SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 31, 1999
(Date of Earliest Event Reported)
ELCOM INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-27376 04-3175156
---------------------------- ------------- -------------------
(State or Other Jurisdiction (Commission (I. R. S. Employer
of Incorporation) F File Number) Identification No.)
10 Oceana Way, Norwood, Massachusetts 02062
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (781) 440-3333
<PAGE>
Item 2. Acquisition or Disposition of Assets
- ----------------------------------------------
On July 31, 1999, Elcom International, Inc. (the "Company") completed the sale
of the substantial majority of its United Kingdom remarketer group operations.
Generally, the Company sold its United Kingdom field-based sales operation, its
professional services organization, its distribution business, and specified
inventory and fixed assets. The transaction is structured as a sale of assets
pursuant to an Agreement for the Sale and Purchase of the Various Businesses and
Assets of Elcom Holdings Limited (the "Agreement"). Elcom Holdings Limited
("Elcom Limited") and Elcom Group Limited, indirect United Kingdom subsidiaries
of the Company, are the primary parties to the Agreement, and the Company has
guaranteed the various obligations of its subsidiaries pursuant to the
Agreement. The disposed businesses accounted for approximately 75% of the
Company's United Kingdom revenues and 67% of its United Kingdom operating income
in 1998 and the first six months of 1999 (excluding the asset impairment charge
described below). The Company recorded total revenues related to its United
Kingdom operations of $147 million in the first half of 1999, $159 million in
the first half of 1998, and $314 million in calendar 1998. The Company has
retained its United Kingdom telemarketing group, which it intends to evolve
towards an Internet-based storefront business similar to the business conducted
by elcom.com, inc., the Company's wholly-owned eBusiness subsidiary in the
United States. The Company also plans to use the retained business as the
platform from which it will market PECOS Procurement Manager, elcom.com's
Internet-based automated procurement system. The acquirer, Specialist Computer
Holdings Limited ("SCH"), is expected to employ approximately 300 of the
Company's 450 United Kingdom personnel, and has assumed the lease of the
Company's Langley facility and has an option to assume the lease of the
Company's Glasgow facility; however, the Company is retaining substantially all
other balance sheet assets and liabilities of the disposed businesses.
Accordingly, the Company is responsible for severance liabilities, and
subleasing excess facilities, as well as realizing inventory and excess fixed
assets no longer required to operate the retained portion of the business. The
Agreement anticipates that Elcom Limited will enter into a non-exclusive
three-year contract for SCH to act as Elcom Limited's preferred product supplier
in the United Kingdom.
Based on the sale price of approximately $12 million (excluding inventory sold
of approximately $6.4 million) and the Company's estimates of incremental
liabilities associated with the sale transaction, the Company has recorded an
asset impairment charge against goodwill of $22.6 million in the second quarter
of 1999 to reduce the carrying value of its United Kingdom assets to estimated
net realizable value. Accordingly, although the Company's estimates are subject
to revision based on actual events, the sale transaction is not expected to
result in a gain or loss being reported by the Company in the third quarter of
1999.
In conjunction with this transaction, the Company now intends to relocate its
United Kingdom headquarter functions from Langley, Berkshire to Slough,
Berkshire. Except as described above, there are no material relationships
between the Company and SCH, the SCH shareholders or any of their respective
affiliates, directors or officers.
<PAGE>
Item 7. Financial Statements and Exhibits.
- --------------------------------------------
(b) Pro Forma Financial Information.
--------------------------------
The following unaudited pro forma condensed consolidated financial
statements are filed with this report:
Unaudited Pro Forma Condensed Consolidated Financial Statements of
Elcom International, Inc. and Subsidiaries - Overview - Page F-1
Unaudited Pro Forma Condensed Consolidated Balance Sheet of Elcom
International, Inc. and Subsidiaries as of June 30, 1999 - Page F-2
Unaudited Pro Forma Condensed Consolidated Statements of Operations
of Elcom International, Inc. and Subsidiaries for the year ended
December 31, 1998 and the six-month interim period ended June 30,
1999 - Pages F-3 and F-4
(c) Exhibits
--------
Exhibit No.
-----------
2.1 Agreement for the sale and purchase of the various businesses
and assets of Elcom Holdings Limited dated 31 July 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ELCOM INTERNATIONAL, INC.
/s/ Laurence F. Mulhern
-----------------------------
Laurence F. Mulhern
Chief Financial Officer and Treasurer
DATE: August 13, 1999
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ELCOM INTERNATIONAL, INC. AND SUBSIDIARIES
(UNAUDITED)
OVERVIEW
On July 31, 1999, Elcom International, Inc. (the "Company") completed the sale
of the substantial majority of its United Kingdom remarketer operations. Elcom
Holdings Limited and Elcom Group Limited, indirect United Kingdom subsidiaries
of the Company, are the primary parties to the Agreement for the Sale and
Purchase of the Various Businesses and Assets of Elcom Holdings Limited (the
"Agreement"). Specialist Computer Holdings Limited is the acquirer and the
Company has guaranteed the various obligations of its subsidiaries in
conjunction with the transaction. The transaction is structured as an asset sale
whereby the Company sold its United Kingdom field-based sales operation, its
professional services organization, its distribution business, and specified
inventory and fixed assets. The acquirer is expected to employ approximately 300
of the Company's 450 United Kingdom personnel and has assumed the lease of the
Company's Langley facility, and has a period of 90 days (from July 31, 1999) to
determine if they will assume the Company's Glasglow facility lease. The Company
has retained all other balance sheet assets and liabilities of the disposed
business including accounts receivable, inventory not sold in the transaction,
and excess fixed assets no longer required to operate the retained portion of
the business. The Company also is responsible for personnel severance
liabilities and sub-leasing excess facilities.
The unaudited pro forma condensed consolidated financial statements have been
prepared by the Company's management based upon the Company's financial
statements. The unaudited pro forma condensed consolidated financial statements
presented herein are shown for illustrative purposes only and are not
necessarily indicative of the future financial position or results of operations
of the Company, or of the financial position or results of operations of the
Company that would have actually occurred had the transaction been in effect as
of the date or for the periods presented. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
Company's audited financial statements as filed with the Securities and Exchange
Commission in its Annual Report on Form 10-K for the year ended December 31,
1998, and the Company's unaudited financial statements included in its Quarterly
Reports on Form 10-Q for the periods ended March 31, 1999 and June 30, 1999.
The unaudited pro forma condensed consolidated balance sheet as of June 30, 1999
gives effect to the transaction as though it had been consummated on that date.
Pro forma adjustments reflected in the unaudited pro forma condensed
consolidated balance sheet generally reflect the receipt of cash, the sale of
specified inventory and fixed assets, and the write-off of residual goodwill, as
well as incremental liabilities and asset net realizable value adjustments
associated with the transaction. The pro forma adjustments do not impact total
stockholders' equity, as the Company reduced the total carrying value of its
United Kingdom assets held for disposal in the second quarter of 1999 to their
estimated net realizable value. Because the Company did not sell the bulk of its
operating assets and liabilities, the pro forma adjustments do not reflect the
potential reduction in the levels of operating assets (i.e. accounts receivable)
and liabilities (i.e. lines of credit, accounts payable and accrued liabilities)
which is likely to occur as a result of the sale. The unaudited pro forma
condensed consolidated statements of operations for the year ended December 31,
1998, and the six-month interim period ended June 30, 1999 give effect to the
transaction as though it had occurred at the beginning of the earliest period
presented. Pro forma adjustments reflected in the unaudited pro forma condensed
consolidated statements of operations generally reflect reductions in revenues
and expenses attributable to the disposed business, as well as an adjustment to
remove the impact of non-recurring charges, including the asset impairment
charge which reduced the carrying value of the United Kingdom assets to
estimated net realizable value, previously recorded by the Company.
F-1
<PAGE>
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
(UNAUDITED)
(in thousands)
<CAPTION>
Elcom Pro Forma
International Adjustments
Inc. (A) Pro Forma
------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 27,503 $ 18,262 (a) $ 45,765
Accounts receivable, net 133,838 133,838
Inventory 18,558 (7,626) (b) 10,932
Prepaids and other current assets 3,165 (453) (c) 2,712
------------- -------------
Total current assets 183,064 193,247
------------- -------------
Property, equipment and software, net 12,892 (2,445) (c) 10,447
Goodwill 3,047 (3,047) (c) -
Other assets and deferred costs 332 (162) (c) 170
------------- -------------
$ 199,335 $ 203,864
============= =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Lines of Credit 82,550 82,550
Accounts payable,
accrued expenses and
other current liabilities 54,891 4,529 (d) 59,420
Current portion of long-term debt and
capital lease obligations 720 720
------------- -------------
Total current liabilities $ 138,161 $ 142,690
------------- -------------
Non-current long-term debt and
Capital lease obligations 311 311
------------- -------------
Total Stockholders' Equity 60,863 60,863
------------- -------------
$ 199,335 $ 203,864
============= =============
</TABLE>
(A) The pro forma adjustments consist of:
(a) Recognition of estimated cash proceeds of the sale transaction,
including estimated cash related to the sale of specified inventory;
(b) Recognition of specified inventory sold and estimated adjustments to net
realizable value, related to the sale transaction;
(c) Recognition of specified assets sold in the transaction and estimated
adjustments to net realizable value of assets no longer required and/or
no longer fully realizable as a consequence of the transaction; and
(d) Recognition of estimated incremental liabilities associated with the
transaction.
The pro forma adjustments are translated at a rate of 1.577 U.S. dollars per
British pound, the translation rate in effect as of June 30, 1999. The
estimated amounts of the adjustments reflected above are subject to revision
based upon actual results achieved. Management does not believe the impact
of such potential revisions would be material to the balance sheet or
statements of operations presented herein.
F-2
<PAGE>
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(in thousands, except per share data)
<CAPTION>
Elcom Pro Forma
International, Adjustments
Inc. (A) Pro Forma
--------------- ---------------- ------------
<S> <C> <C> <C> <C>
Net sales $ 763,600 $ (232,961) (a) $ 530,639
Cost of sales 686,658 (206,943) (a) 479,715
--------------- ---------------- -------------
Gross profit 76,942 (26,018) 50,924
Expenses:
Selling, general and administrative 80,285 (28,110) (a) 52,175
Research and development 1,178 1,178
Restructuring, impairment and
other related charges 12,892 (12,892) (b)
--------------- ---------------- -------------
Operating loss (17,413) B (2,429)
Interest expense (8,355) 2,090 (c) (6,265)
Interest income and other, net 691 225 (d) 916
--------------- ---------------- -------------
Loss before income taxes (25,077) B (7,778)
Tax provision 484 (375) (e) 109
--------------- ---------------- -------------
Net loss $ (25,561) $ B $ (7,887)
=============== ================ =============
Pro forma net loss
per share (basic and diluted) $ (0.94) $ B $ (0.29)
=============== ================ =============
Pro forma weighted average
shares outstanding (basic and
diluted) 27,322 B 27,322
=============== ================ =============
</TABLE>
(A) The pro forma adjustments consist of:
(a) Recognition of estimated reductions in net sales, cost of sales and
selling, general and administrative expenses associated with the
business disposed of;
(b) Adjustment to eliminate non-recurring charges;
(c) Recognition of estimated reduction in interest expense associated with
the business disposed of;
(d) Recognition of estimated increase in interest income associated with the
estimated net cash proceeds of the transaction; and
(e) Recognition of the estimated net tax impact of the above adjustments.
These pro forma adjustments assume the disposition was in effect for the
entire period presented, and are translated at an average rate of 1.657 U.S.
dollars per British pound, the average translation rate for calendar 1998.
(B) Not presented as the data is not meaningful.
F-3
<PAGE>
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(in thousands, except per share data)
<CAPTION>
Elcom Pro Forma
International, Adjustments
Inc. (A Pro Forma
-------------- ---------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 324,900 $ (106,826) (a) $ 218,074
Cost of sales 291,532 (95,804) (a) 195,728
--------------- --------------- --------------
Gross profit 33,368 (11,022) 22,346
Selling, general and administrative 32,066 (9,153) (a) 22,913
Research and development 575 575
Asset impairment charge 22,552 (22,552) (b) -
--------------- --------------- --------------
Operating loss (21,825) B (1,142)
Interest expense (2,072) 639 (c) (1,433)
Interest income and other, net 619 113 (d) 732
--------------- --------------- --------------
Loss before income taxes (23,278) B (1,843)
Tax provision 911 (346) (e) 565
--------------- --------------- --------------
Net loss $ (24,189) $ B $ (2,408)
=============== =============== ==============
Pro forma net loss
per share (basic and diluted) $ (0.88) $ B $ (0.09)
=============== =============== ==============
Pro forma weighted average
shares outstanding (basic and
diluted) 27,561 B 27,561
=============== =============== ==============
</TABLE>
(A) The pro forma adjustments consist of:
(a) Recognition of estimated reductions in net sales, cost of sales and
selling, general and administrative expenses associated with the
business disposed of;
(b) Adjustment to eliminate non-recurring charges;
(c) Recognition of estimated reduction in interest expense associated with
the business disposed of;
(d) Recognition of estimated increase in interest income associated with the
estimated net cash proceeds of the transaction; and
(e) Recognition of the estimated net tax impact of the above adjustments.
These pro forma adjustments assume the disposition was in effect for the
entire period presented, and are translated at an average rate of 1.621 U.S.
dollars per British pound, the average translation rate for the first six
months of 1999.
(B) Not presented as the data is not meaningful.
F-4
Exhibit 2.1
DATED 31 JULY 1999
(1) ELCOM HOLDINGS LIMITED
(2) SPECIALIST COMPUTER HOLDINGS LIMITED
(3) ELCOM INTERNATIONAL, INC
(4) ELCOM GROUP LIMITED
-----------------------------------
AGREEMENT
for the sale and purchase of the various
businesses and assets of Elcom Holdings Limited
-----------------------------------
Wragge & Co
Birmingham
<PAGE>
INDEX
CLAUSE
NUMBER SUBJECT MATTER
1. Interpretation
2. Sale and Purchase
3. Consideration
4. Stock
5. Escrow Account
6. Value Added Tax
7. Completion
8. Apportionments
9. The Debts
10. The Properties
11. Assumed Contracts, Tenders and Ancillary Rights
12. Claims by Customers and Returns
13. Excluded Liabilities
14. Indemnity
15. Warranties
16. Limitations and Liability
17. Covenants to Protect Goodwill
18. Employees
19. Action after Completion
20. Availability of Information
21. Vendor's Guarantee
22. Services
23. Option to Purchaser Retained Business
24. Costs
25. Independent Accountants
26. Domain Names
27. Announcements
28. Severability
29. Execution by EGL
30. Counterparts
31. General
32. Notices
33. Governing Law
34. Arbitration
35. Address for Service
SCHEDULES
1 Excluded Assets/Excluded Liabilities
2 Properties
3 Property Terms
4 Warranties
<PAGE>
APPENDICES
1 Excerpt from Management Accounts
2 List of Customers
3 Customer Contracts
4 Employees
5 Langley Fixed Assets
6 Slough Fixed Assets
7 Redditch Fixed Assets
8 Fixed Asset associated equipment
9 IPR Licence
10 Lease Agreements
11 Management Accounts
12 PECOS Licence
13 Elcom Name Licence
14 Langley Occupation Licence
15 SCH Supply Agreement
16 Supply Contracts
17 Tenders
18 Stock count/valuation procedures
19 Employees Compensation List
20 Transitional Services Agreement
<PAGE>
AN AGREEMENT made on 31 July 1999
BETWEEN
(1) ELCOM HOLDINGS LIMITED ("the Vendor") a company registered in England
with number 2838561 whose registered office is situate at Elcom House,
Langley Business Centre, Station Road, Langley, Berkshire SL3 8YR; and
(2) SPECIALIST COMPUTER HOLDINGS LIMITED ("the Purchaser") a company
registered in England with number 1160482 whose registered office is at
James House, Warwick Road, Birmingham, B11 2LE;
(3) ELCOM INTERNATIONAL, INC ("the Guarantor") a company incorporated under
the laws of Delaware whose principal office is at 10 Oceana Way,
Norwood, Massachussetts, USA;
(4) ELCOM GROUP LIMITED ("EGL") a company registered in England with number
2977666 whose registered office is situate at Elcom House, Langley
Business Centre, Station Road, Langley, Berkshire SL3 8YR.
WHEREAS:
(A) The Vendor owns the business more particularly described in the
Management Accounts as Major Accounts, Enterprise Accounts, Nets and
Comms, ERP, Technical Services, and Elite Distribution and set out in
Appendix 1 involving dealings with the Customers as set out in Appendix
2 and for the avoidance of doubt excluding the Excluded Assets and the
Retained Business ("the Business") which has been carried on by EGL as
undisclosed agent for the Vendor, and who is also the employer of the
Employees.
(B) The Vendor has agreed to sell (and, to the extent legal and/or
beneficial title to any of the Sale Assets is vested in it, EGL has
agreed to sell and to transfer the Employees) and the Purchaser has
agreed to purchase on and with effect from the Completion Date the
Business as a going concern together with the goodwill, property and
assets thereof (other than the Excluded Assets) for the consideration
and upon the terms and subject to the conditions hereinafter appearing
(C) The Vendor and EGL are indirect wholly owned subsidiaries of the Guarantor.
