AGREEMENT FOR PURCHASE AND SALE OF SHARE CAPITAL
OF
SIGNATURE INDUSTRIES LIMITED
Among
APPLIED CELLULAR TECHNOLOGY, INC.
and
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
and
ECI VENTURES GP LIMITED
and
ECI CAPITAL PARTNERS,
ECI CAPITAL PARTNERS "B",
ECI DEVELOPMENTS 2,
ECI EUROFUND
(each acting by its general partner, ECI VENTURES GP LIMITED)
and
▇▇▇▇▇▇ KARPARK HOLDINGS LTD.
and
ECI VENTURES NOMINEES LTD.
Dated June 8, 1998
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇'▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇-▇▇▇-▇▇▇▇ (facsimile)
AGREEMENT FOR PURCHASE AND SALE OF ISSUED SHARE CAPITAL
OF SIGNATURE INDUSTRIES LIMITED.
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is entered into
effective as of the 8th day of June 1998 (the "Effective Date"), by and between
the following (the "Parties"):
(a) APPLIED CELLULAR TECHNOLOGY, INC., a Missouri corporation with its
address at ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ("Buyer");
(b) ▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual with an address at ▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, Great Britain ("Cairnie");
(c) ▇▇▇▇ ▇▇▇▇▇▇, an individual with an address at Ivy House, 43 Church
Street, Buckden, Huntingdon, Cambridgeshire PE18 9TP, Great Britain ("▇▇▇▇▇▇");
(d) ▇▇▇▇▇ ▇▇▇▇▇, an individual with an address at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇, Great Britain ("Tyler");
(e) ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual with an address at ▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇ at Hone, Dartford, Kent DA4 9HW, Great Britain ("▇▇▇▇▇▇▇");
(f) ▇▇▇▇ ▇▇▇▇, an individual with an address at ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇");
(g) ▇▇▇▇▇▇ ▇▇▇▇, an individual with an address at The Willows, Parsonage
Road, Takely, ▇▇▇▇▇▇'▇ Stortford, Hertfordshire, Great Britain ("Gage");
(h) ▇▇▇▇▇ ▇▇▇▇▇▇, an individual with an address at 85 Redhill Wood, New Ash
Green, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ DA3 8QP, Great Britain ("▇▇▇▇▇▇");
(i) ECI VENTURES GP LIMITED ("ECIVGP"), an English company with its
registered office at ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇;
(j) ECI CAPITAL PARTNERS ("ECICP"), ECI CAPITAL PARTNERS `B' ("ECICPB"),
ECI DEVELOPMENTS 2 ("ECID2"), ECI EUROFUND ("ECIE"), four limited partnerships
established under the Limited Partnerships ▇▇▇ ▇▇▇▇, each acting by their
general partner ECIVGP and having their places of business at ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ("ECI");
(k) ▇▇▇▇▇▇ KARPARK HOLDINGS LTD., an English company with an address at
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ("FKH");
(l) ECI VENTURES NOMINEES LTD. ("ECIVN"), an English company with its
registered office at ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇;
1
Cairnie, Booker, Tyler, Bassett, ▇▇▇▇ Gage, Sayles, ECI and FKH are referred to
in this Agreement as the "Sellers".
RECITALS
A. SIGNATURE INDUSTRIES LIMITED (the "Company") is a private limited
company registered in England with a total authorized capital of three hundred
seventy thousand pounds sterling ((pound)370,000), made up of two hundred forty
thousand (240,000) ordinary shares with a par value of ten ▇▇▇▇▇ ((pound) 0.10)
per share (the "Ordinary Shares"), three hundred sixty thousand (360,000)
preferred ordinary shares with a par value of ten ▇▇▇▇▇ ((pound) 0.10) per share
(the "Preferred Ordinary Shares"), one million seven hundred thousand
(1,700,000) "A" preference shares with a par value of ten ▇▇▇▇▇ ((pound) 0.10)
per share (the "A Preference Shares"), and one million four hundred thousand
(1,400,000) "B" preference shares with a par value of ten ▇▇▇▇▇ ((pound) 0.10)
per share (the "B Preference Shares")(each of the Ordinary Shares and the
Preferred Ordinary Shares shall collectively be referred to hereinafter as the
"Ordinary Share Capital", and the A Preference Shares and the B Preference
Shares shall collectively be referred to hereinafter as the "Preference
Shares"). All of the Company's authorized Ordinary Share Capital and Preference
Shares, as set forth above, are issued and outstanding.
B. Of the Company's total issued and outstanding Ordinary Shares, Cairnie
owns 61,681 Ordinary Shares, ▇▇▇▇▇▇ owns 44,861 Ordinary Shares, Tyler owns
44,860 Ordinary Shares, ▇▇▇▇▇▇▇ owns 44,861 Ordinary Shares, ▇▇▇▇ owns 14,579
Ordinary Shares, Gage owns 14,579 Ordinary Shares and ▇▇▇▇▇▇ owns 14,579
Ordinary Shares. ECI owns all of the Company's issued and outstanding Preferred
Ordinary Shares and A Preference Shares, and FKH owns all of the Company's
issued and outstanding B Preference Shares.
C. The Company and certain of the Sellers are parties to a Subscription
Agreement dated the 13th day of April 1993 (the "Subscription Agreement")
relating, inter alia, to the subscription of Shares in the Company and various
matters affecting the Company's organisation and management. In anticipation of
the transactions contemplated by this Agreement, the Company and certain of the
Sellers will procure that the Subscription Agreement is terminated.
D. Subject to the conditions set forth in this Agreement, (a) the Buyer has
agreed to purchase and certain of the Sellers have agreed to sell eighty-five
percent of the Ordinary Share Capital of the Company (or five hundred ten
thousand (510,000) shares of the Ordinary Share Capital), and (b) the Buyer has
agreed to purchase and certain of the Sellers have agreed to sell all of the
issued and outstanding A Preference Shares and B Preference Shares of the
Company. The Buyer has also agreed to give certain of the Sellers put options
for the balance of the shares of Ordinary Share Capital which are not
immediately purchased.
E. The Parties have agreed to enter into this Agreement to set forth the
terms and conditions governing the purchase and sale of the Ordinary Share
Capital, the A Preference Shares and the B Preference Shares, the grant of the
put options, and various other matters incident to these transactions.
2
NOW, THEREFORE, in consideration of the recitals and the mutual covenants,
representations, warranties, conditions, and agreements hereinafter expressed,
the Parties agree as follows:
ARTICLE I
COMPLETION OF PURCHASE AND SALE
1.1 Sale of the Ordinary Share Capital and Preference Shares. Upon the
terms and subject to the conditions and in reliance on the representations and
warranties set forth in this Agreement, at Closing, each Seller shall sell and
deliver or procure the sale and delivery to Buyer and Buyer shall purchase and
accept from or on behalf of each Seller the following Ordinary Shares and
Preferred Ordinary Shares (the "Ordinary Sale Shares"), and the following A
Preference Shares and B Preference Shares (the "Preference Sale Shares")(the
"Ordinary Sale Shares" and the "Preference Sale Shares" being collectively
referred to hereinafter as the "Sale Shares"):
(a) from Cairnie 24,736 Ordinary Shares;
(b) from ▇▇▇▇▇▇ 44,861 Ordinary Shares;
(c) from Tyler 44,860 Ordinary Shares;
(d) from ▇▇▇▇▇▇▇ 17,996 Ordinary Shares;
(e) from ▇▇▇▇ 5,849 Ordinary Shares;
(f) from Gage 5,849 Ordinary Shares;
(g) from ▇▇▇▇▇▇ 5,849 Ordinary Shares;
(h) from ECI three hundred sixty thousand (360,000) Preferred Ordinary
Shares, and one million seven hundred thousand (1,700,000) A Preference Shares;
and
(i) from FKH one million four hundred thousand (1,400,000) B Preference
Shares.
