EXHIBIT 10.25
AGREEMENT
for the exchange of the whole of the issued share capital of Impleo Limited
(1) The persons listed in schedule 1
(2) SmartDisk Corporation
Dated April 28, 0000
XXXXXXX XXXXXX XXX
BRISTOL OFFICE
00 Xxxxx Xxxxxxxxx Xxxxxx, Xxxxxxx XX0 0XX
Telephone 0000 000 0000 Facsimile 0117 917 3005
LONDON OFFICE
Xxxxxxxx Xxxxx, 00 Xxx Xxxxxx, Xxxxxx XX0X 0XX
Telephone 000 0000 0000 Facsimile 020 7809 1005
XXXXXX XXXXXX XXXXXX
Xxxx Xxxxx, Xxxxxxx Xxxx, Xxxxxxx XX0 0XX
Telephone 0000 000 0000 Facsimile 0118 925 0038
WEB SITE: xxx.xxxxxxxxxxxxx.xxx
CONTENTS
1. Definitions and interpretation...........................................................1
2. Exchange................................................................................10
3. Consideration...........................................................................10
4. Completion..............................................................................11
5. Registration Rights Applying to that part of the Consideration Stock
Allotted and Issued to Employee Shareholders and Non-Employee Shareholders..............14
6. Conditional Allotment and Issue (Employee Shareholders only)............................19
7. Release of guarantees...................................................................22
8. Post completion matters.................................................................22
9. Warranties..............................................................................22
10. Specific Indemnities...................................................................23
11. Covenant for Taxation..................................................................24
12. Purchaser's remedies...................................................................24
13. Limitations on liability...............................................................26
14. Conduct of Non-Tax Claims..............................................................29
15. General................................................................................30
16. Announcements..........................................................................32
17. Costs and expenses.....................................................................33
18. Notices................................................................................33
19. Governing law and jurisdiction.........................................................34
Schedule 1.................................................................................35
THE SHAREHOLDERS...........................................................................35
----------------
Schedule 2.................................................................................41
(Information concerning the Company).......................................................41
Schedule 3.................................................................................42
The Non-Tax Warranties.....................................................................42
1. CAPACITY................................................................................42
2. ARRANGEMENTS BETWEEN THE COMPANY AND SHAREHOLDER ASSOCIATES.............................42
3. OTHER INTERESTS OF ANY SHAREHOLDER ASSOCIATE............................................42
4. COMPANY.................................................................................42
5. SUBSIDIARIES............................................................................43
6. INSOLVENCY OF THE COMPANY...............................................................43
7. STATUTORY BOOKS AND DOCUMENTS FILED.....................................................44
8. ACCURACY AND ADEQUACY OF INFORMATION....................................................44
9. PREPARATION AND CONTENTS OF THE MANAGEMENT ACCOUNTS.....................................44
10. ACCOUNTING RECORDS.....................................................................45
11. EURO COMPLIANCE........................................................................45
12. EVENTS SINCE THE ACCOUNTS DATE.........................................................46
13. FINANCIAL COMMITMENTS AND BORROWINGS...................................................47
14. WORKING CAPITAL........................................................................48
15. INSURANCES.............................................................................48
16. CONTRACTS AND COMMITMENTS..............................................................49
17. TERMS OF TRADE.........................................................................50
18. PRODUCT LIABILITY......................................................................50
19. LICENCES AND CONSENTS..................................................................50
20. TRADING PARTNERS.......................................................................50
21. COMPETITION AND TRADE REGULATION LAW...................................................51
22. COMPLIANCE WITH LAW....................................................................52
23. LITIGATION AND DISPUTES................................................................52
24. OWNERSHIP AND CONDITION OF ASSETS......................................................53
25. STOCK..................................................................................53
26. CHARGES AND ENCUMBRANCES OVER ASSETS...................................................53
27. INTELLECTUAL PROPERTY..................................................................54
28. Data Protection Act....................................................................56
29. DIRECTORS AND EMPLOYEES................................................................56
30. INDUSTRIAL RELATIONS...................................................................58
31. PENSIONS...............................................................................59
32. TITLE..................................................................................59
33. ENCUMBRANCES...........................................................................60
34. PLANNING MATTERS.......................................................................60
35. STATUTORY OBLIGATIONS..................................................................60
36. ADVERSE ORDERS.........................................................................60
37. LEASEHOLD PROPERTIES...................................................................61
38. ENVIRONMENTAL MATTERS..................................................................61
Schedule 4.................................................................................62
1. The Property............................................................................62
Schedule 5.................................................................................63
Tax Schedule...............................................................................63
2. Covenant for Taxation...................................................................66
3. Covenant to Shareholders................................................................67
4. Tax Warranties..........................................................................68
5. Limitations on liability................................................................73
6. Repayment...............................................................................75
7. Over-provision and Reliefs..............................................................75
8. NIC and PAYE............................................................................76
9. Claims Procedure........................................................................78
Schedule 6.................................................................................80
The Products...............................................................................80
Schedule7..................................................................................81
The Management Accounts....................................................................81
Schedule 8.................................................................................82
The Employment Contract....................................................................82
Agreement..................................................................................83
THIS AGREEMENT is made the 28th day of April 2000
BETWEEN:
(1) THE PERSONS whose names and addresses are set out in part 1 of schedule
1 ("THE SHAREHOLDERS"); and
(2) SMARTDISK CORPORATION a corporation whose principal place of business
is at 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxx 00000-0000 XXX ("THE
PURCHASER").
BACKGROUND:
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, including the schedules and appendices, unless the
context otherwise requires, the following words have the following
meanings:
"THE ACCOUNTS DATE" 31 March 2000;
"THE ACT" the Companies Act 1985 (as amended);
"THIS AGREEMENT" this Agreement (including any
schedule or annexure to it);
"AVERAGE CLOSING PRICE" US $30.3875 (thirty
point three eight seven five US
dollars) per share of the Purchasers
common stock;
"THE BOARD" in relation to the Company, its
board of directors;
"BUSINESS DAY" a day (other than a Saturday or a
Sunday) on which clearing banks are
open for business in the City of
London;
"CLAIM" a claim by the Purchaser against the
Shareholders under the Covenant for
Taxation or under the Warranties or
indemnities contained in this
Agreement and "NON-TAX CLAIM" means
any claim which is not a Tax Claim;
"THE COMPANY"
Impleo Limited, details of which
are set out in schedule 2;
"COMPLETION" the completion of the exchange of
the Shares for the Consideration
Funds and
1
Consideration Stock under this
Agreement;
"COMPUTER PROGRAMS" all or any part of a set of
instructions whose purpose is to
cause a data processing machine to
perform certain functions or
operations whatever the form of the
program (whether in source code or
in human-readable form, or object
code or machine readable form, and
whether or not compiled or
assembled);
"CONDITIONAL ALLOTMENT DATES means each of 6
October 2000, 6 April 2001, 6
October 2001 and 6 April 2002 and
"Conditional Allotment Date" means
any one of them;
"THE CONSIDERATION" the consideration payable by the
Purchaser to the Shareholders for
the Shares under clause 3;
"CONSIDERATION FUNDS" means together: (i) $39,310.34
(thirty nine thousand three hundred
and ten dollars and thirty four
cents) payable by the Purchaser to
SCM Microsystems Ltd; and
(ii)(pound)101,702.31 (one hundred
and one thousand seven hundred and
two pounds and thirty one xxxxx)
payable by the Purchaser to the
remaining Shareholders for the
Shares under clause 3;
"CONSIDERATION STOCK" new common stock par value US$0.001
per share of the Purchaser
calculated in accordance with
clause 3, 4, 5, 6 and 13 and
Schedule 1 of this Agreement and
which shall not in any event exceed
125,051 (one hundred twenty five
thousand fifty one) Shares of new
Common Stock which equates in value
to US$3,800,000 (three million
eight hundred thousand US Dollars)
calculated by reference to the
Average Closing Price;
"COPYRIGHT" all copyright arising under English
law (whether under the Copyright
Designs and Patents Xxx 0000 or
otherwise) in all original works,
Computer Programs (in whatever
form), customer lists, databases
2
and any other work in which
copyright subsists, together with
all copyrights and/or rights of
like nature arising (whether by
operation of the registration or
otherwise) in any other part of the
world, and the right to apply for
the same and the benefit of any and
all licences in connection with the
foregoing;
"THE COVENANT FOR the covenant given by the
TAXATION" Shareholders under paragraph 2 of
schedule 5;
"DANGEROUS SUBSTANCE" any natural or artificial substance
(whether in the form of a solid,
liquid, gas or vapour) the
generation, transportation,
storage, treatment, use or disposal
of which (whether alone or in
combination with any other
substance) gives rise to a risk of
causing harm to human health,
comfort or safety or harm to any
other living organism or causing
damage to the Environment;
"DISCLOSED" fully and fairly disclosed to the
Purchaser expressly for the purposes
of this Agreement in the Disclosure
Letter and "fully and fairly" means
disclosed with sufficient
particularity to enable the
Purchaser to assess the full impact
on the Company of the matter
disclosed;
"THE DISCLOSURE LETTER" the letter of the same date as this
Agreement in the agreed form from
the Shareholders to the Purchaser,
together with any attachments,
disclosing matters that are
exceptions to the Warranties;
"DOCUMENTATION" all user manuals and other materials
which accompany any unit of Software
and all other technical, reference
and/or other manuals or
documentation, whether intended for
internal or external use in relation
to any Software;
"EMPLOYEE SHARES" that part of the Consideration
Stock held by the Employee
Shareholders following Completion;
"EMPLOYEE those Shareholders who are also an
SHAREHOLDERS" employee, director or consultant of
the
3
Company and whose details are set
out in Part 2 of Schedule 1 to this
Agreement;;
"THE ENVIRONMENT" the environment as defined in
Section 1(2), Environmental
Protection Xxx 0000;
"ENVIRONMENTAL any permit, exemption, filing
CONSENT" requirement, licence or
registration from time to time
necessary or desirable under
Environmental Law;
"ENVIRONMENTAL LAW" any directive, treaty, code of
practice, circular, guidance note
and the like, in each case of any
jurisdiction, in force or enacted
relating or pertaining to a
material extent to the Environment,
any Dangerous Substance, human
health, comfort, safety or the
welfare of any other living
organism;
"ESCROW AGENT" a national bank organised
under the laws of the United Kingdom
or the United States of America to
be appointed by the Purchaser as
soon as reasonably practicable
following Completion;
"ESCROW AGREEMENT" the agreement in the agreed form
between (1) the Purchaser, (2) the
Shareholders and (3) the Escrow
Agent;
"GUARANTEE" any guarantee, suretyship,
indemnity, bonding liability or
similar contingent liability given
or undertaken by a person to secure
or support the obligations of any
third party;
"INTELLECTUAL PROPERTY" all Patents, Copyrights, Marks,
Know-How and Other IPR's;
"KNOW-HOW" all rights anywhere in the world of
the Company in and to all industrial
and commercial trade secrets and
confidential and secret research,
developments, design, inventions,
ideas, information, data, skills,
products, processes, drawing and
specifications;
"THE LEASES" any leases (including underleases)
under which the Properties are
held, particulars of which are set
out in schedule 4 and
4
"LEASE" means any of them;
"MANAGEMENT the unaudited management accounts
ACCOUNTS" for the Company for the period from
15 November 1999 to the Accounts
Date and contained within Schedule
7 of this Agreement;
"MARKS" all trade marks, service marks and
logos whether registered in the UK
or elsewhere or unregistered
(including applications for
registration thereof) together with
all rights of like nature arising
(whether by operation of law,
registration or otherwise) out of
the same in any part of the world
and the rights to apply for the
same and the benefit of any and all
licences in connection with the
foregoing;
"NASDAQ" the NASDAQ National Market,
maintained by the NASDAQ Stock
Market, Inc.;
"NON-EMPLOYEE SHARES" that part of the Consideration
Stock held by the Non-Employee
Shareholders following Completion;
"NON-EMPLOYEE SHAREHOLDERS" the Shareholders set out in Part 1
of Schedule 1 to this Agreement not
being Employee Shareholders;
"NON-TAX WARRANTIES" the representations referred to in
clause 9 and set out in schedule 3;
"NOTICE" includes any notice, demand,
consent or other communication;
"ORDINARY SHARES" ordinary shares of 50p each in the
capital of the Company;
"OPTION AGREEMENTS" the option agreements dated 12
November 1999 between SCM
Microsystems Limited and each of
the remaining Shareholders and
Xxxxxx Xxxxxxx;
"OTHER IPR'S" all designs (registered or
unregistered), utility models and
all other intellectual or
industrial property rights
(including
5
without limitation as to
secrecy or confidence) arising
(whether by operation of law,
registration or otherwise) under
English law or in any other part of
the world to the extent that the
same are not otherwise included
within the definitions of
Copyright, Marks, Patents and Know
How and the right to apply for the
same and the benefit of any and all
licences in connection with the
foregoing;
"PATENTS" letters patent and the right to
apply for letters patent in any part
of the world and any similar rights
situated in any country; and the
benefit of any and all licences in
connection with the foregoing;
"PLANNING ACTS" the Town and Country Planning Xxx
0000, the Planning (Listed
Buildings and Conservation Areas)
Xxx 0000, the Planning (Hazardous
Substances) Xxx 0000, the Planning
(Consequential Provisions) Xxx
0000, the Planning and Compensation
Xxx 0000 and all other statutes
containing provisions relating to
town and country planning;
"THE POLICIES" all insurance policies maintained
by the Company on the date of this
Agreement and "POLICY" means any of
them;
"THE PRODUCTS" the products described in Schedule
6 and all versions thereof and in
each case including the Software
comprised therein and all related
packaging;
"THE PROPERTIES" the properties particulars of which
are set out in schedule 4 and "THE
PROPERTY" means any of them;
"SEC" the United States Securities and
Exchange Commission;
"SERVICE AGREEMENTS" the service agreements in the
agreed form between (the Company)
and each of Xxxxx Xxxxxx, and Xxxx
Xxxxx respectively;
"SHAREHOLDER ASSOCIATE" each of the Shareholders and any
persons connected with any of them
within the
6
meaning of Section 839, ICTA;
"SHAREHOLDERS' SOLICITORS" Xxxxxxxxx Xxxxxxxxx of North Lodge,
Xxxxxxxxxx Xxxx, Xxxxxxx Xxxxxx,
Xxxxx XX0 0XX;
"THE SHARES" the ordinary shares constituting
all the issued shares of the
Company at Completion, as set out
in schedule 1 and schedule 2 of
this Agreement;
"SOFTWARE" all or any of the Computer Programs
and Documentation forming part of
and all or any modification to any
Computer Programs supplied by the
Company as a stand alone product or
embedded in hardware and whether
supplied under a third party end
user licence or not;
"SUBSIDIARIES" any subsidiaries of the Company
within the meaning of Sections 736
and 736A, Companies Xxx 0000 and any
subsidiary undertakings within the
meaning of Sections 258 and 259,
Companies Xxx 0000 from time to
time, and "SUBSIDIARY" means
any of them;
"TAX WARRANTIES" the representations set out in
paragraph 4 of schedule 5 (Tax
Schedule) and each of them;
"TRADING DAY" a day on which stock in the
Purchaser can be traded on;
"SHAREHOLDER'S ASSOCIATE" each of the Shareholders and any
persons connected with any of them
within the meaning of Section 839,
ICTA;
"UNITED KINGDOM" OR "UK" the United Kingdom of Great Britain
and Northern Ireland;
"UNITED STATES" OR US" the United States of America;
"WARRANTIES" the Non-Tax Warranties and the Tax
Warranties, and "WARRANTY" means
any one of them;
"WORKING TIME the Working Time Regulations 1998
REGULATIOS" (SI No 1833);
"YEAR 2000 CONFORMITY" in connection or in relation to any
7
software neither performance nor
functionality is affected by dates
prior to, during and after the Year
2000, in particular:
Rule 1: No value for current date will
cause any interruption in
operation;
Rule 2: Date-based functionality must
behave consistently for dates prior
to, during and after Year 2000;
Rule 3: In all interfaces and data storage,
the century in any date must be
specified either explicitly or by
unambiguous algorithms or
inferencing rules;
Rule 4: Year 2000 must be recognised as a
leap year (all as defined by the
British Standards Institution in
Document DISC PD2000-1).
1.2 Words defined in paragraph 1 of schedule 5 (Tax Schedule) shall bear
the same meaning in the entire Agreement.
