1
DATED AS OF OCTOBER 22 1998
=========================================
SHARE EXCHANGE AGREEMENT
BY AND AMONG
SCM MICROSYSTEMS INC.,
THE EXCHANGING SHAREHOLDERS
AND
THE ESCROW AGENT
=========================================
2
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
Exhibit A Form of Legal Opinion of Counsel to SCM
Exhibit B Registration Rights Agreement
Exhibit C SCM Affiliate Agreement
Exhibit D Form of Legal Opinion of Counsel to Shuttle
Exhibit E Employment Agreements
Exhibit F List of Persons Executing Employment Agreements
Exhibit G Shuttle Affiliate Agreement
Exhibit H Power of Attorney
Exhibit I Directors and Officers Letters of Resignation
Exhibit J Articles of Association
Exhibit K Termination Agreement
3
INDEX OF SCHEDULES
EXHIBIT DESCRIPTION
Schedule 1 Transaction Consideration
Schedule 2 Exchanging Shareholders Protections
Schedule 3 Tax Covenant
Schedule 4 Shuttle Disclosure Letter
4
INDEX OF SCHEDULES TO SHUTTLE DISCLOSURE LETTER
EXHIBIT DESCRIPTION
Schedule 2.2(a)(1) Details of the Company
Schedule 2.2(a)(2) List of Exchanging Shareholders
Schedule 2.2(b) List and Details of Shuttle Subsidiaries
Schedule 2.2(c) Shuttle Stock Options
Schedule 2.3(b) Conflicts
Schedule 2.3(c) Governmental Approvals
Section 2.4(a) Financial Statements
Section 2.4(b) Projections
Section 2.4(c) Indian Financial Statements
Section 2.6(d) Terminated Employees
Section 2.10(a) Assets and Leased Property
Section 2.11 Intellectual Property
Section 2.12(a) Certain Obligations
Section 2.12(b) Defaults
Section 2.14 Shuttle Authorizations
Section 2.19 Third Party Expenses
Section 2.20 Employee Benefit Plans
Section 2.21 Insurance
Section 2.32 Customers
5
SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT (the AGREEMENT) is made and entered into
as of October 22, 1998 by and among SCM Microsystems, Inc. a Delaware
corporation (SCM), and the holders (the EXCHANGING SHAREHOLDERS) of the entire
issued share capital of Shuttle Technology Group Limited, a private company
limited by shares incorporated and registered under the laws of England and
Wales with registered number 2764412 (SHUTTLE), and, as to certain duties and
responsibilities contained in Article I and Article VII, Greater Bay Trust
Company (ESCROW AGENT).
RECITALS
A. The Board of Directors of SCM believes it is in the best interests of SCM and
its stockholders that, in the share exchange contemplated hereby (the
TRANSACTION), SCM exchange shares of its common stock, par value $.001 (SCM
COMMON STOCK), with the Exchanging Shareholders and, in furtherance thereof,
have approved the Transaction and entered into this Agreement; and Exchanging
Shareholders who are the registered holders of all the issued ordinary shares of
pound sterling1 each in the capital of Shuttle and will immediately following
Closing be the registered holders of the 14,290 ordinary shares of pound
sterling1 each in the capital of Shuttle to be issued pursuant to the Historic
Options (as defined in Article 2.2(a)) (together, the ORDINARY SHARES) and who
are the registered holders and beneficial owners of all the issued B ordinary
shares of pound sterling1 each in the capital of Shuttle (the B SHARES and,
collectively with the Ordinary Shares, the SHUTTLE SHARES) have approved the
Transaction and entered into this Agreement.
B. A portion of the stock consideration otherwise issuable by SCM in the
Transaction shall be placed in escrow, the release of which shall be contingent
upon certain events and conditions.
C. SCM and each Exchanging Shareholder desires to make certain representations
and warranties and other agreements in connection with the Transaction as
specified herein.
D. It is the intention of the parties hereto that the Transaction be accounted
for as a pooling of interests under the United States accounting rules.
NOW, THEREFORE, in consideration of the covenants, promises, representations and
warranties set forth herein, and for other good and valuable consideration, the
parties to this Agreement hereby agree as follows:
6
ARTICLE I
THE TRANSACTION
1.1 EFFECTIVE TIME
The closing of the Transaction (the CLOSING) will take place the
business day following notification by SCM to the Shareholders' Agent (as
defined in Article VII hereof) of the fulfilment (or waiver) to the satisfaction
of SCM of all the conditions precedent set out in Section 1.9 (and in any event
within 14 days after such fulfilment or waiver), at the offices of Freshfields,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, unless another place or time is agreed to in
writing by SCM and the Shareholders' Agent. The date upon which the Closing
occurs is herein referred to as the CLOSING DATE.
1.2 EFFECT ON CAPITAL STOCK
Subject to the terms and conditions of this Agreement, by virtue of the
Transaction and without any action on the part of the Exchanging Shareholders,
the following shall occur upon the Closing Date:
(a) EXCHANGE OF SHUTTLE SHARES. The Exchanging Shareholders shall sell, and
SCM shall purchase, the Shuttle Shares with effect from the Closing
Date, on the terms that the same covenants shall be deemed to be given
by the Exchanging Shareholders on the Closing Date in relation to the
Shuttle Shares as are implied under Part 1 of the Law of Property
(Miscellaneous Provisions) ▇▇▇ ▇▇▇▇ where a disposition is expressed to
be made with full title guarantee. The Shuttle Shares shall be sold
free from all security interests, options, equities, claims or other
third party rights (including rights of pre-emption) of any nature
whatsoever, together with all rights attaching to them. The total
consideration for the sale of the Shuttle Shares payable to each
Exchanging Shareholder shall be as follows:
(i) the number of shares of SCM Common Stock set opposite such
Exchanging Shareholders' name in Schedule 1 attached hereto
(the CLOSING SHARES); and
(ii) the number of shares of SCM Common Stock set opposite such
Exchanging Shareholders' name in Schedule 1 attached hereto
(the ESCROW SHARES) distributable to such Exchanging
Shareholders from the Escrow Fund pursuant to Article VII
hereof.
7
(b) DEFINITIONS
(i) AGGREGATE ORDINARY SHARE NUMBER. The AGGREGATE ORDINARY SHARE
NUMBER shall mean the entire issued share capital of Shuttle
immediately prior to the Closing together with the 14,290
ordinary shares of pound sterling1 in the capital of Shuttle
to be issued immediately following Closing pursuant to the
Historic Options (as defined in Article 2.2(a) hereof).
(ii) EXCHANGE RATIO. The EXCHANGE RATIO shall be the quotient
obtained by dividing (1) the Transaction Consideration and (2)
the Aggregate Ordinary Share Number.
(iii) ESCROW AMOUNT. The ESCROW AMOUNT shall be 82,832 shares of SCM
Common Stock; such amount is to be deducted from the
Transaction Consideration payable to the Exchanging
Shareholders at the Closing and placed in escrow in accordance
with the provisions of Section 1.3 and Article VII of this
Agreement.
(iv) SCM Common Stock Price. The SCM COMMON STOCK PRICE shall be
$39.14.
(v) TRANSACTION CONSIDERATION. The TRANSACTION CONSIDERATION in
respect of SCM's acquisition of the Shuttle Shares shall mean,
subject to adjustment pursuant to Section 1.7, 828,310 shares
of SCM Common Stock.
(c) COMPANY OPTIONS. As soon as practicable following the Closing Date, SCM
shall make a Rollover Offer in respect of each outstanding Shuttle
stock option (SHUTTLE STOCK OPTION) issued pursuant to the Shuttle
Unapproved Executive Share Option Scheme established by Shuttle on 21
October 1998 (SHUTTLE OPTION PLAN) and disclosed at 2.2(c) in the
Shuttle Disclosure Letter in accordance with the terms set out and as
defined in Clause 9.6 of the Shuttle Option Plan.
1.3 ESCROW
On the Closing, from the Transaction Consideration otherwise payable
pursuant to Section 1.2, SCM shall deposit the SCM Common Stock constituting the
Escrow Amount into an escrow account pursuant to Article VII. The portion of the
Escrow Amount contributed on behalf of each Exchanging Shareholder shall be
equal to such holder's Escrow Shares.
8
1.4 SURRENDER OF CERTIFICATES; PAYMENT OF TRANSACTION CONSIDERATION
(a) As soon as possible following the Closing Date, and in any event no
later than seven days following the Closing Date, SCM shall make
available for exchange in accordance with this Article 1, the aggregate
SCM Common Stock consideration payable pursuant to Section 1.2.
(b) EXCHANGE PROCEDURES. Upon surrender to SCM or an agent appointed by it
of a certificate or certificates which immediately prior to the Closing
Date represent issued Shuttle Shares (the CERTIFICATES) and accompanied
by an executed stock transfer form in respect of those Shuttle Shares,
the holder of record of such Certificate shall be entitled to receive
in exchange therefor the applicable portion of the Transaction
Consideration payable pursuant to Section 1.2 (subject to Section 1.7
and subject to the escrow provisions of Section 1.3 and Article VII)
and the Certificate so surrendered shall (subject to the payment by SCM
of any stamp duty) forthwith be issued in the name of SCM. Until so
surrendered, each outstanding Certificate held by an Exchanging
Shareholder that, prior to the Closing Date, represented Shuttle
Shares, will be deemed from and after the Closing Date, to evidence
only the right to receive the Transaction Consideration payable in
respect of each such share (subject to Section 1.7 and subject to the
escrow provisions of Section 1.3 and Article VII).
(c) TRANSFERS OF OWNERSHIP. If any payment is to be made to a person other
than the holder in whose name the Certificate surrendered in exchange
therefor is registered, it will be a condition of the payment thereof
that (i) the stock transfer form duly executed will be surrendered and
accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have
been paid, and (ii) the payee make certain representations as required
to comply with United States securities laws.
1.5 NO FURTHER OWNERSHIP RIGHTS IN SHUTTLE SHARES
The Transaction Consideration delivered upon the surrender for exchange
of Shuttle Shares in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such Shuttle
Shares, and (except for transfers contemplated on Schedule 1 and transfers to
SCM) there shall be no further registration of transfers on the records of
Shuttle of Shuttle Shares which were held by Exchanging Shareholders prior to
the Closing Date.
9
1.6 LOST, STOLEN OR DESTROYED CERTIFICATES
In the event any Certificates owned by an Exchanging Shareholder shall
have been lost, stolen or destroyed, SCM shall make payment in exchange for such
lost, stolen or destroyed Certificates, upon the making of an affidavit and
agreement of indemnity in a form satisfactory to SCM of that fact by the holder
thereof.
1.7 PURCHASE PRICE ADJUSTMENT
In accordance with Section 5.2 of this Agreement, the Transaction
Consideration payable pursuant to Section 1.2 to the Exchanging Shareholders
shall be reduced to reflect transaction expenses discharged by Shuttle
Technology Inc., a California corporation (SHUTTLE U.S.), related to (i) Third
Party Expenses (as defined in Section 5.2 hereof) and (ii) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ fees
and expenses.
1.8 PRE-EMPTION RIGHTS
The Exchanging Shareholders, by their execution of this Agreement,
hereby waive any pre-emption rights in respect of the Shuttle Shares conferred
on them under the Articles of Association of Shuttle or otherwise, whenever such
rights shall have arisen.
1.9 CONDITIONS PRECEDENT
The obligations of SCM to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions:
(a) COVENANTS. The Exchanging Shareholders shall have performed and
complied with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by them as of the
Closing Date.
(b) CERTIFICATE OF SHUTTLE. SCM shall have been provided with a certificate
executed on behalf of the Exchanging Shareholders to the effect that,
as of the Closing Date:
(i) all representations and warranties made by the Exchanging
Shareholders in this Agreement are true and correct; and
(ii) all covenants, obligations and conditions of this Agreement to
be performed by the Exchanging Shareholders on or before such
date have been so performed.
10
(c) CLAIMS. There shall not have occurred any claims (whether asserted or
unasserted in litigation) which may materially and adversely affect the
consummation of the Transaction or could reasonably be anticipated to
have a Material Adverse Effect on Shuttle or its subsidiaries.
(d) LITIGATION. There shall be no action, suit, claim or proceeding of any
nature pending, or overtly threatened, against SCM or Shuttle
(including its subsidiaries), their respective properties or any of
their officers or directors, arising out of, or in any way connected
with, the Transactions contemplated by the terms of this Agreement.
(e) NO MATERIAL ADVERSE EFFECT. There shall not have occurred any Material
Adverse Effect on Shuttle and its subsidiaries, taken as a whole.
(f) OPINION OF ACCOUNTANTS. SCM shall have received letters from each of
KPMG, Peat Marwick LLP and Deloitte & Touche, respectively, dated
within two (2) business days prior to the Closing, regarding that
firm's concurrence with SCM's management's and Shuttle's management's
conclusions as to the appropriateness of pooling of interest accounting
for the Transaction under Accounting Principles Board Opinion No. 16,
if the Transaction is consummated in accordance with this Agreement.
1.10 TERMINATION The parties undertake to use all reasonable endeavours to
ensure that the conditions precedent set out in Section 1.9 are fulfilled to the
satisfaction of SCM as soon as reasonably practicable and in any event by
November 30, 1998. SCM shall be entitled in its absolute discretion, by written
notice to the Shareholders' Agent, to waive any or all of the conditions
precedent either in whole or in part.
1.11 SURVIVAL If any of the conditions precedent have not been fulfilled or
waived on or before November 30, 1998 this Agreement (other than Sections 5.1,
5.2 and 9.1) shall automatically terminate and no party shall have any claim of
any nature whatsoever against any other party under this Agreement (save in
respect of its accrued rights arising from any prior breach of this Agreement).
