EXHIBIT 2.1
DATED 1998
▇▇▇▇▇▇▇ LION TECHNOLOGY LIMITED(1)
DIGITAL POWER LIMITED(2)
▇▇▇▇▇▇▇ LION TECHNOLOGY GROUP LIMITED(3)
DIGITAL POWER CORPORATION (4)
______________________________________
ASSET SALE AGREEMENT
Relating to the sale and purchase of
"▇▇▇▇▇▇▇ POWER ELECTRONICS", a division of
▇▇▇▇▇▇▇ Lion Technology Ltd
______________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
INDEX
PAGE NO:
1. Definitions 1
2. Sale and Purchase of the Business 6
3. Excluded Assets 7
4. Value Added Tax 7
5. Debts and Liabilities 8
6. Risk and Liabilities 8
7. Completion 10
8. Title 11
9. Warranties by the ▇▇▇▇▇▇ ▇▇
▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇. Vendor's Undertakings 14
12. Guarantees 14
13. Generally 16
14. Notices 17
Schedule 1 - Warranties 19
Schedule 2 - Transferring Employees 26
Schedule 3 - Agreed Liabilities 27
Schedule 4 - Debts 28
Schedule 5 - Part I - The Property 29
- Part II - the Lease 29
Schedule 6 - Provisions relating to the Property 30
Schedule 7 - Limitation of Vendor's Liability - General 33
Schedule 8 - The Earn-out 35
Appendix 1 - Computer Software Licences 36
Appendix 2 - Equipment 36
THIS AGREEMENT is made the _____ day of ________1998
BETWEEN:
(1) ▇▇▇▇▇▇▇ LION TECHNOLOGY LIMITED whose registered office is at
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ (Registered No:
273299) ("the Vendor")
(2) DIGITAL POWER LIMITED whose registered office is at ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ (Registered No: 3494452) ("the Purchaser")
(3) ▇▇▇▇▇▇▇ LION TECHNOLOGY GROUP LIMITED whose registered office is at
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ (Registered No:
2917664) ("the ▇▇▇▇▇▇▇ Guarantor")
(4) DIGITAL POWER CORPORATION a company incorporated under the laws of
the State of California whose place of business is at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ("the Digital Guarantor")
WHEREAS:
(A) The Vendor, inter alia, designs, manufactures and distributes
switching power supplies, uninterruptible power supplies, and frequency
converters for the commercial and military markets in the United Kingdom
and Europe
(B) The parties have agreed for the sale by the Vendor to the Purchaser
of the Business (as defined below) upon the terms and conditions of this
Agreement
(C) The Purchaser has offered to purchase the Business by reference to
the Statutory Accounts (as defined below)
NOW IT IS HEREBY AGREED as follows:-
1. DEFINITIONS
1.1 In this Agreement the following words and expressions have the
following meanings unless inconsistent with the context:
1.1.1 "AGREED LIABILITIES" the aggregate amount
(including VAT) owed by the Vendor at the Transfer Date in connection with
the Business to or in respect of trade creditors being those creditors set
out in Schedule 3 to be assumed by the Purchaser pursuant to Clause 5 and
in addition any liabilities to be included in the Completion Accounts in
connection with the Business (but excluding any liabilities relating to any
other division of the Vendor and also excluding any costs or liabilities in
connection with the sale and purchase of the Business)
1.1.2 "ASSETS" all the property assets and rights of the
Vendor used in the conduct of Business as at the Transfer Date to be bought
and sold pursuant to Clause 2.1 below
1.1.3 "BALANCE SHEET DATE" the 31st March 1997
1.1.4 "BUSINESS" the business carried on of designing,
manufacturing and distributing switching power supplies, uninterruptible
power supplies, and frequency converters for the commercial and military
markets in the United Kingdom and Europe by the Vendor at the Property
under the name of ▇▇▇▇▇▇▇ Power Electronics, (a division of the Vendor)
1.1.5 "CASH CONSIDERATION" the meaning given in Clause 2.2
1.1.6 "COMPLETION" completion of the sale and purchase of
the Business and the Assets in accordance with Clause 7
1.1.7 "COMPLETION ACCOUNTS" the accounts prepared in
accordance with Schedule 8 incorporating the Assets to be acquired under
clause 2.1 and the Agreed Liabilities
1.1.8 "COMPUTER SOFTWARE LICENSES" the computer software
licences held by Vendor as listed in Appendix 1 together with the benefit
of all guarantees given to the Vendor in respect thereof or relating
thereto
1.1.9 "CONTRACTS" the contracts and engagements of the
Vendor in relation to the Business and the Lease Contracts
1.1.10 "DEBTS" the aggregate amount (including VAT) owed to
the Vendor at the Transfer Date in connection with goods and services
supplied in the Business by or in respect of trade debtors including (but
without limitation) those trade debtors set out in Schedule 4 and in
addition any debtors in connection with the Business to be included in the
Completion Accounts to be assigned to the Purchaser pursuant to a Deed of
Assignment of Debts in the agreed terms
1.1.11 "DISCLOSURE LETTER" the letter dated the date hereof
and written and delivered by the Vendor to the Purchaser in the agreed
terms
1.1.12 "EARN-OUT" the meaning given in Clause 2.2
1.1.13 "EQUIPMENT" the loose equipment comprising furniture
plant and machinery computer hardware software facsimile filing systems
archives and other items listed in Appendix 2
1.1.14 "EXCLUDED ASSETS" the assets listed in Clause 3 which
are owned by the Vendor and excluded from the sale
1.1.15 "EXCLUDED EMPLOYEES" means all employees other than
Transferring Employees
1.1.16 "GOODWILL" the goodwill of the Vendor in connection
with the Business including the exclusive right for the Purchaser to
represent itself as carrying on the business in succession to the Vendor,
and under the name "▇▇▇▇▇▇▇ Power Electronics", and/or "▇▇▇▇▇▇▇ Power" and
all other trade names of the Business but excluding all other trading names
and styles of the Vendor including (but without limitation) the names
"▇▇▇▇▇▇▇", "▇▇▇▇▇▇▇ Lion Technology" and "▇▇▇▇▇▇▇ Scientific Instruments"
1.1.17 "INFORMATION" other than the Retained Records all
stationery promotional material brochures sales publications advertising
material terms of business and all other written or printed material issued
solely in connection with the Business and owned by the Vendor
1.1.18 "INTELLECTUAL PROPERTY RIGHTS" all industrial and
intellectual property rights know-how and other information (including that
comprised in or derived from data, disks, tapes, manuals, source code,
flow-charts, catalogues and instructions) relating to or owned by the
Vendor in respect of the Business and the services provided in connection
therewith
1.1.19 "LEASE" the Lease of the Property brief details of
which are set out in Schedule 5 Part II
1.1.20 "LEASE CONTRACTS" those contracts and other
contractual arrangements (including, without limitation, finance leases,
but excluding leases of real property) entered into by or on behalf of the
Vendor in connection with the Business and which remain unperformed as at
the Transfer Date pursuant to which tangible assets used by the Vendor in
or in connection with the Business at that date (together "the Leased
Assets") have been supplied to or are held by the Vendor on hire or other
rental, lease, licence, hire purchase, or in other terms such that title
thereto does not pass or has not passed to the Vendor
1.1.21 "LIABILITIES" the liabilities of the Vendor in
relation to the Business outstanding at the Transfer Date save for the
Agreed Liabilities
1.1.22 "MANAGEMENT ACCOUNTS" the balance sheet of the
Business made up as at 30{th} November 1997 and the trading and profit and
loss account of the Vendor for the period of 8 months ended on that date
and the balance sheet of the Business made up as at 31 March 1997 and the
trading and profit and loss account of the Vendor for the period of 12
months ended on that date
1.1.23 "THE PROPERTY" the leasehold property owned by the
Vendor in Schedule 5 Part I
1.1.24 "PURCHASE PRICE" the total sum set out in Clause 2.2
for the purchase of the Assets
1.1.25 "PURCHASER'S GROUP" the holding company of the
Purchaser and all of the subsidiaries of such holding company
1.1.26 "PURCHASER'S SOLICITORS" Messrs ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co of