1.3 In this Agreement, unless the context otherwise requires:
(a) words in the singular include the plural and vice versa and
words in one gender include any other gender;
(b) a reference to a statute or statutory provision includes:
(i) any subordinate legislation (as defined in Section
21(1), Interpretation Act 1978) made under it;
(ii) any repealed statute or statutory provision which it
re-enacts (with or without modification); and
(iii) any statute or statutory provision which modifies,
consolidates, re-enacts or supersedes it;
(c) a reference to:
(i) any party includes its successors in title and
permitted assigns;
(ii) a "PERSON" includes any individual, firm, body
corporate, association or partnership, government or
state (whether or not having a separate legal
personality);
8
(iii) clauses and schedules are to clauses and schedules of
this Agreement and references to sub-clauses and
paragraphs are references to sub-clauses and
paragraphs of the clause or schedule in which they
appear;
(iv) any provision of this Agreement is to that provision
as amended in accordance with the terms of this
Agreement;
(v) any document being "IN THE AGREED FORM" means in a
form which has been agreed by the parties on or
before the date of this Agreement and for
identification purposes signed by them or on their
behalf by their solicitors;
(vi) "INDEMNIFY" and "INDEMNIFYING" any person against any
circumstance include, subject to the provisions of
clauses 10 and 13, indemnifying and keeping him
harmless from all actions, claims and proceedings
from time to time made against him and all loss or
damage and all payments, costs or expenses made or
incurred by that person as a consequence of or which
would not have arisen but for that circumstance; and
(d) except as set out in sub-clause 1.1, terms defined in the Act
have the meanings attributed to them by the Act;
(e) "STERLING" and the sign "(POUND)" mean pounds sterling in the
official currency of the United Kingdom and "DOLLAR" and the
sign "$" means US dollars in the official currency of the
United States;
(f) the table of contents and headings are for convenience only
and shall not affect the interpretation of this Agreement;
(g) general words shall not be given a restrictive meaning:
(i) if they are introduced by the word "other" by reason
of the fact that they are preceded by words
indicating a particular class of act, matter or
thing; or
(ii) by reason of the fact that they are followed by
particular examples intended to be embraced by those
general words;
(h) where any liability or obligation is undertaken by two or more
persons unless expressly stated, the liability of each of them
shall be joint and several; and
(i) where any statement is qualified by the expression
"SO FAR AS THE SHAREHOLDERS ARE AWARE" or "TO THE
BEST OF
9
THE SHAREHOLDERS' KNOWLEDGE AND BELIEF" or
any similar expression it shall be deemed to include
an additional statement that it has been made after
due and careful enquiry by the Shareholders and in
the case of SCM Microsystems Limited such enquiry
shall only be made to Xxxx Xxxxx, Xxxxxx Xxxxxx,
Xxxxxx Xxxxxxx, Xxxxx Xxxxxx-Xxxx, Xxxxx Xxxxxxx and
Xxxxx Xxxxxx.
2. EXCHANGE
2.1 Subject to the terms of this Agreement, the Shareholders shall transfer
to the Purchaser, with effect from Completion, the Shares with:
(a) full title guarantee (except for all charges and encumbrances
(whether monetary or not) and all other rights exercisable by
third parties which the Shareholders do not, and could not
reasonably be expected to, know about); and
(b) all rights attaching to or accruing to them (including all
dividends and distributions declared, paid or made on or after
that date).
2.2
(a) Each of the Shareholders waives all rights of pre-emption over
any of the Shares conferred on him or them, by the Articles of
Association of the Company or in any other way and undertakes
to take all steps necessary to waive any rights of pre-emption
over any of the Shares.
(b) Xxxxxx Xxxxxx, Xxxx Xxxxx and Xxxxx Xxxxxx in their capacity
as directors of the Company waive all rights of pre-emption
over any Shares conferred on the board of directors of the
Company.
2.3 The Purchaser shall not be obliged to complete the purchase unless the
sale and purchase of all the Shares is completed simultaneously.
3. CONSIDERATION
3.1 Subject to the provisions of this Agreement the consideration for the
sale and purchase of the Shares shall be satisfied by the Purchaser as
follows:
(a) the payment of $39,310.34 (thirty nine thousand three hundred
and ten dollars and thirty four cents) on Completion to SCM
Microsystems Limited representing part of the Consideration
Funds; and
(b) the payment of (pound)101,702.31 (one hundred and one thousand
seven hundred and two pounds and thirty one xxxxx) on
10
completion to the Shareholders' Solicitors as agent for the
Shareholders, representing part of the Consideration Funds;
and
(c) as to $1,834,493.38 (one million and eight hundred and thirty
four thousand four hundred and ninety three dollars and thirty
eight cents) by the allotment and issue to the Non-Employee
Shareholders of 60,370 (sixty thousand three hundred and
seventy) shares of Consideration Stock on Completion in the
proportions set out in Part 1 of Schedule 1 subject to the
provisions relating to the Retained Stock set out in Clause
13; and
(d) as to $393,092.70 (three hundred and ninety three thousand and
ninety two dollars and seventy cents) by the allotment and
issue to the Employee Shareholders of 12,936 (twelve thousand
nine hundred and thirty six) shares of Consideration Stock on
Completion in the proportions set out in Part 2 of Schedule 1;
and
(e) as to $1,572,370.80 (one million five hundred and seventy two
thousand three hundred and seventy dollars and eighty cents)
by the conditional allotment and issue to each of the Employee
Shareholders of up to 51,744 (fifty one thousand seven hundred
and forty four) shares of Consideration Stock in the
proportions and in the manner set out in Part 3 and Part 4 of
Schedule 1 upon the conditions set out in clauses 6, having
been satisfied and subject to the provision of Clause 13 ("the
Deferred Consideration").
3.2 The receipt of the Consideration Funds by SCM Microsystems Limited and
the Shareholders Solicitors shall be good receipt for the purposes of
the Purchaser and the Purchaser shall not be required to enquire as to
the division of that part of the Consideration Funds between the
Shareholders by the Shareholders Solicitors.
3.3 The Consideration Stock shall rank in all respects pari passu with the
common stock par value $0.001 per share in the capital of the Purchaser
in issue immediately prior to the allotment and issue of the
Consideration Stock.
4. COMPLETION
4.1 Completion shall take place at the offices of Xxxxxxx Xxxxx OWA,
solicitors to the Purchaser, on the date of this Agreement
4.2 On Completion:
(a) the Shareholders shall deliver or shall procure the delivery
to the Purchaser:
11
(i) stock transfer forms, duly completed and executed by
the registered holders or their lawful attorneys, in
favour of the Purchaser (or as it may direct) in
respect of the Shares together with the relevant
share certificates;
(ii) letters of non-crystallisation dated not earlier than
the second business day immediately preceding
Completion from the holders of any outstanding
floating charges given by the Company;
(iii) the certificate of incorporation, any certificates of
incorporation on change of name or re-registration,
the statutory books written up to date, share
certificate books, minute books, and the common seal
of the Company;
(iv) the original version of the licence to occupy the
property granted to the Company by SCM Microsystems
Ltd;
(v) all other papers and documents material to the
continuing operation of the business of the Company
which are in the possession of or under the control
of any of the Shareholders (to be delivered at the
Properties);
(vi) letters of resignation in the agreed form from Xxxxxx
Xxxxxx, Xxxx Xxxxx and Xxxx Xxxxx;
(vii) a statement of all overdraft and credit balances from
the Company's bankers and other lenders as at the
close of business on the day preceding Completion;
(viii) the Disclosure Letter;
(ix) a licence to occupy in an agreed form signed by the
Company, SCM Microsystems Ltd and SCM Microsystems
Group Ltd: and
(x) the documents listed in Schedule 9 to this Agreement.
(b) The Shareholders shall repay all monies then owing by them to
the Company whether due and payable or not and the Company
shall repay all monies owing by the Company to any of the
Shareholders save that any monies payable by the Company to
SCM Microsystems Limited under the terms of a business sale
agreement between the Company and SCM Microsystems Limited
dated 12 November 1999 shall not be payable by the Company at
Completion and shall not be payable by the Company until such
monies become due and payable under the terms of the said
agreement.
12
(c) The Shareholders shall procure that as soon as reasonably
practicable following Completion and in any event no more than
7 days after Completion Xxxxx Xxxxxx & Xxxx Xxxxx enter into
the Service Agreements.
(d) The Shareholders shall procure that a board meeting of the
Company is held at which:
(i) the stock transfer forms referred to in sub-clauses
(a)(i) are approved and (subject to them being
appropriately stamped) registered in the Company's
books;
(ii) Xxxxxx Xxxx and Xxxx Xxxxxxxxx are appointed as
directors of the Company;
(iii) Xxxx Xxxxx, Xxxxxx Xxxxxx and Xxxx Xxxxx cease to be
officers of the Company with immediate effect;
(iv) the accounting reference date of the Company is
changed to 31 December;
(v) Green & Xxxxxx are appointed as auditors of the
Company;
(vi) new articles of association of the Company in an
agreed form are adopted by the Company ;
(vii) the mandates given by the Company to its bankers are
revoked or revised as the Purchaser may require; and
(viii) the execution and completion of the other documents
to be entered into by the Company under this
Agreement is approved.
(e) When the Shareholders have complied with the provisions of
sub-clauses (a)-(d) inclusive, the Purchaser shall: (i)
transfer by telegraphic transfer the Consideration Funds to
SCM Microsystems Ltd and to the Shareholders' Solicitor in the
proportions set out sub-Clause 3.1(a) and sub-Clause 3.1.(b);
(ii) subject to sub-clause 4.3 below procure the allotment
subject to the provisions of this Agreement and issue
of the Consideration Stock to the Shareholders in the
proportions set out in schedule 1;
4.3 If any of the requirements of sub-clause 4.2 are not complied with on
the date set for Completion under sub-clause 4.1, the Purchaser (in the
13
case of the requirements of sub-clauses 4.2(a)-(d) inclusive) or the
Purchaser (in the case of the requirements of sub-clause 4.2(e)) may:
(a) defer Completion with respect to some or all of the Shares to
a date not more than 28 days after that date (in which case
the provisions of this sub-clause shall also apply to
Completion as so deferred); or
(b) proceed to Completion so far as practicable (including, at the
Purchaser's option, completion of the purchase of some only of
the Shares) but without prejudice to any other rights which it
or they may have under this Agreement; or
(c) rescind this Agreement by notice in writing.
4.4 Subject to the provisions of clause 13, the Shareholders undertake to
indemnify the Purchaser against any loss, expense or damage which it
may suffer as a result of any document delivered to it under this
clause being unauthorised, invalid or for any other reason ineffective.
4.5 The Purchaser and the Shareholders undertake to enter into the Escrow
Agreement as soon as reasonably practicable following Completion and
the Purchaser undertakes that when all of the Shareholders and the
Purchaser have entered into the Escrow Agreement to deliver
certificates in respect of the Retained Stock to the Escrow Agent to be
held in the Escrow Account;
5. REGISTRATION RIGHTS APPLYING TO THAT PART OF THE CONSIDERATION STOCK
ALLOTTED AND ISSUED TO EMPLOYEE SHAREHOLDERS AND NON-EMPLOYEE
SHAREHOLDERS.
5.1 Incidental (Piggyback) Registration.
(a) Subject to the limitations set forth in this Agreement, if the
Purchaser, at any time within one (1) year of the date hereof
proposes to file on its behalf and/or on behalf of any of its
security holders ("THE DEMANDING SECURITY HOLDERS") a
registration statement under the Securities Act of 1933 of the
US, as amended (the "Securities Act"), on any form (other than
a registration statement on US forms S-4 or S-8 or any
successor form for shares to be offered in a transaction of
the type referred to in Rule 145 under the Securities Act of
the US or to employees of the Purchaser pursuant to any
employee benefit plan, respectively) for the general
registration of shares to be sold for cash with respect to its
common stock or any other class of equity security (as defined
in Section 3(a)(11) of the Securities Exchange Act of 1934 of
the US) of the Purchaser, it will give written notice to the
Shareholders at least 15 days before the initial filing with
the US Securities and Exchange Commission of such registration
statement, which
14
notice shall set forth the intended method of disposition of
the shares proposed to be registered by the Purchaser. The
notice shall offer to include in such filing the aggregate
number of shares of Consideration Stock as have been properly
allocated and issued to the Shareholders pursuant to this
Agreement and as the Shareholders may request, subject,
however, to the provisions of this clause 5.1.
(b) Any of the Shareholders who desires to have up to 20% of his
or their Consideration Stock entitlement which have been
properly allotted and issued to him or them pursuant to this
Agreement registered under this clause 5, they shall advise
the Company in writing within 10 days after the date of
receipt of written notice from the Purchaser pursuant to
Clause 5.1(a), setting forth the amount of such Consideration
Stock for which registration is requested, not to exceed 20%
of the Consideration Stock properly allotted and issued to
such Shareholder under the terms of this Agreement (subject to
adjustment for stock splits, stock dividends and similar
reclassifications affecting the Common Stock). The Purchaser
shall thereupon include in such filing the number of shares
representing that part of Consideration Stock of each
Shareholder for which registration is so requested, subject to
the following provisions of this clause 5. In the event that
the proposed registration by the Purchaser is, in whole or in
part, an underwritten public offering of securities of the
Purchaser, the Purchaser shall not be required to include any
of the Consideration Stock as aforesaid in such underwriting
unless the Shareholders agree to accept the offering on the
same terms and conditions as the shares of common stock of the
Purchaser, if any, otherwise being sold through the
underwriters under such registration and provided further,
that:
(A) if the managing underwriter determines and advises the
Purchaser that the inclusion of all of the Consideration Stock
proposed to be included by the Shareholders in the
underwritten public offering and other issued and outstanding
shares of common stock of the Purchaser proposed to be
included therein by the persons other than the Shareholders,
the Purchaser and any shareholder who has exercised
registration rights with respect to such registration (the
"Other Shares") would jeopardise the success of the
Purchaser's offering, then
(i) the Purchaser shall be required to include in the
offering (in addition to the number of shares to be
sold by the Purchaser and any Demanding Security
Holder) only that number of shares of the
Consideration Stock that the managing underwriter
believes will not jeopardise the success of the
Purchaser's offering; and
15
(ii) the number of shares of the Consideration Stock and
Other Shares included in such underwritten public
offering shall be reduced pro rata based upon the
number of shares of the Consideration Stock and Other
Shares requested by the holders thereof to be
registered in such underwritten public offering
subject to the provisions of this agreement and an
Investor's Rights Agreement between the Purchaser
(1), Phoenix House Investments (2),, Toshiba
Corporation (3) and Xxxxxx International Systems
Corporation (4) (together the "PRIOR HOLDERS")
requiring that such reduction in Other Shares
included in such offering not reduce the amount of
Other Shares owned by the Prior Holders included in
the Offering below 30% of the total amount of
securities included in the offering; and
(B) in each case all of the Consideration Stock owned by
the Shareholders which are not included in the
underwritten public offering shall be subject to
customary underwriter "lock-up" arrangements and not
sold or otherwise transferred by the Shareholders for
a period, not to exceed ninety (90) calendar days,
which the managing underwriter reasonably determines
as necessary in order to effect the underwritten
public offering.
In the event the Purchaser chooses a registration form which
limits the size of the offering, either in terms of the number
of shares or dollar amount, the Purchaser shall not be
required to include in the offering (in addition to the number
of shares to be sold by the Purchaser and any demanding
security holder) any amount of the Consideration Stock which
would exceed such limits and the number of shares in the
Consideration Stock and Other Shares included in such
underwritten public offering shall be reduced pro rata based
upon the number of shares in the Consideration Stock and Other
Shares requested by the holders thereof to be registered in
such underwritten public offering.
5.2 UNDERWRITING DOCUMENTS AND OTHER LIMITATIONS.
(a) Notwithstanding any provision of this Agreement to
the contrary, a Shareholder may not include any
shares of the Consideration Stock in any underwritten
offering required or contemplated under this
Agreement unless the Shareholder promptly executes
and delivers such form of underwriting agreement,
custody agreement, power of attorney and other
agreements and instruments as the underwriters of
such offering may reasonably require in connection
with the preparation and consummation of such
offering.
(b) Notwithstanding any provision of this Agreement to
the contrary, in no event shall the Purchaser be
required to register
16
the sale of any shares of the Consideration Stock
held by the Escrow Agent but the Purchaser shall
register those shares of the Consideration Stock that
are released by the Escrow Agent under the terms of
the Escrow Agreement and this Agreement.
5.3 FORM S-3 REGISTRATION.
Subject always to the terms and limitations set forth in this
Agreement, the Purchaser will file as promptly as possible after it is
eligible to do so (and in no event later than 5 November, 2000) a
registration statement on Form S-3 (the "Shelf Registration Statement")
covering 100% of the Shares comprising the Consideration Stock (less
any shares registered pursuant to said piggy back registration rights
set forth in clause 5.1 above) of the shares of the Consideration Stock
and thereafter shall use its best efforts to cause the Shelf
Registration Statement to be declared effective as soon as practicable
following such filing and to maintain such effectiveness until the one
year anniversary of the date hereof; provided, however, that the
Purchaser shall have the right to prohibit the sale of shares of the
Consideration Stock pursuant to the Shelf Registration Statement, upon
notice to the Shareholders (A) if in the opinion of counsel for the
Purchaser, the Purchaser would thereby be required to disclose
information not otherwise then required by law to be publicly
disclosed, provided that the Purchaser shall use its best efforts to
minimize the period of time in which it shall prohibit the sale of any
shares of its common stock pursuant to this clause (A), which shall in
no event exceed 45 days in any one-year period; or (B) during the
period starting with the date 10 days prior to the Purchaser's estimate
of the date of filing of, and ending on a date 90 days after the
effective date of, a registration in which the Shareholders are
entitled to participate in accordance with clause 5 hereof, or such
longer post-effective periods as may be reasonably required by the
underwriter or underwriters if such offering is underwritten.
Subject to the terms of this Agreement if the Purchaser is not eligible
to file an S-3 Registration Statement by November 5, 2000, the
Shareholders may require the Purchaser to file an S-1 Registration
Statement to register 100% of the Consideration Stock which has not
already been registered.
5.4 CERTAIN REGISTRATION PROCEDURES.
If the Purchaser is required by the provisions of this clause 5 to use
its best efforts to effect the registration of any Consideration Stock
under the Securities Act, the Purchaser will:
(a) prepare and file with the Securities and Exchange Commission
of the US (the "Commission") a registration statement with
respect to such Consideration Stock and such amendments and
supplements to such registration statement and the prospectus
17
used in connection therewith as may be necessary to keep such
registration statement effective until the earliest of (i) the
completion of the distribution of the registered securities,
and (ii) the three (3)month anniversary of the effective date
of the registration statement and to comply with the
provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such
registration statement;
(b) furnish to any selling security holders such number of copies
of a summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents, as such selling
security holders may reasonably request;
(c) use its best efforts to register or qualify the securities
covered by such registration statement under such other
securities or "blue sky" laws of such jurisdictions within the
United States and Puerto Rico as each Shareholder shall
reasonably request (provided, however, that the Purchaser
shall not be obligated to qualify as a foreign corporation to
do business under the laws of any jurisdiction in which it is
not then qualified or to file any general consent to service
or process or to qualify as a broker or dealer in securities),
and do such other reasonable acts and things as may be
required of it to enable the Shareholders to consummate the
disposition in such jurisdiction of the securities covered by
such registration statement;
(d) take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such common stock;
and
(e) promptly notify in writing the Shareholders and each
underwriter (if any) of the happening of any event, during the
period of distribution, as a result of which the registration
statement includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in
light of the circumstances then existing (in which case, the
Purchaser shall promptly provide the Shareholders and/or
underwriters, as appropriate, with revised or supplemental
prospectuses and if so requested by the Purchaser in writing,
the Shareholders shall promptly take action to cease making
any offers of the Consideration Stock until receipt and
distribution of such revised or supplemental prospectuses).