1.12 PRE-COMPLETION UNDERTAKINGS
(a) Pending Closing, the Exchanging Shareholders shall ensure that:
(i) Shuttle and its subsidiaries shall carry on their business in
the ordinary and usual course and shall not make (or agree to
make) any payment other than routine payments in the ordinary
and usual course of trading;
11
(ii) Shuttle and its subsidiaries shall take all reasonable steps
to preserve and protect their assets;
(iii) prompt disclosure is made to SCM of all relevant information
which comes to the notice of the Exchanging Shareholders in
relation to any fact or matter (whether existing on or before
the date of this Agreement or arising afterwards) which may
constitute a breach of any of the representations or
warranties which would have a Material Adverse Effect on
Shuttle and its subsidiaries if the representations or
warranties were to be repeated on or at any time before
Closing by reference to the facts and circumstances then
existing;
(iv) no dividend or other distribution (within the meaning of
section 209 of the Taxes Act) shall be declared, paid or made
by any Shuttle or any of its subsidiaries;
(v) no share or loan capital shall be allotted or issued or agreed
to be allotted or issued by Shuttle or any of its
subsidiaries;
(vi) no action is taken by Shuttle or any of its subsidiaries which
is inconsistent with the provisions of this Agreement or the
consummation of the transactions contemplated by this
Agreement.
(b) Pending Closing, the Exchanging Shareholders shall ensure that Shuttle
consults fully with SCM in relation to any matters which may have a
material effect upon Shuttle or any of its subsidiaries and that,
without the prior consent of SCM (which shall be deemed to have been
given where the matter is separately disclosed in the Shuttle
Disclosure Letter and proceeds on the terms and conditions referred to
in the Shuttle Disclosure Letter), neither Shuttle or any of its
subsidiaries shall:
(i) enter into any contract or commitment (or make a bid or offer
which may lead to a contract or commitment) having a value or
involving expenditure in excess of $50,000 or which is of a
long term or unusual nature or which could involve an
obligation of a material nature or which may result in any
material change in the nature or scope of the operations of
Shuttle or any of its subsidiaries;
(ii) agree to any variation of any existing contract to which it is
a party and which may have a material effect upon the nature
or scope of the operations of Shuttle or any of its
subsidiaries;
12
(iii) (whether in the ordinary and usual course of business or
otherwise) acquire or dispose of, or agree to acquire or
dispose of, any business or any asset having a value in excess
of $50,000; or
(iv) enter into any agreement, contract, arrangement or transaction
(whether or not legally binding) other than in the ordinary
and usual course of business.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE EXCHANGING SHAREHOLDERS
Except as disclosed in Schedule 4 (the SHUTTLE DISCLOSURE LETTER), the
Exchanging Shareholders jointly and severally represent and warrant to SCM as
set forth in this Article II. Compensation by the Exchanging Shareholders to SCM
for breach of any representations and warranties contained in this Article II
shall be subject to the qualifications contained in Schedule 2. Except as the
context otherwise indicates, all references to SHUTTLE herein include Shuttle
and its subsidiaries, taken as a whole. MATERIAL ADVERSE EFFECT means any event
or condition (financial or otherwise), which has or is likely to have a material
adverse effect on the properties, assets, liabilities, business, operating,
results of operations or prospects of the entity, or entities, specified.
2.1 ORGANIZATION, STANDING AND POWER
Each of Shuttle and its subsidiaries is a corporation duly incorporated
or, in the case of Shuttle Technology, Inc., duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization. Each of Shuttle and its subsidiaries has the corporate power to
own its properties and has obtained all corporate authorizations and all other
applicable governmental, statutory, regulatory or other consents, licenses,
waivers or exemptions required to carry on its business as now being conducted
and is duly authorized to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Shuttle or its subsidiaries or the ability of Shuttle or its
subsidiaries to consummate the transactions contemplated hereby. The Exchanging
Shareholders have delivered a true and correct copy of the Certificate of
Incorporation, Share Register and other charter documents, as applicable, of
Shuttle and each of its subsidiaries, each as amended to date, to SCM. Neither
Shuttle nor any of its subsidiaries is in violation of any of the provisions of
its Articles of Association or equivalent organizational documents save for
inadvertent technical violations which would not have any material impact on the
relevant company.
13
2.2 CAPITAL STRUCTURE AND SUBSIDIARIES
(a) Section 2.2(a)(1) of the Shuttle Disclosure Letter contains certain
true and accurate information of Shuttle. The authorized capital of
Shuttle consists of pound sterling400,000 divided into 300,000 Ordinary
Shares and 100,000 B Shares, of which 205,587 Ordinary Shares and
77,223 B Shares are issued and 14,290 Ordinary Shares will be issued
immediately after Closing pursuant to options over 2,290 ordinary
shares granted by Shuttle on November 7, 1995 and options over 12,000
ordinary shares granted by Shuttle on June 23, 1997, full details of
which (including the names of the optionholders, the terms and
conditions of exercise and the exercise price) are set forth in Section
2.2(a)(2) of the Shuttle Disclosure Letter (the HISTORIC OPTIONS).
Schedule 1 to this Agreement sets forth a current complete list of the
Exchanging Shareholders together with the number and classes of Shuttle
Shares, legally and beneficially owned by such holder assuming (i)
exercise of the Historic Options and (ii) exercise by certain
Exchanging Shareholders of options to purchase in aggregate 4,402
Ordinary Shares from ▇.▇. ▇▇▇▇▇ on the terms set out in the Shuttle
Disclosure Letter (the EYKYN OPTIONS). There are no other issued shares
or voting securities of Shuttle. All issued Shuttle Shares are duly
authorized, validly issued, fully paid or credited as fully paid and
are free of all equities, liens, charges, claims, security interests or
other encumbrances of any sort (LIENS) and are not subject to rights of
others, including, without limitation, rights of pre-emption or rights
of first refusal created by statute, the Certificate of Incorporation
or Articles of Association of Shuttle or any agreement to which Shuttle
is a party or by which it is bound and all Shuttle Shares were issued
in compliance with applicable laws.
(b) A complete list of Shuttle subsidiaries is contained in Section 2.2(b)
of the Shuttle Disclosure Letter and such list and information is true
and accurate. Shuttle is the sole legal and beneficial owner of the
entire issued share capital of each of its subsidiaries and all such
shares are duly authorized, validly issued, fully paid and, in the case
of Shuttle Technology Inc., a California corporation, nonassessable.
All of the issued shares of each such subsidiary are owned by Shuttle
free and clear of all Liens or rights of others, including, without
limitation, rights of pre-emption.
(c) Shuttle has reserved Ordinary Shares for issuance to current employees
of Shuttle and/or companies who are or by Closing will be subsidiaries
of Shuttle) pursuant to the Shuttle Option Plan of which no shares have
been issued pursuant to option exercises and 28,825 ordinary shares are
subject to outstanding, unexercised options. Section 2.2(c) of the
Shuttle
14
Disclosure Letter sets forth a true and current list of all holders of
Shuttle Stock Options, together with the number of Ordinary Shares
covered thereby and the applicable exercise price. There are no other
options, warrants, calls, rights, commitments or agreements of any
character to which Shuttle is a party or by which it is bound
obligating Shuttle to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any
shares of capital stock of Shuttle or obligating Shuttle to grant,
extend, accelerate the vesting of, change the price of, or otherwise
amend or enter into any such option, warrant, call, right, commitment
or agreement. True and complete copies of all agreements and
instruments relating to each Shuttle Stock Option or issued under the
Shuttle Option Plan has been provided to SCM and such agreements and
instruments have not been amended, modified or supplemented, and there
are no agreements to amend, modify or supplement such agreements or
instruments in any case from the form made available to SCM. Shuttle
has obtained all necessary consents or approvals required by Shuttle in
connection with the assumption of the Shuttle Stock Options by SCM.
(d) There are no outstanding subscriptions, options, warrants, puts, calls,
rights, exchangeable or convertible securities or other commitments or
agreements of any character relating to the issued shares or other
securities of any Shuttle subsidiary, or otherwise obligating Shuttle
or any such subsidiary to issue, transfer, sell, purchase, redeem or
otherwise acquire any such securities. Neither Shuttle nor any of the
subsidiaries directly or indirectly owns any equity or similar interest
in, or any interest convertible or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity other than, in the case
of Shuttle, the subsidiaries.
2.3 AUTHORITY, CONFLICTS, CONSENTS
(a) Each of the Exchanging Shareholders has all requisite power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby, and the Agreement, when executed,
will constitute binding obligations on each Exchanging Shareholder. No
corporate action by Shuttle is required in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
(b) The execution and delivery of this Agreement does not, and except as
set forth in Section 2.3(b) of Shuttle Disclosure Letter, the
consummation of the transactions contemplated hereby will not conflict
with, or result in
15
any violation by Shuttle or any of its subsidiaries of, or default
under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit, right or license which it currently
enjoys or in a liability or obligation or loss of any benefit, right or
licence which it currently enjoys or in a liability or obligation being
created or increased that would have a Material Adverse Effect on
Shuttle or its subsidiaries, under (i) any provision of the
constitutional documents of Shuttle or any of its subsidiaries, as
amended, or (ii) any mortgage, lease, debenture, contract or other
agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Shuttle or any of its subsidiaries or any of their
respective properties or assets, nor will it result in any other party
being relieved of any obligation or becoming entitled to exercise any
right (including any right of termination or any other right of
pre-emption or other option).
(c) No consent, approval, waiver, order or authorization of, or
registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality
(GOVERNMENTAL ENTITY) is required by or with respect to Shuttle or any
of its subsidiaries in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated
hereby. Section 2.3(c) of the Shuttle Disclosure Letter sets forth a
full and complete list of all necessary consents, waivers and approvals
of third parties applicable to the operations of Shuttle or its
subsidiaries that were required to be obtained by Shuttle or its
subsidiaries in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
Prior to the Closing Date, the Exchanging Shareholders obtained (or
caused to obtain) all such consents.
(d) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the
Transaction is in effect, nor is any proceeding brought by a
Governmental Entity, seeking any of the foregoing pending; nor is there
any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Transaction, which makes
the consummation of the Transaction unlawful.
16
2.4 SHUTTLE FINANCIAL STATEMENTS
(a) Section 2.4(a) of the Shuttle Disclosure Letter includes Shuttle's
audited consolidated financial statements (balance sheets, profit and
loss accounts, Directors Reports and notes to such statements) as of
June 30, 1998 and for the twelve-month period ended June 30, 1998,
Shuttle's audited consolidated financial statements (balance sheets,
profit and loss accounts, Directors Reports and notes to such
statements) as of April 30, 1996 and June 30, 1997 and for the periods
ended April 30, 1996 and June 30, 1997 (the statements for the period
to June 30, 1998 being referred to as the AUDITED FINANCIAL STATEMENTS)
and Shuttle's unaudited financial statements (balance sheets, profit
and loss accounts, Directors Reports and notes to such statements) as
of and for the two months ended August 31, 1998 (the UNAUDITED
FINANCIAL STATEMENTS and, collectively with the Audited Financial
Statements, the FINANCIAL STATEMENTS). The Audited Financial Statements
are complete and correct in all respects and have been prepared in
accordance with United Kingdom generally applied accounting principles
(GAAP) applied on a basis consistent throughout the periods indicated.
The Financial Statements present a true and fair view of the financial
condition and operating results of Shuttle and its Group Subsidiaries
as of the dates and during the periods indicated therein. The unaudited
balance sheet of Shuttle as of August 31, 1998 is hereinafter referred
to as the UNAUDITED BALANCE SHEET. The audited balance sheet of Shuttle
as of June 30, 1998 is hereinafter referred to as the AUDITED BALANCE
SHEET. Since June 30, 1998 there has been no material change in
Shuttle's accounting policies and the accounting reference date of
Shuttle and its Group Subsidiaries during the last two years has always
been June 30.
(b) The financial projections of Shuttle set forth in Section 2.4(b) of the
Shuttle Disclosure Letter (the PROJECTIONS), were prepared by Shuttle
in good faith. The Exchanging Shareholders make no representations and
warranties, and expressly disclaim all express or implied
representations and warranties, relating to the Projections except that
such Projections were prepared by Shuttle in good faith.
(c) The Audited Financial Statements of Shuttle and each of its Group
Subsidiaries make full provision for or disclose all liabilities
(whether actual, contingent or disputed and including financial lease
commitments and pension liabilities), all outstanding capital
commitments and all bad or doubtful debts of Shuttle or the
subsidiaries as at June 30, 1998.
(d) The results shown by the Financial Statements of Shuttle and the Group
Subsidiaries for April 30, 1996, June 30, 1997 and June 30, 1998,
17
respectively, were not (except as therein disclosed) affected by any
extraordinary or exceptional item or by any other factor rendering such
results for all or any of such periods unusually high or low.
(e) Section 2.4(c) of the Shuttle Disclosure Letter includes the audited
financial statements (balance sheets, profit and loss accounts,
Directors Reports and notes to such statements) for Shuttle Technology
(India) Private Limited (SHUTTLE INDIA) as of March 31, 1996, 1997 and
1998 and for the periods to March 31, 1996, 1997 and 1998 (the INDIAN
AUDITED FINANCIAL STATEMENTS) and Shuttle India's unaudited financial
statements (balance sheets, profit and loss accounts, Directors Reports
and notes to such statements) for Shuttle India for the five months
ended August 31, 1998 (the INDIAN UNAUDITED FINANCIAL STATEMENTS and
collectively with the Indian Audited Financial Statements, the INDIAN
FINANCIAL STATEMENTS). The Indian Audited Financial Statements are
complete and correct in all respects and have been prepared in
accordance with the generally applied accounting principles applicable
in India applied on a basis consistent throughout the periods. The
Indian Financial Statements present a true and fair view of the
financial condition and operating results of Shuttle India as of the
dates and during the periods indicated therein. The unaudited balance
sheet of Shuttle India as of August 31, 1998 is hereinafter referred to
as the INDIAN UNAUDITED BALANCE SHEET. The audited balance sheet of
Shuttle India as of March 31, 1998 is hereinafter referred to as the
INDIAN AUDITED BALANCE SHEET. Since March 31, 1998 there has been no
material change in Shuttle India's accounting policies and the
accounting reference date of Shuttle India during the last five years
has always been March 31.
(f) The Indian Audited Financial Statements make full provision for or
disclose all liabilities (whether actual, contingent or disputed and
including financial lease commitments and pension liabilities), all
outstanding capital commitments and all bad or doubtful debts of
Shuttle India as at March 31, 1998.
