ASSET PURCHASE AGREEMENT
BY AND AMONG
ZITEL LIMITED
(BUYER),
ZITEL CORPORATION,
PALMER & WEBB SYSTEMS LIMITED,
MOEBIUS BUSINESS TRAINING LIMITED,
(SELLERS)
AND
REGINALD WEBB, JULIAN PALMER AND
PALMER & WEBB SYSTEMS LIMITED
(SHAREHOLDERS)
DATED: 30 JUNE 1997
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
1. PURCHASE AND SALE OF ASSETS............................................. 1
1.1 Assets to be Transferred........................................... 1
1.2 Excluded Assets.................................................... 4
2. ASSUMPTION OF LIABILITIES............................................... 5
2.1 Liabilities to be Assumed.......................................... 5
2.2 Liabilities Not to be Assumed...................................... 5
3. PURCHASE PRICE - PAYMENT................................................ 7
3.1 Purchase Price..................................................... 7
3.2 Payment of Purchase Price.......................................... 7
3.3 Warranty Credit.................................................... 7
3.4 VAT................................................................ 7
4. REPRESENTATIONS AND WARRANTIES OF EACH SELLER AND SHAREHOLDER........... 8
4.1 Information........................................................ 8
4.2 Material Facts..................................................... 8
4.3 Business and Purchased Assets...................................... 8
4.4 Liabilities and Accounting Records................................. 8
4.5 Plant and Machinery................................................ 9
4.6 Intellectual Property Rights and Related Matters................... 9
4.7 Software, Contracts and Other Matters.............................. 10
4.8 Business Names..................................................... 11
4.9 Employees and Other Matters........................................ 11
4.10 The Computer System................................................ 14
4.11 Agreements and Commitments......................................... 14
4.12 Restrictive Contracts and Practices................................ 15
4.13 Constitution....................................................... 15
4.14 Business........................................................... 16
4.15 Litigation......................................................... 16
4.16 Insurance.......................................................... 16
4.17 The Products....................................................... 17
4.18 Leased Real Property Warranties.................................... 17
4.19 Tax Warranties..................................................... 23
4.20 Pension Warranties................................................. 26
i.
5. Representations and Warranties of Buyer................................. 26
5.1 Corporate.......................................................... 26
5.2 Authority.......................................................... 26
5.3 No Brokers or Finders.............................................. 27
5.4 Financial Capacity................................................. 27
6. Employees............................................................... 27
7. OTHER MATTERS........................................................... 28
7.1 Use of Sellers' Name............................................... 28
7.2 Investigations..................................................... 28
8. FURTHER COVENANTS OF EACH SELLER AND SHAREHOLDER........................ 28
8.1 Access to Information and Records.................................. 28
8.2 Bank Accounts...................................................... 28
8.3 Conduct of Business Pending the Closing............................ 28
8.4 Consents........................................................... 29
8.5 Other Action....................................................... 31
8.6 Disclosure......................................................... 31
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS............................. 31
9.1 Representations and Warranties True on the Closing Date............ 31
9.2 Compliance With Agreement.......................................... 31
9.3 Absence of Suit.................................................... 32
9.4 Consents and Approvals............................................. 32
9.5 Datametrics Closing................................................ 32
9.6 Ownership of Moebius............................................... 32
10. CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS............................ 32
10.1 Representations and Warranties True on the Closing Date............ 32
10.2 Compliance With Agreement.......................................... 32
10.3 Absence of Suit.................................................... 33
10.4 Datametrics Closing................................................ 33
11. INDEMNIFICATION......................................................... 33
11.1 By Sellers and Shareholders........................................ 33
11.2 By Buyer........................................................... 33
11.3 Indemnification of Third-Party Claims.............................. 34
11.4 Payment............................................................ 35
11.5 Deductible Amount.................................................. 35
ii.
11.6 Maximum Liability................................................. 36
11.7 Treatment of Indemnification Payments............................. 36
11.8 Survival of Representations and Warranties; Claims for
Indemnification.................................................. 36
11.9 No Waiver......................................................... 36
12. CLOSING................................................................. 37
12.1 Documents to be Delivered by Sellers and Shareholders............. 37
12.2 Documents to be Delivered by Buyer................................ 38
13. TERMINATION............................................................. 38
13.1 Right of Termination Without Breach............................... 38
13.2 Termination for Breach............................................ 39
14. Resolution of Disputes.................................................. 40
14.1 Arbitration....................................................... 40
14.2 Arbitrators....................................................... 40
14.3 Procedures; No Appeal............................................. 40
14.4 Authority......................................................... 40
14.5 Entry of Judgment................................................. 40
14.6 Confidentiality................................................... 40
14.7 Continued Performance............................................. 40
14.8 Tolling........................................................... 41
15. EXPENSES................................................................ 41
15.1 Brokerage......................................................... 41
15.2 Expenses to be Paid by Sellers.................................... 41
15.3 Expenses to be Paid by Buyer...................................... 41
15.4 Other............................................................. 42
15.5 Costs of Litigation or Arbitration................................ 42
16. MISCELLANEOUS........................................................... 42
16.1 Materiality....................................................... 42
16.2 Further Assurance................................................. 42
16.3 Announcements..................................................... 42
16.4 Assignment; Parties in Interest................................... 42
16.5 Governing Law..................................................... 43
16.6 Amendment and Modification........................................ 43
16.7 Notice............................................................ 43
16.8 Entire Agreement.................................................. 44
16.9 Counterparts...................................................... 45
16.10 Headings.......................................................... 45
iii.
16.11 Further Documents................................................. 45
16.12 Survival.......................................................... 45
iv.
EXHIBITS
EXHIBIT A Definitions
EXHIBIT B Balance Sheets
EXHIBIT C Purchase Price and Indemnification Escrow Agreement
EXHIBIT D Opinion of MacDonald Oates
EXHIBIT E Escrow Agreement
EXHIBIT F Service Agreement
EXHIBIT G Opinion of Taylor Joynson Garrett
EXHIBIT H Opinion of Cooley Godward LLP
SCHEDULES
SCHEDULE 1.1.1 Intellectual Property Rights
SCHEDULE 1.1.2 Owned Real Property
SCHEDULE 1.1.3 Leased Real Property
SCHEDULE 1.1.4 Personal Property Leases
SCHEDULE 1.1.8 Notes and Accounts Receivable
SCHEDULE 1.1.14 Software and User Manuals
SCHEDULE 1.1.15 Contracts
SCHEDULE 2.2.1 Excluded Contracts
SCHEDULE 4.9.1 Contracts of Employment
SCHEDULE 4.9.4 Rates of Remuneration
[The Schedules listed above have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. Upon request, the Company will furnish supplementally, a copy
of any of the ommitted schedules to the Commission.]
v.
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") dated 30 June 1997, by and
among ZITEL CORPORATION, a California corporation ("PARENT"), ZITEL LIMITED, a
company incorporated in England and Wales ("BUYER"), PALMER & WEBB SYSTEMS
LIMITED, a company incorporated in England and Wales ("PWUK"), REGINALD WEBB and
JULIAN PALMER, as the sole shareholders of PWUK (individually, a "PWUK
SHAREHOLDER" and collectively, the "PWUK SHAREHOLDERS"), MOEBIUS BUSINESS
TRAINING LIMITED, a company incorporated in England and Wales ("MOEBIUS"), and
PWUK, as a shareholder of Moebius (the "MOEBIUS SHAREHOLDER") (PWUK and Moebius
are sometimes hereinafter individually referred to as a "SELLER" and
collectively as the "SELLERS" and the PWUK Shareholders and the Moebius
Shareholder are sometimes hereinafter individually referred to as a
"SHAREHOLDER" and collectively as the "SHAREHOLDERS"). Certain capitalized
terms used in this Agreement are defined in EXHIBIT A.
RECITALS
A. PWUK carries on the business of the sale and distribution of system
performance modelling software and Moebius carries on the business of the
training in the use of the products sold by PWUK (collectively, the "BUSINESS").
The PWUK Shareholders own one hundred percent (100%) of the issued share capital
of PWUK and the Moebius Shareholder owns (or will own, prior to the Closing) one
hundred percent (100%) of the issued share capital of Moebius.
B. PWUK's facilities consist of its offices at Fountain House, Cleave
Road, Leatherhead, Surrey KT22 7LX, United Kingdom and Moebius' facilities
consist of its offices at Unit F4, Business Centre, Aspon Science Centre,
Loveland, Birmingham B7 4BJ (collectively, the "FACILITIES").
C. Buyer desires to purchase from Sellers, Sellers desires to sell to
Buyer, and the Shareholders desire to cause Sellers to sell to Buyer, the
Business of Sellers and substantially all of the property and assets of Sellers
as a going concern and Buyer agrees to assume certain liabilities of the
Business as set forth herein.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows.
1. PURCHASE AND SALE OF ASSETS.
1.1 ASSETS TO BE TRANSFERRED. Subject to the terms and conditions of this
Agreement, on the Closing Date (as hereinafter defined) Sellers hereby, and
Shareholders hereby cause Sellers to, sell (with full title guarantee),
transfer, convey, assign, and deliver to Buyer (or upon Buyer's request, to one
or more wholly-owned subsidiaries of Buyer as designated by Buyer), and Buyer
hereby purchases and accepts all of the business, rights,
1.
claims and assets (of every kind, nature, character and description, whether
real, personal or mixed, whether tangible or intangible, whether accrued,
contingent or otherwise, and wherever situated) of Sellers, other than the
Excluded Assets (as hereinafter defined) (collectively, the "PURCHASED ASSETS").
The Purchased Assets shall include, but not be limited to, the following:
1.1.1 INTELLECTUAL PROPERTY RIGHTS. All Sellers' interest in any
Intellectual Property Rights. As used herein, the term "INTELLECTUAL PROPERTY
RIGHTS" shall mean all patents, copyrights, rights in relation to databases,
design rights, registered designs, trade and service marks (registered and
unregistered), semi-conductor topography rights, know how, rights in
confidential information and all other intellectual property rights throughout
the world for the full term of the rights concerned (including but not limited
to the rights specifically identified in SCHEDULE 1.1.1) in and relating to the
Software (including the Source Code), the Trade Marks, the Supporting Material
and the Confidential Information or otherwise used by Sellers in relation to the
Business and including: (a) all registrations and pending registrations
relating to any such rights and the benefit of any pending applications for any
such registrations; (b) all reversions, extensions and renewals of any such
rights; and (c) all accrued rights of action in relation to such rights
(including the right to sue for and recover damages for past infringements). As
used herein, the term "KNOW-HOW" shall mean all industrial, manufacturing and
commercial information and techniques relating to the Business including
(without prejudice to the generality thereof) drawings, formulae, test reports,
operating and testing procedures, practices, instruction manuals, tables of
operating conditions, lists and particulars of customers, marketing methods and
procedures and advertising material.
1.1.2 OWNED REAL PROPERTY. All of the real property, including
fixtures, buildings, improvements, and all appurtenant rights owned by Sellers,
including the real property described on SCHEDULE 1.1.2 attached hereto (the
"OWNED REAL PROPERTY").
1.1.3 LEASED REAL PROPERTY. All of the leases of real property with
respect to real property leased by Sellers, including the leases (the "REAL
PROPERTY LEASES") described on SCHEDULE 1.1.3 attached hereto with respect to
the real property described thereon (the "LEASED REAL PROPERTY").
1.1.4 PERSONAL PROPERTY LEASES. All leases of machinery, equipment,
vehicles, furniture and other personal property leased by Sellers, including all
such leases (the "PERSONAL PROPERTY LEASES") described in SCHEDULE 1.1.4
attached hereto.
1.1.5 MACHINERY AND EQUIPMENT. All machinery, equipment, vehicles,
tools, supplies, spare parts, furniture and all other personal property not
included in inventory (other than personal property leased pursuant to Personal
Property Leases as hereinabove defined) owned by Sellers on the Closing Date.
1.1.6 LITERATURE. All sales literature, promotional literature,
instructional materials for customers, catalogs and similar materials of
Sellers.
2.
1.7 RECORDS AND FILES. All records, VAT records, files, invoices,
customer lists, blueprints, specifications, designs, drawings, accounting
records, business records, operating data and other data of Sellers. Sellers
and their designated agents shall have reasonable access to such accounting, tax
and business records and may make excerpts therefrom and copies thereof.
1.1.8 NOTES AND ACCOUNTS RECEIVABLE. All notes, drafts and accounts
receivable of Sellers, described on SCHEDULE 1.1.8 attached hereto.
1.1.9 LICENCES; PERMITS. All licences, permits and approvals of
Sellers.
1.1.10 CORPORATE NAME. All rights of Sellers to use or allow others
to use the names "Palmer & Webb Systems" and "Moebius Business Training."
1.1.11 CASH AND CASH EQUIVALENTS. All cash and cash equivalents of
Sellers.
1.1.12 GOODWILL. All goodwill of Sellers.
1.1.13 RIGHTS OF ACTION. All rights and claims of Sellers under any
contracts, warranties, promises, conditions, guarantees or indemnitees
subsisting at the Closing Date, whether express or implied, in relation to any
property, rights or assets included in the Purchased Assets (but excluding all
rights of Sellers granted by or arising out of this Agreement).
1.1.14 SOFTWARE AND USER MANUALS. All Software and User Manuals of
Sellers, described on SCHEDULE 1.1.14 attached hereto.
1.1.15 CONTRACTS. All current contracts, contractual rights, purchase
orders and sales orders (the "CONTRACTS") of Sellers described and set forth in
SCHEDULE 1.1.15 attached hereto (copies of which have been delivered to Buyer).
The Contracts described above are hereinafter collectively described as the
"ASSUMED CONTRACTS." To the extent that any Assumed Contract for which
assignment to Buyer is provided herein is not assignable without the consent of
another party, this Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would constitute a
breach thereof. Shareholders, Sellers and Buyer agree to use their reasonable
best efforts (without any requirement on the part of Buyer, Sellers or
Shareholders to pay any money or agree to any change in the terms of any such
Assumed Contract) to obtain the consent of such other party to the assignment of
any such Assumed Contract to Buyer in all cases in which such consent is or may
be required for such assignment. Insofar as any consents or licences to the
transfer or assignment of the benefit and burden of any portion of the Purchased
Assets have not been obtained by the Closing Date, or if such benefit and burden
cannot effectively be so transferred or assigned to Buyer except with the
consent of or by an agreement with the other party or parties thereto, then:
(a) Sellers shall use all reasonable endeavours to procure that such other party
or parties shall consent to the Purchased Assets so affected being novated or
assigned in terms reasonably acceptable to Buyer; and (b) unless and until all
of the Purchased Assets shall have been so novated or assigned, Sellers shall
(so
3.
far as they are able) give or procure the giving to Buyer with effect from the
Closing Date of the benefit and burden of the same as if the same had been
effectively novated or assigned to Buyer. And Sellers shall hold the same on
trust for Buyer and do everything in relation thereto as Buyer may reasonably
require until such agreement or consent has been obtained but on condition that
Buyer indemnifies Sellers in respect of all obligations and liabilities in
respect thereof. In connection with the obtaining of such licences and consents
Buyer will endeavour to assist Sellers in connection therewith and for such
purpose Buyer shall supply to Sellers such information and references regarding
the financial position of Buyer and such other information concerning Buyer as
may reasonably be requested by Sellers. To the extent that Contracts are
non-assignable, or the other party thereto is unwilling to consent to the
assignment (E.G., automobile leases) and Seller is willing and able to continue
such Contract in force after the Closing and to provide the benefits thereof to
Buyer, then, upon the request of Buyer, Seller may (but shall not be required
to) do so, and Buyer shall pay to Seller, from time to time, an amount equal to
the actual cost incurred by Seller (without any administrative or other overhead
costs of Seller charged) to maintain such Contract in force and to provide the
benefits thereof to Buyer. Any such agreement by Seller to provide the benefits
of any such Contract shall not require it to continue to do so in any future
period.
1.2 EXCLUDED ASSETS. The provisions of Section 1.1 notwithstanding,
Sellers are not selling, transferring, assigning, conveying or delivering to
Buyer, and Buyer is not purchasing or accepting the following assets of Sellers
(collectively, the "EXCLUDED ASSETS"):
1.2.1 STOCK OF MOEBIUS. All of the outstanding shares of stock of
Moebius held by PWUK.
1.2.2 CONSIDERATION. The cash portion of the Purchase Price.
1.2.3 TAX CREDITS. Income and franchise tax credits, and tax refund
claims.
1.2.4 CORPORATE FRANCHISE. Each Seller's Memorandum and Articles of
Association, certificate of incorporation, corporate seal, statutory books,
minute books and other corporate records having exclusively to do with the
corporate organization and capitalization of such Seller. Buyer and its
designated agents shall have reasonable access to such books and records and may
make excerpts therefrom and copies thereof.
1.2.5 TAX RECORDS. Sellers' income, corporation and VAT tax returns
and tax records. Buyer and its designated agents shall have reasonable access
to such records for all periods prior to the Closing Date and may make excerpts
therefrom and copies thereof.
1.2.6 AFFILIATE OBLIGATIONS. Notes, drafts, accounts receivable or
other obligations for the payment of money, made or owed to Sellers by any
Affiliate of Sellers.
1.2.7 INSURANCE POLICIES. All insurance policies of Sellers.
4.
2. ASSUMPTION OF LIABILITIES.
2.1 LIABILITIES TO BE ASSUMED. Subject to the terms and conditions of
this Agreement, on the Closing Date, Buyer hereby assumes and agrees to perform
and discharge to the extent indicated below the following, and only the
following, specific debts, liabilities and obligations of Sellers (collectively,
the "ASSUMED LIABILITIES"):
2.1.1 BALANCE SHEET LIABILITIES. All accounts payable, accrued
payables and pension fund of Sellers as of the date of this Agreement. Buyer
acknowledges and understands that in the event that Buyer's acquisition of RMS
is not consummated by the Closing Date, PWUK's liabilities at the Closing will
include a royalty payment due to RMS in an amount not exceeding USD $65,000,
which Buyer shall assume and agree to perform and discharge.
2.1.2 CONTRACTUAL LIABILITIES. Sellers' liabilities and obligations
arising from and after the Closing Date under and pursuant to the Assumed
Contracts.
2.1.3 LIABILITIES UNDER PERMITS AND LICENCES. Sellers' obligations
arising from and after the Closing Date under any permits or licences listed in
the Disclosure Letters attached hereto and assigned to Buyer at the Closing.
2.1.4 PRODUCT WARRANTIES. Sellers' obligations for repair and
replacement of the Software in accordance with the terms of the warranty
provisions of the applicable Assumed Contracts subject to contribution by
Sellers as set forth in Section 3.3 hereof.
2.1.5 REAL AND PERSONAL PROPERTY LEASES. All of Seller's obligations
arising from and after the Closing Date under the Real Property Leases and the
Personal Property Leases.
2.2 LIABILITIES NOT TO BE ASSUMED. Except as and to the extent
specifically set forth in Section 2.1 hereof, Buyer is not assuming any debts,
liabilities, obligations or contracts of Sellers and all such debts,
liabilities, obligations and contracts remain the responsibility of Sellers.
Notwithstanding the provisions of Section 2.1 hereof and without limiting the
generality of the foregoing, Buyer is not assuming, and Sellers are not
transferring to Buyer, the following debts, liabilities, obligations and
contracts of Sellers:
2.2.1 CERTAIN CONTRACTS. The obligations of Sellers under and
pursuant to the loan agreements with National Westminster Bank and any other
contracts listed in SCHEDULE 2.2.1 attached hereto.
2.2.2 INSURANCE POLICIES. All insurance policies of Sellers.
2.2.3 TAXES ARISING FROM TRANSACTION. Any United States, United
Kingdom, foreign, state or other taxes imposed upon or arising out of the sale
or transfer of the Purchased Assets to Buyer, including but not limited to any
income taxes or Corporation Tax payable by Sellers, PROVIDED, HOWEVER, that
Buyer agrees to pay all documentary stamp
5.
taxes payable in respect of the sale of the Purchased Assets and the assumption
of the Assumed Liabilities.
2.2.4 INCOME AND FRANCHISE TAXES. Any liability or obligation of
Sellers in respect of taxation.
2.2.5 INSURED CLAIMS. Any liability of Sellers insured against, to
the extent such liability is or will be paid by an insurer.
2.2.6 PRODUCT LIABILITY. Any liability or obligation of Sellers
arising out of or in any way relating to or resulting from any product
manufactured, assembled or sold prior to the Closing Date (including any
liability or obligation of Sellers for claims made for injury to person, damage
to property or other damage, whether made in product liability, tort, breach of
warranty or otherwise), except only that to the limited extent set forth in
Section 2.1.4.
2.2.7 LITIGATION MATTERS. Any liability or obligation of Sellers
with respect to any suits, actions, claims or proceedings, whether or not
described in the Disclosure Letters attached hereto.
2.2.8 INFRINGEMENTS. Any liability for third party claims arising
out of the manufacture, use or sale of goods or apparatus, the performance of
services, or the copying, modifying, distributing, performing or displaying of
any work prior to the Closing.
2.2.9 TRANSACTION EXPENSES. All liabilities, costs, obligations or
expenses incurred by Sellers in connection with this Agreement and the
transactions contemplated herein. Buyer acknowledges that Sellers will pay for
such transaction expenses from Sellers' operating accounts.
2.2.10 LIABILITY FOR BREACH. Liabilities and obligations of Sellers
for any breach or failure to perform any of Sellers' covenants and agreements
contained in, or made pursuant to, this Agreement, or, prior to the Closing, any
contract, whether or not assumed hereunder, including any breach arising from
assignment of contracts hereunder without consent of third parties.
2.2.11 LIABILITIES TO AFFILIATES. Liabilities and obligations of
Sellers to its present or former Affiliates except for obligations of Sellers to
their employees as of the Closing Date.
2.2.12 VIOLATION OF LAW. Liabilities and obligations of Sellers for
any violation of or failure to comply with any statute, law, rule, regulation,
order, writ, injunction or decree of any court or governmental authority.
2.2.13 AFFILIATE OBLIGATIONS. Notes, drafts, accounts payable or
other obligations for the payment of money, made or owed by Sellers to any
Affiliate of Sellers.
6.
3. PURCHASE PRICE - PAYMENT.
3.1 PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") for the
Purchased Assets shall be the sum of: (a) Eight Hundred Thousand Dollars (USD
$800,000); PLUS (b) the assumption of the Assumed Liabilities.
3.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by Buyer
as follows:
3.2.1 ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall deliver
to Sellers such documents and instruments as are reasonably required to evidence
the assumption of the Assumed Liabilities.
3.2.2 CASH TO SELLERS. At the Closing, Buyer shall pay to Sellers
Seven Hundred Twenty-Thousand Dollars (USD $720,000) in accordance with
Section 3.2.3 and deliver to the Escrow Agent Eighty Thousand Dollars (USD
$80,000) representing a portion of the Purchase Price Escrow Amount and the
Indemnification Escrow Amount (as such terms are defined in the Purchase Price
and Indemnification Escrow Agreement attached as EXHIBIT C hereto (the "PURCHASE
PRICE AND INDEMNIFICATION ESCROW AGREEMENT")).
3.2.3 METHOD OF PAYMENT. All payments to Sellers under this
Section 3.2 shall be made by wire transfer of immediately available funds to an
account designated by the recipient not less than forty-eight (48) hours prior
to the time for payment specified herein.
3.3 WARRANTY CREDIT. In the event that Buyer's expenses for repair and
replacement warranty work under the terms and conditions of Sellers' warranties
in the Assumed Contracts exceeds the amount Buyer deems to be appropriate in the
ordinary course of business by more than an aggregate of Fifty Thousand Dollars
(USD $50,000) during the period beginning on the Closing Date and ending at 5:00
p.m. (United States Pacific Standard Time) on the first anniversary of the
Closing Date, Buyer shall be entitled to a credit against the Purchase Price
(the "WARRANTY CREDIT") equal to the amount of such excess.
3.4 VAT. All sums referred to in this Section 3 are exclusive of any and
all value added tax which may be payable and the parties to this Agreement
intend that Section 49 of the Value Added Tax Act 1994 and paragraph 5 of the
VAT (Special Provisions) Order 1992 shall apply to the transfer of the Business
and the Purchased Assets and the assumption of the Assumed Liabilities under
this Agreement. If VAT shall be chargeable on the transfer of any of the
Purchased Assets or Assumed Liabilities, then upon receipt by Buyer of a valid
VAT invoice therefor, Buyer shall pay to Sellers, in addition to the Purchase
Price, an amount equal to such VAT charged together with any interest and
penalties required due to late payment.
7.
4. REPRESENTATIONS AND WARRANTIES OF EACH SELLER AND SHAREHOLDER.
Each Seller and Shareholder, where appropriate (and jointly and severally,
where appropriate), make the following representations and warranties to Buyer
with respect to the Business of such Seller, each of which is true and correct
on the date hereof, shall remain true and correct to and including the Closing
Date, shall be unaffected by any investigation heretofore or hereafter made by
Buyer, or any knowledge of Buyer other than as specifically disclosed in the
Disclosure Letters or any Schedule delivered hereunder, and shall survive the
Closing of the transactions provided for herein for a period of two (2) years.