1.2 Share rights. The Sellers shall sell the Sale Shares with full title
guarantee and all rights attaching to them, free and clear of all security
interests, claims, and restrictions. Each of the Sellers hereby waives any
pre-emption rights he or it may have in relation to any of the Sale Shares
whatsoever. The covenants implied under the Law of Property (Miscellaneous
Provisions) ▇▇▇ ▇▇▇▇ by the words "with full title guarantee" in this Section
1.2 are limited to the covenants that would be implied if the words "other than
any charges, encumbrances or rights which that person does not and could not
reasonably be expected to know about" in section 3(1) and the whole of section
6(2) of the said Act were omitted.
3
ARTICLE II PURCHASE CONSIDERATION
2.1 Consideration. The purchase consideration for the Sale Shares shall be
payable in the Buyer's Class A Common Shares (the "Buyer's Shares") with the
values calculated in accordance with Sections 2.2 and 2.3 below. The purchase
consideration payable for the Sale Shares at Closing (the "Initial
Consideration") shall be FIVE MILLION THREE HUNDRED THOUSAND POUNDS STERLING
((pound)5,300,000).
2.2 Initial Consideration. The Initial Consideration shall be calculated
and paid as follows:
(a) The Buyer shall issue at Closing to each of the Sellers of the Ordinary
Sale Shares, Buyer's Shares with a value equal to (pound)942,102 and shall make
a cash payment of (pound)90,238, by telegraphic transfer to the client account
of the Sellers' Solicitors (▇▇▇▇▇▇▇ & Co. clients premium account no. ▇▇▇▇▇▇▇▇,
sort code 20 57 40 at Barclays Bank PLC). Such Buyer's Shares and the cash
consideration shall be apportioned among the Sellers of the Ordinary Sale Shares
as set out in Schedule 1, which also sets forth a ratio defining each Seller's
entitlement to Deferred Consideration, as defined below (the "Ordinary Seller's
Ratio").
(b) The Buyer shall issue on Closing to ECI Buyers Shares with a value
equal to (pound)99,549 representing the value at Closing of all dividend arrears
and interest accumulated in respect of the Preferred Ordinary Shares.
(c) The Buyer shall issue at Closing to each of the Sellers of the
Preference Sale Shares, Buyer's Shares as follows: (i) ECI (pound)2,476,090, and
(ii) FKH (pound)1,692,021 (such sums being the par value of the Preference Sale
Shares together with all dividend arrears and accrued interest thereon).
2.3 Deferred Consideration. Additional purchase consideration shall be
payable to the Sellers of Ordinary Sale Shares if the Company's Operating Profit
for the 1998/99 Fiscal Year is equal to or in excess of eight hundred ninety one
thousand pounds sterling ((pound)891,000).
(a) The additional purchase consideration payable pursuant to this Section
2.3 shall be calculated and paid to each Seller of Ordinary Sale Shares in
additional Buyer's Shares (the "Deferred Shares") with a value calculated in
accordance with the following (the "Deferred Consideration"):
(i) the lesser of the Company's Operating Profit for the 1998/99
Fiscal Year or one million seven hundred forty nine thousand pounds
sterling ((pound)1,749,000);
(ii) multiplied by seven (7);
(iii) multiplied by 0.85;
(iv) minus (pound)5,300,000; and
4
(v) multiplied by the Ordinary Seller's Ratio of each Seller of
Ordinary Sale Shares.
(b) The Buyer shall use reasonable efforts to procure that the Board of
Directors of the Company and those of the Sellers who are such Directors at that
time shall, acting reasonably, procure that such Board approves the final
audited accounts of the Company for the 1998/99 Fiscal Year on or before 30 June
1999. The Deferred Shares shall be issued within thirty (30) days after such
approval (unless such day is not a business day in which case on the next
following business day) unless the dispute resolution procedure set forth in
Section 2.8 is activated, in which case the Deferred Shares shall be issued
immediately upon the determination of such procedure.
(c) For the avoidance of doubt:
(i) no Deferred Shares shall be payable to the Sellers of Preference
Sale Shares;
(ii) no Deferred Shares shall be payable at all in the event the
Company's Operating Profit for the 1998/99 Fiscal Year is less than eight
hundred ninety one thousand pounds sterling ((pound)891,000);
(iii) the total maximum amount of Deferred Shares paid to all Sellers
of Ordinary Sale Shares shall not exceed five million one hundred six
thousand five hundred fifty pounds sterling ((pound)5,106,550); and
(iv) Cairnie, Bassett, Cook, Gage and ▇▇▇▇▇▇ irrevocably agree and
direct the Buyer to pay to ECI the first such Deferred Consideration
otherwise payable to them in the maximum amounts set forth in Schedule 2
and Buyer agrees to make such payment and receipt by ECI of such Deferred
Consideration shall constitute complete satisfaction of any obligation by
the Buyer otherwise to make such payment to them.
2.4 Computation of Initial and Deferred Consideration.
(a) For purposes of this Agreement the "1998/99 Fiscal Year" shall mean the
Company's fiscal year commencing on April 1, 1998 and ending March 31, 1999.
(b) In any case where any part of the Initial Consideration or the Deferred
Consideration can otherwise be paid in full only by the issuance of a fractional
Buyer's Share, the Buyer's Shares payable pursuant to Sections 2.2 or 2.3 shall
be rounded up or down as the case may be to the nearest whole number.
(c) Notwithstanding any provision to the contrary in this Agreement, the
Buyer shall pay to Sellers an amount not to exceed TEN MILLION FOUR HUNDRED SIX
THOUSAND FIVE HUNDRED FIFTY POUNDS STERLING ((pound)10,406,550) in Initial
Consideration and Deferred Consideration for the purchase of all of the Ordinary
Sale Shares, the Deferred Shares and the Preference Sale Shares.
5
2.5 Valuation of Buyer's Shares. For all purposes of this Article II, the
Buyer's Shares shall be valued in accordance with the provisions of this Section
2.5.
(a) The value of the Buyer's Shares in United States dollars shall be the
average closing National Association of Securities Dealers Automatic Quotation
("NASDAQ") price for the 26, 27, 28 and 29 May and 1 June 1998 (the "Closing
Date NASDAQ Closing Price"). Provided that if for any Buyer's Shares when
converted into pounds sterling as provided herein the Closing Date NASDAQ
Closing Price is more than the average NASDAQ closing price for the seventh,
sixth, fifth, fourth and third business days prior to the Alternative Value Date
as defined hereunder (the "Alternative NASDAQ Closing Price"), the value of the
Buyer's Shares shall be the Alternative NASDAQ Closing Price.
(b) The value of the Buyer's Shares as expressed in pounds sterling shall
be the United States dollar value as computed in accordance with Section 2.5(a)
converted into pounds sterling at the following exchange rate:
(i) in the case of those Buyer's Shares issued pursuant to Section
2.2, the average of the closing spot exchange rates for the 26, 27, 28 and
29 May and 1 June 1998, or the average of the closing spot exchange rates
for the seventh, sixth, fifth, fourth and third business days immediately
preceding the Alternative Value Date if the Buyer's Shares are to be valued
at the Alternative NASDAQ Closing Price; and
(ii) in the case of any Buyer's Shares issued pursuant to Section 2.3,
the average of the closing spot exchange rates for the seventh, sixth,
fifth, fourth and third business days immediately preceding the date on
which such Buyer's Shares are issued.