(g) The results shown by the Indian Financial Statements for March 31,
1996, March 31, 1997 and March 31, 1998, respectively, were not (except
as therein disclosed) affected by any extraordinary or exceptional item
or by any other factor rendering such results for all or any of such
periods unusually high or low.
(h) The Unaudited Financial Statements for the two months ended August 31,
1998, and the Indian Unaudited Financial Statements for the five months
ended August 31, 1998, have been prepared in accordance
18
with GAAP for interim financial information. Accordingly, such
financial statements do not include all of the information and
footnotes required by GAAP for complete financial statements however,
in the opinion of the Exchanging Shareholders, all adjustments
(consisting of normal recurring adjustments) considered for a fair
presentation have been included. The Unaudited Financial Statements for
the two months ended August 31, 1998 have been prepared with due
diligence and on a basis consistent with that applicable to management
accounts of Shuttle and its Group subsidiaries over the last two years.
The Indian Unaudited Financial Statements for the five months ended
August 31, 1998 have been prepared with due diligence and on a basis
consistent with that applicable to management accounts of Shuttle India
over the last two years.
(i) GROUP SUBSIDIARIES shall mean the subsidiaries of Shuttle excluding,
however, Shuttle India.
2.5 NO UNDISCLOSED LIABILITIES
Except for obligations incurred in the ordinary course of business
which are not material, Shuttle does not have any liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured or other (whether or
not required to be reflected in financial statements in accordance with GAAP),
which individually or in the aggregate, (i) has not been reflected in the
Audited Financial Statements or (ii) have not been specifically described in
this Agreement or in the Shuttle Disclosure Letter and specifically identified
herein or therein as not being included in the Audited Financial Statements, or
(iii) has not arisen in the ordinary course of Shuttle's business since the date
of the Audited Financial Statements.
2.6 NO CHANGES
Since June 30, 1998 there has not been, occurred or arisen any:
(a) transaction by Shuttle or its subsidiaries except in the ordinary
course of business as conducted on that date or payment other than
routine payments in the ordinary course of trading;
(b) capital expenditure or commitment by Shuttle or its subsidiaries that
has exceeded $25,000 individually or $50,000 in the aggregate;
(c) destruction of, damage to or loss of any assets, business, customer or
supplier of Shuttle or its subsidiaries (whether or not covered by
insurance);
19
(d) labor trouble or claim of wrongful dismissal of which Shuttle or its
subsidiaries has received written notice or of which any Exchanging
Shareholder is aware or other unlawful labor practice or action
(Section 2.6(d) of the Shuttle Disclosure Letter includes a list of all
employees whose employment has been terminated by Shuttle since June
30, 1996);
(e) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by Shuttle or any of
its subsidiaries;
(f) revaluation by Shuttle of any of its assets other than depreciation as
required by GAAP and reflected on either the Audited Balance Sheet or
the Indian Audited Balance Sheet;
(g) declaration, setting aside or payment of any dividends on or any other
distribution (whether in cash, stock or property) by Shuttle or any of
its subsidiaries, or any split, combination or reclassification of any
Shuttle Shares or the issuance or authorization of the issuance of any
share or loan capital in respect of, in lieu of or in substitution for
Shuttle Shares or shares in any of its subsidiaries, or the repurchase,
redemption or other acquisition, directly or indirectly, of any Shuttle
Shares (or options, warrants, or other rights exercisable therefor);
(h) increase of over 10% in the salary or other compensation payable or to
become payable by Shuttle or any of its subsidiaries to any of its
officers, directors, employees or advisors, or the declaration, payment
or commitment or obligation of any kind for the payment, by Shuttle or
any of its subsidiaries, of a bonus or other additional salary or
compensation to any such person, except as otherwise contemplated by
this Agreement or as made in the ordinary course of business in
accordance with Shuttle's, or any of its subsidiaries' past practices;
(i) acquisition, sale, lease, license or other disposition of any of the
business, assets or properties of Shuttle or any of its subsidiaries,
except in the ordinary course of business;
(j) amendment or termination or violation of any material contract,
agreement or license to which Shuttle or any of its subsidiaries is a
party or by which it or they are bound other than termination by
Shuttle or such subsidiary pursuant to the terms thereof in the
ordinary course of business;
(k) loan by Shuttle or any of its subsidiaries to any person or entity,
other than advances to employees for travel and business expenses in
the
20
ordinary course of business and consistent with past practices, or
incurring by Shuttle or any of its subsidiaries of any indebtedness
other than trade debt in the ordinary course of business consistent
with past practices, guaranty of Shuttle or any of its subsidiaries of
any indebtedness, issuance or sale of any debt securities of Shuttle or
any of its subsidiaries or guaranteeing of any debt securities of
others;
(l) waiver or release of any material right or claim of Shuttle or any of
its subsidiaries, including any material write-off or other compromise
of any account receivable of Shuttle or any of its subsidiaries;
(m) the commencement or notice or, to the knowledge of the Exchanging
Shareholders threat of commencement of any lawsuit or proceeding
against or investigation of Shuttle or any of its subsidiaries or their
affairs;
(n) claim of ownership by a third party of Shuttle's Intellectual Property
(as defined in Section 2.11 below), or, to the knowledge of any
Exchanging Shareholder, of infringement by Shuttle or any of its
subsidiaries of any third party's Intellectual Property rights;
(o) issuance, sale or exchange of any share capital of Shuttle, or
securities exchangeable, convertible or exercisable therefor, other
than options or other rights pursuant to the Shuttle Option Plan as
specified in paragraph 2.2(c) above;
(p) change in pricing or royalties set or charged by Shuttle other than in
the ordinary course of business;
(q) any event or condition of any character that any Exchanging Shareholder
considers reasonably likely to have a Material Adverse Effect on
Shuttle or its subsidiaries;
(r) material change in level of borrowing or in the working capital
requirements of Shuttle or any of its subsidiaries; or
(s) agreement by Shuttle, any of its subsidiaries or any officer or
employees thereof to do any of the things described in the preceding
clauses (a) through (r) (other than by negotiations with SCM and its
representatives regarding the transactions contemplated by this
Agreement).
2.7 BOOKS AND RECORDS
(a) The statutory books, books of account and other records of Shuttle and
each of the subsidiaries:
21
(i) are up-to-date and have been maintained in accordance with all
applicable laws and GAAP on a proper and consistent basis;
(ii) comprise complete and accurate records of all information
required to be recorded therein;
(iii) are in its possession or under its control together with all
documents of title and executed copies of all material
existing agreements to which the relevant company is a party.
(b) All accounts, documents and returns required by law to be delivered or
made by Shuttle or any of its subsidiaries to the Registrar of
Companies or any other authority have been duly made.
2.8 TAXES
(a) Shuttle and its subsidiaries have accurately prepared and duly and
punctually filed all Tax Returns relating to any and all taxes
attributable to Shuttle or its operations or for which Shuttle is
liable or has become liable, and such Tax Returns are true and correct
in all material respects and have been completed in accordance with
applicable law in all material respects. Shuttle has duly and
punctually paid all taxes required to be paid. Shuttle has duly and
punctually withheld and paid with respect to its employees all income
tax and national insurance contributions and other taxes Shuttle is
required to withhold and pay, including sums payable to the Inland
Revenue under the P.A.Y.E. system and any amounts of a corresponding
nature payable to any foreign tax authority due and payable by Shuttle
prior to Closing. The provisions or reserves for Shuttle's taxes
reflected on the face of the Audited Balance Sheet and the Unaudited
Balance Sheet as well as the Indian Audited Balance Sheet and Indian
Unaudited Balance Sheet are full and sufficient to discharge the taxes
for all periods (or the portion of any period) ending on or prior to
the date of such Audited Balance Sheet and Unaudited Balance Sheet or
Indian Audited Balance Sheet and Indian Unaudited Balance Sheet,
whensoever payable. No material tax liability has been incurred since
the date of the Audited Balance Sheet or Indian Audited Balance Sheet
other than in the ordinary course of business. So far as the Exchanging
Shareholders are aware, Shuttle has not neglected to pay any tax nor is
there any tax deficiency outstanding, proposed or assessed or
assessable against Shuttle, nor has Shuttle executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any tax. So far as the Exchanging Shareholders are aware,
no dispute, audit or other examination or investigation of the tax
affairs of Shuttle is presently in
22
progress and there has been no such investigation or examination in the
last 6 years. Except to the extent reflected on Shuttle's Unaudited
Balance Sheet or Indian Audited Balance Sheet and Indian Unaudited
Balance Sheet, Shuttle does not have any liabilities for unpaid United
Kingdom, local or foreign taxes, whether asserted or unasserted, known
or unknown, contingent or otherwise and Shuttle does not have any
knowledge of any basis for the assertion of any such liability
attributable to Shuttle, its assets or operations. Shuttle is not a
party to or bound by any tax indemnity, tax sharing or tax allocation
agreement. Shuttle has provided to SCM copies of its Tax Returns that
are required to have been prepared for the periods ended 1996, 1997 and
1998. There are no liens or charges on the assets of Shuttle relating
to or attributable to taxes. There is no contract, agreement, plan or
arrangement, including, but not limited to, the provisions of this
Agreement, covering any employee or former employee of Shuttle that,
individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 162 or
404 of the U.S. Tax Code or for UK Taxation purposes.
Shuttle is not subject to any penalty, fine, surcharge or interest in
respect of taxes by reason of a violation of any order, rule or
regulation of, or a default with respect to any Return, report or
declaration required to be filed with, any Governmental Entity,
including any tax authority to which it is subject, which violations or
defaults, individually or in the aggregate, would have a Material
Adverse Effect.
So far as the Exchanging Shareholders are aware, Shuttle is not
currently the beneficiary of any extension of time within which to file
any Tax Return. So far as the Exchanging Shareholders are aware, no
claim has been made by a tax authority in a jurisdiction where Shuttle
does not file Tax Returns that it is or may be subject to tax by that
jurisdiction.
(b) So far as the Exchanging Shareholders are aware, neither Shuttle nor
its subsidiaries expect any authority to assess any additional tax for
any period for which Tax Returns have been filed. There is no dispute
or claim concerning any tax liability of Shuttle or its subsidiaries
either (A) claimed or raised by any authority in writing or (B) as to
which Shuttle has knowledge.
(c) For the purposes of this Agreement, TAX and TAX AUTHORITY shall have
the meaning ascribed thereto in the Tax Covenant contained in Schedule
3 hereto. TAX RETURN shall mean any return, declaration, report, claim
for refund, or information return or statement relating to taxes
(including any schedule or attachment thereto, and including any
amendment
23
thereof) required under any applicable legislation or regulations
relating to tax (whether of the United Kingdom or elsewhere in the
world).
(d) No tax authority has operated or agreed to operate any special
arrangement (being an arrangement which is not based on relevant
legislation or any published practice) in relation to any of Shuttle's
or its subsidiaries' affairs.
(e) If Shuttle disposed of each of its assets at the date of the Unaudited
Balance Sheet (except trading stock and work-in-progress) for a
consideration equal to the book value of that asset as shown in or
adopted for the purposes of the Unaudited Balance Sheet, to a person
not connected with it and by way of bargain at arm's length, no tax
liability would arise by reference to any actual or deemed gain.
(f) No allowable loss which might accrue on the disposal by Shuttle of any
asset is liable to be reduced or eliminated and no chargeable gain is
liable to be created or increased by virtue of any depreciatory
transaction or reduction in value of that or any related asset for the
purposes of corporation tax on chargeable gains or any corresponding
tax of any relevant foreign jurisdiction in which Shuttle or any of its
subsidiaries operates.
(g) If Shuttle disposed of each of its assets, or of any pool of assets
(that is to say all those assets expenditure relating to which would be
taken into account in computing whether a balancing charge or
corresponding tax would arise on a disposal of any of those assets) for
a consideration equal to their book value as shown in or adopted for
the purpose of the Unaudited Balance Sheet and Indian Unaudited Balance
Sheet, no balancing charge (or corresponding tax of any relevant
foreign jurisdiction) would arise in respect of any such asset or pool
of assets under any legislation relating to capital allowances (or
corresponding legislation of the relevant foreign jurisdiction in which
Shuttle or any of its subsidiaries operates).
(h) VAT means value added tax or any similar sales or turnover tax of any
relevant jurisdiction in which Shuttle or any of its subsidiaries
operates, and VAT LEGISLATION means the Value Added Tax 1994 and any
relevant enactments in relation to VAT and all notices, provisions and
conditions made or issued thereunder including the terms of any
agreement reached with H.M. Commissioners of Customs and Excise or any
relevant tax authority.
In relation to Shuttle:
24
(i) it is registered for the purposes of VAT, has been so
registered at all times that it has been required to be
registered by VAT legislation, and such registration is not
subject to any conditions imposed by or agreed with H.M.
Customs and Excise or any relevant tax authority;
(ii) it has complied with and observed in all material respects the
terms of VAT legislation;
(iii) it has maintained and obtained at all times complete, correct
and up-to-date records, invoices and other documents required
to be kept by the VAT legislation and has preserved such
records, invoices and other documents in such form and for
such periods as are required by VAT legislation;
(iv) it has obtained credit for all input tax paid or suffered by
it;
(v) it has not been treated as a member of a group for the
purposes of VAT legislation, and has not applied for such
treatment;
(vi) it is not and has not been subject under VAT legislation to
any penalty liability notice, written warning of failure to
comply, surcharge liability notice or requirement to give
security as a condition of making taxable supplies for the
purposes of VAT.
(i) All documents in the possession or under the control of Shuttle or to
the production of which Shuttle is entitled which establish the title
of Shuttle to any asset have been duly stamped and any applicable stamp
duties or charges in respect of such documents have been duly accounted
for and paid, and no such documents which are outside the United
Kingdom would attract stamp duty if they were brought into the United
Kingdom.