4.1 INFORMATION. The Schedules and Disclosure Letters, and the Contracts
referred to therein, are true, complete and accurate in all material respects,
and all such information is not misleading because of any omission or ambiguity
or for any other reason, and every document supplied by or on behalf of Seller
to Buyer prior to the Closing Date or annexed to the Schedules or Disclosure
Letters is a true and complete copy of the original. Reference to a section
only is to a section of the 1988 ICTA and reference to a Schedule with a number
is to a Schedule of the 1988 ICTA.
4.2 MATERIAL FACTS. All the facts and matters relating to the Business
and Purchased Assets material for disclosure to an intending buyer of the
Business and Purchased Assets have been disclosed to Buyer.
4.3 BUSINESS AND PURCHASED ASSETS.
4.3.1 SALE OF ASSETS. Such Seller is entitled to sell and transfer
to Buyer the full legal and beneficial ownership of its Business and the
Purchased Assets owned by it free from all liens, options, charges,
encumbrances, rights of pre-emption or rights of any other party on the terms of
this Agreement.
4.3.2 FULL POWER AND AUTHORITY. Such Seller has full power and
authority to enter into this Agreement (and the other agreements referred to in
this Agreement) and when executed by Seller and each other party legally
required and authorized to be a party thereof, each of this Agreement (and the
other agreements referred to in this Agreement) will constitute binding
obligations on such Seller in accordance with their respective terms.
4.4 LIABILITIES AND ACCOUNTING RECORDS.
4.4.1 LIABILITIES. The amounts shown with respect to accounts
payable, accrued payables and pension fund accruals reflected or reserved
against on such Seller's Balance Sheets were complete and accurate in all
material respects as of the date of the Balance Sheet.
4.4.2 ACCOUNTING RECORDS. All the accounts, books, ledgers and
financial and records of such Seller (including all invoices issued by such
Seller) have been properly kept in accordance with Sections 221 and 222 of the
Companies Act 1985 and are in the possession of such Seller or under its
control, and all material transactions relating to the
8.
Business have been duly and correctly recorded therein and such accounts, books,
ledgers and financial and other records taken together give and reflect a true
and fair view of the financial, contractual and trading position of such Seller
and the state of the Purchased Assets and the Assumed Liabilities, debtors,
creditors and work-in-progress.
4.5 PLANT AND MACHINERY.
4.5.1 ASSET REGISTERS. The asset register of such Seller comprises a
complete and accurate record of all depreciable plant, machinery, vehicles,
equipment, furniture, and other assets owned by such Seller.
4.5.2 NO RETENTION OF TITLE PROVISIONS. Such Seller has not
purchased any of the Purchased Assets from any person on terms that provide that
title to such property does not pass until full payment is made or all
indebtedness relating to such property is discharged.
4.5.3 HIRE PURCHASE AND LEASED PURCHASED ASSETS, ETC. Other than as
set forth in SCHEDULE 1.1.4 attached hereto, such Seller has not entered into
any hire purchase or credit sale agreement or leased or hired any of the
Purchased Assets from a third party. Such Seller is not in default in the
performance or observance of any of the provisions of any hire purchase or
credit sale or leasing or hiring agreements disclosed in the Disclosure Letters.
4.6 INTELLECTUAL PROPERTY RIGHTS AND RELATED MATTERS.
4.6.1 OWNERSHIP. All of the Intellectual Property Rights are
beneficially and solely owned by and registered in the name of such Seller, are
valid and subsisting and there is no impediment or restriction on their use (in
any way) by Seller. To the Knowledge of Seller, the use and exercise of the
Intellectual Property Rights does not constitute an infringement of any
intellectual property or other rights owned by any third party.
4.6.2 TITLE. The Intellectual Property Rights: (a) are not subject
to any charges, mortgages, liens or encumbrances granted by such Seller; or (b)
are not subject to any licences or other agreements to which such Seller is a
party other than the Assumed Contracts.
4.6.3 NO THIRD PARTY RIGHTS. There are no circumstances which could
entitle a third party: (a) to a licence, permission, consent or assignment of
or in respect of any Intellectual Property Rights; or (b) to call for or
exercise any right to use or work under any Intellectual Property Rights; save
as may be provided for by the Assumed Contracts.
4.6.4 NO ADVERSE AFFECT. The Intellectual Property Rights and the
Third Party Agreements will not automatically terminate or become terminable as
a result of their transfer or assignment to Buyer in accordance with this
Agreement.
9.
4.6.5 NO ACTIONS OR CLAIMS AGAINST SELLER. There have not been any
actions, claims, counterclaims, applications or allegations against Seller
impugning the validity or enforceability of any of the Intellectual Property
Rights or Seller's ownership thereof and there are no facts, matters or
circumstances known to Seller which could give rise to any such action, claim,
counterclaim, application or allegation.
4.6.6 NO ACTIONS OR CLAIMS AGAINST THIRD PARTIES. There have not
been any actions, claims or allegations by Seller against any third party
alleging infringement of any of the Intellectual Property Rights and there are
not and there have not been any facts, matters or circumstances known to Seller
which could give or have given rise to any such action, claim or allegation.
4.6.7 CONFIDENTIAL INFORMATION. The Confidential Information has
been maintained as confidential by Seller in accordance with its internal
policies; and insofar as the Confidential Information or any part thereof has
been disclosed to any third parties it has been disclosed under the terms of
confidentiality agreement or other agreement which contains provisions intended
to protect the confidentiality of the Confidential Information and maintain
Seller's rights therein.
4.6.8 REQUIRED INTELLECTUAL PROPERTY. Except for the Intellectual
Property Rights, the Business does not require any intellectual property for any
of its normal business operations.
4.6.9 OTHER AGREEMENTS AND LICENCES VALID AND SUBSISTING. All
agreements and licences for the use by the Business of intellectual property not
owned by a Seller are in full force and effect and Seller is not in breach of
any of the material provisions thereof.
4.7 SOFTWARE, CONTRACTS AND OTHER MATTERS.
4.7.1 THIRD PARTY SOFTWARE. Seller has all necessary licences to use
all Third Party Software and to sublicense it to its customers.
4.7.2 RIGHTS OF OTHER PARTIES. Other than the parties to the Assumed
Contracts, there are no other parties to whom the Software is licenced or
supplied by Seller or who are otherwise entitled to possess, use or otherwise
deal with the Software or to whom Seller is liable to perform any maintenance or
other services or provide any goods in relation to or in connection with the
Software.
4.7.3 NO BREACH. There has been no breach of any of the Assumed
Contracts nor any instance of any Customer using, authorizing or purporting to
authorize the use of the Software in a manner which is inconsistent with the
relevant Assumed Contract or not authorized by Seller.
4.7.4 CONTRACTS IN FORCE. The Sellers have delivered to Buyer true,
current and complete copies of the Assumed Contracts. The Assumed Contracts are
in full force and
10.
effect. Seller is not in material breach or default in relation to any of the
Assumed Contracts and no claims or allegations have been made by any person to
the effect that Seller is in breach of any of the Assumed Contracts and insofar
as Seller is aware there are no facts, matters or circumstances nor has Seller
done or omitted to do any act which could amount to or result in any such
material breach or give rise to any such claim or allegation.
4.7.5 NO THIRD PARTY BREACH OR DEFAULT. To the Knowledge of Seller,
no person other than Seller is in material breach or default in relation to any
Assumed Contract.
4.7.6 NO GROUNDS FOR RESCISSION. There are no grounds for
rescission, breach, avoidance or repudiation of any of the Contracts or of any
other agreement (in whole or in part) or other transaction relating to the
Business to which Seller is a party.
4.7.7 NO OTHER FACTS. There is nothing whereby any of the Contracts
or any other such agreement, instrument or arrangement may be terminated or
rescinded by any other party or whereby the terms may be worsened as against
Seller or whereby the Intellectual Property Rights or their ownership or
exercise may be prejudiced as a result of anything done or omitted or permitted
to be done by Seller.
4.7.8 REGISTRATIONS. Seller has obtained and maintained in force all
registrations under the Data Protection Act 1984 or any other similar
legislation or regulations within the EU which are necessary in order for Seller
(or any officer or employee of Seller, as appropriate) to conduct its business
in a lawful and appropriate manner.
4.7.9 CONSENT TO ASSIGNMENT. Sellers and the Shareholders are not
aware of any reason why consents to the assignment of the Value Added Marketing
Agreement with Intercomputer Communications Corp. (subsequently assigned to
Attachmate Sales UK Limited) and the Marketing Agreement with Pyramid Technology
Limited, dated February 6, 1996 will not be obtained promptly after the Closing.
4.7.10 SIEMENS. Sellers and/or the Shareholders have not signed or
performed any services under the draft License Agreement with Siemens Nixdorf
Informationssysteme AG.
4.8 BUSINESS NAMES. Seller does not own or use any trade name or business
name in connection with the Business other than Palmer & Webb Systems Limited
and Moebius Business Training Limited and do not use on its letterhead, books or
vehicles or otherwise carry on its business under, any name other than such
corporate names.
4.9 EMPLOYEES AND OTHER MATTERS.
4.9.1 CONTRACTS OF EMPLOYMENT. Full particulars of the identity,
dates of commencement of employment, or appointment to office, and terms and
conditions of employment of all employees of Seller are fully and accurately set
out in SCHEDULE 4.9.1.
11.
4.9.2 EMPLOYEES. The employees described in Section 4.9.1 hereof are
all the employees employed exclusively or mainly in the Business at the date of
this Agreement and are employed by Seller.
4.9.3 TERMINATION OF SERVICE. All service agreements entered into by
Seller with such employees may be terminated by not more than twelve (12) weeks
notice and without payment of compensation or damages (other than any payments
arising under statutes relating to employment law or other than any payment for
unfair and/or wrongful dismissal).
4.9.4 RATES OF REMUNERATION. There are set out in SCHEDULE 4.9.4 the
rates of remuneration and the pension and other benefits paid to or provided for
each of Seller's employees as of the date of this Agreement.
4.9.5 BENEFITS IN KIND. No benefits in kind are payable to or are
provided to any of Seller's employees.
4.9.6 ARREARS OF PAY. There are no outstanding arrears of salary,
wages, holiday pay or other remuneration due to any of Seller's employees and
all statutory contributions have been paid.
4.9.7 PAY INCREASES. Seller is not under any contractual or other
obligation to make any bonus or incentive or other similar payments to any of
Seller's employees at any future date; and no negotiations are currently taking
place with respect to any increase in the rate of remuneration or for the
improvement of any benefits paid or provided for any such employees.
4.9.8 PROFIT SHARING. There are no schemes or agreements in
operation by or in relation to the Business under which any of Seller's
employees is entitled to shares in Seller or a commission or remuneration of any
kind calculated by reference in whole or in part to the turnover, profits or
sales of Seller.
4.9.9 REDUNDANCIES AND TRANSFER OF BUSINESS. Within the period of
one (1) year preceding the date of this Agreement, Seller: (a) has not given
notice of any redundancies to the Secretary of State or started consultations
with any independent trade union under the provisions of the Employment Rights
Act nor has Seller failed to comply with any such obligation; or (b) has not
been a party to any relevant transfer as defined in the Transfer of Undertakings
(Protection of Employment) Regulations 1981, as amended, nor has Seller failed
to comply with any duty to inform and consult any independent trade union under
such Regulations.
4.9.10 TRADE UNIONS.
4.9.10.1 Seller has no agreement or other arrangement (binding or
otherwise) with any trade union or other body representing its employees or any
of them nor has Seller any dispute with any such body, and no such dispute is
anticipated.
12.
4.9.10.2 Seller is not involved in any industrial or trade
disputes or any dispute or negotiation regarding a claim of material importance
with any trade union or association of trade unions or organizations or any of
its employees, and no such dispute is anticipated.
4.9.11 CLAIMS.
4.9.11.1 No employee of Seller has made any claim against Seller
for termination of employment (including any redundancy payment) or for salary,
wages or other employment benefits alleged to be due to such employee.
4.9.11.2 Seller has no current or future liability for breach of
any contract of employment or for services, for redundancy payments, protective
awards or for compensation for wrongful dismissal or unfair dismissal or for
failure to comply with any order for the reinstatement or re-engagement of any
employee or for any other liability accruing from the termination of any
contract of employment or for services.
4.9.11.3 No gratuitous payment has been made or promised by
Seller in connection with the actual or proposed termination or suspension of
employment or engagement or variation of any contract of employment or
engagement of any present or former director, senior executive, consultant or
employee.
4.9.11.4 No employee of Seller has given or received notice
terminating his or her employment or engagement altering its terms, and no such
person will be entitled to give such notice as a result of the entering into of
this Agreement.
4.9.11.5 All material monies paid or goods or services provided
directly or indirectly or made available (whether by way of the provision of a
credit card or otherwise howsoever) by Seller whether as principal or surety to
any of its directors or employees whether in respect of emoluments of employment
or reimbursement or otherwise howsoever have been expenditure properly incurred
by Seller so as to be deductible in computing its taxable profits and have been
declared to the Inland Revenue.
4.9.11.6 There is no person previously employed by Seller who now
has or may have a right to return to his or her work or a right to be reinstated
by Seller under the provisions of the Employment Rights Act 1996.
4.9.11.7 To Seller's Knowledge, there are no facts or matters
affecting any of its employees which might reasonably be considered grounds for
dismissing any such employee fairly or for warning such employee that the
continuation of any conduct or behavior would lead to dismissal and no warning
has been given to any employee and no notice of termination of employment has
been given to or received from any such employee.
4.9.11.8 Seller is not under any present, future or contingent
liability to provide any goods services accommodation or benefit whatsoever
(whether by way of
13.
remuneration or otherwise) to any employee or former employee or in each case
any Related Party to any such employee or former employee.
4.9.11.9 There are no outstanding loans or quasi loans (as
defined in the Employment Rights Act 1996) from Seller to any of its employees.
4.10 THE COMPUTER SYSTEM.
4.10.1 OWNERSHIP. Seller is the owner of all the items of equipment
relating to the Computer System and no other person has any claims or rights in
respect thereof.
4.10.2 COMPUTER RECORDS. The Business has none of its records,
systems, controls, data or information, recorded, stored, maintained, operated
or otherwise wholly or partly dependent on or held by any means (including any
electronic, mechanical or photographic process whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of Seller.
4.11 AGREEMENTS AND COMMITMENTS.
4.11.1 OTHER REPRESENTATIONS. There is not outstanding in relation to
the Business any:
4.11.1.1 agreement or arrangement between Seller and any third
party which the signature or performance of this Agreement will contravene or
under which the third party will acquire a right of termination or any option as
a result of the signature or performance of this Agreement or under which as a
result thereof any charge over any of the Purchased Assets will be created,
imposed, crystallized or enforced;
4.11.1.2 agreement or arrangement entered into otherwise than by
way of bargain at arm's length;
4.11.1.3 sale or purchase option or similar agreement or
arrangement affecting any of the Purchased Assets; and
4.11.1.4 joint venture, consortium, partnership or profit sharing
agreement or arrangement to which Seller is a party.
4.11.2 INVALIDITY.
4.11.2.1 Seller has not done or omitted to do any act or thing
which might materially prejudice or affect the Goodwill and the Purchased Assets
have not been materially diminished by Seller or any wrongful act of any person.
4.11.2.2 All documents relating to the Business or the Purchased
Assets in the enforcement of which Seller may be interested have been duly
stamped and Seller has all licences, authorizations or consents which are
required to carry on the Business
14.
effectively in the places and in the manner in which the Business is now carried
on; all conditions applicable thereto have been fully complied with; and
Shareholders are not aware of any circumstances including the making or
implementation of this Agreement which might lead to the cancellation withdrawal
or suspension of the same or that might in any way prejudice the continuance or
renewal of the same. Seller is not in material breach of any applicable law or
governmental rule or regulation applicable to the Business and has all
governmental licences and permits necessary to carry on the Business as
currently conducted.
4.12 RESTRICTIVE CONTRACTS AND PRACTICES.
4.12.1 RESTRICTIVE CONTRACTS. Seller is not a party to any agreement
or arrangement which infringe or which have been or which are required to be
registered under the Restrictive Trade Practices Acts, the Fair Trading Act
1973, the Competition Act 1980, the Data Protection Act or the Treaty of Rome
(or any regulation or directive made thereunder) or any other anti-trust
legislation.
4.12.2 RESTRICTIVE PRACTICES. To Seller's Knowledge, it is not under
investigation by the Director-General of Fair Trading or the Monopolies and
Mergers Commission or the European Commission.
4.12.3 NO PROCESS RECEIVED. Seller has not received any process,
notice or communication (formal or informal) relating to the Business by or on
behalf of the Office of Fair Trading or the European Commission or any other
authority claiming jurisdiction in anti-trust, monopoly, competition or consumer
protection matters in relation to any aspect of the Business or any agreement or
arrangement to which it is or is alleged to be a party, and, to Seller's
Knowledge, no circumstances exist whereby Seller could receive any such process,
notice or communication.
4.13 CONSTITUTION.
4.13.1 FOREIGN BRANCHES. Seller has none of the Purchased Assets
outside the United Kingdom or a branch, agency or place of business or any
permanent establishment (as that expression is defined in the relevant double
taxation relief orders current at the date of this Agreement) outside the United
Kingdom.
4.13.2 SUBSIDIARIES. Seller has no shares or other securities in any
other company or any interest in any other business organization other than
Moebius.
4.13.3 POWERS OF ATTORNEY. Seller has not in relation to the Business
generally given any power of attorney or any special authority to any person
(and whether express, implied or ostensible) which is still outstanding or
effective.
4.13.4 OWNERSHIP OF PWUK AND MOEBIUS. The PWUK Shareholders together
own one hundred percent (100%) of the issued share capital of PWUK and the
Moebius Shareholder owns (or will own as of the Closing Date) one hundred
percent (100%) of the issued and outstanding share capital of Moebius.
15.
4.14 BUSINESS.
4.14.1 CLIENTS AND CUSTOMERS. To Seller's Knowledge, no customer or
client of the Business has ceased or has indicated an intention to cease trading
or dealing with Seller or is anticipated to do so or to become bankrupt or go
into liquidation on or after the date of this Agreement or to make any
substantial reduction in its trading or dealing with the Business.
4.14.2 INSOLVENCY. No order has been made or petition presented or
resolution passed for the winding up of Seller or for an administration order in
respect of Seller; no receiver, receiver and manager, administrative receiver or
liquidator has been appointed of the Business or the whole or any part of the
Purchased Assets; Seller has not stopped payment nor is Seller insolvent or
unable to pay its debts for the purposes of section 123 of the Insolvency Act
1986; there are no circumstances likely to give rise to the appointment of any
such receiver, receiver and manager, administrative receiver or liquidator; no
distress, execution or other process has been levied on any of the Purchased
Assets; there are no unfulfilled or unsatisfied judgments or court orders
outstanding against Seller or by which it may be affected; and Seller has not
within the period of two (2) years prior to the date hereof been a party to any
transaction at an undervalue for the purposes of section 238 of the Insolvency
Act 1986, nor has it during that period given or received any preference for the
purposes of section 239 of the Insolvency Act 1986.
4.14.3 CONSUMER CREDIT LICENCE. No licence under the Consumer Credit
Act 1974 is required to carry on the Business.
4.15 LITIGATION. Seller is not a party (whether as plaintiff or defendant)
to any litigation, arbitration, prosecution or other legal or quasi-legal
proceedings relating to the Business or any of the Purchased Assets and has not
been engaged in any such proceedings during the three years prior to today's
date; there are no claims or actions (whether criminal or civil) pending or, to
Seller's Knowledge, threatened relating to the Business or any of the Purchased
Assets or any of its employees and there are no facts known to Seller which are
likely to give rise to any such proceedings, actions or claims.
4.16 INSURANCE.
4.16.1 ALL PURCHASED ASSETS INSURED. All the Purchased Assets of an
insurable nature are, and have at all times been, insured against fire and other
risks normally insured against by persons carrying on the same business as that
of the Business (including, but not limited to, product liability, employer's
liability and public liability insurances).
4.16.2 DETAILS OF INSURANCES. Set forth in the Disclosure Letters is
a complete and accurate list of all policies of fire, casualty, general
liability, product liability, workers compensation, health and other forms of
insurance presently in effect with respect to the business and properties of
Seller, true and correct copies of which have heretofore been delivered to
Buyer.
16.
4.16.3 PREMIUMS PAID. All premiums due in respect of such insurances
have been fully paid; and the next renewal date for each of such insurances is a
date at least thirty (30) days after the date of the Closing Date.
4.16.4 INSURANCES IN FORCE. All such policies are valid, outstanding
and enforceable policies and provide insurance coverage for the properties,
assets and operations of Seller, of the kinds, in the amounts and against the
risks customarily maintained by organizations similarly situated; and no such
policy (nor any previous policy) provides for or is subject to any currently
enforceable retroactive rate or premium adjustment, loss sharing arrangement or
other actual or contingent liability arising wholly or partially out of events
arising prior to the date hereof.
4.16.5 NO CLAIMS UNDER INSURANCES. To Seller's Knowledge, no claim is
outstanding or is likely to be made under any of such insurances.
4.16.6 ACCIDENTS TO EMPLOYEES OR WORKMEN. To Seller's Knowledge,
there are no claims capable of arising by any of Seller's employees or any other
third party, in respect of any accident or injury, which are not fully covered
by insurance.
4.17 THE PRODUCTS.
4.17.1 CLAIMS IN RESPECT OF THE PRODUCTS. Except for the claims
particulars of which have been disclosed in the Disclosure Letters, Seller has
not received any claims alleging that the Products are defective or that they
have caused or contributed to damage or personal injury, and except as
aforesaid, no dispute exists between Seller and any customer or client of the
Business, nor are there any circumstances which may give rise to any such
dispute.
4.17.2 WARRANTIES IN RESPECT OF THE PRODUCTS. No warranties or
guarantees have been given or any representation made in respect of the Products
save for the standard terms of Seller (a copy of which and material variation
thereof is attached to the Disclosure Letters) and save for any guarantee or
warranty implied by law; and Seller has not (except as aforesaid) accepted any
liability or obligation in respect of the Products which would apply after the
Products have been sold or supplied.
4.17.3 AGENCY AGREEMENTS FOR THE PRODUCTS. Seller has not entered
into any agency, distributorship or management agreement relating to the
Products.
4.18 LEASED REAL PROPERTY WARRANTIES.
4.18.1 TITLE.
4.18.1.1 The Leased Real Property comprise all the properties
owned, occupied or otherwise used in connection with its business by Seller.
17.
4.18.1.2 Those of the Leased Real Property which are occupied or
otherwise used by Seller in connection with its business are so occupied or used
by right of ownership or under lease or licence, and the terms of any such lease
or licence permit such occupation or use.
4.18.1.3 Seller is the legal and beneficial owner of its Leased
Real Property.
4.18.1.4 The information contained in SCHEDULE 1.1.3 as to the
ownership and tenure of each of the Leased Real Property and the principal terms
of the leases, licences and tenancies subject to or with the benefit of which
each of the Leased Real Property is held is true and accurate in all respects.
4.18.1.5 Seller has a good and marketable title to each of the
Leased Real Property.
4.18.1.6 Seller is the registered proprietor at H.M. Land
Registry with title absolute in respect of the Leased Real Property which is
registered or should properly be registered at H.M. Land Registry.
4.18.1.7 In the case of any leases of the Leased Real Property in
England and Wales granted for more than twenty-one (21) years, and less than
forty (40) years which are not registered, the lease is not registered at H.M.
Land Registry because the reversion to it was not registered at the time of
grant.
4.18.2 ENCUMBRANCES.
4.18.2.1 Each of the Leased Real Property is free from any
mortgage, debenture, charge, rent-charge, lien or other encumbrance securing
repayment of monies or other obligation or liability of Seller or of any other
person.
4.18.2.2 Each of the Leased Real Property is free of any tenancy,
licence or other arrangement entitling a person other than Seller which owns the
same to occupy the whole or any part.
4.18.2.3 None of the Leased Real Property is subject to any
outgoings, other than general rates, water rates and insurance premiums and, in
the case of leasehold properties, rent and service charges.
4.18.2.4 None of the Leased Real Property is subject to any
restrictive covenants, stipulations, easements, profits, a prendre, wayleaves,
licences, grants, restrictions, overriding interests or other rights vested in
third parties.
4.18.2.5 Where any such matters as are referred to in the
warranties have been disclosed in the Disclosure Letters, the obligations and
liabilities imposed and
18.
arising under them have been fully observed and performed, and any payments in
respect of them due and payable have been duly paid.
4.18.2.6 None of the Leased Real Property is subject to any
option, right of pre-emption or right of first refusal.
4.18.2.7 Each of the Leased Real Property is free from any local
land charge, land charge, caution, inhibition or notice, and no matter exists
which is capable of registration against any of the Leased Real Property.
4.18.2.8 No notice relating to the use and enjoyment of any of
the Leased Real Property has been received or given or is likely to be received
or given in any circumstance.
4.18.3 PLANNING MATTERS.
4.18.3.1 None of the Leased Real Property is being or is intended
or required by Seller to be used other than for the permitted user thereof for
the purposes of the Town and Country Planning Act 1990, the Planning (Listed
Buildings and Conservation Areas) Act 1990, and the Planning (Consequential
Provisions) Act 1990 and legislation of a like nature (collectively, the
"PLANNING ACTS").