NOW IT IS HEREBY AGREED as follows:
1. Interpretation
1.1 In this Agreement and the Schedules and Recitals hereto the following
words and expressions shall have the following meanings:
"Accounting Date" 31 December 1998;
<PAGE>
"Ancillary Rights" all rights of or enjoyed by the Vendor
against and all obligations owing to the
Vendor by third parties whether in contract
tort or otherwise in respect of or to the
extent that they relate to the Business and/
or Sale Assets (or any of them) including
but not limited to all rights under any
insurances or manufacturers' or suppliers'or
other third party guarantees,representations
or warranties whether express or implied,
and claims made thereunder or in respect
thereof and remaining unsatisfied after the
Completion Date;
"Associate" in relation to any company, another company
which is a subsidiary or a holding company
of that company and any other subsidiary of
such holding company;
"Assumed Contracts" the Customer Contracts,the Lease Agreements,
and the Supply Contracts;
"Assumed Liabilities" all liabilities and obligations (i) in
respect of the Assumed Contracts and/or
(ii) of or relating to the Business and/or
Sale Assets and/or, subject to clause 18,
the Employees or any of the foregoing
arising or incurred or attributable to the
period after Completion, but excluding the
Excluded Liabilities;
"Business" the business described in Recital (A);
"Bonded Stock" Stock invoiced to or paid for by any
customer of the Business and held at the
premises of any member of the Vendors' Group
at Completion;
"Business Day" a day (not being a Saturday or Sunday) on
which banks generally are open for business
in London;
"Cash" any cash in hand (including cash floats held
by salesmen and others employed by the
Vendor in connection with the Business) and
at bank and any cheques, bills, negotiable
instruments, or other securities,investments
or deposits in the name of, owned by or
belonging to the Vendor in connection with
the Business at the Completion Date;
"Cash Deposit" the cash deposit specified in Clause 3.2;
"Completion" completion of the obligations of the parties
pursuant to Clause 7;
<PAGE>
"Completion Date" 30 July 1999 or such other date as the
parties shall agree;
"Confidential Information" trade secrets and information equivalent to
them (including but not limited to formulae,
processes, methods, knowledge, know-how,
financial or contractual arrangements and
future business development or planning
strategies) in connection with the products
distributed, produced, and sold and the
services supplied by the Vendor in
connection with the Business and the
customers and suppliers of the Business and
which are for the time being confidential
to the Vendor in connection with the
Business;
"Consideration" the consideration for the sale of the Sale
Assets determined pursuant to Clause 3;
"Customers" the customers of the Business more
particularly set out in Appendix2;
"Customer Contracts" those contracts and accepted
orders which have been received by or on
behalf of the Vendor in connection with the
Business for the supply of goods and/or
services listed in Appendix 3 and which
remain at Completion to be performed (in
whole or in part) by the Vendor;
"Debts" the book and other debts owing to the
Vendor at the Completion Date (whether or
not then due and payable) in respect of
goods delivered or to be delivered and/or
services rendered or to be rendered by the
Vendor in connection with the Business on
or before the Completion Date and all
securities and negotiable instruments given
to the Vendor in payment or satisfaction
of the foregoing;
"Determined by the determined in accordance with Clause 25;
Independent Accountants"
"Developed Software" means any software owned by the Vendor in
connection with Business and comprised
in the Sale Assets, for the avoidance
of doubt excluding the PECOS application
software;
"the Directive" Directive 77/187 of the Council of the
European Communities;
<PAGE>
"Disclosure Letter" a letter with the same date as this
Agreement from the Vendor's Solicitors to
the Purchaser's Solicitors disclosing
exceptions to the Warranties;
"Domain Names" means the internet domain names www.elitecd.
co.uk" and "www.datasuppliesltd.co.uk";
"Elcom Name Licence" the licence to use the "Elcom" name for a
period of six months from the Completion
Date granted by the Guarantor to the
Purchaser in the form of Appendix 13;
"Employees" those employees of EGL or the Vendor who are
at Completion employed in the Business
and whose names and other particulars are
set out in Appendix 4 being both the "A"
Employees whose names and details are set
out in Part I of Appendix 4 and the "B"
Employees whose names and details are set
out in Part II of Appendix 4";
"Environmental Claim" means any claim, notice of violation,
prosecution, demand, action, official
warning, abatement or other order or notice
(conditional or otherwise) relating to
Environmental Matters, Environmental
Liabilities or requiring compliance with the
terms of any Environmental Licence or
Environmental Law;
"Environmental Law" means any laws or regulations relating to
the protection of the Environment;
"Environmental means any liabilities, responsibilities
Liabilities" claims, losses, costs (including remecdial,
removal, response, abatement, clean-up,
investigative and/or monitoring costs),
damages, expenses, charges, assessments,
liens, penalties and fines which are
incurred by,asserted against or imposed
upon a person as a result of or in
connection with any violation of or
non-compliance with Environmental Law
(including the failure to procure any
Environmental Licence required by
Environmental Laws);
"Environmental Licence" means any permit, licence, authorisation,
consent or other approval required
pursuant to any Environmental Law at any
time by the Vendor and/or in relation to the
Business;
"Escrow Account" the joint deposit account in the names of
the Vendor's Solicitors and the Purchaser's
Solicitors as provided in Clause 5.
<PAGE>
"Excluded Assets" all assets of the Vendor other than the Sale
Assets including, but not limited to those
assets of the Vendor listed or
otherwise identified in Schedule 1 Part 1;
"Excluded Liabilities" all liabilities, obligations and commitments
of the Vendor (whether actual or contingent
present or future) which are not expressly
agreed to be assumed by the Purchaser under
or pursuant to this Agreement including
without limitation those Excluded
Liabilities referred to in Schedule 1
Part 2;
"Fixed Assets" those:
(a) fixtures, fittings and furniture
(including but not limited to
warehouse equipment and fittings)
which are affixed to or are situate at
the Property on the Completion Date,
the principal items of which are
detailed in Appendix 5; and
(b) items of furniture and equipment which
are situate at the Slough Property on
the Completion Date the principal
items of which are detailed in
Appendix6 but excluding, for the
avoidance of doubt, all fixtures
affixed to the Slough Property on that
date; and
(c) items of engineering equipment,
benches, apparatus, tools, furniture
and fittings which are utilised in the
operation of that part of the Business
situate at the Redditch Property and
being the stock repair 657, 658
technical support, 659 logistics and
admin and 665 service centre
collectively referred to as the
returns and warranty departments, the
principal items of which are detailed
in Appendix 7; and
(d) all items of personal computer
equipment including peripherals and
whether desktop or laptop) and
telephone equipment in the possession
of or otherwise used by the Employees
in the operation of the Business; and
(e) stocks of stationery employed in the
Business and situated at the premises
used in relation to the Business; and
(f) the RAS server, the fax server for
the Elite software systems, the server
and software for the
<PAGE>
Tracker Lead Management software, the
server and software for the Utopia
system, the Remote Network Management
equipment and software, branch servers
on which customer databases and mail
records reside, all used in relation
to the Business, and any associated
equipment required to enable any of
the above equipment to operate as
listed in Appendix 8;
"Goodwill" the goodwill custom and connections of the
Business together with the exclusive right
for the Purchaser to represent and hold
itself out as carrying on the Business in
succession to the Vendor but excluding, save
as permitted under the Elcom Name Licence,
the right of the Purchaser or any member
of the Purchaser's Group to use the name
"Elcom";
"Group" in relation to a company, that company and
its Associates for the time being;
"IPR" means all trade names, patents, registered
designes, trade marks and service marks
( whether registered or not) copyright,
design rights, moral rights, know how,
configuration procedures and all similar
property rights whether registrable or not,
including those subsisting (in any part of
the world) in inventions, designs, drawings,
performances, Confidential Information,
business or brand names, goodwill or the
style of presentation of goods, hardware,
data or services and in applications for
the protection thereof;
"Intellectual Property
Rights" all the IPR used by the Vendor in connection
with the Business in the year preceding the
date in of this Agreement(including, without
limitation, all rights in the Developed
Software) PROVIDED THAT the trade name
"Elcom" and any other such items which
relate exclusively to either of the PECOS
Management System or the PRMS operating
system shall be excluded from the definition
of Intellectual Property Rights;
"IPR Licence" a licence in the form of Appendix 9 to be
dated of even date herewith;
"Intangible Assets" means all customer and supplier lists
maintained by or on behalf of the Vendor
for the purpose of the Business (and for
copies of the same);
<PAGE>
"Langley Occupation the licence in the form of Appendix 14
Licence" granted by the Purchaser to the Vendor in
relation to the Vendor's continued
occupation of the Property;
"Lease Agreements" the leasing and rental and hire purchase
agreements of the Business listed in
Appendix10;
"Management Accounts" the unaudited balance sheet of the Vendor as
at 31 May 1999 and the unaudited profit and
loss account of the Vendor for the period
from 1 January 1999 to 31 May 1999 (both
dates inclusive) appended as Appendix 11"
"PECOS Licence" the licence in the form of Appendix
12 to be entered into between elcom.com
limited, and the Purchaser, in relation to
the use by Purchaser's Group of the PECOS
Commerce Manager currently used by the
Business and future derivatives (if any);
"Property" the leasehold property referred to in Part
A of Schedule 2;
"Purchaser's Solicitors" Wragge & Co of 55 Colmore Row, Birmingham,
B3 2AS;
"Records" except as required by law to be retained
by the Vendor, all price lists,
catalogues,mailing lists, publicity and
presentational material records exclusively
of the Business, deeds and documents
evidencing title to the Property and the
other assets hereby agreed to be sold
(duly stamped where appropriate), all sales
and technical literature, all contracts of
employment, correspondence, national
insurance and Tax records relating to the
Employees (or any of them), all records and
documents recording or containing any
Intellectual Property Rights but for the
avoidance of doubt,excluding any information
whatsoever relating to the PECOS Management
System or the PRMS Operating System;
"the Regulations" the Transfer of Undertakings (Protection of
Employment) Regulations 1981 (as amended);
"Retained Business" the businesses of the Vendor, other than
the Business, which are more particularly
described in the Management Accounts as
Corporate Accounts, currently conducted
from the Vendor's premises at Redditch
and Basingstoke being principally the sale
of personal computer hardware and software,
and the
<PAGE>
business carried on at the date hereof
by elcom.com limited, and the future
operation of an internet storefront which
for the avoidance of doubt shall not sell or
offer services which compete with the
Business or the business of the Purchaser;
"Retained Employees" all employees of all members of the Vendors'
Group save and except only the Employees;
"Sale Assets" the several assets, rights and things
things listed or otherwise identified in
Clause 2 agreed to be sold and purchased
under this Agreement;
"SCH Supply Agreements" the supply agreements in the form of
Appendix 15 between a member of the Vendors'
Group and Enhancement Technology Corporation
Limited in relation to the supply by the
Vendor to the Purchaser's Group of
Information Technology products and
services;
"the Scottish Property" means the leasehold property referred to in
Part B of Schedule 2;
"Redditch Property" Arrow Road North,Lakeside, Redditch, B98 8NN
"Schemes" means the Elcom Group Personal Pension
Scheme and the Elcom Group Life Assurance
Scheme;
"Slough Property" Commerce House, 349 Edinburgh Avenue,Slough,
Berkshire, SL1 4TU
"Stock" such of the Stock, subject to Clause 4, of
the Business which is in the possession of
the Vendor at the premises of the Vendor's
Group at the Completion Date and which
comprises:
(i) clean stock received directly by the
Vendor from its original manufacturer
or supplier which as at Completion
remains in its original factory sealed
undamaged and undefaced packaging
(other than any attached bar codes or
supplier labels); and
(ii) a product line supported by the Vendor
in the course of conduct of the
Business as at Completion. For these
purposes "supported" meaning that such
product line is as at Completion
listed on the relevant manufacturers
then current
<PAGE>
price list; or
(iii) products not included in (i) or (ii)
above allocated to and supported by a
valid evidenced customer order of the
Business and capable of being sold
without discount to that customer
under that order.
For the avoidance of doubt:
(A) any product supplied by the Vendor in the
course of conduct of the Business that has
been returned, or that is being held by the
Business for repair or replacement by the
Vendor whether by virtue of any actual or
alleged supply of defective goods or breach
of contract or misrepresentation by or on
behalf of the Vendor or otherwise howsoever
shall be excluded from this definition; and
B) all Bonded Stock of the Business is included
within this definition;
"Security Interest" any mortgage, lien, pledge, charge,
hypothecation or other security interest
(or an agreement or commitment to create
any of them), including, for the avoidance
of doubt, but without prejudice to the
generality of the foregoing, any unpaid
vendor's or supplier's lien arising in the
ordinary course of the Business to secure
amounts due in respect of goods or services
sold or supplied;
"subsidiary" and the meanings respectively ascribed thereto
"holding company" by Section 736 of the Companies Act 1985;
"Supply Contracts" those contracts and orders placed by or on
behalf of the Vendor for the supply to
the Vendor of goods and/or services in
connection with the Business listed in
Appendix 16 which remain at Completion to be
performed (in whole or in part);
"Systems" means any computer hardware, software,
networking equipment or other equipment
forming part of the Sale Assets and which
are used by the Business in the context of
its own internal organisations as at
Completion which is reliant upon microchip
technology and including the Remote Network
Management, Tracker and Utopia software
systems;
"Tax" (a) all forms of taxes duties
imposts and levies in the nature of
taxes whenever created or imposed
and whether of the United Kingdom or
<PAGE>
elsewhere including (without limitation)
corporate tax advance corporate tax
income tax (including income tax or
amounts equivalent to income tax
required to be deducted or withheld from
or accounted for in respect of any
payment) capital gains tax any payment
under section 601(2) ICTA 1988
inheritance tax value added tax landfill
tax stamp duty stamp duty reserve tax
general or business rates customs &
excise duties national insurance social
security or similar contributions and
any other taxes levied charges imposts
or withholdings similar to or
corresponding with or replaced by any of
the foregoing; and
(b) all penalties fines charges surcharges
and interest in relation to tax within
paragraph (a) or to any return or
information required to be provided for
the purposes of any such tax;
"Tax Authority" any taxing or other authority (whether
within or outside the United Kingdom)
competent to impose any liability for any
Tax, duties, imports, levies, rates or
similar charges;
"Tenders" the bids, tenders or sales or service
proposals of the Vendor outstanding at
Completion in respect of the Business which
if accepted will constitute a binding
contract on the Vendor as listed in Appendix
17, full details of which are set out in the
Disclosure Letter;
"VAT" Value Added Tax;
"VATA 1994" the Value Added Tax Act 1994;
"VAT Records" the records relating to the
Business required to be preserved after
Completion by virtue of the provisions of
paragraph 6 of Schedule 11 of VATA 1994;
"Vendors" collectively the Vendor and EGL;
"Vendors' Solicitors" Gouldens of 22 Tudor Street,London,EC4Y 0JJ;
"Warranties" the warranties on the part of the Vendors
set out in Schedule 4;
"in writing" includes any communication made by letter
or facsimile transmission;
<PAGE>
"Year 2000 Compliant" means conformity with the Year 2000
conformity definition in the British
Standards Institute Document "DISC PD 2000-1:
1998 A Definition of Year 2000 Conformity
Requirements".
1.2 The ejusdem generis rule of construction shall not apply to this
Agreement and accordingly general words shall not be given a restrictive
meaning by reason of their being preceded or followed by words
indicating a particular class or examples of acts matters or things.
1.3 Words importing the singular shall include the plural and vice versa and
words importing any gender shall include all other genders and
references to persons shall include corporations and unincorporated
associations.
1.4 References in this Agreement to any Agreed Draft document or any
document in Agreed Form are references to the document described in the
form of the draft agreed between the parties and initialled by them or
by the Vendor's Solicitors and Purchaser's Solicitors on their behalf
for identification purposes.
1.5 References in this Agreement to statutory provisions shall be construed
as references to those provisions as respectively amended consolidated
extended or re-enacted from time to time and any orders regulations
instruments or other subordinate legislation made from time to time
under the statute concerned but so that nothing in this Clause 1.5 shall
be taken to extend the obligations of, or increase the liability of, any
of the parties to this Agreement beyond the obligations or liabilities
which pertain at the date hereof.
1.6 References to this Agreement shall include the Schedules hereto which
shall form part hereof and shall have the same force and effect as if
expressly set out in the body of this Agreement.
1.7 References in this Agreement to a "connected person" in relation to
another, are references to a person who is connected with the other
within the meaning of Section 417 or Section 839 of the Taxes Act, as
appropriate.
1.8 In this Agreement, in particular clause 15 and Schedule 4, reference to
the "Vendor" shall include a reference to both of the Vendors and a
reference to the "Vendors" shall include either of the Vendors.
1.9 In this Agreement all obligations to the Vendors shall be joint and
several
1.10 The Clause headings in this Agreement are for convenience only and shall
not affect the interpretation hereof.
2. Sale and Purchase
-----------------
2.1 The Vendor shall sell and assign where appropriate (or in relation to
the Property,
<PAGE>
procure the sale) with full title guarantee and the Purchaser (relying,
as the Vendors acknowledge, on the warranties, undertakings and
indemnities of the Vendors referred to or contained in this Agreement)
shall purchase the Business and the Sale Assets for the Consideration as
at and with effect from close of business on the Completion Date free
from all Security Interests (subject only to Stock supplier retention of
title claims) as a going concern with the undertaking and the following
property and assets thereof including:
(A) the Property (subject to Clause 10);
(B) the Fixed Assets;
(C) the Stock;
(D) the Intellectual Property Rights;
(E) to the extent to which such contracts are capable of transfer
and/or assignment but subject to the terms of Clause 11 the
benefit (subject to the burden as hereinafter provided) of the
Assumed Contracts;
(F) the Goodwill;
(G) the Records;
(H) the full benefit (so far as the same can be lawfully assigned or
transferred to or held on trust for the Purchaser) of the
Ancillary Rights
(I) the benefit of all grants and subsidies receivable in connection
with the Business relating to any period after Completion;
PROVIDED ALWAYS THAT the Excluded Assets shall be excluded from this
sale and purchase.
2.2 Nothing herein shall require the Purchaser to complete the purchase or
the Vendor to complete the sale of any of the Sale Assets unless the
sale and purchase of all of them is completed at the same time.
3. Consideration
-------------
3.1 By way of consideration for the purchase of the Business and the Sale
Assets the Purchaser shall pay to the Vendor in cash (pound)15,000,000
subject to adjustment in accordance with Clauses 3.2, 3.3 and 5.
3.2 The sum referred to in Clause 3.1 shall be payable as to
(pound)6,500,000 in relation to the Stock on Completion in accordance
with Clause 7 and (pound)7,300,000 in relation to the remainder of the
Sale Assets on Completion, as to (pound)500,000 (the "Cash Deposit")
into the Escrow Account to be operated in accordance with the provisions
of Clause 5, as to (pound)500,000 (the "Stock Retention") subject to the
provisions of sub Clause 3.3 on the
<PAGE>
fifth Business Day following the date of agreement or determination of
the value of the Stock in accordance with Clause 4, and as to (pound)
200,000 (the "Employee Claim Fund") to be operated in accordance with
the provisions of Clause 18.10.
3.3 Subject to Clause 4.8 , if the value of the Stock is agreed or (as
applicable) determined (in accordance with Clause 4)to be:
(A) less than (pound)7,000,000 the Vendor shall within five Business
Days of agreement or determination of the value of the Stock (as
aforesaid) pay to the Purchaser an amount equal to the shortfall;
(B) more than (pound)7,000,000 the Purchaser shall within five
Business Days of agreement or determination of the value of the
Stock (as aforesaid) pay to the Vendor an additional amount by
way of consideration equal to the excess (subject to a maximum
additional payment of (pound)3,000,000)
together in each case with interest thereon from Completion to the date
of actual payment at a rate (as hereinafter as before judgment) equal to
3 per cent per annum above the base rate for the time being of HSBC Bank
plc calculated on a daily basis.
In the event that the value of the Stock agreed or determined in
accordance with Clause 4:
(A) is equal to or less than (pound)6,500,000 then the sum payable by
the Vendor to the Purchaser under sub-Clause (A) above shall be
paid and satisfied first by the release to the Purchaser of the
Stock Retention and secondly by the payment by the Vendor to the
Purchaser of a sum equal to the amount by which the value of the
Stock is less than (pound)6,500,000;
(B) is equal to or less than (pound)7,000,000 but more than
(pound)6,500,000 then the sum payable by the Vendor to the
Purchaser under sub-Clause (A) above shall be satisfied by the
release to the Purchaser of so much of the Stock Retention as is
equal to the amount by which the value of the Stock falls short
of (pound)7,000,000. In such circumstances the Purchaser (within
five Business Days as aforesaid) shall pay the balance of the
Stock Retention to the Vendor; and
(C) is more than (pound)7,000,000 then the sum payable by the
Purchaser to the Vendor under sub-Clause (B) above shall be
satisfied first by the release and payment to the Vendor of the
Stock Retention and secondly by the payment by the Purchaser to
the Vendor of a sum equal to the amount by which the value of the
Stock exceeds (pound)7,000,000 (such additional payment over and
above the Stock Retention not in any circumstances to exceed
(pound)3,000,000.)