All duties, fees and penalties payable in respect of the capital of
Shuttle (including any premium over nominal value at which any share was issued)
have been duly accounted for and paid, and there are no circumstances under
which any relief obtained against payment of any such amount could be withdrawn.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no agreement (non-compete or otherwise), commitment, judgment,
injunction, order or decree to which Shuttle or any of its subsidiaries is a
party or, to the knowledge of the Exchanging Shareholders, otherwise binding
upon Shuttle or any of its subsidiaries which has or reasonably could be
expected to have the effect of prohibiting or impairing any business practice of
25
Shuttle or any of its subsidiaries, any acquisition of property (tangible or
intangible) by Shuttle or any of its subsidiaries or the conduct of business as
currently conducted by Shuttle or any of its subsidiaries.
2.10 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF
EQUIPMENT
(a) Section 2.10(a) of the Shuttle Disclosure Letter sets forth a list of
all fixed assets (including real property) currently owned or leased by
Shuttle and its subsidiaries and, in the case of leased property, the
name of the lessor, the date of the lease and each amendment thereto
and the aggregate annual rental and/or other fees payable under any
such lease. All such leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event of default (or
event which with notice or lapse of time, or both, is reasonably likely
to give rise to a default) of Shuttle or any of its subsidiaries.
(b) Shuttle and its subsidiaries have good and marketable title to, or, in
the case of leased properties and assets, valid leasehold interests in,
all of their tangible properties and assets free and clear of any
security interests or any assignment, equity, option, right of
pre-emption, royalty, factoring arrangement, except as reflected in
Shuttle Financial Statements and except for Liens for taxes not yet due
and payable. None of these assets are the subject of any conditional
sale or credit agreement, agreement for payment on deferred terms or
any similar agreement or arrangements, except for those items of leased
property.
(c) The assets owned or leased by Shuttle and its subsidiaries, taken as a
whole, are (i) adequate for the conduct of the business of Shuttle and
its subsidiaries as currently conducted (ii) generally in good
operating condition, subject to normal wear and tear, and (iii)
reasonably maintained where appropriate.
2.11 INTELLECTUAL PROPERTY
(a) For the purposes of this Agreement, the following terms have the
following definitions:
(i) INTELLECTUAL PROPERTY shall mean any or all of the following
and all rights in, arising out of, or associated therewith:
(i) all United States, foreign and international patents and
applications (including provisional applications) therefor and
all reissues, divisions, renewals, extensions, continuations
and continuations-in-part thereof; (ii) all rights in
inventions (whether
26
patentable or not), invention disclosures, improvements, trade
secrets, proprietary information, know how, technical data and
all rights in customer lists, and all documentation relating
to any of the foregoing; (iii) all copyrights, copyright
registrations and applications therefor and all other rights
corresponding thereto throughout the world; (iv) all mask
works, mask work registrations and applications therefor; (v)
all industrial designs and any registrations and applications
therefor throughout the world; (vi) all trade names, logos,
common law trademarks and service marks, trademark and service
▇▇▇▇ registrations and applications therefor and all goodwill
associated therewith throughout the world, all World Wide Web
Internet addresses, sites and domain names; (vii) all
databases and data collections and all rights therein
throughout the world; (viii) any similar, corresponding or
equivalent rights to any of the foregoing; and (ix) all
documentation related to any of the foregoing.
(ii) SHUTTLE INTELLECTUAL PROPERTY shall mean any Intellectual
Property that is owned by or licensed to Shuttle or its
subsidiaries.
(iii) REGISTERED INTELLECTUAL PROPERTY shall mean all United States,
international and foreign: (i) patents, patent applications
(including provisions applications); (ii) registered
trademarks, applications to register trademarks, intent-to-use
applications, or other registrations or applications related
to trademarks; (iii) registered copyrights and applications
for copyright registration; (iv) any mask work registrations
and applications to register mask works; and (v) any other
intellectual property right that is the subject of an
application for registration issued by, filed with or recorded
by, any state, government or other public legal authority.
(b) Section 2.11(a) of the Shuttle Disclosure Letter lists all Registered
Intellectual Property owned by, or filed in the name of, Shuttle or its
subsidiaries (the SHUTTLE REGISTERED INTELLECTUAL PROPERTY) and lists
any proceedings or actions before any court, tribunal (including the
United States Patent and Trademark Office (the PTO) or equivalent
authority anywhere in the world) related to any of Shuttle Registered
Intellectual Property.
Except as set forth in Section 2.11(b) of the Shuttle Disclosure
Letter, all Shuttle Registered Intellectual Property listed in Section
2.11(a) of the Shuttle Disclosure Letter and all Intellectual Property
owned by Shuttle, is free and clear of any Liens. Shuttle (i) is the
owner of all trademarks and trade names used in connection with the
operation or conduct of the
27
business of Shuttle, including the sale of any products or technology
or the provision of any services by Shuttle, (ii) has good title to
each item of Shuttle Registered Intellectual Property, and (iii) has
all rights to and in all patent applications that cover the operation
or conduct of the business of Shuttle or any product or service
attendant to that operation all such patent applications being listed
in Section 2.11(b) of the Shuttle Disclosure Letter.
(c) There is no action, suit or proceeding of any nature pending or
threatened against Shuttle, its officers, directors and properties
relating to the ownership of any Shuttle Registered Intellectual
Property registered in the name of Shuttle. So far as the Exchanging
Shareholders are aware, there is no basis for any action, suit or
proceeding relating to the ownership of any Intellectual Property
registered or otherwise owned, used or licensed by Shuttle.
(d) To the extent that any Intellectual Property has been developed or
created by an employee of Shuttle or any third party other than Shuttle
for which Shuttle has directly paid, Shuttle has a written agreement
with such person with respect thereto and Shuttle thereby has obtained
ownership of, and is the exclusive owner of, all such Intellectual
Property by operation of law or by valid assignment.
(e) Except as set forth in the Shuttle Disclosure Letter, within the last
24 months, Shuttle or its subsidiaries has not transferred ownership of
or granted any license of or right to use or authorized the retention
of any rights to use any Intellectual Property that is or was Shuttle
Intellectual Property to any third party.
(f) The Shuttle Intellectual Property constitutes all the Intellectual
Property used in and/or necessary to the conduct of its business as it
currently is conducted including, without limitation, the design,
development, manufacture, use, import and sale of the products,
technology and services of Shuttle (including products, technology or
services currently under development).
(g) The material contracts, licenses and agreements (including
"shrink-wrap" and similar widely available commercial end-user
licenses) listed in Section 2.11(g) of the Shuttle Disclosure Letter
include all contracts, licenses and agreements to which Shuttle is a
party with respect to any Intellectual Property.
(h) Section 2.11(h) of the Shuttle Disclosure Letter lists all contracts,
licenses and agreements between Shuttle and any other person wherein
28
or whereby Shuttle has agreed to, or assumed, any material obligation
or duty to warrant, indemnify, reimburse, hold harmless, guarantee or
otherwise assume or incur any obligation or liability or provide a
right of rescission with respect to the infringement or
misappropriation by Shuttle or such other person of the Intellectual
Property of any person other than Shuttle and so far as the Exchanging
Shareholders are aware no claim against any such material obligation or
duty has been made by any third party.
(i) So far as the Exchanging Shareholders are aware, the operation of the
business of Shuttle as it currently is conducted or is reasonably
contemplated to be conducted, including but not limited to Shuttle's
design, development, use, import, manufacture and sale of the products,
technology or services (including products, technology or services
currently under development) of Shuttle does not infringe or
misappropriate the Intellectual Property of any other person, violate
the rights of any person (including rights to privacy or publicity), or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and Shuttle has not received notice from any person
claiming that the operation or any, product, technology or service
(including products, technology or services currently under
development) of Shuttle infringes or misappropriates the Intellectual
Property of any person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor is Shuttle aware of
any basis therefor).
(j) Each item of Shuttle Registered Intellectual Property is in force and
subsisting, all necessary registration, maintenance and renewal fees in
connection with such Shuttle Registered Intellectual Property have been
paid and all necessary documents and certificates in connection with
such Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States,
international or foreign jurisdictions, as the case may be, for the
purposes of maintaining such Registered Intellectual Property. There
are no actions that must be taken by Shuttle within sixty (60) days of
the Closing Date, including the payment of any registration,
maintenance or renewal fees or the filing of any documents,
applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Shuttle Intellectual Property.
In each case in which Shuttle has acquired (other than by means of
licence) any Intellectual Property rights from any person, Shuttle has
obtained a valid assignment sufficient to irrevocably transfer all
rights in such Intellectual Property (including the right to seek past
and future damages with respect to such Intellectual Property) to
Shuttle and, to the maximum extent provided for by and in
29
accordance with applicable laws and regulations, Shuttle has recorded
each such assignment with the relevant governmental authorities,
including the PTO, the U.S. Copyright Office, or their respective
equivalents in any relevant foreign jurisdiction, as the case may be.
(k) There are no contracts, licenses or agreements between Shuttle and any
other person with respect to Shuttle Intellectual Property under which
there is any dispute to the knowledge of Shuttle regarding the scope of
such agreement, or performance under such agreement including with
respect to any payments to be made or received by Shuttle thereunder.
(l) So far as the Exchanging Shareholders are aware, no person or entity is
infringing or misappropriating any Shuttle Intellectual Property owned
by Shuttle.
(m) Shuttle requires and has at all times required each employee,
consultant and contractor to execute proprietary information,
confidentiality and assignment agreements substantially in Shuttle's
standard forms, and, except as set forth in Section 2.11(m) of the
Shuttle Disclosure Letter, all current and former employees,
consultants and contractors of Shuttle have executed such an agreement.
(n) No Shuttle Intellectual Property or product, technology or service of
Shuttle is subject to any proceeding or outstanding decree, order,
judgment, agreement or stipulation of a regulatory or governmental
authority as a court that restricts in any manner the use, transfer or
licensing thereof by Shuttle or may affect the validity, use or
enforceability of such Shuttle Intellectual Property.
(o) So far as the Exchanging Shareholders are aware, no (i) product,
technology, service or publication of Shuttle (ii) material published
or distributed by Shuttle or (iii) conduct or statement of Shuttle
constitutes obscene material, a defamatory statement or material, false
advertising or otherwise violates any law or regulation.
(p) No Shuttle Intellectual Property owned by, used by, or licensed to
Shuttle will be lost or rendered liable to any right of termination by
any third parties by virtue of the acquisition of the Shuttle Shares by
SCM.
(q) The ownership of all intellectual property rights in or relating to the
products developed by or on behalf of Shuttle Technology India has been
fully and effectively vested in Shuttle and is free from any liens,
charges, encumbrances or other third party rights. All registered
Intellectual Property of Shuttle Technology India if any have been
registered in the name of Shuttle and any registrable intellectual
property
30
rights can be the subject of an application for registration by
Shuttle. Shuttle has discharged all liabilities due to Shuttle
Technology India relating to the transfer of intellectual property
rights. All intellectual property rights in all products developed by
Shuttle are listed in Section 2.11(b) of the Shuttle Disclosure Letter.
Shuttle has not disclosed to any party other than Shuttle any
confidential information concerning the products it has developed nor
has it licensed or otherwise disposed of any intellectual property
rights in the products it has developed.
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS
(a) Except as set forth in Section 2.12(a) of the Shuttle Disclosure
Letter, each of Shuttle and its subsidiaries does not have continuing
obligations under, is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance pay,
post-employment liabilities or obligations or "golden
parachute" provisions (or similar provisions which provide for
payment of consideration upon the completion of the
transactions contemplated herein),
(iii) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement, contract or commitment
with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a
firm or other organization where the amount payable by Shuttle
or the relevant subsidiary is reasonably expected to exceed
$50,000 or its equivalent in applicable foreign currency,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased,
or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions
contemplated by this Agreement, except as provided herein,
31
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having annual lease payments
individually in excess of $25,000,
(viii) any agreement of indemnification, warranty or guaranty other
than in the ordinary course of business,
(ix) any agreement, contract or commitment containing any covenant
limiting the freedom of Shuttle to engage in any line of
business or to compete with any person,
(x) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of
$50,000 in the aggregate,
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of material assets or any interest
in any business enterprise outside the ordinary course of
Shuttle's business or any subsidiary's business,
(xii) any mortgages, debentures, loans or credit agreements,
security agreements or other agreements or instruments
relating to the borrowing of money or extension of credit,
(xiii) any distribution, joint marketing or development agreement,
(xiv) any agreement, contract or commitment with any customer or
vendor which, during the last two financial years of Shuttle
ended on June 30, 1998, accounted, or is expected to account
during Shuttle's current financial year, for more than 5% of
Shuttle's revenue or trade payables, as applicable, or
(xv) any other agreement, contract or commitment that involves
$75,000 or more or is not cancellable without penalty within
sixty (60) days.
(b) Except for any alleged breaches, violations and defaults, and events
that would constitute a breach, violation or default with the lapse of
time, giving of notice, or both, all as noted in Section 2.12(b) of the
Shuttle Disclosure Letter, neither Shuttle nor any of its subsidiaries
has breached, violated or defaulted under, or received notice that it
has breached, violated or defaulted under, any of the terms or
conditions of any agreement, contract or commitment set forth in
Section 2.11 or Section 2.12(a) of the Shuttle Disclosure Letter (a
SHUTTLE CONTRACT).
32
Each Shuttle Contract is in full force and effect and, except as
otherwise disclosed in Section 2.3(b) or 2.12(b) of the Shuttle
Disclosure Letter, is not subject to any default thereunder of which
any Exchanging Shareholder is aware by any party obligated to Shuttle
or any subsidiary pursuant thereto.
2.13 INTERESTED PARTY TRANSACTIONS
No officer, director or, to Shuttle's or any Exchanging Shareholder's
knowledge, employee or holder of more than 5% of the Shuttle Shares (nor, to any
Exchanging Shareholders' knowledge, any grandparent, descendant of a
grandparent, or spouse of any of such persons, or any trust, partnership or
corporation in which any of such persons has or has had an interest), has or
since January 1, 1995, has had, directly or indirectly, (i) an interest in any
entity which furnished or sold, or furnishes or sells, services or products that
Shuttle or its subsidiaries furnishes or sells, or proposes to furnish or sell,
or (ii) any interest in any entity that purchases from or sells or furnishes to,
Shuttle or its subsidiaries, any goods or services or (iii) a beneficial
interest in any contract or agreement set forth in Section 2.12 of the Shuttle
Disclosure Letter; provided, however, that passive ownership of no more than
five percent (5%) of the outstanding voting stock of a corporation shall not be
deemed an "interest in any entity" for purposes of this Section 2.13.
