to make a Relevant Claim for a portion of certain cost
overruns incurred after the closing by Strategia Europe on Year 2000
projects. The maximum amount that could be required to be paid (including
any amounts paid to Guardian from the Escrow Account) by the Company in
satisfaction of all Relevant Claims, except in the case of fraud or willful
misconduct or willful concealment, is U.S. $5,500,000. No payment can be
made by the Company in respect of any matter giving rise to a Relevant Claim
under the warranty unless and until the amount in respect of the Relevant
Claim (when aggregated with each other Relevant Claim) exceeds FRF 1,250,000
(equal to approximately U.S. $203,700) at which time, the Company will be
liable to Guardian only for the excess. Except in the case of fraud or
willful misconduct or willful concealment, Relevant Claims must be presented
by Guardian for all items other than those that relate to taxation by April
30, 2001 and for those relating to taxation by the end of the relevant French
statutory limitations period, plus one month. In addition to the foregoing,
the Company may also be liable for all or a portion of certain penalties
payable by Strategia Europe under its Year 2000 contracts.
<TABLE>
<CAPTION>
Unaudited Pro forma Financial Statements
(Dollars in thousands, except for per share amounts)
The following tables present the Company's consolidated income statements for
the years ended December 31, 1998, and the six months ended June 30, 1999, and
the consolidated balance sheet as of June 30, 1999, on both an actual basis
and a pro forma basis. Notes to the Pro forma Financial Statements follow on
page 18 describing the adjustments made to the actual financial statements to
arrive at the pro forma financial statements.
Income Statement Year ended
December 31, 1998
Actual Adjustments Pro forma
<S> <C> <C> <C>
Service revenues $ 21,621.6 $ 9,680.1 $ 11,941.5
Operating expenses:
Cost of services 15,454.2 6,982.6 8,471.6
Selling, general & admin. 7,820.5 2,915.8 4,904.7
Other charges 440.1 - 440.1
23,714.8 9,898.4 13,816.4
Operating income (loss) (2,093.2) (218.3) (1,874.9)
Other (income) expense:
Interest expense 257.4 109.2 148.2
Other (income), net (69.2) 3.6 (72.8)
188.2 112.8 75.4
Income (loss) before
income taxes (2,281.4) (331.1) (1,950.3)
Provision for income taxes 132.3 112.5 19.8
Net income (loss) $ (2,413.7) $ (443.6) $ (1,970.1)
Net income (loss) per share $ (0.52) $ (0.42)
Weighted average shares
outstanding 4,667.7 4,667.7
Six Months ended
June 30, 1999
Actual Adjustments Pro forma
Service revenues $ 12,574.3 $ 6,141.4 $ 6,432.9
Operating expenses:
Cost of services 7,659.6 4,211.9 3,447.7
Selling, general & admin. 3,504.3 1,572.9 1,931.4
Other charges 315.0 315.0
11,478.9 5,784.8 5,694.1
Operating income (loss) 1,095.4 356.6 738.8
Other (income) expense:
Interest expense 89.1 18.7 70.4
Other (income), net 63.3 68.1 (4.8)
152.4 86.8 65.6
Income (loss) before
income taxes 943.0 269.8 673.2
Provision for income taxes 102.6 93.1 9.5
Net income (loss) $ 840.4 $ 176.7 $ 663.7
Net income (loss) per share $ .18 $ .14
Weighted average shares
outstanding 4,667.7 4,667.7
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet
June 30, 1999
Actual Adjustments Pro forma
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,228.0 $ 6,238.6 $ 7,466.6
Accounts receivable, net 4,107.6 (2,467.2) 1,640.4
Unbilled revenues 1,871.6 (1,297.0) 574.6
Other current assets 346.1 (215.9) 130.2
Total current assets 7,553.3 2,258.5 9,811.8
Property and equipment
Cost 20,557.6 (8,359.4) 12,198.2
Accumulated depreciation 15,960.7 (6,797.4) 9,163.3
4,596.9 (1,562.0) 3,034.9
Other assets 306.2 (184.8) 121.4
$ 12,456.4 $ 511.7 $ 12,968.1
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of
long-term debt 53.6 - 53.6
Current installments of
obligations under capital leases 351.8 (189.5) 162.3
Deferred revenue 396.3 - 396.3
Accounts payable 991.6 (686.7) 304.9
Accrued expenses and
other liabilities 2,272.8 (1,247.3) 1,025.5
Accrued income taxes 36.1 (45.6) (9.5)
Total current liabilities 4,102.2 2,169.1 1,933.1
Long-term debt, excluding
current installments 854.9 - 854.9
Obligations under capital leases,
excluding current installments 76.6 (45.1) 31.5
Deferred revenue 1,186.7 (1,186.7) -
Deferred income taxes 170.1 (170.1) -
Minority interest 125.8 (125.8) -
Total liabilities 6,516.3 (3,696.8) 2,819.5
Stockholders' equity:
Common stock without par value 13,884.0 - 13,884.0
Accumulated deficit (7,669.2) 3,933.8 (3,735.4)
Accumulated other comprehensive
income (loss) (274.7) 274.7 -
Total stockholders' equity 5,940.1 4,208.5 10,148.6
$ 12,456.4 $ 511.7 $ 12,968.1
</TABLE>
Notes to Pro forma Financial Statements:
(a) Pro forma income statement adjustments comprise the combined operating
results of the French subsidiaries after eliminating intercompany management
fees and inter-company interest charged the French subsidiaries on
intercompany borrowings.
(b) Pro forma balance sheet adjustments at June 30, 1999, comprise the
following:
i. Net proceeds of $6.3 million after purchase of minority interests in
Twin-X for approximately $1.1 million and legal and other professional
fees of approximately $568 thousand.
ii. Net gain of approximately $3.9 million.
(c) No interest income has been included in the pro forma income statement
from any assumed investment of the net proceeds.
(d) No income tax provision has been included in calculating the net gain
included in the June 30, 1999, pro forma balance sheet. The Company had
approximately $8.1 million in U.S. net tax operating loss carry-forwards at
December 31, 1998, and it is assumed that there would be no Federal and/or
state income taxes resulting from the transaction.
(e) Although $1.275 million in proceeds will initially be put into an escrow
account, the above pro forma results assume 100% of the $1.275 million is
included in the pro forma balance sheet. The Company knows of no items that
would require payment to the purchaser for Relevant Claims.
Rights of Dissenting Shareholders
Kentucky law provides certain rights to shareholders who dissent from
certain corporate actions, including the sale of all or substantially all of
the assets of the corporation. The Company has determined that the proposed
Sale constitutes the sale of all or substantially all of its assets within
the meaning of that phrase in the Kentucky law.
The following is not a complete statement of the law pertaining to the
rights of dissenting shareholders and is qualified in its entirety by
reference to the full text of Subtitle 13, Chapter 271B of the Kentucky
Revised Statutes (KRS 271B.13-010 to .13-310), which is reprinted in its
entirety as Appendix A to this Proxy Statement.
Under Kentucky law, any shareholder of the Company may dissent from the
Sale and receive in cash the fair value of his or her shares immediately
before consummation of the Sale, excluding any appreciation or depreciation
in anticipation of the Sale unless such exclusion would be inequitable. The
right to dissent and receive such fair value requires that the exact
procedure specified by Kentucky law be followed.
Shareholders who wish to assert dissenter's rights (i) must deliver to
the Company, before the vote is taken at the Annual Meeting, written notice
of their intent to demand payment for their shares if the Sale occurs; and
(ii) must not vote their shares in favor of the Sale. Shareholders who do
not satisfy these requirements are not entitled to rights to demand payment
for their shares. The delivery of a written demand must be in addition to
and separate from any vote against the Sale by the shareholder. A vote
against the Sale will not itself satisfy the notice requirements of the
Kentucky dissenters' rights statute. A shareholder who submits a signed and
unmarked proxy form will be considered to have voted in favor of the Sale,
which will constitute a waiver of the dissenters' rights of the shareholder.
If the Sale is approved by the shareholders at the Annual Meeting, then,
no later than ten days after such approval, the Company must deliver a
written notice ("Notice") to all shareholders who dissented in compliance
with Kentucky law. The Notice must set forth, among other things, a date by
which shareholders must demand payment, which date may not be fewer than 30,
nor more than 60, days after the date of the Notice. Shareholders who receive
the Notice must demand payment, certify whether they acquired beneficial
ownership of the shares before August 10, 1999 (the date of the first public
announcement regarding the Sale), and deposit their certificates in
accordance with the terms of the Notice. Shareholders who do not demand
payment or deposit their certificates by the date set in the Notice will not
be entitled to receive payment for their shares as a dissenter.
Upon consummation of the Sale or upon a later but timely receipt of a
payment demand, the Company must pay each shareholder who dissented in
compliance with Kentucky law and who was the beneficial owner of the shares
before August 10, 1999, the estimated fair value of the dissenter's shares.
Payment must be accompanied by certain financial information about the
Company and certain statements apprising such shareholders of the estimate
of the fair value of the shares and their rights as "dissenters" under
Kentucky law.
A dissenter may notify the Company of the dissenter's own estimate of
the fair value of the dissenter's shares and demand payment of the
dissenter's estimate, if: (i) the dissenter believes the amount paid or
offered is less than the fair value of the dissenter's shares, (ii) the
Company fails to make payment within 60 days after the date set for demanding
payment, or (iii) the Company, having failed to effect the Sale, does not
return the deposited certificates within 60 days after the date set for
demanding payment. A dissenter waives the right to demand payment unless
he notifies the Company of his demand in writing within 30 days after payment
is made for the dissenter's shares.
A procedure similar to that discussed above applies to shareholders who
acquired beneficial ownership of their shares on or after August 10, 1999.
The primary difference is that the Company may withhold payment on these
after-acquired shares to the dissenter until a price has been agreed upon or
determined by the court.
If a demand for payment remains unsettled, the Company must commence a
proceeding within 60 days after receiving the payment demand and petition the
Circuit Court of Jefferson County, Kentucky to determine the fair value of
the shares. If the proceeding is not commenced within the 60-day period, each
dissenter whose demand remains unsettled must be paid the amount demanded.
The Court may appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. In any appraisal
proceeding, the Court must determine all costs of the proceeding, including
reasonable compensation and expenses of appraisers appointed by the Court,
and generally will be assessed against the Company. However, the Court can
assess costs against the parties in such amounts as the Court finds equitable.
Management's Recommendation
Approval of Sale requires the affirmative vote of a majority of the
Company's shares of Common Stock outstanding and entitled to vote. Any
abstention or broker non-votes will have the same effect as a vote against
the Sale.
At a Special Meeting on September 28, 1999, the Board of Directors voted
unanimously to approve the Share Sale and Purchase Agreement and to recommend
approval of the Sale by the Company's shareholders. For the reasons more
fully set forth above, management recommends a vote in favor of the Sale.
The Company has received undertakings form the current members of the
Board of Directors and EPI Corporation stating that their shares will be voted
in favor of the Sale. These shares represent approximately 30% of the
Company's outstanding shares.
The following table sets forth the quarterly range of high and low
closing sale prices per share reported on the American Stock Exchange during
1999.
<TABLE>
<CAPTION>
1999
Quarter High Low
<S> <C> <C>
First $ .813 $ .625
Second 1.563 .563
Third (through August 31) 1.438 1.063
</TABLE>
On October 1, 1999, the closing sale price reported for the Common
Stock was $.813 per share.
GENERAL
Discretionary Authority
Although the Notice of Annual Meeting of Shareholders provides for
transaction of any other business that properly comes before the meeting, the
Board of Directors has no knowledge of any matters to be presented at the
meeting other than the matters described in this proxy statement. The
enclosed proxy form, however, gives discretionary authority to the proxy
holders to vote in accordance with their judgment if any other matters are
presented.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors and persons who beneficially own more than 10% of the
Company's Common Stock (collectively, "Reporting Persons") to file reports of
ownership and changes in ownership of the Common Stock with the Securities
and Exchange Commission. Reporting Persons are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received or written
representations from certain Reporting Persons that no Form 5s were required,
the Company believes that during fiscal 1998, all the Reporting Persons
complied with all applicable filing requirements, except as noted below.
Paul E. Phillips, Jr. filed a Form 3 report after the report was due.
Information Concerning Independent Auditors
The firm of Carpenter, Mountjoy & Bressler, PSC, Certified Public
Accountants, served as independent auditors for the Company in 1998 and has
been selected to serve as independent auditors for the Company in 1999.
Representatives of Carpenter, Mountjoy & Bressler, PSC will be present at
the 1999 Annual Meeting, will have an opportunity to make a statement if
they desire to do so and will be available to respond to appropriate
questions.
On April 23, 1998, Ernst & Young LLP ("EY") informed the Company of its
resignation as the Company's auditor.
The reports of EY on the Company's financial statements for the fiscal
years ended December 31, 1997 and 1996 did not contain an adverse opinion or
a disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. In connection with the audits of the
Company's financial statements for the years ended December 31, 1997 and 1996,
and in the subsequent interim period, there were no disagreements with EY on
any matters of accounting principles or practices, financial statement
disclosure, or auditing scope and procedures which, if not resolved to the
satisfaction of EY would have caused EY to make references to the matter in
their report.
In connection with the audit of the Company's financial statements for
the year ended December 31, 1997, EY informed the Company and its Audit
Committee of a material weakness in its policies, systems, procedures and
internal controls necessary to assure that revenues, costs and loss
contracts are properly recognized in the consolidated financial statements
under the percentage of completion method of accounting for Year 2000
compliance consulting and program renovation services contracts. Management
of the Company agreed with EY's conclusion that there was a material weakness
in such policies, systems, procedures and internal controls. To address the
weakness identified by EY, management took measures to improve the Company's
internal controls, including enhanced record keeping with respect to costs of
completion of contract work and enhancements to the Company's cost estimation
methodologies. Management designed these measures based in part on certain of
the procedures performed at EY's request to provide information to EY in the
course of its audit engagement on behalf of the Company. As a result of that
audit engagement, EY issued an unqualified opinion on the Company's financial
statements for the year ended December 31, 1997. EY advised us that, in
completing its audit, it considered the aforementioned material weakness in
determining the nature, timing and extent of procedures performed to enable
it to issue the unqualified opinion. The Company authorized and requested EY
to cooperate with, and provide full information to, the Company's successor
auditors pertaining to the material weakness identified by EY.
Shareholder Proposals
The Company intends to hold its 2000 Annual Meeting of Shareholders in
early June 2000. Shareholder proposals to be presented at the 2000 Annual
Meeting must be received by the Secretary of the Corporation no later than
February 1, 2000 to be included in the proxy statement for the 2000 Annual
Meeting. The Corporation expects to exercise discretionary voting authority
granted under any proxy form which is properly executed and returned to the
Corporation on any matter that may properly come before the 2000 Annual
Meeting unless written notice of the matter is delivered to the Corporation
at its corporate offices, addressed to the Secretary of the Corporation,
before April 16, 2000.
INCORPORATION BY REFERENCE
The following documents previously filed with the SEC by Strategia
Corporation accompany this proxy statement and are hereby incorporated by
reference into this proxy statement:
Annual Report on Form 10-KSB for the year ended December 31, 1998,
as amended by Form 10-KSB/A filed April 23, 1999; provided that the
information included in Items 8, 9, 10, 11, and 12, of the Company's
1998 10-KSB shall not be deemed to be incorporated into or a part of
this proxy statement;
Quarterly Reports on Form 10-QSB for the quarters ended March 31 and
June 30, 1999; and
Current Report on Form 8-K dated August 10, 1999.
The Company will provide without charge, upon the oral or written request
of any person to whom this proxy statement is delivered, a copy of any and all
information (excluding exhibits) that has been incorporated by reference into
this proxy statement. Such requests should be addressed to John P. Snyder,
Secretary, Strategia Corporation, P.O. Box 37144, Louisville, Kentucky 40233-
7144, telephone (502) 426-3434.
By Order of the Board of Directors
/s/ John P. Snyder
John P. Snyder
Secretary
Louisville, Kentucky
October 12, 1999
STRATEGIA CORPORATION
Proxy Card for 1999 Annual Meeting of Shareholders
THIS PROXY CARD IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Holly Kratzenberg and
Leigh Ann Dauphinais or either of them (with full power
to act alone), as proxy, with the President of Strategia
Corporation (the "Corporation"), having the power to
appoint a proxy's substitute, to represent me and to vote
all of the shares of the Corporation held of record or
which I am otherwise entitled to vote, at the close of
business on September 14, 1999, at the 1999 Annual
Meeting of Shareholders to be held at the Corporation's
offices at 10301 Linn Station Road, Louisville,
Kentucky, on Wednesday, October 25, 1999, at 10:00 a.m.,
local time, and at any adjournments thereof, with all
the powers the undersigned would possess if personally
present, as indicated herein.
THIS PROXY CARD IS SOLICITED BY THE BOARD OF
DIRECTORS AND WILL BE VOTED AS SPECIFIED AND IN
ACCORDANCE WITH THE ACCOMPANYING PROXY STATEMENT. IF
NO INSTRUCTION IS INDICATED, THE SHARES REPRESENTED
BY THIS PROXY CARD WILL BE VOTED "FOR" THE NOMINEES
LISTED IN ITEM 1 OR CUMULATIVELY, IN THE BOARD OF
DIRECTORS' DISCRETION, AND "FOR" ITEMS 2 and 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ALL OF THE NOMINEES LISTED IN ITEM 1, AND Please mark _______
"FOR" ITEMS 2 AND 3. your votes as
indicated in X
this example. _____
1. ELECTION OF DIRECTORS John A. Brenzel, Richard W. Smith, and
John P. Snyder
FOR all nominees WITHHOLD
(except otherwise AUTHORITY
indicated on the to vote for all nominees.
line at right). (INSTRUCTION: To withhold authority
to vote for any individual nominee,
write the nominee's name on the line
below.)