(c) For purposes of this Section 2.5, the "Alternative Value Date" for any
Buyer's Shares shall be the later of:
(i) the date on which such Buyer's Shares are to be issued pursuant to
either Section 2.2 or 2.3; or
(ii) the date on which registration of such Buyer's Shares is
completed pursuant to Article VIII.
(d) The Closing Date NASDAQ Closing Price, the Alternative NASDAQ Closing
Price, and any exchange rates shall be as reported in the relevant issue of The
Wall Street Journal for which such information appears. All exchange rates shall
be those applicable to trading among banks in amounts of one million United
States dollars ($1,000,000) or more.
(e) Any increase in the number of Buyer's Shares arising from the
application of the other provisions of this Section 2.5 shall be made at the
earliest possible date after the Alternative Value Date and shall be made by the
issuance of such Buyer's Shares by the Buyer to the Sellers.
2.6 Operating Profit. For purposes of this Agreement, "Operating Profit"
shall mean the Company's profit or loss, calculated in accordance with generally
accepted
6
accounting principles and the Company's accounting policies as
reflected on its audited accounts for the fiscal year ended March 31, 1997.
Provided, however, that Operating Profit for purposes of this Agreement shall
consist of such amount computed:
(a) after deducting all reasonable management expenses including, without
limitation, reasonable directors' remuneration (whether by way of fees, salary
or commission) but excluding any management charges or other group costs imposed
by the Buyer or any of its subsidiaries or associates and any fees, salary,
commission or costs incurred by any of the Buyer's nominees which is not
directly connected with their actual management of or appointment as an
executive director to the board of directors of the Company;
(b) after accounting for depreciation;
(c) before deducting any interest paid to any bank or other creditor of the
Company or any taxation on profits or capital gain or on such interest;
(d) without taking into account profits or losses of a capital nature
arising on a disposal of fixed assets, investments, plant or any other assets of
the Company but for the avoidance of doubt upon the sale of any business unit
including the budgeted profit for such unit for the unexpired portion of the
Fiscal Year following such sale (and for the avoidance of doubt, the Company's
budget is attached as Schedule 3 hereto).
2.7 During the 1998/99 Fiscal Year, the Buyer undertakes to procure:
(a) that all trading between the Company and the Buyer or any of its
subsidiary or associated companies will be on arm's length terms;
(b) that the Company be permitted to trade substantially on the same terms
as set out in its business plan and in particular that the Company be permitted
to make the capital expenditure set out in such plan;
(c) that the Company be given reasonable cash reserves to enable it to
continue to trade materially in line with its business plan; and
(d) that separate audited accounts of the Company for the 1998/99 Fiscal
Year shall be prepared for purposes of calculating the Deferred Consideration in
the event the Company changes its year end from 31 March.
2.8 Dispute Resolution. If any Party disputes any computation of Operating
Profit, such Party shall so notify the other Parties in writing ("Notice of
Dispute") specifying in reasonable detail the points of disagreement, which
notice shall be provided on or before the earlier of the following:
(a) in the event such Operating Profit has been computed by the Company's
Auditors that date which is fourteen (14) days following computation of the
final audited accounts; or
7
(b) in the event such final audited accounts have not been computed, that
date which is 120 days following the end of the Company's fiscal year to which
such accounts relate.
Upon receipt of the Notice of Dispute, the Sellers of Ordinary Sale Shares and
Buyer shall promptly consult with respect to such points of disagreement in an
effort to resolve the dispute. If any such dispute cannot be resolved by Buyer
and the Sellers of Ordinary Sale Shares within ten (10) days after the Notice of
Dispute, they shall refer the dispute to a mutually agreeable chartered
accountant ("Accountant") as a mediator. In the event the Parties cannot agree
upon an Accountant within fifteen (15) days after the Notice of Dispute, they
shall apply to the President of the Institute of Chartered Accountants in
England and Wales to appoint such Accountant as he sees fit. The Accountant
shall finally determine, as soon as practicable, and in any event within thirty
(30) days after such reference, all points of disagreement with respect to
Operating Profit. The Accountant shall apply the terms of this Agreement and
GAAP consistent with the Financial Statements, and shall otherwise conduct the
mediation under such procedures as the parties may agree. The fees and expenses
of the Accountant incurred in connection with the mediation of Operating Profit
shall be allocated between the Parties by the Accountant in proportion to the
extent either Party did not prevail on items in dispute. All determinations by
the Accountant shall be final, conclusive and binding with respect to Operating
Profit and the allocation of fees and expenses.
2.9 ECI Payment. In the case of any payment of any Initial Consideration or
Deferred Consideration due to ECI, ECI irrevocably directs the Buyer to pay such
consideration to ECIVN and receipt by ECIVN of such consideration shall
constitute complete satisfaction of any obligation by the Buyer otherwise to
make such payment to ECI.
2.10 Stamp Duty. Any stamp duty which may become payable as a result of any
transfer of the Sale Shares contemplated by this Agreement shall be payable by
the Buyer.
ARTICLE III
CLOSING
3.1 Closing. The consummation of the transactions contemplated herein
("Closing") shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇'▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ on [8] June 1998 or such earlier date as all of the
Parties might agree in writing.
3.2 Deliveries of Sellers at Closing. Sellers shall deliver to Buyer:
(a) duly completed and signed share transfers in favor of Buyer together
with the relevant share certificates evidencing the Sale Shares;
(b) the resignations of such of the Company's directors and secretary as
the Buyer might have specified reasonably in advance with a written
acknowledgement from each person so resigning executed as a deed in agreed form
that he has no claim against the Company in respect of breach of contract,
compensation for loss of office, redundancy or unfair dismissal or on any other
grounds whatsoever except only for accrued remuneration
8
and reimbursable business expenses disclosed to Buyer and approved for
payment by Buyer in writing on or before Closing;
(c) the statutory books of the Company complete and up-to-date and its
certificate of incorporation and certificate of incorporation on change of name
and common seal;
(d) written confirmation from the Sellers that other than the debts
reflected in the Disclosure Letter, as defined below, there are no subsisting
guarantees given by the Company in their favour and that none of Sellers will be
indebted to the Company or vice versa;
(e) a deed of release in form reasonably satisfactory to the Buyer executed
by the Company and the Sellers terminating the Subscription Agreement from a
date which is prior to Closing and confirming that there are no outstanding
liabilities arising thereunder attaching to the Company or to any of its issued
and outstanding share capital; and
(f) a deed of release in form reasonably satisfactory to the Buyer executed
by the Sellers waiving all claims and entitlement to dividends and interest
accrued but unpaid by the Company as at the Closing Date.
3.3 Board Meetings. A board meeting of the Company shall be held at which:
(a) such persons as the Buyer may nominate shall be appointed additional
directors;
(b) the transfers referred to in Section 3.2(a) shall be approved (subject
to stamping);
(c) the resignations referred to in Section 3.2(b) shall be submitted and
accepted effective the end of such meeting; and
(d) such changes shall be made in the Company's articles of association as
the Buyer shall reasonably specify in advance of Closing.