2.14 GOVERNMENTAL AUTHORIZATION.
(a) Section 2.14 of the Shuttle Disclosure Letter accurately lists all, if
any, consent, license, permit, grant or other authorization issued to
Shuttle or its subsidiaries by a Governmental Entity (i) pursuant to
which Shuttle or its subsidiaries currently operate or hold any
interest in any of its or their properties or (ii) which is required
for the operation of its or their business or the holding of any such
interest (herein collectively called SHUTTLE AUTHORIZATIONS), which
Shuttle Authorizations are in full force and effect, are not limited in
duration or subject to any unusual or erroneous conditions, have been
complied with in all material respects, and constitute all Shuttle
Authorizations required to permit Shuttle and its subsidiaries to
operate or conduct their business or hold any interest in their
properties or assets.
(b) To the best of the knowledge of the Exchanging Shareholders, there are
no circumstances which indicate that any of the Shuttle Authorizations
will be revoked or not renewed, in whole or in part, in the ordinary
course of events (whether as a result of the acquisition of the Shuttle
Shares by SCM or otherwise).
33
2.15 LITIGATION
(a) There is no private or governmental action, suit, proceeding, claim,
arbitration or investigation pending before any agency, court or
tribunal, foreign or domestic, or, to the knowledge of the Exchanging
Shareholders, threatened against Shuttle, any of its subsidiaries or
any of their respective assets or any of their respective officers or
directors (in their capacities as such). There is no judgment, decree
or order against Shuttle or any of its subsidiaries, or, to the
knowledge of the Exchanging Shareholders, any of their respective
directors or officers (in their capacities as such), that could
prevent, enjoin, alter or delay any of the transactions contemplated by
this Agreement or that has a reasonable risk of having a Material
Adverse Effect on Shuttle and its subsidiaries, taken as a whole.
(b) There is no action, suit, claim or proceeding of any nature pending, or
overtly threatened, against Shuttle (including its subsidiaries), or
any Exchanging Shareholders, their respective properties or any of the
officers or directors of Shuttle, arising out of, or in any way
connected with, the Transaction contemplated by the terms of this
Agreement.
2.16 ACCOUNTS RECEIVABLE
All accounts receivable of (i) Shuttle reflected on the Unaudited Balance Sheet
and (ii) Shuttle Technology India reflected on the Indian Unaudited Balance
Sheet (collectively, the ACCOUNTS RECEIVABLE) arose in the ordinary course of
business, are carried at values determined in accordance with GAAP consistently
applied and, to the Exchanging Shareholders' knowledge, are collectible in the
ordinary course of business except to the extent of specific reserves therefor
set forth in the Unaudited Balance Sheet and Indian Unaudited Balance Sheet,
respectively. No person has any Lien on any such Accounts Receivable and no
request or agreement for deduction or discount has been made with respect to any
of such Accounts Receivable.
2.17 MINUTE BOOKS
The minute books of Shuttle and its subsidiaries made available to
counsel for SCM are the only minute books thereof and contain an accurate
summary of all material transactions approved by the directors (or committees
thereof) and shareholders since the time of incorporation of Shuttle or any of
its subsidiaries.
34
2.18 ENVIRONMENTAL MATTERS
(a) To the knowledge of the Exchanging Shareholders there is no substance
that is regulated by any foreign, federal, state or local governmental
authority or that has been designated by any such authority to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment (herein, a HAZARDOUS MATERIAL) is present in, on or under
any property that Shuttle or any of its subsidiaries has at any time
owned, operated, occupied or leased (herein, a SHUTTLE FACILITY),
except as permitted by and managed in accordance with applicable law.
(b) Neither Shuttle nor any of its subsidiaries has transported, stored,
used, disposed of, manufactured, released or exposed its employees or
any other person to Hazardous Materials (HAZARDOUS MATERIALS ACTIVITY)
in violation of any applicable foreign, federal, state or local
statute, rule, regulation, order or law.
(c) Each of Shuttle and its subsidiaries is and at all times has been in
compliance with all foreign, federal, state and local laws relating to
emissions, discharges, releases or threatened releases of Hazardous
Materials.
(d) No action, proceeding, permit revocation, writ, injunction or claim is
pending or, to the knowledge of the Exchanging Shareholders,
threatened, concerning the Hazardous Materials Activities of Shuttle or
any of its subsidiaries and/or any Shuttle Facilities, and no
Exchanging Shareholder is aware of any fact or circumstance which could
involve Shuttle or any of its subsidiaries in any environmental
litigation or impose any environmental liability upon Shuttle or any of
its subsidiaries.
2.19 BROKERS' AND FINDERS' FEES
(a) Section 2.19 of the Shuttle Disclosure Letter identifies all Third
Party Expenses (as defined in Section 5.2) expected to be incurred by
Shuttle US in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions
contemplated hereby. All commercially reasonable efforts have been used
to cause all Third Party Expenses and all fees and expenses of ▇▇▇▇▇▇▇▇
▇▇▇▇▇ to be determined and invoiced prior to the Closing.
(b) Neither Shuttle nor any of its subsidiaries will be in breach of the
terms of section 151 of the Companies ▇▇▇ ▇▇▇▇ in connection with the
Third Party Expenses.
35
2.20 EMPLOYEE MATTERS AND BENEFIT PLANS
(a) EMPLOYEE BENEFIT PLANS. Section 2.20 of the Shuttle Disclosure Letter
contains a complete and accurate list of each plan, program, policy,
practice, contract, agreement or other arrangement providing for
employment, compensation, severance, relocation, repatriation,
expatriation, visas, work permits, termination pay, deferred
compensation, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration of any kind,
whether written or unwritten or otherwise, funded or unfunded which is
or has been maintained, contributed to, or required to be contributed
to, by Shuttle or any subsidiary of Shuttle for the benefit of any
current or former employee, consultant, director of Shuttle or any
subsidiary of Shuttle (each an EMPLOYEE), and a list of all current
Employees including details of the salaries, wages, length of
continuous service, notice periods and whether currently under notice
or on maternity leave or secondment or with respect to which Shuttle or
any subsidiary of Shuttle has or may have any liability or obligation
(the EMPLOYEE BENEFIT PLANS). Shuttle does not have any plan or
commitment to establish any new Employee Benefit Plan, to modify any
Employee Benefit Plan (except to the extent required by law or to
conform any such Employee Benefit Plan to the requirements of any
applicable law, in each case as previously disclosed to SCM in writing,
or as required by this Agreement), or to enter into any Employee
Benefit Plan.
(b) DOCUMENTS. Shuttle has made available to SCM correct and complete
copies of all documents relating to each Employee Benefit Plan
including (without limitation) any and all amendments thereto and all
related trust documents; the most recent actuarial valuations, if any,
prepared for each Employee Benefit Plan and any material contracts or
agreements relating to each Employee Benefit Plan.
(c) EMPLOYEE BENEFIT PLAN COMPLIANCE. Shuttle and any trustees and
administrators of any Employee Benefit Plan have performed in all
material respects all obligations required to be performed by it under,
is not in default or violation of, and has no knowledge of any default
or violation by any other party to each Employee Benefit Plan, and each
Employee Benefit Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with
all applicable laws, rules and regulations. All amounts due to the
trustees and to any insurance company in connection with any Employee
Benefit Plan have been paid. There are no actions, suits or claims
pending, or, to the knowledge of the Exchanging Shareholder threatened
or reasonably anticipated (other than routine claims for benefits)
against any Employee
36
Benefit Plan or against the assets of any Employee Benefit Plan. Each
Employee Benefit Plan can be amended, terminated or otherwise
discontinued after the Closing Date in accordance with its terms,
without liability to SCM, Shuttle or any subsidiary of Shuttle (other
than ordinary administration expenses). There are no audits, inquiries
or proceedings pending or, to the knowledge of the Exchanging
Shareholder threatened by any governmental agency with respect to any
Employee Benefit Plan.
(d) NO POST-EMPLOYMENT OBLIGATIONS. No Employee Benefit Plan provides, or
reflects or represents any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare benefits to
any person for any reason, except as may be required by applicable law,
and Shuttle has never represented, promised or contracted (whether in
oral or written form) to any Employee (either individually or to
Employees as a group) or any other person that such Employee(s) or
other person would be provided with retiree life insurance, retiree
health or other retiree employee welfare benefit, except to the extent
required by statute.
(e) LIFE INSURANCE. All benefits payable under any Employee Benefit Plan on
the death of a member or beneficiary while in an employment to which
the Employee Benefit Plan relates or during a period of sickness or
disability of a member or beneficiary are fully insured under a policy
effected in the name of the trustee of the Employee Benefit Plan with
an insurance company of good repute and each member and beneficiary has
been covered for such insurance by such insurance company at its normal
rates and on its terms normal for persons in good health.
(f) EMPLOYMENT MATTERS. Shuttle (i) is and has been in compliance in all
respects with all applicable laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees (save for
technical, inadvertant breaches which will not have any material effect
on Shuttle or any of its subsidiaries); (ii) has withheld and reported
all amounts required by law or by agreement to be withheld and reported
with respect to wages, salaries and other payments to Employees; (iii)
is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; (iv) is not liable for any
payment to any trust or other fund governed by or maintained by or on
behalf of any governmental authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations
for Employees (other than routine payments to be made in
37
the normal course of business and consistent with past practice); and
(v) is not liable to make any loan repayments to any Employee.
(g) All personnel whose services are wholly or partially utilized by
Shuttle or by any of its subsidiaries are employed by Shuttle or its
subsidiaries.
(h) EFFECT OF TRANSACTION. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either
alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Employee Benefit Plan, trust, loan or
other arrangements that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(i) LABOR. No work stoppage or labor strike against Shuttle is pending,
threatened or reasonably anticipated. The Exchanging Shareholders do
not know of any activities or proceedings of any labor union to
organize any Employees. There are no actions, suits, claims, labor
disputes or grievances pending, or, to the knowledge of the Exchanging
Shareholders threatened or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any liability to Shuttle.
To the knowledge of the Exchanging Shareholders none of the
subsidiaries of Shuttle has at any time during the last 5 years engaged
in any unfair labor practices under applicable law. Shuttle is not
presently, nor has it been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to
Employees and no collective bargaining agreement is being negotiated by
Shuttle.
(j) INVENTIONS. No employee has any right to ownership of any invention or
improvement made or discovered by him in the course of his employment/
engagement with Shuttle or any subsidiary, or claim for compensation,
as payment in respect of a right to use any such invention or
improvement.
2.21 INSURANCE
Section 2.21 of the Shuttle Disclosure Letter lists all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of Shuttle and its
subsidiaries. There is no claim by Shuttle or its subsidiaries pending under any
of such
38
policies or bonds as to which Shuttle or its subsidiaries has received notice
that coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All the insurances set forth in Section 2.21 of the
Shuttle Disclosure letters are in full force and effect and all premiums due and
payable under all such policies and bonds have been paid and Shuttle is
otherwise in material compliance with the terms of such policies and bonds (or
other policies and bonds providing substantially similar insurance coverage).
The Exchanging Shareholders have no knowledge of any threatened termination of,
or material premium increase with respect to, any of such policies. No claim is
outstanding by Shuttle or its subsidiaries and to the knowledge of the
Exchanging Shareholders, there are no circumstances likely to give rise to such
a claim.
2.22 COMPLIANCE WITH LAWS
Shuttle has complied with, is not in violation of, and has not received
any notices of violation with respect to, any foreign, federal, state or local
statute, law or regulation which failure to comply or violation would have a
Material Adverse Effect on the conduct of its business, or the ownership or
operation of its business, assets or properties.
2.23 COMPLETE COPIES OF MATERIALS
The Exchanging Shareholders have delivered or made available to SCM
true and complete copies of each agreement, contract, commitment or other
document (or summaries of same) that is referred to in the Shuttle Disclosure
Letter.
2.24 REPRESENTATIONS COMPLETE
None of the representations or warranties made herein by Shuttle or the
Exchanging Shareholders (as modified by the Shuttle Disclosure Letter), nor any
statement made in any Schedule or certificate furnished by the Exchanging
Shareholders pursuant to this Agreement, or furnished in or in connection with
documents mailed or delivered to the Exchanging Shareholders in connection with
soliciting their consent to this Agreement and the Transaction, contains any
untrue statement of a material fact, or omits to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which they were made, not misleading.
2.25 [INTENTIONALLY DELETED]
2.26 POOLING OF INTERESTS
Neither Shuttle nor any of its directors, officers or shareholders has
knowingly taken any action which would interfere with SCM's ability to
39
account for the Transaction as a pooling of interests transaction in accordance
with United States generally accepted accounting procedures (US GAAP).
2.27 DISCLOSURE SCHEDULE
The Shuttle Disclosure Letter has been prepared and executed by the
Exchanging Shareholders and dated and delivered on the date of this Agreement.
The Exchanging Shareholders shall endeavor to disclose in the Shuttle Disclosure
Letter each item of information in each separate section in which such item may
reasonably be required to be disclosed.
2.28 INSOLVENCY
(a) No order has been made, petition presented or meeting convened for the
purpose of considering a resolution for the winding up of Shuttle or
any of its subsidiaries or for the appointment of any provisional
liquidator. No petition has been presented for an administration order
to be made in relation to Shuttle or any of its subsidiaries, and no
receiver (including any administrative receiver) has been appointed in
respect of the whole or any part of any of the property, assets and/or
undertaking of Shuttle or any of its subsidiaries.
(b) No distress, distraint, charging order, garnishee order, execution or
other process has been levied or applied for in respect of the whole or
any part of any of the property, assets and/or undertaking of Shuttle
or any of its subsidiaries.
(c) All charges in favor of Shuttle or any of its subsidiaries required to
be registered in accordance with the provisions of Sections 395 and 398
of the Companies Act of 1985 have been so registered or comply with all
necessary formalities as to registration or otherwise in any foreign
jurisdiction.