4.18.3.2 Planning permission has been obtained, or is deemed to
have been granted, for the purposes of the Planning Acts with respect to all
existing development on each of the Leased Real Property, and no such permission
has been suspended or called in, and no application for planning permission is
awaiting decision.
4.18.3.3 Building regulation consents have been obtained with
respect to all development alterations and improvements to each of the Leased
Real Property.
4.18.3.4 Compliance is being made and has at all times been made
in all respects with all planning permissions, orders, and regulations issued
under the Planning Acts and all building regulation consents and bylaws for the
time being in force with respect to any of the Leased Real Property.
4.18.3.5 Compliance is being made and has at all times been made
with all agreements under section 106 of the Town and Country Planning Act 1990
made with respect to any of the Leased Real Property.
4.18.3.6 Compliance is being and has been made with all
agreements made under section 38 of the Highways Act 1980 with respect to any of
the Leased Real Property.
4.18.3.7 None of the Leased Real Property is listed as being of
special historic or architectural importance or is located in a conservation
area.
19.
4.18.3.8 All development charges, monetary claims and liabilities
affecting any of the Leased Real Property under the Planning Acts or any other
such legislation have been discharged, and no such liability, contingent or
otherwise, is outstanding.
4.18.4 STATUTORY OBLIGATIONS.
4.18.4.1 To Seller's Knowledge, there are not in force or
required to be in force any licences whether under the Licensing Act 1964 or
otherwise which apply to any of the Leased Real Property.
4.18.4.2 To Seller's Knowledge, no part of any land building or
other structure comprised in the Leased Real Property contains any pollutants,
contaminants, wastes, petroleum, petroleum products, dangerous, hazardous or
toxic substances and materials and in particular (but without limitation)
substances prescribed in Schedules 4, 5 and 6 of the Environmental Protection
Prescribed (Processes and Substances) Regulations 1991 as amended ("HAZARDOUS
MATERIALS").
4.18.5 ADVERSE ORDERS.
4.18.5.1 There are no compulsory purchase notices, orders or
resolutions affecting any of the Leased Real Property, nor, to Seller's
Knowledge, are there any circumstances likely to lead to any being made.
4.18.5.2 There are no closing, demolition or clearance orders,
enforcement notices or stop notices affecting any of the Leased Real Property,
nor, to Seller's Knowledge, are there any circumstances likely to lead to any
being made.
4.18.6 CONDITION OF THE LEASED REAL PROPERTY.
4.18.6.1 To Seller's Knowledge, the buildings and other
structures on the Leased Real Property or of which any of the Leased Real
Property form part are in good and substantial repair and fit for the purposes
for which they are presently used.
4.18.6.2 To Seller's Knowledge, there are no disputes with any
adjoining or neighboring owner with respect to boundary walls and fences, or
with respect to any easement, right or means of access to any of the Leased Real
Property.
4.18.6.3 The principal means of access to each of the Leased Real
Property is over roads which have been taken over by the Local or other Highway
Authority and which are maintainable at the public expense, and no means of
access to any of the Leased Real Property is shared with any other party nor
subject to rights of determination by any other party.
4.18.6.4 Each of the Leased Real Property enjoys the main
services of water, drainage, electricity and gas.
20.
4.18.6.5 To Seller's Knowledge, none of the Leased Real Property
is located in an area or subject to circumstances particularly susceptible to
flooding.
4.18.6.6 During the period of Seller's occupation, no building or
structure on any of the Leased Real Property has at any time been affected, to
Seller's Knowledge, by structural damage or electrical defects or by timber
infestation or disease.
4.18.7 ENVIRONMENTAL.
4.18.7.1 None of the Leased Real Property has been at any time
used for the purpose of or in any way involving the handling, manufacture,
treatment, storage, use, generation, recycling, release, discharge, refining or
dumping or disposal of any Hazardous Materials.
4.18.7.2 To Seller's Knowledge, no Hazardous Materials have been
transported to from or across any of the Leased Real Property or been deposited,
stored or located on, under, in or at the Property.
4.18.7.3 During the period of Seller's occupation, to Seller's
Knowledge, no Hazardous Materials have migrated from any of the Leased Real
Property onto or beneath other properties.
4.18.7.4 Seller has not illegally managed or allowed to escape
from its control or transferred to an unauthorized person any controlled waste
as defined in the Environmental Protection Act 1990 ("EPA 1990").
4.18.7.5 No notices have been received by Seller concerning the
disposal, storage, deposit, treatment, recycling or transportation of controlled
waste at any time on the Leased Real Property or other properties at any time
owned by Seller or concerning the terms or conditions of any authorization,
licence or permission relating to any such controlled waste and Seller is not
aware of any circumstances that may give rise to the service of any such notice.
4.18.7.6 No disposal licence, site licence or waste management
licence granted or required to be granted under the Control of Pollution Act
1974 or the EPA 1990 is required by Seller in relation to any of the Leased Real
Property and (if granted) no such licence has been revoked or suspended.
4.18.7.7 To Seller's Knowledge, there are no current
investigations or pending prosecutions involving the or any of Seller's
directors, officers or employees, relating to the EPA 1990 or any other
legislation of an environmental nature ("ENVIRONMENTAL LEGISLATION") whether in
relation to the Leased Real Property or otherwise.
21.
4.18.8 LEASEHOLD PROPERTIES.
4.18.8.1 Seller has paid the rent and observed and performed the
covenants on the part of the tenant and the conditions contained in each of the
leases (which expression includes underleases) under which any of the Leased
Real Property is held and the last demand (or receipt for rent if issued) was
unqualified, and each such lease is valid and in full force.
4.18.8.2 All licences, consents and approvals required from the
landlords and any superior landlords under any leases of any of the Leased Real
Property have been obtained, and the covenants on the part of the tenant
contained in such licences, consents and approvals have been duly performed and
observed.
4.18.8.3 There are no rent reviews currently in progress under
any of the leases of any of the Leased Real Property.
4.18.8.4 There is not outstanding, unobserved or unperformed any
obligation necessary to comply with any notice or other requirement given by or
on behalf of the landlord under any lease of any of the Leased Real Property.
4.18.8.5 There is no obligation to reinstate any of the Leased
Real Property by removing or dismantling any alteration made to it by Seller or
any of its predecessors in title.
4.18.8.6 There have been and are no disputes and, to Seller's
Knowledge, there are not likely to be any disputes with any landlord.
4.18.9 INSURANCE.
4.18.9.1 Each of the Leased Real Property is insured for the
amount and in respect of the risks set out or referred to in the Disclosure
Letters.
4.18.9.2 All premiums due in respect of policies insuring
Seller's interest in the Leased Real Property have been paid in full; and no
such insurances are renewable within thirty (30) days of the Closing.
4.18.9.3 To Seller's Knowledge, there are no circumstances which
entitle the insurers of the Leased Real Property to avoid the insurances
thereon.
4.18.10 GUARANTEES. There is (save in relation to the Leased Real
Property) no actual or contingent liability on the part of the arising directly
or indirectly out of any agreement, lease, underlease, tenancy, conveyance,
transfer, licence or any other deed or document whatsoever relating to real
property or to any estate or interest therein entered into by Seller including
(but not by way of limitation) any actual or contingent liability arising
directly or indirectly out of: (a) any estate or interest held by Seller as
original lessee or
22.
underlessee; (b) any guarantee given by Seller in relation to a lease or
underlease; or (c) any other covenant made by Seller in favor of any lessor or
head lessor.
4.19 TAX WARRANTIES.
4.19.1 RESERVE FOR TAXATION IN THE BALANCE SHEETS. The Balance Sheets
reserve or provide in full for all taxation for which the was in respect of all
periods up to the Balance Sheets Date liable or able to be made liable in
respect of the Business; the Balance Sheets reserve for or contain a note
regarding any contingent liability or possible deferred liability to taxation.
4.19.2 RETURNS AND PAYMENT OF TAXATION.
4.19.2.1 All returns which should have been made by Seller for
any taxation purpose in respect of any accounting period up to and including the
accounting period ending on the Balance Sheets Date have been made punctually,
are correct and on a proper basis and provided all information required for all
taxation purposes and are not the subject of any dispute with the Inland
Revenue; Seller has made all returns and provided all information required to be
provided under the Taxes Management Act 1970 or pursuant to any notice served
thereunder; and Seller is not involved in any dispute with the Inland Revenue
concerning any matter likely to affect in any way the liability (whether accrued
contingent or future) of the to taxation and is under no liability to pay any
penalty or interest in connection with any claim for taxation.
4.19.2.2 Seller has duly and punctually paid to the Inland
Revenue or other appropriate authority all taxation for which it is liable as a
result of any act or omission prior to Closing and in particular: (a) all
income tax deductible by Seller prior to the date hereof under Schedule E by
virtue of the P.A.Y.E. regulations from time to time in force; (b) all National
Insurance Contributions (both employer's and employees') due from the in respect
of any of Seller's employees who will be hired by Buyer after the Closing; and
(c) all income tax required to be deducted from any interest, annuity or other
annual payment, rent or royalty pursuant to sections 349 and 350; and (d) all
income tax required to be deducted from any other payment directed to be made as
if those payments were payments to which section 349 applied.
4.19.2.3 Seller has duly and punctually withheld, or collected
for payment (as appropriate) all taxation which it has become liable to withhold
or collect for payment and is under no liability to pay any penalty or interest
in connection with any claim for taxation at the date of this Agreement or give
any security for any such matter.
4.19.2.4 Seller has if required by law so to do deducted all
appropriate taxation from all payments made or treated as made to any person and
accounted to the Inland Revenue for all tax so deducted.
23.
4.19.2.5 Seller has not within the twenty (20) years prior to
Closing paid or become liable to pay any penalty or interest charged by virtue
of the provisions of the Taxes Management Act 1970 or similar provisions in
other countries.
4.19.2.6 Seller has not in the last ten (10) years been the
subject of a discovery by the Inland Revenue and there are no facts which are
likely to cause a discovery to be made.
4.19.2.7 Seller is not liable as lessee or agent for any Schedule
A tax under the provisions of section 23.
4.19.3 DISALLOWANCE OF DEDUCTIONS. Seller has not made any payment
to, or provided any benefit for, any of its employees which would not be
allowable as a deduction in computing the profits of Seller for corporation tax
purposes.
4.19.4 CHARGEABLE GAINS. Seller has not at any time before or since
the Balance Sheets Date made any claim under sections 152 to 156 of TCGA, and no
such claim has been made or is capable of being made by any other company which
affects or could affect the amount or value of the consideration for the
acquisition of any Asset.
4.19.5 VALUE ADDED TAX.
4.19.5.1 Seller is not and has not at any time been treated as a
member of a group of companies for VAT purposes and no application for it to be
so treated has at any time been made.
4.19.5.2 Seller is duly registered for VAT purposes and has
complied in all material respects with part I of the 1972 Act (VAT) and the VATA
and all orders, provisions, directions or conditions made or imposed thereunder,
and has in all material respects kept and maintained full complete correct and
up to date records, invoices and other documents appropriate or requisite for
the purposes of such legislation, and is not liable to any forfeiture or penalty
or to the operation of any penal provisions and has not incurred any penalty,
surcharge or interest as a result of making late VAT returns.
4.19.5.3 No act or transaction has been effected in consequence
whereof Seller is or may be held liable for any VAT chargeable against any other
company; and Seller is not, and has not agreed to become an agent, manager or
factor for the purpose of section 32 of the VATA of any person who is not
resident in the United Kingdom.
4.19.5.4 All supplies made by Seller in respect of the Business
are taxable supplies and Seller is not and will not be denied credit for any
input tax by reason of the operation of any provisions of VATA and the
regulations made thereunder; and all input tax for which Seller has claimed
credit has been paid by Seller in respect of supplies made to it relating to
goods or services used or to be used for the purpose of the Business.
24.
4.19.5.5 No supplies have been made to Seller to which the
provisions of section 7 to VATA might apply.
4.19.5.6 Seller has not been required to give security for
payment of any VAT.
4.19.5.7 The Disclosure Letters contains full particulars of any
claim for bad debt relief made, or which may be made, by Seller under section 22
of VATA.
4.19.5.8 On all invoices issued and to be issued by Seller prior
to the Closing charge VAT at the percentage rate which at the time of the
relevant supply was or is chargeable has been or will be so charged; all amounts
due to be paid to Customs & Excise prior to the Closing on the date of the
filing of the last VAT return have been paid on the due date; all amounts of VAT
which have been charged on invoices issued by Seller since such last return have
been retained by Seller for the account of Customs & Excise pending the next
return date; there are no disputes between Seller and Customs & Excise and there
are no present circumstances which are likely to give rise to any such dispute.
4.19.5.9 No document has left the possession of Seller which if
improperly used by a third party would lead to any liability on the part of
Seller to pay any amount of VAT under paragraph 6 of schedule 7 to VATA which,
but for such use, would not have been payable by Seller.
4.19.5.10 Seller has not made and does not make exempt supplies
for VAT purposes (except such exempt supplies as may be disregarded in
calculating the amount of input tax for which Seller may claim a credit or a
repayment under section 14 of VATA).
4.19.5.11 Seller is not and has not been or agreed to become an
agent, manager or factor of any person who is not resident in the United
Kingdom.
4.19.6 STAMP DUTY AND STAMP DUTY RESERVE TAX.
4.19.6.1 Seller has duly paid all stamp duty and all stamp duty
reserve tax for which it has at any time been liable, and all documents under
which Seller has any right and which are required to be stamped have been duly
stamped.
4.19.6.2 Within the five (5) years ending on the date of this
Agreement, Seller has not made any claim for relief or exemption under section
42 of the 1930 Act or part III of schedule 19 to the 1973 Act.
4.19.7 GENERAL.
4.19.7.1 Seller has not acquired all or any part of the assets or
undertaking of another company in the course of any reconstruction or
liquidation of that company or any amalgamation of that or any other company.
25.
4.19.7.2 During the period of three (3) years immediately
preceding the date of this Agreement, there has been no major change in the
nature or conduct of the trade (within the meaning of section 768 ICTA) carried
on by Seller or in the customers or markets supplied by Seller in the scale of
its activities.
4.19.7.3 No act or transaction has been effected in consequence
whereof the Business has, is or may be held liable for any taxation primarily
chargeable against some other person.
4.20 PENSION WARRANTIES. There is and has been no scheme, agreement,
arrangement or practice (whether formal or informal) in relation to which Seller
has incurred or will incur or may be expected to incur any liability or
responsibility (including, without limitation, liability for contributions or
expenses or for shortfall in funding, liability as trustees or responsibility as
to any discretionary power) for or in relation to the provision of any relevant
benefits (as defined in Section 612 ICTA) or any benefits to be given by reason
of disability or sickness for or in respect of any employees of Seller or for or
in respect of any other person by reference to any such employees.
5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer and Parent make the following representations and warranties to
Sellers and Shareholders, each of which is true and correct on the date hereof,
shall remain true and correct to and including the Closing Date, shall be
unaffected by any investigation heretofore or hereafter made by Sellers or any
notice to Sellers, and shall survive the Closing of the transactions provided
for herein.
5.1 CORPORATE.
5.1.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of England and Wales. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California.
5.1.2 CORPORATE POWER. Buyer and Parent have all requisite corporate
power to enter into this Agreement and the other documents and instruments to be
executed and delivered by Buyer and Parent and to carry out the transactions
contemplated hereby and thereby.
5.2 AUTHORITY. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Buyer and Parent
pursuant hereto and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of Buyer and Parent.
No other corporate act or proceeding on the part of Buyer or Parent or each of
its shareholders is necessary to authorize this Agreement or the other documents
and instruments to be executed and delivered by Buyer and Parent pursuant hereto
or the consummation of the transactions contemplated hereby and thereby. This
Agreement constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by Buyer and
26.
Parent pursuant hereto will constitute, valid and binding agreements of Buyer
and Parent, enforceable in accordance with their respective terms, except as
such may be limited by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and by general equitable principles.
5.3 NO BROKERS OR FINDERS. Neither Buyer nor Parent nor any of their
directors, officers, employees or agents have retained, employed or used any
broker or finder in connection with the transaction provided for herein or in
connection with the negotiation thereof.
5.4 FINANCIAL CAPACITY. Buyer and Parent have the financial means
necessary to consummate the transactions contemplated hereunder.
6. EMPLOYEES.
6.1 Sellers and Shareholders jointly and severally shall indemnify Buyer
and keep it indemnified against all claims for redundancy or unfair dismissal,
liabilities and other costs and expenses resulting from any breach of the
undertakings, representations and warranties contained in this Section 6 in
respect of any act taken or omitted by Sellers prior to the Closing Date.
6.2 Sellers shall perform and discharge all its obligations in respect of
each and every employee of the Business for its own account up to and including
the Closing and shall indemnify Buyer against all costs, losses, liabilities,
expenses or demands arising from Sellers' failure to perform and discharge such
obligations on time.
6.3 Sellers shall indemnify Buyer against all costs, claims, losses,
liabilities, expenses and demands which relate to or arise out of any act or
omission by Sellers or any other event or occurrence prior to the Closing and
which Buyer may incur or suffer in relation to any contract of employment
concerning one or more of its employees by virtue of the transfer of the
Business including, but not limited to, anything done or omitted by or in
relation to Sellers in respect of any such contract of employment of any
employee which is deemed by the Regulations to have been done or omitted by or
in relation to Buyer.
6.4 Sellers and Buyer acknowledge and agree that pursuant to the
Regulations, the contracts of employment between Sellers and each of its
employees will have and be deemed to have had effect after the Closing Date as
if originally made between Buyer and the respective employees.
6.5 Sellers and Buyer shall jointly communicate to each of its employees
notices regarding the transfer of such employee's employment relationship to
Buyer in such form as may be agreed by Sellers and Buyer.
27.
7. OTHER MATTERS.
7.1 USE OF SELLERS' NAME. Following the Closing, neither Sellers nor any
Affiliate shall, without the prior written consent of Buyer, make any use of the
names "Palmer & Webb Systems Limited" and "Moebius Business Training Limited" or
any other names confusingly similar thereto, except as may be necessary for
Sellers to pay their liabilities, prepare tax returns and other reports, and to
otherwise wind up and conclude their business. After the Closing, upon Buyer's
request, each of PWUK and Moebius shall change its name as Buyer shall approve.
7.2 INVESTIGATIONS. The respective representations and warranties of
Sellers, Shareholders and Buyer contained herein or in any other documents
delivered at or prior to the Closing, shall not be deemed waived or otherwise
affected by any investigation made by any party hereto.
8. FURTHER COVENANTS OF EACH SELLER AND SHAREHOLDER.
Each Seller and Shareholder covenants and agrees as follows:
8.1 ACCESS TO INFORMATION AND RECORDS. During the period prior to the
Closing, Seller shall give Buyer, its counsel, accountants and other
representatives (a) reasonable access during normal business hours to all of the
properties, books, records, contracts and documents of Seller for the purpose of
such inspection, investigation and testing as Buyer deems appropriate (and
Seller shall furnish or cause to be furnished to Buyer and its representatives
all information with respect to the business and affairs of Seller as Buyer may
reasonably request); (b) access to employees, agents and representatives for the
purposes of such meetings and communications as Buyer reasonably desires; and
(c) with the prior consent of Seller in each instance (which consent shall not
be unreasonably withheld), access to vendors, customers, manufacturers of its
machinery and equipment, and others having business dealings with Seller.
8.2 BANK ACCOUNTS. Upon the execution of this Agreement, Seller shall
provide to Buyer a list of each bank in which Seller has an account or safe
deposit box, the name and number of each such account or box and the names of
all persons authorized to draw thereon or who have access thereto, with the
amounts they are authorized to draw.
8.3 CONDUCT OF BUSINESS PENDING THE CLOSING. From the date hereof until
the Closing, except as otherwise approved in writing by Buyer:
8.3.1 NO CHANGES. Seller will carry on its business diligently and
in the same manner as heretofore and will not make or institute any changes in
its methods of purchase, sale, management, accounting or operation.
8.3.2 MAINTAIN ORGANIZATION. Seller will take such action as may be
necessary to maintain, preserve, renew and keep in favor and effect the
existence, rights and franchises of Seller and will use its best efforts to
preserve the business organization of Seller
28.
intact, to keep available to Buyer the present directors and employees, and to
preserve for Buyer its present relationships with suppliers and customers and
others having business relationships with Seller.
8.3.3 NO BREACH. Seller and Shareholders will not do or omit any
act, or permit any omission to act, which may cause a breach of any material
contract, commitment or obligation, or any breach of any representation,
warranty, covenant or agreement made by Seller and/or Shareholders herein, or
which would have required disclosure in the Disclosure Letters or Schedules
attached hereto had it occurred after the Balance Sheets Date and prior to the
date of this Agreement.
8.3.4 NO MATERIAL CONTRACTS. No contract or commitment will be
entered into, and no purchase of raw materials or supplies and no sale of assets
(real, personal, or mixed, tangible or intangible) will be made, by or on behalf
of Seller, except contracts, commitments, purchases or sales which (a) are (1)
contracts or commitments for the purchase of, and purchases of, raw materials,
supplies and services made in the ordinary course of business and consistent
with past practice, (2) contracts or commitments for the sale of, and sales of,
products or inventory or services in the ordinary course of business and
consistent with past practice, or (3) other contracts, commitments, purchases or
sales in the ordinary course of business and consistent with past practice, AND
(b) are not material to Seller (individually or in the aggregate) and would not
have been required to be disclosed in the Disclosure Letters or Schedules had
they been in existence on the date of this Agreement.
8.3.5 NO CORPORATE CHANGES. Seller shall not amend its Memorandum
and Articles of Association or other constituent documents, make any changes in
authorized or issued capital stock, or take or commence the taking of any action
with respect to the dissolution, liquidation or winding up of Seller.
8.3.6 MAINTENANCE OF PROPERTY. Seller shall use, operate, maintain
and repair all property of Seller in a normal business manner.
8.3.7 NO NEGOTIATIONS. Neither Seller nor Shareholder will directly
or indirectly (through a representative or otherwise) solicit or furnish any
information to any prospective buyer, commence, or conduct presently ongoing
negotiations with any other party or enter into any agreement with any other
party concerning the sale of Seller, Seller's assets or business or any part
thereof (other than as provided in Section 8.3.4) or any equity securities of
Seller (an "ACQUISITION PROPOSAL"), and Seller and Shareholder shall promptly
advise Buyer of the receipt of any Acquisition Proposal.
8.4 CONSENTS.
8.4.1 If the Reversioner's Licence has not been obtained in a form
satisfactory to Buyer prior to the Closing Date, Sellers and Buyer shall use all
reasonable endeavors to obtain the Reversioner's Licence and the parties shall
promptly provide all reasonably obtainable information properly required for
this purpose.
29.
8.4.2 As between Buyer and Sellers, Sellers shall be responsible for
all reasonable and proper costs of the Landlord and all superior landlords and
their respective surveyors and solicitors' fees (plus VAT and disbursements in
both Cases) incurred in connection with the grant of the Reversioner's Licence.
8.4.3 The parties shall promptly execute the Reversioner's Licence
and deliver such executed licence to relevant destinations.
8.4.4 The parties shall after the date hereof use all reasonable
endeavors to agree the form of assignment of the Leased Real Property from
Sellers to Buyer and Sellers and Buyer will each execute such assignment in
duplicate.
8.4.5 From and after the Closing, unless and until the Reversioner's
Licence has been obtained and the assignment completed Sellers shall deal with
the Leased Real Property as Buyer shall reasonably direct and shall not
otherwise deal with the Leased Real Property except in such a way as may have
been previously agreed in writing by Buyer.
8.4.6 With effect from and including the date of this Agreement until
actual completion of the assignment or transfer of the Leased Real Property:
8.4.6.1 Seller shall: (a) hold the Leased Real Property on trust
for Buyer for a period not to exceed ninety (90) days; (b) permit Buyer to
occupy and have use of the Leased Real Property; (c) subject to being put in
funds by Buyer to pay all rents, service charges and other sums reserved by the
Real Property Leases to the Landlord; (d) not enter into any contract affecting
the Leased Real Property without the consent of Buyer, which consent shall not
be unreasonably withheld or delayed where such contract is or shall be a lawful
requirement of the Landlord; (e) supply copies of all orders, notices or
directions received from the Landlord or other competent authority forthwith
upon receipt; and (f) not without the consent of Buyer (which consent shall not
be unreasonably withheld or delayed) make any application to the Landlord other
than for consent to assign the Leased Real Property to Buyer.
8.4.6.2 Buyer shall: (a) put Seller in funds in advance of the
date due so as to enable Seller to pay on demand all rents, service charges,
outgoings and other sums payable in respect of the Leased Real Property for the
period from and including the date of this Agreement until actual completion of
the assignment or transfer of the Leased Real Property to Buyer; and (b) insofar
as the same are consistent with Buyer's right to use the Leased Real Property to
observe and perform the covenants and conditions contained in the Real Property
Leases and any license, consent or approval granted thereunder or any document
supplemental thereto.