____________ _________________________________________________
2. SALE OF THE COMPANY'S FRENCH SUBSIDIARIES
FOR AGAINST ABSTAIN
_______ _______ _______
3. OTHER BUSINESS. In their discretion, the proxies are
authorized to act upon such other matters as may
properly be brought before the Annual Meeting or any
adjournment thereof.
FOR AGAINST ABSTAIN
______ ________ _________
Please sign exactly as name appears at left. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian,
please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name
by authorized person.
Dated: __________________________, 1998
_______________________________________
Signature
_______________________________________
Additional signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Appendix A
PROVISIONS OF THE KENTUCKY BUSINESS CORPORATION ACT
RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS
271B.13-010. Definitions.
As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under KRS 271B.13-020 and who exercises that right when and
in the manner required by KRS 271B.13-200 to 271B.13-280.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
In any transaction subject to the requirements of KRS 271B.12-210 or exempted
by KRS 271B.12-220(2), "fair value" shall be at least an amount required to be
paid under KRS 271B.12-220(2) in order to be exempt from the requirements of
KRS 271B.12-210.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equi-table under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
to the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
271B.13-020. Right to dissent.
(1) A shareholder shall be entitled to dissent from, and obtain payment
of the fair value of his shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If shareholder approval is required for the merger by KRS
271B.11-030 or the articles of incorporation and the
shareholder is entitled to vote on the merger; or
2. If the corporation is a subsidiary that is merged with
its parent under KRS 271B.11-040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will
be acquired, if the shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and
regular course of business, if the shareholder is entitled to
vote on the sale or exchange, including a sale in dissolution,
but not including a sale pursuant to court order or a sale for
cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the
shareholders within one (1) year after the date of sale;
(d) An amendment of the articles of incorporation that materially
and adversely affects rights in respect of a dissenter's shares
because it:
1. Alters or abolishes a preferential right of the shares to
a distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking
fund for the redemption or repurchase, of the shares;
3. Excludes or limits the right of the shares to vote on any
matter other than a limitation by dilution through
issuance of shares or other securities with similar voting
rights; or
4. Reduces the number of shares owned by the shareholder to
a fraction of a share if the fractional share so created
is to be acquired for cash under KRS 271B.6-040;
(e) Any transaction subject to the requirements of KRS 271B.12-210
or exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for his shares
under this chapter shall not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
271B.13-030. Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he shall dissent with respect
to all shares beneficially owned by any one (1) person and notify the
corporation in writing of the name and address of each person on whose behalf
he asserts dis-senters' rights. The rights of a partial dissenter under this
subsection shall be determined as if the shares as to which he dissents and
his other shares were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(b) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the
vote.
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
271B.13-200. Notice of dissenters' rights.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert
dissenters' rights under this subtitle and the corporation shall undertake
to provide a copy of this subtitle to any shareholder entitled to vote at
the shareholders' meeting upon request of that shareholder.
(2) If corporate action creating dissenters' rights under KRS 271B.13-020
is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in
KRS 271B.13-220.
271B.13-210. Notice of intent to demand payment.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote is taken
written notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section shall not be entitled to payment for his shares under this
chapter.
271B.13-220. Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenter's notice to all shareholders who satisfied the
requirements of KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten (10) days after
the date the proposed corporate action was authorized by the shareholders, or,
if no shareholder authorization was obtained, by the board of directors, and
shall:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment demand is
received;
(c) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the
terms of the proposed corporate action and requires that the
person asserting dissenters' rights certify whether or not he
acquired beneficial ownership of the shares before that date;
(d) Set a date by which the corporation must receive the pay-ment
demand, which date may not be fewer than thirty (30), nor more
than sixty (60) days after the date the notice provided in
subsection (1) of this sec-tion is delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230. Duty to demand payment.
(1) A shareholder who is sent a dissenters' notice described in
KRS 271B.13-220 shall demand payment, certify whether he acquired beneficial
owner-ship of the shares before the date required to be set forth in the
dissenters' notice pursuant to subsection (2)(c) of KRS 271B.13-220, and
deposit his certifi-cates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his share certificates
under subsection (1) of this section shall retain all other rights of a
shareholder until these rights are cancelled or modified by the taking of the
proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
shall not be entitled to payment for his shares under this subtitle.
271B.13-240. Share restrictions.
(1) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under KRS 271B.13-260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares shall retain all other rights of a shareholder until
these rights are cancelled or modified by the taking of the proposed
corporate action.
271B.13-250. Payment.
(1) Except as provided in KRS 271B.13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with KRS 271B.13-230 the
amount the cor-poration estimates to be the fair value of his shares, plus
accrued interest.
(2) The payment shall be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of
payment, an income statement for that year, a statement of
changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
(b) A statement of the corporation's estimate of the fair value of
the shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under
KRS 271B.13-280.
271B.13-260. Failure to take action.
(1) If the corporation does not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under KRS 271B.13-220 and repeat the payment demand
procedure.
271B.13-270. After-acquired shares.
(1) A corporation may elect to withhold payment required by
KRS 271B.13-250 from a dissenter unless he was the beneficial owner of the
shares before the date set forth in the dissenters' notice as the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action,
it shall estimate the fair value of the shares, plus accrued interest, and
shall pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer a
statement of its estimate of the fair value of the shares, an explanation of
how the interest was calculated, and a statement of the dissenter's right to
demand payment under KRS 271B.13-280.
271B.13-280. Procedure if shareholder dissatis-fied with payment or offer.
(1) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand
payment of his estimate (less any payment under KRS 271B.13-250), or reject
the corporation's offer under KRS 271B.13-270 and demand payment of the fair
value of his shares and interest due, if:
(a) The dissenter believes that the amount paid under
KRS 271B.13-250 or offered under KRS 271B.13-270 is less than
the fair value of his shares or that the interest due is
incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-250
within sixty (60) days after the date set for demanding
payment; or
(c) The corporation, having failed to take the proposed action,
does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within
sixty (60) days after the date set for demanding payment.
(2) A dissenter waives his right to demand payment under this section
unless he shall notify the corporation of his demand in writing under
subsection (1) of this section within thirty (30) days after the corporation
made or offered payment for his shares.
JUDICIAL APPRAISAL OF SHARES
271B.13-300. Court action.
(1) If a demand for payment under KRS 271B.13-280 remains unsettled, the
corporation shall commence a proceeding within sixty (60) day after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the
proceeding within the sixty (60) day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of
the county where a corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(3) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section shall be plenary and exclusive. The
court may appoint one (1) or more persons as appraisers to receive evidence
and recommend decision on the question of fair value. The appraisers have
the powers described in the order appointing them, or in any amendment to it.
The dissenters shall be entitled to the same discovery rights as parties in
other civil proceedings.
(5) Each dissenter made a party to the proceeding shall be entitled to
judgment:
(a) For the amount, if any, by which the court finds the fair value
of his shares, plus interest, exceeds the amount paid by the
corporation; or
(b) For the fair value, plus accrued interest, of his afteracquired
shares for which the corporation elected to withhold payment
under KRS 271B.13-270.
271B.13-310. Court costs and counsel fees.
(1) The court in an appraisal proceeding commenced under KRS 271B.13-300
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters,
if the court finds the corporation did not substantially comply
with the require-ments of KRS 271B.13-200 to 271B.13-280; or
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously,
or not in good faith with respect to the rights provided by
this subtitle.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the
amounts awarded the dissenters who were benefited.
Appendix B
DATED 1999
SHARE SALE AND PURCHASE AGREEMENT
relating to the issued share capitals of
Twinsys Dataguard SA, Twin-X SA and Strategia Europe SAS
STRATEGIA CORPORATION (1)
GUARDIAN DR (OVERSEAS HOLDINGS) LIMITED (2)
GUARDIAN iT PLC (3)
Execution Draft
136/G8903.58/CP1:37643.14/raok
TABLE OF CONTENTS
PARTIES 1
INTRODUCTION 1
OPERATIVE PROVISIONS 1
1 Interpretation 1
2 Sale and purchase of the Shares 5
3 Consideration 5
4 Conditions 9
5 Completion 10
6 Warranty 11
8 Use of name 16
9 Guarantee 16
10 General 17
SCHEDULE 1 19
Part 1 19
Particulars of Strategia Europe SAS 19
Part 2 20
Particulars of Twinsys Dataguard SA 20
Part 3 21
Particulars of Twin-X SA 21
SCHEDULE 2 22
The Properties 22
Description of Lease(s) 22
SCHEDULE 3 23
Warranty Statements 23
1 Information, formal and legal 23
2 Capital, distribution, contracts and liabilities 23
3 The Shares 25
4 Accounts 25
5 Business and Trading 25
6 Stocks, assets and insurance 26
7 Sale of the Shares 27
8 Taxation and tax returns 27
9 Employees, agents and pensions 30
10 Pensions 31
11 Litigation 31
12 Capital commitments, unusual contracts, guarantees etc. 31
13 Borrowings and lendings 32
14 Continuation of facilities 32
15 The Properties 32
16 Environmental 33
17 Insolvency 34
18 Intangible Property Rights and Intellectual Property 34
19 Competition 35
20 Authority 35
21 Year 2000 35
SCHEDULE 4 36
Position Pending Completion 36
SCHEDULE 5 67
Strategia Contracts Schedule 67
ATTESTATIONS 70
DATED
1999
PARTIES
(1) STRATEGIA CORPORATION whose principal office is at 10301 Linn Station
Road, Louisville, Kentucky 40223 United States of America ("the Vendor");
(2) GUARDIAN DR (OVERSEAS HOLDINGS) LIMITED, acting by its French branch
whose principal office is at Benchmark House, St George's Business Centre, 203
Brooklands Road, Weybridge, Surrey KT13 0RH ("the Purchaser"); and
(3) GUARDIAN IT PLC, whose registered office is at Benchmark House, St
George's Business Centre, 203 Brooklands Road, Weybridge, Surrey KT13 0RH
("the Guarantor").
INTRODUCTION
(A) Strategia is a French societe par actions simplifiee with a share
capital of FRF 2,000,000 divided into 20,000 shares of FRF 100 par value,
having its registered office at 39-43 Quai Andre Citroen, 75015 Paris, France
and registered with the Paris Commercial Companies Registry under the number
B413599010.
(B) Twinsys is a French societe anonyme with a share capital of FRF 1,500,000
divided into 15,000 shares of FRF 100 par value, having its registered office
at 39-43 Quai Andre Citroen, 75015 Paris, France and registered with the Paris
Commercial Companies Registry under the number B400265492.
(C) Twin-X is a French societe anonyme with a share capital of FRF 250,000
divided into 2,500 shares of FRF 100 par value, having its registered office
at 39-43 Quai Andre Citroen, 75015 Paris, France and registered with the Paris
Commercial Companies Registry under the number B408615847. Twin-X is 60 per
cent. owned by Twinsys and 40 per cent. owned by Roland Esnis, Francois Domine
and their spouses.
(D) The business of Strategia is that of the provision of IT consultancy and
IT services to users of computer systems.
(E) The business of Twinsys is that of the provision of business continuity
and disaster recovery to users of computer systems.
(F) The business of Twin-X is that of the provision of business continuity
and disaster recovery to users of computer systems.
(G) The Vendor is willing to sell and the Purchaser is willing to purchase
the Shares on the terms and subject to the conditions of this Agreement.
OPERATIVE PROVISIONS
1 Interpretation
1.1 In this Agreement (including the Introduction and Schedules), except
where a different interpretation is necessary in the context, the following
expressions shall have the following meanings:
Accounts together, the audited financial statements
of each of the Companies as at the Accounts
Date together with the related exhibits of
each of the Companies, or as specifically
referred to in this Agreement in respect
of any of the individual Companies
Accounts Date 31 December 1998
Additional Cost the excess cost as referred to in Warranty
Statement 21.2
Business Day any day on which the clearing banks are open
for business in the City of London, other
than a Saturday or a Sunday
Board(s) the board of directors for the time being of
the Purchaser and of each of the Companies
(except in the case of Strategia where the
Vendor acts as the Board in its role as
President of that company), as specifically
referred to in this Agreement
Companies together, Strategia, Twinsys and Twin-X and
each of them
Companies' Auditors Ernst & Young of 34, Boulevard Haussman,
75008 Paris
Completion completion of the acquisition of the Shares
in accordance with the terms of clause 5
Completion Date within 7 days of the passing of the
Resolutions at a date and time to be agreed
in writing by the parties and in any event
no later than 15 November 1999 or such later
date as the parties agree in writing
Conditions the conditions to be satisfied before the
Completion Date as set out in clause 4.1
Contracts all the year 2000 consultancy contracts to
which Strategia is a party at the date of
Completion whether or not the provision of
services under such contracts has been
completed
Consideration the aggregate sum of (i) US$7,150,000 less
the Debts and (ii) FRF5,500,000, subject to
adjustment pursuant to clause 3
Debts the aggregate sum of all indebtedness of the
Companies due to the Vendor's Group at
Completion
Debts Transfer Agreement the agreement in the agreed form to be
entered into at Completion to transfer the
Debts from the Vendor to the Purchaser
the Directors the persons specified as directors of the
Companies in Schedule 1 (the expression
"Director" meaning any of them)
the Disclosure Letter a letter in the agreed form bearing the same
date as this Agreement from the Vendor to
the Purchaser together with the documents
annexed to or incorporated by reference in
such letter
the Employees the employees of each of the Companies
(including directors) whose names appear in
the Disclosure Letter
the Final Accounts the Draft Accounts (as defined in clause 3.3)
once agreed or determined pursuant to clauses
3.5, 3.6 or 3.7
Intellectual Property copyrights, trade and service marks, trade
names, rights in logos and get-up,
inventions, confidential information, trade
secrets and know-how, registered designs,
design rights, patents, utility models,
semi-conductor topographies, all rights of
whatsoever nature in computer software and
data, all rights in plant varieties, all
rights of privacy and all intangible rights
and privileges of a nature similar to any of
the foregoing, in every case in any part of
the world and whether or not registered; and
including all granted registrations and all
applications for registration in respect of
any of the same
Labour Costs the aggregate sum of reasonable labour costs
(including all indirect employment costs such
as expenses, taxes and without exception all
other employee overheads) incurred by the
Purchaser or the Companies to complete the
Contracts including, for the avoidance of
doubt, the reasonable labour costs required
to perform warranty services pursuant to the
Contracts
Loan Capital loan notes or debenture stock of any kind
Management Accounts the management accounts for the Companies
covering the period from the Accounts Date
to end June 1999
NAV the combined net asset value of the Companies
as at Completion as set forth in the Final
Accounts but adjusted upwards to eliminate
the Debts
Properties the leasehold properties short particulars
of which appear in Schedule 2 and references
to "the Properties" shall extend to any part
or parts thereof
Purchaser's Auditors PricewaterhouseCoopers of The Quay, 30
Channel Way, Ocean Village, Southampton S014
3QG
Purchaser's Group the Purchaser and any holding company of the
Purchaser and any of the subsidiaries and
associates of the Purchaser or of any
holding company of the Purchaser from time
to time
Purchaser's French Counsel Salans Hertzfeld & Heilbronn of 9 rue Boissy
D'Anglas, 75008 Paris, France
Purchaser's Solicitors S J Berwin & Co of 222 Grays Inn Road,
London WC1X 8HB
Reserve the accounting reserve of FRF1,800,000 as
set out at clause 3.4(b)
Revenues Recognised the sum shown as at the total figure at the
foot of column 12 of the Strategia Contracts
Schedule
Relevant Claim a claim by the Purchaser under or pursuant
to the Warranty
Relief any loss, relief, allowance, exemption,
set-off, deduction, right to repayment or
credit or other relief of a similar nature
granted by or available in relation to tax
pursuant to any legislation or otherwise
Resolutions the shareholder resolutions of the Vendor
required, inter alia, to approve the
transaction contemplated by this Agreement
Restricted Activities the businesses carried on by the Companies
as at Completion
Revenue Not Yet Recognised the sum shown as the total figure at the
foot of column 13 of the Strategia Contracts
Schedule
Shares together, the Strategia Shares, the
Twin-X-Shares and the Twinsys Shares
Strategia Strategia Europe SAS of which short
particulars are set out in Part 1 of
Schedule 1
Strategia Contracts Schedule the document in the form set out in Schedule
5 to be delivered to the Purchaser at
Completion pursuant to clause 5.2(i),
bearing the information referred to therein
Strategia Proportion the percentage figure shown at the foot of
column 14 of the Strategia Contracts Schedule
Strategia Shares the 19,999 issued shares of FRF 100 each in
the capital of Strategia held by the Vendor
Standard means the year 2000 compliance standard as
defined in Warranty 21.1
System means hardware, software, firmware, other
plant, equipment, machinery or building
facilities
tax, taxes or taxation means all taxes, assessments and governmental
charges of any kind, whether payable directly
or by withholding, including but without
limitation any transfer, property, sales,
withholding, income, value-added or customs,
employment and social security fees,
governmental charges, welfare charges, social,
welfare and other contributions, governmental
insurance fees, governmental pension plan
contributions, duties, charges, levies,
contributions, penalties, interest and other
charges
Twinsys Twinsys Dataguard SA of which short
particulars are set out in Part 2 of
Schedule 1
Twinsys Shares the 14,981 issued shares of FRF 100 each in
the capital of Twinsys held by the Vendor
Twin-X Twin-X SA of which short particulars are set
out in Part 3 of Schedule 1
Twin-X Shares together the 1,499 shares held by Twinsys
and the 998 shares to be held by the Vendor
following satisfaction of condition 4.1(b)
of the issued shares of FRF 100 each in the
capital of Twin-X
VAT French Value Added Tax
Vendor's Group the Vendor and any holding company of the
Vendor and any of the subsidiaries and
associates of the Vendor or of any holding
company of the Vendor from time to time
excluding the Companies
Vendor's French Counsel HSD Ernst and Young of 6 Place de L'Iris, La
Defence 2, 92095 Paris
the Vendor's Solicitors Clifford Chance of 200 Aldersgate Street,
London EC1A 4JJ
Warranty the warranty given by the Vendor in clause 6
Warranty Statements the statements set out in Schedule 3
1.2 All references to statutory provisions or enactments shall include
references to any amendment, modification or re-enactment of any such provision
or enactment before the date of this Agreement to any previous enactment which
has been replaced or amended and to any regulation or order made under such
provision or enactment before the date of this Agreement.