2.29 COVENANTS
Shuttle has performed and complied with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by it as
of the Closing Date.
2.30 EXCHANGING SHARES REQUIREMENTS
Exchanging Shareholders holding 100% of the issued share capital of
Shuttle are a party to this Agreement.
40
2.31 YEAR 2000 COMPLIANCE
All of Shuttle's products (including products currently under
development) will record, store, process, calculate and present calendar dates
falling on and after (and if applicable, spans of time including) January 1,
2000, and will calculate any information dependent on or relating to such dates
in the same manner, and with the same functionality, data integrity and
performance, as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates (collectively, YEAR 2000 COMPLIANT). All
of Shuttle's products will lose no functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
All of Shuttle's internal computer and technology products and systems are Year
2000 Compliant.
2.32 CUSTOMERS
Section 2.32 of the Shuttle Disclosure Schedule sets forth a true,
accurate and complete list of the ten largest customers of Shuttle in terms of
revenue during each of the two most recently completed financial years and the
portion of current financial year prior to the date of this Agreement.
2.33 MEMORY TECHNOLOGY
The purchase by Shuttle of its own ordinary shares from Memory
Technology Limited, a private company incorporated and registered under the laws
of England (MEMORY), and the subsequent purchase by Shuttle of the entire
business of Memory complied in all respects with the requirements of the
Companies ▇▇▇ ▇▇▇▇ and all other applicable laws and regulations, including, but
not limited to, the foregoing:
(a) such purchases were duly authorized under Shuttle's memorandum and
articles of association and all appropriate authorities were obtained
from Shuttle's directors and shareholders;
(b) Shuttle had sufficient distributable reserves to fund the purchase
price of the shares purchased from Memory;
(c) the Ordinary Shares purchased from Memory were duly canceled in
accordance with the requirements of the Companies ▇▇▇ ▇▇▇▇; and
(d) the terms of the subsequent business purchase agreement did not
constitute a contravention by Memory or any other party of the
provisions of section 151 of the Companies ▇▇▇ ▇▇▇▇.
41
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EXCHANGING SHAREHOLDERS
Each of the Exchanging Shareholders hereby represents and warrants to
SCM subject to such exceptions as are specifically disclosed, with reference to
the appropriate section number, in the Shuttle Disclosure Letter provided to SCM
on the date hereof that:
3.1 EXCHANGED SHARES
(a) Such Exchanging Shareholder owns legally and beneficially all Shuttle
Shares set forth opposite such Exchanging Shareholder's name under
Schedule 1 to this Agreement; and
(b) Such Exchanging Shareholder has good and marketable title to such
Shuttle Shares free and clear of all liens, claims, third party rights
(including rights of pre-emption), security interests, charges,
options, or other encumbrances of any kind.
3.2 AUTHORITY
Such Exchanging Shareholder has all requisite power and authority to
enter into this Agreement (and any agreement referenced herein to which such
Exchanging Shareholder is a party to) and to consummate the transactions
contemplated hereby (and thereby). This Agreement, and any agreement referenced
herein to which such Exchanging Shareholder is a party to, have been duly
executed and delivered by such Exchanging Shareholder, and constitutes the
legally binding obligations of such Exchanging Shareholder. The execution and
delivery of this Agreement, and any agreement referenced herein to which such
Exchanging Shareholder is party to, by such Exchanging Shareholder does not, and
the consummation of the transactions contemplated hereby and thereby will not,
conflict with any mortgage, debenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgement, order, decree,
statute, law, ordinance, rule or regulation applicable to such Exchanging
Shareholder. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or any third
party, including a party to any agreement with such Exchanging Shareholder (so
as not to trigger any conflict) is required by or with respect to such
Exchanging Shareholder in connection with the execution and delivery of this
Agreement, and any agreement referenced herein to which such Exchanging
Shareholder is a party to, or the consummation of
42
the transactions contemplated hereby or thereby, except for those consents that
have been previously obtained and are listed on the Shuttle Disclosure Letter.
3.3 INVESTMENT REPRESENTATIONS
(a) The shares of SCM's Common Stock to be issued as Transaction
Consideration pursuant hereto are being acquired by each of the
Exchanging Shareholders pursuant to the terms and subject to the
conditions of this Agreement for each such Exchanging Shareholder's own
account and for investment purposes only, and not with a view to any
public resale, public distribution or other public offering thereof, in
each case within the meaning of the Securities Act of 1993, as amended
(the SECURITIES ACT) or any state securities or "blue sky" law.
(b) Each of the Exchanging Shareholders understands and acknowledges that
the shares of SCM's Common Stock to be issued as Transaction
Consideration pursuant hereto will not be registered under the
Securities Act or any state securities or "blue sky" law, and that,
such shares may not be sold or otherwise disposed of, except pursuant
to registration under the Securities Act or pursuant to an exemption
from the registration requirements of the Securities Act.
(c) Each of the Exchanging Shareholders has such knowledge and experience
in financial and business matters that such parties are capable of
evaluating the merits and risks of the prospective investment in the
shares of SCM's Common Stock to be issued as Transaction Consideration
pursuant hereto, that such parties are able to bear the economic
consequences thereof, and that each of such parties qualify as an
ACCREDITED INVESTOR as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act.
(d) In making the decision to invest in the shares of SCM's Common Stock to
be issued as Transaction Consideration pursuant hereto, each of the
Exchanging Shareholders has relied upon independent investigations made
by such Exchanging Shareholder and, to the extent believed by such
Exchanging Shareholder to be appropriate, such Exchanging Shareholder's
representatives, including such Exchanging Shareholder's own
professional, tax and other advisors, and has not relied upon any
representation or warranty from SCM or any of its directors, officers,
employees, agents, affiliates or representatives with respect to the
value of such shares or the tax consequences of the transactions
contemplated by this Agreement.
43
(e) Each Exchanging Shareholder and such Exchanging Shareholder's
representatives have been given a full opportunity to examine all
documents relating to the transactions contemplated hereby and to ask
questions of, and to receive answers from, SCM and its representatives
concerning, the terms of the transactions contemplated by this
Agreement and such other information as such Exchanging Shareholder
desires in order to evaluate an investment in the shares of the SCM's
Common Stock to be issued as Transaction Consideration pursuant hereto,
and all such questions have been answered to the full satisfaction of
such Exchanging Shareholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SCM
SCM represents and warrants to the Exchanging Shareholders as follows:
4.1 ORGANIZATION, STANDING AND POWER
SCM is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. SCM has the corporate power to
own its properties and to carry on its business as now being conducted and is
duly qualified to do business and is in good standing in each jurisdiction in
which the failure to be so qualified would have a Material Adverse Effect on SCM
or its subsidiaries or on the ability of SCM or its subsidiaries to consummate
the transactions contemplated hereby.
4.2 SCM CAPITAL STRUCTURE
(a) The authorized capital stock of SCM consists of 40,000,000 shares of
SCM Common Stock and 10,000,000 of preferred stock, of which
approximately 13,157,386 shares of SCM Common Stock and no shares of
preferred stock were issued and outstanding as of September 30, 1998.
(b) The shares of SCM Common Stock to be issued pursuant to the
Transaction, when issued in accordance with the terms and provisions of
this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and will not be subject to any pre-emptive or other
statutory right of stockholders and will be issued in compliance with
applicable federal and state securities laws.
44
4.3 AUTHORITY
SCM has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of SCM. This Agreement has been duly executed and delivered by SCM
and constitutes the valid and binding obligations of SCM, enforceable in
accordance with its terms. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of any provision of the constitutional
documents of, SCM. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to SCM in connection with the execution and delivery of this
Agreement by SCM or the consummation by SCM of the transactions contemplated
hereby, except for such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state and federal securities laws and the laws of any other country.
4.4 SEC DOCUMENTS; SCM FINANCIAL STATEMENTS
SCM has made available to the Exchanging Shareholders true and complete
copies of all reports and registration statements filed with the SEC under the
Securities Exchange Act of 1934, as amended (the EXCHANGE ACT) since its initial
public offering in October 1997 all in the form (including exhibits) so filed
(collectively, the SEC DOCUMENTS). As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading, except to the extent corrected by a
subsequently filed SEC Document.
4.5 NO MATERIAL ADVERSE CHANGE
Since the date on which the most recent SEC Document was filed by SCM
and prior to the date of this Agreement, there has not been, occurred or arisen
any event or condition of any character that has had or creates a reasonable
risk of having a Material Adverse Effect on SCM.
4.6 PURCHASE FOR INVESTMENT
SCM is purchasing the Shuttle Shares for investment for its own account
and not with a view to, or the sale in connection with, any distribution
thereof. SCM (either alone or together with its advisors) has sufficient
knowledge and
45
experience in financial business matters so as to be capable of evaluating the
merits and risks of its investment in the Shuttle Shares and is capable of
bearing the economic risks of such investment.
4.7 BROKERS' AND FINDERS' FEES
Neither SCM nor any of its subsidiaries has incurred, nor will it
incur, directly or indirectly, any liability for brokerage for finder's fees or
agents, commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
4.8 POOLING OF INTERESTS
Neither SCM nor any of its subsidiaries nor any of their respective
directors or officers has knowingly taken any action which would interfere with
SCM's ability to account for the Transaction as a pooling of interests
transaction in accordance with US GAAP.
4.9 LITIGATION
(a) There is no private or governmental action, suit, proceeding, claim,
arbitration or investigation pending before any agency, court or
tribunal, foreign or domestic, or, to the knowledge of SCM, threatened
against SCM, any of its subsidiaries or any of their respective assets
or any of their respective officers or directors (in their capacities
as such). There is no judgment, decree or order against SCM or any of
its subsidiaries, or, to the knowledge of SCM, any of their respective
directors or officers (in their capacities as such) except as otherwise
disclosed in the SEC documents, that could prevent, enjoin, alter or
delay any of the transactions contemplated by this Agreement or that
has a reasonable risk of having a Material Adverse Effect on SCM and
its subsidiaries, taken as a whole.
(b) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the
Transaction shall be in effect, nor shall any proceeding brought by a
Governmental Entity, seeking any of the foregoing be pending; nor shall
there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Transaction,
which makes the consummation of the Transaction unlawful.
46
4.10 CONFLICTS
The execution and delivery of this Agreement will not conflict with, or
result in any violation of SCM or any of its subsidiaries of, or default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit, right or licence which it currently enjoys or in a liability or
obligation or loss of any benefit, right or licence which it currently enjoys or
in a liability or obligation being created or increased that would have a
Material Adverse Effect, under (i) any provision of the constitutional documents
of SCM or any of its subsidiaries, as amended, or (ii) any mortgage, lease,
indenture, contract or other agreement or instrument, permit, concession,
franchise, licence, judgement, order, decree, statute, law, ordinance, rule or
regulation applicable to SCM or any of its subsidiaries or any of their
respective properties or assets, nor will it result in any other party being
relieved of any obligation or becoming entitled to exercise any right (including
any right of termination or any other right of pre-emption or other option).
4.11 COVENANTS
SCM has performed and complied with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by it as
of the Closing Date.
4.12 GOVERNMENTAL AUTHORITY
No consent, approval, waiver, order or authorization of, or
registration or filing with, any Governmental Entity is required by or with
respect to SCM or any of its subsidiaries in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 CONFIDENTIALITY
Each of the parties hereto hereby agrees to keep such information or
knowledge obtained in any investigation in connection with the Transaction or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transactions contemplated hereby, confidential.
47
5.2 EXPENSES
Upon consummation of the Transaction, all fees and expenses discharged
by Shuttle U.S. in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, all legal, accounting and
auditing, financial advisory, consulting and all other fees and expenses of
third parties, including but not limited to VAT (THIRD PARTY EXPENSES), shall be
the obligation of SCM, provided that, (i) fees and expenses of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
related to the Transaction shall be excluded from Third Party Expenses and shall
be deducted from the Transaction Consideration on the Closing Date; (ii) to the
extent the aggregate Third Party Expenses are known to exceed $400,000 as of the
Closing Date, a reduction equal to such excess shall be made to the Transaction
Consideration payable pursuant to Section 1.2; and (iii) to the extent the
aggregate Third Party Expenses are known to exceed $400,000 following the
Closing Date such excess shall when known be paid to SCM out of the Escrow Fund
described in Article VII (based on the SCM Common Stock Price). Should the
parties fail to consummate the Transaction, each party shall bear its own
transaction related expenses.
5.3 PUBLIC DISCLOSURE
Unless otherwise required by law, the parties hereto agree that they
shall not make any disclosure, by means of the issuance of any reports,
statements, releases or other public disclosure, or any other third party
disclosure, relating to the terms and conditions of this Agreement and the
transactions contemplated hereby, except for (a) disclosure by SCM of the
intention of the parties to effect the transactions contemplated herein
(disclosing only the nature but not the terms of the transaction), in such
manner as SCM shall determine, subject to the reasonable approval of the
Shareholders' Agent, (b) such disclosures as may be required by applicable law
(provided that the disclosing party shall use reasonable efforts to notify the
other party in advance), and (c) such other disclosures as the parties shall
mutually agree.
5.4 LEGAL REQUIREMENTS
Subject to the terms and conditions provided in this Agreement, each of
the parties hereto shall use its reasonable best efforts to take promptly, or
cause to be taken, all reasonable actions, and to do promptly, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby, to obtain all necessary waivers, consents and approvals and to effect
all necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the
48
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement.
5.5 FURTHER ASSURANCES
Each of the parties to this Agreement shall use its best efforts to
effectuate the transactions contemplated hereby and to fulfil or cause to be
fulfilled the obligations to be discharged by the parties hereto upon closing of
this Agreement and, without limitation, the relevant Exchanging Shareholders
shall exercise the Historic Options and the Eykyn Options immediately following
Closing. Each party hereto, at the reasonable request of another party hereto,
shall execute and deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
5.6 FORM S-8
SCM agrees to file a registration statement on Form S-8 for the shares
of SCM Common Stock issuable with respect to Shuttle Stock Options which are
rolled over as provided in Section 1.2(d) above no later than thirty (30)
business days after the Closing Date and shall keep such registration statement
effective for so long as any such Shuttle Stock Options remain outstanding.