3.4 Deliveries of Buyer at Closing. Buyer shall deliver to Sellers:
(a) upon completion of the matters referred to in Sections 3.2 and 3.3, the
Buyer shall deliver to each of the Sellers stock certificates respecting those
Buyer's Shares to be issued to such Seller pursuant to Section 2.2 together with
the cash sum therein described; and
(b) an opinion of ▇▇▇▇▇ ▇▇▇▇ LLP addressed to ▇▇▇▇▇▇▇ & Co. in the agreed
form confirming that the Buyer is authorized and empowered to enter into this
Agreement.
9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
4.1 True and Correct Warranties. Each of the Sellers represents and
warrants that each of the Warranties made by him or it and contained in this
Article IV, except as expressly qualified herein or as set out in the disclosure
schedule attached as Exhibit 4 to this Agreement (the "Disclosure Schedule"), is
true and correct on the date hereof.
4.2 Enforceable Agreement. Each of the Sellers hereby severally represents
and warrants that he or she or it has the power and capacity to execute and
deliver this Agreement, to perform the obligations of Sellers and to consummate
the transactions contemplated hereby. Each of the Sellers severally agrees this
Agreement constitutes a valid and binding obligation enforceable against him,
her or it in accordance with its terms.
4.3 Share Ownership. Each Seller hereby severally represents and warrants
that he or it is the registered holder and beneficial owner of such of the Sale
Shares as are attributed to him or it in Section 1.1. The Ordinary Sale Shares
consist of one hundred fifty thousand (150,000) Ordinary Shares of ten ▇▇▇▇▇
((pound)0.10) each and three hundred sixty thousand (360,000) Preferred Ordinary
Shares of ten ▇▇▇▇▇ ((pound)0.10) each, the Preference Sale Shares consist of
one million seven hundred thousand (1,700,000) A Preference Shares of ten ▇▇▇▇▇
((pound)0.10) each and one million four hundred thousand (1,400,000) B
Preference Shares of ten ▇▇▇▇▇ ((pound)0.10) each, and each Seller represents
and warrants that his or its Sale Shares are owned free and clear of all
security interests, pledges, liens or other encumbrances, claims, and
restrictions. Each Seller shall transfer good and marketable title to the Sale
Shares at Closing, free and clear of all security interests, pledges, liens or
other encumbrances, claims, and restrictions. As at Closing, each Seller will be
entitled to transfer the full legal and beneficial ownership of the Sale Shares
to Buyer without the consent of any other person.
4.4 Further Warranties. In addition to those representations and warranties
above, ▇▇▇▇▇▇, ECI and FKH, insofar as they are aware, and Cairnie, Bassett,
Tyler, Gage, ▇▇▇▇▇▇ and ▇▇▇▇ hereby severally represent and warrant to Buyer in
the terms set out in Sections 4.4(a) and (b):
(a) Capitalization of the Company. The authorized capital stock of the
Company presently consists solely of three hundred seventy thousand pounds
sterling ((pound)370,000), made up of two hundred forty thousand (240,000)
ordinary shares with a par value of ten ▇▇▇▇▇ ((pound).10) per share, three
hundred sixty thousand (360,000) preferred ordinary shares with a par value of
ten ▇▇▇▇▇ ((pound).10) per share, one million seven hundred thousand "A"
preference shares with a par value of ten ▇▇▇▇▇ ((pound).10) per share, and one
million four hundred thousand "B" preference shares with a par value of ten
▇▇▇▇▇ ((pound).10) per share. All of the Sale Shares are duly authorized,
validly issued and fully paid. There are no other shares or other securities of
the Company which are outstanding or rights or options to acquire shares or
other securities of the Company. Neither the Sellers nor the Company are subject
to any obligation to issue, deliver, redeem, sell, transfer or otherwise acquire
or retire any shares of Ordinary Share Capital, Preference Shares or any other
securities of the Company.
10
(b) Corporate Existence and Qualification. The Company is duly incorporated
and validly existing under the laws of England and Wales with all requisite
corporate power and authority to carry on its business as it is now being
conducted and to own, operate and lease its properties and assets.
4.5 Warranties of the Management Sellers. Each of Cairnie, Tyler, Bassett,
Gage, ▇▇▇▇▇▇ and ▇▇▇▇ (the "Management Sellers") severally represent and warrant
to Buyer as follows:
(a) Financial Statements.
(i) Set forth at Exhibit 4.5(a) to this Agreement are copies of the
audited statutory accounts of the Company for the years ended 31 March 1994
to 1997 inclusive (the "Financial Statements") and the management accounts
of the Company from 1 April 1997 to 31 March 1998, including related year
end adjustments (the "Management Accounts").
(ii) The Financial Statements (A) present a true and fair view of the
Company's financial position and results of operations at the dates and for
the periods indicated, (B) will not have been affected (except as stated
therein) by any unusual or nonrecurring items, (C) as of those dates made
full and proper provision or reserve for all actual and accrued claims and
liabilities, capital commitments and for all bad debts and doubtful debts,
(D) make proper provision or reserve for all tax assessed or liable to be
assessed or for which the Company is accountable including but not limited
to deferred taxation, (E) comply with the requirements of the Companies
Acts and other relevant statutes, and (F) have been prepared in accordance
with generally accepted accounting principles in the United Kingdom for
companies carrying on a similar business to that of the Company which
accounting principles have been consistently applied in the preparation of
each of the Financial Statements ("GAAP").
(iii) As at the date hereof (and on the understanding that events
arising after the Closing Date not reasonably foreseeable by the Management
Sellers shall not affect the Management Accounts), the Management Accounts
(A) are accurate and complete in all material respects, (B) are prepared on
a basis which is consistent with the books and records of the Company and
those management accounts of the Company from 31 March 1996 to 31 March
1997 (which in turn are consistent with the Financial Statements for the
same period), (C) present fairly the results of the Company's operations
and cash flow for the period to which they relate, and (D) have been
prepared in accordance with the Company's ordinary and customary standards
for internal reporting.
(b) Taxes.
(i) The Company timely has filed or caused to be filed with the
appropriate Government entity all tax returns, accounts, reports and
notices as reasonably requested or required to be filed by or on behalf of
the Company ("Tax Returns") and no Tax Returns have been amended. All Tax
Returns are true, correct, and complete in all respects. None of the Tax
Returns currently is the subject of any audit, administrative proceeding,
judicial proceeding or dispute.
11
(ii) All taxes (whether or not reflected in the Tax Returns as filed)
payable by the Company with respect to all periods reflected on the Tax
Returns have been fully paid, and there is no liability and no grounds for
the assertion or assessment of any additional taxes against the Company or
its assets with respect to such periods. All taxes not yet due and payable
are properly accrued and specifically identified as such on the Financial
Statements or the Management Accounts.
(iii) The Company has properly operated the Pay as You Earn ("PAYE")
system and any other wage withholding system required by any other
jurisdiction, deducting tax as required by law from all payments to or
treated as made to or benefits provided for its employees, ex-employees or
independent contractors (including payments within Income and Corporation
Taxes Act, 1988, section 134) and has duly accounted to the Inland Revenue
or such other relevant tax authority for such taxes deducted.
(iv) The Company has complied in all respects with the requirements
and provisions of any applicable Value Added Tax ("VAT") legislation, and
made and maintained up to the Effective Date up-to-date records, invoices,
accounts and other documents required by or necessary for the purposes of
the VAT legislation and has at all times punctually paid and made all
payments and returns required under it.