1.3 The term "holding company" shall have the meaning attributed to it in
section 736 and 736A of the Companies Act 1985 (as amended), a company or other
entity shall be a "subsidiary" for the purposes of this Agreement if it falls
within any of the meanings attributed to a "subsidiary" in such sections or the
meaning attributed to the term "subsidiary undertaking" in section 258 of such
Act, the term "associated" shall have the meaning attributed to it in section
416(1) of the Income and Corporation Taxes Act 1988 and the terms
"subsidiaries", "holding companies" and "associated companies" are to be
construed accordingly.
1.4 References to documents "in the agreed form" are to documents in terms
agreed between the parties and signed (for the purpose of identification only)
by the Vendor's Solicitors and the Purchaser's Solicitors.
1.5 References in this Agreement and the Schedules to the parties, the
Introduction, Schedules and clauses are references respectively to the parties,
the Introduction and Schedules to and clauses of this Agreement.
1.6 Save where the context specifically requires otherwise, words importing
one gender shall be treated as importing any gender, words importing
individuals shall be treated as importing corporations and vice versa, words
importing the singular shall be treated as importing the plural and vice
versa, and words importing the whole shall be treated as including a reference
to any part thereof.
1.7 Clause and paragraph headings are inserted for ease of reference only
and shall not affect construction.
1.8 Section 839 of the Income and Corporation Taxes Act 1988 is to apply to
determine whether a person is connected with another for the purposes of this
Agreement.
1.9 Section 416(2) of the Income and Corporation Taxes Act 1988 is to apply
to determine whether a person is controlled by another person.
2 Sale and purchase of the Shares
2.1 The Vendor with full title guarantee shall sell at and with effect from
Completion the Shares and the Purchaser relying on the, warranties and
undertakings contained in this Agreement, shall purchase subject to clause 2.3
all of the Shares with any dividends, distributions and rights declared, paid,
created or arising on or after the date of this Agreement and free from all
claims, charges, liens, encumbrances, options, rights of pre-emption or
equities.
2.2 The Vendor shall procure the transfer to the Purchaser (or as it
directs) of any of the shares in the share capitals of Strategia, Twinsys and
Twin-X held by persons other than the Vendor or Twinsys, as marked by an
asterisk in Schedule 1, all for no additional consideration or payment by the
Purchaser to any person.
2.3 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
in accordance with this Agreement.
2.4 The Vendor shall not be obliged to complete the transfer of any of the
Shares unless the Purchaser has completed the Debts Transfer Agreement in
accordance with its terms.
3 Consideration
3.1 In consideration of the sale of the Shares in accordance with the terms
of this Agreement, and subject to upwards or downwards adjustment in accordance
with clause 3.2 or 3.13, the Purchaser shall pay:
(a) to the Vendor the aggregate sum of:
(i) US$5,875,000.00 less the Debts; and
(ii) FRF5,500,000
(being part of the Consideration) ; and
(b) to the Escrow Account the sum of US$1,275,000.00 (being part of
the Consideration) pursuant to the terms of clause 3.12.
3.2.1 The sum of the Consideration shall be:
(a) reduced by an amount (if any) equal to FRF1 for every FRF1 that
the NAV as shown in the balance sheet constituting part of the
Final Account is less than FRF11,825,401; and
(b) increased by an amount (if any) equal FRF1 for every FRF1 that
the NAV as shown in the balance sheet constituting part of the
Final Accounts is more than FRF11,825,401;
and such amounts (if any) shall be paid by the Vendor or the
Purchaser (as applicable) in accordance with the provisions of
clause 3.11.
3.2.2 The Purchaser acknowledges that it shall have no claim under the
Warranty to the extent that any claim against the Vendor under the Warranty is
provided for in the Final Accounts or is reflected in the calculation of the
Consideration pursuant to this clause 3.2.
3.3 The Purchaser shall procure that the Companies shall, within 45 days
after the date of Completion, prepare draft audited combined accounts for the
Companies ("Draft Accounts") including an audited combined profit and loss
account for the period commencing on the Accounts Date and ending on Completion
and an audited combined balance sheet as at Completion and the Purchaser shall
procure that the Draft Accounts shall then be audited by the Companies'
Auditors (during which audit the Draft Accounts shall be reviewed by the
Purchaser's Auditors) and then submitted for approval to the Vendor. The
Purchaser shall procure that, for the purposes of considering the Draft
Accounts, the Vendor shall be entitled to receive access to and copies of all
working papers of the Companies, the Purchaser and the Companies' Auditors
used in the preparation of and audit of the Draft Accounts.
3.4 The Draft Accounts shall be prepared in a manner consistent with the
procedures and policies bases and methods of valuation adopted in the
preparation of the Accounts and otherwise in accordance with accounting
principles generally accepted in France. The parties agree that no assets may
be re-valued upwards in the Draft Accounts. It is hereby acknowledged by the
parties that solely for the purposes of the Draft Accounts and the Final
Accounts and for no other reason:
(a) the revenues recognised shall be the sum shown as the total figure
at the foot of column 11 of the Strategia Contracts Schedule; and
(b) there shall be held as a reserve the sum of FRF 1,800,000
("Reserve"), such sum being acknowledged by the parties to be:
(i) adequate as at the date of Completion for all purposes
relating to the Contracts;
(ii) an appropriate reserve for the purposes of preparing and
auditing the Draft Accounts and the Final Accounts and, for
the avoidance of doubt, for the purposes of calculating the
NAV.
The agreement of the Reserve for the purposes of the Draft Accounts and the
Final Accounts between the parties shall not in any way prejudice the
Purchaser's right to bring a Relevant Claim under this Agreement pursuant to
clause 6.25 or pursuant to clause 6.16 in connection with Warranty Statement
21.2 being the only claims that can be brought in respect of the Contracts.
3.5 Within 30 days of receipt by the Vendor of the Draft Accounts the Vendor
will inform the Purchaser in writing whether or not in its opinion the Draft
Accounts comply with the requirements of this clause 3 and, if not, shall
specify in writing, so far as it is then reasonably able so to do, the amount
and nature of any item which it does not accept. If the Vendor confirms in
writing that it accepts the Draft Accounts, or if it fails to inform the
Purchaser within 30 days of receipt whether or not it accepts that the Draft
Accounts comply with the requirements of this clause 3, the Draft Accounts
shall be the agreed audited combined accounts of the Companies for the period
ending on Completion.
3.6 If the Vendor informs the Purchaser, in accordance with clause 3.5, that
it does not accept that the Draft Accounts comply with the requirements of this
clause 3, the Vendor and the Purchaser will hold discussions in good faith with
a view to agreeing the Draft Accounts. If such agreement is reached, and is
confirmed in writing by the parties, it shall be final and binding on the
parties.
3.7 Any dispute about the Draft Accounts which remains unresolved 45 days
after receipt by the Vendor of the Draft Accounts shall, at the request of
either party be referred for final settlement to an independent firm of
chartered accountants nominated jointly by the Vendor and the Purchaser or,
failing such nomination, within 14 days after request by either the Vendor or
the Purchaser, be referred to an internationally known firm of independent
accountants in France nominated by order of the President of the Commercial
Court of Paris ("President du Tribunal de Commerce de Paris") acting in summary
proceedings (Statuant comme en matiere de refere) (other than any such firm
which has, or whose office or related entities have, accepted any engagement or
appointment from any of the parties hereto or from any of their respective
affiliates). Such independent firm shall act as experts and not as arbitrators
and (in the absence of manifest error) its decisions (both as to the manner in
which its determination is to be made and as to the subject matter of its
determination) shall be final and binding on the parties.
3.8 All costs of the Companies' Auditors in connection with the auditing of
the Draft Accounts shall be payable by the Vendor and the Purchaser in equal
proportions and all costs incurred by the Vendor in reviewing and agreeing the
Draft Accounts shall be borne by the Vendor and all such costs incurred by the
Purchaser shall be borne by the Purchaser. The fees of such independent firm,
if any, referred to in clause 3.7 shall be payable by the Vendor and the
Purchaser in equal proportions.
3.9 Each of the Purchaser and the Vendor will co-operate fully with the other
and, if applicable, with the independent firm appointed under clause 3.7
(including giving all reasonable access to records, information, and to
personnel) with a view to enabling the Draft Accounts to be prepared and
subsequently discussed and, if applicable, with a view to enabling any such
independent firm to make any determination required by clause 3.7 and in
particular the Purchaser shall procure that the Companies shall permit the
Vendor and its advisers and the Companies' Auditors (and, if applicable, such
independent firm) to have reasonable access to, and (where reasonable) to take
copies of any records or information belonging to the Companies.
3.10 For the purposes of clause 3.2 the NAV of the Companies shall be as
stated in the Final Accounts once agreed or otherwise determined pursuant to
this clause 3.
3.11.1 Payments of the aggregate amount (if any) referred to in clause 3.2.1(a)
shall be made in U.K. sterling (using the mid-point of the closing spread of
the FRF/U.K. sterling spot rate as shown in the Financial Times on the
Business Day prior to Completion) by the Vendor to the Purchaser by banker's
draft in favour of the Purchaser on the fifth Business Day following the final
determination of the Final Accounts pursuant to clauses 3.3 to 3.10.
3.11.2 Payments of the aggregate amount (if any) referred to in clause 3.2.1(b)
shall be made in US$ (using the mid point of the closing spread of FRF/US$ spot
rate as shown in the Financial Times on the Business Day prior to Completion)
by the Purchaser by banker's draft in favour of the Vendor on the fifth
Business Day following final determination of the Final Accounts pursuant to
clauses 3.3 to 3.10.
3.12 On Completion the Purchaser shall pay US$1,275,000.00 into an interest
bearing account ("the Escrow Account") in the joint name of the Purchaser's
Solicitors and the Vendor's Solicitors with The Royal Bank of Scotland plc.
The amount standing to the credit of the Escrow Account from time to time
("the Escrow") shall be retained in the Escrow Account on the terms of a letter
made between the Purchaser and the Vendor in a form to be agreed ("the Escrow
Account Letter") and payments shall be made from the Escrow Account in
accordance with the provisions in this clause 3.12 as follows:
(a) subject to any deductions in accordance with the provisions of
this clause 3.12 and subject to any delay required to complete the
claims procedure in relation to any Relevant Claim set out in this
clause 3.12 below:
(i) on 31 March 2000, the amount of the balance remaining in the
Escrow Account in excess of US$637,500; and
(ii) on 30 September 2000 ("Payment Date") the balance then
remaining in the Escrow Account;
shall be paid to the Vendor;
(b) in the event that the Purchaser notifies the Vendor of any Relevant
Claim under this Agreement prior to the Payment Date, the following
provisions shall apply:
(i) in the event that prior to the Payment Date:
(aa) it shall be finally determined that the Vendor shall
be liable (in whole or in part) in respect of such
Relevant Claim; or
(bb) the Vendor agrees in writing that it is liable (in
whole or in part) in respect of such Relevant Claim
but the Vendor has not discharged the amount so due
in respect of such Relevant Claim;
there shall be paid to the Purchaser from the Escrow Account
immediately on such determination or agreement a sum equal
to the amount of the liability of the Vendor so determined
or agreed in respect of such Relevant Claim and such sum so
paid to the Purchaser shall be deducted from any subsequent
payments otherwise due to be made to the Vendor pursuant to
sub-clause (a) above;
(ii) in the event that prior to the Payment Date a Relevant Claim
under this Agreement shall have been notified in writing to
the Vendor in respect of which no such final determination
and/or agreement as referred to in sub-clause b(i) above has
been made then an amount equal to the amount of such
Relevant Claim (and where such Relevant Claim has not been
quantified then an amount equal to the Purchaser's
reasonable and bona fide estimate of such Relevant Claim)
shall, subject to clause 6.12, be retained in the Escrow
Account (notwithstanding that any such amounts may otherwise
save but for the operation of this sub-clause be payable to
the Vendor in accordance with the other provisions of this
clause 3.12) until such time as a determination and/or
agreement is made in relation to such Relevant Claim or such
Relevant Claim is withdrawn by the Purchaser. Any excess
over the amount of the Relevant Claim otherwise due to be
paid to the Vendor in accordance with the other provisions
of this clause 3.12 shall be paid to the Vendor in
accordance with the provisions of this clause.
Thereafter, in the event of or to the extent of any
determination and/or agreement in relation to the Relevant
Claim in favour of the Vendor or in the event that such
Relevant Claim is withdrawn by the Purchaser, to the extent
that the amount of such Relevant Claim determined in favour
of the Vendor would otherwise already have been paid to the
Vendor pursuant to the other provisions of this clause 3.12
(but for the operation of the provisions of this
sub-clause), a sum equal to such amount shall be paid to the
Vendor from the Escrow Account immediately on such
determination and/or agreement or withdrawal and any balance
shall be payable in accordance with the other provisions of
this clause 3.12. In the event of or to the extent of any
determination and/or agreement in relation to the Relevant
Claim in favour of the Purchaser then there shall be paid to
the Purchaser from the Escrow Account immediately on such
determination or agreement an amount equal to the amount
determined or agreed to be paid to the Purchaser in respect
of the Relevant Claim and any such sum so paid to the
Purchaser shall be deducted from payments which would
otherwise already have been made to the Vendor pursuant to
the other provisions of this clause 3.12 (but for the
operation of the provisions of this sub-clause) and as
required from any subsequent payments to be made to the
Vendor pursuant to the other provisions of this clause 3.12;
(c) if at any time the amount of the Escrow is less than any amount
agreed or finally determined to be paid to the Purchaser from the
Escrow Account or to be deducted from any amount due to the Vendor
from the Escrow Account in accordance with the terms of this
Agreement then the whole of the Escrow shall be paid to the
Purchaser towards satisfaction of the Relevant Claim so agreed or
determined to be paid to the Purchaser. For the avoidance of
doubt the payment of any sums to the Purchaser from the Escrow
Account towards satisfaction for such Relevant Claim shall not in
any way prejudice or affect any other rights or remedies of the
Purchaser for the purpose of recovering any amount due from the
Vendor in respect of any such Relevant Claim to the extent not
satisfied by payment/s made out of the Escrow Account;
(d) for the purposes of this Agreement any Relevant Claim shall be
deemed to be finally determined if and when determined by an expert
duly appointed in accordance with the terms of this Agreement or by
a court of competent jurisdiction from which there is no appeal or
from whose judgement the Vendor or the Purchaser (as the case may
be) do not appeal (within the period in which any appeal may
properly be brought);
(e) save as otherwise provided, whenever monies are released from the
Escrow Account to either the Purchaser or the Vendor the interest
which has at that time accrued on the Escrow shall be released to
the Vendor;
(f) all monies to be paid to the Vendor from the Escrow Account
pursuant to this clause 3.12 shall be paid to the Vendor's
Solicitors by telegraphic transfer to Clifford Chance Client US
Dollar Account, HSBC, Poultry and Princess Street, London EC2, Sort
Code: 40-05-30, Account No: 70881020, Ref: S1075/133/MER/RBB, Swift
Code: MIDLGB22 and evidence of such transfer shall be a good
discharge for the payment thereof; and
(g) all monies to be paid to the Purchaser from the Escrow Account
pursuant to the this clause 3.12 shall be paid to the Purchaser's
Solicitors by telegraphic transfer to S J Berwin & Co Client
Account, Barclays Bank PLC, 8/9 Hanover Square, London W1A 4ZW,
Sort Code: 20-36-47, Account No: 10644994, Ref: 136/G8903.58 and
evidence of such transfer shall be a good discharge for the
payment thereof.
3.13 Any payment made by the Vendor in respect of any Relevant Claim made
pursuant to this Agreement shall be treated by the parties as a reduction in
the Consideration to the extent of such payment.
4 Conditions
4.1 Completion of this Agreement is conditional upon the following Conditions
being satisfied or, in the case of 4.1(c) and (d), waived by the Purchaser, on
or before the Completion Date:
(a) the passing of the Resolutions;
(b) the transfer to the Vendor (or to its nominee if it shall so
direct) of the 499 shares held by Roland Esnis and the 499 shares
held by Francois Domine in the capital of Twin-X with any dividends,
distributions and rights declared, paid, created or arising on or
after the date of this Agreement and free from all claims, charges,
liens, encumbrances, options or rights of pre-emption;
(c) there having been no material breach of the provisions of Schedule
4;
(d) the Warranty Statements being materially true and accurate as at
the date hereof and as if repeated at Completion; and
(e) no governmental, regulatory or other competition authority having
statutory or regulatory competence in any jurisdiction having
decided to take or initiate any action, proceeding or investigation
the effect of which would be to prohibit or delay Completion beyond
15 November 1999 (or such later date as may be agreed in writing by
the parties.