8.4.6.3 If a notice pursuant to Section 146 Law of Property Act
1925 or similar notice is served in respect of the Leased Real Property between
the date of this Agreement and actual completion of the assignment or transfer
of the Leased Real Property between the date of this Agreement and actual
completion of such assignment or transfer and such notice alleges unlawful
occupation of the Leased Real Property by Buyer, Seller shall at
30.
the direction of Buyer take all steps as are necessary to contest such notice
and, if required by Buyer, shall apply for a declaration that the Landlord's
consent is being unreasonable withheld.
8.4.6.4 If upon final determination of any proceedings in
connection with the notice under Section 146 Law of Property Act 1925 the
application for a declaration that the Landlord's consent is being unreasonably
withheld, Buyer is required to vacate the Property Buyer will forthwith comply
with the Order of the Court in that respect.
8.4.6.5 Seller shall upon the request of Buyer (but not earlier
than one calendar month after the date of this Agreement) apply to a competent
Court for a declaration that the Landlord has unreasonably withheld the
Reversioner's License and such application (which Seller shall not be required
to pursue beyond the Court of First Instance unless its counsel shall advise, at
the expense of Buyer, on the balance of probabilities an appeal would succeed)
shall be at the expense of Buyer.
8.5 OTHER ACTION. Seller and Shareholders shall use their reasonable
efforts to cause the fulfillment at the earliest practicable date of all of the
conditions to Sellers' obligations to consummate the transactions contemplated
in this Agreement.
8.6 DISCLOSURE. Seller and Shareholders shall have a continuing
obligation to promptly notify Buyer in writing with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Letters or Schedules, but no such disclosure shall cure any breach of
any representation or warranty which is inaccurate.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
9.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE. Each of the
representations and warranties made by Sellers and Shareholders in this
Agreement and the Disclosure Letters, and the statements contained in any
Schedule or in any instrument, list, certificate or writing delivered by Sellers
pursuant to this Agreement, shall have been true and correct in all material
respects when made and shall be true and correct in all material respects at and
as of the Closing Date as though such representations and warranties were made
or given on and as of the Closing Date, except for any changes permitted by the
terms of this Agreement or consented to in writing by Buyer.
9.2 COMPLIANCE WITH AGREEMENT. Sellers and Shareholders shall have in all
material respects performed and complied with all of their agreements and
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing Date, including the delivery of the closing
documents specified in Section 12.1 hereof.
31.
9.3 ABSENCE OF SUIT. No action, suit or proceeding before any court or
any governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against Buyer, Sellers or any of the affiliates, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
9.4 CONSENTS AND APPROVALS. All approvals, consents and waivers that are
required to effect the transactions contemplated hereby shall have been
received, and, wherever relevant, executed counterparts thereof shall have been
delivered to Buyer, except such consents, approvals and novations as are
expressly permitted by the terms of this Agreement to be obtained subsequent to
the Closing. Notwithstanding the foregoing, receipt of the consent of any third
party to the assignment of an Assumed Contract which is not (and is not required
to be) disclosed in the Disclosure Letters or any Schedule shall not be a
condition to Buyer's obligation to close, provided that the aggregate of all
such Contracts does not represent a material portion of Sellers' sales or
expenditures. After the Closing, Sellers and Shareholders shall continue to use
their reasonable effects to obtain any such consents or approvals (and Buyer
shall use reasonable efforts to assist Sellers in such efforts), and neither
Sellers nor Shareholders shall hereby be relieved of any liability hereunder for
failure to perform any of their respective covenants or for the inaccuracy of
any representation or warranty.
9.5 DATAMETRICS CLOSING. The transactions between Buyer and Datametrics
System Corporation ("DATAMETRICS") described in that certain Asset Purchase
Agreement between Buyer and Datametrics shall have closed.
9.6 OWNERSHIP OF MOEBIUS. The Moebius Shareholder shall have purchased
any outstanding shares of the issued and outstanding capital stock of Moebius
not held by it so that it shall own one hundred percent (100%) of the issued and
outstanding capital stock of Moebius.
10. CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS.
Each and every obligation of Sellers and Shareholders to be performed on
the Closing Date shall have been subject to the satisfaction prior to or at the
Closing of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE. Each of the
representations and warranties made by Buyer in this Agreement shall be true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Closing Date as though such representations
and warranties were made or given on and as of the Closing Date.
10.2 COMPLIANCE WITH AGREEMENT. Buyer shall have in all material respects
performed and complied with all of Buyer's agreements and obligations under this
Agreement
32.
which are to be performed or complied with by Buyer prior to or on the Closing
Date, including the delivery of the closing documents specified in Section 12.2
hereof.
10.3 ABSENCE OF SUIT. No action, suit or proceeding before any court or
any governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against Buyer, Sellers or any of the affiliates, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
10.4 DATAMETRICS CLOSING. The transactions between Buyer and Datametrics
described in that certain Asset Purchase Agreement between Buyer and Datametrics
shall have closed.
11. INDEMNIFICATION.
11.1 BY SELLERS AND SHAREHOLDERS. Subject to the terms and conditions of
this Article 11, each Seller and Shareholder, jointly and severally, hereby
indemnify, defend and hold harmless Buyer, and its directors, officers,
employees and controlled and controlling persons ("BUYER'S AFFILIATES"), from
and against all Claims asserted against, resulting to, imposed upon, or incurred
by Buyer, Buyer's Affiliates or the business and assets transferred to Buyer
pursuant to this Agreement, directly or indirectly, by reason of, arising out of
or resulting from (a) the inaccuracy or breach of any representation or warranty
of Seller or Shareholder contained in or made pursuant to this Agreement or in
any officer's certificate, the Disclosure Letters, Schedule or agreement
described in Section 9 herein (regardless of whether such breach is deemed
"material"); (b) the breach of any covenant of Seller or Shareholder contained
in this Agreement or in any officer's certificate, the Disclosure Letters,
Schedule or agreement described in Section 9 herein (regardless of whether such
breach is deemed "material"); (c) any Claim of or against Seller, the Purchased
Assets or the business of Seller not specifically assumed by Buyer pursuant
hereto and not covered by clause (d), or (d) any Claim for a Warranty Credit,
but only to the extent that such Claim is not covered by insurance coverage of
Buyer. As used in this Article 11, the term "CLAIM" shall include (a) all
debts, liabilities and obligations; (b) all losses, damages (including without
limitation consequential damages), judgments, awards, settlements, costs and
expenses (including without limitation interest (including prejudgment interest
in any litigated matter), penalties, court costs and reasonable attorneys fees
and expenses) and shall be net of any insurance or tax recoveries by Buyer of
the amount of any such Claim; and (c) all demands, claims, suits, actions, costs
of investigation, causes of action, proceedings and assessments, whether or not
ultimately determined to be valid.
11.2 BY BUYER. Subject to the terms and conditions of this Article 11,
Buyer hereby agrees to indemnify, defend and hold harmless Sellers, its
directors, officers, employees and controlling persons, and Shareholders from
and against all Claims asserted against, resulting to, imposed upon or incurred
by any such person, directly or indirectly, by reason of or resulting from (a)
the inaccuracy or breach of any representation or warranty of
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Buyer contained in or made pursuant to this Agreement or in any agreement,
document or instrument executed and delivered pursuant hereto or in connection
with the transactions contemplated hereby (regardless of whether such breach is
deemed "material"); (b) the breach of any covenant of Buyer contained in this
Agreement (regardless of whether such breach is deemed "material"); or (c) all
Claims of or against Sellers specifically assumed by Buyer pursuant hereto.
11.3 INDEMNIFICATION OF THIRD-PARTY CLAIMS. The obligations and
liabilities of any party to indemnify any other under this Article 11 with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
11.3.1 NOTICE AND DEFENSE. The party or parties to be indemnified
(whether one or more, the "INDEMNIFIED PARTY") will give the party from whom
indemnification is sought (the "INDEMNIFYING PARTY") written notice of any such
Claim, and the Indemnifying Party will undertake the defense thereof by
representatives chosen by the Indemnified Party. Failure to give such notice
shall not affect the Indemnifying Party's duty or obligations under this
Article 11, except to the extent the Indemnifying Party is prejudiced thereby.
So long as the Indemnifying Party is defending any such Claim actively and in
good faith, the Indemnified Party shall not compromise or settle such Claim.
The Indemnified Party shall make available to the Indemnifying Party or its
representatives all records and other materials required by them and in the
possession or under the control of the Indemnified Party, or its representatives
for the use of the Indemnifying Party and its representatives in defending any
such Claim, and shall in other respects give reasonable cooperation in such
defense.
11.3.2 FAILURE TO DEFEND. If the Indemnifying Party, within a
reasonable time after notice of any such Claim, fails to defend such Claim
actively and in good faith, the Indemnified Party will (upon further notice)
have the right to undertake the defense, compromise or settlement of such Claim
or consent to the entry of a judgment with respect to such Claim, on behalf of
and for the account and risk of the Indemnifying Party, and the Indemnifying
Party shall thereafter have no right to challenge the Indemnified Party's
defense, compromise, settlement or consent to judgment.
11.3.3 INDEMNIFIED PARTY'S RIGHTS. Anything in this Section 11 to
the contrary notwithstanding, (a) if there is a reasonable probability that a
Claim may materially and adversely affect Buyer other than as a result of money
damages or other money payments for such Claim, or if the amount of the Claim
being asserted exceeds (in Buyer's judgment) by more than USD $200,000 the
insurance coverage which has been admitted by the applicable insurance carriers,
Buyer shall have the sole right to defend, compromise or settle such Claim and
shall be entitled to recover from Sellers for such amounts, (b) the Indemnifying
Party shall not, without the written consent of the Indemnified Party, settle or
compromise any Claim or consent to the entry of any judgment which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such Claim, and (c) Buyer shall have the exclusive right to defend and settle
breach of warranty claims for Software.
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11.3.4 WARRANTY CLAIMS. Buyer shall have the right to defend or
settle any warranty Claims relating to the Software, provided that any
Indemnifying Party with respect to such warranty claim shall be allowed to
participate, at its or his own cost, in the defense, settlement or compromise of
any such Claim, and Buyer shall not settle or compromise any such Claim without
the consent of such Indemnifying Party, which shall not be unreasonably
withheld. Buyer agrees that it shall not seek any indemnity from Sellers or
Shareholders with respect to any warranty Claim where (a) such Claim relates to
or results from a claim by a third party that a software program contained in
the Software has caused damage to such third party; (b) such software program is
or was licenced by a Seller from a third party vendor; and (c) (i) the rights of
Sellers to seek indemnification from such third party vendor with respect to
such licenced software program have been transferred to Buyer in accordance with
this Agreement, or (ii) the vendor of such software program has been, or the
rights to the software program itself have been, acquired by Buyer.
11.4 PAYMENT. Subject to the terms of the Purchase Price and
Indemnification Escrow Agreement, the Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this Article 11, which payment may be
accomplished in whole or in part, to the extent that the Indemnified Party owes
any amount to the Indemnifying Party, at the option of the Indemnified Party, by
the Indemnified Party setting off any amount owed to the Indemnifying Party by
the Indemnified Party. To the extent set-off is made by an Indemnified Party in
satisfaction or partial satisfaction of an indemnity obligation under this
Article 11 that is disputed by the Indemnifying Party, upon a subsequent
determination by final judgment not subject to appeal that all or a portion of
such indemnity obligation was not owed to the Indemnified Party, the Indemnified
Party shall pay the Indemnifying Party the amount which was set off and not owed
together with interest from the date of set-off until the date of such payment
at the Prime Rate set by Comerica Bank - California at its San Francisco,
California office. Upon judgment, determination, settlement or compromise of
any third party Claim, the Indemnifying Party shall pay promptly on behalf of
the Indemnified Party, and/or to the Indemnified Party in reimbursement of any
amount theretofore required to be paid by it, the amount so determined by
judgment, determination, settlement or compromise and all other Claims of the
Indemnified Party with respect thereto, unless in the case of a judgment an
appeal is made from the judgment. If the Indemnifying Party desires to appeal
from an adverse judgment, then the Indemnifying Party shall post and pay the
cost of the security or bond to stay execution of the judgment pending appeal.
Upon the payment in full by the Indemnifying Party of such amounts, the
Indemnifying Party shall succeed to the rights of such Indemnified Party, to the
extent not waived in settlement, against the third party who made such third
party Claim.
11.5 DEDUCTIBLE AMOUNT. Without limiting the effect of any of the other
limitations set forth herein, Sellers and Shareholders shall not be required to
make any indemnification payment hereunder with respect to any breach of any of
its representations and warranties, except to the extent that the cumulative
amount of the Damages actually incurred by Buyer as a direct result of all such
breaches of such representations and warranties during the period from (a) the
Closing Date until 5:00 p.m. (Pacific Standard Time) on the first anniversary of
the Closing Date (the "FIRST ANNIVERSARY DATE") (such period being referred to
as the "FIRST PERIOD") actually exceeds the First Period Deductible
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Amount, and (b) the first day following the First Anniversary Date until
5:00 p.m. (Pacific Standard Time) on the second anniversary of the Closing Date
(such period being referred to as the "SECOND PERIOD") actually exceeds the
Second Period Deductible Amount; and Sellers and Shareholders shall only be
required to pay, and shall only be liable for, the amount by which the
cumulative amount of the Damages actually incurred by Buyer as a direct result
of all such breaches of such representations and warranties actually exceeds the
First Period Deductible Amount or the Second Period Deductible Amount, as
appropriate. The "FIRST PERIOD DEDUCTIBLE AMOUNT" shall be USD $112,500 and the
"SECOND PERIOD DEDUCTIBLE AMOUNT" shall be USD $18,750.
11.6 MAXIMUM LIABILITY. The total amount of the payments that Sellers and
Shareholders can be required to make under or in connection with this Agreement
(including all indemnification payments required to be made to Buyer and all
amounts payable to any counsel retained by Sellers and Shareholders in
accordance with Section 11.3), excluding Claims arising solely from software
produced by Datametrics (the determination of which shall be in the sole
discretion of Buyer) where Sellers have acted only as a distributor of such
software, shall be limited in the aggregate (including the Indemnification
Escrow Amount) to a maximum of: (a) USD $1,187,500 during the First Period; (b)
USD $375,000, less any amount paid by Sellers and Shareholders during the First
Period, during the Second Period; and (c) Zero Dollars (USD $0) thereafter.
11.7 TREATMENT OF INDEMNIFICATION PAYMENTS. The parties shall treat all
indemnification payments as either a reimbursement to the party making the
original payment or as a reduction in the Purchase Price paid by Buyer, as
appropriate, to achieve the most beneficial tax and accounting treatment for
both parties. In the event that treating the payment as either reimbursement or
a reduction of the Purchase Price will have a positive tax and accounting effect
for one of the parties and no negative tax or accounting effect for the other
party, the payment shall be so treated. If one party will benefit from one form
of treatment at the expense of the other, the parties shall treat the payment
for tax and accounting purposes to minimize taxes and in a manner which favors
the Indemnified Party.
11.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; CLAIMS FOR
INDEMNIFICATION. All representations and warranties made by Sellers,
Shareholders or by Buyer in this Agreement, or in any officer's certificate, the
Disclosure Letters, any Schedule or agreement described in Sections 9 or 10
herein, shall survive the Closing and any investigation at any time made by or
on behalf of Seller or Buyer, as the case may be. All such representations and
warranties shall expire on the second anniversary of the Closing Date, except
with respect to claims, if any, (a) asserted in writing prior to such second
anniversary identified as a Claim for indemnification pursuant to this
Section 8, or (b) which are based upon the representations and warranties of
Sellers or Shareholders relating to taxes, which shall survive until the
applicable statute of limitations has expired.
11.9 NO WAIVER. The closing of the transactions contemplated by this
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach,
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violation or failure of condition constituting the basis of the Claim at or
before the Closing, and regardless of whether such breach, violation or failure
is deemed to be "material".
12. CLOSING.
The closing of this transaction (the "CLOSING") shall take place at the
offices of Cooley Godward LLP, One Maritime Plaza, 20th Floor, San Francisco,
California, at 7:00 a.m. (Pacific Standard Time) on June 30, 1997, or at such
other time and place as the parties hereto shall agree upon (the "CLOSING
DATE").
12.1 DOCUMENTS TO BE DELIVERED BY SELLERS AND SHAREHOLDERS. At the
Closing, Sellers and Shareholders shall deliver to Buyer the following
documents, in each case duly executed or otherwise in proper form:
12.1.1 DEEDS. Originally executed Real Property Leases (apart from
Unit 1 Fountain House), land certificates and a statutory declaration relating
to the contents of the missing lease.
12.1.2 CERTIFIED RESOLUTIONS. A certified copy of the resolutions of
the Board of Directors and shareholders of Sellers authorizing and approving
this Agreement and the consummation of the transactions contemplated by this
Agreement.
12.1.3 MEMORANDUM AND ARTICLES OF ASSOCIATION. A copy of the
Memorandum and Articles of Association of each Seller certified by the Company
Secretary of Sellers.
12.1.4 OPINION OF COUNSEL. A written opinion of MacDonald Oates dated
as of the Closing Date, addressed to Buyer, substantially in the form of
EXHIBIT D hereto.
12.1.5 ESCROW AGREEMENT. The Escrow Agreement duly executed by
Sellers, Shareholders and the Escrow Agent in the form of EXHIBIT E hereto.
12.1.6 PURCHASE PRICE AND INDEMNIFICATION ESCROW AGREEMENT. The
Purchase Price and Indemnification Escrow Agreement duly executed by Sellers and
Shareholders.
12.1.7 CONSENTS TO ASSIGNMENT. Executed consents to the assignment of
the Assumed Contracts.
12.1.8 BANK LETTER. A letter from National Westminster Bank
confirming that it will release its lien on Sellers' property and a Certificate
of Non-Crystalisation.
12.1.9 SERVICE AGREEMENT. A Service Agreement duly executed by each
of the PWUK Shareholders in the form of EXHIBIT F hereto.
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12.1.10 OTHER DOCUMENTS. All other documents, instruments or writings
required to be delivered to Buyer at or prior to the Closing pursuant to this
Agreement and such other certificates of authority and documents as Buyer may
reasonably request.
12.2 DOCUMENTS TO BE DELIVERED BY BUYER. At the Closing, Buyer shall
deliver to Sellers the following documents, in each case duly executed or
otherwise in proper form:
12.2.1 CASH PURCHASE PRICE. To Sellers and the Escrow Agent wire
transfers as required by Section 3.2.2 hereof.
12.2.2 LETTER REGARDING ADDITIONAL FUNDS. To Sellers a letter
confirming that Buyer has authorized the release of funds sufficient to pay the
following amounts: (a) L75,001 due to ECTS; (b) L62,500 to repay the pension
plan loans; (c) amounts necessary to fund the closing costs of the transactions
contemplated herein; and (d) the present overdraft due to National Westminster
Bank.
12.2.3 CERTIFIED RESOLUTIONS. A certified copy of the resolutions of
the Board of Directors of Buyer authorizing and approving this Agreement and the
other agreements, documents and instruments herein and the consummation of the
transactions contemplated by this Agreement.
12.2.4 OPINION OF COUNSEL. A written opinion of Taylor Joynson
Garrett, counsel to Buyer, dated as of the Closing Date, addressed to Sellers,
in substantially the form of EXHIBIT G hereto.
12.2.5 OPINION OF COUNSEL. A written opinion of Cooley Godward LLP,
counsel to Parent, dated as of the Closing Date, addressed to Sellers, in
substantially the form of EXHIBIT H hereto.
12.2.6 ESCROW AGREEMENT. The Escrow Agreement duly executed by Buyer
and the Escrow Agent in the form of EXHIBIT E hereto.
12.2.7 PURCHASE PRICE AND INDEMNIFICATION ESCROW AGREEMENT. The
Purchase Price and Indemnification Escrow Agreement duly executed by Buyer.
12.2.8 SERVICE AGREEMENT. A Service Agreement duly executed by Buyer,
Parent and Zitel World Trade in the form of EXHIBIT F hereto.
12.2.9 OTHER DOCUMENTS. All other documents, instruments or writings
required to be delivered to Sellers at or prior to the Closing pursuant to this
Agreement and such other certificates of authority and documents as Sellers may
reasonably request.
13. TERMINATION.
13.1 RIGHT OF TERMINATION WITHOUT BREACH. This Agreement may be terminated
without further liability of any party at any time prior to the Closing:
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13.1.1 by mutual written agreement of Buyer and Sellers; or
13.1.2 by either Buyer or Sellers if the Closing shall not have
occurred on or before that date which is thirty (30) days after the date of this
Agreement, or if such date is not a business day, the first business day
thereafter, provided the terminating party has not, through breach of a
representation, warranty or covenant, prevented the Closing from occurring on or
before such date.
13.2 TERMINATION FOR BREACH.
13.2.1 TERMINATION BY BUYER. If (a) there has been a material
violation or breach by Sellers or Shareholders of any of the agreements,
representations or warranties contained in this Agreement which has not been
waived in writing by Buyer, or (b) there has been a failure of satisfaction of a
condition to the obligations of Buyer which has not been so waived, or (c)
Sellers or Shareholders shall have attempted to terminate this Agreement under
this Article 13 or otherwise without grounds to do so, then Buyer may, by
written notice to Sellers and Shareholders at any time prior to the Closing that
such violation, breach, failure or wrongful termination attempt is continuing,
terminate this Agreement with the effect set forth in Section 13.2.3 hereof.
13.2.2 TERMINATION BY SELLERS. If (a) there has been a material
violation or breach by Buyer of any of the agreements, representations or
warranties contained in this Agreement which has not been waived in writing by
Sellers, or (b) there has been a failure of satisfaction of a condition to the
obligations of Sellers which has not been so waived, or (c) Buyer shall have
attempted to terminate this Agreement under this Article 13 or otherwise without
grounds to do so, then Sellers may, by written notice to Buyer at any time prior
to the Closing that such violation, breach, failure or wrongful termination
attempt is continuing, terminate this Agreement with the effect set forth in
Section 13.2.3 hereof.
13.2.3 EFFECT OF TERMINATION. Termination of this Agreement pursuant
to this Section 13.2 shall not in any way terminate, limit or restrict the
rights and remedies of any party hereto against any other party which has
violated, breached or failed to satisfy any of the representations, warranties,
covenants, agreements, conditions or other provisions of this Agreement prior to
termination hereof. In addition to the right of any party under common law to
redress for any such breach or violation, each party whose breach or violation
has occurred prior to termination shall jointly and severally indemnify each
other party for whose benefit such representation, warranty, covenant, agreement
or other provision was made ("indemnified party") from and against all losses,
damages (including, without limitation, consequential damages), costs and
expenses (including, without limitation, interest (including prejudgment
interest in any litigated matter), penalties, court costs, and attorneys fees
and expenses) asserted against, resulting to, imposed upon, or incurred by the
indemnified party, directly or indirectly, by reason of, arising out of or
resulting from such breach or violation. Subject to the foregoing, the parties'
obligations under Article 15 of this Agreement shall survive termination.
39.
14. RESOLUTION OF DISPUTES.
14.1 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement or any contract or agreement entered into pursuant
hereto or the performance by the parties of its or their terms, or any claim
that the execution and delivery of such agreements constituted a violation of
the securities laws of any state or the United States or any claim for damages
or rescission of this Agreement for fraud, misrepresentation or violation of any
such securities laws, shall be settled by binding arbitration held in San
Francisco, California, accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect, except as specifically
otherwise provided in this Article 14. Notwithstanding the foregoing, Buyer
may, in its discretion, apply to a court of competent jurisdiction for equitable
relief from any violation or threatened violation of the covenants of Sellers
and/or Shareholders under Section 7.1 hereof.
14.2 ARBITRATORS. If the matter in controversy (exclusive of attorney fees
and expenses) shall appear, as at the time of the demand for arbitration, to
exceed USD $500,000, then the panel to be appointed shall consist of three
neutral arbitrators; otherwise, one neutral arbitrator.
14.3 PROCEDURES; NO APPEAL. The arbitrator(s) shall allow such discovery
as the arbitrator(s) determine appropriate under the circumstances and shall
resolve the dispute as expeditiously as practicable, and if reasonably
practicable, within one hundred twenty (120) days after the selection of the
arbitrator(s). The arbitrator(s) shall give the parties written notice of the
decision, with the reasons therefor set out, and shall have thirty (30) days
thereafter to reconsider and modify such decision if any party so requests
within ten (10) days after the decision. Thereafter, the decision of the
arbitrator(s) shall be final, binding, and nonappealable with respect to all
persons, including (without limitation) persons who have failed or refused to
participate in the arbitration process.
14.4 AUTHORITY. The arbitrator(s) shall have authority to award relief
under legal or equitable principles, including interim or preliminary relief,
and to allocate responsibility for the costs of the arbitration and to award
recovery of attorneys fees and expenses in such manner as is determined to be
appropriate by the arbitrator(s).
14.5 ENTRY OF JUDGMENT. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject matter
jurisdiction. Sellers, Buyer and Shareholders hereby submit to the in personam
jurisdiction of the Federal and State courts in California, for the purpose of
confirming any such award and entering judgment thereon.
14.6 CONFIDENTIALITY. All proceedings under this Article 14, and all
evidence given or discovered pursuant hereto, shall be maintained in confidence
by all parties.