(v) The Company is not liable to pay tax in any country other than the
United Kingdom.
(c) Litigation. Except as might be set forth in the Disclosure Schedule:
(i) there is not now pending, any suit, claim, litigation, proceeding
(administrative, judicial, or in arbitration, mediation or alternative
dispute resolution), Government, or other action (any of the foregoing,
"Action") or, to the knowledge of any of the Executive Directors threatened
against the Company or involving its business, any of its property, or, in
connection with its business, any of its shareholders, directors, officers,
agents, or other personnel, including without limitation any Action
challenging, enjoining, or preventing this Agreement or the consummation of
the transactions contemplated hereby;
(ii) the Company is not now subject to any order, writ, injunction, or
decree of any court or other Government entity ("Order") other than Orders
of general applicability; and
(iii) during the five years preceding the Effective Date, neither the
Sellers nor the Company has threatened or has been threatened to be a party
or subject to any Action or Order relating to personal injury, death, or
property or economic damage arising from products of the Company.
(d) Employee Benefit Matters. The Disclosure Schedule sets forth a complete
and correct list of employees of the Company, their respective salaries, date of
commencement of employment, vacation entitlement, level of pension contributions
and company car entitlement. True, correct, and complete copies of all
employment, consulting, engagement or retainer agreements for the provision of
services to the Company have been
12
delivered to Buyer in addition to all documents describing the amount,
entitlement to and rules governing any employee insurance, pension plan, sick
pay, maternity leave and company car policy of the Company. Apart from the
contributions to independent pension plans described on the Disclosure Schedule,
there are no defined benefit pension plans, bonus schemes, profit sharing or
retirement or other similar benefit schemes operated by the Company and there is
no contracting out certificate in force for the Company. There are no
negotiations, demands or proposals which are pending or threatened or which have
been made since 31st December 1997 which concern matters now covered, or that
would be covered, by the foregoing types of agreement, arrangement, plan, or
policy.
(e) Governmental Approvals and Filings. Except as might be provided in the
Disclosure Schedule, neither the Sellers nor the Company is required to obtain
any approval, consent, or authorization of, or to make any declaration or filing
with, any Government for the valid execution and delivery of this Agreement or
any other agreement to be delivered hereunder, the purchase and sale of the Sale
Shares, or the performance or consummation of the respective transactions
contemplated hereby or thereby.
(f) Real Property. Except as disclosed in the Disclosure Schedule:
(i) with respect to the Company's premises at ▇▇▇▇ ▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, the Company has paid in full all rent and
services charges falling due on or before Closing and has not received any
notice of irritancy or forfeiture; and
(ii) with respect to any of the real property used in connection with
its business, the Company has received no notice of any breach of the
provisions of any lease or any breach of any obligation imposed by any
governmental authority.
(g) Year 2000 Compliance. The Company and the Management Sellers have
reviewed all internal hardware and software configurations to assess the risks
related to such hardware and software in respect of Year 2000 Compliance. The
Company and the Management Sellers have established Year 2000 Compliance as a
business priority, and have established a budget and allocated sufficient human
and financial resources to achieve Year 2000 Compliance. For the purposes of
this Section 4.5(g), "Year 2000 Compliance" means the successful operation prior
to, during and after calendar year 2000 A.D. without error relating to date
data, the successful management and manipulation of data involving dates,
including single century formulas and multi-century formulas, and the obtaining
of correct results for date calculations that are both chronologically earlier
and later than 31 December 1999, in date calculations that involve more than one
century, in date calculations using the date 9 September 1999 (i.e., 9/9/99),
and in the recognition of the Year 2000 as a leap year, such that all date data
imputed for use with such computer software and hardware is accurate and in
appropriate format.
(h) Disclosure. Each Exhibit, the Disclosure Schedule and each document
attached as or on an Exhibit is true, correct, and complete. No representation
or warranty by Sellers in this Agreement or any Exhibit or any agreement or
certificate referred to in this Agreement contains or will contain as of the
Effective Date any untrue statement of a material fact or any omission of a
material fact necessary to make the respective statements contained herein or
therein, in light of the circumstances under which the statements were made, not
misleading.
13
(i) Brokers, Finders. Except as might be provided in the Disclosure
Schedule, no finder, broker, agent, or other intermediary, acting on behalf
of Sellers or the Company, is entitled to a commission, fee, or other
compensation or obligation in connection with the negotiation or
consummation of this Agreement or any of the transactions contemplated
hereby.
4.6 Warranty by ECIVGP. ECIVGP represents and warrants to Buyer that it is
the general partner of each of ECICP, ECICPB, ECID2 and ECIE and in that
capacity has all requisite power and authority on their behalf to enter into
this Agreement, to consummate the transactions contemplated by this Agreement,
and to fulfill all obligations under this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to Sellers,
each of which is true and correct on the date hereof:
5.1 Corporate Existence and Authorization. Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Missouri and is duly qualified and in good standing in each foreign jurisdiction
where the nature of such qualification is required. Buyer has all requisite
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated hereby.
This Agreement constitutes a valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
5.2 No Violation. Buyer is not subject to or obligated under any
certificate of incorporation, bylaw, Law, or any agreement or instrument, or any
license, franchise or permit, which would be breached or violated by its
execution, delivery or performance of this Agreement. Buyer will comply with all
Laws in connection with its execution, delivery and performance of this
Agreement and the transactions contemplated hereby.
5.3 Governmental Approvals and Filings. Buyer is not required to obtain any
approval, consent, or authorization of, or to make any declaration or filing
with, any Government for the valid execution and delivery of this Agreement or
any other agreement to be delivered hereunder, the purchase and sale of the Sale
Shares, or the performance or consummation of the respective transactions
contemplated hereby or thereby.
5.4 Buyer's Shares. To the knowledge of Buyer there are no current
circumstances which will directly lead to the suspension of trading of Buyer's
Shares issued to Sellers on the public stock exchange or cause Sellers to be
unable to register or trade in such Buyer's Shares as are issued to them at the
time that they are issued.
14
ARTICLE VI
ADDITIONAL SHARES
6.1 Continuing Management. Each of the Management Sellers agrees that,
while he remains employed by the Company but subject to the other provisions of
this Article VI, he shall retain the following additional number of Ordinary
Shares not constituting Ordinary Sale Shares on the date of Closing set forth
opposite his name (such additional shares being referred to as the "Additional
Shares"):
Cairnie 36,945 Ordinary Shares
▇▇▇▇▇▇▇ 26,865 Ordinary Shares
Gage 8,730 Ordinary Shares
▇▇▇▇▇▇ 8,730 Ordinary Shares
▇▇▇▇ 8,730 Ordinary Shares
6.2 Right to Require Purchase. The Buyer hereby grants to each of the
Management Sellers the right to require Buyer to purchase from such Management
Seller (the "Put Option") those Additional Shares belonging to such Management
Seller. Such purchase of Additional Shares by the Buyer from each of the
Management Sellers shall be made at the Option Price, as defined below, shall be
payable in Buyer's Shares and shall be made upon the other terms and conditions
set forth in this Article VI. For the exercise of a Put Option by any of the
Management Sellers to be effective, such Put Option must include all of the
Additional Shares that are owned by such Management Seller and that are subject
to such Put Option, in accordance with Section 6.3 below, on the date the Put
Notice is issued.