4.2 The Vendor shall use its best endeavours to procure the satisfaction of
Conditions 4.1(a) to 4.1(d) and, in respect of Condition 4.1(a), shall use its
best endeavours to provide to the Purchaser, as soon as is practicable
hereafter, certified copies of irrevocable undertakings to vote in favour of
the Resolutions from each member of the Vendor's board of directors and their
affiliates in their capacity as shareholders of the Vendor.
4.3 In the event Completion does not occur and either of the Conditions set
out at clause 4.1(a) or (b) has not, for whatever reason, been satisfied in
full on or before the Completion Date (or such later date as shall have been
agreed in writing between the Vendor and Purchaser) then the Vendor shall be
responsible on a full indemnity basis for all reasonable legal, accountancy
and other professional costs and expenses incurred by the Purchaser in
connection with the preparation of this Agreement, which figure shall in any
event be no more than 150,000 U.K. pounds, and this Agreement shall terminate
on 15 November 1999 unless otherwise agreed by the parties.
4.4 If Completion shall have occurred the Purchaser shall have no claim under
the best endeavours undertaking contained in clause 4.2 in respect of clauses
4.1 (c) and (d).
4.5 If at any time the Vendor or the Purchaser becomes aware of a fact or
circumstance that might prevent a Condition being fulfilled it shall
immediately inform the other party.
4.6 Unless as is otherwise required pursuant to the fiduciary duties of the
directors of the Vendor, from the date hereof until Completion (or the lapse or
termination of this Agreement if earlier), the Vendor shall not and the Vendor
shall procure that the Companies shall not, directly or indirectly, encourage,
continue, solicit, engage in discussions or negotiations with, or enter into
any agreement with, any person (other than the Purchaser or its
representatives), or provide any information to any potential purchaser (other
than the Purchaser or its representatives), concerning any purchase or sale of
shares of, or any merger, or any sale of any part of, the assets of the
Companies, or engage in any similar transaction involving the Companies or
their assets or encourage any third party to initiate actions to accomplish any
of the foregoing. Between the date hereof and Completion (or the lapse or
termination of this Agreement if earlier) the Vendor shall notify the Purchaser
as soon as is reasonably practical in writing of the details of any indications
of interest from any persons with respect to the foregoing of which the Vendor
becomes aware.
4.7 If Completion does not occur due to a failure to satisfy condition 4.1(e)
then the Purchaser shall be responsible on a full indemnity basis for all
reasonable legal accountancy and other professional costs and expenses incurred
by the Vendor in connection with the preparation of this Agreement, which
figure shall in any event be no more than U.K. 150,000.
5 Completion
5.1 Completion shall take place at the offices of the Purchaser's Solicitors
(or any other location agreed upon by the Vendor and the Purchaser) on the
Completion Date.
5.2 At Completion the Vendor shall deliver (where appropriate as agent for
the Companies) to the Purchaser or the Purchaser's French Counsel (as the
Purchaser directs):
(a) share transfer forms (ordres de mouvement) in respect of the Shares
and the nominee shares referred to at clause 2.2 duly executed by
the Vendor in favour of the Purchaser (or as it directs);
(b) the resignations of the Vendor as President of Strategia, Richard
Wayne Smith, John Patrick Snyder, John Allen Brenzel and Eric
Leroux as directors of Twinsys and Roland Esnis, Richard Wayne
Smith and Francois Andre Domine as directors of Twin-X in a form
to be agreed;
(c) in relation to each of the Companies, a certified copy of an
original K-bis extract, a certified true copy of the Companies'
constitutional documents, records of the board of directors
meetings, records of the shareholders meetings, shareholders'
accounts ("comptes individuels d'actionnaires") and register of
the share transfers;
(d) a letter from each of the Companies' bankers advising as to the
indebtedness of the Companies as at the close of business on the
Business Day prior to Completion;
(e) a certified copy of any power of attorney under which any document
required to be delivered under this clause 5.2 has been executed;
(f) appropriate written consents in connection with certain change of
control provisions contained in equipment lease/rental agreements
as follows: in relation to Twinsys, three such agreements entered
into with Norbail Location and one such agreement entered into with
EFSI and, in relation to Twin-X, five such agreements entered into
with Norbail Location and two such agreements entered into with
Digital;
(g) a written agreement in a form to be agreed to be entered into
between the Vendor and Twinsys terminating the arrangement whereby
Twinsys pays the Vendor a monthly management fee of around
US$10,597;
(h) a written agreement in a form to be agreed terminating the
arrangement whereby the Vendor invoices Twinsys certain fees due
to Copex in connection with a settlement agreement dated 20 January
1998;
(i) the Strategia Contracts Schedule duly completed;
(j) an officers' certificate confirming or qualifying (as the case
may be) accuracy of the Warranty, to be in a form to be agreed;
(k) the Escrow Account Letter;
(l) the Debts Transfer Agreement in the agreed form duly executed by
the Vendor; and
(m) certified copies of board or shareholder resolutions (as
appropriate) of each of the Companies in a form to be agreed:
(i) recording acceptance of the resignation from office of the
directors of each of the Companies as set out in clause
5.2(b);
(ii) revoking all existing and adopting new bank mandates in
respect of all bank accounts operated by the Companies;
(iii) approving the transfers of the Shares and the nominee
shares referred to at clause 2.2 delivered under this
Agreement to the Purchaser or as it directs; and
(iv) recording the appointment of such persons as the directors
or President of the respective Companies as the Purchaser
shall nominate.
(v) changing the name of Strategia.
5.3 At Completion the Purchaser shall procure the delivery:
(a) to the Vendor or the Vendor's nominee(s), by transfer of funds for
same day value in such proportions as the Vendor shall determine,
the aggregate sum of:
(i) US$5,875,000.00 less the Debts;
(ii) FRF5,500,000; and
(iii) an amount equal to the Debts (being the Assignment Price as
defined in the Debts Transfer Agreement) pursuant to the
Debts Transfer Agreement;
(b) to the Escrow Account, the sum of US$1,275,000.00; and
(c) of the Debts Transfer Agreement duly executed by the Purchaser.
5.4 If for any reason the provisions of clause 5.2 are not fully complied
with, the Purchaser shall be entitled (in addition and without prejudice
to any other right or remedy available to it) to elect:
(a) if such non-compliance is material, to terminate this Agreement in
which case the Purchaser shall not be obliged to purchase any of
the Shares or pay any of the Consideration; or
(b) to fix a new date for Completion; or
(c) to proceed to Completion so far as practicable, the Vendor then
being obliged to use its best endeavours to perform or procure the
performance of any of the outstanding provisions of clause 5.2.
5.5 If the Purchaser terminates this Agreement pursuant to clause 5.4(a),
each party's further rights and obligations cease immediately, but termination
does not affect a party's accrued rights and obligations at the date of
termination and further does not affect:
(a) clause 7.1 which shall survive termination,
(b) the Purchaser's right to claim under the indemnity provided to it
by the Vendor pursuant to clause 4.3; and
(c) the Vendor's right to claim under the indemnity provided to it by
the Purchaser pursuant to clause 4.7.
6 Warranty
6.1 The Vendor hereby:
(a) acknowledges that the Purchaser has entered into this Agreement
and agreed to purchase the Shares on the basis of the Warranty; and
(b) warrants to the Purchaser that each and every of the Warranty
Statements (which for the avoidance of doubt are contractual
warranties only) are true and accurate at the date of this Agreement
(except for Warranty Statements 21.2 and 21.3 which the Vendor
hereby warrants are true and accurate as at the date of Completion)
in all material respects, subject only to:
(i) the matters disclosed in the Disclosure Letter provided
that such matters will be treated as qualifying any
Warranty Statement only to the extent that such disclosure
is fair; and
(ii) any exceptions for which express provision is made pursuant
to this Agreement.
6.2 The Warranty is a separate and independent warranty in relation to each
of the Warranty Statements and no Warranty Statement shall be limited by
reference to any other Warranty Statement or (save as expressly stated
otherwise) by the other terms of this Agreement.
6.3 No proceedings shall be commenced in respect of any Relevant Claim
(except in the case of fraud or wilful misconduct or wilful concealment and
except in the case of a breach of the Warranty Statements contained in
paragraph 3 of Schedule 3, when the limitations in this clause 6 shall not
apply), unless notice giving reasonable details and an estimated amount of the
Relevant Claim:
(a) shall, in the case of any Relevant Claim, other than a Relevant
Claim relating to taxation (pursuant to the Warranty Statements
contained in paragraph 8 of Schedule 3) have been delivered to
the Vendor by the Purchaser not later than 30 April 2001; and
(b) shall insofar as such Relevant Claim relates to taxation (pursuant
to the Warranty Statements contained in paragraph 8 in Schedule 3)
have been delivered to the Vendor by the Purchaser not later than
the end of the relevant French Statutory limitations period plus
one month.
6.4 The total amount of the liability of the Vendor for claims under the
Warranty shall, except in the case of fraud or wilful misconduct or wilful
concealment, be limited to a sum equal to US$5,500,0000.
6.5 Each party shall immediately give written notice to the other of any
fact or circumstance which results or which to their knowledge may result in
any of the Warranty Statements being untrue or inaccurate or in a breach of
any of the parties' respective obligations under this Agreement or under any
of the documents in the agreed form entered into at the date of this Agreement,
giving sufficient details of the fact or circumstance.
6.6 Save as otherwise provided in this Agreement, the rights and remedies of
the Purchaser in respect of any breach of the Warranty shall not be affected by
Completion or by any other event or matter whatsoever which otherwise might
have affected such rights and remedies except a specific and duly authorised
written waiver or release.
6.7 Any information supplied by the Companies, their officers or employees
to the Vendor, its agents, representatives or advisers in connection with, or
to form the basis of, the Warranty or a Warranty Statement or any matter
covered in the Disclosure Letter, or for any other reason, shall be deemed not
to include or have included a representation, warranty or guarantee of its
accuracy by the Companies, their offices or employees to the Vendor. Any
inaccuracy in any such information so supplied shall not constitute a defence
to the Vendor to any claim made by the Purchaser. The Vendor agrees with the
Purchaser for itself and as trustee for the Companies, their officers and
employees that it waives any and all claims against the Companies, their
officers or employees in respect of any information so supplied.
Notwithstanding the foregoing, the Purchaser acknowledges that the Vendor shall
retain a right of action against Roland Esnis and Francois Domine solely to
the extent provided for in a share sale and purchase agreement in respect
of the sale of Mr Esnis' and Mr Domine's minority shareholding in Twin-X to
the Vendor.
6.8 References to the awareness or knowledge of the Vendor in a Warranty
Statement in Schedule 3 shall be deemed to include a warranty that the Vendor
has used its best endeavours to make all reasonable enquiries of Richard Smith,
James Huguenard, Paul Phillips, Roland Esnis, Francois Domine, Eric Leroux,
the Vendor's French Counsel and the Vendor's Solicitors to ascertain if the
relevant information is true and accurate.
6.9 If there is a breach of the Warranty the Purchaser shall not be entitled
to rescind this Agreement and hereby waives all and any rights of rescission in
respect of this Agreement that it may have (howsoever arising or deemed to
arise) other than such rights in respect of fraud but:
6.9.1 in the case of a Relevant Claim, other than a claim relating to taxation
(pursuant to paragraph 8 of Schedule 3), the Purchaser may claim for all loss
suffered by it in consequence of such breach of Warranty.
6.9.2 in the case of a Relevant Claim relating to taxation (pursuant to the
Warranty Statements set out in paragraph 8 of Schedule 3), the Purchaser may
claim damages for an amount equal to the amount which would be necessary to
indemnify the relevant Company against any liability to taxation to the extent
that the liability is greater than it would have been if there had been no
breach of the Warranty.
6.10 No payment shall be made by the Vendor in respect of any matter giving
rise to a Relevant Claim under the Warranty unless and until the amount in
respect of that Relevant Claim (when aggregated with each other Relevant Claim)
shall exceed FRF1,250,000 and in such event the Vendor shall be liable only for
such excess.
6.11 For the purposes of the Warranty and the Warranty Statements references
to "the Company" shall be deemed to extend to each of the Companies to the
effect that each of the Warranty Statements shall be deemed to be repeated
(save where the context otherwise requires) in respect of each of the Companies
as if the expression the Company had been replaced by the name of the relevant
one of the Companies concerned throughout.
6.12 A Relevant Claim notified in accordance with clause 6.3 and not
satisfied, settled or withdrawn is unenforceable against the Vendor on the
expiry of the period of nine months starting on the day of notification of the
Relevant Claim, unless proceedings in respect of the Relevant Claim have been
issued and served on the Vendor.
6.13 The Purchaser shall not be entitled to recover more than once in respect
of any one matter giving rise to a Relevant Claim under the Warranty.
6.14 The Vendor shall not be liable in respect of any Relevant Claim unless
the amount that would be recoverable from the Vendor in respect of such
Relevant Claim exceeds FRF125,000 and the Purchaser hereby acknowledges claims
of less than FRF125,000 may not be incorporated by the Purchaser for the
purposes of calculating whether the hurdle referred to at clause 6.10 has been
attained.
6.15 The Purchaser hereby acknowledges that as at the date hereof it is not
actually aware of any specific fact or specific circumstance which results or
which to its actual knowledge may result in any of the Warranty Statements
being untrue or inaccurate. For the purpose of this clause 6.15, reference to
the awareness of the Purchaser means that the Purchaser has used its best
endeavours to make all reasonable enquiries of Peter Jakob, Peter MacLean and
S J Berwin & Co.
6.16 For the purposes of a Relevant Claim made pursuant to Warranty Statement
21.2, the Purchaser hereby acknowledges and agrees that the amount of such
Relevant Claim shall be limited to the Strategia Proportion of the Additional
Cost.
6.17 The Vendor is not liable in respect of a Relevant Claim to the extent
that the matter giving rise to a Relevant Claim is taken into account in
computing the amount of the Reserve or other allowance, provision of reserve
in the Final Accounts.
6.18 The Vendor is not liable in respect of a Relevant Claim in relation to
taxation:
6.18.1 to the extent that the matter giving rise to the Relevant Claim is a tax
liability of the Companies arising because the Companies' aggregate assets are
more than, or their aggregate liabilities are less than, were taken into
account in computing the provision for tax in the Final Accounts;
6.18.2 to the extent that the matter giving rise to the Relevant Claim would
not have arisen but for:
(a) a claim, election, surrender or disclaimer made, or notice or
consent given, or another thing done, after Completion (other than
one the making, giving or doing of which was taken into account in
computing a provision for tax in the Final Accounts or one made at
the request of the Vendor) under, or in connection with, a
provision of an enactment or regulation relating to tax by a
company in the Purchaser's Group; or
(b) the Companies' failure or omission to make a claim, election,
surrender or disclaimer, or give a notice, or consent or do another
thing, under, or in connection with, a provision of an enactment or
regulation relating to tax after Completion, the anticipated
making, giving or doing of which was taken into account in
computing the provision for tax in the Final Accounts.
6.19 Where an amount of tax paid by the Companies has resulted in a Relief
(the "Relevant Relief") and the Vendor has made a payment to the Purchaser in
respect of the tax in satisfaction of a Relevant Claim, the Purchaser shall
pay to the Vendor an amount equal to the amount by which the Companies' tax
liability is to be reduced as a result of use of the Relevant Relief within
five Business Days after the last date (without incurring penalties or
interests) on which the Companies' would otherwise be liable to make a payment
of tax provided that the Purchaser shall not be obliged to ensure that the
Companies use the Relevant Relief in preference to any other Relief.
6.20 If and to the extent that:
6.20.1 any expenditure by the Companies has been treated as deductible or
allowable for tax purposes in the Final Accounts and is set out in the Final
Accounts; and
6.20.2 a Relevant Claim arises because such expenditure, provision or reserve,
or a part of it, is not deductible or allowable in respect of the accounting
period in which it was treated as deductible or allowable, but it is
deductible or allowable in another accounting period,
the value to the Company of the deduction or allowance obtained in the relevant
accounting period in respect of the expenditure, specific provision or specific
reserve whether by way of reduced tax liability, an amount used for group
relief surrender or otherwise is to be treated as a "Benefit" for the purposes
of 6.22.
6.21 If and to the extent that:
6.21.1 any income, profit or gain of the Companies not received by the
Companies is found to be subject to tax;
6.21.2 the tax gives rise to a Relevant Claim; and
6.21.3 the Companies subsequently actually receive the income, profit or gain
and it is not subject to tax, the amount of tax which would otherwise have been
payable in respect of the income, profit or gain is to be treated as a
"Benefit" for the purposes of paragraph 6.22.
6.22 If the Vendor has made a payment to the Purchaser in satisfaction of a
Relevant Claim of a type mentioned in paragraph 6.20 or 6.21, the Purchaser
shall pay the Vendor an amount equal to any Benefit provided such payment of
Benefit shall not exceed the amount paid by the Vendor.
6.23 Nothing in this clause 6 restricts or limits the Purchaser's general
obligation at law to mitigate any loss or damage which it may incur in
consequence of a matter giving rise to a Relevant Claim.
6.24 If the Purchaser becomes aware of any one matter that may give rise to a
Relevant Claim or a claim referred to in clause 6.25, the Purchaser:
6.24.1 shall as soon as reasonably practicable notify the Vendor of the matter;
6.24.2 shall and shall procure that the Companies shall provide to the Vendor
and its advisers reasonable access to premises and personnel and to relevant
assets, documents and records within the power or control of the Purchaser or
the Companies for the purposes of investigating the matter enabling the Vendor
to take the action referred to in clause 6.24.3;
6.24.3 shall and shall procure that the Companies shall take any action and
institute any proceedings and give any information or assistance as the Vendor
reasonably requests to dispute, resist, appeal, compromise, defend, remedy or
mitigate the matter;
provided always that, unless the provisions of clause 6.25 apply, the Vendor
shall indemnify the Purchaser for all costs and expenses of whatever kind
incurred as a result of such a request by the Vendor.