5.5 CERTAIN LIMITATIONS ON REGISTRATION RIGHTS.
The Purchaser's obligations under Clause 5.1 with respect to each
Shareholder are also expressly conditioned upon such Shareholder
furnishing to the Purchaser in writing such information concerning such
Shareholder and such Shareholder's controlling persons and the
18
terms of such Shareholder's proposed offering of Consideration Stock as
the Purchaser or the managing underwriter (if any) shall reasonably
request for inclusion in the applicable registration statement.
5.6 Expenses.
All expenses incurred in complying with this clause 5, including,
without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities
Dealers, printing expenses, fees and disbursements of professional
adviser instructed by the Purchaser, expenses of any special audits
incident to or required by any such registration and expenses
(including English solicitors' or US attorneys' fees) of complying with
the securities or blue sky laws of any jurisdictions pursuant to this
clause 5, except to the extent required to be paid by participating
selling security holders by state securities or blue sky laws, shall be
paid by the Purchaser, except that the Purchaser shall not be liable
for any fees, discounts or commissions to any underwriter or any fees
or disbursements of counsel for Shareholders in respect of the
securities sold by Shareholders, which amounts shall be paid by the
Shareholders.
6. CONDITIONAL ALLOTMENT AND ISSUE (EMPLOYEE SHAREHOLDERS ONLY)
6.1 Subject to the provisions of sub-clause 6.2 and Clause 13, the
Purchaser shall allot and issue to each Employee Shareholder the
Deferred Consideration on each of the Conditional Allotment Dates in
the proportions and in the manner set out in Part 3 and Part 4 of
Schedule 1.
6.2 The obligations of the Purchaser to allot and issue the Deferred
Consideration referred to in sub-clause 6.1 shall, in the case of each
Employee Shareholder, be in all respects conditional upon:
(a) each Employee Shareholder having remained, throughout the
period prior to and including any Conditional Allotment Date,
a Service Provider to the Company. For the purpose of this
sub-clause an Employee Shareholder shall be deemed to be a
"Service Provider" to the Company for so long as such Employee
Shareholder serves as an employee of the Company or one or
more of the Company's holding or subsidiary corporations
PROVIDED THAT each Employee Shareholder shall not be prevented
from receiving Deferred Consideration under this sub-clause
6.2(a) by virtue only of:
(i) such Employee Shareholder's death while a Service
Provider,
19
(ii) termination of such Employee Shareholder's employment
arrangement with the Company without "Cause" (as
defined below),
(iii) termination of such Employee Shareholder's employment
with the Company for "Just Cause" (as defined below),
or
(iv) such Employee Shareholder's receipt of disability
insurance payments pursuant to any plan or scheme
sponsored by the Company and if upon such plan's or
scheme's or in the absence of any such plan or
scheme, determination that the Employee Shareholder
cannot perform each of the material duties of the
Employee Shareholder's employment with the Company.
For the purposes hereof, "JUST CAUSE" means (a) the
requirement by the Company that the Employee
Shareholder perform duties which are contrary to or
constitute a material diminution of the Employee
Shareholder's position (including status, offices,
titles and reporting requirements), authority, duties
or responsibilities as contemplated by the Employee
Shareholder's contract of employment with the
Company, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Employee
Shareholder; (b) failure by the Company to comply
with any material provision of such Employee
Shareholder's contract of employment with the
Company, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Employee
Shareholder; or the requirement by the Company that
the Employee Shareholder be based at any office or
location which is located more than 50 miles from the
office of the Company at Ashville Park, Wokingham.
For purposes of this Agreement, the term "CAUSE"
shall mean (i) the failure or refusal of the Employee
Shareholder to perform the duties or render the
services reasonably assigned to him from time to time
by or under direction of the Managing Director of the
Company (except during reasonable vacation periods or
sick leave); (ii) gross negligence or willful
misconduct by the Employee Shareholder in the
performance of his duties as an employee of the
Company, (iii) the conviction of the Employee
Shareholder of a criminal offence; (iv) the material
breach by the Employee Shareholder of any of
20
the provisions of his contract of employment with the
Company; (v) the breach by the Employee Shareholder
of his fiduciary duty or duty of trust to the
Company, including the commission by the Employee
Shareholder of an act of fraud or embezzlement
against the Company, (vi) use of illegal drugs, or
(vii) any other material breach by the Employee
Shareholder of any of the material terms or
provisions of this Agreement or any other agreement
between the Company and the Employee Shareholder
related to the Employee Shareholder's employment;
AND
(b) the total Deferred Consideration exceeding in
monetary value the cumulative aggregate amount of all
or any Claim or Claims made in accordance with the
provisions of clause 13 (the value of all or any
Claim or Claims shall be determined by reference to
the Purchaser's estimate of the amount involved)
("the Claim Threshold") on or before each of the
Conditional Allotment Dates so that where the total
Deferred Consideration does not exceed, in monetary
value, the Claim Threshold made on or before each of
the Conditional Allotment Dates the Purchaser shall
have no obligation to allot or issue any of the
Deferred Consideration. In the event that the total
Deferred Consideration does exceed, in monetary
value, the Claim Threshold, on or before each of the
Conditional Allotment Dates ("the Excess"), the
Purchaser shall allot and issue only that amount of
the Deferred Consideration which the Excess
represents in the form of Consideration Stock based
on the Average Closing Price.
The rights and remedies of the Purchaser in respect
of any breach of the Warranties or the Covenant for
Taxation or any indemnities contained in this
Agreement shall not be affected by the condition
contained in this sub-clause 6.2(b).
This condition shall be without prejudice to the
Purchaser's entitlement to set off the amount of any
Claim against any sum due from it to the Shareholders
under this Agreement or the Purchaser's entitlement
to set off or make offsets or deductions on account
of any Claim against any Retained Stock held in the
Escrow Account or against any future entitlement to
Deferred Consideration including all cancellation
rights of the Purchaser hereunder.
6.3 Upon the conditions set out in sub-clause 6.2(a) and 6.2(b) having been
satisfied, the Purchaser shall allot and issue to the Employee
21
Shareholders the Deferred Consideration, or that part of the Deferred
Consideration to which they are entitled pursuant to sub-clause 6.2(b),
upon each of the Conditional Dates of Allotment in the proportions and
in the manner set out in Part 3 and Part 4 of Schedule 1.
7. RELEASE OF GUARANTEES
7.1 The Shareholders shall on Completion procure the release of the Company
from any Guarantee given by the Company in respect of any obligations
of any Shareholder or Shareholder Associate and shall indemnify the
Purchaser against all liability arising after Completion in respect of
it.
8. POST COMPLETION MATTERS
8.1 The Shareholders declare that for as long as they remain the registered
holders of the Shares after Completion they will:
(a) hold the Shares and the dividends and any other moneys paid or
distributed in respect of them after Completion and all rights
arising out of or in connection with them in trust for the
Purchaser;
(b) deal with the Shares and all such dividends, distributions and
rights as the Purchaser may direct for the period between
Completion and the day on which the Purchaser or its nominee
is entered in the register of members of the Company as the
holder of the Shares.
8.2 The Shareholders irrevocably appoint the Purchaser as their attorney
for the purpose of exercising any rights, privileges or duties
attaching to the Shares including receiving notices of and attending
and voting at all meetings of the members of the Company from
Completion to the day on which the Purchaser or its nominee is entered
in the register of members of the Company as the holder of the Shares.
8.3 For the purpose of clause 8.2, the Shareholders authorise:
(a) the Company to send copies of any notices in respect of their
share holdings to the Purchaser;
(b) the Purchaser to complete and return proxy cards, consents to
short notice and any other document required to be signed by
the Purchaser as a member.
9. WARRANTIES
9.1 Subject to the provisions of this clause 9 the Shareholders jointly and
severally warrant and represent to the Purchaser that, save as
Disclosed
22
in the Disclosure Letter, each of the Warranties is true and
accurate in all respects and not misleading at the date of this
Agreement.
9.2 The Shareholders acknowledge that they give the Warranties with the
intention of inducing the Purchaser to enter into this Agreement and
that the Purchaser does so in reliance on the Warranties.
9.3 Each of the Warranties is a separate and independent Warranty and shall
not be limited by reference to any other Warranty or anything in this
Agreement.
9.4 SCM Microsystems Ltd does not warrant and represent that the Warranty
contained in paragraph 14 of Schedule 3 regarding the working capital
of the Company is true and accurate in all respects and not misleading
at the date of this Agreement.
10. SPECIFIC INDEMNITIES
10.1 The Shareholders shall pay to the Purchaser or at its discretion to the
Company an amount equal to all losses, claims, liabilities, damages,
actions, demands suffered and all accompanying costs and expenses
reasonably incurred by the Purchaser or the Company arising from any of
the following matters:
(a) the Purchaser or the Company infringing any third party
Intellectual Property in the Products or the Company not being
authorised to licence the Products to end-users;
(b) any claim howsoever arising which would not have arisen had
the Company enjoyed a lawful right to occupy part only of the
Property with the written consent of the owner of the freehold
of the Property ("THE BUILDING INDEMNITY") (but for the
avoidance of doubt the Purchaser or the Company shall not be
entitled to claim or recover monies in respect of the same
fact or facts from SCM Microsystems Limited under both the
Building Indemnity and also under the provisions of an
agreement dated on the same day as this Agreement and being
between the Company, SCM Microsystems Limited and SCM
Microsystems Group Limited;
(c) any claim howsoever arising resulting from the transfer of
those employees of the Company whose employment was
transferred from SCM Microsystems Limited to the Company under
the Transfer of Undertakings (Protection of Employment)
Regulations 1981, pursuant to a business sale agreement dated
12 November 1999 between SCM Microsystems Limited and the
Company and without prejudice to the generality of the
foregoing any claim howsoever arising which would not have
arisen had the said employees of the Company each signed a
contract of employment with the Company on 12 November
23
1999 in the form annexed in schedule 8 of this Agreement ("THE
EMPLOYMENT INDEMNITY");
(d) any claim howsoever arising made by any third party or a
liquidator, receiver or trustee in bankruptcy against the
Purchaser or the Company in respect of the transfer of the
Datawise business from SCM Microsystems Ltd to the Company
pursuant to a Business Sale Agreement dated 12 November 1999
and the assignment of all intellectual property rights in the
Products and arising under the Insolvency Xxx 0000 ("THE
DATAWISE INDEMNITY");
(e) any stamp duty payable on the consideration passing in respect
of the transfer or assignment of all intellectual property
rights in the Products from SCM Microsystems Limited to the
Company;
(f) the Products not meeting Year 2000 Conformity;
(g) the Company failing to comply with the provisions of the Data
Protection Act;
(h) the Management Accounts not being true and accurate in all
material respects ("THE MANAGEMENT ACCOUNTS INDEMNITY"); and
For the avoidance of doubt no Disclosed matter shall affect the
indemnities contained in this clause.
10.2 Each undertaking contained in sub-clause 10.1 shall be construed as a
separate and independent undertaking and are considered by the parties
to be reasonable in all the circumstances.
11. COVENANT FOR TAXATION
11.1 The Shareholders covenant to the Purchaser in the terms of the Covenant
for Taxation as set out in schedule 5.
12. PURCHASER'S REMEDIES
12.1 Each of the Shareholders undertake to disclose in writing to the
Purchaser anything which is or may constitute a Claim or be
inconsistent with the contents of the Disclosure Letter directly it
comes to the notice of any of them either before, at the time of, or
after Completion.
12.2 The rights and remedies of the Purchaser in respect of any breach of
the Warranties or the Covenant for Taxation shall not be affected by
Completion or by any investigation made, or which could have been made,
by it or on its behalf into the affairs of the Company.
24
12.3 If any Claim is made, no Shareholder shall make any claim against the
Company or any director or employee of the Company on whom he may have
relied before agreeing to any terms of this Agreement or authorising
any statement in the Disclosure Letter. This sub-clause shall not
preclude any Shareholder from claiming against any other Shareholder
under any right of contribution or indemnity to which he may be
entitled.
12.4 In the event of a Claim, without prejudice to the right of the
Purchaser to claim damages on any basis available to it or to any other
right or remedy available to it, subject to the provisions of Section
13.5 the Shareholders agree to pay on demand to the Purchaser a sum by
way of damages as agreed between the Shareholders and the Purchaser or,
in default of such agreement, as determined by order of a court of
competent jurisdiction which is the higher of:
(a) an amount sufficient to put the Company into the position
which would have existed if the Warranties had been true and
accurate or not misleading when given or repeated;
(b) an amount equal to the resulting diminution in value of the
Shares;
(c) the amount by which the assets of the Company are less, or
less valuable, or its liabilities greater, than the values at
which the same were included in the Management Accounts or (if
the Purchaser so elects) than they would have been if the
Warranty concerned had been true and accurate and not
misleading; and
(d) the amount by which the profitability of the Company is less,
or its losses greater, than would have been in the case if the
Warranty concerned had been true and accurate and not
misleading, calculated on the same basis as if such reduction
in profitability or increase in losses were suffered as the
result of an actionable wrong done to the Company.
12.5 This clause applies if at any time the Purchaser makes any Claim
against any Shareholder in circumstances where no disclosure has been
made in the Disclosure Letter and (notwithstanding the express
provisions of this Agreement) such Shareholder avoids or limits
liability as a result of a court of competent jurisdiction holding that
the Claim (or any part of it) should fail or the quantum recoverable
should be reduced because the Purchaser has or is deemed to have
knowledge of the matters which give rise to the breach of Warranty.
Subject to the provisions of Clause 13.5, the Shareholders covenant to
pay to the Purchaser on demand an amount equal to the amount which the
Purchaser would have been entitled to recover from the Shareholders but
for the Purchaser having or being deemed to have knowledge of the
matters giving rise to the breach of Warranty.
25
12.6 Subject to the provisions of Clause 13.5 the Shareholders shall
indemnify the Purchaser against all costs (including legal costs on an
indemnity basis as defined in Rule 44.4(3) of the Civil Procedure Rules
1998), expenses or other liabilities which the Purchaser may reasonably
incur either before or after the commencement of any action in
connection with:
(a) the settlement of any Non-Tax Claim;
(b) any legal proceedings in respect of any Non-Tax Claim in which
judgement is given for the Purchaser; or
(c) the enforcement of any such settlement or judgement.
12.7 Any amount paid by the Shareholders to the Purchaser in respect of any
of the provisions of this Agreement shall be treated as paid to the
Purchaser by way of pro rata reduction in the Consideration.
13. LIMITATIONS ON LIABILITY
13.1 To provide a source of indemnification to the Purchaser pursuant to any
Claims, the Shareholders agree that
(a) certificates for 12,708(twelve thousand seven hundred and
eight) shares of Consideration Stock being 20% of the
aggregate of the value of the Consideration Stock and the
Consideration Funds issued to the Non-Employee Shareholders
pursuant to clause 3 ("THE RETAINED STOCK") shall be deposited
with the Escrow Agent in an escrow account ("THE ESCROW
ACCOUNT") pursuant to the Escrow Agreement following
Completion;
(b) for the avoidance of doubt, this sub-clause 13.1 shall not
affect the Purchaser's right to cancel all of the Deferred
Consideration outstanding from time to time in the event that
any Claim arises and which cancellation rights are provided
for in accordance with this Agreement;
(c) For the purpose of interpretation of this sub-clause 13.1 the
parties have assumed that in the case of sub-Clause
13.1(b)(ii) the Deferred Consideration being subject to a
conditional right of allotment was so allotted and issued and
in all cases by reference to the Average Closing Price. In the
case of the Employee Shareholders the Purchaser shall have the
right by way of set-off, deduction, off-set, cancellation or
otherwise for the period of one year following the date of
this Agreement to:
(i) irrevocably and unconditionally cancel any Deferred
Consideration allotted and issued to Employee
Shareholders pursuant to Clause 3 and 6; and/or
26
(ii) irrevocably and unconditionally determine, cancel,
extinguish or determine any conditional right of
allotment of Deferred Consideration.
in either case to a total aggregate value of $413,840 (four
hundred and thirteen thousand eight hundred and forty dollars
("the Set-Off Amount").
13.2 The Retained Stock shall be held in the Escrow Account on such terms as
are set forth in the Escrow Agreement for a period of one year from the
date of Completion ("THE HOLD PERIOD"). Any dividends and distributions
with respect to such Retained Stock while held in the Escrow Account
shall also be retained in the Escrow Account until the expiration of
the Hold Period. Any offsets or deductions made from Retained Stock
held in the Escrow Account on account of any Claim shall be made on the
last business day of the Hold Period, or at such other time as set
forth in the Escrow Agreement and shall be based upon the Average
Closing Price. All Retained Stock subject to such offset or deduction
shall be cancelled by the Purchaser and the remaining Retained Stock
together with any dividends paid or distributions made with respect to
such Retained Stock shall be then delivered to the Shareholders in
accordance with their respective interests. For the avoidance of doubt,
no offset or reduction in the Retained Stock allocated to SCM
Microsystems Limited shall be made in respect of any Claim for which
SCM Microsystems Limited is not liable to any extent under this
Agreement.