6.3 Time and Exercise of Put. Subject to the provisions of Section 6.9,
such Management Sellers may exercise a Put Option by written notice to the Buyer
(the "Put Notice") as follows:
(a) on any date that is more than three (3) years after the Closing Date,
but in any case no later than the close of business on December 31, 2005, such
Management Seller will be entitled to sell and the Buyer required to purchase
fifty (50) per cent of the Management Seller's Additional Shares;
(b) on any date that is more than five (5) years after the Closing Date,
but in any case no later than the close of business on December 31, 2005, such
Management Seller will be entitled to sell and the Buyer required to purchase
the balance of the Management Seller's Additional Shares; and
(c) at any time within ninety (90) days of the relevant Management Seller
ceasing to be an employee of the Company for any reason other than resignation
or dismissal for reason that such Management Seller breached his employment
contract with the Company warranting such dismissal.
Once given, a Put Notice may be withdrawn only by the mutual consent of the
Buyer and the Management Seller giving the Put Notice. The Buyer shall complete
the purchase of the Additional Shares subject to the Put Notice at the Option
Price within sixty (60) days following receipt of the Put Notice.
15
6.4 Right to Purchase. The Buyer hereby retains the right to purchase from
the Management Sellers and to require each of the Management Sellers to sell
(the "Call Option") any part or all of the Additional Shares held by such
Management Seller by written notice to such Management Seller (the "Call
Notice") to be made at the earlier of the following dates:
(a) any date which is between thirty (30) and ninety (90) days after the
termination of that Management Seller's employment by the Company as a result of
resignation or dismissal for reason that such Management Seller breached his
employment contract with the Company warranting such dismissal; or
(b) any date which is after December 31, 2005 by written notice to such
Seller (the "Call Notice").
Such purchase of Additional Shares by the Buyer from each of the Sellers shall
be made at the Option Price, as defined below, shall be payable in Buyer's
Shares and shall be made upon the other terms and conditions set forth in this
Article VI.
6.5 Option Price. The Option Price for the Additional Shares of the Sellers
subject to a Put Notice or a Call Notice shall be equal to:
(a) a sum which shall consist of
(i) seven (7) times the average of the Operating Profit for the
Relevant Fiscal Period ending before the submission of the Put Notice or
the Call Notice,
(ii) multiplied by a ratio, the numerator of which will be the number
of Additional Shares set out in the Put Notice or the Call Notice, and the
denominator of which will be the total number of issued and outstanding
shares of the Ordinary Share Capital of the Company at Closing or at the
date of issue of such notice (whichever is lower) which sum shall be
(b) minus any dividends paid to such Seller which are treated as having
been made out of the Operating Profit making up part of the Option Price
calculation.
6.6 Relevant Fiscal Period. For purposes of Section 6.5(a)(i), the Relevant
Fiscal Period shall for any Additional Shares subject to a Put Notice or a Call
Notice be defined as:
(a) the two (2) full fiscal years of the Company ending before submission
of the Put Notice or the Call Notice; provided that
(b) in the event such Put Notice or Call Notice is exercised before 31
December 2000, the Relevant Fiscal Period shall be the year commencing 1 April
1998 and ending 31 March 1999.
16
6.7 Valuation of Buyer's Shares. For purposes of this Article VI, the
Buyer's Shares issued in exchange for the Additional Shares of any Seller shall
be valued by reference to the following information as reported in The Wall
Street Journal for the relevant days before the date of the relevant Put Notice
or Call Notice:
(a) the value of the Buyer's Shares in United States dollars shall be the
average closing NASDAQ prices for the seventh, sixth, fifth, fourth and third
business days prior to the date of the relevant Put Notice or Call Notice; and
(b) the value of the Buyer's Shares as expressed in pounds sterling shall
be the United States dollar value converted into pounds sterling at the average
closing spot exchange rates for trading among banks in excess of one million
United States dollars ($1,000,000), for the seventh, sixth, fifth, fourth and
third business days prior to the date of the relevant Put Notice or Call Notice.
6.8 Buyer's Obligations. The Buyer shall:
(a) use its best endeavours to procure that the Company produces its
audited financial accounts for any of the financial years in respect of which a
Put Option may be exercised as soon as is reasonably practicable following the
end of the relevant fiscal year,
(b) procure that the matter set out in Section 2.7(a) for periods up to the
exercise of a Put Option or Call Option apply.
6.9 Warranties. The exercise of a Put Option by any Seller or a sale by any
Seller upon the exercise of a Call Option by the Buyer shall constitute the
relevant Seller's representation and warranty that it owns the Additional Shares
subject to such Put Option or Call Option free and clear of all security
interests, claims and restrictions.
6.10 No Assignment. Except as provided in Article VII, the rights granted
to Sellers under this Article VI shall be non-assignable and non-transferable to
any person (including but not limited to, any other Seller) unless Buyer gives
its prior written consent. Buyer shall be deemed to have consented to a transfer
by a Management Seller to any spouse or descendant of such Management Seller or
to any family trust of which the Management Seller is the settlor, provided that
any such transferee shall execute a deed of adherence providing that such
transferee shall be bound by the Put Option or the Call Option, and provided
further, that such transferee is:
(a) a relative, spouse or relative of the spouse of a Management Seller who
has the same principal residence as the Management Seller;
(b) a trust or estate in which a Management Seller and any of the persons
related to such Management Seller as specified in (a) above or (c) below
collectively have more than 50 percent of the beneficial interest (excluding
contingent interests); or
(c) any corporation or other organization of which a Management Seller and
any of the persons related to such Management Seller as specified in (a) or (b)
17
above collectively are beneficial owners of more than 50 percent of the equity
securities (excluding directors' qualifying shares) or equity interests.
ARTICLE VII
OWNERSHIP OF SALE SHARES AND ADDITIONAL SHARES
Each of the Sellers agrees that the Buyer shall be entitled to purchase any
Sale Shares or Additional Shares from the registered owner of such Shares as
reflected in the register of members of the Company on that date without regard
to any claims of beneficial ownership which any other Seller might have to such
Shares. Each of the Sellers releases and discharges the Buyer from any and all
liabilities or claims (including rights of rescission, if any) which any of them
might have with respect to any Sale Shares or Additional Shares purchased by the
Buyer in accordance with this Article VII.
ARTICLE VIII
SHARES AND REGISTRATION RIGHTS
8.1 Restrictions and Registration of Buyer's Shares. Buyer's Shares shall
be restricted and subject to all transfer restrictions imposed by applicable
federal and state securities laws. Buyer shall have the right to affix the
legend described in Exhibit 8.1 on all certificates for Buyer's Shares. In the
case of those Buyer's Shares issued pursuant to Section 2.2, the Buyer shall
include Buyer's Shares at that time issued and outstanding to Sellers in any
registration statement or statements filed with the Securities and Exchange
Commission ("SEC") by Buyer from and after the Closing, provided that Buyer will
use its best efforts to include the Buyer's Shares in such a registration
statement submitted to the SEC within sixty (60) days of the Closing Date, or in
the case of payments under Section 2.3 within ninety (90) days after the
issuance of the Buyer's Shares. Buyer shall advise the Sellers as to the
approval of any such statements.
8.2 Costs. Buyer shall bear all of the cost, fees and expenses involved in
the preparation and filing of the statements and documents described in Section
8.1 above; provided, however, that any Seller shall pay his proportionate share
of all transfer taxes and brokerage commissions which are incurred as a result
of the sale of any of Buyer's Shares by such Seller.