All sums payable under this Clause 3.3 shall be paid by telegraphic
transfer to the account of the receiving party, details of which have
been notified in advance, and receipt of such sums into such account
shall constitute a good discharge of the paying party in respect
thereof.
3.4 The consideration payable by the Purchaser for the Sale Assets shall be
apportioned as
<PAGE>
follows:
(A) for the Property the sum of (pound)1;
(B) for the Fixed Assets the sum of (pound)1,500,000;
(C) for the Stock the sum of (pound)7,000,000 (subject to adjustment
in accordance with Clause 3.2);
(D) for the Intellectual Property Rights the sum of (pound)1;
(E) for the benefit of the Assumed Contracts and Tenders the sum of
(pound)1;
(F) for the Goodwill the sum of (pound)6,499,995;
(G) for the Records the sum of (pound)1;
(H) for the other assets and rights agreed to be sold and purchased
hereunder the aggregate sum of (pound)1.
4. Stock
-----
4.1 On the Completion Date the parties shall procure that there shall be a
stocktaking of the Stock which shall be attended by representatives of
the Vendor and the Purchaser. The procedures and practices to be adopted
by the Vendor and Purchaser in undertaking the stock take are set out in
Appendix 18 As soon as practicable following the Completion Date, and in
any event not later than seven days after the Completion Date, a draft
of the Stock valuation ("the draft Stock Valuation") shall be prepared
by the Vendor in accordance with the Stock valuation policies and
principles set out in Appendix 18 and delivered to the Purchaser.
4.2 As soon as reasonably practicable after delivery of the draft Stock
Valuation to the Purchaser, and in any event within thirty-one days
after such delivery ("the Review Period"), the Purchaser shall review
the draft Stock Valuation and shall set out in writing the adjustment
(if any) it considers necessary for the draft Stock Valuation to comply
with Clause 4.1 above, and endeavour to agree with the Vendor what
adjustments (if any) need to be made to it in order for it to comply
with Clause 4.1 above.
4.3 If:
(A) the Purchaser agrees that no adjustment need to be made to the
draft Stock Valuation or does not dispute the draft stock
valuation; or
(B) the Purchaser and the Vendor agree on the adjustments to be made
to the draft Stock Valuation in order for it to comply as
aforesaid,
they shall (in the circumstances mentioned in (b) above) jointly
incorporate into, and
<PAGE>
reflect any such adjustments in, the draft Stock Valuation and the value
of the Stock reflected in that adjusted draft Stock Valuation, shall be
the value of the Stock agreed or determined in accordance with this
Clause 4 for all purposes of this Agreement and shall in the absence of
manifest error be final and binding on the parties and shall not be
subject to question on any ground whatsoever and the date of such
adjusted or determined draft Stock Valuation shall for all purposes of
this Agreement be the date of agreement of the value of the Stock.
4.4 If the Vendor and the Purchaser are unable to agree within the Review
Period on:
(A) whether adjustments need to be made to the draft Stock Valuation;
(B) the adjustments to be made thereto; or
(C) the value of the Stock,
then the matter or matters in dispute, but no others, shall be referred
for determination in accordance with Clause 25.
For the avoidance of doubt all matters falling to be determined under
this clause 4.4 shall be determined by the Independent Accountants
pursuant to clause 25 irrespective of the content of clause 34.
4.5 Until the value of the Stock shall have been agreed or determined, the
Vendor and the Purchaser shall respectively:
(A) give or procure that their respective representatives and the
Independent Accountants are given access at all reasonable times
to all books and records relevant to the exercise of agreeing the
value of the Stock which are in the possession or under the
control of the Vendor or the Purchaser (as the case may be); and
(B) generally provide each other and the Independent Accountants with
such other information and assistance as they may reasonably
require (including access to and assistance at reasonable times
from personnel employed by the Vendor or the Purchaser, as the
case may be), in relation to the review, agreement or
determination of the draft Stock Valuation and the determination
of the value of the Stock.
4.6 In the event that the value of the Stock agreed or determined as
provided in this Clause 4 exceeds (pound)10,000,000 then, without
prejudice to the Purchaser's obligation, as provided in Clause 3.2(c) to
pay the maximum additional sum of (pound)3,000,000, the Purchaser shall
be at liberty to choose which of the items of Stock (excluding, for the
avoidance of doubt, all Bonded Stock which will be acquired by the
Purchaser hereunder at nil value) valued (as aforesaid) it will purchase
pursuant to this Agreement (it being acknowledged that the Purchaser
will be obliged to purchase Stock up to the maximum value of
(pound)10,000,000 and that for these purposes the valuation mechanism to
be adopted is that which is described above) and the balance of the
items not selected will not, subject to Clause 4.7 below, be sold to the
<PAGE>
Purchaser hereunder and will not be regarded as falling within the
definition of Stock for the purposes of this Agreement.
4.7 Any other stock of the Vendor not falling within the definition of Stock
for the purposes of this Agreement shall be offered by the Vendor to the
Purchaser at a value to be agreed, and the Purchaser will have the
option to purchase the stock from the Vendor within 14 days of
Completion although the Purchaser shall be under no obligation to accept
such offer. If the parties fail to consummate such sale within such 14
days, then the Vendor shall (subject to the provisions of Clause 17) be
free to sell such stock as it deems appropriate.
4.8 (A) Notwithstanding the provisions of Clause 3.3 and this Clause 4,
for up to a period of 90 days from the Completion Date, or, if
later, until the date upon which the value of the Stock is agreed
or determined in accordance with clause 4 the Purchaser shall be
entitled to withhold payment of sums due to the Vendor from the
Stock Retention, until it has received (in relation to a
particular supplier's stock) documentary evidence reasonably
acceptable to itestablishing that the Vendor has paid such
supplier for such Stock ("Evidence of Payment").
(B) The Vendor hereby agrees to use all reasonable endeavours to
obtain Evidence of Payment in respect of each such supplier,
within the period of 90 days from the Completion Date referred to
above, but in any event, if such Evidence of Payment has not been
provided by the Vendor at the expiry of such 90 day period, and
again provided on that date the value of the Stock has been
agreed or determined in accordance with this clause 4, then all
sums remaining in the Stock Retention shall be immediately paid
to the Vendor.
(C) Subject to clause 3.3 and the remainder of this clause 4, and
again provided on that date the value of the Stock has been
agreed or determined in accordance with this clause 4, then if
during the 90 day period referred to above, the Vendor provides
the Purchaser with Evidence of Payment is relation to a
particular supplier, any sums payable to the Vendor by the
Purchaser in respect of all Stock supplied to the Vendor by such
supplier (a "Released Stock Payment") shall be payable to the
Purchaser in accordance with Clause 8 below.
5. Escrow Account
--------------
5.1 At any time prior to the first anniversary hereof, ("the Expiry Date")
and thereafter as provided in this Clause the Purchaser shall be
entitled to have recourse to the Cash Deposit to obtain payment of any
amounts due to it in respect of any claim finally decided under this
Agreement or under any agreement entered into pursuant to this Agreement
(a "Claim") which has not previously been paid or satisfied by the
Vendor in accordance with the terms of this Agreement.
5.2 If a Claim has been notified to the Vendor by the Purchaser, together
with, so far as is reasonably practicable full details of the amount
alleged to be due in respect thereof,
<PAGE>
and it shall be finally decided that the Vendor is liable in whole or in
part in respect of the Claim but the Vendor has not discharged the
amount so due in respect of the Claim, the parties shall procure the
release forthwith of the amount so due from the Escrow Account (to the
extent sufficient) by way of satisfaction (or to the extent sufficient
aforesaid) of the liability of the Vendor.
5.3 If by the Expiry Date it shall not have been finally decided whether or
not the Vendor is liable in whole or in part in respect of a Claim there
shall be retained in the Escrow Account subject to Clause 5.5 an amount
equal to the alleged amount of the Claim (and the balance of the Cash
Deposit not required to meet any other then outstanding Claims shall be
released to the Vendor's Solicitors) until it shall be finally decided
that the Vendor is liable in whole or in part in respect thereof or
until the provisions of Clause 5.4 apply
5.4 If at any time after the Expiry Date it shall be finally decided that
the Vendor is not liable in whole or in part in respect of the Claim
then to the extent that the Vendor is not so liable or the Claim has
been withdrawn, the rights of the Purchaser to have recourse to any
amount retained in the Escrow Account in respect thereof under this
Clause shall to that extent, lapse and so much of the amounts retained
in the Escrow Account in respect of the Claim as is equal to the amount
of the Claim in respect of which it has been finally decided the Vendor
is not liable shall be released to the Vendor's Solicitors
5.5 (A) In the event that a Claim has not been finally decided at close
of business on the Expiry Date, then an amount equal to what the
Purchaser reasonably believes to be the quantum of the Claim
shall be retained in the Escrow Account (subject to the
provisions of this Clause 5.5) pending final decision of such
Claim in accordance with the provisions of Clause 5.6 below. In
such circumstances the Vendor may notify the Purchaser in writing
that it wishes to invoke the provisions of this Clause 5.5.
Following such notification the Vendor and the Purchaser shall
have a period of 7 days in which to agree the identity of a
Queen's Counsel to provide an opinion in respect of the Claim. In
the event that the Vendor and the Purchaser shall fail to agree
the identity of the Queen's Counsel to be instructed within such
period of 7 days then either the Vendor or the Purchaser may
apply to the Chairman of the Bar Counsel for determination of the
identity of the Queen's Counsel to be instructed. The Queen's
Counsel so identified shall be instructed jointly by the Vendor
and the Purchaser ("the Instructions"). The Instructions shall be
sent to the Queen's Counsel no later than the seventh day after
the Queen's Counsel has been identified in accordance with this
Clause accompanied by such submissions as the Vendor and the
Purchaser shall wish to make in relation to the Claim (the
"Submissions"), provided that no later than the fifth day after
the identity of the Queen's Counsel shall have been determined
each of the parties shall provide to the other copies of the
submissions that it intends to make to the Queen's Counsel to
enable the other party to comment on such submissions save that
neither party shall be required to submit to the other party
copies of any material which in the opinion of their respective
solicitors attracts legal professional privilege on any ground.
Any commentary on the other party's submissions (the "Further
Submissions")
<PAGE>
may also be submitted to Queen's Counsel with the Instructions.
The Vendor and the Purchaser further agree that:
(i) any disclosure of legally privileged information to the
Queen's Counsel shall not amount to a waiver of such legal
privilege;
(ii) the Queen's Counsel appointed pursuant to this Clause 5.5
shall not be eligible to act for either party in relation to
any proceedings to which the Claim relates;
(iii)the opinion of Queen's Counsel shall be kept confidential as
between the parties and may not be referred to or relied
upon by either party in any proceedings to which the Claim
relates; and
(iv) the Queen's Counsel's opinion to be provided shall be made
on the basis of the Instructions, the Submissions and the
Further Submissions by the Vendor and the Purchaser which
accompany the Instructions and neither the Vendor nor the
Purchaser shall be entitled to provide to the Queen's
Counsel any further submissions whether written or oral.
(B) If the Queen's Counsel opines that the Purchaser has reasonable
grounds for the Claim in question, the costs of such Queen's
Counsel shall be borne in full by the Vendor whether or not
Queen's Counsel was able to determine the Estimated Amount of
such Claim in accordance with (C) below. However, if the Queen's
Counsel opines that the Purchaser does not have reasonable
grounds for such Claim, the costs of such Queen's Counsel shall
be borne in full by the Purchaser.
(C) The opinion which shall be sought from Queen's Counsel shall be
whether or not (i) there are reasonable grounds for the Claim to
be made and (ii) if so the likely quantum of such Claim (to the
extent that this can be assessed by Queen's Counsel) (the
"Estimated Amount"). The Purchaser shall only be entitled to
withhold (and retain in the Escrow Account) from the amount that
would otherwise be required to be released from the Escrow
Account to the Vendor an amount equal to the Estimated Amount and
such sums retained in the Escrow Account shall be retained
pending final decision of such Claim in accordance with Clause
5.6 below. In the event that any Claim is not quantifiable by
Queen's Counsel on the basis of the information underlying such
Claim then the amount equal to what the Purchaser reasonably
believes to be the quantum of the Claim shall not be released
from the Escrow Account pending final decision of such claim in
accordance with Clause 5.6.
5.6 For the purposes of this Clause only, a Claim shall be deemed to be
"finally decided" if either:
(A) the Vendor and the Purchaser agree a final settlement thereof in
writing; or
(B) upon an order or decree of a Court of competent jurisdiction
being given in proceedings in respect of the Claim and such order
or decree being final and not
<PAGE>
or no longer appealable.
The amount determined to be payable upon final decision of the Claim
shall be the amount agreed by the Vendor and the Purchaser or determined
by any such order or decree (as the case may be) to be payable by the
Vendor in respect thereof.
5.7 The Purchaser hereby undertakes that, unless a final decision has been
agreed between the parties, it will commence proceedings in respect of
any Claim within six months from the date the Purchaser notifies the
Vendor of such Claim in accordance with Clause 5.2.
5.8 Interest earned on principal monies released from the Escrow Account
shall be paid to the person receiving the same at the same time as they
are released.
5.9 The Escrow Account shall be an interest bearing deposit account opened
at a United Kingdom branch of one of the clearing banks (or such other
bank as the parties shall agree) in the joint names of the Vendor's
Solicitors and the Purchaser's Solicitors on terms that no amounts
(including interest) shall be paid out therefrom otherwise than as
expressly provided in this Clause. The mandate applicable to the Escrow
Account shall be operated jointly by the Vendor's Solicitors and
Purchaser's Solicitors.
5.10 For the avoidance of doubt matters falling to be determined by Queen's
Counsel under this clause 5 shall be determined by Queen's Counsel in
accordance with this clause 5 irrespective of the content of clause 34.
6. Value Added Tax
---------------
6.1 The amount of the Consideration payable by the Purchaser to the Vendor
under this Agreement is exclusive of VAT which may be determined to be
payable in respect thereof, and which, if so determined shall be paid by
the Purchaser to the Vendor upon delivery of an appropriate VAT invoice.
6.2 The Vendor and the Purchaser consider that the sale of the Business by
the Vendor to the Purchaser is one to which the provisions of paragraph
5 of the Value Added Tax (Special Provisions) Order 1995 ("Paragraph 5")
applies and agree that Clause 6.1 will not apply to any sale to which
Paragraph 5 applies or any payments to be made by the Purchaser to the
Vendor in respect of such sale.
6.3 The Vendor shall not charge any VAT to the Purchaser in respect of the
sale and purchase of the Business and the Assets unless Customs shall
first have provided a written ruling to the effect that the Vendor is
obliged to charge VAT to the Purchaser in respect of the sale and
purchase hereunder. If H M Customs & Excise confirms to the Purchaser
that the sale of the Sale Assets pursuant to this Agreement is a taxable
supply for VAT purposes, the Purchaser shall pay, within five Business
Days of demand by the Vendor accompanied by the relevant VAT invoice, an
amount equal to the VAT chargeable in respect of the Sale Assets, return
any VAT Records delivered to the Purchaser by the Vendor pursuant to
Clause 6.7 and the Vendor shall issue the Purchaser with a tax invoice
in respect of the supply, unless the Vendor is prevented
<PAGE>
from issuing the tax invoice by virtue of sub-paragraph 13(5) of the
Value Added Tax Regulations 1995 ("Paragraph 13(5)") without first
obtaining the permission of H M Customs & Excise, in which case, the
Vendor shall use its reasonable endeavours to obtain permission to issue
such invoice and will issue the invoice within five Business Days of
obtaining such permission.
6.4 The Vendor hereby warrants and undertakes that:
(A) the Business is capable of operation as a going concern by the
Vendor;
(B) the Sale Assets are legally and beneficially owned by the Vendor,
are used for the purposes of the Business and are the Vendor's
business assets;
(C) the Vendor is a taxable person for the purposes of VAT;
(D) the Vendor has not made any election in respect of the Property
under paragraph 2 of Schedule 10 to the VATA 1994 and will not
make any such election before Completion; and
(E) there has been no significant break in the normal trading pattern
of the Business at any time in the last six months.
For the avoidance of doubt, any penalty or interest incurred by the
Vendor for late payment of VAT by reason of it having been assumed that
sale and purchase of the Business and the Assets to the Purchaser fell
within Paragraph 5 shall be borne by the Vendor.
6.5 The Purchaser hereby warrants that:
(A) the Purchaser is a taxable person;
(B) the Sale Assets are to be used by the Purchaser or a member of
the same VAT group as the Purchaser in carrying on the same kind
of business as the Business, whether or not as part of any
existing business carried on by the Purchaser; and
(C) there are no arrangements in existence for the transfer of the
legal or the beneficial interest in the assets by the Purchaser
(save for Stock in the ordinary course of the Business) otherwise
than to another member of the same VAT group as the Purchaser.
6.6 If the Purchaser shall have paid to the Vendor any amount in respect of
a supposed liability to VAT and Customs shall subsequently determine
that the whole or part of such supposed liability to VAT was not
properly chargeable ("Overpaid VAT"), then the Vendor shall:
(A) promptly notify the Purchaser of Customs' determination; and
<PAGE>
(B) forthwith on recovery of the Overpaid VAT, repay the Overpaid VAT
(together with all interest paid by HM Customs & Excise relating
thereto) to the Purchaser and issue a VAT credit note to the
Purchaser in respect of the Overpaid VAT.
6.7 The Vendor shall make a request as soon as it is reasonably practicable
and in any event within ten Business Days after Completion for a
direction from the Commissioners that the VAT Records shall continue to
be preserved by the Vendor. If the Commissioners decline to issue the
direction within thirty Business Days after Completion, the Vendor
shall, on the earlier of five Business Days of the receipt of the
Commissioners' written notification to that effect or thirty-five
Business Days after Completion, deliver the VAT Records to the
Purchaser. The Vendor undertakes to maintain and preserve the VAT
Records as the Purchaser is or would be required to maintain and
preserve them by law for the period between Completion and the delivery
thereof to the Purchaser or the issue of the direction sought (as they
case may be).
7. Completion
----------
7.1 Subject as hereinafter provided Completion shall take place at Guernsey.
7.2 On Completion the Vendor shall deliver to the Purchaser (or to such
person as the Purchaser may nominate):
(A) such duly executed documents in the Agreed Form as are reasonably
required by the Purchaser to complete the sale and purchase of
the other Sale Assets and to vest title thereto in the Purchaser;
(B) all property hereby agreed to be sold which is capable of
transfer by delivery (which delivery shall, unless otherwise
agreed, take place at the Property);
(C) the Records;
(D) duly executed SCH Supply Agreement, Elcom Name Licence, PECOS
Licence and Langley Occupation Licence;
(E) the originals of all of the documents in the Vendor's possession
constituting or evidencing the Contracts and the terms and
conditions of employment of each of the Employees;
(F) the Disclosure Letter;
(G) the IPR Licence.