13.3 Subject to the provisions of this clause 13, the cancellation by the
Purchaser of any Retained Stock contained in the Escrow Account or the
exercise of any cancellation or set-off rights in respect of the
Set-Off Amount shall not prejudice its right to recover any further sum
due to it for that or any other Claim not satisfied by the Escrow
Account or the Set-Off Amount.
13.4 The liability of the Shareholders under the Covenant for Taxation shall
be reduced if and to the extent that the loss shall have been recovered
under the Warranties (and vice versa).
13.5 In the absence of fraud, dishonesty or wilful non-disclosure on the
part of any of the Shareholders, their agents or advisors and subject
to the remaining provisions of this clause 13:
(a) the Purchaser shall not have any claim under the Warranties in
respect of any matter if, and to the extent that, it is fully
and fairly Disclosed;
(b) the Shareholders shall not be liable for any Claim or any
claim under any indemnity in this Agreement unless they have
27
received written notice from the Purchaser giving reasonable
details of the Claim and, if practicable, the Purchaser's
estimate of the amount involved on or before the expiration of
one (1) year from Completion or, in the case of any claim or
Claim relating to Taxation, not later than six (6) years from
Completion;
(c) the aggregate liability of the Shareholders in respect of any
indemnity in this Agreement (for the avoidance of doubt
including, in the absence of fraud, the indemnity in clause
4.4) and the Non-Tax Warranties shall not exceed(pound)506,337
(five hundred and six thousand three hundred and thirty-seven
pounds) representing the value at Completion of the Retained
Stock and the Set-Off Amount and in relation to the Management
Accounts Indemnity no claim shall be made by the Purchaser if
the value of the claim is estimated by the Purchaser to be
less than(pound)15,000, but if the value of a claim made by
the Purchaser is estimated to exceed(pound)15,000 then the
Shareholders shall be liable for the whole of such claim and
not merely the excess;
(d) the aggregate liability of the Purchaser in respect of any
indemnity or liability in or under this Agreement shall not
exceed (pound)506,337 (five hundred and six thousand three
hundred and thirty seven pounds).
13.6 The limitations on liability contained in clause 13.5 shall not apply
to any Claims relating to fraud or the Tax Warranties or any Claim
under the Covenant for Taxation (together the "MAJOR CLAIMS") and for
the avoidance of doubt SCM Microsystems Limited shall be severally
liable and the remaining Shareholders shall be jointly and severally
liable for the Major Claims but in any event no such Shareholder shall
be liable for such Major Claims for an amount exceeding that part of
the maximum aggregate Consideration payableto the said Shareholder
under the terms of this Agreement assuming in the case of any Employee
Shareholder that they are fully entitled to the Deferred Consideration.
13.7 The limitations on liability contained in clause 13.5 shall not apply
to any Claims relating to the Employment Indemnity and for the
avoidance of doubt all of the Shareholders with the exception of SCM
Microsystems Limited (which shall not be liable to any extent in
relation to the Employment Indemnity) shall be jointly and severally
liable for any Claims under the Employment Indemnity but no such
Shareholder shall be liable for such Claim for an amount exceeding that
part of the maximum aggregate Consideration payable to the said
Shareholder under the terms of this Agreement assuming for the purpose
of this sub-clause 17.7. that in the case of any Employee Shareholder
that they are fully entitled to the Deferred Consideration.
28
13.8 If the Shareholders make any payment to the Purchaser or the Company in
relation to any Non-Tax Claim and the Purchaser or the Company
subsequently receives from a third party any amount referable to, or
any benefit which would not have been received but for the
circumstances giving rise to, the subject matter of that Claim, the
Purchaser shall, once it or the Company has received such amount or
benefit, immediately repay or procure the repayment to the Shareholders
of either:
(a) the amount of such receipt (after deducting an amount equal to
the reasonable costs of the Purchaser or the Company incurred
in recovering such receipt and any Taxation payable on it); or
if lesser
(b) the amount paid by the Shareholders.
14. CONDUCT OF NON-TAX CLAIMS
14.1 The Purchaser shall notify the Shareholders in writing of:
(a) any claim made against it by a third party which may give rise
to a Non-Tax Claim; and
(b) any claim the Company is entitled to bring against a third
party which claim is based on circumstances which may give
rise to a Non-Tax Claim.
14.2 The Purchaser shall procure that the conduct, negotiation, settlement
or litigation of the claim by or against such third party is, so far as
is reasonably practicable, carried out in accordance with the wishes of
the Shareholders and at their cost subject to their giving timely
instructions to the Purchaser and providing reasonable security for any
costs and expenses which might be incurred by the Purchaser or the
Company.
14.3 Subject to the provisions of clause 13.5(b) the Purchaser shall not be
liable for any delay in giving any notice under sub-clause 14.1 and
shall not by reason of such delay be precluded from bringing any such
Non-Tax Claim against the Shareholders.
14.4 The Purchaser shall provide and shall procure that the Company provides
to the Shareholders and the Shareholders' professional advisers
reasonable access to premises and personnel and to any relevant assets,
documents and records within their power, possession or control for the
purpose of investigating any Non-Tax Claim and enabling the
Shareholders to take the action referred to in sub-clauses 14.2 and
shall allow the Shareholders and their advisers to take copies of any
relevant documents or records at their expense.
29
15. GENERAL
15.1 ENTIRE AGREEMENT AND CONFLICTS
(a) This Agreement sets out the entire agreement and understanding
between the parties in respect of the subject matter of this
Agreement.
(b) The Purchaser acknowledges that it has entered into this
Agreement in reliance only upon the representations,
warranties and promises specifically contained or incorporated
in this Agreement and, save as expressly set out in this
Agreement, the Shareholders shall have no liability in respect
of any other representation, warranty or promise made prior to
the date of this Agreement unless it was made fraudulently.
15.2 CONTRACTS (RIGHTS OF THIRD PARTIES) XXX 0000
The Contracts (Rights of Third Parties) Act 1999 does not apply to this
Agreement.
15.3 ASSIGNMENT
(a) This Agreement shall be binding upon and enure for the benefit
of the successors in title of the parties but, except as set
out in sub-clause (b), shall not be assignable by any party
without the prior written consent of the other.
(b) The Purchaser may assign the benefit of this Agreement
(including, without limitation, the Warranties) to any member
of the same group of Companies as the Purchaser being a
successor in title or any subsequent purchaser of the Shares.
15.4 VARIATION
No purported variation of this Agreement shall be effective unless it
is in writing and signed by or on behalf of each of the parties.
15.5 EFFECT OF COMPLETION
Except to the extent already performed, all the provisions of this
Agreement shall, so far as they are capable of being performed or
observed, continue in full force and effect notwithstanding Completion.
15.6 INVALIDITY
To the extent that any provision of this Agreement is found by any
court or competent authority to be invalid, unlawful or unenforceable
in any jurisdiction, that provision shall be deemed not to be a part of
this Agreement, it shall not affect the enforceability of the remainder
of
30
this Agreement nor shall it affect the validity, lawfulness or
enforceability of that provision in any other jurisdiction.
15.7 RELEASES AND WAIVERS
(a) The rights, powers and remedies conferred on the Purchaser by
this Agreement and remedies available to it are cumulative and
are additional to any right, power or remedy which it may have
under general law or otherwise.
(b) The Purchaser may, in whole or in part, release, compound,
compromise, waive or postpone, in its absolute discretion, any
liability owed to it or right granted to it in this Agreement
by any other party or parties without in any way prejudicing
or affecting its rights in respect of that or any other
liability or right not so released, compounded, compromised,
waived or postponed.
(c) No single or partial exercise, or failure or delay in
exercising any right, power or remedy by the Purchaser shall
constitute a waiver by it of, or impair or preclude any
further exercise of, that or any right, power or remedy
arising under this Agreement or otherwise.
15.8 FURTHER ASSURANCE
After Completion, each party shall execute such documents and take such
steps as the other party may reasonably require to fulfil the
provisions of and to give to each party the full benefit of this
Agreement.
15.9 COUNTERPARTS
(a) This Agreement may be executed in any number of counterparts
and by the parties on separate counterparts, but shall not be
effective until each party has executed at least one
counterpart.
(b) Each counterpart, when executed, shall be an original of this
Agreement and all counterparts shall together constitute one
instrument.
15.10 TERMINATION
Without prejudice to any remedy available to any party arising out of
any outstanding breach of this Agreement on the part of any other
party, if this Agreement is terminated in accordance with its terms,
the following shall occur:
(a) the restrictions contained in sub-clause 15.11
(Confidentiality) and clause 16 (Announcements) shall continue
to apply; and
31
(b) except as referred to in sub-clause (a), all obligations of
the Purchaser under this Agreement shall cease.
15.11 CONFIDENTIALITY
(a) Except as referred to in sub-clause (b), each party shall
treat as strictly confidential all information received or
obtained as a result of entering into or performing this
Agreement which relates to the provisions or subject matter of
this Agreement, to any other party or the negotiations
relating to this Agreement.
(b) Any party may disclose information which would otherwise be
confidential if and to the extent:
(i) it is required to do so by law or any securities
exchange or regulatory or governmental body to which
it is subject wherever situated;
(ii) it considers it necessary to disclose the information
to its professional advisers, auditors and bankers
provided that it does so on a confidential basis;
(iii) the information has come into the public domain
through no fault of that party; or
(iv) each party to whom it relates has given its consent
in writing.
15.12 SET-OFF
In addition to all rights and remedies that the Purchaser may have, the
Purchaser shall be entitled to set off the amount of any Claim against
any sum due from it to the Shareholders under this Agreement.or any
other agreement in the agreed form. This contractual right of set off
shall extend to the Purchaser the right to cancel all or any of the
Consideration Stock, the Retained Stock subject to the provisions of
Clause 13 or the Deferred Consideration and in the case of any such
Deferred Consideration not issued or allotted hereunder the right to
cancel or extinguish conditional rights of allotment.
16. ANNOUNCEMENTS
16.1 Except as referred to in sub-clause 16.2, no announcement concerning
the terms of this Agreement shall be made by or on behalf of any of the
parties without the prior written consent of the others, such consent
not to be unreasonably withheld or delayed.
16.2 Any announcement or circular required to be made or issued by any party
by law or under the regulations of the SEC or other regulatory body may
be made or issued by that party without consent if it has first sought
consent and given the other parties a reasonable opportunity to
32
comment on the subject matter and form of the announcement or circular
(given the time scale within which it is required to be released or
despatched).
17. COSTS AND EXPENSES
17.1 The Purchaser shall contribute to the reasonable professional costs
incurred by the Company in the preparation, execution and
implementation of this Agreement up to a maximum aggregate of
(pound)50,000.
17.2 Except as set out in sub-clause 17.1, sub-clause 17.3 and sub-clause
15.10 (Termination) each party shall bear its own costs and expenses
incurred in the preparation, execution and implementation of this
Agreement.
17.3 The Purchaser shall pay all stamp and other transfer duties and
registration fees applicable to any document to which it is a party and
which arise as a result of or in consequence of this Agreement.
18. NOTICES
18.1 Any notice to a party under this Agreement shall be in writing signed
by or on behalf of the party giving it and shall, unless delivered to a
party personally, be left at, or sent by prepaid first class post,
prepaid recorded delivery or facsimile to the address of the party as
set out on page 1 and in schedule 1 of this Agreement or as otherwise
notified in writing from time to time.
18.2 Except as referred to in sub-clauses 18.3 and 18.4, a notice shall be
deemed to have been served:
(a) at the time of delivery if delivered personally:
(i) 48 hours after posting in the case of an address in
the United Kingdom and 96 hours after posting for any
other address;
(ii) 2 hours after transmission if served by facsimile on
a business day prior to 3pm or in any other case at
10 am on the business day after the date of despatch.
18.3 If the deemed time of service is not during normal business hours in
the country of receipt, the notice shall be deemed served at or, in the
case of faxes, two hours after the opening of business on the next
business day of that country.
18.4 The deemed service provisions set out in sub-clause 18.2 do not apply
to:
33
(a) a notice served by post, if there is a national or local
suspension, curtailment or disruption of postal services which
affects the collection of the notice or is such that the
notice cannot reasonably be expected to be delivered within 48
hours or 96 hours (as appropriate) after posting; and
(b) a notice served by facsimile, if, before the time at which the
notice would otherwise be deemed to have been served, the
receiving party informs the sending party that the notice has
been received in a form which is unclear in any material
respect, and, if it informs the sending party by telephone, it
also despatches a confirmatory facsimile within two hours.
18.5 In proving service it will be sufficient to prove:
(a) in the case of personal service, that it was handed to the
party or delivered to or left in an appropriate place for
receipt of letters at its address;
(b) in the case of a letter sent by post, that the letter was
properly addressed, stamped and posted;
(c) in the case of facsimile, that it was properly addressed and
despatched to the number of the party.
18.6 A party shall not attempt to prevent or delay the service on it of a
notice connected with this Agreement.
19. GOVERNING LAW AND JURISDICTION
19.1 This Agreement shall be governed by and construed in accordance with
English law.
19.2 Each of the parties irrevocably submits for all purposes in connection
with this Agreement to the non-exclusive jurisdiction of the courts of
England.
THIS AGREEMENT has been executed and delivered as a deed on the date appearing
at the head of page 1.
34
SCHEDULE 1
THE SHAREHOLDERS
PART 1
THE NON-EMPLOYEE SHAREHOLDERS
NAME ADDRESS NO. OF SHARES IN THE CONSIDERATION STOCK ISSUED AT
COMPANY COMPLETION
Xxxxxxx Xxxxx 00 Xxxxx Xxxxxx, 2,000
Xxxxxxxxx
XX00 0XX 2,156 shares
Xxxxxxx Xxxxxxx Xxxxx 943 Manor Way, Los 20,000
Xxxxx, XX00000 XXX 21,561 shares
Xxxx Xxxxx 000 Xxxxx Xxx, 9,200
Xxx Xxxxx,
XX00000 XXX 9,918
Xxxxx Xxxx 5, Bird Mews, 1,000
Xxxxxxxxx,
Xxxxx XX00 0XX 1,078 shares
Xxxxxx Xxxxxx 00 Xxxxx Xxxxx, 1,000
Lychpit,
00
Xxxxxxxxxxx,
Xxxxxxxxx XX00 0XX 1,078 shares
SCM Microsystems Limited Shuttle House, 22,800
Xxxxxxxx Xxx,
Xxxxxxxx Xxxx,
Xxxxxxxxx, Xxxxx XX00 0XX 24,579 shares
--------------------------------------
TOTAL 60,370 shares
--------------------------------------
PART 2
THE EMPLOYEE SHAREHOLDERS
CONSIDERATION STOCK
NAME ADDRESS NO. OF SHARES ISSUED AT COMPLETION
Xxxxx Xxxxxxxx 4 Green Xxxxx Close, 8,000 1,725 shares
Xxxxxxxxxx Xxxx,
Xxxxxxxxxx,
Xxxxx XX00 0XX
Xxxx Xxxxx 17 The Hatches, 6,000 1,294 shares
Xxxxxxx Xxxxx,
Xxxxxxxxx, Xxxxxx
XX00 0XX
Xxxx Xxxxx 0 Xxxxxxx Xxxxx, 4,000 862 shares
Tilehurst, Reading,
Berks RG31 5LJ
Xxxxxxx Xxxxxxx 113 Juniper Birch 3,000 647 shares
Hill, Bracknell,
RG142 7ZF
Xxxxxx Xxxxx 00 Xxxxxxxxx Xxxxx, 10,000 2,156shares
Xxxxxxxxx Xxxx XX00 0XX
Xxxxx Xxxxx 35 Leyland Gardens, 2,000 431 shares
Shinfield, Xxxxxxx,
Xxxxx XX0 0XX
36
Xxxxx Xxxxxx 7 Coulsden Rise, 15,000 3,234 shares
Xxxxxxxx, Xxxxxx
XX0 0XX
Tiel Xxxxxxxxx 00 Xxxxxx Xxxx, 8,000 1,725 shares
Xxxxxxxxx, Xxxxx XX00 0XX
Xxxx Hayesmore 22 Hill Brow, 2,000 431 shares
Xxxxxxx, Xxxxx XX0 0XX
Xxxxxxxxxxx Xxxxxxxxx 2 Hazelbank, 2,000 431 shares
Xxxxxxxxxxxxx, Xxxxx
XX00 0XX
--------------------------------------
TOTAL 12,936 shares
--------------------------------------
37
PART 3
EMPLOYEE SHAREHOLDERS
CONDITIONAL ALLOTMENT DATE % OF DEFERRED CONSIDERATION PERCENTAGE
AVAILABLE FOR ALLOTMENT
CALCULATED PURSUANT TO
CLAUSE 6
06/10/2000 30%
06/04/2001 16.7% As set out in Part 4 of
Schedule 1 Column 3
06/10/2001 16.7%
06/04/2002 16.6%
38
PART 4
THE PROPORTIONS OF CONSIDERATION STOCK FOR WHICH THE EMPLOYEE
SHAREHOLDERS HAVE THE CONDITIONAL RIGHT TO SUBSCRIBE
NAME ADDRESS PERCENTAGE OF DEFERRED
CONSIDERATION AVAILABLE TO EACH
EMPLOYEE SHAREHOLDER UPON EACH
CONDITIONAL ALLOTMENT
Xxxxx Xxxxxxxx 4 Green Xxxxx Close, 13.33
Xxxxxxxxxx Xxxx,
Xxxxxxxxxx, Xxxxx
XX00 0XX
Xxxx Xxxxx 17 The Hatches, 00
Xxxxxxx Xxxxx,
Xxxxxxxxx, Xxxxxx
XX00 0XX
Xxxx Xxxxx 0 Xxxxxxx Xxxxx, 0.000
Xxxxxxxxx, Xxxxxxx,
Xxxxx XX00 0XX
Xxxxxxx Xxxxxxx 113 Xxxxxxx Xxxxx 0
Xxxx, Xxxxxxxxx,
XX000 0XX
Xxxxxx Xxxxx 00 Xxxxxxxxx Xxxxx, 00.000
Xxxxxxxxx Xxxx XX00 0XX
Xxxxx Xxxxx 00 Xxxxxxx Xxxxxxx, 0.00
Xxxxxxxxx, Xxxxxxx,
Xxxxx XX0 0XX
Xxxxx Xxxxxx 0 Xxxxxxxx Xxxx, 00
Xxxxxxxx, Xxxxxx XX0 0XX
Tiel Holdstock 00 Xxxxxx Xxxx, 00.00
00
Xxxxxxxxx, Xxxxx XX00 0XX
Xxxx Hayesmore 00 Xxxx Xxxx, 0.00
Xxxxxxx, Xxxxx XX0 0XX
Xxxxxxxxxxx Xxxxxxxxx 2 Hazelbank, 3.33
Xxxxxxxxxxxxx,
Xxxxx XX00 0XX
-----------------------------------------
TOTAL 100
-----------------------------------------
40
SCHEDULE 2
(Information concerning the Company)
REGISTERED NUMBER 3786531
DATE OF INCORPORATION 10 June 1999
PLACE OF INCORPORATION Cardiff
ADDRESS OF REGISTERED OFFICE Xxxxxxxxx Xxxxxxxxx, North
Lodge, Xxxxxxxxxx Xxxx,
Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxx XX0 0XX
CLASS OF COMPANY Private
AUTHORISED SHARE CAPITAL (pound)5,000,000
ISSUED SHARE CAPITAL (pound)58,000
LOAN CAPITAL There is no loan capital
DIRECTORS
FULL NAME USUAL RESIDENTIAL ADDRESS NATIONALITY
Xxxxx Xxxxxx 0 Xxxxxxxx Xxxx, Xxxxxxx
Xxxxxxxx, Xxxxxx XX0 0XX
Xxxx Xxxxx 000 Xxxxx Xxx, Xxx Xxxxx, Xxxxxxx
XX00000 XXX
Xxxxxx Xxxxxx 00 Xxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxx
Xxxxx XX00 0XX
SECRETARY
FULL NAME USUAL RESIDENTIAL ADDRESS
Xxxxx Xxxxxxxxx
ACCOUNTING REFERENCE DATE 30 April
TAX RESIDENCE England and Wales
41
SCHEDULE 3
The Non-Tax Warranties
THE SHAREHOLDERS
1. CAPACITY
1.1 Each Shareholder has the requisite power and authority to enter into
and perform this Agreement.