6.25 Notwithstanding the fact that any relevant disclosures may be contained
in the Disclosure Letter in relation to the following matters, the parties
hereby confirm that the following provisions shall apply in respect of such
matters:
(a) in the event that the monthly management fee (in the period from
its commencement and Completion) charged by the Vendor to Twinsys
(which the Vendor hereby acknowledges is the only such management
fee charged by it to any of the Companies) of around US$10,597.00
is challenged by any taxing authority, the Vendor and Purchaser
hereby agree that they shall each pay half of such tax (and any
associated interest or penalties) claimed by such taxing authority
and paid by the Companies;
(b) subject to clause 6.26, the Vendor hereby indemnifies the Purchaser
in respect of any penalty payment payable by Strategia pursuant to
a penalty clause provision contained in the Contracts with Conseil
General de Loire Atlantique and CANSSM;
(c) pursuant to any penalty clause contained in any other Contract apart
from those set out at sub-paragraph (b) above, where any customer
has made a claim or has provided a notice to Strategia of any event
that may lead to a claim being brought by such customer then:
(i) if such claim or notice has occurred in the period between
the commencement of such Contract and Completion then the
Vendor hereby undertakes to make an appropriate accrual in
the Draft Accounts and in the Final Accounts in respect of
such claim; and
(ii) if such claim or notice occurs after Completion then,
subject to clause 6.26, the amount of such penalty shall be
payable equally as between the Vendor and the Purchaser.
6.26 For the purposes of clause 6.25(b) and 6.25(c)(ii), the Vendor shall not
be liable to make any payment to the Purchaser unless the amount of such
penalty exceeds the aggregate amount of (a) the amount by which Revenue Not Yet
Recognised exceeds Labour Costs and (b) the amount of the Reserve.
7 Non-disclosure of information and restrictions
7.1 The parties hereby agree to keep secret and confidential and not to use,
disclose or divulge to any third party or enable or cause any person to become
aware of any confidential information including but not limited to intellectual
property (whether owned or licensed), inventions, know-how, lists of customers,
reports, notes, memoranda and all other documentary records or their business
affairs, finances, suppliers, customers or contractual or other arrangements:
(a) in respect of the Vendor, relating to any of the Companies; and
(b) in respect of the Purchaser and the Guarantor, relating to the
Vendor.
7.2 The restrictions contained in clause 7.1 shall not apply to any
confidential information which:
(a) is required to be disclosed by law, by a rule of a stock exchange
on which a party's shares are listed or traded, by a governmental
authority or an order of a court or tribunal of competent
jurisdiction (provided that so far as is reasonably practicable
the other party is given prior written notice of such intended
disclosure); or
(b) comes into the public domain otherwise than as a result of its
wrongful disclosure by the parties.
7.3 To ensure that the Purchaser receives the full benefit of the goodwill of
the business of each of the Companies, the Vendor hereby undertakes that it
will not, and the Vendor will procure that no other member of the Vendor's
Group shall, for a period of two years from Completion in connection with the
Restricted Activities either alone or together with or as agent, officer or
employee of any other person, firm or company or through the medium of any
company directly or indirectly:
(a) solicit, interfere with or attempt to entice away from any of the
Companies any person who is at the date hereof or was within the
previous 12 months an employee or agent of any of the Companies, or
who is reasonably considered by the Purchaser to be or have been a
regular client or customer of or supplier to the Companies on the
date of this Agreement or during the 12 months immediately
preceding the date of this Agreement; or
(b) interfere or attempt to interfere with the supply or continued
supply of goods or services to or by the Companies; or
(c) carry on or be engaged, concerned, interested or hold shares or
other securities in any company or businesses (save for the
ownership for investment purposes only of not more than 5 per cent.
of the issued ordinary shares of any company whose shares are
listed on a recognised stock exchange) which compete with the
Restricted Activities in France.
7.4 Each of the restrictions contained in each paragraph of clause 7.3 is a
separate and distinct restriction and is to be construed separately from the
other restrictions. The Vendor acknowledges that the restrictions are
reasonable when taken together as well as individually, that the duration,
extent and application of each restriction are no greater than is necessary
for the protection of the goodwill of the businesses of the Companies and that
the consideration paid by the Purchaser for the Shares takes into account and
provides adequate compensation for the restraints and restrictions imposed.
Should any restriction be found to be void or unenforceable without the
deletion of some part of it or the reduction in area or duration specified,
that restriction shall apply with such modification as may be necessary to
make it valid.
7.5 The parties agree that the benefit of the covenants and undertakings
given in this clause shall be assignable in whole or in part by the Purchaser
to and become enforceable by any of the Companies and any subsidiary or holding
company of any of the Companies or the Purchaser which from time to time is the
holder of any of the Shares, save that should such assignee cease to be a
subsidiary or holding company of the Purchaser or any subsidiary of any such
holding company the benefits of the covenants and undertakings referred to in
this clause shall cease in respect of such assignee.
7.6 After Completion, the Vendor shall not and the Vendor shall procure that
each member of the Vendor's Group shall not without the Purchaser's express
agreement hold itself or himself out as being interested in or in any way
connected (other than as a matter of historic fact) with the Companies or any
of them or permit any person to hold out the Vendor or any other member of the
Vendor's Group as being so interested.
8 Use of name
8.1 From Completion, the Purchaser shall have all of the Companies' rights to
use the names Twinsys and Twin-X as part of the Companies' names and the Vendor
undertakes with the Purchaser for itself and as trustee for the Companies not
to use as a corporate or trading name any name which is or might be likely to
be confused with the names Twinsys and/or Twin-X.
8.2 The Purchaser agrees and the Guarantor agrees to procure to change the
name of Strategia as soon as reasonably possible following Completion and
undertakes with the Vendor not to use as a corporate or trading name any name
which is or might be likely to be confused with Strategia.
9 Guarantee
9.1 In consideration of the Vendor entering into this Agreement with the
Purchaser, the Guarantor hereby irrevocably and unconditionally, as a primary
obligor, undertakes and guarantees the full, prompt and complete performance by
the Purchaser, of all its obligations under this Agreement and the due and
punctual payment of all sums now or subsequently payable.
9.2 The Guarantor's obligations under this clause 9 are primary obligations
and not those of mere surety. The Guarantor's obligations are continuous
obligations and are not satisfied, discharged or affected by an intermediate
payment of settlement of account by, or a change in the constitution or control
of, or insolvency of or bankruptcy, winding up or analogous proceedings
relating to the Purchaser. If any obligation of the Purchaser is void,
voidable or unenforceable for any reason, the Guarantor's obligations under
clause 9 are unaffected and the Guarantor shall perform the Purchaser's
obligations as if it was primarily liable for their performance.
10 General
10.1 The waiver by any party of any right or breach, default or omission by
another party of any of the terms of this Agreement or any of the agreements in
the agreed form shall not take effect unless in writing and, unless
specifically so stated in writing, shall not constitute a continuing waiver of
the right waived or apply to, or operate as a waiver of, any other breach,
default or omission and any forbearance in enforcing any right shall not
constitute a waiver.
10.2 No party shall divulge to any third party (other than their respective
professional advisers bankers or insurers each party agreeing to procure the
adherence of said professional advisers to the terms of this clause), any
information regarding the terms of this Agreement or any matters contemplated
by this transaction or make any announcement relating to it without the prior
agreement (not to be unreasonably withheld or delayed) of the other parties
save to the extent that such announcement is required by London Stock Exchange
Limited, the UK Inland Revenue, the French Treasury, the Securities and
Exchange Commission and the American Stock Exchange and/or a court of
competent jurisdiction or is required by law or is necessary to enforce the
parties' rights under or in respect of this Agreement, in which event the
other parties shall so far as is reasonably practicable be given prior written
notice of such intended announcement. Any announcement shall in any event but
save as required as specified above be made or issued only in a form approved
by the other party (such approval not to be unreasonably withheld or delayed).
10.3 The Vendor shall ensure that the Purchaser and its auditors are given on
reasonable notice and in office hours reasonable access to all accounting and
other records of the Companies and any other facilities and information
regarding the business, assets, liabilities, contracts and arrangements of the
Companies (for the purposes of this clause 10.3 and clause 10.4 only "the
Records") which the Purchaser may reasonably request and which are within the
possession or the control of the Vendor and the Vendor hereby undertakes to
retain all such information in their possession and control for a period of six
years following the date hereof. The Purchaser shall and shall procure that
the Purchaser's auditors shall, to the extent that the Records do not relate to
the Companies, keep such records and their contents confidential.
10.4 The Purchaser shall and shall ensure that the Companies shall preserve
the Records for a period of six years following the date hereof and shall give
access to and copies of such Records to the Vendor to the extent such
disclosure is reasonably required by the Vendor.
10.5 Each party shall pay its own legal, accountancy and other costs, charges
and expenses incurred in connection with the preparation, negotiation,
execution and completion of this Agreement.
10.6 This Agreement, together with any document expressly referred to in any
of its terms, contains the entire agreement between the parties relating to
the subject-matter covered. No oral explanation or oral information given by
any party shall alter the interpretation of this Agreement. The Purchaser
acknowledges that it has not relied on or been induced to enter into this
Agreement (or any other document referred to in it) by a representation other
than those set out in this Agreement. The Vendor is not liable to the
Purchaser (in equity, contract or tort, under the Misrepresentation Act 1967
or in any other way) for a representation that is not set out in this
Agreement. Nothing in this clause shall affect the Vendor's liability in
respect of any fraud, wilful misconduct or wilful concealment.
10.7 The parties hereby undertake with each other to do or procure to be done
all such further acts and things and execute or procure to be executed all such
further deeds and documents as may be reasonably necessary fully and
effectively to vest in each party the respective benefits of this Agreement
including, for the avoidance of doubt, the legal and beneficial ownership of
the Shares in the Purchaser and, pending such vesting, the Vendor shall hold
such Shares and benefits in trust for the Purchaser and shall receive all
monies in connection therewith as trustee of the Purchaser and shall account
to the Purchaser forthwith on receipt.
10.8 Any notice:
(a) must be in writing and must be given:
(i) in the case of the Vendor to Richard Smith at PO Box 37144,
Louisville, Kentucky 40233-7144, fax 00502 426 2662;
(ii) in the case of the Purchaser, to Peter Jakob at the
Purchaser's address set out in this Agreement, fax: (44)193
284 0464; and
(b) unless there is evidence such notice has been received earlier will
be effectively served:
(i) on the day of receipt where any hand-delivered letter or any
telefax message is received on a Business Day before or
during normal working hours; or
(ii) on the following Business Day, where any hand-delivered
letter or any telefax message is received either on a
Business Day after normal working hours or on any other
day; or
(iii) on the seventh Business Day following the day of posting
of any letter sent by first class mail postage prepaid or
sent by air mail.
10.9 This Agreement and all documents supplemental thereto are governed by
and are to be construed in accordance with English law.
10.10 The parties accept the non-exclusive jurisdiction of the appropriate
court of law in England in relation to all matters, claims and disputes
arising out of or in connection with this Agreement and of the documents in
the agreed form.
10.11 Any provisions of this Agreement shall, so far as they are capable of
being performed or observed, continue in full force and effect notwithstanding
Completion except in respect of those matters already performed.
10.12 This Agreement may be executed in several counterparts (whether original
or facsimile counterparts) and upon the execution of all such counterparts by
one or more parties, each counterpart shall be deemed to be an original hereof.
10.13 The benefit of this Agreement may be assigned in whole but not in part
within the Purchaser's Group or the Vendor's Group respectively with the prior
written consent of the other party, such consent not to be unreasonably
withheld or delayed.
SCHEDULE 1
Part 1
Particulars of Strategia Europe SAS
Number: Paris: B413599010
Registered Office: 39-43 Quai Andre Citroen, 75015 Paris,
France
Share capital: FRF2,000,000 divided into 20,000 shares
of FRF100 each
Shareholders and shareholdings: Strategia Corporation - 19,999 shares of
FRF100 each
Twinsys - 1 share of FRF100*
President: the Vendor
Auditors: Ernst & Young
Charges: None
Part 2
Particulars of Twinsys Dataguard SA
Number: Paris: B400265492
Registered Office: 39-43 Quai Andre Citroen, 75015 Paris,
France
Share capital: FRF1,500,000 divided into 15,000 shares of
FRF100 each
Shareholders and shareholdings: Strategia Corporation - 14,981 shares of
FRF100 each
Richard Smith - 6 shares of FRF100 each*
John Snyder - 6 shares of FRF100 each*
John Brenzel - 6 shares of FRF100 each*
Eric Leroux - 1 share of FRF100*
Directors: John Snyder
Richard Smith
John Brenzel
Eric Leroux
President: Eric Leroux
Auditors: Ernst & Young
Charges: None
Part 3
Particulars of Twin-X SA
Number: Paris: B408615847
Registered Office: 39-43 Quai Andre Citroen, 75015 Paris,
France
Share capital: FRF250,000 divided into 2,500 shares of
FRF100 each
Shareholders and shareholdings: Twinsys 1,499 - shares of FRF100 each
Roland Esnis - 499 shares of FRF 100 each
Francois Domine - 499 shares of FRF 100 each
Richard Smith - 1 share of FRF100*
Valerie Potherat Enis - 1 share of FRF100*
Paule Jurville Domine- 1 share of FRF100*
Directors: Roland Esnis
Francois Domine
Richard Smith
President: Roland Esnis
Auditors: Ernst & Young
Charges: None
SCHEDULE 2
The Properties
Description of Lease(s)
1. Premises at 2 rue du Docteur Lombard, 92130 Issy des Molineaux, more
particularly described in a bail commercial dated 9 October 1998 made between
Prebail Enterprise (1) and Twinsys (2).
2. Premises at 39-43 Quai Andre Citroen, 75015 Paris, France, more
particularly described in a bail commercial dated 23 September 1997 made
between AGF Assurances (1) and Twinsys (2) (803 square metres and 6 parking
spaces).
3. Premises at 30-43 Quai Andre Citroen, more particularly described in a
Convention d'Occupation precaire dated 13 April 1994 made between AGF
Assurances (1) and Twinsys (2) (79 square metres and 2 parking spaces).
SCHEDULE 3
Warranty Statements
1 Information, formal and legal
1.1 The information contained or referred to in the Introduction and
Schedules 1 and 2 is true, and accurate.
1.2 Since incorporation the Company has not had a subsidiary or an associated
company.
1.3 So far as the Vendor is aware, all statutory, municipal, governmental,
court and other requirements applicable to the formation, continuance in
existence, creation and issue of securities, management, property or operations
of the Company, and all material licences and consents (including planning
consents) involved or that should be involved in the carrying on of the
business of the Company, have been obtained and complied with in all respects
and the Vendor has not been notified of any contemplated revocation of any
such licence or consent.
1.4 The statutory books and books of account of the Companies are duly
entered up and maintained in accordance with all legal requirements applicable
thereto. All such books, which are its property are in its possession or under
its control and all accounts, documents, returns and forms required to be
delivered or made to the Trade and Companies Registry have been duly and
correctly delivered or made.
1.5 So far as the Vendor is aware the Company has not committed and is not
liable for any criminal, illegal, unlawful, ultra vires or unauthorised act or
statutory duty and the Company is not in violation of, or default with respect
to, any statute, regulation, order, decree or judgement of any court or central
or local government agency of France or any foreign country which has or is
likely to have a material adverse effect upon the assets or business of the
Company.
1.6 Copies of the Company's constitutional documents provided to the
Purchaser by the Vendor are true and accurate.
1.7 In the past 24 months the Company has not done any material act or thing
or engaged in any material activity or incurred any debts and liabilities
otherwise than in the ordinary course of the business carried on by it at the
date of this Agreement.
1.8 The Company does not trade nor has it traded under any name other than
its corporate name.
2 Capital, distribution, contracts and liabilities
2.1 The Company has no Loan Capital outstanding and since the Accounts Date
no loan or share capital of the Company has been put under option or agreed to
be issued or to be put under option and no person has the right (whether
exercisable now or in the future and whether contingent or not) to call for
the issue of any share or Loan Capital and/or the issuance of securities which
entitle the holder to a share of the profits or to the voting rights of the
Company.
2.2 The Company has not at any time:
(a) repaid, redeemed or purchased or agreed to repay, redeem or
purchase any shares of any class of its share capital or otherwise
reduced or agreed to reduce its issued share capital or any class
thereof; or
(b) directly or indirectly provided any financial assistance (as
referred to in article 217.9 of the Law on French Commercial
Companies) for the purpose of the acquisition of shares of the
Company or of any holding company of the Company or for the purpose
of reducing or discharging any liability incurred in any such
acquisition; and
(c) capitalised or agreed to capitalise in the form of shares,
debentures or any other securities or in paying up any amounts
unpaid on any shares, debentures or other securities any profits
or reserves of any class or description or passed or agreed to
pass any resolutions to do so.
2.3 There is not outstanding any indebtedness or other liability (of
whatsoever nature, whether actual or contingent) owing:
(a) by the Company to the Vendor or to any member of the Vendor's
Group or to any director or employee of the Vendor's Group or to
the Company by the Vendor or by any member of the Vendor Group or
by any director or employee of the Vendor's Group save for
remuneration accruing under contracts of employment and expenses
in the ordinary course;
(b) to the Company by the Vendor or any member of the Vendor's Group
or by any such director or former director or by any person
connected with the Company or with any member of the Vendor's
Group or with any such director or former director; or
(c) by the Company to any person in connection with the Commercial
Court of Nanterre Judgement of 5 February 1995 organising the
transfer of the "Twinsys" and DKI business to Twinsys Dataguard or
in or around 1995.