14.7 CONTINUED PERFORMANCE. The fact that the dispute resolution
procedures specified in this Article 14 shall have been or may be invoked shall
not excuse any party from performing its obligations under this Agreement and
during the pendency of any such
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procedure all parties shall continue to perform their respective obligations in
good faith, subject to any rights to terminate this Agreement that may be
available to any party and to the right of setoff provided in Section 11.4
hereof.
14.8 TOLLING. All applicable statues of limitation shall be tolled while
the procedures specified in this Article 14 are pending. The parties will take
such action, if any, required to effectuate such tolling.
15. EXPENSES.
Regardless of whether or not the transactions contemplated hereby are
consummated:
15.1 BROKERAGE. Sellers, Shareholders and Buyer each represent and warrant
to each other that there is no broker involved or in any way connected with the
transfer provided for herein. Buyer agrees to hold Sellers and Shareholders
harmless from and against all claims for brokerage commissions or finder's fees
incurred through any act of Buyer in connection with the execution of this
Agreement or the transactions provided for herein. Each Seller and Shareholder,
jointly and severally, agree to hold Buyer harmless from and against all claims
for brokerage commissions or finder's fees incurred through any act of any
Seller or Shareholder in connection with the execution of this Agreement or the
transactions provided for herein.
15.2 EXPENSES TO BE PAID BY SELLERS. Sellers shall pay, and shall
indemnify, defend and hold Buyer harmless from and against, each of the
following:
15.2.1 TRANSFER TAXES. Any sales, use, excise, transfer, income or
other similar tax (but excluding stamp duties, all of which shall be paid by
Buyer) imposed on Sellers with respect to the transactions provided for in this
Agreement, and any interest or penalties related thereto.
15.2.2 PROFESSIONAL FEES. All fees and expenses of Sellers' legal,
accounting, investment banking and other professional counsel in connection with
the transactions contemplated hereby. Buyer acknowledges that Sellers will pay
for such transaction expenses from Sellers' operating accounts.
15.3 EXPENSES TO BE PAID BY BUYER. Buyer shall pay, and shall indemnify,
defend and hold Sellers harmless from and against, each of the following:
15.3.1 STAMP DUTY/FILING FEES. Any stamp duty, filing fees, land
registry fees, and windup costs imposed with respect to the transactions
provided for in this Agreement, and any interest or penalties related thereto.
15.3.2 PROFESSIONAL FEES. All fees and expenses of Buyer's legal,
accounting, investment banking and other professional counsel in connection with
the transactions contemplated hereby.
41.
15.4 OTHER. Except as otherwise provided herein, each of the parties shall
bear its own expenses and the expenses of its counsel and other agents in
connection with the transactions contemplated hereby.
15.5 COSTS OF LITIGATION OR ARBITRATION. The parties agree that (subject
to the discretion, in an arbitration proceeding, of the arbitrator as set forth
in Section 14.4 hereof) the prevailing party in any action brought with respect
to or to enforce any right or remedy under this Agreement shall be entitled to
recover from the other party or parties all reasonable costs and expenses of any
nature whatsoever incurred by the prevailing party in connection with such
action, including without limitation attorneys' fees and prejudgment interest.
16. MISCELLANEOUS.
16.1 MATERIALITY. For purposes of Sections 4, 8, 9 and 11.1 of this
Agreement and for purposes of EXHIBIT A to this Agreement, a contract,
obligation, liability, transaction, change, breach, encumbrance, proceeding or
other matter or event shall not be deemed to be "material" unless the existence
or occurrence of such matter or event would, by itself, (a) cause a reasonable
purchaser to reverse its decision to enter into a transaction of the type
contemplated by this Agreement, and (b) reduce the value of the Purchased Assets
by more than USD $15,000.
16.2 FURTHER ASSURANCE. From time to time, (a) at Buyer's request and
without further consideration, Sellers and Shareholders will execute and deliver
to Buyer such documents and take such other action as Buyer may reasonably
request in order to consummate more effectively the transactions contemplated
hereby and to vest in Buyer good, valid and marketable title to the business and
assets being transferred hereunder, and (b) at Seller's or Shareholders' request
and without consideration, Buyer will execute and deliver to Sellers and/or
Shareholders such documents and take such other actions as Sellers and/or
Shareholders may reasonably request in order to vest in Buyer the Assumed
Liabilities.
16.3 ANNOUNCEMENTS. Announcements concerning the transactions provided for
in this Agreement by either Sellers or Buyer shall be subject to the approval of
the other in all essential respects, except that Sellers' approval shall not be
required as to any statements and other information which Buyer may submit to
the SEC, the California Securities Commission or be required to make pursuant to
any rule or regulation of the SEC or any state or local securities regulatory
board, or otherwise required by law.
16.4 ASSIGNMENT; PARTIES IN INTEREST. Except as expressly provided herein,
the rights and obligations of a party hereunder may not be assigned, transferred
or encumbered without the prior written consent of the other parties.
Notwithstanding the foregoing, Buyer may, without consent of any other party,
cause one or more subsidiaries of Buyer to carry out all or part of the
transactions contemplated hereby; provided, however, that Buyer shall,
nevertheless, remain liable for all of its obligations, and those of any such
subsidiary, to Sellers hereunder. This Agreement shall be binding upon, inure
to the benefit of, and be
42.
enforceable by the respective successors and permitted assigns of the parties
hereto. Nothing contained herein shall be deemed to confer upon any other
person any right or remedy under or by reason of this Agreement.
16.5 GOVERNING LAW. The parties acknowledge and agree that the Purchased
Assets and the Assumed Liabilities being transferred hereunder are being
transferred under the laws of England. This Agreement shall be construed and
interpreted according to the internal laws of the State of California, excluding
any choice of law rules that may direct the application of the laws of another
jurisdiction.
16.6 AMENDMENT AND MODIFICATION. Buyer, Sellers and Shareholders may
amend, modify and supplement this Agreement in such manner as may be agreed upon
by them in writing.
16.7 NOTICE. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by international courier service. The respective
addresses to be used for all such notices, demands or requests are as follows:
(a) If to Buyer, to:
Zitel Corporation
47211 Bayside Parkway
Fremont, CA 94538
Attention: Mr. Henry C. Harris
Telephone: (510) 440-9600
Telecopier: (510) 440-9696
(with a copy to)
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Attention: John L. Cardoza, Esq.
Telephone: (415) 693-2000
Telecopier: (415) 951-3699
or to such other person or address as Buyer shall furnish to Sellers in writing.
43.
(b) If to any Seller or Shareholder, to:
Palmer & Webb Systems Limited
Fountain House, Cleave Road
Leatherhead
Surrey KT22 7LX
United Kingdom
Attention: Julian Palmer
Phone: 011-44-137-2378899
Fax: 011-44-137-2378845
(with a copy to)
MacDonald Oates
Solicitors
Square House
The Square
Petersfield
Hampshire GU32 3HT
ATTENTION: Tony Cooper
Telephone: 011-44-1730268211
Telecopier: 011-44-1730261232
and
Brobeck Hale and Dorr
Hasilwood House
60 Bishopsgate
London EC2N 4AJ
ATTENTION: David Ayres
Telephone: 011-44-1716386688
Telecopier: 011-44-1716385888
or to such other person or address as Sellers shall furnish to Buyer in writing.
If personally delivered, such communication shall be deemed delivered upon
actual receipt; if electronically transmitted pursuant to this paragraph, such
communication shall be deemed delivered the next business day after transmission
(and sender shall bear the burden of proof of delivery); if sent by overnight
courier pursuant to this paragraph, such communication shall be deemed delivered
upon receipt. Any party to this Agreement may change its address for the
purposes of this Agreement by giving notice thereof in accordance with this
Section.
16.8 ENTIRE AGREEMENT. This instrument embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been
44.
and are no agreements, representations or warranties between the parties other
than those set forth or provided for herein.
16.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.10 HEADINGS. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
16.11 FURTHER DOCUMENTS. Buyer, Sellers and Shareholder each agree to
execute all other documents and to take such other action or corporate
proceedings as may be necessary or desirable to carry out the terms hereof.
16.12 SURVIVAL. All provisions of this Agreement shall survive the
Closing.
45.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written and have executed this
Agreement as a deed for English law purposes.
"BUYER"
Executed as a deed ZITEL LIMITED
for and behalf of:
By: /s/ Jack H. King
---------------------------------------
Jack H. King, CEO
---------------------------------------
[Print Name and Title]
By: /s/ David N. Kent, Director for and on
behalf of Huntsman Nominees Ltd.
as Secretary
---------------------------------------
David N. Kent for Secretary
---------------------------------------
[Print Name and Title]
"PARENT"
Executed as a deed ZITEL CORPORATION
for and behalf of:
By: /s/ Jack H. King
---------------------------------------
Jack H. King, CEO
---------------------------------------
[Print Name and Title]
"SELLERS"
Executed as a deed PALMER & WEBB SYSTEMS LIMITED
for and behalf of:
By: /s/ R. H. W. Webb
---------------------------------------
R. H. W. Webb, Director
---------------------------------------
[Print Name and Title]
By: /s/ Julian C. C. Palmer
---------------------------------------
Julian C. C. Palmer, Director
---------------------------------------
[Print Name and Title]
46.
Executed as a deed MOEBIUS BUSINESS TRAINING LIMITED
for and behalf of:
By: /s/ R. H. W. Webb
---------------------------------------
R. H. W. Webb, Director
---------------------------------------
[Print Name and Title]
By: /s/ Julian C. C. Palmer
---------------------------------------
Julian C. C. Palmer, Director
---------------------------------------
[Print Name and Title]
"SHAREHOLDERS"
Executed as a deed by:
In the presence of:
illegible /s/ Reginald Webb
- --------------------------------- ---------------------------------
Reginald Webb
- ---------------------------------
Solicitor
- ---------------------------------
Name and Address
Executed as a deed by:
In the presence of:
illegible /s/ Julian Palmer
- --------------------------------- ---------------------------------
Julian Palmer
- ---------------------------------
Solicitor
- ---------------------------------
Name and Address
47.
Executed as a deed PALMER & WEBB SYSTEMS, LIMITED
for and behalf of:
By: /s/ R. H. W. Webb
---------------------------------------
R. H. W. Webb, Director
---------------------------------------
[Print Name and Title]
By: /s/ Julian C. C. Palmer
---------------------------------------
Julian C. C. Palmer, Director
---------------------------------------
[Print Name and Title]
48.
EXHIBIT A
DEFINITIONS
As used in the Agreement the following terms shall have the following
respective meanings:
"ACQUISITION PROPOSAL" shall have the meaning specified in Section 8.3.7 of
the Agreement.
"AFFILIATE" shall mean and include: (a) any current or former shareholder,
director or officer of Sellers; (b) any sibling, uncle, aunt, niece or nephew of
any person described in clause (a); (c) any ancestor or lineal descendant of any
person described in clauses (a) or (b); (d) any current or former spouse of any
person described in clauses (a), (b) or (c) or any person who is a member of the
same household of the person described in clauses (a), (b) or (c) or who has
resided with such person for more than ten (10) days in any calendar year; (v)
any ancestor or lineal descendant of any person described in clauses (a), (b),
(c) or (d); and (e) any entity or person in which any of the foregoing have a
direct or indirect interest (except through ownership of less than five percent
(5%) of the outstanding shares of any entity whose securities are listed on a
national securities exchange or traded in the national over-the-counter market).
"AGREEMENT" shall have the meaning specified in the preamble to the
Agreement.
"ASSUMED CONTRACTS" shall have the meaning specified in Section 1.1.15 of
the Agreement.
"ASSUMED LIABILITIES" shall have the meaning specified in Section 2.1 of
the Agreement.
"BALANCE SHEETS" shall mean the balance sheets of Sellers dated as of
April 30, 1997 in the form of EXHIBIT B attached hereto.
"BALANCE SHEETS DATE" shall mean April 30, 1997.
"BUSINESS" shall have the meaning specified in the recitals to the
Agreement.
"BUYER" shall have the meaning specified in the preamble to the Agreement.
"BUYER'S AFFILIATES" shall have the meaning specified in Section 11.1 of
the Agreement.
"CAA" shall mean the Capital Allowances Act 1990.
"CLAIM" shall have the meaning specified in Section 11.1 of the Agreement.
1.
"CLOSING" and "CLOSING DATE" shall have the meanings specified in
Section 12 of the Agreement.
"COMPUTER SYSTEM" shall mean all other computer hardware (including
peripheral devices, cables and other related products) used in the Business at
the Closing.
"CONFIDENTIAL INFORMATION" shall mean the financial or trade secrets of the
Business, including but not limited to, Sellers' list of clients and customers.
"CONTRACTS" shall have the meaning specified in Section 1.1.15 of the
Agreement.
"CUSTOMERS" shall mean the licencees of the Software or any other customers
of the Business including those listed in SCHEDULE 1.1.14 to the Agreement.
"DATAMETRICS" shall have the meaning specified in Section 9.5 of the
Agreement.
"DEDUCTIBLE AMOUNT" shall have the meaning specified in Section 11.5 of the
Agreement.
"DISCLOSURE LETTERS" shall mean the letter of today's date from each Seller
to Buyer.
"ENVIRONMENTAL LEGISLATION" shall have the meaning specified in
Section 4.18.7.7 of the Agreement.
"EPA 1990" shall have the meaning specified in Section 4.18.7.4 of the
Agreement.
"ESCROW AGENT" shall mean Comerica Bank - California
"ESCROW AGREEMENT" shall mean that certain agreement between the parties to
the Agreement and the Escrow Agent in the form of EXHIBIT E to the Agreement.
"EXCLUDED ASSETS" shall have the meaning specified in Section 1.2 of the
Agreement.
"FACILITIES" shall have the meaning specified in the recitals to the
Agreement.
"FIRST ANNIVERSARY DATE" shall have the meaning specified in Section 11.5
of the Agreement.
"FIRST PERIOD" shall have the meaning specified in Section 11.5 of the
Agreement.
"FIRST PERIOD DEDUCTIBLE AMOUNT" shall have the meaning specified in
Section 11.5 of the Agreement.
"GAAP" shall mean generally accepted accounting principles in the relevant
jurisdiction.
2.
"GOODWILL" shall mean the goodwill of Sellers in connection with the
Business together with the right for Buyer to represent itself as carrying on
the Business in succession to Sellers and the benefit and burden of the Assumed
Contracts.
"HAZARDOUS MATERIALS" shall have the meaning specified in Section 4.18.4.4
of the Agreement.
"ICTA" shall mean the Income and Corporation Taxes Act 1988 and use of a
year followed by the word "ACT" shall mean the Finance Act of that year.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the meanings
specified in Section 11.3.1 of the Agreement.
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning specified in
Section 1.1.1 of the Agreement.
"KNOWLEDGE," "KNOWN," "AWARENESS" and "AWARE" in reference to Sellers or
the Shareholders shall mean the combined actual knowledge of any Shareholder and
any director or officer of either Seller and any Shareholder or any director or
officer of any Seller shall be deemed to have such knowledge as he or she would
have after having made all due, diligent and careful inquiries and after having
received full disclosure in response to such inquiries.
"KNOW-HOW" shall have the meaning specified in Section 1.1.1 of the
Agreement.
"LANDLORD" shall mean the respective landlords or other persons for the
time being entitled to the reversion mediately or immediately expectant on the
determination of the Real Property Leases.
"OWNED REAL PROPERTY" shall have the meaning specified in Section 1.1.2 of
the Agreement.
"PERSON" means any individual, corporation, limited liability corporation,
association, general partnership, limited partnership, limited liability
partnership, venture, trust, association, firm, organization, company, business,
entity, union, society, government (or political subdivision thereof) or
governmental agency, authority or instrumentality.
"PERSONAL PROPERTY LEASES" shall have the meaning specified in
Section 1.1.4 of the Agreement.
"PLANNING ACTS" shall have the meaning specified in Section 4.18.3.1 of the
Agreement.
"PURCHASE PRICE" shall have the meaning specified in Section 3.1 of the
Agreement.
3.
"PURCHASE PRICE AND INDEMNIFICATION ESCROW AGREEMENT" shall have the
meaning specified in Section 3.2.2 of the Agreement.
"PURCHASED ASSETS" shall have the meaning specified in Section 1.1 of the
Agreement.
"REAL PROPERTY LEASES" shall have the meaning specified in Section 1.1.3 of
the Agreement.
"REGULATIONS" shall mean the Transfer of Undertakings (Protection of
Employment) Regulations 1981.
"RELATED PARTY" shall mean in relation to an individual person his or her
brother, sister, parent,spouse, child or grandchild or the trustees of any
settlement of which he is the settlor or in which he is a beneficiary (and
whether discretionary or otherwise), and in relation to a company any subsidiary
or other company over which it has control within section 840 1988 ICTA or in
which it holds twenty-five percent (25%) or more of the share capital carrying
voting rights.
"REVERSIONER'S LICENCE" shall mean the licence or licences of the Landlord
and/or all superior landlords required for the assignment of the Real Property
Leases from Seller to Buyer.
"RMS" shall mean Resource Management Systems Ltd., a Bermuda corporation.
"SECOND PERIOD" shall have the meaning specified in Section 11.5 of the
Agreement.
"SECOND PERIOD DEDUCTIBLE AMOUNT" shall have the meaning specified in
Section 11.5 of the Agreement.
"SELLERS" shall have the meaning specified in the preamble to the
Agreement.
"SHAREHOLDER" shall have the meaning specified in the preamble to the
Agreement.
"SOFTWARE" shall mean the computer programs and other material listed in
SCHEDULE 1.1.14 to the Agreement.
"SOURCE CODE" shall mean the source code versions of the Software, together
with all manuals and materials necessary to maintain and update the Software
(all in machine-readable form).
"SUPPORTING MATERIAL" shall mean: (a) the User Manuals, any training
manuals, upgrade information documents, marketing and product brochures; (b) all
programmer's documentation, documents prepared for the design of any data models
used both in memory and on disk and all other documents (in machine-readable or
hard copy format) relating to the Software (including the specific items listed
in SCHEDULE 1.1.14 to the Agreement); (c) all
4.
other software. manuals, text, documents, designs, artwork, photographs,
information and other material devised or used by the Business in relation to
the Software (but not including the Third Party Software); and (d) all designs,
drafts, documents and other works underlying any of the items listed at (a) to
(d) above.
"TAXATION" shall mean all forms of taxation, charges, duties, imposts,
levies and rates whenever imposed and whether of the United Kingdom or
elsewhere, including without limitation income taxes, withholding taxes,
corporation tax, advance corporation tax, capital gains tax, capital transfer
tax, inheritance tax, rates, uniform business rates, water rates, value added
tax, custom duties, capital duty, excise duties, betterment levy, community
charges, development land tax, stamp duty, stamp duty reserve tax, national
insurance, social security or other similar contributions and generally any tax,
duty, import, levy or rate or other amount and any interest, penalty or fine in
connection therewith.
"TCGA" shall mean Taxation of Chargeable Gains Act 1992.
"THIRD PARTY AGREEMENTS" shall mean the agreements for the use, maintenance
or other dealing by the Business with Third Party Software or any third party
Intellectual Property Rights as listed in SCHEDULE 1.1.14 to the Agreement.
"THIRD PARTY SOFTWARE" shall mean all computer programs used by the
Business in connection with the Software or the Equipment (and including any
computer programs embedded or incorporated in any Software or with which any
Software is bundled for sale or marketing by the Business).
"TRADE MARKS" shall mean any business names, trade marks (whether in
particular script or otherwise), devices, logos and signs owned or used by
Seller in connection with the Business (including those listed in
SCHEDULE 1.1.1) together with all Goodwill associated with or symbolised by any
of the foregoing.
"TUPE" shall mean the Transfer of Undertakings (Protection of Employment)
Regulations 1981.
"USER MANUALS" shall mean the user manuals relating to the Software as
listed in SCHEDULE 1.1.14 to the Agreement.
"VATA" shall mean the Value Added Tax Act 1994.
"WARRANTY CREDIT" shall have the meaning specified in Section 3.3 of the
Agreement.
5.
EXHIBIT B
BALANCE SHEETS
APRIL 30, 1997
(FIGURES ARE IN POUND STERLING)
PWUK MBT
FIXED ASSETS 316,286 7,811
CURRENT ASSETS:
Trade 897,999 131,806
Stock 116,970 28,650
Prepayments 0 8,830
Other Debtors 0 6,859
Bad Debt Provision 0 -2,653
Cash in Bank -208,253 -64,795
-------- --------
Total Current Assets 806,716 108,697
CURRENT LIABILITIES:
Trade Creditors 649,896 179,658
Sales in Advance 0 13,695
Accruals 0 2,263
Other Creditors 62,500 12,762
VAT Liability 0 5,178
Paye/NIC Creditor 0 3,643
Expense Accounts 0 0
-------- --------
TOTAL CURRENT LIABILITIES 712,396 217,199
NET WORKING CAPITAL 94,320 -108,502
-------- --------
NET ASSETS 410,606 -100,691
-------- --------
-------- --------
CAPITAL & RESERVES:
Ordinary Shares 100,000 2
Share Premium Account 0 98
Reserves 12,500 -74,611
P & L Prior 300,003 -43,052
P & L Current 6,103 16,872
Dividends Paid Current -8,000 0
-------- --------
TOTAL CAPITAL AND RESERVES 410,606 -100,691
-------- --------
-------- --------
1.
EXHIBIT C
PURCHASE PRICE AND
INDEMNIFICATION ESCROW AGREEMENT
THIS PURCHASE PRICE AND INDEMNIFICATION ESCROW AGREEMENT (this "AGREEMENT")
is dated as of June 30, 1997, by and among ZITEL LIMITED, a company incorporated
in England and Wales ("ZITEL U.K."), and ZITEL WORLD TRADE, a California
corporation ("ZITEL WORLD TRADE") (Zitel U.K. and Zitel World Trade are
hereinafter collectively referred to as "BUYER"), PALMER & WEBB SYSTEMS LTD., a
company incorporated in England and Wales ("PWUK"), REGINALD WEBB and JULIAN
PALMER, as the sole shareholders of PWUK (individually, a "PWUK SHAREHOLDER" and
collectively, the "PWUK SHAREHOLDERS"), MOEBIUS BUSINESS TRAINING LTD., a
company incorporated in England and Wales ("MOEBIUS"), and PWUK, as the sole
shareholder of Moebius (the "MOEBIUS SHAREHOLDER"), HELL SAILS B.V., a private
limited liability company organized under the laws of the Kingdom of the
Netherlands ("HELL SAILS"), and PALMER & WEBB SYSTEMS B.V., a private limited
liability company organized under the laws of the Kingdom of the Netherlands
("PWBV"), and COMERICA BANK - CALIFORNIA (the "ESCROW AGENT"). (PWUK, Moebius
and Hell Sails are sometimes hereinafter individually referred to as a "SELLER"
and collectively as the "SELLERS") (The PWUK Shareholders and the Moebius
Shareholder are sometimes hereinafter individually referred to as a
"SHAREHOLDER" and collectively as the "SHAREHOLDERS").
RECITALS
A. Pursuant to that certain Asset Purchase Agreement dated the date
hereof (the "ASSET PURCHASE AGREEMENT") between Zitel U.K., PWUK, Moebius, the
PWUK Shareholders and the Moebius Shareholder, Zitel U.K. is purchasing
substantially all of the assets, and assuming certain of the liabilities, of
PWUK and Moebius.
B. Pursuant to that certain Stock Purchase Agreement dated the date
hereof (the "STOCK PURCHASE AGREEMENT") between Zitel World Trade, Hell Sails
and PWBV, Zitel World Trade is purchasing all of the outstanding and issued
stock of PWBV from Hell Sails. The Asset Purchase Agreement and the Stock
Purchase Agreement are hereinafter collectively referred to as the "AGREEMENTS".
C. A condition precedent to the consummation of the Agreements is the
execution and delivery of this Agreement by the parties hereto. Certain
capitalized terms used in this Agreement are defined in the Agreements.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows.
1.
1. ESTABLISHMENT OF ESCROW ACCOUNTS.
1.1 PURCHASE PRICE ADJUSTMENT ESCROW. At the Closing (as defined in the
Agreements), Buyer shall deliver the amount of One Hundred Fifty Thousand
Dollars ($150,000) (the "PURCHASE PRICE ADJUSTMENT ESCROW AMOUNT") to Comerica
Bank - California (the "ESCROW AGENT") to be held in a segregated
interest-bearing account as provided for in this Section 1.1 (the "PURCHASE
PRICE ADJUSTMENT ESCROW"). On or before the fifth (5th) day following the final
determination of the Second Quarter Balance Sheets (as defined below) (such date
being hereinafter referred to as the "SETTLEMENT DATE"): (a) if the total
assets reflected in the Second Quarter Balance Sheets less the total assets
reflected in the balance sheets of PWUK, Moebius and PWBV, each dated as of
April 30, 1997 (collectively, the "APRIL 30 BALANCE SHEETS") is less than Fifty
Thousand Dollars ($50,000), no adjustment shall be made to the Purchase Price in
both Agreements and the entire Purchase Price Adjustment Escrow Amount shall be
paid to PWUK on behalf of all Sellers promptly thereafter; and (b) if the total
assets reflected in the Second Quarter Balance Sheets less the total assets
reflected in the April 30 Balance Sheets is equal to or greater than Fifty
Thousand Dollars ($50,000), the excess, together with actual interest earned
thereon paid from the Closing Date (as defined in the Agreements) to the
Settlement Date (the "PURCHASE PRICE ADJUSTMENT"), shall be deducted equally
from the Purchase Price paid under both Agreements and paid to Buyer from the
Purchase Price Adjustment Escrow and the remaining Purchase Price Adjustment
Escrow Amount, together with actual interest earned thereon, shall be paid to
PWUK on behalf of all Sellers promptly thereafter.