1.2 No Shareholder is bankrupt, has proposed a voluntary arrangement or has
made or proposed any arrangement or composition with his creditors or
any class of his creditors.
1.3 This Agreement constitutes and imposes valid legal and binding
obligations on each Shareholder fully enforceable in accordance with
its terms.
2. ARRANGEMENTS BETWEEN THE COMPANY AND SHAREHOLDER ASSOCIATES
There are no contracts, arrangements or liabilities, actual or
contingent, outstanding or remaining in whole or in part to be
performed between the Company and any Shareholder Associate.
3. OTHER INTERESTS OF ANY SHAREHOLDER ASSOCIATE
No Shareholder other than SCM Microsystems Limited has or intends to
acquire any interest, direct or indirect, in any business which has a
close trading relationship with or which competes or is likely to
compete with any business now carried on by the Company and, so far as
the Shareholders are aware, no Shareholder Associate has or intends to
do so.
SHARE CAPITAL
4. COMPANY
4.1 The Shares constitute the entire issued and allotted share capital of
the Company and are fully paid or credited as fully paid.
4.2 Apart from this Agreement, there is no agreement, arrangement or
commitment outstanding which calls for the allotment, issue or transfer
of, or accords to any person the right to call for the allotment, issue
or transfer of, any share or loan capital of the Company.
4.3 None of the Shares was, or represents assets which were, the subject of
a transfer at an undervalue, within the meaning of Sections 238 or 339,
Insolvency Xxx 0000, within the past 5 years.
4.4 The Company has not at any time:
42
(a) reduced its share capital;
(b) redeemed any share capital;
(c) purchased any of its shares; or
(d) forfeited any of its shares.
5. SUBSIDIARIES
5.1 There are no Subsidiaries of the Company.
5.2 The Company does not have, and has never had, a participating interest
(as defined in Section 260 of the Act) in any undertaking nor has it
agreed to acquire such an interest.
5.3 The Company does not hold or is not liable on any share or relevant
security.
CORPORATE MATTERS
6. INSOLVENCY OF THE COMPANY
6.1 No order has been made, no resolution has been passed, no petition
presented, no meeting convened for the winding up of the Company or for
a provisional liquidator to be appointed in respect of the Company
6.2 No administration order has been made and no petition for one has been
presented in respect of the Company.
6.3 No receiver or administrative receiver has been appointed in respect of
the Company or any of its assets.
6.4 The Company is not insolvent, has failed or is unable to pay, or has no
reasonable prospect of being unable to pay, any of its debts as they
fall due, as those expressions are defined in Xxxxxxx 000, Xxxxxxxxxx
Xxx 0000.
6.5 No voluntary arrangement has been proposed under Xxxxxxx 0, Xxxxxxxxxx
Xxx 0000 in respect of the Company and the Company has not made or
proposed any arrangement or composition with its creditors or any class
of them.
6.6 No distress, execution or other process has been levied on the
Company's assets or action taken to repossess goods in the possession
of the Company.
6.7 No unsatisfied judgement is outstanding against the Company and no
demand has been served on the Company under Section 123(1)(a),
Insolvency Xxx 0000.
43
6.8 No event analogous to any referred to in sub-paragraphs 6.1 to 6.7 has
occurred anywhere in the world.
7. STATUTORY BOOKS AND DOCUMENTS FILED
7.1 The statutory books, including all registers and minute books, of the
Company have been properly kept and contain an accurate and complete
record of the matters with which those books should deal.
7.2 All documents which should have been delivered by the Company to the
Registrar of Companies are complete and accurate and have been properly
so delivered.
7.3 A copy of the memorandum and articles of association of the Company is
contained in the Disclosure Letter and has embodied in it or annexed to
it a copy of each resolution as referred to in Section 380, Companies
Xxx 0000, and is accurate and complete in all respects.
7.4 Since the Accounts Date the members of the Company in general meeting,
or of any class of them, have not passed any resolution other than
resolutions relating to the ordinary business of annual general
meetings.
INFORMATION
8. ACCURACY AND ADEQUACY OF INFORMATION
8.1 The information contained in schedules 1, 2 and 4 to this Agreement is
accurate and complete.
8.2 The information contained in the Disclosure Letter and all written
information supplied to the Purchaser or its advisers by or on behalf
of the Shareholders or any of their advisers or by the Company is
complete and accurate and is not misleading because of any omission or
ambiguity or for any other reason and where the information is
expressed as an opinion, it is truly and honestly held and not given
casually, recklessly or without due regard for its accuracy.
8.3 So far as the Shareholders with the exception of SCM Microsystems Ltd
are aware, there is no fact or circumstance relating to the business
and affairs of the Company which, if Disclosed to the Purchaser or any
of its advisers, might reasonably be expected to influence the decision
of the Purchaser to purchase the Shares on the terms contained in this
Agreement and which has not been so Disclosed.
MANAGEMENT ACCOUNTS
9. PREPARATION AND CONTENTS OF THE MANAGEMENT ACCOUNTS
(a) The Management Accounts:
44
(i) contain full provision or reserve for all liabilities
and for all capital and revenue commitments of the
Company as at the Accounts Date;
(ii) disclose all the assets of the Company as at the
Accounts Date and none of the values placed in the
Accounts on any of those assets was in excess of its
market value at the Accounts Date;
(iii) make full provision for bad and doubtful debts;
(iv) do not include any figure which is referable to the
value of an intangible asset; and
(v) make full provision for depreciation of the fixed
assets of the Company having regard to their original
cost and life.
10. ACCOUNTING RECORDS
10.1 The accounting records of the Company comply with the requirements of
Sections 221 and 222 of the Act, do not contain or reflect any material
inaccuracy or discrepancy and present and reflect in accordance with
generally accepted accounting principles and standards the financial
position of and all transactions entered into by the Company or to
which it has been a party.
10.2 All relevant financial books and records of the Company are in its
possession or otherwise under its direct control.
10.3 Where any of the records of the Company are kept on computer, the
Company:
(a) is the owner of all hardware and all software necessary to
enable it to use the records as they have been used in its
business to the date of this Agreement and to Completion;
(b) does not share any hardware or software relating to the
records with any person; and
(c) maintains adequate back up records and support in the event of
any fault or failure of such computer hardware and software.
11. EURO COMPLIANCE
11.1 The products, systems and services are "Euro Compliant" and are capable
of satisfying the legal requirements applicable to the common currency
adopted or to be adopted by the relevant participating member states of
the European Union and known as the "Euro" as set out in the European
Commission Regulation number 1103.97 ("THE REGULATION"). For the
purposes of this warranty "Euro Compliant"
45
shall mean the ability of the systems to perform using the Euro and to
allow any currency recognised by the systems, including but not limited
to the Euro and all other currencies belonging to and adopted by full
member states of the European Union, to be converted to other
currencies, and in particular (but without limitation) to:
(a) perform all monetary functions in Euros;
(b) process multiple currencies and in particular the dual
currencies during the transition phase set out in the
Regulation of countries adopting the Euro;
(c) recognise the industry standard keyboard configurations or
key-strokes and screen layouts for the Euro symbol;
(d) correctly implement the conversion and rounding requirements
(including the triangulation rule) set out in the Regulation;
and
(e) interface with other Euro Compliant products.
11.2 Neither the Company nor the Shareholders have any knowledge that the
introduction of the Euro will or may cause any agreement, arrangement
or obligation to which the Company is a party to terminate or to be
capable of termination or will or may alter the terms of or excuse or
discharge performance of such an agreement.
12. EVENTS SINCE THE ACCOUNTS DATE
12.1 Since the Accounts Date there has been no material change in:
(a) the financial or trading position or prospects of the Company;
(b) the value or state of assets or amount or nature of
liabilities as compared with the position disclosed in the
Management Accounts.
12.2 The Company has since the Accounts Date carried on its business in the
ordinary course and without interruption, so as to maintain it as a
going concern and paid its creditors in the ordinary course and within
the credit periods agreed with such creditors.
12.3 Since the Accounts Date no supplier of the Company has ceased or
restricted supplies or threatened so to do, there has been no loss or
material curtailment of the business transacted by the Company with any
customer which at any time represented 10 per cent or more of the
turnover of the Company and the Shareholders are not aware of any
circumstances likely to give rise to any of the above.
12.4 Since the Accounts Date the Company has not:
(a) incurred or committed to incur:
46
(i) material capital expenditure exceeding(pound)5,000;
or
(ii) any liability whether actual or contingent except for
full value or in the ordinary course of business;
(b) acquired or agreed to acquire:
(i) any asset for a consideration higher than its market
value at the time of acquisition or otherwise than in
the ordinary course of business; or
(ii) any business or substantial part of it or any share
or shares in a body corporate;
(c) disposed of or agreed to dispose of, any of the assets of the
Company, except in the ordinary course of business and for
full value;
(d) repaid wholly or in part any loan except upon the due date or
dates for repayment;
(e) issued or allotted share or loan capital, increased its
authorised share capital, purchased or redeemed any shares,
reduced or re-organised its share capital or agreed to do so;
or
(f) declared or paid any distribution of profit.
12.5 None of the debts included in the Management Accounts or any of the
debts subsequently arising have been the subject of factoring by the
Company and the Shareholders are not aware of any circumstances which
could result in any presently outstanding debt in excess of
(pound)1,000 not being paid in full.
FINANCIAL
13. FINANCIAL COMMITMENTS AND BORROWINGS
13.1 Complete and accurate details of all overdraft, loan and other
financial facilities available to the Company and the amounts
outstanding under them at the close of business on the day preceding
the date of this Agreement are set out in the Disclosure Letter and
none of the Shareholders or the Company has done anything, or omitted
to do anything, as a result of which the continuance of any of those
facilities might be affected or prejudiced.
13.2 The Company is not a party to, and has not agreed to enter into, any
lending, or purported lending, agreement or arrangement (other than
agreements to give credit in the ordinary course of its business).
13.3 The Company is not exceeding any borrowing limit imposed upon it by its
bankers, other lenders, its articles of association or otherwise nor
47
has the Company entered into any commitment or arrangement which might
lead it so to do.
13.4 No overdraft or other financial facilities available to the Company are
dependent upon the guarantee of or security provided by any other
person.
13.5 No event has occurred or been alleged which is or, with the passing of
any time or the giving of any notice, certificate, declaration or
demand, would become an event of default under, or breach of, any of
the terms of any loan capital, borrowing, debenture or financial
facility of the Company or which would entitle any person to call for
repayment prior to normal maturity.
13.6 The Company is not, or has agreed to become, bound by any guarantee,
indemnity, surety or similar commitment.
13.7 The Company has no credit cards in issue in its own name or that of any
officer or employee of the Company or any person connected with any
officer or employee.
13.8 The Company has not received any grants, allowances, loans or financial
aid of any kind from any government departmental or other board, body,
agency or authority which may become liable to be refunded or repaid in
whole or in part.
13.9 The Company has not engaged in financing of a type which is not
required, or has not been, shown or reflected in the Management
Accounts.
14. WORKING CAPITAL
Having regard to existing bank and other facilities available to it,
the Company has sufficient working capital for the purposes of
continuing to carry on its business, in its present form and at its
present level of turnover, for the period of 12 months after
Completion.
15. INSURANCES
15.1 The Company maintains, and at all material times has maintained,
adequate insurance cover against all risks normally insured against by
companies carrying on a similar business, for the full replacement or
reinstatement value of its business and assets, and in particular has
maintained product liability, professional indemnity insurance and all
insurance required by statute and insured against loss of profits for a
period of not less than 6 months and for loss of rent for a period of
not less than 3 years.
15.2 The Policies are valid and enforceable and all premiums due have been
paid. There are no outstanding claims or circumstances likely to give
rise to a claim under the Policies or which would be required to be
48
notified to the insurers and nothing has been done or omitted to be
done which has made or could make any Policy void or voidable or as a
result of which the renewal of any Policy might be refused or the
premiums due in respect of them may be liable to be increased.
15.3 There are no claims outstanding or threatened, or so far as the
Shareholders are aware, pending, against the Company which are not
fully covered by insurance.
TRADING AND CONTRACTS
16. CONTRACTS AND COMMITMENTS
16.1 All contracts, agreements, transactions, obligations, commitments,
understandings or arrangements requiring in relation to its discharge
any payment in excess of (pound)5,000 to which the Company is a party
are Disclosed in the Disclosure Letter.
16.2 The Company is not a party to any agreement, arrangement or commitment
which:
(a) has or is expected to have material consequences in terms of
expenditure or revenue;
(b) relates to matters outside the ordinary business of the
Company or was not entered into on arms' length terms;
(c) can be terminated in the event of any change in the underlying
ownership or control of the Company or would be materially
affected by such change;
(d) cannot readily be fulfilled or performed by it on time; or
(e) cannot be terminated, without giving rise to any liabilities
on the Company, by the Company giving 3 months' notice or
less.
16.3 The Company:
(a) has no outstanding bid, tender, sale or service proposal which
is material in relation to its business or which, if accepted,
would be likely to result in a loss;
(b) or shareholders are not aware of any actual, potential or
alleged breach, invalidity, grounds for termination, grounds
for rescission, grounds for avoidance or grounds for
repudiation of, any contract to which the Company is a party;
or
(c) has not granted any power of attorney or other such authority
(whether express or implied) which is still outstanding.
49
17. TERMS OF TRADE
The Company has not given any guarantee or warranty (other than any
implied by law) or made any representation in respect of any product or
services sold or supplied by it nor has it accepted any liability to
service, maintain, repair or otherwise do or refrain from doing
anything in relation to such goods or services after they have been
sold or supplied by it except for those contained in its standard
conditions of trading, complete and accurate copies of which are
contained in the Disclosure Letter.
18. PRODUCT LIABILITY
So far as the Shareholders are aware the Company has not manufactured,
sold or provided any product or service which does not in every respect
comply with all applicable laws, regulations or standards or which is
defective or dangerous or not in accordance with any representation or
warranty, express or implied, given in respect of it.
19. LICENCES AND CONSENTS
19.1 Complete and accurate details of all licences, consents, permissions,
authorisations and approvals required by the Company for the carrying
on of its business are contained in the Disclosure Letter and all of
them have been obtained by the Company and are in full force and
effect.
19.2 So far as the Shareholders are aware, all reports, returns and
information required by law or as a condition of any licence, consent,
permission, authorisation or approval to be made or given to any person
or authority in connection with the business of the Company have been
made or given to the appropriate person or authority and there are no
circumstances which indicate that any licence, consent, permission,
authorisation or approval might not be renewed in whole or in part or
is likely to be revoked, suspended or cancelled or which may confer a
right of revocation, suspension or cancellation.
20. TRADING PARTNERS
20.1 The Company does not act or carry on business in partnership with any
other person or is a member of any corporate or unincorporated body,
undertaking or association.
20.2 The Company is not a party to any joint venture agreement or
arrangement or any agreement or arrangement under which it is to
participate with any other person in any business.
20.3 The Company is not a party to any agency, distributorship, licence or
management agreement or is a party to any contract or arrangement which
restricts its freedom to carry on its business in such manner as it
50
may think fit in any part of the world.
20.4 The Company has no branch, agency, place of business or establishment
outside the United Kingdom.