2.4 So far as the Vendor is aware, there are no existing contracts to which
the Company is a party and in which the Vendor or any of the Vendor's Group or
any director of the Company or any person connected with any of them is
interested.
2.5 The Company does not have one customer that is responsible for in excess
of 10% of the Company's turnover in the current financial year or one supplier
that supplied in the current financial year in excess of 10% of the Company's
supplies (as quantified by payments to all suppliers in that year) and no
material customer of such supplier to the Company is a member of the Vendor's
Group or a director, shareholder or consultant (or independent contractor
providing the services of any such persons) of the Vendor or connected with a
member of the Vendor's Group or any such director, shareholder or consultant
(or independent contractor providing the services of any such persons).
2.6 Other than in the ordinary course of business, the Company has not in
the past 12 months:
(a) received notice of any amendment to the prices or other terms of
any contract with any supplier which accounts for in excess of 10%
the Company's supplies in the current financial year (as
quantified by payments to all suppliers in that year) or any
customer that is responsible for in excess of 10% of the Company's
turnover in the current financial year; or
(b) received from the parties to any such customer contract or such
supplier contract, any notice of intention to terminate any of
such contracts prior to their contractual termination date.
2.7 At Completion the Company shall have in its control or possession true
and complete copies of its current written contracts with customers.
2.8 The Company does not have outstanding in relation to the business of the
Company any commitment to obtain or supply goods or services exclusively from
or to any person.
2.9 So far as the Vendor is aware:
(a) the Company is not in material breach of any of its contracts with
customers or suppliers;
(b) the Company has received no notice alleging that it is in breach
of any such contracts; and
(c) no counterparty to any of such contracts is in breach of any of
such contracts.
2.10 The Company is not a party to any contract or other arrangements
(whether in respect of capital expenditure or otherwise) which is:
(a) of an unusual nature having regard to the usual practice of the
Company prior to the date hereof;
(b) dependent on the guarantee or security of any party other than the
Company;
(c) a contract or other arrangement requiring the Company to pay any
royalty, commission or like payment; or
(d) a contract for or arrangement or understanding relating to the
supply of goods and/or services by or to the Company (whether or
not legally enforceable) under or in relation to which
retrospective or future discounts, price reductions or other
incentives have been or are or are proposed to be given by or to
the Company or by or to any other person.
3 The Shares
3.1 The Vendor is the legal and beneficial owner of the Shares and is
entitled to sell such shares with full title guarantee.
3.2 There is no pledge, lien, option, warrant, charge or encumbrance on,
over or affecting any of the Shares, no agreement to create such pledge, lien,
option, warrant, charge or encumbrance has been made and no claim has been
notified to the Vendor that any person is entitled to any such pledge, lien,
charge or encumbrance.
4 Accounts
4.1 The Accounts and the Management Accounts were prepared in accordance
with accounting principals generally accepted in France, applied on a
consistent basis with prior periods, and are true and accurate and provide a
fair image of the financial position of the Company as of the relevant dates
and the results of its operations and changes in financial condition for the
periods then ended.
4.2 Since 1 January 1999 to the date of this Agreement, the Company has
conducted its business (including the payment of its creditors) in the
ordinary course of their business and in substantially the same manner as
previously conducted.
4.3 The Accounts reflect, to the extent compulsorily required by French
GAAP, all contingent and disputed liabilities of the Company as at the
Accounts Date.
4.4 The Company is not bound by an off-balance sheet undertaking (ie
"engagement hors bilan").
4.5 As far as the Vendor is aware no debt owing to the Company is subject
to any set-off or counter-claim.
4.6 None of the book debts of the Company have been outstanding for more
than two months from their due dates for payment and the Vendor have received
no notice that such debts have not realised or will not realise in the normal
course of collection their full value (whichever is the highest) as included
in the books of the Company.
4.7 As far as the Vendor is aware, the Shareholder Loans (as defined in the
Debts Transfer Agreement) represent binding and valid obligations of the
relevant Company at the date of this Agreement and no levy, tax or any
withholding tax in respect of such Shareholder Loans in the period prior to
Completion will impair recovery of the Shareholder Loans by the Purchaser.
5 Business and Trading
5.1 Since the Accounts Date:
(a) the Company has carried on its business in the ordinary course and
so as to maintain it as a going concern;
(b) the Company has not acquired or disposed of or agreed to acquire
or dispose of any business or any asset or assumed or acquired any
material liability (including any contingent liability) except at
a value and on terms determined on an arm's length basis;
(c) the Company has paid its creditors in accordance with its normal
practice;
(d) the Company's business and turnover (excluding seasonal variations)
has not deteriorated or been adversely affected to a material
extent by any act or omission of the Company or by the loss of any
material customer or supplier and the Vendor is not aware of any
facts likely to give rise to any such loss or factor having or
likely to have such effect;
(e) no dividend has been declared, made or paid to the members of the
Company;
(f) no change has been made in the emoluments or other terms of
employment of any of the Company's employees who are in receipt of
remuneration in excess of FRF 300,000 per annum or of any of the
Directors and the Company has not paid any bonus of any kind to
any such employee or any Director;
(g) as far as the Vendor is aware, all material amounts received by
the Company have been paid into the relevant bank account and
appear in the appropriate books of account;
(h) the Company has not repaid or so far as the Vendor is aware become
liable to repay any loan, Loan Capital or other debenture by
reason of its default (and no notification has been received since
the Accounts Date that any such liability has arisen for any other
reason) or (except in the ordinary course of business or for
payments in reduction of bank overdrafts) borrowed any money;
(i) except for discounts applied for payments made in advance, no
debtor has been released by the Company for less than the book
value of any debt and no debt owing to the Company has been
deferred, subordinated or written off or has proved to be
irrecoverable to any extent;
(j) no material commission has been paid and no material discount has
been allowed by the Company at a rate or otherwise on terms
different from those upon which commissions and discounts were
paid or allowed for in the accounting period ended on the Accounts
Date; and
(k) there have been no significant changes in the outstanding
financial position of the Company that have had or are likely to
have a material adverse effect on the financial position of the
Company.
5.2 All the Company's material assets (being assets of a value of FRF100,000
or more) and all debts due to it which are included in the Accounts or have
otherwise been represented as being the Company's property at the Accounts
Date (save for any property subsequently disposed of or realised in the
ordinary course of the business carried on by the Company) are its absolute
property (being property which is not the subject of any encumbrance (excepting
only liens, arising in the normal course of trading) or the subject of any
factoring arrangement, hire-purchase, retention of title, conditional sale or
credit sale agreement) ("Absolute Property") and all such material assets and
debts and all material assets and debts which have subsequently been acquired
or have arisen since the Accounts Date are now the Company's Absolute Property.
5.3 So far as the Vendor is aware, the Company holds all the permits
necessary from the French authorities to conduct its business (including
employment on Sundays and overnight).
6 Stocks, assets and insurance
6.1 The Company owns or has on lease or hire purchase or contract hire the
motor vehicles the make, model and registration number and driver of which are
set out in the Disclosure Letter by reference to this Warranty Statement.
6.2 All computer hardware equipment, plant, machinery, vehicles and other
equipment owned or used by the Company is in the reasonable opinion of the
Vendor adequate for the continued operation by the Purchaser of the business
of the Company and are in the reasonable opinion of the Vendor adequate to
service all of the contracts for the supply of services by the Company to
customers including in respect of disc and memory size required for the proper
conduct of the business of the Company.
6.3 All computer equipment, plant and machinery, vehicles and other
equipment owned or used by the Company is in good working order and has been
maintained and none is, in the reasonable opinion of the Vendor, in need of
renewal or replacement.
6.4 Maintenance contracts are in full force and effect in respect of all
assets which the Company is obliged to maintain or repair under any leasing or
similar agreement and in respect of all assets which in the reasonable opinion
of the Vendor it is necessary to have maintained by outside or specialist
contractors.
6.5 Other than complaints in the ordinary course of business, the Company
has not received notice in the past 12 months that it is in breach of any of
its contracts with material customers.
6.6 There has been no exercise or purported exercise of, or any claim for,
any charge, lien, encumbrance or equity over any of the fixed assets of the
Company which is still outstanding.
6.7 In respect of all insurances relating to the business of the Company as
at the date of this Agreement:
(a) all premiums have been duly paid to date;
(b) all the policies are in full force and effect and to the Vendor's
knowledge are not voidable on account of any act, omission or
non-disclosure on the part of the insured party;
(c) particulars and copies of policies are contained in and attached
to the Disclosure Letter;
(d) so far as the Vendor is aware there are no specific facts or
circumstances which would or are likely to give rise to any claim
and no insurance claim is outstanding; and
(e) all policies are held in the name of the Company.
7 Sale of the Shares
7.1 As a result of the acquisition of the Shares by the Purchaser:
(a) no material supplier of the Company (being a supplier which
supplied in the current financial year in excess of 10% of the
Company's supplies as quantified by payments to all suppliers in
that year) has an express contractual right to cease or reduce its
supplies to the Company; and
(b) no material customer of the Company (being a customer that is
responsible for in excess of 10% of the Company's turnover in the
current financial year) has an express contractual right to, cease
dealing with or reduce the level of business done with the Company.
7.2 The execution or implementation of this Agreement and the agreements in
the agreed form and compliance with the terms of this Agreement and each of the
agreements in the agreed form does not and will not:
(a) conflict with, result in the breach of or constitute a default
under any obligation by which the Company is bound or any provision
of the constitutional documents of the Company;
(b) relieve any person from any material obligation to the Company;
(c) result in the creation, imposition, crystallisation or enforcement
of any encumbrance on any of the assets of the Company; or
(d) result in any present indebtedness of the Company becoming due, or
so far as the Vendor is aware capable of being declared due, and
payable prior to its stated maturity save as contemplated by this
Agreement.
7.3 No person is entitled to receive from the Company any finder's fee,
brokerage or other commission in connection with the sale and purchase of the
Shares.
8 Taxation and tax returns
Tax returns
8.1 Since incorporation, the Company has within the required period duly and
properly made, given or delivered all information, returns, notices, accounts
and computations which ought to have been made for the purposes of taxation
and all such information, returns, notices, accounts and computations supplied
to any taxing authority for any purpose have been made on a consistent basis.
8.2 There is no dispute or question with any taxing authority and so far as
the Vendor is aware the Company has not been the subject of any review, audit
or investigation by any taxing authority and so far as the Vendor is aware,
there is no fact or circumstance which is likely to give rise to any such
dispute, audit, review investigation or question.
8.3 The Company has not obtained any clearances or consents from any taxing
authority.
Payment of taxation
8.4 The Company has duly paid all taxation for which it is liable to the
appropriate taxing authority and whether or not such liability to taxation is
or could be the subject of an appeal.
8.5 The Company is under no liability to pay any penalty, interest,
supplement, fine or default surcharge in connection with any taxation.
Payments under deduction of taxation
8.6 The Company has deducted or withheld all taxation required to be
deducted or withheld from any payments made by the Company and the Company has
duly complied with any obligation to account for any such taxation deducted or
withheld to the appropriate taxing authority in particular without prejudice
to the generality of the foregoing, social security taxes and charges
(including in respect of pensions), interest, payments to subcontractors and
payments in respect of patents and copyrights.
8.7 Any liability (actual or contingent) to make a payment subject to a
deduction or withholding of taxation which are subject to a liability to
grossing up has been disclosed to the Purchaser.
Shares and Financing
8.8 All interest payments which the Company is under an obligation to make
are deductible.
8.9 The Company has not at any time repaid or redeemed or agreed to repay
or redeem any share capital or securities.
8.10 The Company has not at any time capitalised or agreed to capitalise any
profits or reserves into shares or securities and has not passed or agreed to
pass any resolution to do so.
8.11 The Company is not a party to a loan relationship or other debt, the
repayment of which at par could give rise to a tax liability for the Company.
Residence etc.
8.12 The Company is and always has been resident in France and is not and
never has been resident for any purpose in any other country.
8.13 The Company has no permanent establishment (as defined in any relevant
double taxation relief order), branch or agency or place of business outside
France.
8.14 The Company is not within the charge to taxation of any nation, country,
state or other political division outside France.
Deductions
8.15 No material amount of a revenue nature which has been paid or is payable
by the Company after the date of this Agreement incurred under an obligation
entered into before Completion to pay is wholly or partly disallowable as a
deduction, charge on income or otherwise in computing the liability of the
Company to taxation.
8.16 The Company has not made or agreed to make any payment to or provided
or agreed to provide any benefit to any director, employee, former director or
former employee which is not allowable as a deduction in computing the
Company's liability to taxation on profits.
Conduct of business
8.17 Since the creation of the Company, there has been no major change in the
nature or conduct of any trade or business of the Company whether or not
arising as a result of the transfer of assets directly or indirectly by the
Company to the Vendor or to any other company under the control of the Vendor
or to a connected person of any of them, and so far as the Vendor is aware no
arrangements exist whereby, after Completion, any such major change shall
occur.
Capital allowances
8.18 The Company has received no grants, subsidies or other contributions in
respect of assets in respect of which it may claim capital allowances.
8.19 No capital expenditure incurred or to be incurred by the Company will be
deemed to be incurred on a date other than that upon which the obligation to
pay the expenditure becomes unconditional.
Allowable cost of assets for chargeable gains
8.20 The Company does not own and has not agreed to acquire any asset the
consideration for the acquisition of which was or will be in excess of its
market value or determined otherwise than on an arm's length basis.
8.21 No assets owned by the Company was owned by any other member of the
Vendor's Group.
8.22 The Company is not and never has been the settlor, trustee or
beneficiary of or otherwise interested in, any trust or settlement or foreign
equivalent.
Groups and consortia
8.23 The Company is not and has not been a member of a tax consolidation
group ("groupe integre fiscalment").
8.24 The Company has not entered into any agreements or arrangements relating
to group relief
8.25 There are no outstanding obligations to make or rights to receive
payment in respect of surrenders of group relief.
Recovery of tax from the Company
8.26 There is no liability to taxation for which the Company is or may be
liable to be assessed or asked to account or have collected from it where such
taxation is primarily chargeable against some other person or where such
taxation is the joint or joint and several liability of the Company and some
other person or where the taxation in question relates to any income, profits
or gains earned, accrued or received by any other person.
8.27 The Company has no liability to indemnify any person in respect of
taxation whether statutory or otherwise.
VAT
8.28 The Company has complied in all material respects with all statutory
provisions and regulations and notices relating to VAT and has duly paid or
provided for all amounts of VAT for which the Company is or may be liable.
8.29 The Company has been duly attributed a VAT number.
8.30 All supplies made by the Company are taxable supplies.
8.31 The Company has not received any zero rated supplies for VAT purposes.
Stamp duty, stamp duty reserve tax and capital duty
8.32 All documents in the possession of the Company or to the production of
which it is entitled and which attract stamp duty capital duty or transfer
duty in France or elsewhere and in the enforcement of which the Companies is
interested or needs to establish title to an asset have been properly stamped.
Anti-avoidance
8.33 No transaction has been entered into or event occurred (the main purpose
or one of the main purposes of which is the avoidance of tax) in consequence
whereof the Company is liable to taxation or increased taxation or to denial
or reduction of a tax relief.
Miscellaneous
8.34 The Disclosure Letter contains all material details of any
reorganisation, reconstruction or amalgamation involving the Company.
8.35 The Company does not and has never carried on business in partnership,
or under any joint venture agreement or arrangement and is not a member of a
GIE.
8.36 The Company is not and never has been any person's agent or
representative for taxation purposes.
8.37 The entry into this Agreement and/or Completion will not give rise to
any actual or deemed charge to taxation on capital gains in respect of the
Company.
Taxation outside France
8.38 Paragraphs 8.1 to 8.38 of this Schedule 3 shall apply mutatis mutandis
in relation to taxation outside France and accordingly any reference in those
paragraphs to any form of taxation or tax relief or any statutory provision
relating to taxation in France shall be deemed to include a reference to the
equivalent or substantially equivalent form of taxation or tax relief or
statutory provision relating to taxation in any other relevant taxing
jurisdiction.
9 Employees, agents and pensions
9.1 The Employees are all the employees of the Company as at the date of
this Agreement and the names, current monthly wage and other emoluments,
salary review dates, age, the date of commencement their period of continuous
employment with the Company, notice periods and job titles of the Employees
are set out in the Disclosure Letter.
9.2 The Disclosure Letter also includes full details of all employee share
schemes, employee share option schemes, profit related pay schemes or other
employee benefit schemes of any kind of the Company now in force and there are
no other such schemes.
9.3 There is no liability whatsoever (whether legally binding or not) to
make any payment to or for the benefit of any of the Employees or the wife or
widow or any other relative of any of the Employees in respect of past service
or the termination of the employment of that person by way of pension
contribution, pension retirement benefit or otherwise and the Company has no
superannuation fund, retirement benefit or other pension schemes or
arrangements to provide benefits to past or present employees or directors (or
their dependants) by reason of retirement, death, disability or sickness or
otherwise.
9.4 No assurances or undertakings (whether legally binding or not) have been
given to any of the Employees as to the continuance or introduction or
increase or improvement of any retirement, death, sickness or disability scheme.
9.5 There is no outstanding commitment (whether legally binding or not) to
increase the remuneration of any Employee who is earning at the date hereof in
excess of FRF300,000.
9.6 All contracts of service or consultancy or for services with directors
or employees or consultants or independent contractors providing the services
of individual personnel of the Company can be terminated by three months'
notice or less without liability on the Company to pay damages or compensation
(other than a statutory redundancy payment or statutory compensation for
unfair dismissal, if applicable).