5.7 UK TAX TREATMENT OF EXCHANGE
SCM shall use its commercially reasonable efforts to cause the purchase
of Shuttle Shares contemplated by the Transaction to be eligible for capital
gains tax rollover treatment under the laws of the United Kingdom and shall take
no action inconsistent with such treatment.
5.8 OPTION GRANT
SCM shall establish an option pool for future grants to Shuttle
employees with the pool size based on customary factors such as size and nature
of Shuttle's employee base. Such pool is estimated to range from 180,000 to
200,000 shares of SCM Common Stock. The option grants and terms thereof shall be
on terms consistent with SCM current practices.
5.9 SCM STOCK LEGEND
SCM will be entitled to place appropriate legends on the certificates
evidencing any SCM Common Stock to be received by an Exchanging Shareholder
pursuant to the terms of the Transaction, and to issue appropriate stop transfer
instructions to the transfer agent for the SCM Common Stock,
49
consistent with the terms of the Shuttle Affiliate Agreement and applicable
Securities Act provisions.
5.10 COMBINED AUDITED FINANCIALS
The parties shall co-operate to obtain audited financial statements for
the combined enterprise for a thirty day period no later than March 1, 1999.
ARTICLE VI
CLOSING DELIVERIES
6.1 SCM DELIVERIES
On the Closing Date, SCM shall deliver (or cause to be delivered) to
the Exchanging Shareholders or as they shall direct:
(a) LEGAL OPINION. A legal opinion from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
P.C., legal counsel to SCM, substantially in the form of EXHIBIT A
hereto.
(b) REGISTRATION RIGHTS AGREEMENT. A duly executed counterpart of the
registration rights agreement, substantially in the form of EXHIBIT B
hereto (the REGISTRATION RIGHTS AGREEMENT).
(c) ARTICLE I. SCM shall cause the provisions of clauses 1.2, 1.3 and 1.4
of this Agreement to have effect including the issuance of necessary
stock transfer instructions to the SCM transfer agent.
(d) AFFILIATE AGREEMENTS. SCM has previously provided to Shuttle a list of
those persons who may be deemed to be, in SCM's reasonable judgment,
affiliates of SCM within the meaning of Rule 145 promulgated under the
Securities Act (each a SCM AFFILIATE). Each SCM Affiliate shall have an
executed affiliate agreement in substantially the form attached hereto
as EXHIBIT C (the SCM AFFILIATE AGREEMENT).
6.2 EXCHANGING SHAREHOLDER DELIVERIES
On the Closing Date, the Exchanging Shareholders shall deliver (or
cause to be delivered) to SCM or as it shall direct:
(a) THIRD PARTY CONSENTS. All consents, waivers, and approvals listed
pursuant to Section 2.3 of the Shuttle Disclosure Letter.
(b) LEGAL OPINION. A legal opinion from ▇▇▇▇▇▇ ▇▇▇▇, legal counsel to
Shuttle, substantially in the form of EXHIBIT D-1 hereto and a legal
50
opinion from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, substantially in the form of EXHIBIT D-2
hereto, legal counsel to the Trust (one of the Exchanging Shareholders)
(c) EMPLOYMENT AGREEMENTS. Employment and non-competition agreements
entered into among Shuttle and the individuals set forth on EXHIBIT E
hereto (the EMPLOYMENT AGREEMENTS) shall (i) be in form and substance
satisfactory to SCM and each of such individuals (with respect to each
such individual's contract only), (ii) have been duly executed and
delivered by all persons set forth in EXHIBIT F and (iii) be in full
force and effect.
(d) AFFILIATE AGREEMENTS. Shuttle has previously provided to SCM a list of
those persons who may be deemed to be, in Shuttle's reasonable
judgment, affiliates of Shuttle within the meaning of Rule 145
promulgated under the Securities Act (each a SHUTTLE AFFILIATE). Each
Shuttle Affiliate shall have an executed affiliate agreement in
substantially the form attached hereto as EXHIBIT G (the SHUTTLE
AFFILIATE AGREEMENT).
(e) OPINION OF ACCOUNTANTS. Letters from each of KPMG, Peat Marwick LLP,
and Deloitte & Touche, respectively, dated within two (2) business days
prior to the Closing, regarding that firm's concurrence with SCM's
management's and Shuttle's management's conclusions as to the
appropriateness of pooling of interest accounting for the Transaction
under Accounting Principles Board Opinion No. 16, if the Transaction is
consummated in accordance with this Agreement.
(f) REGISTERED HOLDER POWER OF ATTORNEY. The power of attorney attached
hereto as EXHIBIT H duly executed as a deed by each Exchanging
Shareholder.
(g) SHAREHOLDERS' AGENT POWER OF ATTORNEY. A copy of the power of attorney
appointing the Shareholders' Agent duly executed as a deed by each
Exchanging Shareholder.
(h) REGISTRATION RIGHTS. Exchanging Shareholders shall deliver duly
executed counterparts of the Registration Rights Agreement.
(i) SHUTTLE SHARE CERTIFICATES. Definitive certificates for the Shuttle
Shares (or indemnities in respect thereof in a form satisfactory to
SCM), together with transfers therefore duly executed by the Exchanging
Shareholders.
(j) SUBSIDIARY SHARE CERTIFICATES. Share certificates in respect of all of
the issued shares in the capital of each of Shuttle's subsidiaries,
together
51
with duly executed transfers into the name of SCM or its nominee or a
duly executed declaration of trust in respect of any shares in such
subsidiaries not held in the name of a direct or indirect subsidiary of
Shuttle.
(k) CORPORATE RECORDS. The Certificates of Incorporation, Common Seal,
Share Register and Share Certificate Book (with any unissued share
certificates) and all minute books and other statutory books (which
shall be written-up to but not including Closing) of Shuttle and each
subsidiary.
(l) AUDITORS RESIGNATIONS. Letters of resignation in the agreed form duly
executed by the existing auditors of Shuttle and of each direct or
indirect subsidiary of Shuttle, together in the case of Shuttle with
evidence that such letter has been deposited at the registered office
of Shuttle in accordance with section 392 of the U.K. Companies Act,
with a statement that there are no circumstances connected with such
resignation which they consider should be brought to the attention of
the members or creditors of Shuttle.
(m) DIRECTORS AND OFFICERS RESIGNATIONS. Letters of resignation and waiver
of all claims against Shuttle and its subsidiaries in the form attached
hereto as EXHIBIT I duly executed as a deed by each of the directors
and officers of Shuttle.
(n) NON-CRYSTALLIZATION. Certificate of non-crystallization and assignment
to SCM duly executed as a deed by Lloyds Bank PLC in respect of the
floating charge dated June 10, 1998 granted to Shuttle.
(o) SHUTTLE BOARD OF DIRECTOR RESOLUTIONS. The Exchanging Shareholders
shall procure that resolutions of the boards of directors of Shuttle
and each subsidiary are passed by which the following business is
transacted:
(i) the registration (subject to their being duly stamped) of the
transfers in respect of the Shuttle Shares is approved;
(ii) the accounting reference date of Shuttle and each subsidiary
is changed to December 31;
(iii) the director and accountant resignations referred to above are
accepted;
(iv) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ is appointed as a director of Shuttle,
Shuttle Technology Limited, Shuttle Research and Shuttle
India;
52
(v) ▇▇▇▇▇ ▇▇▇▇▇ is appointed as a director of Memory Technology
Limited;
(vi) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ is appointed as a director of Shuttle
Technology, Inc.; and
(vii) the registrations of the transfers of the nominee shares in
the subsidiaries are approved.
(p) The Exchanging Shareholders shall procure that new Shuttle Articles of
Association are adopted by way of written resolution and that all B
Shares are reclassified as Ordinary Shares and shall procure that each
of Shuttle Technology Limited and Memory Technology Limited adopts new
Articles of Association by way of written resolution, in each case in
the form of Exhibit J.
(q) SHUTTLE DISCLOSURE LETTER. An executed Shuttle Disclosure Letter
referring to the representations and warranties in this Agreement.
(r) TERMINATION AGREEMENT. The Termination Agreement in the agreed form
attached hereto as Exhibit K duly executed as a deed by each of the
parties thereto.
6.3 EXCHANGING SHAREHOLDER DELIVERIES. If the Exchanging Shareholders fail
or are unable to perform any material obligation required to be
performed by the Exchanging Shareholders pursuant to Section 6.2 by the
Closing Date, SCM shall not be obliged to complete the transaction and
may, in its absolute discretion, by written notice to the Exchanging
Shareholders:
(i) rescind this Agreement without liability on the part of SCM;
or
(ii) elect to complete this Agreement on that date, to the extent
that the Exchanging Shareholders are ready, able and willing
to do so, and specify a later date on which the Exchanging
Shareholders shall be obliged to complete the outstanding
obligations of the Exchanging Shareholders; or
(iii) elect to defer the Closing Date of this Agreement by not more
than twenty (20) business days to such other date as it may
specify in such notice, in which event the provisions of this
Section 6.3 shall apply, mutatis mutandis, if the Exchanging
Shareholders fail or are unable to perform any such
obligations on such other date.
53
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All covenants to be performed prior to the Closing Date, and all
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Transaction until the earlier of
the date that the first audit of the combined enterprises' financial statements
for a thirty day period is completed or one year from the Closing Date.
Compensation by the Exchanging Shareholders to SCM for breach of any
representations and warranties contained in Article II shall be subject to the
qualifications contained in Schedule 2.
7.2 ESCROW ARRANGEMENTS
(a) ESCROW FUND. As provided in Section 1.3, on the Closing Date, SCM shall
deposit with the Escrow Agent SCM Common Stock equalling the Escrow
Amount, which shall constitute an escrow fund (the ESCROW FUND) to be
governed by the terms set forth herein. The portion of the Escrow
Amount contributed on behalf of each Exchanging Shareholder shall
correspond to such stockholder's Escrow Shares. The Escrow Fund shall
be available to compensate SCM (i) for any claim, loss, expense,
liability or other damage, including reasonable attorneys' fees and
disbursements in connection with any action, suit or proceeding, to the
extent of the amount of such claim, loss, expense, liability or other
damage (collectively LOSSES) that SCM or any of its affiliates has
actually incurred (or, in the case of an extension of the Escrow Period
pursuant to Section 7.2(b)(ii), reasonably anticipates incurring), by
reason of the breach by any Exchanging Shareholder of any
representation, warranty, covenant or agreement of Shuttle contained
herein, (ii) for any Third Party Expenses in excess of $400,000 and any
fees and expenses of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, in each case, to the extent not
deducted from the Transaction Consideration on the Closing Date; and
(iii) for any claim made pursuant to the Tax Covenant contained in
Schedule 3 hereof; provided, however, that claims for Losses incurred
as a result of a breach by an Exchanging Shareholder shall be satisfied
out of such shareholder's proportionate interest of the Escrow Fund set
opposite such Exchanging Shareholders' name in Schedule 1 (the
PROPORTIONATE INTEREST) until such Proportionate Interest is exhausted.
SCM and Shuttle each acknowledge that such Losses, if any, would relate
to unresolved contingencies existing at the Closing Date, which if
resolved at the Closing Date would have led to a reduction in the
54
aggregate Transaction Consideration. SCM shall not be entitled to
receive any disbursement with respect to any Loss under Section 7.2(a)
arising in respect of any individual occurrence or circumstance unless
the amount of the Loss arising in respect of all such occurrences or
circumstances in the aggregate exceeds a $100,000 level; provided,
however, that in the event the aggregate Losses of SCM under Section
7.2(a) shall exceed $100,000, then SCM shall be entitled to recover
from the Escrow Fund the total of its Losses including any amounts
below the $100,000 level for each such occurrence or circumstance.
(b) ESCROW PERIOD; DISTRIBUTION UPON TERMINATION OF ESCROW PERIOD. Subject
to the following requirements, the Escrow Fund shall remain in
existence until the earlier of the date that the first audit of the
combined enterprises' financial statements for a thirty day period is
completed or one year from the Closing Date (the ESCROW PERIOD),
subject to extension as set forth below. At the expiration of the
Escrow Period, the Escrow Fund shall be released from escrow to the
Exchanging Shareholder entitled to receive the Transaction
Consideration hereunder, in an amount equal to the entire initial
Escrow Fund less an amount equal to the sum of (i) all amounts
theretofore paid out of the Escrow Fund to SCM pursuant to this Article
VII and (ii) an amount equal to such portion of the Escrow Fund which,
in the reasonable judgment of SCM, subject to the objection of the
Shareholders' Agent and the subsequent arbitration of the matter in the
manner provided in Section 7.2(f) hereof, is necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate (as defined
in Section 7.2(d), theretofore delivered to the Escrow Agent prior to
the end of the Escrow Period (which amount shall remain in the Escrow
Fund (and which shall cause the Escrow Fund to remain in existence)
until such claims have been resolved). As soon as all such claims have
been resolved, the Escrow Agent shall deliver to the Exchanging
Shareholder, the remaining portion of the Escrow Fund not required to
satisfy such claims. Deliveries of Escrow Amounts to the Exchanging
Shareholders pursuant to this Section 7.2(b) shall be made according to
each holder's Proportionate Interest.
(c) PROTECTION OF ESCROW FUND. The Escrow Agent shall hold and safeguard
the Escrow Fund during the Escrow Period, shall treat such fund as a
trust fund in accordance with the terms of this Agreement and not as
the property of SCM and shall hold and dispose of the Escrow Fund only
in accordance with the terms hereof.
55
(d) CLAIMS UPON ESCROW FUND. Upon receipt by the Escrow Agent at any time
on or before the last day of the Escrow Period of a certificate signed
by any officer of SCM (an OFFICER'S CERTIFICATE): (A) stating that SCM
has incurred and paid or properly accrued Losses or other amounts
payable from the Escrow Funds, or reasonably anticipates that it may
have to pay or accrue Losses (or such other amounts), and (B)
specifying in reasonable detail the individual items of Losses (or such
other amounts) included in the amount so stated, the date each such
item was incurred and paid or properly accrued, or the basis for such
anticipated liability, and the nature of the misrepresentation, breach
of warranty or claim to which such item is related, the Escrow Agent
shall, subject to the provisions of Section 7.2(a) and 7.2(e) hereof,
deliver to SCM out of the Escrow Fund, as promptly as practicable, such
amounts held in the Escrow Fund equal to such Losses (or such other
amounts).