7.3 Subject to the Vendor complying with its obligations as aforesaid, the
Purchaser shall:
(A) deliver to the Vendor (or such person as the Vendor shall
nominate) counterparts of the documents referred to at Clause
7.2(A), (B), (E) and (I)
<PAGE>
duly executed by the Purchaser; and
(B) pay the sum of (pound)13,800,000 specified in Clause 3.2 by bank
transfer to the Vendors' Solicitors :
Bank: C Hoare & Co
Address: 37 Fleet Street, London EC4
Sort Code: 15-99-00
Client Account: 28782240
whose receipt in respect of such payment shall be a complete discharge
to the Purchaser.
(C) pay the sum of (pound)500,000 into the Escrow Account pursuant to
Clause 3.2.
7.4 The property and (subject to the terms of this Agreement) the risk in
the Sale Assets shall pass to the Purchaser on Completion or in the case
of the title or beneficial interest in any Sale Asset capable of passing
by delivery on actual delivery thereof and (save where the Purchaser has
before Completion notified the Vendor that it requires delivery of any
Sale Assets to take place at the venue at which Completion takes place)
any Sale Assets at the Property or in the possession of the Employees
shall be deemed to have been delivered on Completion.
8. Apportionments
--------------
8.1 All rents, rates and other periodic outgoings in respect of the Business
including (but without limitation) those in relation to the Property and
all wages, salaries and other periodic outgoings in respect of the "A"
Employees including accrued holiday remuneration and bonuses (deferred
or otherwise), sales commissions and other periodic outgoings in respect
of the Sale Assets and the Assumed Contracts for periods of time on or
before Completion shall be borne by the Vendor and for periods of time
after Completion shall be borne by the Purchaser and all periodic
payments receivable in respect of the foregoing for periods of time on
or before Completion shall belong to and be payable to the Vendor and
for periods of time after Completion shall belong to and be payable to
the Purchaser. Such outgoings payable and payments receivable in respect
of periods starting on or before Completion and ending after it shall be
apportioned accordingly, provided that any such outgoings or payments
receivable which are referable to the extent of the use of any asset or
right shall as far as practicable be apportioned according to the extent
of such use. All deferred revenue constituted by services invoiced prior
to Completion by the Vendor in respect of invoices raised prior to
Completion by the Vendor but in respect of services to be supplied by
the Business after Completion shall belong to the Purchaser, and shall
be payable by the Vendor to the Purchaser, and all Released Stock
Payments treated as if an apportionment sum under this clause 8.1 and
shall be payable by the Purchaser to the Vendor, in accordance with
Clause 8.2.
8.2 Where any amounts fall to be apportioned under this Agreement the Vendor
or the Purchaser (as the case may be) shall other than in relation to
Released Stock Payments
<PAGE>
provide the other with full details of the apportionments together with
supporting vouchers or similar documentation. The apportionments made
pursuant to this Clause 8 shall be agreed between the Vendor and the
Purchaser at the end of each month following the Completion Date until
the Vendor and Purchaser agree that all items that would fall to be
apportioned pursuant to this Clause 8 have been so apportioned and that
all consequential payments have been made. If the amount of any
apportionment or deferred revenue is in dispute, the matter shall be
Determined by the Independent Accountants. The amount so agreed or
determined shall be paid within seven days of such agreement or
determination. Any amount payable under this clause shall carry interest
from the due date for payment at the end of each month until the date of
actual payment at a rate equal to three per cent per annum above the
base rate for the time being of HSBC Bank plc. For the avoidance of
doubt all matters falling to be determined under this clause 8.2 shall
be determined by the Independent Accountants pursuant to clause 25
irrespective of the content of clause 34.
8.3 Each of the Vendor and the Purchaser shall keep accounting records
reasonably sufficient to enable verification of the apportionments and
shall allow the other of them, its auditors or other duly authorised
representatives and any Independent Accountants access to such
accounting records at any time during normal business hours on
reasonable notice to examine and take copies, notes or extracts from
such records for the purpose of such verification.
9. The Debts
---------
9.1 The Vendor shall remain entitled to the Debts and will continue to
collect them in accordance with its normal procedures for the collection
of debts full details of which will be provided to the Purchaser by the
Vendor within seven days of Completion. If any member of the Purchaser's
Group receives any communication or payment in respect of any of the
Debts, it shall as soon as reasonably practicable pass such
communication or payment to the Vendor and in any event pending payment
it shall hold all such payments so received upon trust absolutely for
the Vendor. Save as otherwise provided herein, in the event that any
member of the Vendors' Group receives, after Completion, any
communication or payment relating to or in connection with the operation
of the Business after Completion, it will, as soon as reasonably
practicable, pass such communication or payment to the Purchaser and in
any event, pending payment, it shall hold all such payments so received
upon trust absolutely for the Purchaser.
9.2 The Purchaser shall provide the Vendor, following a request on
reasonable notice by the Vendor to the Finance Director of the Purchaser
(consent to such request not to be unreasonably withheld or delayed),
with such access at reasonable times on business days to the Records
relevant to the Debts and Employees as the Vendor may from time to time
reasonably require for the purposes of collecting in the Debts provided
that such access does not cause material disruption to the Business.
9.3 Where any Debt due from an end user customer of the Business (a
"Customer Debt") remains unpaid to the Vendor for a period in excess of
90 days, and provided that
<PAGE>
such Customer Debt is a proven and valid debt, the Vendor may give
notice to the Purchaser of its intention to commence legal or collection
proceedings in relation to the recovery of such Customer Debt, such
notice setting out the value of such Customer Debt, and providing the
Purchaser with an option to purchase such Customer Debt from the Vendor
at a price to be agreed between the Vendor and the Purchaser but in any
event not greater than the value stated in the Vendor's Sales Ledger net
of any specific provision which should have been made by application of
the Vendors' debtor provisioning policy on liquidation or insolvency (
"Purchase Price").
9.4 The Purchaser shall then have a period of fourteen days to confirm by
written notice ("Purchase Notice") to the Vendor its desire to purchase
the unpaid Customer Debt from the Vendor, in such confirmation
indicating the purchase price which it is prepared to offer in respect
of same.
9.5 If the Purchaser confirms to the Vendor its intention to purchase the
unpaid Customer Debt pursuant to a Purchase Notice, completion of such
purchase shall occur within 2 Business Days of service of the Purchase
Notice and
9.5.1 The Vendor shall sell with full title guarantee free from all
encumbrances the relevant Customer Debt for the Purchase Price.
9.5.2 The Vendor shall use its reasonable endeavours to procure the release of
the relevant Customer Debt from all and any legal and/or beneficial
interest of Deutsche Financial Services Limited ("the Factor").
9.5.3 To the extent that such Customer Debt is legally vested in the Factor,
the Vendor shall use its reasonable endeavours to procure either that
the Factor reassigns legal title to the Customer Debt to the Vendor or
that the Factor assigns such Customer Debt direct to the Purchaser,
prior to completion of the purchase by the Purchaser of that Customer
Debt.
9.5.4 In either situation contemplated by clause 9.5.3 the Purchaser may at
its sole option either pay direct to the Factor the amount of any monies
advanced by the Factor to the Vendor in relation to such Customer Debt
or pay such monies to the Vendor to account to the Factor.
9.6 If a sale of the Customer Debt has not been completed within fourteen
days of any confirmation given pursuant to Clause 9.5 above, the Vendor
may then take any action or institute any legal proceedings in respect
of any such unpaid Customer Debt as it thinks fit.
9.7 Where any Debt which is due from a dealer for the distribution
operations of the Business (a "Dealer Debt") remains unpaid to the
Vendor for a period in excess of 30 days after its due date for payment,
the Purchaser hereby agrees on the reasonable request of the Vendor(s)
to inform such dealer that the Purchaser is aware of the overdue Dealer
Debt and that failure to satisfy such overdue Dealer Debt may impact on
the credit limits granted by the Purchaser to such dealer.
<PAGE>
10. The Property
------------
The Property and the Scottish Property shall be sold by the Vendor to
the Purchaser or shall otherwise be dealt with subject to and upon the
terms set out in Schedule 3.
11. Assumed Contracts Tenders and Ancillary Rights
----------------------------------------------
11.1 Subject to Clause 13.1 and as otherwise expressly provided herein or in
any agreement executed pursuant hereto, the Purchaser shall with effect
from Completion assume and perform all of the obligations of the Vendor
under the Assumed Contracts to be performed (in accordance with the
terms of such Assumed Contracts) after Completion.
11.2 All Contracts which can be assigned by the Vendor without the consent of
any third party shall be assigned to the Purchaser with effect from
Completion.
11.3 Insofar as the benefit (subject to the burden as hereinafter provided)
of any of the Assumed Contracts or of any of the Ancillary Rights cannot
be transferred by the Vendor to the Purchaser on Completion without the
agreement or consent of a third party:
(A) the Vendor shall use its best endeavours (with the reasonable
co-operation of the Purchaser) to procure that such Assumed
Contracts and Ancillary Rights are novated or assigned as soon as
possible after Completion;
(B) unless and until any such Assumed Contracts and Ancillary Rights
are novated or assigned;
(i) the Vendor shall hold the benefit (subject to the burden)
of such Assumed Contracts and Ancillary Rights upon trust
for the Purchaser absolutely and shall pay to the
Purchaser as soon as reasonably practicable any sums or
other benefits received by the Vendor in relation thereto
as soon as reasonably practicable after receipt;
(ii) the Purchaser shall have the right and the Vendor shall at
the election of the Purchaser permit the Purchaser to
perform, in place of the Vendor, any such Assumed Contract
as sub-contractor, agent, licensee or sub-licensee (as
appropriate) of the Vendor to the extent that such
performance may be permitted by any such Assumed Contract;
and
(iii) subject to clause 9, unless and until any such Assumed
Contracts and Ancillary Rights shall be novated or
assigned, the Vendor shall (so far as it lawfully may
so do) act under the direction of the Purchaser in all
matters relating to such Assumed Contracts and
Ancillary Rights for so long as the Vendor is required
and authorised so to do by the Purchaser and shall not
without the Purchaser's express prior written consent
make or effect any variation of terms compromise,
release or waiver or settlement of or otherwise take
any action in relation to any such
<PAGE>
Assumed Contracts or Ancillary Rights or any other rights
arising under the same.
(C) In any case where the consent of a third party is required in
connection with the novation or assignment of an Assumed Contract
or any Ancillary Rights and such consent is not forthcoming or is
refused the Vendor shall use its best endeavours to make such
arrangements as may be acceptable to the Purchaser for assuring
to the Purchaser the full benefit of such Assumed Contracts and
Ancillary Rights.
11.4 Insofar as any Tender is accepted and becomes a binding contract of the
Vendor the provisions of Clauses 11.1 and 11.2 shall apply to such
contracts as if they were Assumed Contracts.
12. Claims by Customers and Returns
-------------------------------
12.1 In relation to items of stock returned after Completion to the Vendor,
or to the Purchaser in the course of conduct of the Business, in either
case by any customer of the Business and where, in either case, the
stock in question was supplied to that customer by the Vendor in the
course of conduct of the Business prior to Completion, then the
following provisions of this clause 12 shall apply:
(a) If the stock in question has been returned direct by the customer
to the Purchaser and where it has been returned because the
customer concerned alleges that the item in question is faulty or
otherwise does not conform to the requirements/specification
stipulated or confirmed by the manufacturer's warranty in place
in respect of such item supplied then:
(i) if the Purchaser successfully passes, by agreement of the
manufacturer concerned, the item in question back to the
manufacturer and obtains reimbursement from that
manufacturer in respect of the repair or replacement (as
appropriate) cost of the item concerned, then the cost to
the Purchaser of the repair or replacement as aforesaid
will not be recoverable by the Purchaser from the Vendor
under any provision of this Agreement; but
(ii) if the Purchaser cannot, having used its reasonable
endeavours so to do for a period of thirty days commencing
on the date of return of the item to the Purchaser, pass,
as aforesaid,the item in question back to the manufacturer
concerned and/or obtain reimbursement in respect of the
repair or replacement cost as aforesaid,then the Purchaser
shall return the item in question to the Vendor and the
Vendor shall reimburse the Purchaser the costs incurred by
the Purchaser in replacement of that item and all sums due
from the Vendor to the Purchaser under this sub-clause(ii)
shall be regarded as falling within the definition of the
Excluded Liabilities for the purposes of this Agreement;
but
<PAGE>
(b) if the stock has been returned after Completion to the Vendor,
then the Purchaser may, at its absolute discretion, agree to
operate the provisions of sub-clause (a) above as if the item in
question had in fact been returned after Completion direct by the
customer concerned to the Purchaser.
12.2 In relation to items of stock returned, prior to Completion, to the
Vendor in the course of conduct of the Business, then the Purchaser may,
at its absolute discretion, agree to operate the provisions of
sub-clause 12.1(a) above as if the item in question had in fact been
returned after Completion direct by the customer concerned to the
Purchaser in the course of conduct of the Business
PROVIDED THAT for the avoidance of doubt, save to the extent expressly
provided in this clause 12, nothing in this clause 12 shall be taken to
limit or exclude the liability of the Vendor to the Purchaser as
provided in any other provision of the Agreement.
13. Excluded Liabilities
--------------------
13.1 Nothing contained in this Agreement or otherwise:-
(A) shall require the Purchaser to perform any obligation relating to
the Business or the Sale Assets which was due to have been
performed or should have been performed by the Vendor before
Completion;
(B) shall impose on the Purchaser any liability for any losses or
claims or expenses arising by reason of a breach by the Vendor of
its obligations under or contemplated by this Agreement;
(C) shall impose on the Purchaser any liability for or in respect of
any of the Excluded Liabilities and/or any of the Excluded
Assets.
13.2 The Vendor undertakes with the Purchaser fully to indemnify the
Purchaser against any and all losses, claims, actions, proceedings,
damages, and reasonable costs and expenses (including reasonable
professional fees) and other liabilities which the Purchaser may suffer
or incur by reason of
(i) the failure by the Vendor to discharge the creditors of the
Business at Completion including the discharge of any retention
of title clauses invoked by any supplier of the Business in
relation to any Stock; and/or
(ii) the Excluded Liabilities listed in Schedule 1 and/or
(iii) by reason of or in connection with any of the Excluded Assets.
The Purchaser agrees not to take any action to avoid, dispute, resist,
appeal, settle, compromise or defend or otherwise deal with any Excluded
Liability without the prior written consent of the Vendor. If requested
by the Vendor, the Purchaser will re-assign, insofar as is possible, to
the Vendor any right to claim against a manufacturer, which right is
comprised in the Ancillary Rights, required by the Vendor to mitigate
<PAGE>
its liability in respect of an Excluded Liability.
The indemnity in this clause 13 extends to all losses, claims, actions,
proceedings, damages and reasonable costs and expenses suffered or
incurred by the Purchaser as a result of any claim against the Purchaser
by any third party relating to any Excluded Liability listed in Schedule
1, save that any consequential loss suffered by the Purchaser as a
result of any such claim shall, without prejudice to the provisions of
clause 13.1, not be the subject of this indemnity.
13.3 The Vendor shall supply to the Purchaser promptly after request such
information as the Purchaser shall from time to time require in relation
to the discharge of the Vendor's obligations under or contemplated by
this Clause and shall not in the discharge of such obligations take any
steps which might reasonably be expected to damage in any material
respect the continuing commercial interests of the Purchaser.
14. Assumed Liabilities
-------------------
Except as expressly provided herein, nothing in this Agreement or any
other agreement entered into pursuant to this Agreement or otherwise
shall impose any liability on the Vendor's Group in respect of the
Assumed Liabilities or in connection with the Business or Sale Assets or
any of them after risk therein shall pass to the Purchaser in accordance
with the terms hereof, and the Purchaser agrees to fully indemnify the
Vendor against any and all losses, claims, actions, proceedings,
damages, and reasonable costs and expenses (including reasonable
professional fees) and other liabilities which the Vendor may suffer or
incurs in relation to the Assumed Liabilities. The Vendor agrees (i) not
to take any action to avoid, dispute, resist, appeal, settle, compromise
or defend or otherwise deal with any Assumed Liability without the prior
written consent of the Purchaser, and (ii) (subject to first being
indemnified by the Purchaser to its reasonable satisfaction against all
liability which may thereby be incurred) take such action as the
Purchaser may reasonably require from time to time to assist it in
dealing with any such claim or to enforce any rights it may have to
recover from any third party any sum or benefit the matter of the
subject of a claim hereunder or otherwise referable hereto.
15. Warranties
----------
15.1 In consideration of the Purchaser entering into this Agreement the
Vendors hereby warrant to the Purchaser (for itself and as trustee for
its successors in title) in the terms set out in Schedule 4.
15.2
(A) The Warranties are qualified to the extent, but only to the
extent, of those matters fairly disclosed in the Disclosure
Letter and for this purpose "fairly disclosed" means disclosed in
such manner and in such detail as to enable a reasonable
purchaser to make an informed assessment of the matter concerned.
(B)
(i) Each of the paragraphs in Schedule 4 shall be construed as a
separate and independent warranty; and
(ii) save as expressly otherwise provided in this Agreement,
shall not be
<PAGE>
limited by reference to any other paragraph in
Schedule 4 or by any other provision of this Agreement
and the Purchaser shall have a separate claim and right of action
in respect of every breach of each such warranty.
15.3 The rights and remedies conferred on the Purchaser under this Agreement
are cumulative and are additional to, and not exclusive of, any rights
or remedies provided by law or otherwise available at any time to the
Purchaser in respect of any breach of Warranty (including but not
limited to the right to damages for any loss or additional loss suffered
by the Purchaser).
15.4 The Warranties shall not in any respect be extinguished or affected by
Completion.
15.5 The Vendor agrees with the Purchaser (for itself and as trustee for the
Employees):
(A) that the giving by any of the Employees to the Vendor or its
agents or advisers of any information or opinion in connection
with the Warranties or the Disclosure Letter or otherwise in
relation to the Business or in connection with the negotiation
and preparation of this Agreement or the Disclosure Letter shall
not be deemed a representation, warranty or guarantee to the
Vendor of the accuracy of such information or opinion;
(B) to waive any right or claim which the Vendor may have (whether
against any of the Employees or the Purchaser) for any
inaccuracy, error, omission or misrepresentation in any such
information or opinion (other than any claim which in the
reasonable opinion of the Vendor would arise out of fraud); and
(C) that any such right or claim shall not constitute a defence to
any claim by the Purchaser under or in relation to this Agreement
(including the Warranties).