21. COMPETITION AND TRADE REGULATION LAW
21.1 The Company is not and has not been a party to, is not, has not been
concerned in any agreement or arrangement, or is not conducting or has
not conducted itself, whether by omission or otherwise, in a manner
which:
(a) contravenes, is invalidated in whole or in part by or has
been, or should have been, registered under the Restrictive
Trade Practices Acts 1976 and 1977;
(b) contravenes the provisions of the Resale the Purchasers Xxx
0000, the Trade Description Acts 1968 and 1972, the Fair
Trading Act 1973 or any secondary legislation made under
either of those Acts;
(c) infringes Articles 81 or 82 of the EC Treaty or any regulation
or directive made under it or any other anti-trust or similar
legislation in any jurisdiction in which the Company has
assets or carries on or intends to carry on business or where
its activities may have any effect; or
(d) infringes Chapter 1 or Chapter 2 of the Competition Xxx 0000
or any secondary legislation made under it.
21.2 The Company has not:
(a) given an undertaking to, or is subject to, any order of or
investigation by, or has received any request for information
from;
(b) received, nor so far as the Shareholders are aware, is it
likely to receive any process, notice or communication, formal
or informal by or on behalf of;
(c) been or is a party to, or is or has been concerned in, any
agreement or arrangement in respect of which an application
for negative clearance and/or exemption has been made to
the Office of Fair Trading, the Competition Commission, the Secretary
of State, the European Commission or any other governmental or other
authority, department, board, body or agency of any country having
jurisdiction in anti-trust or similar matters in relation to its
business.
51
22. COMPLIANCE WITH LAW
22.1 The Company has not committed or is liable for, and no claim has been
or, so far as the Shareholders are aware, will be made that the Company
has committed or is liable for, any criminal, illegal, unlawful or
unauthorised act or breach of any obligation or duty whether imposed by
or pursuant to statute, contract or otherwise.
22.2 The Company has not received notification that any investigation or
inquiry is being, or has been, conducted by, or received any request
for information from any governmental or other authority, department,
board, body or agency in respect of the affairs of the Company and, so
far as the Shareholders are aware, there are no circumstances which
would give rise to such investigation, inquiry or request.
22.3 None of the activities, contracts or rights of the Company is ultra
xxxxx, unauthorised, invalid or unenforceable or in breach of any
contract or covenant and all documents in the enforcement of which the
Company may be interested are valid.
23. LITIGATION AND DISPUTES
23.1 Except for actions to recover any debt incurred in the ordinary course
of the business owed to the Company where each individual debt and its
costs outstanding amounts to less than (pound)1,000:
(a) The Company is not nor is any person for whose acts the
Company may be liable engaged in any litigation, arbitration,
administrative or criminal proceedings, whether as plaintiff,
defendant or otherwise;
(b) no litigation, arbitration, administrative or criminal
proceedings by or against the Company or any person for whose
acts the Company may be liable are threatened or expected and,
as far as the Shareholders are aware, none are pending; and
(c) there are no facts or circumstances likely to give rise to any
litigation, arbitration, administrative or criminal
proceedings against the Company or any person for whose acts
the Company may be liable.
23.2 The Company is not subject to any order or judgement given by any court
or governmental or other authority, department, board, body or agency
or has not been a party to any undertaking or assurance given to any
court or governmental or other authority, department, board, body or
agency which is still in force, nor are there any facts or
circumstances likely to give rise to the Company becoming subject to
such an order or judgement or to be a party to any such undertaking or
assurance.
52
ASSETS
24. OWNERSHIP AND CONDITION OF ASSETS
24.1 Each of the assets included in the Management Accounts or acquired by
the Company since the Accounts Date (other than the Properties and
current assets subsequently disposed of or realised in the ordinary
course of business) is owned both legally and beneficially by the
Company free from any third party rights and, if capable of possession,
is in the possession of the Company.
24.2 Each item of plant and machinery, vehicle and office equipment used by
the Company is:
(a) in good repair and condition, regularly maintained and
certified safe and without risk to health when used;
(b) capable and will remain capable of doing the work for which it
was designed or purchased until the time when (on the basis of
depreciation adopted in the Management Accounts) it will have
been written down to a nil value;
(c) not surplus to requirements; and
(d) not expected to require replacement or additions within 6
months of Completion.
24.3 The Company has not acquired, or agreed to acquire, any asset on terms
that title to that asset does not pass until full payment is made or
all indebtedness incurred in connection with the acquisition is
discharged.
24.4 The assets owned by the Company, together with all assets held under
hire purchase, lease or rental agreements which are contained in the
Disclosure Letter, comprise all assets necessary for the continuation
of the business of the Company as it is currently carried on.
25. STOCK
At Completion, other than where provision has been made in the
Management Accounts, no more than 5% of the stocks of materials of the
Company is redundant, obsolete, obsolescent or defective.
26. CHARGES AND ENCUMBRANCES OVER ASSETS
26.1 No option, right to acquire, mortgage, charge, pledge, lien (other than
a lien arising by operation of law in the ordinary course of trading)
or other form of security or encumbrance or equity on, over or
affecting the shares or the whole or any part of the undertaking or
assets of the Company is outstanding and, apart from this Agreement,
there is no
53
agreement or commitment to give or create any of them and no claim has
been made by any person to be entitled to any of them.
26.2 No floating charge created by the Company has crystallised and there
are no circumstances likely to cause such a floating charge to
crystallise.
26.3 The Company has not received notice from any person intimating that it
will enforce any security which it may hold over the assets of the
Company, and there are no circumstances likely to give rise to such a
notice.
26.4 All charges in favour of the Company have, if required, been registered
in accordance with the provisions of the Companies Xxx 0000, Part XII.
27. INTELLECTUAL PROPERTY
27.1 The Company is the sole legal owner with full title guarantee of the
Intellectual Property used in connection with its business and has
absolute unencumbered title to such Intellectual Property and such
Intellectual Property is not subject to any outstanding rights of any
third party nor does the Intellectual Property infringe any third
party's Intellectual Property rights or rights in know how of any
nature whatsoever or to any option or agreement for licence or purchase
in favour of any person nor do any circumstances exist whereby any
person may claim entitlement to such Intellectual Property in
competition with the Company and without prejudice to the generality of
the foregoing no employee of the Company is entitled to any award or
compensation in respect thereof whether under the Patents Xxx 0000 or
otherwise.
27.2 All Marks and Patents (if any) used by the Company in the course of its
business are registered in the name of the Company as proprietor.
27.3 As regards all Marks owned by the Company, the Company has paid all
renewal and other fees or expenses which may be necessary to ensure the
continuance in force of the registrations of the said Marks.
27.4 All Know-How used by the Company in connection with its business is its
sole property and the Company has neither disclosed to nor licensed any
third party to use such Know-How.
27.5 None of the operations of the Company infringe any industrial property
rights or intellectual property rights of any third party and the
Company is not liable to make any payment of any royalty or fee in
respect of the same.
27.6 The Company does not use on its letterheads, business cards, circulars,
advertisements, brochures, sales literature or vehicles or otherwise
carry on business under a name other than its corporate name.
54
27.7 None of the Intellectual Property used by the Company in its business
has been assigned or is being used, claimed, opposed or attacked by any
person nor so far as the Shareholders are aware are the Company's
rights thereto being infringed.
27.8 The Company has not entered into any agreement which restricts the
disclosure or use by the Company of any Know-how or technical
information or other Intellectual Property and there has not been any
infringement by any third party of any of the rights in confidential
information or other Intellectual Property held by the Company.
27.9 The Company owns all Intellectual Property with full title guarantee.
27.10 The Intellectual Property is free from encumbrances and /or any third
party interests.
27.11 The Company has quiet enjoyment of all Intellectual Property at the
date hereof.
27.12 No part of any of the Intellectual Property has except in the ordinary
course of business been licensed, transferred, assigned, charged or
otherwise encumbered or dealt with.
27.13 There is no third party Software licensed to the Company which the
Company needs for its business.
27.14 No part of any of the Software is manufactured, supplied or licensed by
the Company under any licence, consent or permission from any third
party.
27.15 In respect of any part of any Intellectual Property written, developed
or originated by an employee or director of the Company:
(a) all such Intellectual Property was written, developed or
originated by such employee in the course of his employment by
the Company; and
(b) the contract of employment between the Company and such
employee provides for the Company to own all rights in and to
such Software; and
(c) if sub-paragraphs 28.15(a) and (b) do not both apply, such
employee has expressly assigned as beneficial owner to the
Company all Intellectual Property.
27.16 None of the processes employed, or products or services dealt in, by
the Company infringes any rights of any third party relating to
intellectual property nor makes the Company liable to pay a fee or
royalty and no claims have been made, threatened or so far as the
Shareholders are aware are pending, in relation to any Intellectual
Property against the Company.
55
28. DATA PROTECTION ACT
28.1 The Company has complied in all respects with the provisions of the
Data Protection Act 1984 (as amended) and the Data Protection Xxx 0000
("DPA") and the principles contained in the DPA.
28.2 Except as registered under the DPA, the Company has not held or
processed any personal data or is exempt from registering under the DPA
under one of the exemptions contained in the DPA.
28.3 Insofar as personal data are subject to registration:
(a) the Company has at all times maintained full and accurate
registration under the DPA and has operated wholly within the
terms of such registrations;
(b) all personal data are accurate and up to date;
(c) personal data have not been used by the Company for an
unspecified or unlawful purpose nor has there been any
disclosure thereof outside the terms of the Company's
registration.
28.4 The Company has not been served with any notice under the DPA nor are
there any circumstances which might give rise to the Company being
served with such a notice in the future
EMPLOYMENT
29. DIRECTORS AND EMPLOYEES
29.1 Complete and accurate details of the terms and conditions of employment
of all employees of the Company, including the date of commencement of
their continuous period of employment and any arrangements or
assurances (whether or not legally binding) in relation to their
employment, are contained in the Disclosure Letter.
29.2 The Company has maintained up-to-date, adequate and suitable records
regarding the service and terms and conditions of employment of each of
its employees.
29.3 The Company has maintained up-to-date adequate and suitable records for
the purposes of the Working Time Regulations and has complied with all
other obligations to its workers (as "workers" is defined in Regulation
2 of the Working Time Regulations) and there are no claims capable of
arising or pending or threatened by any officer or employee or former
officer or employee or the Health and Safety Executive or any local
authority Environmental Health Department or any trade union or
employee representative related to the Working Time Regulations.
56
29.4 The Company is not a party to any consultancy agreement, any agreement
for management services or any contract of services.
29.5 Since the Accounts Date there has been:
(a) no material alteration in the terms of employment or any
material change in the number of employees employed by the
Company; or
(b) no material increase in any fees, remuneration or benefits
paid or payable to any officer or employee of the Company, nor
are any negotiations for any such increase current.
29.6 No officer or employee of the Company is remunerated on a
profit-sharing, bonus or commission basis.
29.7 Other than salary for the current month and accrued holiday pay, no
amount is owing to any present or former officer or employee of the
Company.
29.8 There is no share option or share incentive scheme in operation by or
in relation to the Company for any of its officers or employees nor is
the introduction of such a scheme been proposed.
29.9 The Company has at all relevant times complied with all its obligations
under statute and otherwise concerning the health and safety at work of
its employees and there are no claims capable of arising or pending or
threatened by any employee or third party in respect of any accident or
injury which are not fully covered by insurance.
29.10 Save as provided for or taken into account in the Management Accounts:
(a) no claim or liability to make any payment of any kind to any
person who is or has been an officer or employee has been
received or incurred by the Company whether under the
Employment Rights Xxx 0000, Sex Discrimination Xxx 0000, the
Race Relations Xxx 0000 and the Disability Discrimination Act
1995 or otherwise; and
(b) no gratuitous payment of a material amount has been made or
promised by the Company in connection with the actual or
proposed termination or suspension of employment or variation
of any contract of employment of any present or former officer
or employee.
29.11 No officer or employee of the Company has given notice or is under
notice of dismissal nor are there any service contracts between the
Company and its officers or employees which cannot be terminated by the
Company by 12 weeks notice or less without giving rise to a claim
57
for damages or compensation (other than a statutory redundancy
payment).
29.12 The Company has not, in contravention of the Act:
(a) entered into any arrangement involving the acquisition of
non-cash assets from or disposal to;
(b) granted any loan or quasi-loan to or entered into any
guarantee or credit transaction with; or
(c) provided any security in connection with any loan, quasi-loan
or credit transaction to or with
any director or person connected with a director within the meaning of
the Act.
30. INDUSTRIAL RELATIONS
30.1 The Company is not a party to any contract, agreement or arrangement
with any trade union or other body or organisation representing any of
its employees.
30.2 The Company has in relation to its officers and employees and former
officers and employees complied with all conditions of service, customs
and practices and, where relevant, all collective agreements,
recognition agreements workforce agreements and relevant agreements for
the time being.
30.3 Within the last 12 months, the Company has not:
(a) given notice of any redundancies to the Secretary of State,
started consultations with any appropriate representatives or
failed to comply with any obligation under the provisions of
Chapter II Trade Union and Labour Relations (consolidation)
Xxx 0000;
(b) been a party to any relevant transfer as defined in the
Transfer of Undertakings (Protection of Employment)
Regulations 1981 or has failed to comply with any duty to
inform and consult any appropriate representative under the
Regulations.
30.4 No dispute has arisen between the Company and a material number or
category of its employees nor are there any present circumstances known
to the Shareholders which are likely to give rise to any such dispute.
30.5 No training schemes, arrangements or proposals exist nor have there
been any such schemes, arrangements or proposals in the past in respect
of which a levy may become payable by the Company under the Industrial
Training Xxx 0000.
58
31. PENSIONS
31.1 Except as disclosed in the Disclosure Letter, the Company does not have
any plans, schemes or arrangements in relation to death, disability or
retirement of its employees or any of them.
31.2 In relation to each plan, scheme or arrangement disclosed in the
Disclosure Letter:
(a) complete and accurate details:
(i) of it (including, where appropriate, copies of all
trust deeds and rules together with copies of all
amending deeds and resolution and the latest
actuarial reports);
and
(ii) of the basis on which the Company makes, or is liable
to make, contributions to it
are contained in the Disclosure Letter.
(b) all contributions which are payable by the Company in respect
of any such plans, schemes or arrangements referred to above
and all contributions due from the employees of the Company as
members of such plans, schemes or arrangements have been duly
made and the Company has fulfilled all its obligations under
each of them.
PROPERTIES.
32. TITLE
32.1 The Property comprises all the properties presently owned, occupied,
held, controlled or otherwise used by the Company.
32.2 The Company occupies the Property under a licence to occupy contained
in a Business Sale Agreement dated 12 November 1999 between SCM
Microsystems Ltd (1) and Impleo Limited (2), the original of which is
in the possession of the Company.
32.3 So far as the Shareholders are aware, no person is in adverse
possession of any Property or has acquired or is acquiring any rights
or overriding interests (as defined by Section 70, Land Registration
Act 1925) adversely affecting any Property.
32.4 So far as the Shareholders are aware the Company has not had occasion
to make any claim or complaint in relation to any neighbouring property
or its use or occupation and there are no disputes, claims, actions,
demands or complaints in respect of any Property which are ongoing nor
are any disputes, claims, actions,
59
demands or complaints anticipated and no notices materially affecting
any Property have been given or received and not complied with.
33. ENCUMBRANCES
33.1 So far as the Shareholders are aware the Property is not subject to any
restrictive covenant, reservation, stipulation, easement, profits a
prendre, wayleave, licence, grant, restriction, overriding interest,
agreement for sale, estate contract, option, right of pre-emption or
other similar agreement or right vested in third parties.
33.2 Where sub-paragraphs 33.1 has been Disclosed against in the Disclosure
Letter, the obligations and liabilities imposed and arising under the
Disclosed matter have been fully observed and performed and any
payments in respect of it which are due and payable have been duly
paid.
34. PLANNING MATTERS
34.1 The use of each Property is a lawful and permitted use for the purposes
of the Planning Acts.
34.2 So far as the Shareholders are aware, building regulation consents have
been obtained with respect to all development, alterations and
improvements to the Property.
34.3 So far as the Shareholders are aware, all claims and liabilities under
the Planning Acts or any other legislation have been discharged and no
claim or liability, actual or contingent, is outstanding.
35. STATUTORY OBLIGATIONS
35.1 So far as the Shareholders are aware, the Company has complied with and
is continuing to comply with all applicable statutory and by-law
requirements with respect to the Property, and in particular with the
requirements as to fire precautions under the Fire Precautions Xxx 0000
and under the Public Health Acts, the Offices, Shops and Railway
Premises Xxx 0000, the Health and Safety at Work Xxx 0000, the
Xxxxxxxxx Xxx 0000 and the Shops Acts 1950 to 1956.
36. ADVERSE ORDERS
36.1 So far as the Shareholders are aware, there are no compulsory purchase
notices, orders or resolutions affecting the Property and there are no
circumstances likely to lead to any being made.
36.2 So far as the Shareholders are aware, there are no closing, demolition
or clearance orders, enforcement notices or stop notices affecting the
Property and there are no circumstances likely to lead to any being
made.
60
37. LEASEHOLD PROPERTIES
37.1 The Company has not in the past been the tenant of or guarantor of any
leasehold premises not listed in schedule 4 in respect of which any
obligations or liabilities could still accrue to the Company.
ENVIRONMENT
38. ENVIRONMENTAL MATTERS
38.1 In relation to its business, the Company holds and has since its
incorporation always held all Environmental Consents.
38.2 Complete and accurate details of all Environmental Consents held by the
Company are contained in the Disclosure Letter and are valid and
subsisting.
38.3 The Company has not received any notification that any Environmental
Consent it holds is or is likely to be modified, restricted or
withdrawn and no works or other upgrading or investment are or will be
necessary to secure compliance with or to maintain any such
Environmental Consent.
38.4 The Company has not breached the terms, conditions or provisions of any
Environmental Consent.
38.5 The Company has not received any notification or informal indication
that further Environmental Consents will be required under
Environmental Law in order for it to continue its present business.