8.3 Indemnification. In connection with any registration statement in which
Seller is participating, Seller shall furnish to Buyer in writing such
information and affidavits relating to such Seller as Buyer reasonably requests
for use in connection with any such registration statement or prospectus and, to
the extent permitted by law, shall indemnify Buyer, its directors and officers
against any losses, claims, damages, liabilities and expenses resulting from any
untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent such untrue statement or omission is
contained in any information or affidavit so furnished in writing by Seller.
18
8.4 Miscellaneous.
(a) No Inconsistent Agreements. Buyer shall not hereafter enter into any
agreement with respect to its securities which is inconsistent with or violates
the rights granted to the Sellers in this Agreement.
(b) Adjustments Affecting Shares. Buyer shall not take any action, or
permit any change to occur, with respect to its securities which would adversely
affect the ability of the Sellers to include such Buyer's Shares in a
registration undertaken pursuant to this Agreement or which would adversely
affect the marketability of such shares in any such registration (including,
without limitation, effecting a stock split or a combination of such shares).
(c) ECIVN as Nominee. ECIVN undertakes that until such time as the Buyer's
Shares are registered with the SEC, ECIVN will hold those Buyer's Shares which
are issued to it pursuant to this Agreement as nominee only for ECI and not for
any other person whatsoever.
ARTICLE IX
RESTRICTIVE AGREEMENT
For the purpose of assuring to the Buyer the full benefit of the businesses
and goodwill of the Company, by way of further consideration for the obligations
of the Buyer under this agreement, and as separate and independent agreements
each of the Management Sellers undertake that for one (1) year after Closing,
absent the prior written consent of the Buyer he or it will not, either on his
or its own account or for any other person directly or indirectly solicit away
from, interfere with or endeavor to entice away from the Company any person who
to his or its knowledge is, or has during the past one (1) year been, a client,
customer or employee of, or in the habit of dealing with, the Company.
ARTICLE X
INDEMNIFICATION
10.1 Survival. The respective representations and warranties made by the
Parties in Articles IV, V and VI shall survive the Effective Date but shall
expire five (5) years from the Effective Date unless a claim with respect
thereto shall have been made prior to such date against the Party or Parties
responsible for making such representation or warranty and thereby responsible
for indemnification hereunder (the "Indemnifying Party"); provided, that the
foregoing shall not apply to representations and warranties under Sections 4.1,
4.2, 4.3, 4.4(a), (b), (d) and 6.9, which shall survive for a period of ten (10)
years from the Effective Date and provided further that the representation and
warranty under Section 4.6 shall survive without limit in point of time.
10.2 Notice of Claim. In the event that a Party seeks indemnification on
behalf of itself, its permitted assigns, agents, and in the case of the Buyer
its shareholders,
19
directors, officers, successors or the Company, such Party
seeking indemnification (the "Indemnified Party") shall give written notice to
the Indemnifying Party specifying in reasonable detail the facts constituting
the basis for such claim and the amount, to the extent known, of the claim
asserted. The Indemnifying Party shall pay the amount of any valid claim not
more than ten (10) days after the Indemnified Party provides notice to the
Indemnifying Party of such amount.
10.3 Limitations on Liability. The relevant Indemnifying Parties shall have
no liability (or such liability shall be reduced) in respect of any claim as
follows:
(a) where the matter or matters giving rise to Indemnified Losses and the
amount of such Losses are fairly and specifically disclosed in the Disclosure
Schedule;
(b) where provision or reserve for or in respect of the liability or other
matter giving rise to such claim has been made in the Financial Statements or
Management Accounts, but only up to the amount specifically reserved for in the
Financial Statements or Management Accounts;
(c) where any claim occurs or is increased as a result of any change in
legislation after the date of this Agreement (or any legislation not in force at
the date of this Agreement) which take effect retrospectively or the withdrawal
after the date of this Agreement of any published concession or published
general practice previously made by the Inland Revenue or other taxing
authority;
(d) where any claim occurs or is increased as a result of any increase in
the rate of taxation in force at the date of this Agreement;
(e) where any breach of the Warranties occurs as a result of or is
otherwise attributable to the Indemnified Party disclaiming any part of the
benefit of capital or other allowances against taxation claimed or proposed to
be claimed on or before the date of this Agreement;
(f) where the aggregate of all claims against the following individual
Sellers exceeds the lesser of the amount set out opposite their name below and
the aggregate of the Initial and Deferred Consideration received by them net of
costs:
Cairnie (pound)167,000
Tyler (pound)167,000
▇▇▇▇▇▇▇ (pound)167,000
▇▇▇▇▇▇ (pound)48,000
▇▇▇▇ (pound)48,000
Gage (pound)48,000
that Seller shall not be responsible for payment to Buyer of any amount
exceeding the amount of consideration actually received by that Seller;
(g) where a claim is attributable to any voluntary act or omission of or
transaction or arrangement carried out by the Indemnified Party after the
Effective Date
20
otherwise than in the ordinary course of business and without
prejudice to the generality of the foregoing the following shall not be regarded
as being within the ordinary course of business of the Company for the purpose
of this Agreement:
(h) where any claim would not have arisen but for a change of accounting
policy or practice of any Indemnified Party after the Effective Date;
(i) where the amount of a claim shall cause a relief from taxation
arising by virtue of the loss or damage in respect of which the claim was
made, provided however, that any liability so reduced shall then be
increased by any amount of taxation attributable to receipt of the
indemnity payment;
(j) to the extent that that liability for taxes or otherwise has been made
good by insurers or otherwise compensated for without cost to any third party or
any Indemnified Party; or
(l) to the extent that any income, profits or gains to which that liability
for taxes is attributable were actually earned or received by or actually
accrued to the Company but were not reflected in the Financial Statements or the
Management Accounts.
10.4 Right to Contest Claims of Third Persons. If an Indemnified Party is
entitled to indemnification hereunder because of a claim asserted by any
claimant (other than an indemnified person hereunder) (a "Third Person"), the
Indemnified Party shall give the Indemnifying Party reasonably prompt notice
thereof after such assertion is actually known to the Indemnified Party;
provided, however, that the right of a person to be indemnified hereunder in
respect of claims made by a Third Person shall not be adversely affected by a
failure to give such notice unless, and then only to the extent that, an
Indemnifying Party is prejudiced thereby. The Indemnifying Party shall have the
right, upon written notice to the Indemnified Party, and using counsel
reasonably satisfactory to the Indemnified Party, to investigate, secure,
contest, or settle the claim alleged by such Third Person (a "Third-Person
Claim"), provided that the Indemnifying Party has unconditionally acknowledged
to the Indemnified Party in writing his or its obligation to indemnify the
persons to be indemnified hereunder with respect to such Third-Person Claim; the
Indemnified Party may thereafter participate in (but not control) the defense of
any such Third-Person Claim with its own counsel at its own expense, unless
separate representation is necessary to avoid a conflict of interest, in which
case such representation shall be at the expense of the Indemnifying Party.
Unless and until the Indemnifying Party so acknowledges his or its obligation to
indemnify, the Indemnified Party shall have the right, at its option, to assume
and control defense of the matter and to look to the Indemnifying Party for the
full amount of the costs of defense. The failure of the Indemnifying Party to
respond in writing to the aforesaid notice of the Indemnified Party with respect
to such Third-Person Claim within twenty (20) days after receipt thereof shall
be deemed an election not to defend the same. If the Indemnifying Party does not
so acknowledge his or its obligation to indemnity and assume the defense of any
such Third-Person Claim:
(a) the Indemnified Party may defend against such claim, in such manner as
it may deem appropriate, including, but not limited to, settling such claim,
after giving
21
notice of the same to the Indemnifying Party, on such terms as the
Indemnified Party may deem appropriate; and
(b) the Indemnifying Party may participate in (but not control) the defense
of such action, with its own counsel at its own expense.