15.6 Where in this clause 15 or in Schedule 4 any representation or warranty
is expressed to be qualified by reference to the awareness of the Vendor
then that representation or warranty shall be deemed not to be so
qualified unless the Vendor shall have made reasonable enquiry of its
officers, senior employees with relevant responsibilities and relevant
professional advisers.
16. Limitations on Liability
------------------------
16.1 Subject as provided below, the liability of the Vendor under or in
respect of the Warranties shall be limited as follows:-
(A) no claim under the Warranties ("a relevant claim") may be made
unless written notice of the claim concerned has been given to
the Vendor in accordance with this Clause before the first
anniversary from the Completion Date; and
(B) any relevant claim which is notified within the required period
as prescribed above shall (unless previously settled or
withdrawn) be deemed to have been
<PAGE>
settled or withdrawn if legal proceedings in respect thereof have
not been issued and served on the Vendor within six months from
the date of the notice of such relevant claim being given to the
Vendor.
For the purposes of this Clause 16.1 (in relation to which time shall be
of the essence) the Purchaser shall give notice of any relevant claim as
soon as reasonably practicable after it first becomes aware of the
breach of warranty and such notice shall contain sufficient details
(having regard to the information available to the Purchaser) to enable
the Vendor to identify subject matter of the claim.
16.2 Subject to clause 16.3 below, no relevant claim may be made unless and
until (i) the value of that claim exceeds (pound)5,000; and (ii) the
aggregate amount of all relevant claims individually worth in excess of
(pound)5,000 shall exceed (pound)75,000 although (subject to Clause
16.4) once such limit is exceeded the full amount of all such claims and
any other claims shall be recoverable.
16.3 For the purposes of clause 16.2, if any one or more relevant claims are
all founded on the same circumstance but individually are worth less
than (pound)5,000 but in aggregate are worth in excess of (pound)75,000
then, subject to clause 16.4, the full amount of all such claims and all
other claims shall be recoverable by the Purchaser.
16.4 The maximum aggregate liability of the Vendor under the Warranties shall
not exceed (pound)8,000,000.
16.5 No relevant claim or any other claim under this Agreement may be made:
(A) if the claim has previously been satisfied in full pursuant to
any other provision of this Agreement or any agreement entered
into pursuant hereto; or
(B) if it would not have arisen but for some voluntary act or
transaction carried out or effected after Completion by or on
behalf of any member of the Purchaser's Group outside the
ordinary course of the Business as presently carried on save
where any of such parties are committed to undertake any such act
or transaction after Completion by virtue of any of the acts or
omissions of any member of the Vendor's Group prior to Completion
not disclosed to the Purchaser in the Disclosure Letter; or
(C) if it arises or is increased by reason of any legislation not in
force at the date of Completion; or
(D) to the extent (net of the costs and expenses of recovery incurred
by the Purchaser) the Purchaser obtains compensation in respect
of the loss or damage the subject of the claim under any
suppliers' warranty or guarantee or like obligations or any
Ancillary Rights; or
(E) to the extent (net of the costs and expenses of recovery incurred
by the Purchaser including, without limitation of the generality
of the foregoing, any increased insurance premiums resultant)
that the Purchaser or any other
<PAGE>
member of the Purchaser's Group receives compensation against the
loss or damage suffered the subject of the claim under the terms
of any insurance policy for the time being in force.
16.6 The Purchaser shall not be entitled to recover any sum in respect of any
relevant claim or otherwise retain reimbursement or restitution more
than once in respect of the same loss or damage.
16.7 Any payment under the Warranties shall be deemed to be a reduction of
the Consideration payable hereunder and shall be first set off against
the Consideration payable for the Goodwill.
16.8 Nothing contained in this Agreement or in any agreement entered into
pursuant hereto shall be deemed to relieve any party from any common law
duty to mitigate any loss or damage incurred by it.
17. Covenants to protect Goodwill
-----------------------------
17.1 For the purposes of protecting the Goodwill of the Business, the Vendor
hereby undertakes to and covenants with the Purchaser that no member of
the Vendor's Group nor any associated company or connected company of
any member of the Vendor's Group will, without the prior written consent
of the Group Chief Executive or Finance Director of the Purchaser
whether for its own account or jointly with or as manager agent officer
employee consultant shareholder or otherwise on behalf of any other
person firm or corporation, and whether directly or indirectly during
the Relevant Period:
(A) within the Relevant Territory carry on or be employed, engaged
concerned or interested in any capacity in, knowingly provide any
technical or commercial or professional advice to, or in any way
knowingly assist any business which is or is about to be engaged
in the production, distribution and/or sale of the Restricted
Products or any of them and/or the supply of the Restricted
Services or any of them in competition with the Business; and/or
(B) within the Relevant Territory carry on or be employed, engaged,
concerned or interested in the production, distribution and/or
sale of the Restricted Products or any of them and/or the supply
of the Restricted Services or any of them to any person firm or
company which has at any time within the period of twelve months
preceding the Completion Date been a customer of the Business for
such goods or services (as evidenced by aggregate annual turnover
of the Business with such customer of over (pound)5,000); and/or
(C) solicit, interfere with or endeavour to entice away from the
Business any person, firm or company who is now or has during the
twelve months preceding the Completion Date been a client or
customer of the Business (as evidenced by aggregate annual
turnover of the Business with such customer of over(pound)5,000)
or who has had during such twelve month period substantial
contact, either in writing or otherwise, with the Business in
connection with
<PAGE>
the production, distribution and/or sale of the Restricted
Products or the supply of the Restricted Services (or any of
them) including but not limited to a response to a bid, or tender
process involving the Vendor and/or the Business or a
presentation made by the Vendor and/or the Business to such
person, firm or company, nor enter into a partnership or any
association whether directly or indirectly with any such person,
firm or company; and/or
(D) solicit, interfere with, or endeavour to solicit, interfere with,
or entice away from the Business, or (save for the Retained
Employees) offer to employ or engage under a contract for
services, or enter into partnership with, any person who on or
during the twelve months preceding the Completion Date is or was
an officer or employee of or full time consultant to the
Business, except as otherwise agreed in writing in advance by
either the Group Chief Executive or Finance Director of the
Purchaser and whether or not that person would commit any breach
of his contract of employment by reason of his leaving the
service of the Business;
PROVIDED THAT (i) nothing in this Clause 17 shall prohibit the Vendor's
Group as a whole from holding directly or indirectly (for investment
purposes only) not more than 5% of the shares of a company listed or
dealt in on a recognised Stock Exchange, (ii) subject to the foregoing
nothing in sub-clauses 17.1(A) to (D) shall prohibit any member of the
Vendor's Group carrying on the Retained Business in the manner in which
it has been carried on prior to Completion; (iii) nothing in this Clause
17 shall prohibit any third party (not being a member of the Vendor's
Group or a company associated or affiliated to any member of the
Vendor's Group) from acquiring Elcom International, Inc. by way of
merger, tender offer or other business combination or from acquiring
substantially all of the assets of the Vendor's Group and thereafter in
either case from carrying on any business carried on by such third party
prior to the date of any such acquisition and (iv) nothing in this
Clause 17 shall prohibit the Vendor from selling any stock not
transferred to the Purchaser hereunder provided that any such stock is
not sold to any person who has been a client or a customer of the
Business (as evidenced by aggregate annual turnover of the Business with
such customer of over (pound)5,000) in the 12 months prior to Completion
or who has had during such twelve month period substantial contact,
either in writing or otherwise, with the Business in connection with the
Restricted Products or Restricted Services, including but not limited to
a response to a bid, or tender process involving the Vendor and/or the
Business or a presentation made by the Vendor and/or the Business to
such person, firm or company.
17.2 The Vendor hereby undertakes to and with the Purchaser that no member of
the Vendor's Group will without the prior written consent of either the
Group Chief Executive or Finance Director of the Purchaser, whether for
its own account or jointly with or as manager agent officer consultant
shareholder or otherwise on behalf of any other person firm or
corporation, and whether directly or indirectly:-
(A) take away make use of or disclose to any person firm or
corporation (save insofar as necessary to comply with any
statutory obligation or final non-appealable order of any Court
or statutory tribunal of competent jurisdiction)
<PAGE>
any Confidential Information or information relating to any
manufacturers suppliers customers clients agents or to any other
person who has or who has had any dealings with the Business;
and/or
(B) hold itself or themselves out as having any continuing interest
in the Business (other than the Retained Business) PROVIDED
ALWAYS that the Vendor's Group continues to own the "Elcom" name
and, subject always to the provisions of Clause 17.1 above, may
use such name (or variation thereof) in any way in which they see
fit.
17.3 For the purposes of protecting the goodwill of the Retained Business the
Purchaser will not hold itself out as operating or having any interest
in the Retained Business and the Purchaser hereby undertakes to and
covenants with the Vendor that it will procure that no member of the
Purchaser's Group will, whether for its own account or jointly with or
as manager agent officer employee consultant shareholder or otherwise on
behalf of any other person firm or corporation and whether directly or
indirectly during the Relevant Period (without the prior written consent
of the Vendor) solicit, interfere or endeavour to entice away from the
Retained Business or offer to employ or engage under a contract for
services, or enter into a partnership with any person who on or during
the twelve months preceding the Completion Date is or was an officer or
employee of or full time consultant to the Retained Business.
17.4 For the purposes of this Clause:-
(A) the expression "the Relevant Period" means, for the purposes of
paragraph (D) of Clause 17.1 and paragraph 17.3, the period of
one year commencing on the Completion Date; and, for the purposes
of paragraphs (A), (B) and (C) of Clause 17.1 means (i) the
period from the Completion Date to the first anniversary of the
Completion Date; and (ii) the period from the first anniversary
of the Completion Date to the second anniversary of the
Completion Date; and (iii) the period from the second anniversary
of the Completion Date to the third anniversary of the Completion
Date;
(B) the expression "the Relevant Territory" means United Kingdom,
Italy, France, Spain and Germany;
(C) the expression "Restricted Products" means (i) all products which
are produced, distributed and/or sold by the Business at the
Completion Date (including without prejudice to the generality of
the foregoing, personal computers, hardware, and software); and
(ii) any other products which are of a type similar to any of the
products referred to in (i) above;
(D) the expression "Restricted Services" means (i) all services which
are supplied by the Business at the Completion Date (including,
without prejudice to the generality of the foregoing,
installation, maintenance and/or configuration services in
relation to Restricted Products); and (ii) any other services
which are of a type similar to any of the services referred to in
(i) above.
17.5 Each of the undertakings and covenants contained in the separate
paragraphs of
<PAGE>
Clauses 17.1 and 17.2 is and shall be a separate undertaking and
covenant by the Vendor.
17.6 The parties agree that the restrictive covenants in this Clause 17 are
reasonable and necessary for the protection of the value of the Business
and the Sale Assets and the Retained Business (as appropriate) and that,
having regard to that fact, those covenants do not work harshly on them.
18. Employees
---------
18.1 The parties acknowledge and agree that unless any of the Employees
objects to transferring pursuant to the Regulations the contracts of
employment between the Vendor or EGL and the Employees (save insofar as
such contracts relate to any occupational pension scheme) will have
effect after Completion as if originally made between the Purchaser and
the Employees and all rights, powers, duties and liabilities of the
Vendor or EGL thereunder (other than as provided in Regulation 7 of the
Regulations) shall be automatically transferred to the Purchaser with
effect from Completion as provided in the Regulations.
18.3 The parties acknowledge and agree that, save for the Employees, it is
not the intention of the parties that the contracts of employment of any
other employees of EGL or the Vendor or any other member of the Vendor's
Group (including, for the avoidance of doubt, but without prejudice to
the generality of the foregoing, the Retained Employees) shall be
transferred to the Purchaser as a result of the transactions specified
herein.
18.4 All the obligations of the Vendor or EGL under or in connection with the
contracts of employment, remuneration and/or other benefits of the
Employees arising in respect of any event or period on or prior to the
Completion Date shall be performed and discharged by the Vendor or EGL
and the Vendor or EGL shall indemnify the Purchaser from and against any
and all actions, proceedings, costs, claims, expenses (including legal
expenses), demands, damages, awards (whether of compensation or
otherwise), fines, penalties, judgements, order and liabilities
whatsoever in respect of the same.
18.5 The Vendor and EGL shall be liable for and shall indemnify the Purchaser
in respect of all or any redundancy payments, unfair dismissal or other
compensation (whether statutory or contractual), salary, wages,
commissions, remuneration, national insurance contributions, damages,
costs, claims, PAYE, tax deductions or expenses (including legal
expenses) and employers' liability claims (insofar as such claims are
not covered by a policy of insurance taken out by the Purchaser) which
may be incurred by the Purchaser as a result of:
(A) anything done on or before the Completion Date by or in relation
to the Vendor, EGL or any other member of the Vendor's Group in
respect of the Employees or any of their contracts of employment
or being deemed to have been done by or in relation to the
Purchaser by virtue of the Regulations; or
<PAGE>
(B) any persons other than any Employee (for the avoidance of doubt,
but without prejudice to the generality of the foregoing,
including the Retained Employees) being an employee of the
Vendor, EGL, or any other member of the Vendor's Group being
engaged in the Business in such way that such persons employment
transfers to the Purchaser pursuant to or by virtue of the
Regulations; or
(C) the Purchaser's termination or serving notice of termination of
the contracts of employment of all or any of the "B" Employees
during the period ending four months after the Completion Date
provided that the Purchaser shall also comply with its
obligations under Clause 18.8 below and that the indemnity in
respect of remuneration and contractual benefits shall not
include remuneration and benefits payable to any of the "B"
Employees in respect of work done by them in the Business during
the period of time between Completion and the issuing of notice
of termination to the "B" Employees by the Purchaser and the
indemnity shall not cover any unfair dismissal claims by any of
the "B" Employees which are based solely on an act or omission of
the Purchaser following the Completion Date which represents a
breach of the "B" Employees employment contract; or
(D) relate to any failure by the Vendor or EGL to comply with their
obligations under regulation 10 of the Regulations in respect of
any of the Employees
save to the extent that such liability is specifically included and
agreed by the Vendor and the Purchaser in the amount of any
apportionments made pursuant to Clause 8.
18.6 The Purchaser shall indemnify and keep indemnified EGL, the Vendor and
the Vendor's Group against all actions, proceedings, costs, claims,
expenses (including legal expenses) , demands, damages, awards (whether
of compensation or otherwise) fines, penalties, judgments, order and
liabilities whatsoever incurred by it in relation to the employment, the
termination of employment and/or any variation on the terms of
employment of any of the "A" Employees following Completion.
18.7 The Vendor and EGL undertake to authorise and hereby authorises each of
the Employees to disclose to the Purchaser after Completion all
information in his possession relating to the Business notwithstanding
any term of his employment with the Vendor or EGL (whether express or
implied) which would otherwise preclude him from so doing.
18.8 The Purchaser undertakes to use all reasonable endeavours to dismiss any
"B" Employees after Completion fairly and, in particular, to comply with
an employer's obligations to consult with such employees at an
individual level and with elected employee representatives, if
appropriate, in accordance with section 188 of the Trade Union and
Labour Relations (Consolidation) Act 1992.
18.9 The Vendor and EGL undertake and confirm to the Purchaser that the
Disclosure Letter contains full details of all written and all verbal
communications which may have been issued to any of the Employees which
to any extent refer to, describe or
<PAGE>
relate to the transaction contemplated by this Agreement.
18.10 Without prejudice to any of the Purchaser's other rights under the
indemnity contained in Clause 18.5(C):-
(A) the Employee Claim Fund shall be retained by the Purchaser for a
period of 35 days from the Completion Date (the "Employee Claim
Fund Period") in respect of any amount due from the Vendor to the
Purchaser pursuant to Clause 18.5(C).
(B) at the end of the Employee Claim Fund Period, the Purchaser
will provide the Vendor with a list of those "B" Employees who
have been issued notice of termination of employment by the
Purchaser by reason of redundancy (the "Redundant Employees"),
and set out the amount of estimated compensation payable to such
Redundant Employees in relation to any redundancy payments
payable to them, any remuneration and benefits due for the period
from Completion and any payments due in respect of the notice
periods following the notice of termination of their employment,
calculated by reference to the estimated employees compensation
payment list in the form of Appendix 19.
(C) within 2 business days of the end of the Employee Claim Fund
Period, the Purchaser will pay to the Vendor the Employee Claim
Fund less any payments to be made to the Redundant Employees
pursuant to sub-Clause (B) above, and account to each Redundant
Employee through the payroll of the Business for any such sums
due to each Redundant Employee as appropriate. Any payment from
the Purchaser to the Vendor under this clause 18.10(C) shall
constitute an apportionment sum under the provisions of clause 8.
19. Action after Completion
-----------------------
19.1 If at any time after Completion the Vendor receives any notices,
correspondence, information, orders or enquiries relating to the
Business, it will promptly deliver them to the Purchaser and title in
them shall vest in the Purchaser.
19.2 If at any time after Completion the Purchaser receives any notices,
correspondence, information order or enquiries relating to any assets or
liabilities of the Vendor other than the Sale Assets and those
liabilities expressly assumed by the Purchaser hereunder or relating to
any business of the Vendor other than the Business it will promptly
deliver them to the Vendor and title in them shall vest in the Vendor.
20. Availability of Information
---------------------------
20.1 The Vendor shall for a period of seven years following Completion on
reasonable notice during usual business hours make available for
inspection by the Purchaser or its representatives all the books of
account and records (including computer records) which relate (whether
wholly or partly) to the Business and/or the Sale Assets or any of them
and which have not been delivered to the Purchaser (including the VAT
Records), and shall for a period of seven years from the date hereof
preserve and
<PAGE>
maintain such books and records.
20.2 The above provisions of this Clause shall apply mutatis mutandis so as
to permit the Vendor to inspect the books and records delivered to the
Purchaser pursuant to this Agreement insofar as they relate to
transactions completed before Completion.
21. Guarantee of the Guarantor
--------------------------
21.1 In consideration of the Purchaser entering into this Agreement and the
sum of (pound)1 (receipt of which is hereby acknowledged) the Guarantor
unconditionally guarantees to the Purchaser as principal obligor full,
prompt and complete performance by the Vendors of each of their
obligations and covenants under this Agreement (as varied, extended or
renewed from time to time), including without limitation the due and
punctual payment of all sums payable now or in the future to the
Purchaser by the Vendors (or either of them) pursuant to this Agreement
and the performance of all covenants under this Agreement when and as
the same shall become due for payment or performance (as the case may
be). Accordingly, the Guarantor undertakes with the Purchaser that if
and each time that a Vendor shall be in default in the payment of any
sum whatsoever or the performance of any obligation under this Agreement
the Guarantor will on demand make good the default and pay all sums
which may be payable and do all things required as if the Guarantor
instead of that Vendor were expressed to be the primary obligor
warrantor or covenantor together with interest thereon at the rate of 3%
per annum above the base rate of HSBC Bank plc for the time being in
force from the date on which such sums become payable by that Vendor
hereunder until payment of such sums in full.
21.2 This guarantee is a continuing guarantee and shall remain in force for
42 months from the Completion Date, or until all obligations and
covenants of the Vendors under this Agreement have been discharged and
performed in full whichever occurs earlier.