1.2 INDEMNIFICATION ESCROW. At the Closing, Buyer shall deliver the
amount of One Hundred Fifty Thousand Dollars ($150,000) (the "INDEMNIFICATION
ESCROW AMOUNT") to the Escrow Agent to be held in a segregated interest-bearing
account as provided for in this Section 1.2 (the "INDEMNIFICATION ESCROW"). The
Escrow Agent shall hold the Indemnification Escrow Amount until 5:00 p.m.
(Pacific Standard Time) on the first anniversary of the Closing Date (the "FIRST
ANNIVERSARY DATE") for the purpose of paying for: (a) any claims for indemnity
made by Buyer pursuant to Section 11 of the Asset Purchase Agreement or Section
8 of the Stock Purchase Agreement; and (b) any claim for a Warranty Credit made
by Buyer pursuant to Section 3.3 of the Asset Purchase Agreement. In the event
that no such claim(s) are made by Buyer by the First Anniversary Date, the
Indemnification Escrow Amount, together with any interest earned thereon, shall
be paid by the Escrow Agent to PWUK on behalf of all Sellers promptly
thereafter. In the event that Buyer makes one or more such claim(s) by the
First Anniversary Date: (a) the amount of such claim(s) shall continue to be
held in the Indemnification Escrow and the Indemnification Escrow shall be
extended after the First Anniversary Date until such time as such claim(s) is
finally resolved; and (b) the difference between the Indemnification Escrow
Amount and the amount of such claim(s), together with any interest earned
thereon, shall be paid by the Escrow Agent to PWUK on behalf of all Sellers
promptly thereafter.
1.3 METHOD OF PAYMENT. All payments under this Article 1 shall be made by
wire transfer of immediately available funds to an account designated by the
recipient not less than forty-eight (48) hours prior to the time for payment
specified herein.
2.
2. SECOND QUARTER BALANCE SHEETS.
2.1 PREPARATION. Within sixty (60) days after the Closing Date, Buyer
shall deliver to PWUK on behalf of all Sellers a balance sheet of each of PWUK,
Moebius and PWBV as of July 31, 1997, prepared in accordance with generally
accepted accounting principles from the books and records of each of PWUK,
Moebius and PWBV, on a basis consistent with generally accepted accounting
principles ("GAAP") theretofore followed by each of PWUK, Moebius and PWBV in
the preparation of the April 30 Balance Sheets and in accordance with this
Section 2.1, and fairly presenting the financial position of each of PWUK,
Moebius and PWBV as of July 31, 1997. Such balance sheets shall be accompanied
by detailed schedules of the Purchased Assets and Assumed Liabilities together
with a report prepared by Buyer stating that such balance sheets have been
prepared in accordance with GAAP, on a basis consistent with the accounting
principles theretofore followed by each of PWUK, Moebius and PWBV, except as
otherwise provided in this Section 2.1 and setting forth the amount of any
adjustment to the Purchase Price under the Agreements.
2.2 RIGHT TO OBJECT. Within thirty (30) days following the delivery of
such balance sheets, only PWUK, or the Sellers' independent accountants (MP
Saunders & Company with respect to PWUK and Moebius and Van Doesburg & Partners
with respect to PWBV ("SELLERS' ACCOUNTANTS")), on behalf of any or all Sellers,
may object to any of the information contained in such balance sheets. Any such
objection shall be made in writing. PWUK and the applicable Sellers'
Accountant, on the one hand, and Buyer and Coopers & Lybrand L.L.P. ("BUYER'S
ACCOUNTANT"), on the other hand, shall use their best efforts to reasonably
resolve such dispute(s) in a timely fashion.
2.3 APPOINTMENT OF THIRD AUDITOR. In the event of a dispute or
disagreement relating to the balance sheets which Buyer and Seller(s) are unable
to resolve, any party may elect to have all such disputes or disagreements
resolved by an accounting firm of nationally recognized standing (the "THIRD
ACCOUNTING FIRM") to be mutually selected by the applicable Seller and Buyer or,
if no agreement is reached, by the applicable Sellers' Accountant and Buyer's
Accountant. The Third Accounting Firm shall make a resolution of the balance
sheet of the applicable Seller as of July 31, 1997, which shall be final and
binding for purposes of this Article 2. The Third Accounting Firm shall be
instructed to use every reasonable effort to perform its services within fifteen
(15) days of its hiring and, in any case, as soon as practicable after such
date. The fees and expenses for the services of the Third Accounting Firm shall
be shared by Buyer and the applicable Seller as follows:
The applicable Seller shall pay a percentage of such fees and expenses
equal to A/(A+B) and Buyer shall pay a percentage of such fees and expenses
equal to B/(A+B), where A is equal to the absolute value of the difference (in
dollars) between assets as finally determined by the Third Accounting Firm and
assets as reflected in the objection prepared and delivered by the applicable
Seller in accordance with Section 2.2 hereof, and B is equal to the absolute
value of the difference (in dollars) between assets as finally determined by the
Third Accounting Firm and assets as reflected in the report prepared and
delivered by Buyer in accordance with Section 2.1 hereof. As used in this
Agreement, the term "SECOND
3.
QUARTER BALANCE SHEETS" shall mean the balance sheets of each of PWUK, Moebius
and PWBV as of July 31, 1997 as finally determined for purposes of this
Article 2, whether by acquiescence of Sellers in the figures supplied by Buyer
in accordance with Section 2.1 hereof, by negotiation and agreement of the
parties or by the Third Accounting Firm in accordance with this Section 2.3.
2.4 ACCESS. Buyer agrees to permit Sellers, the applicable Sellers'
Accountant, and their respective representatives, during normal business hours,
to have reasonable access to, and to examine and make copies of, all books and
records of Seller, including but not limited to, the books, records, schedules,
work papers and audit programs of Buyer and Buyer's Accountant and access to
representatives of Buyer's Accountant, which documents and access are necessary
to review the balance sheet delivered by Buyer in accordance with Section 2.1
hereof. Sellers similarly agree to permit Buyer's Accountant and their
respective representatives, during normal business hours, to have reasonable
access to any books and records of Sellers which do not constitute Purchased
Assets, in order to enable them to prepare such balance sheet.
3. REPRESENTATIONS AND WARRANTIES.
Each of Zitel U.K., Zitel World Trade, PWUK, Moebius, Hell Sails, PWBV and
Escrow Agent hereby makes the following representations and warranties to every
other party hereto, each of which is true and correct on the date hereof, shall
remain true and correct to and including the Closing Date, shall be unaffected
by any investigation heretofore or hereafter made by any other party hereto, or
any knowledge of any other party and shall survive the Closing.
3.1 CORPORATE. It is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation. It has all
requisite corporate power to enter into this Agreement and the other documents
and instruments to be executed and delivered by it and to carry out the
transactions contemplated hereby and thereby.
3.2 AUTHORITY. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by it pursuant hereto and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by its board of directors. No other corporate act or proceeding
on the part of it or its shareholders is necessary to authorize this Agreement
or the other documents and instruments to be executed and delivered by it
pursuant hereto or the consummation of the transactions contemplated hereby and
thereby. This Agreement constitutes, and when executed and delivered, the other
documents and instruments to be executed and delivered by it pursuant hereto
will constitute, valid and binding agreements of it, enforceable in accordance
with their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
4.
4. TERMINATION. This Agreement shall terminate upon the earlier of: (a) that
date when the amount in both the Purchase Price Adjustment Escrow and the
Indemnification Escrow is Zero Dollars ($0); or (b) the written agreement of all
parties hereto.
5. RESOLUTION OF DISPUTES.
5.1 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement or any contract or agreement entered into pursuant
hereto or the performance by the parties of its or their terms, or any claim
that the execution and delivery of such agreements constituted a violation of
the securities laws of any state or the United States or any claim for damages
or rescission of this Agreement for fraud, misrepresentation or violation of any
such securities laws, shall be settled by binding arbitration held in San
Francisco, California, accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect, except as specifically
otherwise provided in this Article 5. The panel to be appointed shall consist
of one neutral arbitrator.
5.2 PROCEDURES; NO APPEAL. The arbitrator shall allow such discovery as
he or she determines appropriate under the circumstances and shall resolve the
dispute as expeditiously as practicable, and if reasonably practicable, within
one hundred twenty (120) days after the selection of the arbitrator. The
arbitrator shall give the parties written notice of the decision, with the
reasons therefor set out, and shall have thirty (30) days thereafter to
reconsider and modify such decision if any party so requests within ten (10)
days after the decision. Thereafter, the decision of the arbitrator shall be
final, binding, and nonappealable with respect to all persons, including
(without limitation) persons who have failed or refused to participate in the
arbitration process.
5.3 AUTHORITY. The arbitrator shall have authority to award relief under
legal or equitable principles, including interim or preliminary relief, and to
allocate responsibility for the costs of the arbitration and to award recovery
of attorneys fees and expenses in such manner as is determined to be appropriate
by the arbitrator.
5.4 ENTRY OF JUDGMENT. Judgment upon the award rendered by the arbitrator
may be entered in any court having in personam and subject matter jurisdiction.
Sellers, Buyer and Shareholders hereby submit to the in personam jurisdiction of
the Federal and State courts in California, for the purpose of confirming any
such award and entering judgment thereon.
5.5 CONFIDENTIALITY. All proceedings under this Article 5, and all
evidence given or discovered pursuant hereto, shall be maintained in confidence
by all parties.
5.6 CONTINUED PERFORMANCE. The fact that the dispute resolution
procedures specified in this Article 5 shall have been or may be invoked shall
not excuse any party from performing its obligations under this Agreement and
during the pendency of any such procedure all parties shall continue to perform
their respective obligations in good faith.
5.
5.7 TOLLING. All applicable statues of limitation shall be tolled while
the procedures specified in this Article 5 are pending. The parties will take
such action, if any, required to effectuate such tolling.
5.8 EXPENSES. The parties agree that (subject to the discretion, in an
arbitration proceeding, of the arbitrator as set forth in Section 5.3 hereof)
the prevailing party in any action brought with respect to or to enforce any
right or remedy under this Agreement shall be entitled to recover from the other
party or parties all reasonable costs and expenses of any nature whatsoever
incurred by the prevailing party in connection with such action, including
without limitation attorneys' fees and prejudgment interest.
6. MISCELLANEOUS.
6.1 ASSIGNMENT; PARTIES IN INTEREST. Except as expressly provided herein,
the rights and obligations of a party hereunder may not be assigned, transferred
or encumbered without the prior written consent of the other parties.
Notwithstanding the foregoing, Buyer may, without consent of any other party,
cause one or more subsidiaries of Buyer to carry out all or part of the
transactions contemplated hereby; provided, however, that Buyer shall,
nevertheless, remain liable for all of its obligations, and those of any such
subsidiary, to Sellers hereunder. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by the respective successors and permitted
assigns of the parties hereto. Nothing contained herein shall be deemed to
confer upon any other person any right or remedy under or by reason of this
Agreement.
6.2 GOVERNING LAW. This Agreement shall be construed and interpreted
according to the internal laws of the State of California, excluding any choice
of law rules that may direct the application of the laws of another
jurisdiction.
6.3 AMENDMENT AND MODIFICATION. This Agreement may not be amended,
modified or supplemented without the prior written consent of all parties
hereto.
6.4 NOTICE. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated in the Agreements (or, with respect to the Escrow Agent, to
the address indicated on the signature page hereto), by registered or certified
international courier service. If personally delivered, such communication
shall be deemed delivered upon actual receipt; if electronically transmitted
pursuant to this Section, such communication shall be deemed delivered the next
business day after transmission (and sender shall bear the burden of proof of
delivery); if sent by overnight courier pursuant to this Section, such
communication shall be deemed delivered upon receipt. Any party to this
Agreement may change its address for the purposes of this Agreement by giving
notice thereof to each other party hereto.
6.
6.5 ENTIRE AGREEMENT. This instrument embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.
6.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.7 HEADINGS. The headings in this Agreement are inserted for convenience
only and shall not constitute a part hereof.
6.8 FURTHER DOCUMENTS. The parties hereto each agree to execute all other
documents and to take such other action or corporate proceedings as may be
necessary or desirable to carry out the terms hereof.
6.9 SURVIVAL. All provisions of this Agreement shall survive the Closing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
"BUYERS"
ZITEL LIMITED
By: /s/ Jack H. King
---------------------------------------
Jack H. King, CEO
---------------------------------------
[Print Name and Title]
ZITEL WORLD TRADE
By: /s/ Jack H. King
---------------------------------------
Jack H. King, CEO
---------------------------------------
[Print Name and Title]
7.
"SELLERS"
PALMER & WEBB SYSTEMS LTD.
By: /s/ Julian C. C. Palmer
---------------------------------------
Julian C. C. Palmer, Director
---------------------------------------
[Print Name and Title]
MOEBIUS BUSINESS TRAINING LTD.
By: /s/ R. H. W. Webb
---------------------------------------
R. H. W. Webb, Director
---------------------------------------
[Print Name and Title]
HELL SAILS B.V.
By: /s/ J. H. Van Bergen
---------------------------------------
J. H. Van Bergen
---------------------------------------
[Print Name and Title]
"SHAREHOLDERS"
/s/ Reginald Webb
-------------------------------------------------
REGINALD WEBB
/s/ Julian Palmer
-------------------------------------------------
JULIAN PALMER
8.
PALMER & WEBB SYSTEMS, LTD.
By: /s/ R. H. W. Webb
---------------------------------------
R. H. W. Webb, Director
---------------------------------------
[Print Name and Title]
"PWBV"
PALMER & WEBB SYSTEMS B.V.
By: /s/ T. Fortgens, Managing Director
---------------------------------------
/s/ M. L. Schuurkes, Managing Director
---------------------------------------
[Print Name and Title]
9.
Exhibit D
MacDONALD OATES
Solicitors
Square House The Square Petersfield Hampshire GU32 3HT
Tel: 01730 268211 Fax: 01730 261232 DX 100400 Petersfield
Zitel Limited 30 June 1997
Zitel Corporation
OPINION
Dear Sirs,
RE: PALMER AND WEBB SYSTEMS LIMITED ("PWUK")
1. We have been asked to provide a written Opinion in respect of the
incorporation, share issue, corporate authority and good standing of PWUK.
2. We understand that this letter is being delivered pursuant to an asset
purchase agreement ("the agreement") made between PWUK, Zitel Corporation, Zitel
Limited, Reginald Webb and Julian Palmer and Moebius Business Training Limited.
3. Unless otherwise defined, expressions defined in the agreement shall have
the same meanings when used in this Opinion.
4. For the purpose of this Opinion, we have examined:
(a) The Certificate of Incorporation of PWUK.
(b) The Memorandum and Articles of Association of the Company.
(c) The Statutory Books of the Company comprising Registers of:
(i) applications and allotments
(ii) share transfers
(iii) members
(iv) directors
(v) secretaries
(vi) directors' interests
(vii)mortgages and Charges
1.
5. Assumptions.
For the purpose of this Opinion, we have assumed the following:
(a) The genuineness of all signatures.
(b) The authenticity and completeness of all documents submitted to us as
originals.
(c) The conformity to originals of all documents submitted to us as copies of
originals.
(d) The legal capacity, power and authority of all persons executing
agreements, instruments or documents relied upon by us.
(e) The information disclosed to us by the UK Companies Registry.
This opinion is limited to English law as currently applied by the English
Courts and is given on the basis that it will be governed and be construed and
have the effect in accordance with English law. We have made no investigation
of the laws of any country, state or jurisdiction, other than England and we
have assumed that there is nothing in the law of any other country, state or
jurisdiction which affects the Opinion expressed in this letter. In particular
this Opinion does not extend to cover matters of the laws of the State of
California.
We express no opinion as to matters of fact.
6. Opinion.
To the best of our knowledge, based upon and subject to the foregoing and
subject to the reservations referred to below, we are of the opinion that:
(a) PWUK is duly incorporated and existing as a private Limited Company
registered in England under Company No. 01648965. PWUK changed its name from
Rentonbeech Limited to Palmer and Webb Limited on lst September 1982 and to
Palmer and Webb Systems Limited on 6th March 1995. PWUK is authorised pursuant
to its Memorandum of Association to carry on its current business. PWUK is in
good standing under English law.
(b) The authorised share capital of PWUK is 3,000,000 divided into ordinary
shares of 5p each of which 2,000,000 shares have been validly issued and are
fully paid up. Reginald Webb and Julian Palmer are each the registered holders
of 1,000,000 of the 2,000,000 issued ordinary shares of 5p each in the capital
of PWUK.
(c) PWUK has power under its Memorandum of Association to carry on its business
and to enter into and perform its obligations under the Agreement.
(d) All corporate and other action required by statute or pursuant to PWUK's
Memorandum and Articles of Association to authorize the execution of the
Agreement by PWUK and the performance of its obligations thereunder has been
duly taken.
(e) The choice of Californian law to govern the Agreement is a valid and
effective choice of laws by PWUK.
2.
7. Reservations and Qualifications.
This Opinion is subject to the following qualifications:
(a) A certificate, documentation, notification, opinion or the like might be
held by the English Courts not to be conclusive if it can be shown to have an
unreasonable or arbitrary basis or in the event of a manifest error.
(b) The English Courts may have discretion as to the enforceability of certain
terms of restrictive covenants.
This Opinion is addressed to and is for the benefit solely of Zitel Limited and
Zitel Corporation in connection with the transactions contemplated by the
agreement. This Opinion may not be relied on by any other person for any other
purpose, nor may it be disclosed to any other person (other than as may be
required by any regulatory authority for the time being having jurisdiction over
Zitel Limited and Zitel Corporation) without our prior written consent.
Yours faithfully,
/s/ Macdonald Oates
MacDonald Oates
3.
MacDONALD OATES
Solicitors
Square House The Square Petersfield Hampshire GU32 3HT
Tel: 01730 268211 Fax: 01730 261232 DX 100400 Petersfield
Zitel Limited 30 June 1997
Zitel Corporation
OPINION
Dear Sirs,
RE: MOEBIUS BUSINESS TRAINING LIMITED ("MOEBIUS")
1. We have been asked to provide a written Opinion in respect of the
incorporation, share issue, corporate authority and good standing of Moebius.
2. We understand that this letter is being delivered pursuant to an asset
purchase agreement ("the agreement") made between PWUK, Zitel Corporation, Zitel
Limited, Reginald Webb and Julian Palmer and Moebius Business Training Limited.
3. Unless otherwise defined, expressions defined in the agreement shall have
the same meanings when used in this Opinion.
4. For the purpose of this Opinion, we have examined:
(a) The Certificate of Incorporation of Moebius.
(b) The Memorandum and Articles of Association of the Company.
(c) The Statutory Books of the Company comprising Registers of:
(i) applications and allotments
(ii) share transfers
(iii) members
(iv) directors
(v) secretaries
(vi) directors' interests
(vii) mortgages and Charges
1.
5. Assumptions.
For the purpose of this Opinion, we have assumed the following:
(a) The genuineness of all signatures.
(b) The authenticity and completeness of all documents submitted to us as
originals.
(c) The conformity to originals of all documents submitted to us as copies of
originals.
(d) The legal capacity, power and authority of all persons executing
agreements, instruments or documents relied upon by us.
(e) The information disclosed to us by the UK Companies Registry.
This Opinion is limited to English law as currently applied by the English
Courts and is given on the basis that it will be governed and be construed and
have the effect in accordance with English law. We have made no investigation
of the laws of any country, state or jurisdiction, other than England and we
have assumed that there is nothing in the law of any other country, state or
jurisdiction which affects the Opinion expressed in this letter. In particular
this Opinion does not extend to cover matters of the laws of the State of
California.
We express no opinion as to matters of fact.
6. Opinion.
To the best of our knowledge, based upon and subject to the foregoing and
subject to the reservations referred to below, we are of the opinion that:
(a) Moebius is duly incorporated and existing as a private Limited Company
registered in England under Company No. 2833019. Moebius was originally
incorporated with the name Proofreport Trading Limited but changed its name to
Moebius Business Trading Limited on 19th November 1993. Moebius is authorised
pursuant to its Memorandum of Association to carry on its current business.
Moebius is in good standing under English law.
(b) The authorised share capital of Moebius is 1,000 divided into ordinary
shares of 1 (pound) each of which 2 shares have been validly issued and are
fully paid up. Palmer and Webb Systems Limited are the registered holders of
the 2 issued ordinary shares of 1 (pound) each.
(c) Moebius has power under its Memorandum of Association to carry on its
business and to enter into and perform its obligations under the Agreement.
(d) All corporate and other action required by statute or pursuant to Moebius'
Memorandum and Articles of Association to authorise the execution of the
Agreement by Moebius and the performance of its obligations thereunder has been
duly taken.
(e) The choice of Californian law to govern the Agreement is and effective
choice of laws by Moebius.
2.
7. Reservations and Qualifications.
This opinion is subject to the following qualifications:
(a) A certificate, documentation, notification, opinion or the like might be
held by the English Courts not to be conclusive if it can be shown to have an
unreasonable or arbitrary basis or in the event of a manifest error.
(b) The English Courts may have discretion as to the enforceability of certain
terms of restrictive covenants.
This Opinion is addressed to and is for the benefit solely of Zitel Limited and
Zitel Corporation in connection with the transactions contemplated by the
agreement. This Opinion may not be relied on by any other person for any other
purpose, nor may it be disclosed to any other person (other than as may be
required by any regulatory authority for the time being having jurisdiction over
Zitel Limited and Zitel Corporation) without our prior written consent.
Yours faithfully,
/s/ MacDonald Oates
MacDonald Oates
3.
Exhibit E
ESCROW AGREEMENT
INSTITUTIONAL TRUST DEPARTMENT
This Agreement made this 30th day of June 1997 between the parties listed on
Exhibit Attached hereto, a corporation (herein called the "Depositor"), and
parties listed on Exhibit A attached (herein called the "Other Party") and
COMERICA BANK, a California banking corporation (herein called the "Agent")
whose address is 250 Lytton Avenue, Palo Alto, CA 94301.
WITNESSETH
The Agent acknowledges receipt in Escrow from Depositor of the following:
$300,000.00 (herein called "Property").
1. The Agent is hereby authorized and instructed to either:
a. Deliver the Property to the Other Party in strict compliance with the
following Condition(s), or,
b. Failing strict compliance with the Condition(s), re-deliver the
Property to Depositor; whereupon in either event, Agent's duties and
liabilities in connection with this Escrow shall terminate.
c. The Conditions are: See the Purchase Price and Indemnification Escrow
Agreement attached as Exhibit B hereto.
2. The duties and obligations of Agent hereunder shall be determined solely by
the express provision of this Agreement. Agent shall not be liable or
responsible for any act done, or step taken or omitted by it, or any
mistake of fact or law, or for anything which it may do or refrain from
doing, except for its gross negligence, willful default or failure in the
performance of any obligation imposed upon it hereunder.
Agent is authorized to act in reliance upon the sufficiency, correctness,
genuineness or validity of any instrument or document or other writing
submitted to it hereunder, and shall have no liability with respect to said
matters.
3. Any funds held by Agent hereunder shall be held and invested by Agent as
specified in written instructions, Agent may deposit said funds in an
interest bearing deposit account with other similar funds. All proxies
will be voted by the Agent. Agent is not obligated to render any
statements or notices of non-performance hereunder to any party hereto but
may in its discretion inform any party hereto, or his authorized
representative, of any matters pertaining to this Escrow.
Rule 14b-1(c) of the Securities and Exchange Commission enables
corporations to learn the identity of their security holders whose
securities are held by the Bank and registered in "nominee" or "street"
name unless the beneficial owner specifically indicates its objection to
such disclosure. The Depositor hereby indicates its objection to
disclosure by the Bank of Depositor's name, address and security position
to all companies whose securities are held in this Account and are
registered in "nominee" or "street" name.
1.
4. Agent's fee in the amount of 50 basis points shall be automatically
deducted from the Escrow. The Depositor and Other Party agree, jointly and
severally, to indemnify and hold harmless the Agent from any costs,
damages, expenses or claims, including attorney's fees, which Agent may
incur or sustain as a result of or arising out of this Escrow Agreement or
Agent's duties relating thereto, and will apply them on demand, and the
Agent is hereby given a lien upon, and security interest in, the Property
deposited in this escrow to secure Agent's right to payment or
reimbursement.
Agent shall be reimbursed $25 for all wire or check disbursements and
actual cost for any termination expenses made or incurred hereunder, and if
it shall be required to perform extraordinary services not contemplated
herein, it shall receive reasonable additional compensation therefor.