9.7 In the 36 months immediately prior to the date of this Agreement:
(a) no liability (actual or contingent) has been incurred by the
Company for breach of any contract of service or consultancy, for
redundancy payments (including protective awards), for
compensation for wrongful dismissal or unfair dismissal or loss of
office or for failure to comply with any order for the
reinstatement or re-engagement of any officer or employee; and
(b) no payment has been made or promised by the Company in connection
with the termination, suspension or variation of any contract of
service or consultancy or for services of any present or former
officer or employee.
9.8 So far as the Vendor is aware the Company has in relation to each of the
Employees and its former employees complied in all material respects with all
material obligations imposed on it by all contracts, statutes, orders,
regulations, collective agreements, awards and codes of conduct and practice
relevant to conditions of service and to the relations between it and the
Employees and such former employees and has in all material respects
maintained adequate and suitable records regarding the service of the
Employees and such former employees.
9.9 The Company has not entered into any recognition agreement with any
trades union or association of trade unions or organisation or body of
employees nor has it done any act which could be construed as an act of
recognition and the Company is not involved in and there are no present
circumstances which are likely to give rise to any industrial or trade dispute
or any dispute or negotiation regarding a claim of material importance with
any trade union or association of trade unions or organisation or body of
employees.
9.10 All current employee agreements in relation to employees of the Company
earning in excess of FRF300,000 per annum are attached to the Disclosure
Letter.
9.11 There are no non-compete clauses contained within any of the agreements
attached to the Disclosure Letter pursuant to Warranty 9.10.
9.12 The Company has acted and currently acts in conformity with the laws
applicable to recourse to temporary staff, overtime staff and loan of
personnel (through subcontractor agreements or otherwise).
10 Pensions
The Company has complied in all material respects with all statutory
regulations in respect of employee pensions (retraite obligatoire et retraite
complementaire).
11 Litigation
11.1 So far as the Vendor is aware the Company is not and no person for whose
acts and defaults (and which acts and defaults are the subject of any such
claim) it may be vicariously liable is at present engaged whether as
plaintiff, defendant or otherwise in any legal action, proceeding or
arbitration which is either in progress, or threatened (other than as
plaintiff in the collection of debts arising in the ordinary course of the
business carried on by it none of which exceeds FRF100,000 and which do not
exceed FRF150,000 in aggregate) or is being prosecuted for any criminal
offence and no written notice of any claim in damages or for an injunction has
been received by the Company and no governmental or official investigation or
inquiry concerning the Company is in progress or pending.
11.2 There are no circumstances known to the Vendor likely to lead to any
such claim or legal action, proceeding or arbitration, prosecution,
investigation or enquiry.
11.3 No distress, execution or other process has been levied in respect of
the Company in the 12 months immediately prior to the date of this Agreement.
There is no judgement or court order outstanding against the Company of which
it has received notice. The Company has not given any undertaking to any
court, tribunal or governmental authority.
11.4 No act, transaction or omission has occurred as a result of which the
Company is held liable to refund in whole or in part any investment grant (or
other grant or loan received from any governmental department or agency or any
local or other authority by virtue of any statute) or any such grant or loan
for which application has been made by them will not be paid or will be
reduced.
11.5 There are no material outstanding disputes between the Company and any
of its customers or suppliers.
12 Capital commitments, unusual contracts, guarantees etc.
The Company:
(a) has no capital commitments which individually exceed FRF 100,000
or in aggregate exceed 200,000;
(b) is not a party to any arrangement or commitment (in respect of
capital expenditure) which is outside the ordinary course of
business;
(c) has not delegated any powers under a power of attorney (other than
as an incidental part of a larger transaction) which remains in
effect or has appointed any agent under an authority which has not
been revoked and other than any ostensible or implied authorities
to directors or employees and consultants to enter into routine
contracts in the normal course of their duties;
(d) as far as the Vendor is aware, by reason of its default has not
become bound, and no person has become entitled (or with the
giving of notice and/or the issue of a certificate will become
entitled) to require it, to repay prior to its stipulated due date
any Loan Capital or other debenture, redeemable preference share
capital or borrowed money and no notice has been received since
the Accounts Date of such liability having arisen for any other
reason;
(e) has not entered into, and is not subject to, any outstanding
agreement which requires or confers any right to require the sale
(whether for cash or otherwise) or transfer by them of any
material asset; or
(f) has not entered into, and is not subject to, an agreement or
arrangement which restricts the freedom of the Company to carry on
the whole or any part of the business of the Company or to use or
exploit any of its assets in any part of the world in such manner
as it thinks fit.
13 Borrowings and lendings
13.1 Full details of all limits on the Company's bank facilities are
accurately set out in the Disclosure Letter and the total amount borrowed by
the Company from its bankers does not exceed its facilities.
13.2 The Company has no limitation on its borrowing powers contained in its
Articles of Association, or in any debenture or other deed or document binding
on it.
13.3 The Company has not factored any of its debts, or engaged in financing
of a type which would not require to be shown or reflected in statutory
accounts or borrowed any money which it has not repaid.
14 Continuation of facilities
In relation to all debentures, acceptance credits, overdrafts, loans or other
financial facilities outstanding or available to the Company (referred to in
this Warranty Statement as "Facilities"):
(a) there are attached to the Disclosure Letter full and complete
copies of all documents relating to the Facilities;
(b) so far as the Vendor is aware, there have been no material
contravention or, or material non-compliance with, any provision
of any document relating to any of the Facilities;
(c) no notice has been received that any steps to the early repayment
of any indebtedness have been taken or threatened in writing;
(d) none of the Facilities are dependent upon the guarantee or
indemnity of, or any security provided by, any party other than
the Company.
15 The Properties
15.1 The particulars of the Properties specified in Schedule 2 are true and
accurate in all material respects.
15.2 Save as specified in of Schedule 2 the Company exclusively occupies the
whole of each of the Properties shown against its name in Schedule 2.
15.3 The Company does not own or have any interest in any land or building
other than the Properties, and the Company has not entered into any legally
binding agreement for the purchase of any such interest.
15.4 The Company occupies and uses the Properties shown under its name in
Schedule 2 for the purpose of conducting the business of the Company only and
has quiet enjoyment thereof and occupies or uses no other properties for such
purpose.
15.5 So far as the Vendor is aware, all covenants, obligations, restrictions
and conditions affecting the Properties or the Company as lessee have been
observed and performed and all outgoings have been duly paid and all consents
(where necessary) obtained and complied with and no notice of any alleged
breach of such covenants, obligations, restrictions and conditions has been
received and so far as the Vendor is aware, there are no circumstances now
existing which would entitle the landlord of any leasehold property to
exercise any power of entry upon or take possession of any property or to draw
upon any rental deposit or other security available to it.
15.6 No notice, action or proceedings affecting the Properties has been
served or commenced and there are no disputes concerning the Properties with
any person and so far as the Vendor is aware, there are no circumstances now
existing which are likely to result in any such notice, action or proceedings
being served or commenced or any such dispute arising.
15.7 The Company has in its possession or under its control all documents
relating to the Properties necessary to constitute proper title to the
Properties.
15.8 The Properties are in good repair and condition to the extent that such
repair and condition constitutes an obligation of the Company.
15.9 The Company is entitled to rights of way and rights for the supply of
services and all other rights and easements sufficient for the present use of
the Properties.
15.10 No lease under which the Company holds the Properties:
(a) contains rent review provisions the operation of which would or
may result in more than a current market rent being payable for
that Property;
(b) contains any provision enabling the landlord to terminate the
lease prior to the term determination date.
15.11 The Company is not engaged in any negotiation for review of the rent
payable under any lease under which it holds the Properties, no such
negotiations have been concluded since the Accounts Date changing the rent and
there are no rent reviews capable of being implemented by the landlord in
respect of the period prior to completion.
15.12 There are no alterations refurbishments or renewals of the whole or any
part of any of the Properties or the building or estate of which the
Properties forms part which may be incurred by or charged in whole or part to
the Company.
15.13 Save as specified in the Disclosure Letter and so far as the Vendor is
aware, there are no other material matters which adversely affect the
continued use of the Properties for the purposes of the business of the
Company.
15.14 So far as the Vendor is aware, there is no actual or contingent
liability on the part of the Company arising directly or indirectly out of any
lease, agreement for lease, conveyance or licence or other deed including any
actual or contingent liability arising directly or indirectly out of any
covenant made by the Company in favour of any lessor or any guarantee given by
the Company in relation to a lease or underlease.
15.15 The Company has not been given a notice to leave the Properties.
16 Environmental
16.1 As far as the Vendor is aware, the Company has obtained and is in full
compliance with the terms and conditions of all Environmental Consents
required in respect of the Company' activities and is in full compliance with
and has no actual or contingent liability under Environmental Law.
16.2 As far as the Vendor is aware, no conditions exist on any of the
Properties in respect of which the Company is or may be responsible for all or
any part of the costs or expenses associated with the treatment or removal of
Materials of Environmental Concern under Environmental Law.
16.3 For the purposes of the foregoing sub-paragraphs, the following
definitions shall have the following respective meanings:
Environmental Consents any permit, license, authorisation,
approval or consent required under
or agreement made pursuant to any
Environmental Law;
Environmental Law all laws (including common laws,
statutes and subordinate
legislation), treaties, conventions,
regulations, codes of practice or
guidance notes concerning the
Environment or health and safety
which are or were binding upon
the Company;
Materials of Environmental Concern any substance which may cause harm
to or have a deleterious effect on
the Environment; and
Environment air, water, land, buildings,
structures, enclosures, or other
constructions, flora, fauna and
humans.
17 Insolvency
17.1 No administrator, administrative receiver, receiver, manager of assets,
liquidator or any other similar officer has ever been appointed in respect of
the whole or any part of the assets or undertaking of the Company and no order
has been made, petition presented or resolution passed for the purpose of the
making of any order in relation to administration, administrative receivership,
receivership, liquidation, management of assets or any other similar situation
of the Company.
17.2 The Company is not insolvent (i.e. "en etat de cessation de paiements"
under French law) nor unable to pay its debts as they fall due.
17.3 No voluntary arrangement or scheme of arrangement as regards its
creditors has been proposed by the Directors or is in operation in relation to
the Company.
17.4 The Company has not entered into any transaction with a member of the
Vendor's Group nor been given a preference by a member of the Vendor's Group
(as referred to in Articles 107 and 108 of Law No: 85-98 of January 25 1985
relating to bankruptcy proceedings or Article 1167 of the French Civil Code)
or which may otherwise be liable to be set aside or avoided for any reason.
18 Intangible Property Rights and Intellectual Property
18.1 The businesses of the Company and the material processes, data, material
and software employed by it and the material goods and services supplied by it
in France or elsewhere in the world do not so far as the Vendor is aware
infringe or use or (except as set out in the Disclosure Letter) require the
Company to acquire a licence under any Intellectual Property in which any
other person has rights of any nature.
18.2 The Company has not granted any licences in relation to Intellectual
Property and all material licences in respect of which the Company is a or the
licensee , are set out in the Disclosure Letter.
18.3 No material plant or equipment, goods, services, documentation,
software, data or other items used by the Company in the course of its
business has been supplied under any licence or permission that provides in
its terms that it will cease on any change in the control of the Company or
any transfer of the legal or beneficial interest in any shares in the Company.
18.4 No Intellectual Property which the Company owns (which shall not include
any licences granted to the Company) and which is, material to the business of
the Company is:
(a) so far as the Vendor is aware, being infringed, misappropriated or
used without permission by any other person; or
(b) so far as the Vendor is aware, subject to any licence, estoppel or
authority or similar right in favour of any other person, except
as set out in the agreements listed in the Disclosure Letter.
18.5 The Company has no registered Intellectual Property nor has the Company
made any application for registration.
18.6 So far as the Vendor is aware, no other person has registered in any
country any invention, topography, copyright work, design, trade or service
mark or name, trade secret or know-how made, or claimed to be owned, by the
Company and nothing has been notified to the Vendor in relation to an
application to register the same.
18.7 So far as the Vendor is aware the licences listed in the Disclosure
Letter have been entered into in the ordinary course of business, are in full
force and effect and no notice has been given or received by the Company to
terminate any of them and the obligations of the Company under each of the
same have been materially complied with and no disputes exist in respect of
any of them.
18.8 Other than to the Purchaser and to agents, employees or professional
advisers of the Purchaser and the Vendor, the Company has not knowingly
disclosed, or knowingly or recklessly permitted to be disclosed, or undertaken
or arranged to disclose, to any person any of its know-how, trade secrets,
confidential information or lists of customers or suppliers except in the
ordinary course of business on terms as to the maintenance of confidentiality
of the same by the disclosee.
18.9 As far as the Vendor is aware, the Company owns or has valid and
enforceable licences in respect of the Intellectual Property which the Vendor
reasonably believes to be necessary to operate its business.
18.10 The business is operated by the Company in full ownership. It has been
duly created, purchased or contributed. The Company has not leased the
business pursuant to a contract of "location-gerance or "gerance libre".
All the pledges concerning the business have been registered and are contained
in the Disclosure Letter. The Company's clientele belongs to it without
restrictions.
19 Competition
So far as the Vendor is aware, the Company has not done anything which, and is
not a member or party to any agreement or arrangement which, contravenes or
requires registration or notification under any of the provisions of the
Treaty of Rome; or any other French anti-trust, anti-monopoly or anti-cartel
legislation or regulation in any country of the world in which or with which
it does business.
20 Authority
20.1 The Vendor has taken all necessary corporate and regulatory actions to
authorise the execution, delivery and performance of its obligations under
this Agreement, and no other corporate or regulatory proceedings on the part
of the Vendor (save for the passing of the Resolutions) is or will be
necessary to authorise such execution, delivery and performance. This
Agreement has been duly executed and delivered by the Vendor and constitutes a
valid and binding obligation of the Vendor enforceable against the Vendor in
accordance with its terms.
20.2 No other consent, appeal, authorisation or order of any court or
government or local agency or body is required by the Vendor or the Company
for the implementation of this Agreement.
21 Year 2000
21.1 The Company has taken all reasonable steps based on prevailing industry
best practice applicable in the period prior to the date of this Agreement and
on knowledge or on information known or that reasonably ought to have been
known in the period prior to the date of this Agreement to determine that all
hardware, software, firmware, other plant, equipment, machinery or building
facilities (each a "System") used by the Company in its business meets the
standards of year 2000 compliance as set out in Rules 1-4 of British Standards
Institute (DISC PD 2000-1) (the "Standard") and has determined from having
taken such reasonable steps that each and every System complies with the
Standard.
21.2 In the period from Completion, Labour Costs shall not exceed the sum
equal to Revenue Not Yet Recognised and the Reserve (such excess being the
"Additional Cost").
21.3 Subject to the qualifications expressly set out in the Strategia
Contracts Schedule, the information contained in or referred to in the
Strategia Contracts Schedule is true and accurate and there are no other
Contracts other than those listed therein.
SCHEDULE 4
Position Pending Completion
1 Except as contemplated by this Agreement, the Vendor hereby covenants
with and undertakes to the Purchaser to procure that none of the Companies
shall at any time prior to Completion or, if earlier, the lapse or termination
of this Agreement, without the prior written consent of the Purchaser (which
shall not be unreasonably withheld or delayed) or save as specifically
mentioned in the Disclosure Letter:
(a) permit or cause to be proposed any alteration to its share capital
(including any increase thereof) or the rights attaching to its
shares;
(b) create, allot, issue, redeem, consolidate, convert or sub-divide
any share or Loan Capital or grant or agree to grant any options
for the issue of any share or Loan Capital;
(c) subscribe or otherwise acquire, or dispose of any shares in the
capital of any company;
(d) acquire or dispose of the whole or part of the undertaking of it
or of any other person, firm or company;
(e) send any notice to its shareholders or pass any shareholder
resolution;
(f) save as may be required by law cease or propose to cease to carry
on its business or be wound up or enter into receivership,
administrative receivership or any form of management or
administration of its assets or;
(g) permit or suffer any of its insurances to lapse or do anything
which would make any policy of insurance of its null or voidable;
(h) apply or permit its directors to apply to petition to the Court for
an administration order or similar order to be made in respect of
it;
(i) make any change to its auditors, its bankers or (except in the
ordinary course of business) the terms of the mandate given to
such bankers in relation to its account(s), or its accounting
reference date;
(j) enter into or vary any transaction or arrangement with, or for the
benefit of any of its directors or shareholders or any other
person who is a connected person with any of its directors or
shareholders;
(k) borrow monies (other than by way of its existing agreed overdraft
facility) or accept credit (other than normal trade credit) or
make payments out of or drawings on its bank accounts other than
in accordance with its usual practice prior to the date of this
Agreement;
(l) make any payment otherwise than on an arm's length basis;
(m) (except in the ordinary course of business) enter into or give or
permit or suffer to subsist any guarantee of or indemnity or
contract of suretyship for or otherwise commit itself in respect
of the due payment of money or the performance of any contract,
engagement or obligation of any other person or body;
(n) grant any lease or third party right in respect of any of or any
part of any of the Properties or assign or dispose or deal with
any of the Properties or any part of any of them;
(o) propose or pay any dividend or propose or make any other
distribution;
(p) enter into any partnership or joint venture;
(q) incur any capital expenditure (including obligations under hire
purchase and leasing arrangements), other than in the ordinary
course of business up to a total of FRF100,000;
(r) save for normal replacement of capital assets up to a total of
FRF100,000 dispose of any asset of a capital nature;
(s) engage any employee on terms that either his contract cannot be
terminated by three months' notice or less or his emoluments
and/or commissions or bonuses are or are likely to be at the rate
of FRF300,000 per annum or more or increase the emoluments and/or
commissions or bonuses or any employee to more than FRF300,000 per
annum or vary the terms of employment of any employee earning
(or so that after such variation he will, or is likely to earn)
more than FRF300,000 per annum;
(t) vary or make any binding decisions on the terms of employment and
service of any officer or of the Employees generally or increase
or vary the salary or other benefits of any such officer or
employee (except in accordance with his existing terms of
employment), or appoint or dismiss any officer or such employee
(other than a lawful summary dismissal);
(u) mortgage or charge or permit the creation of any mortgage or
charge over the whole or any part of its assets or redeem any of
the foregoing;
(v) make any loan or give any credit (other than normal trade credit)
or acquire any Loan Capital of any corporate body (wherever
incorporated);
(w) surrender or agree to any material change in the terms of any
substantial agency, supply or distribution agreement to which it
is from time to time a party;
(x) (other than in the ordinary course of business) enter into any
leasing, hire, hire purchase or other agreement for payment on
deferred terms or any unusual or onerous contract or any other
material or major or long term contract;
(y) make any material change in its business or do any act or thing
outside the ordinary course of the business carried on by it;
(z) institute any material litigation (save for the collection of
debts arising in the ordinary course of business) or settle or
compromise any claim or dispute; or
(aa) enter into any contract or binding commitment to do any of the
acts or matters referred to in this clause 1.