21.3 The obligations of the Guarantor hereunder shall not be affected by any
act, omission, matter or thing which, but for this Clause 21.3, might
operate to release or otherwise exonerate the Guarantor from its
obligations, warranties or covenants hereunder or affect such
obligations or covenants including but not limited to
(A) any time or indulgence granted to or composition with the Vendors
(or either of them);
(B) the taking, variation, compromise, renewal or release of or
refusal or neglect to perfect or enforce any right or remedies
against the Vendors (or either of them);
(C) any legal limitation, disability, incapacity or other
circumstances relating to either Vendor or any other person or
any amendment to or variation which has been previously agreed in
writing by the Guarantor of the terms of this Agreement or any
other document or security; or
(D) any irregularity, unenforceability or invalidity of any
obligations of either Vendor under this Agreement with the intent
that the Guarantor's obligations
<PAGE>
under this guarantee shall remain in full force and this
guarantee shall be construed accordingly as if there were no such
irregularity, unenforceability or invalidity.
21.4 The Guarantor waives any right it may have of first requiring the
Purchaser to proceed against or enforce any guarantee or security of or
claim payment from the Vendor.
22. Services
--------
22.1 The Vendor shall for the period of 6 months following Completion provide
the services set out in the Transitional Services Agreement in the form
of Appendix 20.
23. Option to Purchase Retained Option Business
-------------------------------------------
23.1 Provided always that the Purchaser is not in breach of any of its
obligations hereunder and continues to carry on the Business transferred
pursuant to the Agreement, if the Vendor or any member of the Vendor's
Group resolves to dispose of the Retained Business (excluding the
business carried on by Elcom.com) ("the Retained Option Business") at
any time within 3 years from the date hereof, the Vendor shall give
notice of such fact to the Purchaser, and subject to the offer and
completion of the same being lawful by the Purchaser, the Purchaser may
within a period of 30 days from the date of receipt of such notice make
an offer to acquire the whole and not part only of the Retained Option
Business.
23.2 Upon receipt of a formal offer to purchase the Retained Business by the
Purchaser pursuant to Clause 23.1 above, the Vendor shall then have a
period of 90 days ("the Third Party Period") in which to agree the terms
of a sale of the Retained Business to a third party, for a consideration
in excess of that offered by the Purchaser pursuant to Clause 23.1,
failing which, the Vendor and the Purchaser shall if the Vendor notifies
to the Purchaser its intention to proceed with a sale of the Retained
Option Business during such period have a binding agreement for the sale
and purchase of the Retained Option Business on the terms set out in the
Vendor's offer pursuant to Clause to 23.1 above. The Parties shall then
use all reasonable endeavours to complete the sale as soon as is
reasonably practicable, but in any event within the period of 90 days
from the expiry of the Third Party Period. If the Vendor does not so
notify the Purchaser of its intention to proceed with a sale of the
Retained Option Business during the Third Party Period, then the Vendor
shall be entitled to continue to operate such business, subject still to
the provisions of this Clause 23.
23.3 Nothing in this Clause 23 shall operate to provide the Purchaser with an
option to purchase the Retained Option Business in the event of any sale
of Elcom International, Inc. by way of merger, tender, offer or other
business combination, or any sale of substantially all of the assets of
the Vendor's Group.
24. Costs
-----
24.1 Each party hereto shall pay its own costs and expenses in relation to
the preparation and execution of this Agreement and all documents
ancillary hereto.
<PAGE>
24.2 The Purchaser shall pay all stamp duty payable on or in respect of this
Agreement or documents entered into pursuant hereto.
25. Independent Accountants
-----------------------
25.1 Any matter hereby agreed to be determined by the Independent Accountants
may if the failure to agree or other dispute has existed for not less
than seven days (or such longer period as in any particular case is
expressly otherwise provided in this Agreement) be referred by either
the Vendor or the Purchaser to a firm of Chartered Accountants agreed by
the Vendor and the Purchaser within 7 days of notice calling for such
agreement from one to the other and which firm accepts such appointment
within 14 days of such agreement or, in default of such agreement and/or
acceptance of appointment, nominated for the purpose by the President
for the time being of the Institute of Chartered Accountants in England
and Wales on the application of the Vendor or the Purchaser.
25.2 Each of the parties shall on request promptly supply to the Independent
Accountants all such assistance, documents and information as they may
require for the purposes of the reference; and all parties shall use all
reasonable endeavours to procure the prompt determination of such
reference.
25.3 The Independent Accountants shall be deemed to act as experts and not as
arbitrators, or arbiters and shall take into account the representations
made by the parties in relation to the matters in dispute. Their
determination shall (in the absence of manifest error) be conclusive and
binding on the parties and the cost of any such determination shall be
borne as the Independent Accountants shall in their determination direct
and in the absence of any determination, equally between the parties.
26. Domain Names
------------
26.1 The Vendor shall execute or procure that any necessary third party shall
execute all such documents and/or do or procure the doing of such acts
and things as the Purchaser shall after Completion reasonably require in
order to effectively transfer the Domain Names to the Purchaser.
26.2 The Vendor agrees that on Completion all information relating to the
Business other than the Announcement Page will by agreement with the
Purchaser either be removed from the www.elcom.co.uk site and the
www.elcom.com site or redirected to the SCH sites.
26.3 The Vendor shall undertake or procure that any necessary third party
shall undertake all such acts and things as the Purchaser shall after
Completion reasonably require in order to remove any keywords (except
"elcom") associated with the Business (including, without limitation,
the names "Elite", "Lantec", "Rapid Recall" and "Data Supplies") from
the meta-tags of the Vendor's websites.
<PAGE>
27. Announcements
-------------
The Vendor shall following Completion at each party's own cost join in
making such announcements to the press and in sending to customers and
suppliers such notices as the Purchaser shall require and the Vendor
shall approve, such approval not to be unreasonably withheld or delayed,
concerning the sale of the Business hereunder.
28. Severability
------------
28.1 Each provision of this Agreement is severable and distinct from the
others. The parties intend that every such provision shall be and remain
valid and enforceable to the fullest extent permitted by law. If any
such provision is or at any time becomes to any extent invalid, illegal
or unenforceable under any enactment or rule of law, it shall to that
extent be deemed not to form part of this Agreement but (except to that
extent in the case of that provision) it and all other provisions of
this Agreement shall continue in full force and effect and their
validity, legality and enforceability shall not be thereby affected or
impaired, provided that the operation of this Clause would not negate
the commercial intent and purpose of the parties under this Agreement.
28.2 If any provision of this Agreement is illegal or unenforceable as a
result of any time period specified herein being in excess of that
permitted by a regulatory authority, that provision shall take effect
with the substitution of the longest period acceptable to the relevant
regulatory authorities, provided that the operation of this Clause would
not negate the commercial intent and purpose of the parties under this
Agreement.
29. Execution by EGL
----------------
29.1 EGL hereby agrees to be bound by the terms of this Agreement to the
extent that is required to transfer the Business and the legal title to
any of the Sale Assets vested in EGL to the Purchaser, but in return
receiving the benefit of all covenants and undertakings on behalf of the
Purchaser given to the Vendor.
30. Counterparts
------------
30.1 This Agreement may be entered into in the form of two or more
counterparts each executed by one or more of the parties but, taken
together, executed by all and, provided that all the parties so enter
into the Agreement, each of the executed counterparts, when duly
exchanged or delivered, shall be deemed to be an original, but, taken
together, they shall constitute one instrument.
31. General
-------
31.1 This Agreement shall be binding upon and enure for the benefit of the
successors of the parties but shall not be assignable, save that either
party may at any time assign all or any part of its rights and benefits
under this Agreement and any agreement referred to herein and any other
indemnities, undertakings and obligations given or undertaken by any
other party and any cause of action arising under or in respect of any
of them to any company within the same Group (on the basis that if such
company ceases to be a company in the same Group, it shall re-assign to
the Vendor or Purchaser as
<PAGE>
appropriate the rights and benefits so assigned to it).
31.2 No failure or delay by any party hereto in exercising any right, power
or privilege under this Agreement shall operate as a waiver thereof nor
shall any single or partial exercise by any party hereto of any right,
power or privilege preclude any further exercise thereof or the exercise
of any other right, power or privilege.
31.3 The rights and remedies herein provided are cumulative and not exclusive
of any rights and remedies provided by law.
31.4 Except as otherwise expressly provided herein no provision of this
Agreement may be amended, modified, waived, discharged or terminated,
otherwise than by the express written agreement of the parties hereto
nor may any breach of any provision of this Agreement be waived or
discharged except with the express written consent of the parties.
31.5 This Agreement together with all documents in agreed form represents the
entire agreement between the parties and it supersedes all previous
understandings, agreements and arrangements between the parties in
relation to such transactions
31.6 The Vendors shall execute or procure that any necessary third party
and/or any other member of the Vendors' Group shall execute all such
documents and/or do or procure the doing of such acts and things as
shall be necessary as at Completion and/or the Purchaser shall after
Completion require in order to give effect to this Agreement and any
documents entered into pursuant to it and to give to the Purchaser the
full benefit of all the provisions of this Agreement.
32. Notices
-------
32.1 Save as otherwise provided, any notice or other communication given or
made under this Agreement shall be in writing signed by the chief
executive officer or finance director of the party concerned and may be
delivered to the relevant party or sent by first class prepaid letter,
telex or facsimile transmission to the address of that party specified
in this Agreement or to that party's telex or facsimile transmission
number thereat or such other address or number as may be notified
hereunder by that party from time to time for this purpose and marked
for the attention of the chief operating officer, finance director or
group solicitor of the party concerned.
32.2 Each such notice or communication shall be deemed to have been given or
made and delivered, if by letter, 48 hours after posting, if by
delivery, when left at the relevant address and, if by telex or
facsimile transmission, on receipt by the party giving the notice or
communication of the recipient's confirmation of receipt answer back at
the end of transmission.
32.3 The Purchaser shall at the same time as serving any notice on the Vendor
serve a copy of such notice on the Guarantor.
33. Governing Law
-------------
<PAGE>
This Agreement shall be governed by and construed in all respects in
accordance with English law and the parties hereby submit to the
non-exclusive jurisdiction of the English Courts as regards any claim or
matter arising in relation to this Agreement.
34. Arbitration
-----------
34.1 Subject to the provisions of clauses 4, 5 and 8 of this Agreement, any
dispute or claim arising out of or in connection with this contract
including any question regarding its existence, validity or termination
may, at the discretion of Purchaser, be referred to and finally resolved
by arbitration under the Uncitral Arbitration Rules, which Rules are
deemed to be incorporated by reference to this clause. Any arbitration
commenced pursuant to this clause will be administered by LCIA. The
appointment authority shall be the LCIA. Standard LCIA Administrative
Procedures and Schedule of Costs shall apply. The number of arbitrators
shall be one. The place of arbitration shall be London. The language to
be used in the arbitratal proceedings shall be English. The governing
law of the contract shall be the substantive law of England.
34.2 Notwithstanding clause 34.1 above, either party may take proceedings or
take remedies before the Court or any competent authority of any country
for interim or interlocutory remedies in relation to any breach of this
agreement.
35. Address for service
-------------------
35.1 The Guarantor hereby irrevocably authorises and appoints the Vendor to
accept on its behalf service of all legal process arising out of or
connected with this Agreement.
35.2 Service of such process on the person for the time being authorised
under Clause 35.1 to accept it on behalf of the appointor shall be
deemed to be service of that process on the appointor.
IN WITNESS whereof this Agreement has been duly executed as a deed the day and
year first above written
<PAGE>
SCHEDULE 1
----------
Part 1 Excluded Assets
----------------------
(A) All contracts of the Vendor other than the Assumed Contracts and the
Records
(B) Cash
(C) Debts
(D) Statutory books of the Vendor and all records required by law to be
retained by the Vendor
(E) Share capital of direct and indirect subsidiary companies
Part 2 Excluded Liabilities
---------------------------
(A) Tax and all Tax creditors
(B) Amounts owed to any third party banks or other third party lenders by
way of overdraft or term loan or otherwise as at the Completion Date
(C) Any amounts owed by the Vendor in respect of the Business on loan
account or otherwise in respect of a non-trading liability to the other
businesses of the Vendor or other members of the Vendor's Group at the
Completion Date
(D) Any claim by a party to any Assumed Contract that the Vendor has before
Completion breached its obligations under any of the Assumed Contracts
(E) Any other claim made by any third party that the Vendor has prior to
Completion committed any tort or breached any legal obligation or any
obligation owed to a third party by the Vendor in relation to the
Business or any Sale Asset, including (but not limited to):
(i) claims that any products sold or supplied to that third party by
the Vendor as part of the Business prior to the Completion Date
are not Year 2000 Compliant; or
(ii) any claim relating to any incorrect or negligent advice,
consultancy services, or other services which the Vendor has
provided to that third party in the course of the Business prior
to Completion, and in particular (but without limitation) any
advice or recommendations to that third party relating to the
adequacy or appropriateness of any hardware, software, equipment
or data supplied by the Vendor as part of the Business to such
third party; or
<PAGE>
(iii) any breach by the Vendor of any Customer Contract with that third
party under which the Business supplied services to that third
party in relation to Year 2000 Compliance prior to Completion
(F) Any claim made by Deutsche Financial Services Limited that the transfer
of the Business and/or the Sale Assets effected hereby required but was
absent their consent.
<PAGE>
SCHEDULE 2
----------
Property
--------
Part A
------
(a) All that leasehold property known as 6b Langley Business Centre, Langley
registered at HM Land Registry under title number BK272035 with title
absolute.
(b) All that leasehold property known as 6C Langley Business Centre, Langley
registered at HM Land Registry under title number BK272037 with title
absolute.
Part B
------
All and whole the tenant's interest in those warehouse premises located on the
sixth floor of the building known as 8 Elliot Place, the Clydeway Centre,
Glasgow, known as Suite 6/5B extending to 2044 square feet or thereby more
particularly described in and shown hatched on the plan annexed and subscribed
as relative to the Lease between Allied London & Scottish Properties plc and
Elcom Information Services Limited dated 12 and 26 January and registered in the
Books of Council and Session on 17 February, all 1998.
<PAGE>
SCHEDULE 3
----------
Part 1 - Property Terms
-----------------------
PART A: ENGLISH PROPERTY
------------------------
1. Definitions
-----------
1.1 In this Part A of this Schedule
"the Standard Conditions" means the Standard Conditions of Sale (3rd
Edition)
"the Vendor" means Elcom Information Services Limited
"the Purchaser" means Specialist Computer Holdings Limited
"Landlord's Consent" means the consent of any landlord which requires
a consent to the assignment of the Property to the Purchaser
"the Leases" means together (a) a lease of Unit 6 B Langley Business
Centre as the same is more particularly described in a lease dated 23rd
November 1988 made between Allied Dunbar Assurance plc (1) Business Land
(UK) Limited (2) Business Land Inc. (3) and (b) a lease of Unit 6C
Langley Business Centre dated 23rd November 1988 and made between Allied
Dunbar Avenue Plc (1) Business Land (UK) Limited (2) Business Land (3)