Agent shall not be required to institute or maintain litigation unless
indemnified to its satisfaction for its counsel fees, costs, disbursements
and all other costs, expenses and liabilities to which it may in its
judgment be subjected in connection with such action.
5. In the event of any disagreement or the presentation of adverse claims or
demands in connection with the Property, Agent shall, at its option, be
entitled to refuse to comply with any claims or demands during the
continuance of such disagreement and may refrain from delivering any item
affected thereby, and in so doing, Agent shall not become liable to
Depositor or Other Party, or any of them, or to any other person, due to
its failure to comply with any such adverse claim or demand. Agent shall
be entitled to continue, without liability, to refrain and refuse to act:
a. Until all the rights of the adverse claimants have been finally
adjudicated by a court having jurisdiction of the parties and the
items affected thereby, after which time the Agent shall be entitled
to act in conformity with such adjudication; or
b. Until all differences shall have been adjusted by agreement and Agent
shall have been notified thereof and shall have been directed in
writing, signed jointly or in counterpart by Depositor and Other Party
and by all persons making adverse claims or demands, at which time
agent shall be protected in acting in compliance therewith.
The parties agree that the Agent may seek adjudication of any adverse claim
or demands in an appropriate County Court, or the United States Federal
District Court, agree to the jurisdiction of either of said Courts over
their persons as well as the Property, waive personal service of any
process, and agree that service of process by certified or registered mail,
return receipt requested, to the address set forth below each party's
signature to this Agreement shall constitute adequate service.
6. The entire agreement of the parties is contained herein; any change in
terms or conditions herein may only be made in writing signed by all
parties hereto. Agent shall not be charged with knowledge of any fact,
including but not limited to performance or non-performance of any
Condition, unless it has actually received written notice hereof from one
of the parties by certified or registered mail, return receipt requested,
addressed to Agent's address shown at the top of this Agreement, such
notice clearly referring to this Agreement.
7. This Escrow Agreement shall be deemed to have been made under and shall be
governed by the laws of the State of California in all respects, including
matters of construction, validity and performances.
2.
8. Agent may consult with legal counsel to be selected and employed by it and
shall be fully protected with respect to any action or inaction under this
Agreement taken or suffered in good faith by Agent in accordance with the
opinion of such counsel.
9. Agent may resign as such following the giving of thirty (30) days prior
written notice to the other parties hereto. Similarly, Agent may be
removed and replaced following the giving of thirty (30) days prior written
notice to Agent by the other parties hereto. In either event, the duties
of the Agent shall terminate thirty (30) days after the date of such notice
(or at such earlier date as may be manually agreeable); and Agent shall
then delivery the balance of the escrow deposit then in its possession to a
successor escrow agent as shall be appointed by Other Party hereto, as
evidenced by a written notice filed with Agent, or if no successor escrow
agent has been so appointed, the then acting Agent shall deliver the
balance of the escrow deposit then in its possession to (indicate
disposition of escrow deposit) ____________________________________________.
10. It is the intention of the parties hereto that Agent shall never be
required to use or advance its own funds or otherwise incur personal
financial liability in the performance of any of its duties or the exercise
of any of its rights and powers hereunder.
11. No waiver nor any past agreement or condition hereunder by any party hereto
shall operate as a continuing waiver of any agreement or condition under
this Agreement. Each party shall have the right to waive and/or nullify,
in writing, any condition or term of this Agreement which is for its or his
benefit.
12. If any provision or clause in this Agreement or application thereof to any
person or circumstances is held invalid or unenforceable, such invalidity
or unenforceability shall not affect other provisions or applications of
this Agreement which can be given effect without the invalid or
unenforceable provision or application, and to this end the provisions of
this Agreement are declared to be severable.
See the signature page attached as Exhibit C hereto.
DEPOSITOR: OTHER PARTY:
--------------------- -------------------------------
By: By:
---------------------------- ----------------------------------------
(Name & Title) (Name & Title)
- ------------------------------- -------------------------------------------
(Signature) (Signature)
- ------------------------------- -------------------------------------------
(Date) (Date)
- ------------------------------- -------------------------------------------
(Address) (Address)
3.
COMERICA BANK:
By: /s/ illegible
---------------------------------
(Name & Title)
- -------------------------------
(Signature)
- -------------------------------
(Date)
4.
EXHIBIT A TO ESCROW AGREEMENT
PARTIES TO ESCROW AGREEMENT:
the "Depositor":
ZITEL LIMITED, a company incorporated in England and Wales, and
ZITEL WORLD TRADE, a California corporation
the "Other Party":
PALMER & WEBB SYSTEMS LTD., a company incorporated in England and Wales,
MOEBIUS BUSINESS TRAINING LTD., a company incorporated in England and Wales,
HELL SAIS B.V., a private limited liability company organized under the laws of
the Kingdom of the Netherlands,
PALMER & WEBB SYSTEMS B.V., a private limited liability company organized under
the laws of the Kingdom of the Netherlands, and
REGINALD WEBB AND JULIAN PALMER, individually
1.
EXHIBIT B TO ESCROW AGREEMENT
Purchase Price and Indemnification Escrow Agreement
(attached)
1.
2 EXHIBIT C TO ESCROW AGREEMENT
SIGNATURE PAGE TO ESCROW AGREEMENT:
THE "DEPOSITOR"
ZITEL LIMITED
By: /s/ Jack H. King
--------------------------------------
Jack H. King, CEO
--------------------------------------
[Print Name and Title]
ZITEL WORLD TRADE
By: /s/ Jack H. King
--------------------------------------
Jack H. King, CEO
--------------------------------------
[Print Name and Title]
THE "OTHER PARTY"
PALMER & WEBB SYSTEMS LTD.
By: /s/ Julian C. C. Palmer
--------------------------------------
Julian C. C. Palmer, Director
--------------------------------------
[Print Name and Title]
MOEBIUS BUSINESS TRAINING LTD.
By: /s/ R. H. W. Webb
--------------------------------------
R. H. W. Webb, Director
--------------------------------------
[Print Name and Title]
HELL SAILS B.V.
1.
By: /s/ J. H. Van Bergen
--------------------------------------
J. H. Van Bergen
--------------------------------------
[Print Name and Title]
PALMER & WEBB SYSTEMS B.V.
By: /s/ T. Fortgens, Managing Director
--------------------------------------
/s/ M. L.Schuurkes, Managing Director
--------------------------------------
[Print Name and Title]
/s/ Reginald Webb
-------------------------------------------
REGINALD WEBB
/s/ Julian Palmer
-------------------------------------------
JULIAN PALMER
2.
Exhibit F
DATED June 30, 1997
- --------------------------------------------------------------------------------
ZITEL CORPORATION
- and -
ZITEL WORLD TRADE
- and -
ZITEL LIMITED
- and -
REGINALD HARRY WEBB
- --------------------------------------------------------------------------------
SERVICE AGREEMENT
- --------------------------------------------------------------------------------
TAYLOR JOYNSON GARRETT
Carmelite
50 Victoria Embankment
Blackfriars
London EC4Y 0DX
Tel No: 0171-353 1234
Fax No: 0171-936 2666
Ref: AIR
INDEX
CLAUSE NO. HEADING
1. Definitions and Interpretations
2. Period of Employment
3. Duties
4. Place of Employment
5. Remuneration and Benefits
6. Pension
7. Holidays
8. Sickness or Injury
9. Confidential Information and Trade Secrets
10. Inventions
11. Dismissal
12. Suspension
13. Grievance and Disciplinary Procedure
14. Duties upon Termination
15. Restrictions
16. Restrictive Trade Practices Act 1976
17. Notices
18. Miscellaneous
19. Law and Jurisdiction
Schedule 1 1990 Zitel Corporation Stock Option Plan
Schedule 2 Holiday Rules
THIS AGREEMENT is made the 30th day of June, 1997
BETWEEN
(1) ZITEL CORPORATION, a California corporation of 47211 Bayside Parkway,
Fremont, California 94538, USA ("Zitel"); and
(2) ZITEL WORLD TRADE, a California corporation of 47211 Bayside Parkway,
Fremont, California 94538 USA ("ZWT"); and
(3) ZITEL LIMITED whose registered office is at Carmelite, 50 Victoria
Embankment, Blackfriars, London EC4Y 0DX (the "Company"); and
(4) REGINALD HARRY WEBB of Horseshoe Hollow, Claremont Lane, Esher, Surrey
KT10 9DP (the "Executive").
AGREED TERMS
1. DEFINITIONS AND INTERPRETATIONS
1.1 In this agreement including the schedule the following expressions shall
have the following meanings:
"ASSOCIATED COMPANY" means any holding or intermediate holding company of
the Company and any other company over which the Company (either alone or
in conjunction with any connected person) has control for the time being
within the meaning of section 840 of the ICTA;
"BOARD" means the board of directors of the Company from time to time;
"BUSINESS DAY" means any day other than a Saturday, Sunday or any other
day which is a public holiday in the place from which the notice in
question was sent;
"EFFECTIVE DATE" means 30 June 1997;
"EMPLOYMENT" means the employment of the Executive by the Company;
"ICTA" means the Income and Corporation Taxes Act 1988;
"TERMINATION DATE" means the date on which the Executive's employment
under this agreement terminates.
1.2 In this agreement and the schedules:
(a) reference to any statute or statutory provision includes a reference
to that statute or statutory provision as amended, extended or
re-enacted and to any regulation, order, instrument or subordinate
legislation under the relevant statute or statutory provision;
(b) reference to the singular includes a reference to the plural and
vice versa;
(c) reference to any clause, sub-clause or schedule is to a clause,
sub-clause or schedule (as the case may be) of or to this agreement;
(d) reference to any gender includes a reference to all other genders; and
(e) references to persons include bodies corporate, unincorporated
associations and partnerships and any reference to any party who is
an individual is also deemed to include their respective legal
personal representative(s).
2. PERIOD OF EMPLOYMENT
2.1 The Company shall employ the Executive as a Director of the Company and
President of ZWT and of any other Associated Company as may be agreed.
2.2 The Employment shall begin on the Effective Date and shall continue until
terminated in accordance with the terms of this agreement.
2.3 There is no employment with a previous employer other than employment
with Palmer & Webb Systems Limited which counts as part of the
Executive's continuous period of employment for the purposes of the
Employment Rights Act 1996 which began on 1 February 1984.
2.4 In order to terminate the employment under this contract, the Employee is
required to give to the Employer, and the Employer is required to give to
the Employee, the following periods of written notice:
(a) up to 4 years
continuous employment - 1 month's notice
(b) from 5 years continuous - 1 week's notice for every completed year
employment and up to of continuous employment
11 years continuous
employment
(c) more than 12 years
continuous employment - 3 months' notice
2.5 If written notice is given by the Executive or by the Company to
terminate the Employment during the notice period, the Company may
notwithstanding any other terms of this agreement but subject to
sub-clause 2.6:
(a) require the Executive to continue to perform such duties as the
Board or the Chief Executive Officer of Zitel may direct; or
(b) require the Executive to perform no duties,
and in each case the Company will continue to pay the Executive salary
and provide all other benefits arising under this agreement during the
period of notice.
-2-
2.6 If written notice is given by the Executive or by the Company to
terminate the Employment the Company may require that the Executive shall
accept a payment of salary in lieu of notice and the Employment shall
terminate on the Termination Date but without prejudice to any other
claim the Company or the Executive may have against the other.
2.7 If written notice is given by the Company to terminate the Employment
otherwise than in accordance with clause 11 within 4 years of the
Effective Date, the Executive shall be entitled to receive a severance
payment equivalent to 18 months net basic salary less the basic salary
arising during the period of notice. For the avoidance of doubt, such
payment shall not include any bonus, profit sharing or other benefits
arising under this agreement. All details of which shall be contained in
a compromise agreement to be drafted at that time and restating the
restrictions binding on the Executive. Zitel hereby guarantees to the
Executive that if the Company, for any reason, shall fail to make the
severance payment pursuant to this clause, then Zitel shall promptly make
such severance payment to the Executive.
3. DUTIES
The Executive shall:
(a) exercise the powers and functions and perform the duties resigned to
him from time to time by or under the authority of the Board in such
manner as shall be specified by or under the authority of the Board;
(b) report to the Chief Executive Officer of Zitel as and when required
or to such other person as the Board may direct;
(c) have particular responsibility for ensuring that the Company
achieves in each year the objectives as set out in the Company's
annual budget;
(d) devote the whole of his time attention and abilities to the
performance of his duties during the Company's normal business hours
of 9.00 a.m. to 5.00 p.m. Monday to Friday inclusive and at such
other times as may reasonably be necessary in the interests of the
Company and if requested any Associate Company (unless prevented by
illness or other incapacity and except as may from time to time be
permitted or required by the Board);
(e) well and faithfully serve the Company and if requested any
Associated Company if directed to do so by the Board or the Chief
Executive Officer of Zitel and use his best endeavours to promote
and protect the interests of the Company and any Associated Company;
and undertakes not to harm the reputation of the Company or any
Associated Company; and
(f) when requested to do so, fully and promptly give the Board such
explanations, information and assistance as it may require relating
to the transactions and affairs of the Company and any Associated
Company.
4. PLACE OF EMPLOYMENT
The Executive's place of employment shall be at the offices of the
Company at Fountain House, Cleave Road, Leatherhead, Surrey KT22 7LX or
at such other place within the United Kingdom
-3-
as the Company may reasonably require. If the Company requires the
Executive to change his residence the Company will reimburse such removal
and other incidental expenses as the Company considers fair and
reasonable in the circumstances. In addition, the Executive shall travel
to such parts of the world as the Board may direct or authorise. If the
Company requires the Executive to work outside the United Kingdom for a
period of more than one month it will provide him with written details of
any terms and conditions which may apply to that work and his return to
the United Kingdom.
5. REMUNERATION AND BENEFIT
5.1 (a) The Executive shall be paid a base salary at the rate of 125,000
(pounds) per annum, or at such other rate as may be agreed in
writing for the proper performance of his duties. This salary
shall accrue from day to day and shall be payable by equal monthly
installments in arrears on the last Wednesday of each month and
shall include any sums receivable as director's fees in respect
of the Company and any Associated Company.
(b) The salary shall be reviewed by the Chief Executive Officer of
Zitel on each anniversary of the date hereof.
5.2 Provided that the Executive remains at each date upon which the options
are to be granted an employee of the Company, the Executive shall be
granted the following options:
(a) At the Effective Date nonstatutory options to purchase 50,000
shares of the common stock ("Zitel Common Stock") of Zitel issued
under, and to be governed by the terms of, the Zitel Corporation
1990 Stock Option Plan set out in schedule 1. The exercise price
of such options shall be the closing price of Zitel Common Stock
on the Effective Date, as reported in the Wall Street Journal
(the "Journal"). Such options shall have a term of not more than
ten years measured from the grant date and twenty-five percent
(25%) of the option shares shall vest on each anniversary of the
grant date. If the Executive is terminated for any reason other
than pursuant to clause 11 herein all options to be offered
pursuant to this sub-clause 5.2(a) shall accelerate and shall
vest immediately upon such termination.
(b) 45 days after 30 September 1998, 30 September 1999, 30 September
2000 and 30 September 2001, in the event that the actual
performance ("Actual Performance") of ZWT reaches benchmark
performance goals to be set during ZWT's annual budget process
(the "Target") as of the preceding fiscal year-end date,
additional non-statutory stock options (the "Performance NSOs")
to purchase 10,000 shares of Zitel Common Stock to be issued
under and governed by the terms of the Zitel Corporation 1990
Stock Option Plan. The shares subject to the Performance NSOs
shall be increased by 300 shares of Zitel Common Stock (up to a
maximum of an additional 10,000 shares of Zitel Common Stock) for
each one percent (1%) by which Actual Performance exceeds the
Target. The Performance NSOs shall be decreased by 300 shares of
Zitel Common Stock (down to a minimum of zero shares of Zitel
Common Stock) for each one percent (1%) by which Actual
Performance is less than the Target. The price of the
Performance NSOs shall be the closing price of Zitel Common Stock
on the grant date of such Performance NSOs, as reported in the
Journal.
-4-
(c) In the event of an Exit Event (as defined below), the right to
purchase shares of common stock of ZWT ("ZWT Common Stock")
immediately prior to such Exit Event equal to x% of the value of
ZWT on the date of the Exit Event (the "ZWT Common Stock Right"),
where x = 2% of the ZWT Common Stock held by Parent immediately
prior to such Exit Event times 100% of the fair market value, as
reflected in the Exit Event, of ZWT on the date of the Exit Event
minus $12,500,000. Twenty-five percent (25%) of the ZWT Common
Stock Right shall vest on each anniversary of the date hereof.
However, if an Exit Event, as defined in sub-clause (ii) or
(iii), takes place prior to the fourth anniversary of the date
hereof, all the ZWT Common Stock Right shall accelerate and
become immediately vested. The exercise price of the ZWT Common
Stock Right shall be the par value of such ZWT Common Stock,
which shall be $0.01 per share. "Exit Event" shall mean: (i)
the closing of the sale of ZWT Common Stock in a firm commitment,
underwritten public offering registered under the United States
Securities Act of 1933, as amended ("the Act"), (ii) the sale of
substantially all of the share capital of ZWT, or (iii) the sale
of substantially all of the assets of ZWT. Prior to the closing
of an underwritten public offering of ZWT Common Stock, ZWT and
the Executive shall enter into a Registration Rights Agreement
with respect to the ZWT Common Stock, which shall provide for
"piggy-back" registration rights and at least one demand
registration right.
Zitel represents that all of the Zitel Common Stock which are subject to
options under Section 5.2(a) and (b) above are currently, and will be at
the time of grant, registered on Form S-8 with the Securities and
Exchange Commission under the Act.
5.3 The Executive shall also receive the following benefits:
(a) the Executive shall be entitled to be a member of the Company's
WPA Health Insurance medical expenses scheme or such other medical
expenses scheme as the Company may make available from time to
time provided the Executive meets the normal underwriting
requirements of that scheme and is accepted at normal rates of
premium;
(b) the Executive shall be entitled to the benefit of life insurance
cover of a sum insured equal to three times the Executive's
salary provided the Executive meets the normal underwriting
requirements of the scheme and is accepted at normal rates of
premium.
Details of these benefits may be obtained from the Company secretary.
6. PENSION
6.1 A contracting-out certificate is not in force in respect of the
Executive's employment.
6.2 Subject to any applicable Inland Revenue requirements and overriding
legislation, the Company shall contribute to such pension arrangement as
the Executive nominates and the Company approves (such approval not to be
unreasonably withheld) at the rate of 7.2% of the basic salary from time
to time payable to the Executive under sub-clause 5.1(a).
-5-
7. HOLIDAYS
7.1 The Executive shall in addition to normal statutory and bank holidays be
entitled to 5 weeks' (25 working days') paid holiday during each year
commencing on 1 January and pro rata for any shorter period. The Company
shall endeavour to meet the Executive's reasonable requests as to time
and duration of holidays but it reserves the right to arrange holidays in
its interest. The Executive's entitlement to holidays and to holiday pay
shall be subject to the rules of the Company from time to time in force
relating to holiday entitlement and holiday pay.
7.2 The Company's current holiday rules are set out in schedule 2.
8. SICKNESS OR INJURY
PAYMENT
8.1 If, in the opinion of the Board, the Executive is unable to perform his
duties properly for a period, or periods, not exceeding six months
(whether or not any days not worked are normal working days) in the
aggregate in any period of twelve months (the "Aggregate Period") by
reason of illness (including mental illness), accident or any other cause
beyond the control of the Executive, then he shall be entitled during
that time to receive his full remuneration. Thereafter any payment shall
be subject to, and in accordance with, the terms of the Company's
permanent health insurance scheme.
PROCEDURES
8.2 If the Executive is prevented by any of the factors mentioned in
sub-clause 8.1 from performing his duties properly he shall report this
fact promptly to the Company's personnel department by telephone on the
first morning of absence or as soon as reasonably practical thereafter.
If the Executive is absent for more than three consecutive working days
he must complete a self-certification sickness form on his return and
deliver it to the personnel department. If the absence continues for
five or more working days he shall provide an appropriate medical
certificate from his doctor in the manner required by the rules of the
Company. Thereafter the Executive should submit a further appropriate
medical certificate at weekly intervals during the whole period of
absence.
8.3 Payment of any remuneration to the Executive under sub-clause 8.1 is
conditional upon the prompt compliance by the Executive of his
obligations under sub-clauses 8.2 and 8.5 as well as with any other rules
of the Company from time to time in force relating to sickness or injury.
SSP
8.4 Statutory sick pay ("SSP") will be paid by the Company in accordance with
the legislation in force at the time of absence. Any payment of
remuneration under sub-clause 8.1 for a day of absence will discharge its
obligation to pay SSP for that day.
-6-
MEDICAL EXAMINATION
8.5 The Company may at any time require the Executive to be medically
examined at its expense by a medical practitioner nominated by it and for
a report of that examination to be provided to the Board.
TERMINATION
8.6 If, in the opinion of the Board, the Executive is or has been unable to
perform his duties properly for a period or periods exceeding the
Aggregate Period or if the Board at any time has reason to believe that
because of any such cause the Executive may be unable properly to perform
his duties for a continuous period of six months or more, the Company
shall be entitled at any time to give to the Executive not fewer than six
months' notice of termination of the Employment less the aggregate of any
periods during which he has been paid salary under sub-clause 8.1 during
the twelve months prior to the giving of such notice provided always that
notwithstanding that the Executive is entitled to benefit under the terms
of the Company's permanent health insurance scheme, the Company may
terminate the Employment by giving of not fewer than six months' notice
of termination of the Employment less the aggregate of any periods during
which he has been paid salary under sub-clause 8.1 during the twelve
months prior to the giving of such notice.
9. CONFIDENTIAL INFORMATION AND TRADE SECRETS
9.1 The Executive acknowledges that in the ordinary course of the Employment
he will be exposed to information about the Company's business and that
of any Associated Company and that of its or their suppliers and
customers which amounts to a trade secret, is confidential or is
commercially sensitive and which may not be readily available to others
engaged in a similar business to that of the Company or any Associated
Company or to the general public and which if disclosed may cause harm to
the Company's business or that of any Associated Company.
9.2 The Executive shall keep secret and shall not at any time either during
the Employment, or after its termination, for whatever reason, use
communicate or reveal to any person for the Executive's own or another's
benefit, any secret or confidential information concerning the business,
finances or organization of the Company or any Associated Company, its or
their systems, techniques or know-how or its or their suppliers or
customers which shall have come to his knowledge during the course of the
Employment. The Executive shall also use his best endeavors to prevent
the publication, disclosure or use of any such information.
9.3 For the purposes of this clause and by way of illustration and not
limitation information will prima facie be secret and confidential if it
is not in the public domain and relates to:
(a) raw materials;
(b) research and developments;
(c) formulae, formulations;
(d) methods of treatment, processing, manufacture or production, process
and production controls including quality controls;
-7-
(e) suppliers and their production and delivery capabilities;
(f) customers and details of their particular requirements;
(g) costings, profit margins, discounts, rebates and other financial
information;
(h) marketing strategies and tactics;
(i) current activities and current and future plans relating to all or
any of development, production or sales including the timing of all
or any such matters;
(j) the development of new products;
(k) production or design secrets; or
(l) technical design or specifications of the Company's or any
Associated Company's products;
(m) pricing, credit policies, credit procedures, payment policies,
payment procedures and systems for the same whether of the Company
or, any Associated Company or of any client customer supplier of the
Company or any Associated Company.
9.4 The restriction contained in this clause shall not apply to:
(a) any disclosure or use authorised by the Board or required in the
ordinary and proper course of the Employment or as required by a
court of competent jurisdiction or tribunal or as required by an
appropriate regulatory authority; or
(b) any information which the Executive can demonstrate was known to the
Executive prior to the commencement of his employment by the Company
or is in the public domain otherwise than as a result of a breach of
this clause or breach of an equivalent provision by any other
employee of the Company.
9.5 The Executive hereby covenants with the Company, which for the purposes
of this clause shall act as trustee for each Associated Company in
relation to each Associated Company, in terms of clauses 9.1, 9.2, 9.3
and 9.4 as if every reference therein to the Company was a reference to
an Associated Company.
9.6 If a court of competent jurisdiction should declare any provision
contained in clauses 9.1, 9.2, 9.3, 9.4 and 9.5 unenforceable or void
as unreasonable with respect to time or geographical area as for any
other reason the provisions of clauses 9.1, 9.2, 9.3, 9.4 and 9.5
shall remain in effect for whatever reduced time period and whatever
reduced geographical area or whatever other change as may be necessary
to make such provisions valid and effective.
10. INVENTIONS
10.1 If the Executive shall alone or jointly make or conceive an invention,
discovery, design, improvement, trade mark or copyright work (together
called "the invention") relating to or suitable for or capable of
being used in the business of the Company or any Associated Company
-8-
during his employment he shall promptly disclose to the Company full
details of the invention to enable the Company to assess the invention
and to determine whether under the applicable law the invention is the
property of the Company.
10.2 If the invention is the property of the Company then either (i) the
Company shall hold it on trust for Zitel and shall assign the same to
Zitel, on request, or (ii) where vested in the Executive the Executive
shall hold it on trust for the Company and the Company shall hold it
on trust for Zitel and the Executive shall at the request and expense
of the Company assign the same to Zitel and do all things necessary to
enable Zitel to obtain the worldwide benefit of the invention and to
secure patent or other appropriate forms of protection for the
invention.