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
1.1.27 "RECORDS" all sale and purchase records and lists of
customers, suppliers, agents, distributors and prospective customers,
contracts, correspondence, data, information reports, all consultancy
reports prepared for the Vendor or its customers, personnel, payroll and
National Insurance records, orders for services and other books and records
in whatever form the same are maintained (including computer programmes) in
respect of the Business as are within the power possession or control of
the Vendor and as may exist but excluding the Retained Records and any
other records the Vendor is required to retain including (without limit)
all national insurance and PAY records and all records which relate both to
the Business and other operations or businesses of the Vendor
1.1.28 "RETAINED RECORDS" the records and other documents of
the Vendor relating to the Business required to be maintained by the Vendor
by law
1.1.29 "REVERSIONER" the person or corporation for the time
being entitled to the reversion expectant on the term granted by the Lease
and shall include any superior landlord and the freeholder of the Property
1.1.30 "THE STATUTORY ACCOUNTS" the draft balance sheet of
the Vendor incorporating the Business as at 31st March 1997 and the draft
profit and loss account of the Vendor incorporating the Business for the
period ended on the same day and the notes to the said balance sheet and
the said profit and loss account forming part thereof and the directors'
report and draft auditors' report a copy of which is contained in the
Disclosure Schedule
1.1.31 "STOCK" all unsold products and stock in trade raw
materials and components and work in progress of the Business at the
Transfer Date
1.1.32 "THIRD PARTY RIGHTS" rights of the Vendor against
third parties arising out of the Business in respect of manufacturer's or
supplier's warranties guarantees and other contractual obligations and
assurances (express or implied) in relation to Stock, Equipment and
Computer Software so far as the Vendor can assign the same but excluding
any claim or right by the Vendor in respect of taxation or insurance
1.1.33 "TRANSFER DATE" the date hereof
1.1.34 "TRANSFERRING EMPLOYEES" the employees listed in
Schedule 2
1.1.35 "VAT RECORDS" all records relating to the Business
referred to in Section 49 of and Schedule 11 to the Value Added Tax 1994
1.1.36 "VENDOR'S GROUP" the holding company of the Vendor and
all of the subsidiaries of such holding company
1.1.37 "VENDOR'S SCHEME" the pension scheme known as the
▇▇▇▇▇▇▇ Lion Technology Group Limited Pension Scheme
1.1.38 "VENDOR'S SOLICITORS" ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ House, ▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
1.1.39 "WARRANTIES" the warranties representations and
undertakings given by the Vendor set out in Schedule 1 to this Agreement
1.2 The Schedules and Appendices form part of this Agreement and
have the same force and effect as if expressly set out in the body of this
Agreement and any reference to this Agreement includes the Schedules,
Appendices and the recitals hereto
1.3 In this Agreement and its Schedules:
1.3.1 words and expressions defined in the Companies Acts
1985-1989 bear the same respective meanings
1.3.2 reference to any statute or statutory provision
includes any statute or statutory provision which amends or replaces or has
amended or replaced it or which it has replaced and includes any
subordinate legislation made under the relevant statute except to the
extent that any amendment or modification enacted after today's date would
extend or increase the liability of the Vendor under the Warranties
1.3.3 the paragraph headings and index are for reference
purposes only and shall not affect interpretation
1.3.4 unless otherwise stated a reference to a clause or
schedule is a reference to the clause or schedule so numbered in this
Agreement
1.3.5 unless the context otherwise requires words importing
one gender include the other genders and words importing the singular
include the plural and vice versa
1.3.6 reference to a document "in agreed terms" is a
reference to a document whose form has already been agreed between the
parties to this Agreement and the proposed parties to that document and a
copy of which has been initialled by those parties to identify it
2. SALE AND PURCHASE OF THE BUSINESS
2.1 Subject to the provisions of this Agreement the Vendor shall
sell and the Purchaser shall purchase with effect from the Transfer Date
the Business as a going concern and the following assets of the Business
for the following sums:
2.1.1 the Goodwill for the sum equal to the Cash
Consideration the Earn-out and the Agreed Liabilities less the amounts
calculated in accordance with clauses 2.1.2 to clause 2.1.10
2.1.2 the Lease for the sum of $1
2.1.3 the Equipment for the sum determined in accordance with
the Completion Accounts
2.1.4 the benefit (subject to the burden) of the Contracts
for the sum of $1
2.1.5 the benefit (subject to the burden) of the Computer
Software Licences (including for the avoidance of doubt the benefit of all
guarantees given to the Vendor in respect thereof or relating thereto) for
the sum of $1
2.1.6 the Records for the sum of $1
2.1.7 the Stock for the sum determined in accordance with the
Completion Accounts
2.1.8 Third Party Rights for the sum of $1
2.1.9 the Debts for the sum determined in accordance with the
Completion Accounts
2.1.10 without in any way limiting the generality of the
foregoing all other assets (if any) of the Vendor of whatever nature
employed in the Business at the Transfer Date for the sum of $1
2.2 The Purchaser shall pay to the Vendor as consideration for the
sale of the Business as a going concern and the Assets US$2.7million on the
Transfer Date ("the Cash Consideration") and such further sum as may be
payable pursuant to Schedule 8 ("the Earn-out")
3. EXCLUDED ASSETS AND LIABILITIES
There shall be excluded from the sale and purchase of the Business
and retained by the Vendor:
3.1 all the statutory books and statutory records of the Vendor
and the Retained Records
3.2 any amounts recoverable by the Vendor in respect of taxation
paid or payable by the Vendor in connection with matters or events
occurring on or before the Transfer Date
3.3 cash in hand and at bank and all cheques and other securities
representing the same
3.4 the rights to use, assign, licence or grant rights over any
trade or service ▇▇▇▇ of the Vendor or any member of the Vendor save for
"▇▇▇▇▇▇▇ Power Electronics" and/or "▇▇▇▇▇▇▇ Power"
3.5 all other assets, rights and benefits of the Vendor save for
the Assets
3.6 the Liabilities
4. VALUE ADDED TAX
4.1 The parties intend that Section 49 of the Value Added Tax ▇▇▇
▇▇▇▇ and Article 5 of the Value Added Tax (Special Provisions) Order 1995
shall apply to the transfer of the Business and the parties shall use all
reasonable endeavours to secure that the sale of the Business as a going
concern is treated as neither a supply of goods nor a supply of services
for the purposes of VAT
4.2 The consideration shall be exclusive of any Value Added Tax
4.3 In the event that VAT is chargeable on the transfer of the
whole or any part of the Business pursuant to this Agreement the Purchaser
shall pay within sufficient time for the Vendor to pay such VAT in due time
to the Vendor (in addition to the consideration referred to in Clause 2.2)
an amount equal to the VAT payable in respect of the transfer following
delivery by the Vendor to the Purchaser of tax invoices in respect of the
purchase price (or such part that attracts VAT)
4.4 The Purchaser hereby undertakes to preserve the VAT Records
for such periods as are required by law and, upon reasonable notice but
only during normal business hours, to permit the Vendor or its duly
authorised representatives to inspect and at the Vendor's costs to make
copies of the VAT records
4.5 The Purchaser shall pay to the Vendor a sum equal to such part
of the Debts paid to the Purchaser as represents value added tax ("Output