2 Except as contemplated by this Agreement, the Vendor hereby covenants
with and undertakes to the Purchaser to procure that prior to Completion or,
if earlier, the lapse or termination of this Agreement:
(a) Strategia shall not enter into any new contract with any customer
which contains a penalty clause the effect of which new contract
is to create a liability for the Company (pursuant to penalty
clauses contained in any new contract) in excess of an aggregate
sum of FRF500,000; and
(b) neither Twin-X or Twinsys shall enter into any new contract with
any customer (other than in relation to renewals, replacements
and/or extensions of contracts with existing customers for which
no consent is required) which contains a penalty clause the effect
of which new contract is to create a liability for the Company
(pursuant to a penalty clause contained in any new contract) in
excess of 25% of the annual value of such contract;
without the prior written consent of the Purchaser.
For the purposes of this clause 2, the notice provisions set out
at clause 10.8 are excluded and such consent as is required from
the Purchaser will be deemed to have been given if the Purchaser
has not responded to an email request for such consent within 72
hours. Email requests for consent should be addressed to Peter
MacLean at [email protected].
3 The Vendor hereby covenants with and undertakes to the Purchaser that
the Vendor will procure so far as it is able, but without obligation to spend
money outside of the ordinary course of business, that between the date of
this Agreement and Completion or, if earlier, the lapse or termination of this
Agreement:
(a) the Companies will continue to carry on their respective business
in the ordinary course including, without limitation, paying their
creditors in the ordinary course of business and within the usual
terms of payment of such creditors and collecting their debtors in
the ordinary course of business and within the usual terms of
payment by such debtors;
(b) the Companies will maintain their usual level of stocks;
(c) the Vendor will use their reasonable endeavours to maintain the
customer base, customer relationships, the trade and trade
connection of the businesses of the Companies will not by any
action, omission, neglect or default knowingly damage or risk
damage to the same; and
(d) the Vendor will promptly inform the Purchaser of any material
concerns that arise (or of which they are informed) in relation to
the customer base, the customer relationships, the trade and trade
connection of the businesses of the Companies.
(e) the Companies will continue to take all reasonable steps based on
industry best practice and knowledge or information known to
determine that any System used by the Companies meets the Standard.
4 Pending Completion the Vendor shall procure that the Purchaser and its
agents and representatives are given full access, at reasonable times and upon
reasonable notice, to the Properties and to the books and to the records of
the Companies and the Vendor shall upon request furnish such information
regarding the businesses and affairs of the Companies as the Purchaser may
reasonably require so long as it does not hinder the proper running of the
business of the Company and the Purchaser shall and shall procure that its
agents and representatives shall pending Completion and save as may be
required by law or order of court or the rules of any stock exchange or by a
governmental authority maintain the confidentiality of the information
contained therein. If Completion shall not occur then any information so
obtained by the Purchaser shall be kept confidential by the Purchaser and
returned thereafter to the Vendor.
SCHEDULE 5
Strategia Contracts Schedule
<TABLE>
<CAPTION>
1 2 3 4 5
Customer Contract Commencement Estimated Cost Estimated
Date to Complete Completion
Date
<S> <C> <C> <C> <C> <C>
1
2
3
4
5
6 7 8 9 10
Costs Man Days Percentage Adjusted Total
Incurred Incurred Complete /3 Percentage Revenue /7
to Date to Date Complete /1
<S> <C> <C> <C> <C> <C>
1
2
3
4
5
11 12 13 14
Revenue Adjusted Revenue Strategia
Recognized /4 Revenue Not Yet Proportion
Recognized /2 Recognized /5
<S> <C> <C> <C> <C>
1
2
3
4
5
/1 Equals the lesser of Percentage Complete and 75%
/2 Equals Adjusted Percentage Complete X Total Revenue
/3 Determined by Vendor in good faith based on information known at Completion
/4 Equals Total Revenue X Percentage Complete
/5 Equals Total Revenue less Revenue Recognised
/6 Equals Adjusted Revenue Recognized as a percentage of Total Revenue
/7 Total Revenue is the total contract value
</TABLE>
ATTESTATIONS
Signed by )
on behalf of )
STRATEGIA CORPORATION )
in the presence of: )
Signed by )
on behalf of )
GUARDIAN DR (OVERSEAS HOLDINGS) )
LIMITED acting by its French Branch )
in the presence of: )
Signed by )
on behalf of )
GUARDIAN IT PLC )
in the presence of: )
Appendix C
TWINSYS/TWIN-X/STRATEGIA EUROPE SHAREHOLDER AGREEMENT
This is an Agreement entered into as of May 28, 1999, between Strategia
Corporation (a Kentucky, USA, corporation) ("Strategia"), and Twinsys
Dataguard SA, Twin-X SA, Strategia Europe SAS (collectively, the "French
Subsidiaries") and Roland Esnis ("Esnis"), Valerie Potherat Esnis, and
Francois Domine ("Domine") and Paule Jurville Domine (collectively, the
"Individual Shareholders"). Strategia owns substantially all of the
outstanding shares of Twinsys Dataguard SA ("Twinsys") and Strategia Europe
SAS ("Strategia Europe") and Twinsys owns 60% of Twin-X SA ("Twin-X"). The
Individual Shareholders collectively own 40% of Twin-X.
Strategia is exploring the possible sale (the "Sale") of its interests in the
French Subsidiaries and has engaged First Albany Corporation, an investment
advisory firm, for assistance in this regard. It is anticipated that the Sale
will be effected as a substantially simultaneous sale of all three French
Subsidiaries to one buyer. The purpose of this Agreement is to obtain the
option to acquire the Individual Shareholders' stock in Twin-X, to obtain the
commitment of Esnis and Domine to assist in the sale process (including the
due diligence process of the purchaser) and to resolve and eliminate any
issues related to the employment compensation of Roland Esnis ("Esnis") and
Francois Domine ("Domine") in their capacities (to the extent that they have
such capacities) as employees, officers, and board members of Strategia and
the French Subsidiaries through the date occurring three months after the
Closing (defined below).
The Purchase Price is defined as the cash proceeds from the Sale plus the
amount of any dividends or debt repayments made by the French Subsidiaries to
Strategia between the date of this Agreement and the closing of the Sale (the
"Closing") and minus the amount of any debt incurred by any of the French
Subsidiaries to Strategia between the date of this Agreement and the Closing.
Taxes imposed on the Individual Shareholders and/or Strategia in connection
with the Sale or this Agreement shall be paid by the parties against whom the
tax is imposed and shall not cause an adjustment to the Purchase Price. The
Adjusted Purchase Price is defined as the Purchase Price minus $200,000. For
all purposes of this Agreement, the currency conversion rates shall be
determined based on the mean of the rates quoted by an authoritative source as
of the close of the business day before the Closing.
The Individuals hereby grant Strategia an option (the "Option") to purchase
(the "Minority Purchase") all of their shares of Twin-X (representing 40% of
the outstanding shares) free and clear of any encumbrances. The Option is
exercisable only if Strategia enters into a definitive agreement (the
"Definitive Agreement") by June 30, 1999, providing for the Sale. The Option
shall remain open thereafter until either the Closing occurs or the Definitive
Agreement is terminated. The terms and conditions of a Minority Purchase shall
be as follows:
(i) any closing of the Minority Purchase will occur substantially
simultaneously with the Closing, and
(ii) the aggregate purchase price to be paid to the Individual
Shareholders (the "Minority Price") shall be fifteen percent of
the Adjusted Purchase Price; provided that if the fifteen percent
calculation yields less than 6,000,000 French Francs, the Minority
Price shall be 6,000,000 French Francs, and if the fifteen percent
calculation yields more than 7,000,000 French Francs, the Minority
Price shall be 7,000,000 French Francs and
(iii) the Minority Price will be paid to the Individual Shareholders on
the same schedule (the "Primary Payment Schedule") that the
Purchase Price is received by Strategia pursuant to the Sale (e.g.,
if Strategia actually receives only a percentage of the Purchase
Price at the Closing (the "Closing Percentage") and the rest (the
"Deferred Percentage") on subsequent date(s), the Individual
Shareholders will receive only the Closing Percentage of the
Minority Price at the Closing and the Deferred Percentage of the
Minority Price only as and if Strategia receives the Deferred
Percentage of the Purchase Price). If the Primary Payment Schedule
provides for a payment to the Individual Shareholders of less than
6,000,000 French Francs at the Closing, (i) the Individual
Shareholders will be paid 6,000,000 French Francs at the Closing
and (ii) the Individual Shareholders will be paid additional
amounts of the Minority Price (if any) only when and to the extent
that they would have been entitled to receive more than an
aggregate amount of 6,000,000 French Francs pursuant to the
Primary Payment Schedule (e.g., if the Minority Price is 6,500,000
French Francs, the Closing Percentage of that is 5,500,000 French
Francs, and the Deferred Percentage is actually paid in two equal
installments, the Individual Shareholders would receive 6,000,000
French Francs at the Closing, nothing on the payment of the first
installment and 500,000 French Francs on the payment of the last
installment) and
(iv) Strategia is responsible for negotiating with the buyer all of the
terms and conditions of the Definitive Agreement and for executing
it. The Individual Shareholders will use their good faith efforts
to provide the factual information necessary as a basis for the
representations and warranties to be made by Strategia in the
Definitive Agreement. Prior to Strategia executing the Definitive
Agreement, Strategia will provide it to the Individual Shareholders
to review. The Individual Shareholders will then promptly give
Strategia a certificate stating that, to the best of their
knowledge, all of the representations and warranties are true and
correct (except those representations and warranties for which the
Individual Shareholders identify and provide the details in their
certificate as to why they are not true and correct ("Identify and
Provide Details")). If Strategia has any liability or is subject
to a purchase price adjustment (a "Liability/Adjustment") because
one or more of those representations or warranties were not true
and correct and the Individual Shareholders had knowledge that
they were not true and correct but intentionally failed to
Identify and Provide Details with regard to those representations
and warranties in their certificate, the Individual Shareholders
shall be liable to Strategia for 15 percent of the
Liability/Adjustment; provided, that except in the case of fraud,
the Individual Shareholders' liability will not exceed 3,000,000
French Francs. The Individual Shareholders will be deemed to have
failed to Identify and Provide Details intentionally if they knew
of an item to Identify and Provide Details and a reasonably
prudent person with their knowledge or capacity who carefully
reviewed the representations and warranties in the Definitive
Agreement would more likely than not have recollected the memory
of that knowledge to enable them to Identify and Provide Details.
This clause (iv) will not create any liability to the Individual
Shareholders with respect to representations and warranties (even
if not true or correct) so long as the Individual Shareholders
Identify and Provide Detail in the certificate as required by this
clause to the best of their knowledge at the time the certificate
is given.
At the closing of the Option Purchase, the Individual Shareholders will
execute a document
(i) transferring their 40% interests in Twin-X free and clear of all
liens and encumbrances, and
(ii) agreeing to sign such further documents and take such further
actions as may be reasonably necessary to effect the intentions
of this Agreement. The Individual Shareholders will take such
actions as shareholders as may be necessary to cause the Sale to
be consummated in accordance with the terms of the Definitive
Agreement, including, without limitation, voting their interests
in favor of the Sale, consenting to the Sale, and transferring
their interests at the Closing. Esnis and Domine shall cooperate
fully and in good faith and shall take all reasonable steps in
their official capacities of the French Subsidiaries to assist in
the sales process, including, without limitation, assisting in
the due diligence process.
There will be no other amounts due to any of the Individual Shareholders from
Strategia Corporation or the French Subsidiaries upon completion of the Sale
other than ordinary compensation (including bonuses) paid on a basis
consistent with past practices and subject to any changes implemented prior
to the date of this Agreement.
Any resignation by Esnis and Domine from any of their current positions in
the French Subsidiaries shall not be effective until at least three months
after the Closing. Except as otherwise explicitly stated in this Agreement,
this Agreement does not change the terms of Esnis' and Domine's employment
with the French Subsidiaries.
This Agreement will be governed by French law.
Strategia Corporation
By /s/ Richard W. Smith, President
Twinsys Dataguard SA
By /s/ Richard W. Smith, President
Twin-X SA
By /s/ Richard W. Smith, President
Strategia Europe SAS
By /s/ Richard W. Smith, President
/s/ Roland Esnis
Roland Esnis
/s/ Valerie Potherat Esnis
Valerie Potherat Esnis
/s/ Francois Domine
Francois Domine
/s/ Paule Jurville Domine
Paule Jurville Domine
AMENDMENT TO EXTEND TIME TO THE
TWINSYS/TWIN-X/STRATEGIA EUROPE SHAREHOLDER AGREEMENT
This is an Amendment (this "Amendment") to the Agreement (the "Agreement")
entered into as of May 28, 1999, between Strategia Corporation (a Kentucky,
USA, corporation) ("Strategia"), and Twinsys Dataguard SA, Twin-X SA,
Strategia Europe SAS (collectively, the "French Subsidiaries") and Roland
Esnis ("Esnis"), Valerie Potherat Esnis, and Francois Domine ("Domine") and
Paule Jurville Domine (collectively, the "Individual Shareholders").
Strategia owns substantially all of the outstanding shares of Twinsys
Dataguard SA ("Twinsys") and Strategia Europe SAS ("Strategia Europe") and
Twinsys owns 60% of Twin-X SA ("Twin-X"). The Individual Shareholders
collectively own 40% of Twin-X.
The parties hereby agree to amend the Agreement as follows: the sentence in
the Agreement "The Option is exercisable only if Strategia enters into a
definitive agreement (the "Definitive Agreement") by June 30, 1999, providing
for the Sale. " is hereby amended by replacing June 30, 1999, with July 31,
1999. Except as explicitly amended by this Amendment, the terms of the
Agreement shall remain unchanged.
Strategia Corporation
By /s/ Richard W. Smith, President
Twinsys Dataguard SA
By /s/ Richard W. Smith, President
Twin-X SA
By /s/ Richard W. Smith, President
Strategia Europe SAS
By /s/ Richard W. Smith, President
/s/ Roland Esnis
Roland Esnis
/s/ Valerie Potherat Esnis
Valerie Potherat Esnis
/s/ Francois Domine
Francois Domine
/s/ Paule Jurville Domine
Paule Jurville Domine
SECOND AMENDMENT TO EXTEND TIME TO THE
TWINSYS/TWIN-X/STRATEGIA EUROPE SHAREHOLDER AGREEMENT
This is an Amendment (this "Second Amendment") to the Agreement (the
"Agreement") entered into as of May 28, 1999, and the Amendment entered into
as of June 30, 1999 between Strategia Corporation (a Kentucky,
USA, corporation) ("Strategia"), and Twinsys Dataguard SA, Twin-X SA,
Strategia Europe SAS (collectively, the "French Subsidiaries") and Roland
Esnis ("Esnis"), Valerie Potherat Esnis, and Francois Domine ("Domine") and
Paule Jurville Domine (collectively, the "Individual Shareholders").
Strategia owns substantially all of the outstanding shares of Twinsys
Dataguard SA ("Twinsys") and Strategia Europe SAS ("Strategia Europe") and
Twinsys owns 60% of Twin-X SA ("Twin-X"). The Individual Shareholders
collectively own 40% of Twin-X.
The parties hereby agree to amend the Agreement as follows: the sentence in
the Agreement "The Option is exercisable only if Strategia enters into a
definitive agreement (the "Definitive Agreement") by June 30, 1999, providing
for the Sale. ", already modified once by the Amendment as follows "The Option
is exercisable only if Strategia enters into a definitive agreement (the
"Definitive Agreement") by July 31, 1999, providing for the Sale.", is hereby
amended by replacing July 31, 1999, with August 31, 1999. Except as
explicitly amended by this Amendment, the terms of the Agreement shall remain
unchanged.
Strategia Corporation
By /s/ Richard W. Smith, President
Twinsys Dataguard SA
By /s/ Richard W. Smith, President
Twin-X SA
By /s/ Richard W. Smith, President
Strategia Europe SAS
By /s/ Richard W. Smith, President
/s/ Roland Esnis
Roland Esnis
/s/ Valerie Potherat Esnis
Valerie Potherat Esnis
/s/ Francois Domine
Francois Domine
/s/ Paule Jurville Domine
Paule Jurville Domine
Accompanying Documents
Annual Report on Form 10-KSB (enclosed separately)
Quarterly Reports for the quarters ended March 31 and June 30, 1999
Current Report on Form 8-K