"the Completion Date" means the date 14 days after the Landlord's
consent has been obtained
"the Elcom Licences" means the licences annexed at Annexure 1 to this
Part A
"the SCH Licence" means the Licence annexed at Annexure 2 to this Part A
1.2 Any reference in the Standard Conditions to the seller and the buyer
shall be treated as references to the Vendor and the Purchaser
respectively
1.3 Any reference herein to any clause or schedule is to a clause or
schedule to this agreement
1.4 The headings herein are for convenience only and shall not affect the
interpretation of this agreement
2. Standard Conditions etc.
------------------------
2.1 THIS Schedule incorporates the Standard Conditions. Where there is a
conflict between the Standard Conditions and this agreement this
agreement prevails
2.2 Standard Conditions 2.2 and 2.3, 4.1,4.3.2 5.1 ,.3 3 and 9 do not apply
<PAGE>
2.3 There shall be deleted from Standard Condition 6.8.2(b) the words "if
the amount to be paid on completion ..." to the end thereof
2.4 Save as expressly provided in this Agreement no fixtures and fittings
are included in the sale
3. Purchaser's Occupation Pending Completion
-----------------------------------------
The Vendor agrees that the Purchaser may take occupation of any parts of
the Property not being used or occupied by the employees to be retained
by the Vendor under the terms of this Agreement under the terms set out
in Standard Condition 5.2 save that:
3.1 The words "If the buyer is not already lawfully in the property, and the
seller agrees to let him into occupation", shall be deleted from
Standard Condition 5.2.1
3.2 Standard Conditions 5.2.2(d) and (e), and Standard Conditions 5.2.3
and 5.2.6 shall be deleted
3.3 The words "or when 5 working days' notice given by one party to the
other takes effect" shall be deleted from Standard Condition 5.2.5
4. Use of Warehouse in the Property
--------------------------------
As from the date hereof the Vendor shall not be entitled to occupy the
warehouse area within the Property save that the Vendor may use the
warehouse area within the Property for the purpose of the storage of
goods which shall be entirely at the risk of the Vendor for a period of
2 weeks from the date hereof PROVIDED THAT the Vendor shall only be
entitled to do so in the event that the Vendor or its employees servants
agents or representatives are accompanied by the Purchaser or one of its
employees servants agents or representatives in bringing onto and
removing from the warehouse area of the Property any goods that the
Vendor wishes to store in the said warehouse area
5. Completion
----------
THE purchase shall be completed on the Completion Date
6. Title
-----
THE Purchaser having already been supplied with an abstract epitome or
other information in respect of the title to the English Property it
shall purchase subject (so far as the same relate thereto) to all
matters therein set out or referred to and shall be deemed to purchase
with full knowledge thereof and shall raise no requisition in relation
thereto and the Vendor shall not be obliged to deduce title to the
English Property
7. Matters Affecting the Property
------------------------------
7.1 The English Property is sold subject to the rents, conditions and
tenant's obligations
<PAGE>
contained or referred to in the Leases
7.2 The English Property is also sold subject to:
7.2.1 all local land charges (whether registered or not before the date
hereof) and all matters capable of registration as local land charges
7.2.2 all notices charges orders resolutions demands plans proposals
requirements restrictions agreements conditions directions or other
matters whatsoever served or made before or after the date hereof by any
body acting on statutory authority
7.2.3 all matters disclosed or reasonably to be expected to be disclosed by
searches or enquiries formal or informal and whether made in person, by
writing or orally by or for the Purchaser or which a prudent buyer ought
to make
7.2.4 all notices served by the owner or occupier of any adjoining or
neighbouring property
7.2.5 (whether or not the title is registered at HM Land Registry) all such
matters as are referred to in Section 70 Land Registration Act 1925
7.3 The Purchaser has investigated and will purchase the English Property
subject to and will be deemed to have full knowledge and notice of and
shall not be entitled to require any information or to raise any
requisitions in regard to (i) the present use and the authorised use of
the English Property (ii) any development operations or works which may
have been carried out to or on the English Property or (iii) any
contravention of the Town and Country Planning Act 1990 the Planning
(Listed Buildings and Conservation Areas) Act 1990 the Planning
(Consequential Provisions) Act 1990 the Planning (Hazardous Substances)
Act 1990 and the Planning and Compensation Act 1991
8. Vacant Possession
-----------------
SUBJECT to the provisions set out in clause 10 of this Part A the
Property is sold with vacant possession on Completion
9. Indemnity
---------
WHERE the English Property is sold subject to stipulations or
restrictive or other covenants (including personal indemnity covenants
relating to the English Property) and whether or not breach thereof
would expose the Vendor to liability the Purchaser shall in the transfer
of the English Property covenant by way of indemnity only to observe and
perform the same and to indemnify the Vendor against all actions and
claims in respect thereof whether or not a covenant for indemnity will
be implied by Section 77 of the Law of Property Act 1925 or Section 24
of the Land Registration Act 1925
10. Landlord's Consent
------------------
10.1 The Vendor shall as soon as reasonably practicable apply for and use all
its
<PAGE>
reasonable endeavours to obtain the Landlord's Consent as soon as
possible
10.2 The Purchaser shall use all reasonable endeavours to assist the Vendor
in obtaining the Landlord's Consent and in particular shall promptly
provide all such information as the Vendor may reasonably require in
relation to the obtaining of such consent and such other information as
the Landlord may be entitled to request under the terms of the lease of
the English Property
10.3 If reasonably required by the Landlord the Purchaser will enter into a
direct covenant with the Landlord to observe and perform the terms of
the Leases throughout the remainder of the term and any statutory
extension of it and./or provide such additional security for the
performance of the lessee's covenants including (but without prejudice
to the generality of the foregoing) providing a guarantor for the
Tenant's covenants under the Lease in such form as the Landlord shall
reasonably require
10.4 If the Landlord's Consent has not been obtained within 3 months after
Completion then the Vendor shall at the request and cost of the
Purchaser procure that there is made an application to a competent court
for a declaration that the Landlord's consent is being unreasonably
withheld
10.5 If a competent court determines that the landlord of the English
Property has reasonably withheld the Landlord's Consent the Vendor shall
as soon as reasonably practicable apply for and use its reasonable
endeavours to obtain the Landlord's consent at the cost and direction of
the Purchaser to the grant to the Purchaser of an underlease of the
relevant Lease Property on the same terms as the terms of the relevant
lease of the English Property (mutatis mutandis) and the Purchaser shall
take such an underlease within five days of the grant of the Landlord's
Consent and upon so doing neither party shall have any further liability
in respect of the English Property under this paragraph 8
10.6 With effect from Completion the Vendor shall hold the English Property
on trust for the Purchaser until the earlier of (a) the assignment of
the Property or (b) the grant of the underlease to the Purchaser
10.7 The Purchaser shall from Completion until completion of the sale and
purchase be responsible for the payment of all outgoings in respect of
the Property (save that any rent or sums payable to the Landlord shall
be paid by the Purchaser or its relevant subsidiary to the Vendor not
less than 7 working days before they are due and the Vendor shall
promptly pay or procure payment of such sums to the relevant Landlord)
and shall observe and perform the covenants agreements conditions and
stipulations on the part of the lessee to be performed and observed
under the Leases and shall indemnify the Vendor against any losses
arising out of any breach of those obligations. The Vendor shall at the
request direction and cost of the Purchaser use its reasonable
endeavours to procure the observance by the relevant landlord of the
covenants agreements conditions and stipulations on its part contained
in the Leases
10.8 Notwithstanding paragraph 8.4 the Purchaser may at any time on giving
notice to the Vendor elect to take an assignment of the Leases
notwithstanding that the Landlord's Consent has not been obtained shall
in that case and the Purchaser shall provide to the
<PAGE>
Vendor in the assignment an indemnity against all demands claims losses
damages costs expenses and other liabilities whatsoever which may be
suffered or sustained by the Company as a result of such assignment
being completed without the Landlord's Consent
11. Transfer
--------
11.1 The transfer of the English Property to the Purchaser shall be executed
by the Purchaser and shall contain a declaration that no covenant on the
part of the Vendor implied therein shall extend to any breach of any
covenant or other provision contained in the Lease relating to the state
or condition of the English Property and that the covenants on the part
of the Purchaser implied therein shall extend to any breach of covenant
or other provision contained in the Lease which may have occurred prior
to the transfer to the Purchaser
11.2 The parties hereto agree that the transfer of the English Property will
contain no reference to this Agreement unless required to do so by any
statutory provision
Licences to Occupy
- ------------------
12.1 On the date hereof the parties will enter into or procure the relevant
parties to enter into the Elcom Licences in the form of the annexed
hereto
12.2 On the Completion Date the parties hereto will enter into the SCH
Licence in the form annexed hereto for a term expiring no later than six
months after the date hereof
Replacement Land Certificates
- -----------------------------
13. The Vendor will use all reasonable endeavours to obtain replacement Land
Certificates at its own cost for the English Property prior to the
Completion Date but provided that the Purchaser shall not be entitled to
delay completion of the sale and purchase on the basis that such
replacement Certificates have not been obtained by the Vendor.
Duplicate Transfer
- ------------------
The Purchaser shall on completion execute and within 35 days after completion
deliver to the Vendor a duplicate of the transfer to it duly stamped as a
duplicate.
<PAGE>
SCHEDULE 3
----------
PART B: SCOTTISH PROPERTY
-------------------------
1. Definitions
-----------
In this Part B of the Schedule:
"the Vendor" means Elcom Information
Services Limited,
incorporated under the
Companies Acts (Company
Number 2834456) and having
its registered office at
Elcom House, Langley Business
Centre, Station Road,
Langley, Berkshire SL3 8YR;
"the Lease" means the Lease between
Allied London & Scottish
Properties plc and the Vendor
dated 12 and 26 January and
registered in the Books of
Council and Session on 17
February, all 1998.
"the Licence to Occupy" means the licence to occupy
to be granted by the Vendor
to the Purchaser on the
Completion Date in the form
of the draft licence to
occupy annexed and subscribed
as relative hereto.
2. Vacant Possession
-----------------
Full vacant possession of the Scottish Property will be granted to the
Purchaser at the Completion Date in accordance with the provisions of
Clause 5 of this Part B of this Schedule.
3. Statutory Notices
-----------------
Any statutory notices issued, and the cost of any repairs instructed as
a result in respect of the Property prior to the Completion Date will be
the responsibility of the Vendor in questions with the Purchaser;
liability under this paragraph will not be avoided by the withdrawal of
any such notice and the issue of a fresh notice.
4. Apportionments
---------------
<PAGE>
All necessary apportionments between the Vendor and the Purchaser,
including apportionment of the annual rates and (subject to the
provisions of the Licence to Occupy) rent and other sums payable under
the Lease will be made at the Completion Date.
5. Licence to Occupy
-----------------
The Vendor and the Purchaser (or their respective solicitors as the case
may be) shall enter into the Licence to Occupy on the Completion Date.
6. Option
------
The Purchaser or any other company which is for the time being a holding
company of the Purchaser of a subsidiary of the Purchaser or such
holding company (as the terms "subsidiary" and "holding company" are
defined in Section 736 of the Companies Act 1985) shall have a
non-exclusive option to take from the Vendor an assignation of the Lease
("the Option") on the following terms and conditions:-
6.1 the Option shall subsist from the Completion Date until the date falling
3 months thereafter ("the Expiry Date");
6.2 the Option may be exercised by the Purchaser at any time at or prior to
the Expiry Date by service of notice to the effect that the Option is
being exercised in accordance with this Agreement; Upon service of such
notice the Option shall become exclusive to the Purchaser and its
foresaids and the Vendor shall (i) if it is at that time in negotiation
with a third party to grant an assignation of the Lease, cease such
negotiation pending the outcome of the Option (provided always that it
shall not have concluded a binding contract with such third party) and
(ii) not enter into any other negotiations with any third party to grant
an assignation of the Lease pending the outcome of the Option BUT
DECLARING ALWAYS THAT the Option shall once again become non-exclusive
and the Vendor shall be free to contract to assign the Lease to a third
party in the event that (i) the assignation in favour of the Purchaser
shall (through no fault of the Vendor or its agents) not have been
completed by the date falling three months after the date of the
landlord's consent thereto or (ii) the landlords intimate their refusal
of consent to the said assignation;
6.3 any notice to be served hereunder shall be validly served if sent by fax
or post by the Purchaser or its solicitors on the Purchaser's behalf to
the Vendor or its solicitors in Scotland and/or England on the Vendor's
behalf;
6.4 if and only if the Option is validly exercised, the assignation of the
Lease shall continue in accordance with the terms of this Clause 6;
6.5 the assignation shall, following the exercise of the Option, remain
subject to the terms of the Lease (in particular, without prejudice to
the foregoing generality, Clause 23 (a) (ii) of Part III of the Schedule
thereto) and shall be conditional on the procurement by
<PAGE>
the Vendor of landlords' consent thereto in terms acceptable to the
Vendor and the Purchaser (both parties acting reasonably) which the
Vendor shall use all reasonable endeavours to procure as soon as
reasonably practicable following the exercise of the Option in
accordance with this Clause 6. The Purchaser will render the Vendor such
information as is reasonably required by the Licensor and provide such
reasonable assistance (which shall not extend to include the provision
of any guarantees or similar or the incurring of any costs or outlays
beyond what might be reasonably expected in dealing with reasonable
landlords' enquiries on assignation) as the Vendor may require in
connection with the securing of said consent.
6.6 The date of entry under the Assignation shall be deemed to be the first
Working Day occurring 10 Working Days after the purification in full of
Clause 6.5 hereof ("the Assignation Date") when the Vendor shall:-
6.6.1 exhibit searches disclosing no entries adversely prejudicial to the
Vendor's ability to grant a valid assignation:-
(i) in the Personal Registers against the Vendor and Landlord for the
usual prescriptive period; and
(ii) in the Companies Charges Register and the Company file of the
Vendor and Landlord
to a date as near as practicable to the Assignation Date, the Searches
in the Personal Registers to be brought down to the Assignation Date and
the Searches in the Companies Charges Register and Company File to be
brought down to 22 days thereafter;
6.6.2 deliver a valid duly executed Assignation in a form to be agreed in
favour of the Purchaser or its nominees or trustees;
6.6.3 deliver letters of non-crystallisation in the chargeholders' usual form
duly signed by the holders of each (if any) floating charge over the
Scottish Property releasing the Scottish Property from the ambit of such
charges with effect from the Assignation Date;
6.6.4 deliver an extract of the Lease; and
6.6.5 deliver all (if any) permissions, warrants, consents and certificates
affecting the Scottish Property and all relative plans, all in so far as
within the Vendor's possession and assign the benefit of any
transferable guarantees, warranties or others pertaining to the Scottish
Property.
<PAGE>
6.7 The Purchaser shall sign the Assignation within 14 days of the
Assignation Date and shall procure that the same is signed by the
landlords within a further period of 14 days and thereafter the
Purchaser's Solicitors shall stamp (if required) and register the
Assignation in the Books of Council and Session and deliver 2 extracts
to the Vendor's Solicitors (one for the landlord) on receipt thereof
from the Keeper of the Registers of Scotland. The costs incurred thereby
shall be met by the Purchaser. The Vendor shall provide 1 extract of the
Assignation to the landlords forthwith thereafter.
6.8 The whole costs incurred by the Vendor in obtaining the landlords'
consent to the Assignation together with Value Added Tax thereon shall
be met by the Vendor.
7. The parties hereto agree that the Assignation document or documents
relating to the Scottish Property (other than the Licence to Occupy)
shall contain no reference to this Agreement unless required to do so in
terms of any statutory provision.
<PAGE>
SCHEDULE 4
----------
The Warranties
--------------
1 Sale Assets
-----------
1.1 The Sale Assets are the absolute legal and beneficial property of the
Vendor free from any lease, hire or hire purchase agreement, agreement
for payment on deferred terms, bill of sale or retention of title claim,
mortgage, charge, lien or other encumbrance or Security Interest
whatsoever. The Sale Assets are in the possession or under the control
of the Vendor. There are no agreements or arrangements other than in
respect of suppliers' retention of title claims, restricting the freedom
of the Vendor to sell the Sale Assets to the Purchaser or otherwise to
use or dispose of the Sale Assets as it thinks fit.
1.2 No Sale Asset has been acquired on terms that property therein does not
pass until full payment is made or on a sale or return basis.
2 Condition
---------
2.1 The vehicles, Fixed Assets and plant and equipment other than the Stocks
comprised in the Sale Assets are in a state of reasonable repair and
condition having regard to their age and reasonable usage. All vehicles
are so far as the Vendor is aware roadworthy and duly licensed for the
purposes for which they are used.
2.2 The Maintenance contracts in existence are disclosed in the Disclosure
Letter.
2.3 The items comprised in the Sale Assets other than the Stock (as to which
the Purchaser can form its own view as to use and saleability):
(a) are capable of being used for the purposes for which they were
acquired or used by the Vendor;
(b) have been maintained on a regular basis and serviced in accordance
with their manufacturers' recommendations.
3 Management Accounts
-------------------
3.1 The Management Accounts have been honestly and prudently prepared on a
basis consistent and with policies consistent with the preparation of
prior management accounts of the Vendor and are not materially
misleading or inaccurate.
3.2 Prior sets of management accounts of the Business have only been subject
to normal year end adjustments for the purposes of the preparation of
the Vendor's statutory audited accounts.
4 Stock
-----
<PAGE>
4.1 The schedule of "Bonded Stock" in the Agreed Form is complete and
accurate and no items comprised within the Stock are Bonded Stock and
ought properly to have been included within those stocks listed on the
aforementioned schedule of "Bonded Stock" as at Completion.
5 Assumed Contracts
-----------------
5.1 There are either annexed to the Disclosure Letter and/or detailed in the
computer printout in the Agreed Form true complete and up-to-date copies
of all documentation or the terms of the Assumed Contracts and the
Tenders and there has been no material amendment or addition thereto,
whether express or implied, not contained in such documentation.
5.2 None of the Assumed Contracts:
(a) is incapable of termination by the Vendor in accordance with its
terms without payment of compensation or damages by three months'
notice or less; or
(b) is reasonably believed by the Vendor to be likely to result in a
loss to the Vendor upon completion of performance or fulfilment
of the Vendor's obligations under the relevant Assumed Contract;
or
(c) involves the supply to or by the Vendor of goods or services at
fixed prices more than twelve months from the date of order or
variations to prices arising out of any minimum purchasing
requirement or target or similar incentive; or
(d) involves payment by the Vendor by reference to fluctuations in
the index of retail prices or any other index or in the rate of
exchange for any currency; or
(e) is dependant upon the guarantee or security of any person; or
(f) is incapable of assignment by the Vendor without the consent of
any other party; or
(g) is with any person connected or any member of the Vendor's Group
or an officer or shareholder of the Vendor; or
(h) involves any commitment to obtain or supply goods or services
exclusively from or to any person or otherwise restricts the
manner or geographical area in which the Business may be
operated; or
(i) is outside the ordinary course of the Business or entered into
otherwise than at arm's length or involves the supply by or to
the Vendor of goods or services other than at full market value.
5.3 Neither the Vendor nor, so far as the Vendor is aware having made no
enquiry, any third party is in breach of any of its obligations under
and Assumed Contracts and, so far as the Vendor is aware, there are no
is aware, there are no circumstances likely to give rise to any such
breach.
<PAGE>
5.4 No event or omission has occurred which would entitle the Vendor nor, so
far as the Vendor is aware, any third party to terminate prematurely any
of the Assumed Contracts.
5.5 There are no contracts with Customers other than the Customer Contracts
and there are no leasing, rental or hire purchase agreements in relation
to the Business other than the Lease Agreements.
5.6 Save for the Tenders, no offer tender or the like made by or to the
Vendor relating to the Business which is capable following Completion of
being converted into an obligation of the Vendor or the Purchaser by an
acceptance or other act of some other person is outstanding.
6 Conduct of Business
-------------------
6.1 The Business has for a period of at least two years preceding the
Completion Date been carried on by the Vendors and other members of the
Vendors' Group and the Business has at all times been carried on in the
ordinary and normal course.
6.2 Since the Accounting Date:
(a) there has been no material adverse change in the financial or
trading position of the Business;
(b) the Vendor has not disposed of any assets used in connection with
the Business other than in the normal course of trading;
(c) no customer of the Business has terminated any contract with the
Vendor in the course of the Business;
6.3 The Vendor has obtained all licences,permissions and consents reasonably
required by the Purchaser for the carrying on of the Business and all
such items are comprised within the Supply Contracts or the Ancillary
Rights and all such licences permissions and consents are in full force
and effect.The Vendor is not in breach of any of the terms or conditions
of any such licences, permissions or consents held by it. The Vendor
knows of no reason why any of the same may be revoked or not renewed in
the ordinary course or should not be capable of being transferred to or,
so far as the Vendor is aware, obtained by the Purchaser without the
necessity for any special arrangements or expenses.
6.4 Since the Accounting Date, the Vendor in relation to the Business has
not:
(a) agreed to acquire any business; or
(b) agreed to purchase stocks in quantities or at prices materially
greater than was the practice of the Vendor in relation to the
Business prior to the Accounting Date.
6.5 So far as the Vendor is aware having made no enquiry (1) no supplier of
the Business will be entitled as a direct result of the sale of the
Business by reason of the express
<PAGE>
terms of an existing agreement or arrangement to cease to deal with the
Business or substantially to reduce its existing level of business with
the Business; and (2) the Business will not lose the benefit of any
right or privilege which it currently enjoys.
6.6 There are no express or implied arrangements in place between any member
of the Vendor's Group and any Employee concerning their employment by
any such Vendor Group company after Completion.
6.7 The deferred revenue calculation for the position of the Business as at
Completion produced by the Vendor after Completion will be correct.
7 Litigation, offences and processes
----------------------------------
7.1 Apart from normal debt collection by the Vendor (not exceeding in
aggregate (pound)250,000) there is no litigation, arbitration,
prosecution or other legal proceedings relating to the Business or the
Sale Assets pending, threatened or outstanding by or against the Vendor
and the Vendor is not aware of any facts or circumstances likely to give
rise to any such proceedings.
7.2 No injunction has been granted against the Vendor in connection with the
Business and the Vendor has given no undertaking to any court or to any
third party arising out of any legal proceedings relating to the
Business or the Sale Assets.
7.3 No order has been made or petition served or resolution passed for the
winding up of the Vendor nor has any person threatened to present such a
petition or convened or threatened to convene a meeting of the Vendor to
consider a resolution to wind up the Vendor or any other resolution.
7.4 No distress execution or other process has been levied on any of the
Sale Assets nor do there exist any circumstances which would give rise
to any person seeking to distrain against any of the Sale Assets.
7.5 No person has appointed nor do there exist any circumstances which would
give rise to any person being in a position to appoint any receiver of a
Vendor Group company which has title to any Sale Assets.