VAT") The Vendor shall pay to the Purchaser a sum equal to such part of
the Agreed Liabilities paid by the Purchaser as represents value added tax
("Input VAT") Within seven days of the end of each calendar month the
Purchaser shall deliver to the Vendor an account of the Output VAT against
the Input VAT and any balance thereunder shall be due and payable within
seven days thereafter Any dispute relating to such account shall be
determined in accordance with clause 6.7 which shall apply, mutatis
mutandis
5. DEBTS AND LIABILITIES
5.1 The Vendor shall assign the Debts to the Purchaser on the
Transfer Date by executing a Deed of Assignment in the agreed terms
5.2 The Vendor shall be solely responsible for and in the ordinary
course of business shall discharge the Liabilities and notwithstanding
Completion shall be responsible for all debts payable by and claims
accruing or outstanding against it in relation to the Business at the
Transfer Date (save for the Agreed Liabilities) In relation to any claim
made by a third party the Vendor will promptly give notice thereof to the
Purchaser and will not take any steps which might reasonably be expected to
damage the commercial interests of the Purchaser without prior consultation
with and the approval of the Purchaser not to be unreasonably withheld or
delayed
5.3 The Purchaser shall be responsible for discharge of the Agreed
Liabilities in accordance with their terms and for the avoidance of doubt
where it is determined in accordance with Schedule 8 that any listed
Liability in Schedule 3 should not have been An Agreed Liability then such
liability shall be deleted from the Agreed Liabilities for all the purposes
of this Agreement and be treated as a Liability
5.4 The Purchaser shall fully and effectively indemnify and keep
indemnified the Vendor on demand against all demands, claims, liabilities,
costs and expenses properly incurred by it in relation to the Agreed
Liabilities
6. RISK AND LIABILITIES
6.1 The assets rights and property to be sold pursuant to this
Agreement shall be at the sole risk of the Purchaser from the Transfer Date
6.2 Save for Agreed Liabilities and the other obligations of the
Purchaser assumed hereunder the Vendor hereby undertakes to indemnify and
hold harmless the Purchaser from and against any and all
6.2.1 losses costs liabilities and expenses arising out of or
in connection with the ownership or carrying on of the Business arising or
relating to all periods up to Completion and any and all actions suits
proceedings claims demands assessments awards and judgements in respect
thereto and (save in respect of work in progress and unfinished products
and any steps required to be taken by the Purchaser under Clause 5.2)
6.2.2 liabilities arising under or in respect of all
contractual commitments entered into by the Vendor in respect of the
Business (save as provided in Clause 2.1.4 in respect of the Contracts)
6.3 The Purchaser covenants with the Vendor that it will pay,
satisfy, discharge, and fulfil all costs, claims, expenses, liabilities,
obligations and undertakings whatsoever relating to the Business in respect
of any period commencing on the Transfer Date and will indemnify and hold
harmless the Vendor in respect of the same
6.4 Ater the Transfer Date the Purchaser shall meet and discharge
all claims for fulfilment of warranties given by the Vendor in relation to
the Business to customers which have been disclosed to the Purchaser or are
normal warranties to be given in the ordinary course of the Business which
arise after that date in respect of products sold or supplied or services
provided by the Vendor before the Transfer Date and the Purchaser shall
indemnify the Vendor against all reasonable costs and liabilities incurred
by the Vendor under such warranties
6.5 All rents, rates, gas, water, electricity and telephone
charges and other outgoings relating to or payable in respect of the
Business up to the Transfer Date shall be borne by the Vendor and as from
the Transfer Date shall be borne by the Purchaser and all rents, royalties
and other periodical payments receivable in respect of the Business after
that time shall belong to and be payable to the Purchaser. Such outgoings
and payments receivable shall if necessary be apportioned accordingly,
provided that any such outgoings or payments receivable which are referable
to the extent of the use of any property or right shall be apportioned
according to the extent of such use
6.6 Where any amounts fall to be apportioned under this Agreement,
the Vendor shall provide the Purchaser with full details of the
apportionments, together with supporting vouchers or similar documentation,
and in the absence of dispute the appropriate payment shall be made by or
to the Vendor forthwith. If the amount of any apportionment is in dispute,
the provisions of Clause 6.7 shall apply for resolving the dispute and the
amount determined in accordance with that clause shall be paid within 14
days of the determination, together with interest calculated on a daily
basis (as well after as before judgment), from the Transfer Date until the
date of actual payment, at the rate of one per cent per annum above the
base rate from time to time of Barclays Bank PLC
6.7 Any dispute with respect to the determination of the value of
any apportionments under Clause 6 .6 shall be referred for final settlement
to a firm of chartered accountants nominated jointly by the Vendor and the
Purchaser or, failing such nomination within 14 days after request by
either the Vendor or the Purchaser, nominated at the request of either of
them by the President for the time being of the Institute of Chartered
Accountants in England and Wales. The accountants shall be entitled to
call for and inspect the working papers of the Vendor's auditors and such
other documents as they may reasonably consider necessary. In making their
determination, the accountants shall act as experts and not as arbitrators,
their decision shall (in the absence of manifest error) be final and
binding on the parties and their fees shall be borne and paid by the Vendor
and the Purchaser in such proportions as the accountants determine
6.8 The Vendor shall be granted by the Purchaser the right during
normal business hours to inspect on reasonable notice the Retained Records
and all the Records relating to the Business which the Vendor considers
necessary to consider such apportionments provided that the Vendor shall
keep the same confidential and not divulge or disclose the same save as
required by law
6.9 The Purchaser shall maintain all such of the Retained Records
which are delivered to it on Completion for a period of not less than 7
years from the Transfer Date
7. COMPLETION
7.1 Completion of the sale and purchase of the Business shall take
place at 10.00am. on the Transfer Date at the offices of the Purchaser's
Solicitors or at such other place as the parties may agree whereupon the
transactions set out in Clause 7.2 shall take place
7.2 The Vendor shall deliver or cause to be delivered to the
Purchaser:
7.2.1 an assignment of the Goodwill and the Intellectual
Property Rights in the agreed terms duly executed by the Vendor
7.2.2 an assignment of the Debts in the agreed form duly
executed by the Vendor together with a letter in the agreed form the Vendor
to the Purchaser confirming the assignment is executed in escrow
7.2.3 the Equipment and all other of the Assets as are
capable of passing by delivery
7.2.4 such documents as shall be reasonably necessary or
appropriate to complete the sale and purchase of the Assets and vest title
in them in the Purchaser
7.2.5 the Records and VAT records and copies of the PAYE and
NI records
7.2.6 the Stock
7.2.7 the Contracts which the Vendor hereby assigns to the
Purchaser
7.2.8 the Information
7.2.9 the Computer Software Licences
7.2.10 an assignment of the Lease and Reversioner's consent
relating to the Assignment of the Lease if available
7.2.11 deeds of release in respect of all charges mortgages
debentures and other security interests created by the Company or to which