38.6 The Company (and each of its officers, employees and agents in the
course of its business) has complied with all applicable Environmental
Laws and has never received any notification under Environmental Law
requiring it to take or omit to take any action.
38.7 The Company has not been threatened with any investigation or enquiry
by any organisation, or received any complaint, in connection with the
Environment.
61
SCHEDULE 4
1. THE PROPERTY
ADDRESS OF PROPERTY DATE AND PARTIES TO THE TERM
CURRENT RENTAL RENT REVIEWS
LEASE OF THE PROPERTY
Xxxx 000, Xxxxxxxx Xxxx, Xxxxxxxx Xxx, Xxxxxxx Properties Limited 18 years
Xxxxx Millars Lane, Wokingham (1) and Shuttle Technology
Group Limited (2) dated 8
September 1998
62
SCHEDULE 5
Tax Schedule
Definitions and interpretation
1.1 In this Schedule, unless the context otherwise requires, the following
words have the following meanings:
"CLAIM FOR TAXATION" any notice, demand, assessment, letter
or other document issued or action taken
by any Tax Authority or any person
(including the Company) indicating that
any person is or may be placed or sought
to be placed under either a Liability to
Taxation or a claim for Taxation to
which paragraph 3 may apply;
"ICTA" the Income and Corporation Taxes Xxx
0000;
"LIABILITY TO TAXATION" (a) any liability to make a
payment of or in respect of
Taxation regardless of whether
such Taxation is chargeable or
attributable directly or
primarily to the Company or to
any other person;
(b) the loss of any Relief which
would (were it not for the
loss) have been available to
the Company and which has been
treated as an asset in
preparing the Accounts or
taken into account in
computing (and so reducing) or
obviating any provision for
deferred taxation which
appears in the Accounts (or
which, but for the
availability or presumed
availability of such Relief
prior to its loss, would have
appeared in the Accounts);
(c) the setting off against any
liability to Taxation or
against Profits earned,
accrued or received on or
before Completion of any
Relief which arises in respect
of any period after Completion
or in
63
respect of any Transaction
effected on or after
Completion in
circumstances where, but
for the setting off, the
Company would have had a
liability to Taxation in
respect of which the
Purchaser (ignoring any
limitations on liability
contained herein) would
have been able to make a
claim against the
Shareholders under the
Covenant for Taxation; and
(d) any liability to make a
payment by way of indemnity or
damages, or any other payment
pursuant to a contract or
arrangement, in each case
arising out of or in
connection with Taxation
and references to a Liability to
Taxation shall include the
settlement of a Claim for Taxation;
"PROFITS" income, profits and gains, the value of
any supply and any other consideration,
value or receipt used or charged for
Taxation purposes and references to
"PROFITS EARNED, ACCRUED OR received"
include Profits deemed to have been
earned, accrued or received for Taxation
purposes;
"PURCHASER'S RELIEF" a Relief falling within the
definition of Liability to Taxation;
"RELIEF" any relief, loss, allowance, exemption,
set-off, deduction or credit in
computing or against Profits or Taxation
or any right to repayment of Taxation
and references to the "LOSS OF ANY
Relief" include the loss, reduction,
counteraction, disallowance, setting-off
against Profits, crediting against a
liability to make an actual payment of
Taxation or failure to obtain a Relief
and "LOSE" and "LOST" shall be construed
accordingly;
"TAXATION" all forms of taxation and statutory,
governmental, supra governmental, state,
provincial, local governmental or
64
municipal impositions, duties,
contributions and levies (including
withholdings and deductions), whether of
the United Kingdom or elsewhere in the
world, whenever imposed and however
arising and all penalties, fines,
charges, costs and interest, together
with the cost of removing any charge or
other encumbrance, relating thereto and
"TAX" shall be construed accordingly;
"TAX AUTHORITY" any taxing or other
authority, body or official competent to
administer, impose or collect any
Taxation;
"TAX CLAIM" a claim by the Purchaser against
the Shareholders under the Covenant for
Taxation or that any of the Taxation
Warranties is untrue or inaccurate in
any respect or is misleading or, as the
case may be, a claim by the Shareholders
against the Purchaser under the covenant
in paragraph 3;
"TCGA" the Taxation of Chargeable Gains Xxx
0000;
"TMA" the Taxes Management Xxx 0000;
"TRANSACTION" any transaction, deed, act, event,
omission, payment or receipt of whatever
nature and whether actual or deemed for
Tax purposes and references to "ANY
TRANSACTION EFFECTED ON OR BEFORE
COMPLETION" include the combined result
of two or more Transactions, the first
of which shall have taken place or
commenced (or be deemed to have taken
place or commenced) on or before
Completion;
"VATA" the Value Added Tax Xxx 0000; and
"SHAREHOLDERS ASSOCIATE" any Shareholder and any other person
with whom such Shareholder is either
associated (within the meaning of
section 417 ICTA) or connected (within
the meaning of Section 839 ICTA).
1.2 In this Schedule:
65
(a) a reference to any law shall include any statute, law,
regulation, notice, directive or similar provision relating to
Taxation, whether of the United Kingdom or elsewhere; and
(b) references to the VATA shall include all law relating to value
added tax in the United Kingdom and any value added, turnover,
sales, purchase or similar tax of any other jurisdiction and
references to value added tax shall be construed accordingly.
2. COVENANT FOR TAXATION
2.1 Subject to Section 13.6 the Shareholders jointly and severally shall
pay to the Purchaser an amount equal to any Liability to Taxation of
the Company, save as fully provided for in the Management Accounts:
(a) arising directly or indirectly from any Transaction effected
on or before Completion;
(b) in respect of, or by reference to, any Profits earned, accrued
or received on or before Completion;
(c) which would not have arisen but for the failure by any person
who is or has been a Shareholders Associate to discharge a
Liability to Taxation which falls upon such Shareholders
Associate:
(i) arising directly or indirectly from any Transaction
effected or deemed to have been effected at any time
by such Shareholders Associate; or
(ii) in respect of any Profits earned, accrued or received
at any time by such Shareholders Associate; or
(d) arising directly or indirectly from the transfer of the Shares
by the Shareholders to the Purchaser or the allotment and
issuance to the Shareholders by the Purchaser of the
Consideration Stock either on Completion or at any time
thereafter (but for the avoidance of doubt any liability of
the Shareholders pursuant to this sub-clause 2.1 (d) of this
schedule 5 shall not include a liability to pay stamp duty on
the stock transfer forms executed by the Shareholders pursuant
to clause 4.2 of this Agreement)
together with all costs and expenses reasonably and properly incurred
by the Purchaser or the Company in connection with any such Liability
to Taxation or Claim for Taxation or in bringing any claim or defending
any action under the provisions of this Schedule.
2.2 Where the Shareholders become liable to make any payment under the
Covenant for Taxation, the due date for the making of that payment
66
shall be:
(a) in a case that involves an actual payment of Taxation by the
Company, the date that is the last date on which the Company
is liable to pay to the appropriate Tax Authority the Taxation
in question in order to avoid incurring a liability to
interest or penalties or, if later, five days following a
written demand from the Purchaser;
(b) in the case of the loss of any Relief, the date falling five
days following the date when the Shareholders have been
notified by the Purchaser that the auditors for the time being
of the Company have certified, at the request of the
Purchaser, that the Shareholders have a liability for a
determinable amount in respect of the loss of such Relief
under the Covenant for Taxation; or
(c) in any other case, the date falling five days following the
date on which the Shareholders receive a written demand for
such amount from the Purchaser.
2.3 In a case of a loss of any Relief, the amount that is to be treated
under the Covenant for Taxation as a Liability to Taxation shall:
(a) be the amount of that Relief, if the Relief that was the
subject of the loss was either a deduction from or offset
against Taxation or a right to a repayment of Taxation;
(b) be the amount of Taxation which has been saved in consequence
of the setting off where the Relief that was the subject of
the loss was a deduction from or offset against gross Profits,
and the Relief was the subject of a setting off; and
(c) in any other case where the Relief that was the subject of the
loss was a deduction from or offset against gross Profits, be
the amount of Taxation which would, on the basis of the rates
of Taxation current at the date of the loss, have been saved
but for the loss.
2.4 If, in respect of or in connection with any Claim, or otherwise in
connection with any payment made under this Agreement, any amount
payable to the Purchaser by the Shareholders is subject to Taxation,
the amount to be paid to the Purchaser by the Shareholders shall be
such amount as will ensure that the net amount received by the
Purchaser after such Taxation has been taken into account is equal to
the full amount which would be payable to the Purchaser had the amount
not been subject to Taxation.
3. COVENANT TO SHAREHOLDERS
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3.1 The Purchaser hereby covenants with the Shareholders to pay to the
Shareholders an amount equal to any Taxation which is assessed on the
Shareholders or on any Shareholders Associate pursuant to either
section 767A or section 767AA, ICTA by reason of Taxation assessed on
or primarily or directly attributable to the Purchaser or the Company
for any accounting period remaining unpaid provided that this covenant
shall not apply to any Taxation in respect of which the Purchaser is
entitled to bring a Tax Claim against the Shareholders or would have
been so entitled but for paragraphs 5 (Limitations), 6 (Repayment) and
7 (Over-provision and Reliefs) below or clause o of the Agreement
(Limitations).
3.2 The Shareholders hereby covenant that they shall make no claim under
paragraph 3.1 above to the extent that they have recovered the Taxation
in question under section 767B(2), ICTA and that to the extent that it
recovers any amount under paragraph 3.1 they shall not seek to recover
payment under section 767B(2).
3.3 The provisions of paragraphs 2.2 (date of payment), 2.4 (grossing up),
6 (repayment) and 9 (Claims Procedure) shall apply to this covenant as
if references to the "PURCHASER" were to the "SHAREHOLDERS" (and vice
versa), references to the "THE COMPANY" were also to the "SHAREHOLDERS"
and references to "COVENANT FOR TAXATION" were to the "COVENANT UNDER
PARAGRAPH 3".
4. TAX WARRANTIES
EVENTS SINCE THE ACCOUNTS DATE
4.1 Since the Accounts Date:
(a) no transaction has occurred, either in circumstances where the
consideration actually received or receivable (if any) was
less than the consideration which could be deemed to have been
received for Tax purposes or which will give rise to a
Liability to Taxation on the Company calculated by reference
to deemed as opposed to actual Profits;
(b) no transaction has occurred which will result in the Company
becoming liable to pay or bear a Liability to Taxation
directly or primarily chargeable against or attributable to
another person
(c) no disposal has taken place or other event occurred which
will, or may have, the effect of crystallising a Liability to
Taxation which would have been included in the provision for
deferred taxation contained in the Accounts if such disposal
or other event had been planned or predicted at the Accounts
Date;
68
(d) the Company has not been a party to any transaction for which
any Tax clearance provided for by statute has been, or could
have been, obtained; and
(e) no accounting period or period of account by reference to
which Taxation is measured of the Company has ended within the
meaning of Section 12, ICTA (basis of, and periods for,
assessment).
STAMP DUTY
4.2 All documents which are required to be stamped or in respect of which
any form of Taxation is due and which are in the possession of the
Company, or by virtue of which the Company has any right, have been
duly and sufficiently stamped or the Taxation on such documents has
been paid and no such document has been executed and retained outside
the United Kingdom in circumstances in which a liability to stamp duty
would arise if such document were to be brought into the United
Kingdom.
RECORDS AND COMPLIANCE
4.3 The Company has duly complied with all requirements imposed on it by
law and in particular:
(a) the Company has paid all Taxation for which it is liable and
made all withholdings and deductions in respect, or on
account, of any Taxation from any payments made by it which it
is obliged or entitled to make and has paid to the appropriate
Tax Authority all amounts so withheld or deducted;
(b) the Company will not be liable to pay any Tax the due date for
payment of which will arise in the 30 days following
Completion;
(c) the Company has properly prepared and punctually submitted all
notices, returns and applications for clearances or consents
required for Tax purposes and provided complete and accurate
information to any Tax Authority and all such notices,
returns, applications and information remain complete and
accurate and in compiling the same the Company has not taken
the benefit of any doubt, such that the relevant Tax Authority
may discover information of which it was not reasonably aware
and thereby make an enquiry into or dispute the Tax affairs of
the Company;
(d) the Company has kept and maintained complete and accurate
records, invoices and other documents and information of
whatever nature appropriate or requisite for Tax purposes and
has sufficient such records, invoices and other documents and
69
information relating to past events to calculate its liability
to Taxation or the relief from Taxation which would arise on
any disposal or on the realisation of any assets owned at
Completion;
(e) there are no disputes, unsettled or outstanding assessments or
appeals in respect of Taxation and the Company has not within
the last six years been subject to any enquiry, investigation
or other dispute with any Tax Authority and there are no
circumstances which may give rise to such an enquiry or
dispute;
(f) the Company has not within the last six years been liable or
will in respect of any Transaction occurring on or before
Completion become liable to pay any interest, penalty, fine or
sum of a similar nature in respect of Taxation nor, in
relation to value added tax, has received any penalty
liability notice, surcharge liability notice or other written
notice or warning under the VATA; and
(g) the Company has duly submitted all claims and elections which
have been assumed to have been made for the purposes of the
Accounts.
4.4 The Company has at all times been resident for Tax purposes in the
jurisdiction identified as the Tax Residence in Schedule 2 and the
Company has not during the past six years paid and is not liable to pay
Tax in any other jurisdiction.
4.5 The Company has not within the last six years received any audit, visit
or inspection from any Tax Authority and no such audit, visit or
inspection to take place on or after Completion has been arranged or
requested.
4.6 The amount of Tax chargeable on the Company or subject to withholding
or deduction by the Company during any accounting period ending on or
within the last six years has not to any material extent depended on
any concession, agreement, dispensation or other formal or informal
arrangement with any Tax Authority.
4.7 The Company is not liable to pay corporation tax by instalments
pursuant to Section 59E, TMA, or any regulations made thereunder.
VAT
4.8 The Company:
(a) is registered for the purpose of, and has complied in all
respects with, the VATA and is not subject to any conditions
imposed or agreed with any Tax Authority; and
70
(b) is not, and has not within the last three years been a member
of a group for value added tax purposes under Section 43, VATA
(groups of companies).
4.9 All supplies made by the Company are taxable supplies, and all input
tax for which the Company has claimed credit has been paid by the
Company, in respect of supplies made to it relating to goods or
services used or to be used for the purpose of the business of the
Company.
4.10 The Company has not made, nor will prior to Completion make, any
election to waive exemption under paragraph 2, Schedule 10, VATA
(election to waive exemption).
4.11 The Disclosure Letter contains full details of all assets owned by the
Company to which the provisions of Part XV, Value Added Tax Regulations
1995 (the Capital Goods Scheme) may apply, including the date of
acquisition, the cost of the asset, the amount of the input tax for
which credit has been claimed and the adjustment period relating to
that asset.
CUSTOMS DUTIES
4.12 The Company has made all necessary returns in relation to the
collection and payment of customs duties, excise duties and other Taxes
having an equivalent effect and has provided to any relevant Tax
Authority all necessary information, returns and documentation and paid
all amounts due in relation to the same and within the prescribed time
limits.
4.13 Details of all bonds, recognisance and guarantees given to any relevant
Tax Authority by or in relation to the Company are set out in the
Disclosure Letter.
BALANCE SHEET VALUES
4.14 No Liability to Taxation will arise or be incurred on a disposal by the
Company of any of its assets for:
(a) in the case of each asset owned at the Accounts Date, a
consideration equal to the value attributed to that asset in
preparing the Management Accounts; and
(b) in the case of each asset acquired since the Accounts Date, a
consideration equal to the consideration given for the
acquisition.
4.15 The Company has not at any time in respect of any asset owned at the
date hereof made, nor will prior to Completion make, any claim under
Sections 152 to 158 (inclusive), TCGA (replacement of business assets)
and there is no proposal or plan to make any such claim either in the
claims and elections assumed to have been made for the
71
purposes of the Management Accounts or otherwise.
CLOSE COMPANY
4.16 The Company is not, nor has it at any time within the last six years
been, either a close company within the meaning of Section 414, ICTA
(close companies) or a close investment holding company for the
purposes of Section 13A, ICTA (close investment-holding companies).
4.17 The Company has not at any time made any loan or advance or payment or
given any consideration or effected any transaction falling within
Sections 419 to 422 (inclusive), ICTA (loans to participators etc).
GROUP TRANSACTIONS
4.18 Within the last six years the Company has not been a member of a group
of companies within the meaning of Section 170 TCGA (groups of
companies).
DEDUCTIBLE EXPENSES.
4.19 The Company has not since the Accounts Date made or provided and is not
under any obligation currently or for the future to make any payment of
an income or revenue nature which, or to provide a benefit the cost of
which, will be prevented from being deductible for Tax purposes,
whether as a deduction in computing the profits of a trade or as an
expense of management or as a charge on income.
4.20 The accounting treatment adopted by the Company in its accounts in
relation to any loan relationship as defined in Section 81, Finance Xxx
0000 (meaning of "LOANS RELATIONSHIPS" etc.) will be treated as an
authorised accounting method for the purposes of Section 85, Finance
Xxx 0000 (authorised accounting methods).
4.21 The Company has not been a party to a loan relationship treated as
being for an unallowable purpose within the meaning of Paragraph 13
Schedule 9, Finance Xxx 0000 (loan relationships for unallowable
purposes).
DIVIDENDS AND DISTRIBUTIONS
4.22 The Company has not at any time purchased, repaid or redeemed or agreed
to purchase, repay or redeem its share capital, or capitalised or
agreed to capitalise in the form of redeemable shares or debentures any
profits or reserves, or otherwise issued any share capital or other
security as paid up otherwise than by the receipt of new consideration
within the meaning of Section 254, ICTA (interpretation of Part VI).