(e) OBJECTIONS TO CLAIMS. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Shareholders' Agent, and for a period of
twenty (20) business days after such delivery the Escrow Agent shall
make no delivery to SCM of any Escrow Amount specified in such
Officer's Certificate unless the Escrow Agent shall have received
written authorization from the Shareholders' Agent to make such
delivery. After the expiration of such twenty (20) business day period,
the Escrow Agent shall make delivery of an amount from the Escrow Fund
in accordance with such Officer's Certificate and Section 7.2(d)
hereof, provided, that, no such payment or delivery may be made if the
Shareholders' Agent shall object in a written statement to the claim
made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent prior to the expiration of such twenty
(20) business day period.
(f) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Shareholders' Agent shall so object in writing to
any claim or claims made in any Officer's Certificate, the
Shareholders' Agent and SCM shall attempt in good faith to
agree upon the rights of the respective parties with respect
to each of such claims. If the Shareholders' Agent and SCM
should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be
entitled to rely on any such memorandum signed by SCM and the
Shareholders' Agent and distribute amounts from the Escrow
Fund in accordance with the terms thereof.
56
(ii) If no such agreement can be reached after good faith
negotiation, either SCM or the Shareholders' Agent may demand
arbitration of the matter unless the amount of the damage or
loss is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration;
and in either such event the matter shall be settled by
arbitration conducted by three arbitrators. SCM and the
Shareholders' Agent shall each select one arbitrator, and the
two arbitrators so selected shall select a third arbitrator.
The arbitrators shall, within ten (10) business days after the
last day of any hearings on any motion, issue a definitive
ruling on such motion. The arbitrator shall also, within
twenty (20) business days from the last day of any hearings
regarding the imposition of sanctions or the issuance of any
awards, issue a definitive ruling on the imposition of any
such sanctions or the issuance of any such award in such
arbitration. The arbitrators shall also establish procedures
designed to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the sole
judgement of the arbitrators, to discover relevant information
from the opposing parties about the subject matter of the
dispute. The arbitrators shall rule upon motions to compel or
limit discovery and shall have the authority to impose
sanctions, including attorneys fees and costs, to the extent
as a court of competent law or equity, should the arbitrators
determine that discovery was sought without substantial
justification or that discovery was refused or objected to
without substantial justification. The decision of a majority
of the three arbitrators as to the validity and amount of any
claim in such Officer's Certificate shall be binding and
conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 7.2(e) hereof, the Escrow
Agent shall be entitled to act in accordance with such
decision and make or withhold payments out of the Escrow Fund
in accordance therewith. Such decision shall be written and
shall be supported by written findings of fact and conclusions
which shall set forth the award, judgment, decree or order
awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration
shall be held in Delaware under the rules then in effect of
the American Arbitration Association. Each party to any
arbitration pursuant to this Section 7.2(f) shall pay its own
expenses; the fees of each arbitrator and the administrative
fee of the American
57
Arbitration Association shall be borne equally by SCM, on the
one hand, and the Shareholders' Agent, on the other.
(g) SHAREHOLDERS' AGENT; POWER OF ATTORNEY.
(i) Each Exchanging Shareholder hereby appoints ▇.▇. ▇▇▇▇▇ as
agent and attorney-in-fact (the SHAREHOLDERS' AGENT) for each
Exchanging Shareholder on whose behalf a portion of the
Transaction Consideration was deposited into escrow, for and
on their behalf, to give and receive notices and
communications, to authorise delivery to SCM of shares of SCM
Common Stock from the Escrow Fund in satisfaction of claims by
SCM, to object to such deliveries, to agree to, negotiate,
enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of the
Shareholders' Agent for the accomplishment of the foregoing.
Such agency may be changed by the shareholders of Shuttle from
time to time upon not less than thirty (30) days prior written
notice to SCM or in the event of the death or permanent
disability of the Shareholders' Agent; provided, that, the
Shareholders' Agent may not be removed or replaced unless
holders of a majority interest of the Escrow Fund agree to
such removal and to the identity of the substituted agent. No
bond shall be required of the Shareholders' Agent, and the
Shareholders' Agent shall not receive compensation for his or
her services. Notices or communications to or from the
Shareholders' Agent shall constitute notice to or from each of
the stockholders of Shuttle.
(ii) The Shareholders' Agent shall not be liable for any act done
or omitted hereunder as Shareholders' Agent while acting in
good faith and in the exercise of reasonable judgment. The
Exchanging Shareholders on whose behalf the Escrow Amount was
contributed to the Escrow Fund shall severally indemnify the
Shareholders' Agent and hold the Shareholders' Agent harmless
against any loss, liability or expense incurred without
negligence or bad faith on the part of the Shareholders' Agent
and arising out of or in connection with the acceptance or
administration of the Shareholders' Agent's duties hereunder,
including the reasonable fees and expenses of any legal
counsel retained by the Shareholders' Agent.
58
(iii) The Shareholders' Agent shall be entitled to submit a claim to
and receive reimbursement from the Escrow Agent out of the
Escrow Fund for all reasonable, documented and out-of-pocket
expenses incurred by the Shareholders' Agent as a result of
his or her acting as the Shareholders' Agent, in an aggregate
amount not to exceed $50,000. Any expenses or costs incurred
by the Shareholders' Agent from which he or she does not
receive reimbursement from the Exchanging Shareholders shall
be borne by the Shareholders' Agent, unless it is an expense
or cost for which such Shareholders' Agent may be reimbursed
pursuant to Section 7.2(g)(ii).
(h) ACTIONS OF THE SHAREHOLDERS' AGENT. A decision, act, consent or
instruction of the Shareholders' Agent shall constitute a decision of
all the Exchanging Shareholders whom a portion of the Escrow Amount
otherwise issuable to them are deposited in the Escrow Fund and shall
be final, binding and conclusive upon each Exchanging Shareholder and
the Escrow Agent and SCM may rely upon any such decision, act, consent
or instruction of the Shareholders' Agent as being the decision, act,
consent or instruction of each every such stockholder of Shuttle. The
Escrow Agent and SCM are hereby relieved from any liability to any
person for any acts done by them in accordance with such decision, act,
consent or instruction of the Shareholders' Agent.
(i) THIRD-PARTY CLAIMS. In the event SCM becomes aware of a third-party
claim which SCM believes may result in a demand against the Escrow
Fund, SCM shall promptly notify the Shareholders' Agent of such claim,
and the Shareholders' Agent and the Exchanging Shareholders who have
monies in the escrow shall be entitled, at their expense, to
participate in any defense of such claim. SCM shall consult with the
Shareholders' Agent prior to the settlement any such claim and discuss
with the Shareholders' Agent in good faith any input regarding the
claim and potential settlement the Shareholders' Agent may have prior
to any settlement. After such consultation, SCM shall have the right to
settle any such claim; provided, however, that except with the consent
of the Shareholders' Agent, no settlement of any such claim with
third-party claimants shall alone be determinative of the amount of any
claim against the Escrow Fund. In the event that the Shareholders'
Agent has consented to any such settlement, the Shareholders' Agent
shall have no power or authority to object under any provision of this
Article VII to the amount of any claim by SCM against the Escrow Fund
with respect to such settlement to the extent that such amount is
consistent with the terms of such settlement.
59
(j) ESCROW AGENT'S DUTIES.
(i) The Escrow Agent shall be obligated only for the performance
of such duties as are specifically set forth herein, and as
set forth in any additional written escrow instructions which
the Escrow Agent may receive after the date of this Agreement
which are signed by an officer of SCM and the Shareholders'
Agent, and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed
to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be liable
for any act done or omitted hereunder as Escrow Agent while
acting in good faith and in the exercise of reasonable
judgment, and any act done or omitted pursuant to the advice
of counsel shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to disregard
any and all warnings given by any of the parties hereto or by
any other person, excepting only orders or process of courts
of law, and is hereby expressly authorized to comply with and
obey orders, judgments or decrees of any court. In case the
Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable
to any of the parties hereto or to any other person by reason
of such compliance, notwithstanding any such order, judgment
or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on account
of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this
Agreement or any documents or papers deposited or called for
hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) The Escrow Agent may resign at any time upon giving at least
thirty (30) days written notice to SCM and the Shareholders'
Agent; provided, however, that no such resignation shall
become effective until the appointment of a successor escrow
agent which shall be accomplished as follows: SCM and the
Shareholders' Agent shall use their best efforts to mutually
agree upon a successor escrow agent within thirty (30) days
after receiving
60
such notice. If the parties fail to agree upon a successor
escrow agent within such time, SCM shall have the right to
appoint a successor escrow agent. The successor escrow agent
selected in the preceding manner shall execute and deliver an
instrument accepting such appointment and it shall thereupon
be deemed the Escrow Agent hereunder and it shall without
further acts be vested with all the estates, properties,
rights, powers, and duties of the predecessor Escrow Agent as
if originally named as Escrow Agent. Thereafter, the
predecessor Escrow Agent shall be discharged for any further
duties and liabilities under this Agreement.
(k) NON EXCLUSIVITY. Remedies available to SCM and its affiliates under
this Article VII shall be non-exclusive and shall be cumulative with
any other remedies available at law or in equity.
(l) FEES. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by SCM. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be
considered compensation for ordinary services as contemplated by the
Agreement.
ARTICLE VIII
AMENDMENT AND WAIVER
8.1 AMENDMENT
This Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed on behalf of each of the parties
hereto.
8.2 EXTENSION; WAIVER
SCM, on the one hand, and the Exchanging Shareholders, on the other
hand, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
61
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES
All notices and other communications required or permitted hereunder
shall be in writing, shall be effective when given, and shall in any event be
deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit
with the U.S. Postal Service or other applicable postal service, if delivered by
first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c)
one (1) business day after the business day of deposit with Federal Express or
similar overnight courier, freight prepaid or (d) one (1) business day after the
business day of facsimile transmission, if delivered by facsimile transmission
with copy by first class mail, postage prepaid, and shall be addressed to the
address set forth below (or at such other address as a party may designate by
ten (10) days' advance written notice to the other party pursuant to the
provisions above):
(a) if to SCM, to:
SCM Microsystems, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. and ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Shareholders' Agent, to:
▇.▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
England
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇-▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Attn: The Administrative Controller
Facsimile No.: 011 44 171 283 6500
9.2 INTERPRETATION
Any reference to Exchanging Shareholder's "knowledge" shall mean the
actual knowledge of the Exchanging Shareholders after due inquiry, which may be
satisfied by consultation with Shuttle's executive officers and other key
personnel as said executive officers or the Exchanging Shareholders deem
appropriate. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Any reference to "business day" shall mean any day of the year
other than (i) any Saturday or Sunday or (ii) any day on which the Nasdaq
National Market is closed.
9.3 COUNTERPARTS
This Agreement may be executed in one or more counterparts (including
by means of telecopier), all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
9.4 ENTIRE AGREEMENT; ASSIGNMENT
This Agreement, the schedules and Exhibits hereto, and the documents
and instruments and other agreements among the parties hereto referenced herein:
(a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; (b) are not intended to confer upon any other person any rights or
remedies hereunder except that the Shareholders' Agent and the Escrow Agent
shall have the express rights articulated in Article VII hereof and Exchanging
Shareholders shall be entitled to enforce SCM's obligation, if any, under
Exhibit B hereto; and (c) shall not be assigned by operation of law or otherwise
except as otherwise specifically provided, except that SCM may assign its
respective rights and delegate its respective obligations hereunder to a wholly
owned subsidiary.
63
9.5 SEVERABILITY
In the event that any provision of this Agreement or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
9.6 OTHER REMEDIES
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof. Each of the
parties hereto irrevocably consents to the exclusive jurisdiction and venue of
any federal or state court within Delaware, in connection with any matter based
upon or arising out of this Agreement or the matters contemplated herein, agrees
that process may be served upon them in any manner authorized by the laws of the
State of Delaware for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction, venue
and such process.
9.8 RULES OF CONSTRUCTION
The parties hereto agree that they have been represented by counsel
during the negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
IN WITNESS WHEREOF, SCM and the Exchanging Shareholders have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
64
SCM
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------
Title: CEO and President
------------------------------
EXCHANGING SHAREHOLDERS
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
by his attorney ▇.▇. ▇▇▇▇▇
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
by his attorney ▇.▇. ▇▇▇▇▇
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
by his attorney ▇.▇. ▇▇▇▇▇
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇.▇. ▇▇▇▇▇
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇.▇. ▇▇▇▇▇
by his attorney ▇.▇. ▇▇▇▇▇
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇. ▇▇▇▇▇▇▇-▇▇▇▇▇
by her attorney ▇.▇. ▇▇▇▇▇
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
by his attorney ▇.▇. ▇▇▇▇▇
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
by his attorney ▇.▇. ▇▇▇▇▇
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
by his attorney ▇.▇. ▇▇▇▇▇
65
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
by his attorney ▇.▇. ▇▇▇▇▇
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇
by his attorney ▇.▇. ▇▇▇▇▇
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
by his attorney ▇.▇. ▇▇▇▇▇
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: ▇.▇. ▇▇▇▇▇ as trustee
of the ▇.▇. ▇▇▇▇▇ Settlement 1998
By: /s/ ▇.▇. ▇▇▇▇▇
---------------------------------
Name: A.R. ▇▇▇▇▇▇ as trustee
of the ▇.▇. ▇▇▇▇▇ Settlement 1998
by his attorney ▇.▇. Ekykn
66
With respect to the matters set forth in Article I and VII only, the Escrow
Agent has caused this Agreement to be signed by its duly authorized
representative, as of the date first written above.
ESCROW AGENT
GREATER BAY TRUST COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
----------------------------------
Title: Vice President and Trust Officer
----------------------------------