any of the Assets are subject in terms satisfactory to the Purchaser
7.2.12 transfer documents in respect of motor vehicles
included in the Leased Assets
7.2.13 a duly executed re-assignment by ▇▇▇▇ ▇▇▇▇▇▇ Limited
of all book debts relating to the Business and confirmation that the deed
of charge has been released
7.3 The Purchaser shall not be obliged to complete the purchase of
any of the Assets unless the purchase of all the Assets is completed in
accordance with this Agreement
7.4 The Vendor undertakes with the Purchaser to allow the
Purchaser on reasonable notice access to or copies of such of the books and
records of the Business relating to the period before Completion as the
Purchaser may reasonably require in order to comply with any legal
obligations imposed on the Purchaser after Completion and the Vendor
undertakes to procure that Messrs. ▇. ▇▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇▇▇▇ shall give
such reasonable assistance to the Purchaser as shall be agreed by the
Purchaser and the Vendor after the Transfer Date to facilitate the
transition of the Business to the Purchaser including if requested by the
Purchaser attending meetings with customers of the Business
7.5 At Completion the Purchaser shall pay the Cash Consideration
to the Vendor's Solicitors on behalf of the Vendor by electronic funds
transfer and the receipt of the Vendor's Solicitors shall be a good
discharge for such payment
7.6 On or before 4th February 1998 the Purchaser shall pay the sum
of US$600,000 ("the Earn-Out Security Deposit") into a US Dollar interest
bearing deposit account opened in the joint names of the Vendor's
Solicitors and the Purchaser's Solicitors whose respective partners will be
the sole parties authorised to operate such account
7.7 The Earn-Out Security Deposit shall be applied only against
the obligations of the Purchaser to pay the Earn-Out The Vendor and the
Purchaser shall irrevocably instruct in writing the Vendor's Solicitors and
the Purchaser's Solicitors respectively to deal with the Earn-Out Security
Deposit in accordance with this clause and clause 7.8
7.8 Any payments required to be made under Schedule 8 shall be
made out of the Earn-Out Security Deposit and for the avoidance of doubt
all interest that accrues on the Earn-out Security Deposit shall be for the
benefit of the Purchaser and accordingly the Vendor and the Purchaser shall
instruct in writing the Vendor's Solicitors and the Purchaser's Solicitors
respectively to deal with the interest accordingly
8. TITLE
8.1 The Lease shall be assigned by the Vendor to the Purchaser
pursuant to the terms and conditions set out in Schedule 6
8.2 The Vendor shall take all necessary steps and generally
co-operate fully with the Purchaser to ensure that it obtains the full
benefit of the Business and the Assets and shall execute such documents and
take such other steps as are reasonably necessary or appropriate for
vesting its rights and interests in the Business and the Assets in the
Purchaser and as requested by the Purchaser
8.3 In so far as the Assets comprise the benefit of the Contracts
or the Computer Software Licences which cannot be effectively assigned to
the Purchaser without the consent of a third party or except by agreement
or novation:-
8.3.1. the Vendor and the Purchaser shall use all reasonable
endeavours to obtain such consent in order to procure a novation;
8.3.2 unless and until such consent is obtained or any such
contract is novated the Purchaser shall for its own benefit and to the
extent that such Contracts or Computer Software Licences (as the case may
be) permit perform on behalf of the Vendor and the Vendor shall hold the
relevant Contract or Computer Software Licence as bare trustee for the
Purchaser (and subject to 8.3.3) for nil consideration and shall
sub-contract any work arising from the Contracts to the Purchaser to the
intent that the Vendor does not benefit from the Contracts
8.3.3 if and to the extent that any Contract incorporates a
prohibition against holding on trust or any agency arrangement, pending the
obtaining of such consents, the Vendor and the Purchaser will make such
other arrangements between themselves as may be permissible to implement so
far as possible the effect of the transfer of the benefit and the burden of
such Contracts to the Purchaser to the intent that the Vendor does not
benefit from the Contracts
8.4 The Purchaser shall indemnify and hold harmless the Vendor
against all costs, claims, liabilities and expenses arising out of the
Contracts (but not in the event that the same arises from a breach or
default by the Vendor) or the Computer Software Licence after the Transfer
Date
8.5 The Purchaser will in so far as it is able procure the Vendor
is reimbursed as soon as possible and in any event within 28 days the sum
of 18,250 in respect of monies deposited by it with
Barclays Bank PLC in relation to a performance guarantee to ▇▇▇▇▇ Naval
Shipyard
9. WARRANTIES BY THE VENDOR
9.1 The Vendor warrants to the Purchaser that subject to matters
fairly disclosed in the Disclosure Letter and in this Agreement the
Warranties set out in Schedule 1 are true and accurate in all material
respects
9.2 Subject to the provisions of Schedule 7 the rights and
remedies of the Purchaser in respect of any breach of the Warranties shall
not be affected by Completion, by the Purchaser failing to exercise or
delaying the exercise of any of its rights or remedies or by any other
event or matter whatsoever
9.3 Where any Warranty refers to the awareness or knowledge
information and belief of the Vendor the Vendor undertakes that it has made
reasonable and proper enquiry into the subject matter of that Warranty save
where otherwise stated
9.4 If the Vendor pays to the Purchaser an amount in respect of a
breach of the Warranties and the Purchaser subsequently recovers from a
third party a sum which is in respect of that breach the Purchaser shall
forthwith pay to the Vendor so much of the amount paid by the Vendor as
does not exceed the sum recovered from the third party less all reasonable
costs charges and expenses incurred by the Purchaser in recovering that sum
from the third party and any applicable tax
9.5 The liability of the Vendor in respect of the Warranties shall
be subject to the provisions of Schedule 7
9.6 The Purchaser confirms it is not aware of any fact or matter
relating to the Business which would enable it to bring a claim for breach
of warranty
10. EMPLOYEES
10.1 The parties declare that it is their intention that the
contracts of employment of the Transferring Employees shall be transferred
to the Purchaser pursuant to the Transfer of Undertakings (Protection of
Employment) Regulations 1981 ("the Regulations") with effect from
Completion
10.2 All salaries and other emoluments including national insurance
payments relating to the Transferring Employees shall be borne by the
Vendor up to Completion and by the Purchaser thereafter and all necessary
apportionments shall be made
10.3 The Vendor shall indemnify the Purchaser against each and
every cost claim liability expense or demand which relates to or arises out
of any act or omission by the Vendor or any other event or occurrence prior
to the date of Completion and which the Purchaser may incur in relation to
any contract of employment and collective agreements concerning the
Transferring Employees pursuant to the operation of Regulations including
without limitation any such matter relating to or arising out of:
10.3.1 the Vendor's rights powers duties and/or liabilities
under or in connection with any such contract of employment and any such
collective agreements (which rights powers duties and/or liabilities are
or will be transferred to the Purchaser in accordance with the Regulations)
10.3.2 anything done or omitted before the date of Completion
by or in relation to the Vendor in respect of any contract of employment or
any such collective agreements or any person employed in the Business which
is deemed to have been done or omitted by or in relation to the Purchaser
in accordance with the Regulations