7.6 There is no unfulfilled or unsatisfied judgement or court order
outstanding against the Vendor.
7.7 The Business has at all times been conducted in compliance in all
material respects with applicable statutory requirements, bye-laws and
regulations for the time being in force including (without prejudice to
the generality of the foregoing) those for the health and safety of
employees and the safety of those using, or who may be affected by, the
services provided by the Business.
7.8 No investigations or enquiries by or on behalf of any environmental or
health and safety office or agency or, so far as the Vendor is aware any
other governmental or other body in respect of the Business or any of
the Sale Assets is in existence.
8 Defective Products or Services
-------------------------------
<PAGE>
8.1 The Vendor has not in the last twelve months sold any products in
connection with the Business which were supplied to the customer
concerned on terms more favourable to the customer than those offered
under the relevant manufacturer's warranty in respect of such product
8.2 The Vendor has not in connection with the Business in the last twelve
months supplied any services which did not or do not comply with all
applicable regulations and standards or agreed design or performance
specifications.
8.3 The Disclosure Letter discloses the Vendors' ordinary course policies in
relation to the return, service, repair and maintenance of goods or
products supplied in the course of the Business.
9 Employees
----------
9.1 All of the Employees are employed by the Vendor in connection with the
Business and no person other than the Employees is now or has been in
the two months preceding the Completion Date employed in connection with
the Business.
9.2 The details of the Employees contained in Appendix 4 are true, complete
and accurate and there are disclosed in the Disclosure Letter full and
accurate particulars of all material terms and conditions of employment
and all remuneration payable and other benefits provided to the
Employees or their dependants or o which they are entitled (whether now
or in the future and whether legally enforceable or not) including
(without limitation) details of all profit sharing, incentive, bonus,
commission or other similar arrangements which relate to the Employees.
9.3 There is no outstanding commitment (whether legally binding or not) to
increase the remuneration payable or other benefits provided to any of
the Employees and no negotiations for any such increase are current, so
far as the Vendor is aware, no Employee has any expectation that any
such matters will occur within a period of six months from the
Completion Date.
9.4 The employment or engagement of all of the Employees may be terminated
by not more than one month's notice or the statutory minimum period of
notice set out in Section 86 of the Employment Rights Act 1996, given at
any time without liability for payment of compensation or damages (other
than compensation payable by statute)and none of the Employees has given
or received notice terminating his employment.
9.5 There is no recognised trade union, closed shop or collective agreement
of any kind relating to the Employees.
9.6 No dispute is subsisting between the Vendor and any Employee and, so far
as the Vendor is aware, there are no present circumstances (including,
without limitation of the foregoing completion of the transaction
contemplated by this Agreement)which may to give rise to such a dispute.
There have been no strikes, work-to-rules, go-slows or other industrial
action by any of the Employees or former employees of the Vendor during
the period of two years immediately preceding the Completion Date.
<PAGE>
9.7 The Vendor has in relation to each of the Employees complied with:
(a) so far as the Vendor is aware, all legal and other material
obligations imposed on it by all statutes regulations and codes
of conduct and practice relevant to the relations between it and
the Employees and has maintained current adequate and suitable
records regarding the service and terms and conditions of
employment of each of the Employees;
(b) so far as the Vendor is aware, customs and practices for the time
being dealing with such relations or the conditions of service of
the Employees;
(c) all relevant orders and awards made under any relevant statute
regulation or code of conduct and practice affecting the
conditions of service of the Employees. and
(d) all recommendations made by the Advisory Conciliation and
Arbitration Services and all awards and declarations made by the
Central Arbitration Committee. 9.8 None of the "A" Employees has
indicated to the Vendor their intention to resign notwithstanding
the transfer of the Business as contemplated by this Agreement.
10 Business Name
-------------
10.1 Details of all names under which the Business has traded in the last
three years are set out in the Disclosure Letter.
10.2 No person other than the Vendor has any rights in relation to the names
referred to in warranty 10.1 above or has required the Vendor to refrain
from using such names or attempted to prevent such use by the Vendor.
11 Intellectual Property
---------------------
11.1 Such of the Intellectual Property Rights which are owned are valid and
in full force and effect.
11.2 All renewal or other fees required to be paid to maintain any such
inward-licensed Intellectual Property Rights (if any) have been paid on
their respective due dates for payment.
11.3 There are not outstanding any contracts under which the Vendor in
connection with the Business grants or transfers to any third party any
Intellectual Property Rights or rights or licences to manufacture use or
sell or supply any product, process, data, software or hardware.
11.4 Except in the ordinary course of business, there has not been disclosed
to any person other than the Purchaser any details of the Intellectual
Property Rights or the Intangible Assets.
11.5 The conduct of the Business does not infringe the IPR of any other
person firm or
<PAGE>
company, nor has the Vendor in the course of conduct of the Business
become liable to make any payment of any royalty, or license fee or of
any sum in the nature of any royalty or license fee to any such person
firm or company in relation to the Business.
12 Information Technology Systems
-------------------------------
12.1 Accurate copies of all material agreements required to use, support
and/or maintain all components of the Systems (including all licences,
software maintenance and support agreements and hardware maintenance
agreements) are attached to the Disclosure Letter.
12.2 The Vendor has not breached any of its obligations under any of the
agreements referred to in paragraph 12.1, those agreements all remain in
full force and effect as at Completion and no notice has been served by
anyparty to terminate any of those agreements.
12.3 So far as the Vendor is aware and save as stated in the agreements
referred to in paragraph 12.1, the Vendor is not restricted in any way
in using the Systems.
12.4 The use of the Systems in relation to the Business does not infringe the
IPR of any third party.
12.5 The Vendor has exclusive control of the operation of the Systems.
12.6 All IPR in the Developed Software are owned by the Vendor.
12.7 The Systems have adequate functionality, capability and capacity for the
Vendors' requirements of the Business.
12.8 There are in place reasonable procedures to ensure, in all material
respects, adequate on-site and off-site back-up copies of material
computer programs and data, for preventing introduction of viruses into
and for the protection of security of data stored on each of the
Developed Software, the Tracker Lead Management Software, the Utopia
Software System and the Remote Network Management System.
12.9 The Systems have not been used to process data in any manner that
contravenes the Data Protection Act 1984 or the Data Protection Act
1998.
12.10 The Vendor having made reasonable enquiry is not aware of any
circumstances which could lead to the material interruption or
disruption of the business of the Business or material data corruption
within the Systems or Developed Software as a result of any non-Year
2000 Compliance issue associated with any aspect of the Business.
12.11 No company in the Vendor's Group has, nor has any other person,
disclosed to any third party any source code or algorithms relating to
Developed Software.
12.12 A copy of the Vendor's current Year 2000 Policy is attached to the
Disclosure Letter.
13 Insurance
---------
<PAGE>
13.1 No insurer has refused to insure any of the Sale Assets or has imposed
unusual conditions for such insurance, whether by the imposition of
increased premiums or otherwise.
14 Books and Records
-----------------
14.1 All of the Records:
(a) have been kept or stored in accordance with all relevant
requirements of the Data Protection Act 1984 and the Data
Protection Act 1998;
(b) have at all times been fully properly and accurately made up kept
and completed in all respects;
c) record all matters which would normally be required to be entered
therein; and
(d) include all documents of title relating to the Sale Assets which
are held exclusively by the Vendor and all such documents,
together with the executed copies of all the Assumed Contracts
which have been reduced to writing, are in its possession or
under its control.
15 Capacity and other activities
-----------------------------
15.1 Each of the Vendors and the Guarantor has:
(a) all requisite corporate power to enter into and perform this
Agreement and the transaction and matters contemplated in this
Agreement; and
(b) has taken all necessary action to authorise the entry into and
performance of this Agreement and the transactions and matters
contemplated in it.
15.2 Each of the obligations expressed to be assumed by the Vendors and the
Guarantor under this Agreement and any agreement hereby contemplated
constitutes a valid and binding obligation on each of the Vendors and
the Guarantor respectively.
15.3 The execution and performance of this Agreement by each of the Vendors
and the Guarantor is not prohibited or restricted by any provision of
law or any other matter or thing and in particular but without
limitation is not subject to the approval or consent of any governmental
authority or regulatory body or otherwise.
15.4 Neither the Vendor nor any member of the Vendor's Group nor any person
connected with the Vendor nor any member of the Vendor's Group (within
the meaning of Section 839 of the Income and Corporation Taxes Act 1988)
has any interest directly or indirectly in any business other than the
Business which is or is likely to be or become competitive with the
Business (except as the holder for investment only of securities dealt
in on a recognised stock exchange and not exceeding 5% in nominal value
of the securities of that class).
15.5 No consent of any third party is required to carry on the Business in
the manner in which it is currently carried on.
<PAGE>
16 EC Competition Matters
----------------------
16.1 The Vendor is not in relation to the Business, and has not been party to
in relation to the Business, or concerned in any agreement, arrangement,
understanding or concerted practice, or any other conduct or practice
(unilateral or otherwise) which:
(a) has been or is required to be furnished to the Director General
of Fair Trading pursuant to the Restrictive Trade Practices Act
1976 ("the RTPA 1976") or
(b) contravenes the Resale Prices Act 1976; or
(c) constitutes a breach of any relevant undertaking, order,
assurance or other measure taken under the Fair Trading Act 1973,
the RTPA 1976, or the Competition Act 1980; or
(d) infringes Article 81 or 82 of the EC Treaty or any similar
provisions of the ECSC, Euratom, or EEA Treaties, or any other
competition rule of the European Community including, without
prejudice to the generality of the foregoing, any rule relating
to state aid, public procurement, or anti-dumping; or
(e) infringes any competition, anti-trust or equivalent legislation
of any other jurisdiction.
16.2 The Vendor is not in relation to the Business subject to any
publication, order, condition, undertaking, assurance or similar measure
or obligation imposed by or under any of the laws referred to in
paragraph 16.1.
16.3 The Vendor is not, and has not been subject to any investigation,
request for information, notice or other communication (whether formal
or informal, and whether or not in writing) in relation to the Business
by any court, governmental or regulatory authority pursuant to any of
the laws referred to in paragraph 16.1;
16.4 The Vendor has no reason to believe that any such action as is mentioned
in paragraph 16.3 will be taken in relation to the Business;
16.5 None of the Sale Assets has been acquired by the Vendor other than by
way of an arm's length transaction.
16.6 The Vendor has not given in r elation to the Business any guarantee,
indemnity, warranty or bond or incurred any other similar obligation or
created any security for or in respect of liabilities, actual or
contingent, of any other person otherwise than in the ordinary course of
trading.
16.7 Neither the Vendor nor any other members of the Vendor's Group has
agreed any unusual terms of credit with any customers or suppliers of
the Business.
16.8 The Vendor will deliver an aged debtors listing of the Customers as at
Completion, within seven days of Completion.
<PAGE>
16.9 The Vendor has given no power of attorney and no other authority,
express, implied or ostensible, which is still outstanding or effective
to any person to enter into any contract or commitment to do anything on
its behalf in connection with the Business other than the authority of
employees to enter into routine trading contracts in the normal course
of their duties.
17 Tax.
---
17.1 The Vendor is a taxable person for VAT purposes and is registered under
schedule 1 VATA.
17.2 The VAT Records are complete accurate and up-to-date.
17.3 None of the Sale Assets is a capital item, the input tax on which could
be subject to adjustment on accordance with the provisions of Part XV of
the Value Added Tax Regulations 1995.
17.4 None of the Vendor, its relevant associates (within the meaning of
paragraph 3(7) schedule 10 VATA), nor any other person has made or will
make an election under paragraph 2 schedule 10 VATA in respect of any of
the Sale Assets.
17.5 The PAYE and NIC Records of the Employees are complete accurate and
up-to-date.
17.6 There is no branch agent office or permanent establishment (within the
meaning of the OECD Model Double Taxation Agreement) of the Business
outside the United Kingdom.
17.7 There is not ( nor in the last two years has there been) any dispute
enquiry or investigation with or by any tax authority concerning the tax
treatment of income or expenditure of the Business which the Vendor is
or should reasonably be aware will adversely affect the Purchaser after
Completion.
17.8 The Vendor has not applied to any tax authority for approval to use any
statutory arrangement or scheme which is used for the purposes of the
Business including (without limitation) any VAT deferment scheme and no
licence by or consent of any tax authority is held by the Vendor to
continue operation of the Business in the same way as it has been
carried on prior to Completion.
17.9 No tax authority has agreed to operate any concessionary treatment
(whether in connection with the computation of tax liabilities or the
submission of tax returns) relevant to the Business and which is
required to continue operation of the Business in the same way as it has
been carried on prior to Completion.
17.10 The Vendor does not make (and in the period of three years ending on the
date of this agreement has not made) any exempt supplies in respect of
the Business or the Sale Assets.
17.11 The Disclosure Letter contains details (including estimated amounts) of
all income tax and National Insurance Contributions (including Class 1A
NICs) which will have accrued at Completion and for which the Purchaser
will be obliged to account to the
<PAGE>
Inland Revenue after Completion.
17.12 No sub-contractors (within Chapter IV Part XIII ICTA 1988) or agency
workers (within section 134 ICTA 1988) provide services to the Business
and there are no self-employed persons who provide services to the
Business who might be regarded by the Inland Revenue as employees.
17.13 The Vendor has not claimed (nor is it entitled to claim) any industrial
buildings allowances, writing down or other capital allowances in
respect of any of the Assets and none of the Assets are fixtures for the
purposes of Capital Allowances Act 1990.
18 Pensions
--------
18.1 Other than the Schemes there are no agreements, arrangements, customs or
practices (whether legally enforceable or not) in operation for the
payment of or contribution towards any pensions, allowances, lump sums
or other like benefits on retirement or on death or during periods of
sickness or disablement for the benefit of any of the Vendor's employees
or directors or former employees or former directors (together called
for the purposes of this paragraph 18 "Employees") or for the benefit of
dependants of any such Employees nor has any proposal to establish any
such agreement or arrangement been announced.
18.2 All material details of Schemes have been given to the Purchaser
including copies of announcements and other explanatory literature
issued to the Employees who are members of the scheme and policy
documents.
18.3 All benefits (other than refunds contributions) payable under the Life
Assurance Scheme on the death of a member who is an Employee are fully
insured under a policy effected with an insurance company of good repute
and each such member has been covered for such insurance by such
insurance company at its normal rates and on its normal terms for
persons in good health and all insurance premiums payable have been
paid.
18.4 So far as the Vendor is aware, there has been no breach of the trusts of
the Schemes.
18.5 There are no actions, suits or claims (other than routine claims for
benefits) outstanding, pending or threatened against the trustees or
administrator of the Schemes or against the Vendor or any other employer
which participates in the Schemes in respect of any act, event, omission
or other matter arising out of or in connection with the Schemes, and
all liabilities in respect of any costs, fees and expenses in relation
to the Schemes which have or will have fallen due by Completion will
have been met by Completion.
18.6 In relation to the Schemes:
(a) the current rates of all contributions are set out in the
Disclosure Letter and there are not at the date hereof any
contributions thereto from or in respect of Employees or other
payments which have fallen due but are unpaid;
(b) there is no obligation on the Vendor or any other employer which
participates
<PAGE>
in the Schemes to pay contributions at rates higher than those
mentioned in paragraph 18.6(a) in the future.
(c) employer and employee contributions in respect of the Employees
have been made promptly at the time that they were due; 18.7 The
Elcom Group Life Assurance Scheme is approved by the
Commissioners of Inland Revenue as an exempt approved scheme for
the purposes of Part XIV Chapter I ICTA 1988 and the Elcom Group
Personal Pension Scheme is approved by the Revenue as a personal
pension scheme, under Part XIV Chapter IV ICTA 1988 or the
Schemes are capable of receiving such approval and the Vendor is
not aware of any circumstances which might give the Inland
Revenue reason to withdraw or withhold such approval.
18.7 The Elcom Group Life Assurance Scheme is approved by the Commissioners
of Inland Revenue as an exempt approved scheme for the purposes of Part
XIV Chapter I ICTA 1988 and the Elcom Group Personal Pension Scheme is
approved by the Revenue as a personal pension scheme, under Part XIV
chapter IV ICTA 1988 or the Schemes are capable of receiving such
approval and the Vendor is not aware of any circumstances which might
give the Inland Revenue reason to withdraw or withhold such approval.
18.8 The Schemes have not at any time excluded employees from eligibility for
membership on the grounds of specified hours of work.
18.9 There are no circumstances which could result in any penalty under the
Pensions Act 1995 becoming payable by the Vendor.
19 Property
--------
19.1 The description of the Property contained in Schedule 2 is full and
correct.
19.2 The replies to the preliminary enquiries in relation to the Property
annexed to the Disclosure Letter are correct.
20 Environmental Matters
----------------------
20.1 The Vendor in relation to the Business has received no written notice
alleging that it has failed to comply with any Environmental Law and/or
any Environmental Licence.
20.2 There are attached to the Disclosure Letter complete and up-to-date
copies of all Environmental Licences and all orders,notices, directions,
applications,appeals,amendments and reports and any other communications
relating to or in connection with any Environmental Licence.
20.3 No Environmental Claim in relation to the Business is pending or has
been made or threatened against the Vendor or any of its present
directors or secretary or any occupier of the Property. The Vendor does
not have any reason to believe that the Vendor or any of its officers
has incurred any liability the subject of an Environmental Claim in
respect of the Business.
21 Effect of the sale of the Business and the Sale Assets
------------------------------------------------------
21.1 The sale of the Business or the Sale Assets under this Agreement will
not conflict with, result in a breach of or constitute a default under
the terms of any of the Assumed Contracts.
21.2 All information which is contained in or disclosed by the Disclosure
Letter is
<PAGE>
materially accurate.
22 Domain Names
------------
22.1 The Vendor in the operation of the Business does not utilise any other
domain names other than "www.elitecd.co.uk" and "www.elcom.co.uk" and
"www.elcom.com" and "www.pecos.co.uk" and "www.portablecomputers.co.uk"
<PAGE>
EXECUTED AND DELIVERED )
as a Deed of Elcom Holdings ) /s/ J. Rousou
------------------------
Limited acting by: ) Jim Rousou (as attorney)
Witnessed by:
/s/ D. Hearse
------------------------
D. E. Hearse
EXECUTED AND DELIVERED )
as a deed of Specialist ) /s/ Peter Rigby
------------------------
Computer Holdings Limited ) Peter Rigby
by: its due and lawful attorney, )
Peter Rigby) )
Witnessed by:
/s/ D. Hearse
------------------------
D. E. Hearse
EXECUTED by )
Elcom International, Inc. ) /s/ J. Rousou
------------------------
acting by ) Jim Rousou (as attorney)
Witnessed by:
/s/ D. Hearse
------------------------
D. E. Hearse
EXECUTED AND DELIVERED ) /s/ J. Rousou
------------------------
as a Deed of Elcom Group Limited ) Jim Rousou (as attorney)
acting by )
Witnessed by:
/s/ D. Hearse
------------------------
D. E. Hearse