If the Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such Third-Person Claim or the amount or nature of
any such settlement, the Indemnifying Party shall have the burden to prove by
clear and convincing evidence that conduct of the Indemnified Party in the
defense and/or settlement of such Third-Person Claim constituted gross
negligence or willful misconduct. The Parties shall make available to each other
all relevant information in their possession relating to any such Third-Person
Claim and shall cooperate in the defense thereof.
10.5 Access to Records. The Indemnified Party shall provide to the
Indemnifying Party and the Indemnifying Party's professional advisers reasonable
access to premises and personnel and to any relevant assets, documents and
records within their power, possession or control for the purpose of
investigating the Third-Person Claim and enabling the Indemnifying Party to take
such action as referred to in this Article X above and shall allow the
Indemnifying Party and its advisers to take copies of any relevant documents or
records.
10.6 Reduction in Purchase Price. Any amount payable by the Sellers to an
Indemnified Party in satisfaction of any claim made under the Warranties shall
be treated as a reduction in the amount of the total consideration received by
the Sellers.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Notices.
(a) Any notice or other communication required or permitted to be given
under this Agreement shall be in writing in the English language and delivered
personally or sent by first class mail (postage prepaid) or facsimile
transmission and any notice so posted shall be deemed to have been received in
the ordinary course of post, and any notice sent by facsimile shall be deemed to
have been given twenty four (24) hours after transmission.
(b) Notices under this Agreement shall be sent to the following addresses:
If to Buyer:
Applied Cellular Technology, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman
Telecopier No. 561/366-0002
22
With a copy to:
▇▇. ▇▇▇▇▇▇▇▇▇ Sale III
▇▇▇▇▇ ▇▇▇▇ LLP
One Metropolitan Square
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. 314/259-2020
If to Sellers:
▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Great Britain
ECI Ventures GP Limited
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Great Britain
With a copy to:
▇▇▇▇▇▇▇ & Co.
352 Silbury Court
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Great Britain
11.2 Entire Agreement. This Agreement and the Exhibits and documents
specifically mentioned herein embody the entire agreement and understanding of
the Parties with respect to the subject matter hereof, and supersede all prior
and contemporaneous agreements and understandings relative to such subject
matter.
11.3 Assignment; Binding Agreement. This Agreement and the various rights
and obligations arising hereunder shall inure to the benefit of and be binding
upon Buyer, its successors, and permitted assigns, and the Sellers and their
legal representatives, successors, and permitted assigns. Neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be transferred,
delegated, or assigned (by operation of law or otherwise) by any of the Parties
hereto without the prior written consent of the other Parties (which consent
shall not be unreasonably withheld), except that Buyer shall have the right to
transfer and assign its rights hereunder to purchase the Sale Shares and any
other rights or benefits afforded to it by this Agreement to any entity which at
the time of such transfer and assignment is controlled by Buyer.
23
11.4 Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
11.5 Headings; Interpretation. The article and section headings contained
in this Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of the Agreement. Each reference in this
Agreement to an Article, Section or Exhibit, unless otherwise indicated, shall
mean an Article or a Section of this Agreement or an Exhibit attached to this
Agreement, respectively. References herein to "days", unless otherwise
indicated, are to consecutive calendar days. All of the Parties have
participated substantially in the negotiation and drafting of this Agreement and
agree that no ambiguity herein should be construed against the draftsman.
11.6 Expenses. Sellers (and not the Company) shall pay all costs and
expenses incurred on behalf of themselves or the Company in connection with the
negotiation, preparation and execution of this Agreement and the consummation of
the transactions contemplated hereby, including, without limitation, fees and
expenses of advisors, brokers, attorneys and accountants.
11.7 Further Assurances. From and after the Closing, the Parties shall do
such acts and execute such documents and instruments as may be reasonably
required to make effective the transactions contemplated hereby.
11.8 Remedies Cumulative. All rights and remedies of the Parties under this
Agreement are cumulative and without prejudice to any other rights or remedies
under Law.
11.9 Governing Law. This Agreement shall in all respects be construed in
accordance with and governed by the substantive laws England and Wales, without
reference to choice of law rules.
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be executed as of the date first above written.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ LXM (as attorney)
---------------------------
▇▇▇▇ ▇▇▇▇▇▇
24
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇
---------------------------
▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
EXECUTED by /s/ ▇. ▇▇▇▇▇▇
-----------------------
for and on behalf of ECI VENTURES GP LIMITED
EXECUTED by /s/ ▇. ▇▇▇▇▇▇
-----------------------
for and on behalf of ECI VENTURES GP LIMITED
acting as General Partner of ECI CAPITAL
PARTNERS, ECI CAPITAL PARTNERS "B", ECI
DEVELOPMENTS 2 AND ECI EUROFUND
EXECUTED by /s/ ▇▇▇▇▇ ▇▇▇▇
-----------------------
for and on behalf of ▇▇▇▇▇▇ KARPARK
HOLDINGS LTD.
25
EXECUTED by /s/ ▇. ▇▇▇▇▇▇
-----------------------
for and on behalf of ECI VENTURES
NOMINEES LTD.
APPLIED CELLULAR TECHNOLOGY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Title: President
26
SIGNATURE INDUSTRIES LIMITED
Schedule 1
--------------------------------------------------------------------------------
Share of Initial
Consideration payable
to Sellers of Ordinary "Ordinary Seller's Ratio"(for
Sale Shares calculating entitlement to
Name ((pound)882,340) Deferred Consideration)
------------- ------------------------------------ -----------------------------
------------- ------------------------------------ -----------------------------
▇▇▇▇▇▇ (pound)77,613.05 8.80%
------------- ------------------------------------ -----------------------------
Cairnie (pound)42,795.22 4.85%
------------- ------------------------------------ -----------------------------
Tyler (pound)77,611.32 8.80%
------------- ------------------------------------ -----------------------------
▇▇▇▇▇▇▇ (pound)31,134.49 3.53%
------------- ------------------------------------ -----------------------------
▇▇▇▇ (pound)10,119.23 1.15%
------------- ------------------------------------ -----------------------------
Gage (pound)10,119.23 1.15%
------------- ------------------------------------ -----------------------------
▇▇▇▇▇▇ (pound)10,119.23 1.15%
------------- ------------------------------------ -----------------------------
ECI (pound)622,828.23 70.59%
------------- ------------------------------------ -----------------------------
Total (pound)882,340 100.00%
------------- ------------------------------------ -----------------------------
------------- ------------------------------------ -----------------------------
Note to ▇▇▇▇▇▇▇ & Co.: Allocate cash consideration here in separate column.
27
SIGNATURE INDUSTRIES LIMITED
Schedule 2
28
Exhibit 3.2
29
Exhibit 4
30
Exhibit 4.5(a)
31
Exhibit 8.1
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and are "restricted securities" as that
term is defined in Rule 144 under said Act. The shares may not be sold or
offered for sale except pursuant to an effective registration statement
under the Securities Act of 1933 or an opinion of counsel for the
corporation that registration is not required under such Act."
32