10.3.3 the Vendor's failure to pay to any Transferring
Employee any sums due in respect of the period prior to the Transfer Date
10.3.4 any claim by any trade union staff association or
staff body recognised by the Vendor or Transferring Employees in respect of
all or any of the Transferring Employees arising out of the Vendor's
failure to comply with its legal obligations to such trade unions or staff
associations or bodies or Transferring Employees
10.3.5 any claim by any of the Excluded Employees or any
other former existing or future employee of the Vendor (other than
Transferring Employees) against the Purchaser concerning or relating to any
matter whatever
10.4 The Vendor will instruct the pension scheme administrator to
note the name of the new employer of the Transferring Employees and the
Vendor shall cease to make any contributions from the Transfer Date
10.5 The Purchaser shall indemnify the Vendor against each and
every cost claim liability expense or demand arising from any fact or event
in relation to a Transferring Employee occurring after the date of
Completion and against any claim for redundancy payments or protective
awards and any liability for wrongful dismissal or unfair dismissal or
otherwise in connection with the transfer of the employment of the
Transferring Employees to the Purchaser
11. VENDOR'S UNDERTAKINGS
For the purpose of assuring to the Purchaser the full benefit of
the Business the Vendor covenants with the Purchaser that the Vendor shall
not and the Vendor shall procure that each company in the Vendor's Group
shall not:-
11.1 use in any way, for their own account or the account of any
other party, nor disclose to any third party, Confidential Information
relating to the Business or any clients or customers of the Business or any
Assets or information which are the subject of this Agreement save as may
be required by law or which enters the public domain (through no fault of
the Vendor)
11.2 publish any technical descriptions of Confidential Information
beyond those published and authorised for disclosure by the Purchaser save
as may be required by law or which enters the public domain (through no
fault of the Vendor)
11.3 for three (3) years following the Transfer Date, either on its
own account or through any other person anywhere within the United Kingdom
or Europe, unless otherwise authorised by the Purchaser in writing
11.3.1 solicit interfere with or endeavour to entice away
from the Purchaser any person who is now or has during the last two (2)
years preceding the Transfer Date been a client or customer or employee of
the Vendor in relation to the Business
11.3.2 participate in the ownership, management, operation,
or control of, or have any financial interest in or be connected with, or
engage in or aid or knowingly assist anyone else, in the conduct of any
business activities involving the design, development, manufacture, or
distribution of switching power supplies, uninterruptible power supplies,
or frequency converters for the commercial or military markets
12. GUARANTEES
12.1 In consideration of the Purchaser entering into this Agreement
the ▇▇▇▇▇▇▇ Guarantor hereby guarantees the due and full performance by the
Vendor of its duties obligations and undertakings under this Agreement and
hereby undertakes to the Purchaser that if the Vendor shall fail in any
respect to fulfil or shall be in breach of any of its duties obligations
warranties representations covenants or undertakings the Purchaser shall be
at liberty to act and the ▇▇▇▇▇▇▇ Guarantor shall be liable as if it were
the party principally bound thereby
12.2 In consideration as aforesaid the ▇▇▇▇▇▇▇ Guarantor hereby
covenants with the Purchaser that it will indemnify and at all times
hereafter keep the Purchaser fully indemnified against all losses damages
costs and expenses which may be incurred or suffered by it by reason of any
default on the part of the Vendor in making the payments and in performing
and observing the agreements and conditions on its part herein contained
12.3 The ▇▇▇▇▇▇▇ Guarantor hereby agrees that any duty obligation
covenant warranty agreement or undertaking expressed in this Agreement or
in the Schedules to be a duty obligation covenant warranty agreement or
undertaking of the Vendor shall be and be construed as a duty obligations
covenant warranty agreement and undertaking of the ▇▇▇▇▇▇▇ Guarantor and
the Vendor jointly and severally
12.4 The guarantee herein contained shall be a continuing security
and shall not be affected by any time or indulgence granted by the
Purchaser to the Vendor
12.5 Each reference herein to the ▇▇▇▇▇▇▇ Guarantor shall be deemed
to include its successors all of whom shall be bound by the provision
hereof
12.6 In consideration of the Vendor entering into this Agreement
the Digital Guarantor hereby guarantees the due and full performance by the
Purchaser of its duties obligations and undertakings under this Agreement
and hereby undertakes to the Vendor that if the Purchaser shall fail in any
respect to fulfil or shall be in breach of any of its duties obligations
representations covenants or undertakings the Vendor shall be at liberty to
act and the Digital Guarantor shall be liable as if it were the party
principally bound thereby
12.7 In consideration as aforesaid the Digital Guarantor hereby
covenants with the Vendor that it will indemnify and at all times hereafter
keep the Vendor fully indemnified against all losses damages costs and
expenses which may be incurred or suffered by it by reason of any default
on the part of the Purchaser in making the payments and in performing and
observing the agreements and conditions on its part herein contained
12.8 The Digital Guarantor hereby agrees that any duty obligation
covenant warranty agreement or undertaking expressed in this Agreement or
in the Schedules to be a duty obligation covenant agreement or undertaking
of the Purchaser shall be and be construed as a duty obligations covenant
warranty agreement and undertaking of the Digital Guarantor and the
Purchaser jointly and severally
12.9 The guarantee herein contained shall be a continuing security
and shall not be affected by any time or indulgence granted by the Vendor
to the Purchaser
12.10 Each reference herein to the Digital Guarantor
shall be deemed to include its successors all of whom shall be bound by the
provision hereof
13. GENERALLY
13.1.1 Except as required by law no announcements of the
terms of this Agreement shall be made by any party without the consent of
the others and pending any agreed announcement each party shall use its
best endeavours to keep the same confidential
13.1.2 The exercise of or the failure to exercise any right
(including a right of rescission) conferred on any party by this Agreement
shall not constitute a waiver of that or any other right or remedy
available to that party
13.1.3 If any provision of this Agreement is held by any
competent authority to be invalid or unenforceable in whole or in part this
Agreement shall continue to be valid as to its other provisions and the
remainder of the affected provision
13.1.4 This Agreement shall be governed by and construed in
accordance with English law and the parties irrevocably submit to the
exclusive jurisdiction of the English Courts and waive any objection to
proceedings in such courts on grounds of venue or on the grounds that
proceedings have been brought in an inconvenient forum
13.2 All obligations which remain to be performed after the date of
Completion shall continue in full force and effect notwithstanding
Completion and shall not merge in the assurance to the Purchaser
13.3 This Agreement shall be binding upon and enure for the benefit
of the successors of the parties but shall not be assignable, save that the
Purchaser may at any time assign all or any part of the Assets
13.4 This Agreement, together with any documents referred to in it,
constitutes the whole agreement between the parties relating to its subject
matter and supersedes and extinguishes any prior drafts, agreements,
undertakings, representations, warranties, assurances and arrangements of