4.23 The Company has not at any time been a party to or otherwise involved
in any transaction to which Sections 213 to 218 (inclusive), ICTA
72
(exempt distributions etc.) applied.
INHERITANCE TAX AND GIFTS
4.24 No circumstances exist under which any power within Section 212,
Inheritance Tax Act 1984 (powers to raise tax) could be exercised in
relation to, and there is no Inland Revenue charge (within the meaning
of Xxxxxxx 000, Xxxxxxxxxxx Xxx Xxx 0000 (imposition of charge))
attaching to, or which may attach to any shares or securities in or
over any assets of the Company.
4.25 The Company is not liable and there are no circumstances in existence
as a result of which it may become liable to be assessed to Tax as
donor or donee of any gift or transfer or transferee of value.
ANTI-AVOIDANCE
4.26 The Company has not:
(a) entered into, or been party to, any scheme or arrangement
designed for the purpose of avoiding Taxation, such that a
Liability to Taxation may arise after Completion as a result
of or in consequence of such a scheme or arrangement; or
(b) acquired or disposed of any asset, or entered into any
Transaction whatsoever, otherwise than by way of a bargain at
arms length.
5. LIMITATIONS ON LIABILITY
5.1 The liability of the Shareholders under the Covenant for Taxation shall
be reduced if and to the extent that the Liability to Taxation shall
have been recovered under the Warranties or under any other part of the
Covenant for Taxation (and vice versa).
5.2 The Shareholders shall not be liable to the Purchaser for a Tax Claim
in respect of any Liability to Taxation:
(a) to the extent that provision or reserve in respect of that
Liability to Taxation was included in the Accounts;
(b) to the extent that the Liability to Taxation arises or is
increased as a result only of:
(i) any increase in rates of Taxation;
(ii) any change in law or in the published practice
thereof;
(iii) any change in the bases upon which the accounts of
the Company are prepared or any change in accounting
practice or principles except in either case in order
to
73
comply with generally accepted accounting principles;
or
(iv) any change in the date to which the Company makes up
its accounts,
made in any such case after Completion with retrospective
effect; or
(c) which arises under sub-paragraphs (a) to (d) of paragraph 2 of
this Schedule to the extent that the Purchaser falls to be
indemnified for the Liability to Taxation pursuant to
paragraph 8 of this Schedule.
5.3 The Shareholders shall not be liable to the Purchaser under the
Covenant for Taxation in respect of a Liability to Taxation:
(a) to the extent that such Liability to Taxation is upon income,
profits or gains which were actually earned, accrued or
received by the Company since the Accounts Date in the
ordinary and normal course of the business of the Company;
(b) to the extent that there is available to the Company to
relieve or mitigate such Liability to Taxation any Relief
which is not a Purchaser's Relief;
(c) to the extent that such Liability to Taxation would not have
arisen but for a voluntary act or omission carried out or
effected by the Company at any time after Completion, other
than any act or omission carried out or effected:
(i) under a legally binding commitment created on or
before Completion;
(ii) in order to comply with any law or in order to comply
with generally accepted accounting principles;
(iii) in the ordinary and normal course of the business
carried on by the Company; or
(iv) at the request of or with the consent of the
Shareholders;
(d) to the extent that such Liability to Taxation would not have
arisen or would have been reduced but for a failure or
omission on the part of the Company or the Purchaser after
Completion to make any claim or election, the making or
claiming of which was taken into account in computing the
provision or reserve for Taxation in the Management Accounts
but only to the extent that the relevant claim or election was
identified in a disclosure specifically made against the Tax
Warranty in paragraph 4.3(g) of this schedule.
74
5.4 SCM Microsystems Limited shall not be liable for any Tax Claim to the
extent that such liability is a liability to PAYE or National
Insurance.
6. REPAYMENT
If the Shareholders shall make any payment to the Purchaser in relation
to any Tax Claim and the Purchaser or the Company subsequently receives
from any Tax Authority or any person any amount referable to the
subject matter of that Tax Claim, the Purchaser shall, once it or the
Company has received such amount, repay (after deducting the costs and
expenses of the Purchaser incurred in recovering such amount and any
Taxation payable on it or on any interest) to the Shareholders either:
(a) a sum equal to such amount; or
(b) if lesser a sum equal to the Tax Claim paid by the
Shareholders to the Purchaser,
together with any interest paid to the Purchaser or the Company in
respect of such sum.
7. OVER-PROVISION AND RELIEFS
7.1 If the auditors for the time being of the Company shall certify (at the
request and expense of the Shareholders) that any provision for
Taxation in the Management Accounts (excluding any provision for
deferred taxation) has proved to be an over-provision, then the amount
of such over-provision shall be dealt with in accordance with paragraph
7.3 below.
7.2 If the auditors for the time being of the Company shall certify (at the
request and expense of the Shareholders) that any Liability to Taxation
which has resulted in a payment having been made or becoming due from
the Shareholders under the Covenant for Taxation will give rise to a
Relief for the Company (other than a Purchaser's Relief) which would
not otherwise have arisen, then as and when such Relief reduces a
liability to make an actual payment of Tax (other than a liability for
which the Purchaser would be entitled to bring a Tax Claim), the amount
of that reduction shall be dealt with in accordance with paragraph 7.3
below.
7.3 Where it is provided under paragraphs 7.1 or 7.2 that any amount ("THE
RELEVANT AMOUNT") is to be dealt with in accordance with this
sub-clause:
(a) the relevant amount shall first be set-off against any payment
then due from the Shareholders under the Covenant for
Taxation;
75
(b) to the extent that there is an excess, a refund shall be made
to the Shareholders of any previous payment made by the
Shareholders under the Covenant for Taxation (to the extent
not previously refunded under this paragraph 7) up to the
amount of such excess; and
(c) to the extent that the excess referred to in paragraph 7.3(b)
above is not exhausted under that paragraph, the remainder of
the excess shall be carried forward and set off against any
future payment or payments which become due from the
Shareholders under the Covenant for Taxation.
7.4 Where any certification referred to in paragraphs 7.1 or 7.2 has been
made, the Shareholders or the Purchaser or the Company may request the
auditors to review such certification in the light of all relevant
circumstances, including any facts which have become known only since
such certification, and to certify whether such certification remains
correct or whether the certified amount should be amended.
7.5 If the auditors certify under paragraph 7.4 that an amount previously
certified should be amended, that amended amount shall be substituted
for the purposes of paragraph 7.3 as the relevant amount in respect of
the certification in question in place of the amount originally
certified, and such adjusting payment (if any) as may be required shall
be made as soon as practicable by the Shareholders or (as the case may
be) to the Shareholders to give effect to the revised certification.
8. NIC AND PAYE
8.1 The Shareholders agree that as between themselves, the Company and the
Purchaser, neither the Company nor the Purchaser shall be liable for
any income tax or Primary Class 1 National Insurance Contributions to
which any Shareholder may be subject by reason of the right to receive,
acquisition, holding, variation in terms, release of restrictions or
disposal of the Shares or the Consideration Stock (in this paragraph
together referred to as "the Shares") and, without limitation, any
event relevant for the purposes of section 203FB, ICTA with respect to
the Shares.
8.2 Each Shareholder shall severally indemnify the Company and the
Purchaser to the extent that either of them is or may be liable to pay
or account for any Tax in respect of:
(a) any PAYE income tax liability which arises under Chapter V of
Part V of ICTA and the PAYE regulations referred to therein,
as each may be amended from time to time; and
(b) any Primary Class 1 National Insurance Contributions which may
be payable by the Company or the Purchaser under the
76
modified PAYE system as it applies under Schedule 1 of the
Social Security (Contributions) Regulations 1979
(together in this paragraph referred to as "the PAYE liability") and
which in each case becomes due by reason of the right to receive,
acquisition, holding, variation in terms, release of restrictions or
disposal of any Shares by such Shareholder or any event relevant for
the purposes of section 203FB, ICTA with respect to the Shares.
8.3 The Company shall notify each Shareholder of the amount which, on the
basis of the best estimate that can reasonably be made, is the amount
of income likely to be chargeable to the PAYE liability.
8.4 Subject to sub-paragraph 8.6 below:
(a) Each Shareholder appoints the Purchaser as its agent for the
sale of such number of Shares as may be required to be sold to
satisfy the PAYE liability and, after satisfying the same, the
Purchaser shall remit any balance of Shares remaining to the
Shareholder.
(b) In order to enable the Purchaser to effect the sale envisaged
in this clause each Shareholder agrees that he will, within 14
days of a demand by the Purchaser:
(i) deposit with the Purchaser share certificates which
the Shareholder has a good right to deposit and
transfer, free from any option, lien, charge or
encumbrance in sufficient quantities to enable the
Purchaser to satisfy the PAYE liability;
(ii) at the same time, submit to the Purchaser such other
documents as the Purchaser may require (duly executed
and signed by the Shareholder) to enable the
Purchaser to sell the Shares.
(c) Where the share certificates have not yet been issued, the
Shareholder agrees that the Purchaser may retain sufficient
Shares with a view to selling them to cover any contingent
PAYE liability.
8.5 The Purchaser will hold any dividends paid on the Shares between the
time that it notifies the Shareholder of the PAYE liability and the
actual sale for the account of the Shareholder and may add the same to
the proceeds of sale referred to in sub-paragraph 8.4 above.
8.6 Each Shareholder and the Purchaser may, at the complete discretion of
the Purchaser, agree alternative arrangements for the Shareholder to
satisfy the PAYE liability, including but not limited to a loan
arrangement on terms to be agreed between the Shareholder and the
77
Purchaser. The provisions of this paragraph shall be without prejudice
to any rights that the Purchaser may have to cancel shares pursuant to
the Agreement.
9. CLAIMS PROCEDURE
9.1 Upon the Purchaser becoming aware of a Claim for Taxation which may
result in a Tax Claim (which for the purposes of this paragraph 9 shall
include any claim in respect of the indemnity contained in paragraph 8
above) the Purchaser shall give written notice of that Claim for
Taxation to the Shareholders or, as the case may be, shall procure that
the Company forthwith give written notice of that Claim for Taxation to
the Shareholders, and the Purchaser shall, subject always to the terms
of this paragraph 9, the Shareholders agreeing to indemnify and secure
the Purchaser and/or the Company to its reasonable satisfaction against
all losses, costs, damages and expenses, including interest on overdue
Tax, which may be incurred, further procure that the Company take such
action and give such information and assistance in connection with the
affairs of the Company as the Shareholders may reasonably and promptly
by written notice request to avoid, resist, appeal or compromise the
Claim for Taxation.
9.2 The Purchaser shall not be obliged to procure that the Company appeals
against any tax assessment if, the Shareholders having been given
written notice of the receipt of that Claim for Taxation in accordance
with paragraph 9.1 above, the Company has not within 21 days (or, if
there is a statutory time limit of not more than 30 days, within 14
days) thereafter received instructions in writing from the
Shareholders, in accordance with the preceding provisions of this
paragraph 9, to make that appeal.
9.3 The Purchaser shall procure that the Shareholders are promptly provided
with copies of any correspondence from the Tax Authority, copies of any
correspondence from the Purchaser to the Tax Authority prior to its
submission to the Tax Authority, and shall be given a reasonable
opportunity to comment thereon prior to submission and account shall be
taken of its reasonable comments.
9.4 The Purchaser shall not be obliged to procure that the Company take any
action under paragraph 9.1 above which involves contesting any matter
with any Tax Authority (excluding the authority or body demanding the
Tax in question) or any court or tribunal unless the Shareholders
furnishes the Company with the written opinion of leading tax counsel
to the effect that the appeal in question will, on the balance of
probabilities, succeed. Such tax counsel shall be instructed by the
Shareholders at the Shareholders expense but the Shareholders shall
promptly provide the Purchaser with a copy of such instructions and
give the Purchaser or its representative a reasonable opportunity to
78
attend any conference with Counsel.
9.5 The Purchaser shall not be required to take any action or procure that
the Company take any action under this paragraph 9 if it reasonably
determines that such action would have an adverse effect on the amount
of tax payable by the Purchaser or the Company in respect of a period
after Completion.
79
SCHEDULE 6
THE PRODUCTS
SCHEDULE 7
THE MANAGEMENT ACCOUNTS
SCHEDULE 8
THE EMPLOYMENT CONTRACT
SCHEDULE 9
(DOCUMENTS)
1. The signed Service Agreements of each of the employees of the Company.
2. A contract relating to the purchase of shares in the Company held by Xx
Xxxxxxx signed by Xx Xxxxxxx and the Company, and a special resolution
of the Company dated prior to the date of the contract approving the
purchase.
3. A letter regarding the Company's bank overdraft signed by SmartDisk
Corp. and SCM Microsystems Limited "(SCM").
4. Form 403a signed by a director of SCM.
5. A quote for insurance for the Company relating to its occupation of the
Property and acknowledging the Company's current legal position as
occupier of the property under a licence not authorised by the tenant's
lease.
6. The deed of waiver of its options over the Shares signed by the
Director and the Secretary of SCM.
7. The licence to occupy the Property executed by SCM.
8. The deed regarding transfers of domain names executed by SCM.
9. A written resolution of the Company adopting new articles of
association.
10. Board minutes of SCM appointing a company secretary to replace Xxxxx
Haughtrey.
11. Board minutes of SCM approving the transaction, this Agreement and all
related documents to be executed by SCM and authorising the Director
and Secretary of SCM to execute those documents on SCM's behalf.
12. Letters of resignation of Xxxx Xxxxx, Xxxxxx Xxxxxx and Xxxx Xxxxx as
directors of the Company.
13. Replies to request for information and supplemental request for
information signed by Xxxxx Xxxxxx.
14. Minutes of a board meeting of the Company in the form set out in the
Agreement.
15. Powers of Attorney appointing Xxxxx Xxxxxx as attorney for:
Xxxxx Xxxxxxxx;
Xxxx Xxxxx;
Xxxx Xxxxx;
Xxxxxxx Xxxxxxx;
Xxxxxx Xxxxx;
Xxxxxxx Xxxxx;
Xxxxx Xxxxx;
Tiel Holdstock;
Xxxx Hayesmore;
Xxxxxxxxxxx Xxxxxxxxx;
Xxxxx Xxxx; and
Xxxxxx Xxxxxx.
16. Forms 288b signed by Xxxxxx Xxxxxx, Xxxx Xxxxx and Xxxx Xxxxx.
17. Bank statement for both accounts of the Company (no.s 4095447 and
11308971) dated the working day immediately prior to completion.
18. Stock transfer forms signed by:
Xxxxx Xxxxxxxx;
Xxxx Xxxxx;
Xxxx Xxxxx;
Xxxxxxx Xxxxxxx;
Xxxxxx Xxxxx;
Xxxxxxx Xxxxx;
Xxxxx Xxxxx;
Tiel Holdstock;
Xxxx Hayesmore;
Xxxxxxxxxxx Xxxxxxxxx;
Xxxxx Xxxx;
Xxxxxx Xxxxxx;
Xxxx Xxxxx;
Xxxxxxx Xxxxxxx-Xxxxx;
SCM Microsystems Ltd; and
Xxxxx Xxxxxx.
19. Share certificates from:
Xxxxx Xxxxxxxx;
Xxxx Xxxxx;
Xxxx Xxxxx;
Xxxxxxx Xxxxxxx;
Xxxxxx Xxxxx;
Xxxxxxx Xxxxx;
Xxxxx Xxxxx;
Tiel Holdstock;
Xxxx Hayesmore;
Xxxxxxxxxxx Xxxxxxxxx;
Xxxxx Xxxx;
Xxxxxx Xxxxxx;
Xxxx Xxxxx;
Xxxxxxx Xxxxxxx-Xxxxx;
SCM Microsystems Ltd; and
Xxxxx Xxxxxx.
20. The tax deed of covenant in the agreed form executed by the
Shareholders.
EXECUTED (but not delivered until dated) as a DEED by Xxxxx Xxxxxxxx )
acting through his lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by Xxxx Xxxxx )
acting through his lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by XXXX XXXXX )
acting through her lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by XXXXXXX XXXXXXX )
acting through his lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by XXXXXX XXXXX )
acting through her lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by XXXXXXX XXXXX )
acting through her lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by XXXXX XXXXX )
acting through her lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by )
XXXXXXX XXXXXXX XXXXX )
acting through her lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000: )
EXECUTED (but not delivered until dated) as a DEED by TIEL HOLDSTOCK )
acting through his lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by XXXX HAYESMORE )
acting through his lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by )
XXXXXXXXXXX XXXXXXXXX acting through his lawfully appointed attorney ) /s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by XXXXX XXXX )
acting through his lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by XXXXXX XXXXXX )
acting through his lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by XXXX XXXXX )
acting through his lawfully appointed attorney Xxxxx Xxxxxx ) /s/ Xxxxx Xxxxxx
pursuant to a power of attorney dated 4 April 2000 )
EXECUTED (but not delivered until dated) as a DEED by )
XXXXX XXXXXX ) /s/ Xxxxx Xxxxxx
in the presence of: )
SIGNATURE OF WITNESS: /s/ Xxxx Xxxxxx
NAME: Xxxx Xxxxxx
ADDRESS: 00 Xxx Xxxxxx
Xxxxxx X00X
OCCUPATION: Solicitor
EXECUTED as a DEED (but not )
delivered until the date )
appearing at the head of )
page 1) by SCM MICROSYSTEMS LIMITED ) /s/ Xxxxxx Xxxxxxxxx
acting by its director Xxxxxx Xxxxxxxxx )
and its secretary Xxxxx Xxxxxxxx: ) /s/ Xxxxx Xxxxxxxx
Director
Secretary
EXECUTED as a DEED (but not )
delivered until the date )
appearing at the head of )
page 1) by SMARTDISK )
CORPORATION )
acting by: ) /s/ Xxxxxxx X. Xxxxxxxxx
Officer Chief Executive Officer and
President