any nature, whether in writing or oral, relating to such subject matter
13.5 The Purchaser acknowledges that it has not been induced to
enter into this Agreement by any representation, warranty, promise or
assurance by the Vendor or any other person save for those contained in
this Agreement. The Purchaser agrees that (except in respect of fraud) it
shall have no right or remedy in respect of any representation, warranty,
promise or assurance save for those contained in this Agreement
13.6 No variation of this Agreement shall be effective unless made
in writing and signed by each of the parties
13.7 Each party shall bear its own costs arising out of or in
connection with the preparation, negotiation and implementation of this
Agreement
14. NOTICES
Any notice, request, instruction or other document required to be
given hereunder by any party hereto shall be in writing and shall be deemed
to have been given upon the earlier of (a) receipt by the party entitled to
such notice, or (b) five days following deposit in the U.S. mail, certified
or registered mail, postage prepaid:
(a) If to Vendor, addressed as follows:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Lion Technology Limited,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇,
Challoner House,
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇, ▇.▇.
(b) If to Purchaser, addressed as follows:
▇▇▇▇▇▇ ▇▇▇▇▇,
Digital Power Corporation,
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, ▇.▇.▇.
with copies to:
▇▇▇▇▇▇ ▇. Eng,
▇▇▇▇▇▇ Eng Linn & ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇.▇.▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co.,
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇ ▇▇▇, U.K.
(c) if to the ▇▇▇▇▇▇▇ Guarantor, addressed as follows:
▇▇▇▇▇▇▇ Lion Technology Group Limited,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
if to the Digital Guarantor, addressed as follows:
(d) ▇▇▇▇▇▇ ▇▇▇▇▇,
Digital Power Corporation,
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, ▇.▇.▇.
or to such other individual or address as any party hereto may designate
for itself following the giving of prior written notice as provided herein
15. PROCESS AGENT
The Digital Guarantor appoints ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co of ▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ as its process agent to receive on its
behalf service of process in any proceedings in England Service upon the
process agent shall be good service upon the Digital Guarantor whether or
not it is forwarded to and received by the Digital Guarantor if for any
reason the process agent ceases to be able to act as process agent, or no
longer has an address in England the Digital Guarantor irrevocably agrees
to appoint a substitute process agent with an address in England acceptable
to the Vendor and to deliver to the Vendor a copy of the substitute process
agent's acceptance of that appointment within 30 days In the event that
the Digital Guarantor fails to appoint a substitute process agent it shall
be effective service for the Vendor to serve the process upon the last
known address in England of the last known process agent for the Digital
Guarantor notified to the Vendor, notwithstanding that such process agent
is no longer found at such address or has ceased to act
AS WITNESS the hands of the Parties the day and year first above written
SCHEDULE 8
EARN-OUT and NAV ADJUSTMENT
1.1 In this Schedule the following words and phrases have the meanings
next to them:
"Accountants" The Purchaser's Accountants and the
Vendor's Accountants
"Additional Consideration" Any sums payable under paragraph
12 of this Schedule
"Completion NAV" The sum calculated in accordance with
paragraph 2.3 of this Schedule
"Earn-out" Any sum payable as Additional
Consideration under paragraph 12 of
this Schedule
"Earn-out Period" The twelve month period commencing on
1 April 1997 and ending on 31 March
1998
"EBIT" The aggregate of the unaudited profit
of the Business before Vendor Group
Charges, interest and taxation for the
period from 1 April 1997 to Completion
("Completion EBIT") extracted from the
Completion Accounts and the unaudited
profit before Purchaser Group Charges,
interest and taxation for the period
from Completion to 31 March 1998
("Post-Completion EBIT") extracted
from the Post Completion Accounts of
the Business
"Group Charges" All directors fees and emoluments and
all related costs (other than any
charges in respect of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
and any other executive manager or
employee of the Business) management
or administration charges and any
other costs not directly related to
the Business whether normal or
exceptional levied on the Business by
the Vendor's Group or the Purchaser's
Group.
"Independent Accountant" A firm of independent accountants
agreed by the Vendor and the
Purchaser or in default of agreement
within 21 days of either party
requesting an appointment appointed
on the application of either party
(following notice to the other) by
the President for the time being of
the Institute of Chartered
Accountants in England and Wales
"NAV" In relation to the Completion NAV the
value of the fixed assets of the
Business as at the Transfer Date, the
Debts and the Stock less the value of
the Agreed Liabilities extracted from
the Completion Accounts, or in
relation to Post Completion NAV
assets and liabilities similar in
nature thereto as extracted from the
Post Completion Accounts as the case
may be
"Operation Premises" The Property and any premises to
which any activity is presently
carried on at or from the Property
are transferred and any other
premises of the Purchaser or the
Purchaser's Group within the United
Kingdom
"Post Completion NAV" The sum calculated in accordance with
paragraph 5 of this Schedule
"Vendor Operation" The Business as transferred to the
Purchaser conducted at and from the
Operation Premises prior to Completion
1.2 (A) for the avoidance of doubt EBIT and (where appropriate) NAV
excludes (without limit);
1.2.1 interest payable or receivable in relation to the Business or
other costs or returns on capital employed and any payment of a
similar nature but excluding any imputed interest on hiring and
leasing equipment;
1.2.2 any tax levied or measured by profits (including corporation tax
and any provision for deferred taxation and any similar or
additional or substitute tax on any capital gains);
1.2.3 emoluments and all related costs and expenses payable to any
nominee of any member of the Purchaser's Group to the board of
the Purchaser;
1.2.4 any expenses arising out of or in connection with the
calculations and reports to be produced pursuant to this
Schedule;
1 2.5 Group Charges;
1.2.6 any charges or expenses relating to the acquisition of the
Business by the Purchaser including (but without limit) charges
or expenses of solicitors or accountants and any professional
costs which would not have been incurred had the Business not
been sold; and
1.2 (B) The amounts set out in the Schedule of Adjustment prepared by
Messrs. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and annexed hereto shall be excluded
from the Completion Accounts and from EBIT save that the
quantum thereof for the purpose of the Post Completion
Accounts and EBIT shall be subject to agreement between the
Accountants in order to comply with generally accepted UK
accounting principles and failing agreement as shall be
determined by the Independent Accountants (applying the
provisions in Clauses 4 to 11 below)
1.3 It shall be an overriding principle in relation to the calculation
of NAV and EBIT that the calculation shall be on a fair and
equitable basis representing a fair and equitable apportionment of
income and costs incurred in relation to the Vendor Operation prior
to Completion and the Purchase Operation thereafter and having
regard to the benefit reasonably expected to be derived from the
matter in respect of which the income is earned and the expenditure
as charged by the Vendor Operation and the Purchaser Operation in
the Earn-Out Period.
2.1 The Vendor shall procure that unaudited accounts are prepared for
the Business incorporating the results of the Business for the
period commencing 1 April 1997 and ending at midnight on 22 January
1998 and a balance sheet of the Business including a statement of
Agreed Liabilities and Debtors at that date ("the Completion
Accounts"). The Completion Accounts will be prepared in accordance
with generally accepted UK accounting principles and on the same
basis and utilizing consistent with the same policies adopted by
the Management Accounts and passed to the Purchaser within 30 days
of Completion for approval by the Purchaser.
2.2 For the purposes of the preparation of the Completion Accounts and
the Post Completion Accounts the value of Stock shall be
ascertained in accordance with the provisions of this paragraph:
2.2.1 The Vendor and the Purchaser shall cause a full stocktaking of
the Stock to be made on the first working day following
Completion and within 3 working days following 31 March 1998;
2.2.2 Unless otherwise agreed by the parties such stocktaking shall
consist of a physical check of the amount, quality and condition
of Stock situated at the Operation Premises at Completion or
31 March 1998 (as the case may be);
2.2.3 Stock shall be valued on the same basis as used in the Statutory
Accounts.
2.3 Completion NAV shall consist of the sum of the value of the fixed
assets of the Business as at the Transfer Date the Debts and the
Stock less the value of the Agreed Liabilities.
3.1 As soon as the Completion Accounts shall have been prepared the
Vendor shall send a copy to the Purchaser together with all such
working papers used in connection with the preparation of the same
as it is necessary or appropriate to understand and agree the
Completion Accounts and shall in addition, and at the same time,
send to the Purchaser its calculation of the Completion NAV.
3.2 Unless the Purchaser shall within 30 days of receipt of the
Completion accounts serve a notice in writing on the Vendor that it
objects to the Completion Accounts (identifying the reason for any
objection and the amount(s) or item(s) in the Completion accounts
and/or calculation which is/are in dispute) (such notification
being, for the purposes of this Paragraph, an `Objective Notice')
the Purchaser shall be deemed to have agreed to the Completion
Accounts and the Vendor's calculation of the Completion NAV for all
purposes of this Agreement.
3.3 If, within the period referred to in paragraph 3.2, the Purchaser
shall give the Vendor an Objection Notice then the Purchaser and
the Vendor shall use their best endeavors to reach agreement upon
adjustments to the draft Completion Accounts and the value of the
Completion NAV.
3.4 In the event that the Vendor and the Purchaser are unable to reach
agreement within 30 days following service of the Object Notice,
either the Vendor or the Purchaser shall be entitled to refer the
matter or matters in dispute to an Independent Accountant. Such
Independent Accountant shall act as expert not as an arbitrator and
shall determine the matter or matters in dispute and certify the
Completion NAV accordingly and whose decision shall, save in the
event of fraud or manifest error be binding. The cost of the
Independent Accountant shall be borne equally by the Vendor and the
Purchaser.
3.5 If the Purchaser accepts, or is deemed to accept, that the said
draft complies with Paragraph 2 the Vendor shall sign a report to
the effect that the Completion Accounts comply with Paragraph 2 or
(if Paragraph 3.4 shall apply) the final draft of the Completion
Accounts as determined by the Independent Accountant shall be the
Completion Accounts for the purposes of this Agreement and shall be
final and binding on the parties.
3.6 When the Completion Accounts have become binding, the Cash
Consideration shall forthwith:
3.6.1 be increased by US$1.6284 for each pound that
the Completion NAV exceeds GB1,100,000;
or (as the case may be)
3.6.2 be reduced by US$1.6284 for each pound that the Completion NAV
is less than GB1,100,000.
3.7 Any increase or reduction in the Cash Consideration shall be paid
by the Purchaser or the Vendor (as appropriate) within 7 days after
the Completion Accounts have become binding as aforesaid and any
amount not paid when due shall carry interest (accrued daily) at
the rate of per cent above the lease rate of Barclays Bank plc from
time to time.
4 The Purchaser shall procure that the unaudited accounts for the
Business for the period from Completion to 31 March 1998 and a
balance sheet of the Business at that date ("the Post Completion
Accounts") are prepared and passed to the Vendor within 30 days of
the end of that period. The Post Completion Accounts shall apply
bases and policies of accounting consistent to those applied in the
Completion Accounts and shall disregard any items of an
extraordinary exceptional or unusual nature.
5 The Purchaser will procure that the Purchasers' Accountants will
review the Completion Accounts and the Post Completion Accounts and
calculate the EBIT and the Post Completion NAV in accordance with
this Schedule and issue a certificate ("the Certificate") within 30
days of receipt of the Post Completion Accounts.
6 For the purpose of calculating the Post Completion NAV:
6.1 all consideration and costs, expenses and other sums payable
in respect of the acquisition of the Business shall be added
back for the purposes of calculating the Post Completion NAV;
6.2 any reduction in the Post Completion NAV caused by a breach of
any of the provisions of paragraph 14 of this Schedule shall
be added back to the Post Completion NAV.
7 The Vendor may be notice to the Purchaser delivered within 30 days
of receipt by the Vendor of the Certificate require that the
calculation of the EBIT and/or the Post Completion NAV in it
(including the Post Completion Accounts on which the calculation is
based) be reviewed by the Vendor's Accountants.
8 The Purchaser's and Vendor's Accountants shall endeavor to agree
any matters relating to the Certificate not agreed between them
within 56 days of the Vendor's Accountants completing their review.
9 If the Purchaser's and Vendor's Accountants fail to agree any
matter referred to in paragraph 6 of this Schedule within the time
specified in it the matter in dispute shall be referred to the
Independent Accountant (acting as expert) for determination. The
decision of the Independent Accountant's on any matter referred to
them shall (except in the case of manifest error) be final and
binding on the accountants and the parties. The costs of the
Independent Accountants shall be borne equally between the Vendor
and the Purchaser.
10 The parties shall procure that the Purchaser's and Vendor's
Accountants and any Independent Accountants are given access to all
working papers prepared by the Purchaser and given any information
and explanations they may reasonably request to carry out their
respective functions under this Schedule.
11 Upon the agreement of (or determination under paragraph 7 of any
matter disputed) the EBIT the parties shall procure that the
Accountants jointly sign (on the basis of any such determination)
and deliver to the Vendor and Purchaser a report confirming the
amount of EBIT.
12.1 The Purchaser shall pay to the Vendor an additional consideration
in the sum of:
12.1.1 US$1.15 for every one pound of EBIT in excess of 250,000 up to a maximum payment of US$300,000; and
12.1.2 US$300,000 in the event that the Post Completion NAV equals
or exceeds 1,606,000.
12.2 In the event that the Post Completion NAV is less than 1,606,000 any payment due under clause 12.1 shall be
reduced by US$1.6284 for each pound by which the Post Completion
NAV is less than 1,606,000 until any payment due
under clause 12.1.2 is extinguished.
13 Any Additional Consideration payable to the Vendor shall be paid:
13.1 if the Vendor agrees the figures for EBIT and Post Completion
NAV set out in the Certificate or does not require a review
under paragraph 9 of this Schedule within 14 days of the
delivery of the Certificate to the Vendor;
13.2 if the Vendor requires a review under paragraph 9 of this
Schedule the Purchaser shall:
13.2.1 pay the amount of such Additional Consideration as is
payable in accordance with the calculation by the
Purchaser's Accountants of the relevant EBIT and Post
Completion NAV within 7 days of being notified by the
Vendor that a review is required;
13.2.2 pay any balance of that consideration (if any) within
7 days of the delivery of the Accountants Report to the
Purchaser and interest on that balance from the date the
sum specified in paragraph 13.2.1 above down to the date
of payment of that balance at the rate of one percent
above the base rate of Barclays Bank plc current from
time to time.
14 The Purchaser acknowledges that (having regard to the manner in
which the Consideration for the Business has been calculated) the
Vendor has a legitimate interest in ensuring that the EBIT and NAV
of the Business for the Earn-Out Period as high as may fairly and
reasonably be achieved by the Purchaser (having due regard to the
Purchasers legitimate interest in establishing a stable and secure
business for the Business in the long term). Accordingly, the
Purchaser and the Digital Guarantor undertake jointly and severally
with the Vendor that during the Earn Out Period:
14.1 they will use their best endeavors to promote the business of
the Business;
14.2 they will not do anything with the intention of adversely
affecting the business or the EBIT or NAV;
14.3 they will not develop or seek to develop any business
competitive with that of the Business;
14.4 they will not transfer, divert or direct the custom of any
customer or client or any potential customer or client of the
Business elsewhere or seek to do so;
14.5 they will not seek to transfer or divert or direct elsewhere
any orders or enquiries for products or services available
from the Business;
14.6 they will use their best endeavors to maintain the operations
of the Business in terms of fixed assets (including premises,
plant and equipment) and financial facilities to the
reasonable satisfaction of the vendor being not less suitable
for the purposes of the Business than as maintained by the
Vendor prior to Completion;
14.7 they will provide the Business will access to the financial
management and other facilities of the Purchaser's Group on a
basis no less beneficial to the conduct of the Business than
that provided to any other members of the Purchaser's Group;
14.8 the Digital Guarantor only undertakes that it will not without
the previous written consent of the Vendor part with control
of the Purchaser (save to another member of the Purchaser's
Group). (For the purposes of this sub-paragraph one company
("Company A") shall be deemed to part with control of another
("Company B") if as a result of any transaction or series of
transactions or arrangements whether or not involving a
transfer of shares in the relevant company or the issue of any
shares in any Company A ceases (either directly or indirectly)
to be the holder of shares representing the percentage of the
equity share capital of Company B held at completion;
14.9 they will not sell or procure the sale or otherwise dispose of
the whole or any substantial part of the Business (other than
current assets disposed of in the normal course of business);
14.10 to procure that the Purchaser does not pass any resolution to go
into voluntary liquidation (except if the Purchaser is at that
time insolvent and a licensed insolvency practitioner advises
liquidation by reason of insolvency);
14.11 to procure that the Purchaser makes no material adverse
alteration in the nature scope or conduct of the Business;
14.12 to procure that ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ whilst so willing shall be
employed by the Purchaser on the terms of his Service Agreement
and that if the employer named in the Service Agreements
claims to be entitled to terminate the Service Agreements for
the Vendor to take effect before the end of the Earn-Out Period
it shall not do so unless agreed by the Vendor;
14.13 to procure that the EBIT is not adversely affected by any service
management or similar charge or by any transaction or arrangement
which is not or would not on the basis that the Purchaser
Operation were a separate undertaking to any other member or
division of the Purchaser's Group) be a bona fide commercial
transaction or arrangement on arms-length terms;
14.14 It will not materially alter the number of employees of the
Business or make any increase in the emoluments of the employees
of the Business (including without limitation any employers
contribution to pensions or in benefits provided hours of work or
holiday entitlement) which would have an adverse effect on EBIT;
14.15 not to procure or permit any capital expenditure in relation to
the Business except:
14.15.1 as is reasonably required to comply with the
provisions in the legal obligations contained
in any of the covenants (including the terms of
any lease) of premises occupied by the Business
as disclosed to and approved by the Vendor such
approval not to be unreasonably withheld or delayed;
14.15.2 as is reasonably required to replace plant and
equipment as it comes to the end of its useful
working life and in accordance with the policy
adopted by the Business immediately prior to
Completion or as the Vendor otherwise agrees
(such agreement not to be unreasonably withheld
or delayed) and not to incur capital expenditure
in excess of 10,000 without the
prior consent of the Vendor (such consent not to
be unreasonably withheld or delayed) and in the
event of such consent any costs or losses associated
with such expenditure shall be added back for the
purpose of calculating EBIT and NAV;
14.15.3 to procure that any goods or services provided
to or in respect of the Business whether by any
member of the Purchaser's Group or any third party
are provided on terms no less beneficial to the
recipient than any similar goods or services are
provided to any other member of the Purchaser's
Group; and
14.15.4 to procure that the Purchaser does not depart
from the ordinary course of the conduct of the
Business as conducted by the Vendor.
12.6 To procure that all shipments and deliveries are made no later than
their due date for shipment or delivery respectively.
15 The Purchaser shall procure that the Vendor is given access to the
Operations Premises during the compilation of the Completion
Accounts and the Post Completion Accounts and participation in such
compilation and any information it may reasonably request to enable
it to understand the basis on which Post Completion EBIT and Post
Completion NAV is being calculated.
16 The Vendor shall procure that the Purchaser is given any information
it may reasonably request to enable it to understand the basis on
which the Completion Accounts and the Pre-Completion EBIT and Completion
NAV is being calculated.