10.3 If the invention is not the property of the Company, Zitel shall have
the right to acquire the Executive's rights therein within 3 months
after disclosure pursuant to sub-clause 10.1 on fair and reasonable
terms to be agreed or settled by a single arbitrator and the Employee
shall hold the invention in trust for Zitel on such terms.
10.4 The Executive shall not except as provided in this clause or as may be
necessary in the course of his employment disclose or make use of any
invention which is the property of or is held on trust for the Company
or Zitel or (unless and until Zitel's right under sub-clause 10.3
shall have expired) any other invention subject to this clause.
10.5 The Executive hereby irrevocably appoints the Company and Zitel as his
attorney with full power in his name to execute or sign any document
and do any other thing which the Company or Zitel may consider
desirable for the purpose of giving effect to the provisions of this
clause 10 and agrees to notify and confirm whatever the Company may
lawfully do as his attorney.
10.6 The Employee undertakes that neither he nor his successors in title
will at any time object to the exploitation of any invention (with or
without modification) by the Company or Zitel in any part of the world
or any omission by the Company or Zitel to indicate in any part of the
world the author of the invention.
11. DISMISSAL
Notwithstanding the provisions of clause 2, the Company shall be entitled
to terminate the Employment summarily by oral or written notice and
without any payment in lieu of notice (but without prejudice to the
rights and remedies of the Company for any breach of this agreement and
to the Executive's continuing obligations under this agreement) in any of
the following events:
(a) if the Executive shall commit any serious or wilful or persistent
breach or breaches of any express or implied term of his
employment;
(b) if the Board shall have reason to believe that the Executive has
committed any criminal offence (other than minor motoring
offenses) or been guilty of any dishonesty or serious misconduct
in each case whether during the performance of his duties or
otherwise which in the opinion of the Board renders the Executive
unfit to continue as an executive of the Company or which would be
likely adversely to prejudice the reputation or interests of the
Company;
-9-
(c) if the Executive shall petition for a bankruptcy order or have a
bankrupt order made against him or take the benefit of any
legislation for the relief of insolvent debtors or make amy
composition with his creditors or shall become prohibited by law
from being a director or taking part in the management of the
Company whether under the Company Directors Disqualification Act
1986 or otherwise;
(d) if, and without prejudice to the generality of the terms of this
clause 11, the Executive shall wilfully abuse or misuse the
Company's computer system, or any password relating to that
computer system or shall gain access to any file or load any
information or program contrary to the Company's interests or
procedures.
12. SUSPENSION
If the Board has reason to suspect that any one or more of the events set
out in sub-clauses 11(a) to 11(d) (inclusive) has or have occurred (or if
the circumstances in sub-clause 8.6 appear to exist) the Board may
suspend the Executive on such terms as to payment of salary and other
benefits or otherwise as the Board may think fit pending further
investigations PROVIDED THAT in the even of any such suspension being
made the Executive shall have the right to terminate his employment
forthwith by notice in writing to the Company but without any claim for
compensation.
13. GRIEVANCE AND DISCIPLINARY PROCEDURE
13.1 If the Executive has any grievance relating to the Employment he
should raise the matter with the Chief Executive Officer of Zitel
orally or in writing and the matter will be discussed with the
Executive. If the matter is not then settled the Executive may
submit his grievance to the Board which shall as soon as possible
consider such grievance at a meeting of the Board and will give the
Executive a written response as soon as practicable thereafter.
13.2 The Company accepts that it is in the interests of good relations
with its staff to ensure that there is a fair and proper
disciplinary procedure.
Any Executive who departs from normally expected standards or who
violates the Company's rules will be liable to disciplinary action.
(a) In the following circumstances, which are intended by way of
example only and not by way of a complete list, the Executive will
be dismissed summarily by written notice to operate from the date
of such notice and the Executive will not be entitled to any
further payment under his terms of employment except such sum as
has accrued and is due at the date of termination:
(i) refusing to carry out any proper direction given in the course
of the employment
(ii) improperly divulging to any third party any information
regarding the Company, its employees or any person with whom
the Company deals
(iii) committing any act or divulging any information which is
contrary to or damages the interests or objectives of the
Company
-10-
(iv) commit may criminal offence which in the opinion of the
Company makes the Executive unsuitable for the type of work
that the Executive is employed to do or may reasonably be
expected to do or which makes him/her unacceptable to other
employees
(v) dishonest conduct
(vi) violent, obscene or abusive behavior towards other employees
or officers of the Company
(vii) serious or wilful breach of the Executive's duties.
(b) With the exception of acts of the nature referred to in (a) above,
the following disciplinary procedure will be adopted. The stages
will normally be implemented in order but action may start at any
stage in the event of serious misconduct or an aspect of poor
performance that creates a risk to other employees.
(i) On the first occasion that an Executive fails to reach the
standards required, the Executive will receive a formal verbal
warning.
(ii) If the required improvement is not made, or if the first
offence is considered too serious for a formal verbal warning,
the Executive will receive a formal written warning.
(iii) Continued failure to achieve the required improvement, or
further transgressions, will result in a formal written
warning being issued.
(iv) Failure to comply with the conditions of a final written
warning will result in dismissal after the requisite period of
notice or payment of salary in lieu thereof.
The following, which are intended by way of example only and not by
way of a complete list, are examples of conduct warranting
disciplinary action;
(i) poor timekeeping
(ii) poor attendance
(iii) inadequate or incompetent performance of the Executive's job
(iv) failure to comply with the Company's established procedures, as
notified from time to time
(v) attending the Company's premises or engaging in the Company's
business whilst under the influence of alcohol or unlawful drugs
(vi) rudeness or discourtesy to people with whom the Company deals
or to other employees.
-11-
(c) The Company reserves the right to suspend the Executive on full
pay pending investigation where the Company has reasonable grounds
to believe that the Executive's continued employment might be
prejudicial to the Company's business or other employees.
(d) The Company reserves the right to exclude the Executive from the
premises during his period of notice and shall be under no
obligation to provide any work for the Executive or to assign him
any duties.
(e) If the Executive has outside interests which in the opinion of the
Company conflict with its interests, the Executive may be asked to
leave the service of the Company.
(f) The Company reserves the right to suspend the Executive without
pay as a disciplinary measure.
(g) The Executive may appeal in accordance with the provisions of the
grievance procedure set out in clause 13 above against any
disciplinary action taken.
13.3 Subject to the provisions of sub-clause 8.6 and clause 11 the policy
of the Company is that an employee is not normally dismissed for a
breach of his contract of employment which is capable of being
remedied until after he has been warned that he will be dismissed in
the event that such breach is not remedied or is repeated. However
the Executive accepts that in the case of a senior executive of the
Company it may not always be appropriate to give any warning.
14. DUTIES UPON TERMINATION
Upon termination of the Employment for whatever reason the Executive
shall immediately:
(a) hand over to the Company all source codes, documents, books,
materials, records, correspondence, papers and information (on
whatever media and wherever located) relating to the business of
the Company or any Associated Company, any magnetic discs on which
information relating to the business is stored and any keys,
credit cards and other property of the Company or any Associated
Company (including in particular any car provided to the
Executive) which may be in his possession, custody, care or
control and shall provide a signed statement that he has complied
fully with the terms of this clause;
(b) irretrievably delete any information relating to the business of
the Company or any Associated Company stored on any magnetic or
optical disc or memory and all matter derived therefrom which is
in his possession, custody, care or control outside the premises
of the Company and shall produce such evidence of compliance with
this sub-clause as the Company may require;
(c) resign any office or appointment held by him in the Company or in
any Associated Company without any claim for compensation or
damages for loss of such office or appointment and the Executive
hereby irrevocably appoints the Company as his agent to execute
letters of resignation of such offices or appointments on his
behalf.
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15. RESTRICTIONS
DEFINITIONS
15.1 For the purposes of this clause the following words have the following
meanings:
"CUSTOMER" means any customer or client of the Company in connection with
the Restricted Business or any other person, firm or company to whom the
Company has presented to or approached or with whom the Company has
negotiated with a view to that person becoming a customer or client of
the Company in connection with the Restricted Business and who became a
customer within six months following the Termination Date and in each
case provided that during the twelve month period immediately prior to
the Termination Date the Executive has dealt or sought to deal on behalf
of the Company with that customer, client or person or the Executive has
been responsible during such period for that customer, client or person;
"DESIGNATED AREA" means the United Kingdom;
"RESTRICTED BUSINESS" means the business of the Company or any Associate
Company in the business of which the Executive was materially involved at
the date of Termination or in the six months prior thereto but limited to
goods, products or services of a kind with which the Executive was
concerned or involved in the course of this employment during the twelve
month period immediately prior to the Executive ceasing to be employed or
for which the Executive has been responsible during such period;
"RESTRICTED PERSON" means any person who has at any time in the period of
twelve months prior to the Termination Date been employed by the Company
or who is a consultant to the Company and in either case works in an
executive or a technical or advisory or sales capacity (excluding
clerical and administrative staff) in the Restricted Business and who was
known to or worked with the Executive during that period;
EXECUTIVE'S DUTIES AND OBLIGATIONS
15.2 The Executive acknowledges that:
(a) his primary duty under this agreement is to ensure that the Company
achieves in each year the objectives as set out in the Company's
annual budget;
(b) the information gained by him in the performance of his duties is
not or may not be known by the general public or by the majority of
those engaged in the Restricted Business;
(c) by virtue of his previous employment by Palmer & Webb Systems
Limited and Palmer & Webb Systems B.V. and of his employment under
this agreement he has obtained and will obtain confidential
information as to the business, operations and organization of the
Company including names of customers and their operations which
belong exclusively to, and is of substantial value to the Company;
and
(d) the services to be provided by him under this agreement are expected
to be of a special and unusual character;
-13-
and that accordingly he agrees to be bound by this clause 15 in order to
protect the legitimate interests of the Company.
NON-SOLICITATION OF CUSTOMERS
15.3 The Executive shall not for a period of twelve months after the
Termination Date either personally or by an agent and either on his
own account or for or in association with any other person directly
or indirectly canvass, solicit, approach or seek out or cause to be
canvassed, solicited, approached or sought out any Customer for
orders or instructions in respect of any goods or services provided
or supplied by the Company in connection with the Restricted
Business.
NON-DEALING WITH CUSTOMERS
15.4 The Executive shall not for a period of twelve months after the
Termination Date either personally or by an agent and either on his
own account or by or in association with any other person or
otherwise directly or indirectly engage in the Restricted Business
with any Customer.
NON-SOLICITATION OF EMPLOYEES
15.5 The Executive shall not during his employment or for a period of
twelve months after the Termination Date either personally or by an
agent and either on his own account or for or in association with
any other person directly or indirectly solicit, endeavor to entice
away, induce to break their contract of employment or offer
employment to any Restricted Person.
NON-INTERFERENCE WITH SUPPLIES
15.6 The Executive shall not for a period of twelve months after the
Termination Date either personally or by an agent and either on his
own account or for or in association with any other person directly
or indirectly interfere or seek to interfere or take such steps as
may be likely to interfere with the continuance of supplies to the
Company in respect of the Restricted Business (or the terms relating
to such supplies) from any supplier or seek to damage the
relationship between any supplier and the Company who has supplied
goods or services to the Company in the twelve month period
immediately prior to the Executive ceasing to be employed by the
Company.
NON-COMPETITION WITH A DESIGNATED AREA
15.7 The Executive shall not for the period of twelve months after the
Termination Date whether directly or indirectly:
(a) take up or hold any office in or with any business which is engaged
or is intended to be engaged in the Restricted Business within the
Designated Area;
(b) take up or hold any post or position which enables or permits the
Executive to exercise whether personally or by an agent and whether
on his own account or in association with or for the benefit of any
other person either a controlling influence over any business which
is engaged or is intended to be engaged in the Restricted Business
within the Designated Area; or
-14-
(c) take up or hold any employment or consultancy with any person which
is engaged or is intended to be engaged in the Restricted Business
within the Designated Area,
which would have the necessary or probable result of the Executive
being engaged within Designated Area in business activities which
are the same or similar to the Restricted Business.
APPLICATION OF COVENANTS TO ASSOCIATED COMPANIES
15.8 (a) The provisions of sub-clauses 15.2 to 15.7 inclusive shall
apply equally where, during the period of twelve (12) months
prior to the Termination Date, the Executive was engaged in or
responsible for the business of any Associated Company (each of
which Associated Company is hereinafter called "Relevant
Company").
(b) The Executive hereby covenants with the Company (which for the
purposes of this paragraph shall act as Trustee for each
Relevant Company) in relation to each of the sub-clauses 15.2
to 15.7 inclusive as if every reference therein to the Company
was a reference to the Relevant Company and the definitions of
"Customer", "Designated Area", "Restricted Business",
"Restricted Person" and "Specified Business" in sub-clause 15.1
apply with the substitution of "the Relevant Company" for the
Company.
15.9 The Executive undertakes with the Company that he will observe any
substitute restrictions (in place of those set out in clause 9 and
sub-clauses 15.2 to 15.8 above) as the Company may from time to time
specify in writing which are in all respects less restrictive in
extent than those specified in clause 9 and sub-clauses 15.3 to 15.8
above.
15.10 If any breach or violation of any of the terms of sub-clauses 15.3 to
15.8 occurs, the Executive and the Company agree that damage alone
may not compensate for such breach or violation and that injunctive
relief is reasonable and essential to safeguard the interests of the
Company or any Associated Company and that an injunction in addition
to any other remedy may accordingly be obtained by the Company or
any Associated Company. No waiver of any such breach or violation
shall be implied from the forbearance or failure by the Company to
take action in respect of such breach or violation.
15.11 The Executive hereby agrees that he will at the request and cost of
the Company enter into a direct agreement or undertaking with any
Associated Company whereby he will accept restrictions and
provisions corresponding to the restrictions and provisions above
(or such of them as may be appropriate in the circumstances) in
relation to such activities and such areas and/or such periods not
including those set out above as any such Associated Company may
require for the protection of its legitimate interest.
15.12 The Executive fully understands the meaning and effect of the
covenants given by him in this agreement and confirms that on taking
separate and independent legal advice on the terms of this agreement
he acknowledges and accepts that the clauses in his clause 18 are
fair and reasonable in all the circumstances at the time this
agreement was made.
-15-
16. RESTRICTIVE TRADE PRACTICES ACT 1976
No restriction contained in this agreement by virtue of which this
agreement or any arrangement of which it forms part is registrable under
the Restrictive Trade Practices Act 1976 shall come into effect or be
enforced until the day after particulars of this agreement and any
arrangement of which it forms part shall have been delivered to the
Director General of Fair Trading in accordance with the Act provided that
such suspension shall not extend or increase the periods during which the
provisions of clause 15 are in force.
17. NOTICES
17.1 Any notice or other written communication given under or in
connection with this agreement may be delivered personally or sent
by first class post (airmail if overseas) or by telex or facsimile.
17.2 The address for service of the Company shall be its registered
office marked for the attention of the managing director and in the
case of the Executive shall be his address stated in this agreement
or if any other permanent address has previously been notified to
the Company to the address so notified.
17.3 Any notice or other written communication shall be deemed to have been
served:
(a) if delivered personally, at the time of delivery;
(b) if posted, at the expiry of two Business Days or in the case of
airmail four Business Days after it was posted;
(c) if sent by telex or facsimile message, at the time of transmission
(if sent during normal business hours, that is 9.30 to 17.30 local
time) in the place from which it was sent or (if not sent during
such normal business hours) at the beginning of the next Business
Day in the place from which it was sent.
17.4 In proving service it shall be sufficient to prove that personal
delivery was made, or that such notice or other written
communication was properly addressed stamped and posted or in the
case of a telex that the intended recipient's answerback code is
shown on the copy retained by the sender at the beginning and end of
the message or in the case of a facsimile message that an activity
or other report from the sender's facsimile machine can be produced
in respect of the notice or other written communication showing
recipient's facsimile number and the number of pages transmitted.
18. MISCELLANEOUS
18.1 The Executive consents to the deduction from any sum otherwise
payable to the Executive by reason of the Employment (or its
termination) the value of any claim of whatever nature and in
whatever capacity that the Company may bona fide have against the
Executive, including but not limited to:
(a) overpayment of wages;
(b) overpayment in respect of expenses incurred by the Executive in
carrying out his duties;
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(c) loans which the Company or any Associated Company may from time to
time make to the Executive;
(d) advances on wages which the Company or any Associated Company may
from time to time make to the Executive.
18.2 Save as expressly provided in this agreement no term or provision of
this agreement shall be varied or modified by any prior or
subsequent statement, conduct or act of any party. The Company and
the Executive may amend this agreement only by letter or written
instrument signed by both the Company and the Executive.
18.3 The headings to the clauses and any underlining in this agreement
and in the schedules are for ease of reference only and shall not
form any part of this agreement for the purposes of construction.
18.4 This agreement sets out the entire agreement and understanding
between the parties in connection with the Employment save only for
any terms implied by law. There are no collective agreements which
directly affect the terms and conditions of the Employment. This
agreement supersedes all previous agreements and arrangements
relating to the Employment (except for those relating to stock
options).
18.5 If at any time any term or provision in this agreement shall be held
to be illegal, invalid or unenforceable, in whole or in part, under
any rule of law or enactment, such term or provision or part shall
to that extent be deemed not to form part of this agreement, but the
enforceability of the remainder of this agreement shall not be
affected.
18.6 The Executive shall not at any time make any untrue statement in
relation to the Company or any Associated Company, and in particular
shall not after the termination of his employment under this
agreement wrongly represent himself as being employed by or
connected in any respect with the Company or any Associated Company.
19. LAW AND JURISDICTION
19.1 This agreement shall be governed by and construed in accordance with
English law and each party to this agreement submits to the
non-exclusive jurisdiction of the English courts.
19.2 The Executive irrevocably agrees that the courts and tribunals of
England shall have jurisdiction to settle any dispute which may
arise out of or in connection with this agreement and that
accordingly any suit, action or proceedings arising out of this
agreement (together in this clause referred to as "Proceedings") may
be brought in such courts and tribunals.
19.3 The Executive irrevocably waives any objection which he may have now
or hereafter to the laying of the venue of any Proceedings in any
such court and tribunals as are referred to in sub-clause 19.2 and
any claim that any such Proceedings have been brought in an
inconvenient forum and further irrevocably agree that a judgment in
any Proceedings brought in the English courts shall be conclusive
and binding upon the Executive and may be enforced in the courts of
any other jurisdiction. The Executive hereby expressly waives all
rights of jurisdiction in any Proceedings which he may have now or
hereafter by reason of his present domicile or by reason of any
subsequent or other domicile.
-17-
19.4 Nothing contained in this clause shall limit the right of the
parties to take Proceedings against any of the parties in any other
court of competent jurisdiction, nor shall the taking of Proceedings
in one or more jurisdictions preclude the taking of Proceedings in
any other jurisdiction, whether concurrently or not.
19.5 The Executive hereby consents generally in respect of any
Proceedings arising out of or in connection with this agreement to
the giving of any relief or the issue of any process in connection
with such execution against any property or assets whatsoever or any
order or judgment which may be made or given in such proceedings.
19.6 The Executive irrevocably agrees that any writ, judgment or other
notice of process shall be sufficiently and effectively served on
him if delivered, in connection with Proceedings in England, to the
address referred to in paragraph 17.2 above.
-18-
Exhibit G
[TAYLOR JOHNSON GARRETT LETTERHEAD]
DNK/AIR
Palmer & Webb Systems Limited
Fountain House
Cleave Road
Leatherhead
Surrey KT22 7LX
30 June 1997
Dear Sirs
ZITEL LIMITED ("THE COMPANY")
1. We have been asked to provide a written opinion in respect of the
incorporation, share issue, corporate authority and good standing of the
Company, a subsidiary, of Zitel World Trade ("ZWT").
2. We understand that this letter is being delivered pursuant to an asset
purchase agreement the purchase price and indemnification escrow agreement
and the escrow agreement and other agreements involved in the transactions
(collectively the "Agreement") made between the Company, Palmer & Webb
Systems Limited, Reginald Webb and Julian Palmer and Moebius Business
Training Limited.
3. Unless otherwise defined, expressions defined in the Agreement shall have
the same meanings when used in this opinion.
-2-
4. For the purpose of this opinion, we have examined:
(a) the certificate of incorporation of the Company;
(b) the Memorandum and Articles of Association of the Company;
(c) the statutory books of tim Company comprising registers of:
(i) applications and allotments;
(ii) share transfers;
(iii) members;
(iv) directors;
(v) secretaries;
(vi) directors' interests;
(vii) mortgages and charges;
(d) the entries shown on a microfiche (obtained by us from the UK
Companies Registry) on 27 June 1997 of the files of Zitel Limited (the
"Microfiche");
-3-
(e) a Certificate of Good Standing (a copy of which is attached to this
opinion) given by the Registrar of Companies on 27 June 1997 in
relation to Zitel Limited.
and we have made:
(f) oral enquiries of the Central Registry of Winding-up Petitions on 27
June 1997 which confirmed that as at that date no petition has been
lodged for tho winding up of Zitel Limited.
5. ASSUMPTIONS.
For the purpose of this opinion, we have assumed the following:
(a) the genuineness of all signatures and copy signatures;
(b) the authenticity and completeness of all documents submitted to us as
originals;
(c) the conformity to originals of all documents submitted to us as copies
of originals;
-4-
(d) the legal capacity, power and authority of all persons executing
agreements, instruments or documents relied upon by us;
(e) that the information disclosed by the Microfiche as at 27 June 1997
and by our telephone enquiry of 27 June 1997 of the Central Registry
of Winding-up Petitions was then accurate and has not been altered
since then; and that the Microfiche was complete as regards all
matters requiring to be registered at the UK Companies Registry and
that our said telephone enquiry did not fail to disclose any
information relevant for the purpose of this opinion.
This opinion is limited to English law as currently applied by the English
courts and is given on the basis that it will be governed and be construed and
have the effect in accordance with English law. We have made no investigation
of the laws of any country, state or jurisdiction, other than England and we
have assumed that there is nothing in the law of any other country, state or
jurisdiction which affects the opinion expressed in this letter. In particular
this opinion does not extend to cover matters of the laws of the State of
California.
We express no opinion as to matters of fact.
-5-
6. OPINION.
To the best of our knowledge, based upon and subject to the foregoing and
subject to the reservations referred to below, we are of the opinion that:
(a) the Company is duly incorporated and existing as a private limited
company registered in England under company number 3382824. The
Company changed its name from Westchurch Services Limited to Zitel
Limited on 24 June 1997. The Company is authorised pursuant to its
Memorandum of Association to carry on its current business. The
Company is in good standing under English law.
(b) the authorised share capital of the Company is 1,000 (pounds) divided
into 1,000 shares of 1 (pound) each all of which have been validly
issued and are paid up in full. ZWT is the registered holder of all
1,000 issued ordinary shares of 1 (pound) each in the capital of the
Company free and clear of all liens, encumbrances, equities or claims.
(c) the Company has power under its Memorandum of Association to carry on
its business and to enter into and perform its obligations under the
Agreement.
-6-
(d) all corporate and other action required by statute or pursuant to the
Company's Memorandum and Articles of Association to authorise the
execution of the Agreement by the Company and the performance of its
obligations thereunder has been duly taken.
(e) the choice of Californian law to govern the Agreement is a valid and
effective choice of law by the Company.
7. RESERVATIONS AND QUALIFICATIONS.
This opinion is subject to the following qualifications:
(a) a certificate, documentation, notification, opinion or the like might
be held by the English courts not to be conclusive if it can be shown
to have an unreasonable or arbitrary basis or in the event of a
manifest error.
(b) the English Courts may have discretion as to the enforceability of
certain terms of restrictive covenants.
This opinion is addressed to and is for the benefit solely of Palmer & Webb
Systems Limited in connection with the transactions contemplated by the
Agreement. This opinion may not
-7-
be relied on by any other person for any other purpose, nor may it be disclosed
to any other person, (other than as may be required by any regulatory authority
for the time being having jurisdiction overPalmer & Webb Systems Limited)
without our prior written consent.
Yours faithfully,
/s/ David N. Kent /s/ illegible
TAYLOR JOHNSON GARRETT
- ----------------------
THE COMPANIES ACT 1985
Company No. 3382824
The Registrar of Companies for England and Wales hereby certifies that
ZITEL LIMITED (ORIGINALLY CALLED WESTCHURCH SERVICES LIMITED WHICH NAME WAS
CHANGED BY SPECIAL RESOLUTION ON 24TH JUNE 1997 TO ZITEL LIMITED) WAS
INCORPORATED UNDER THE COMPANIES ACT 1985 AS A LIMITED COMPANY ON 6TH JUNE 1997.
ACCORDING TO THE DOCUMENTS ON THE FILE OF THE COMPANY IN THE CUSTODY OF THE
REGISTRAR OF COMPANIES, THE COMPANY HAS BEEN IN CONTINUOUS AND UNBROKEN
EXISTENCE SINCE THE DATE OF ITS INCORPORATION.
NO ACTION IS CURRENTLY BEING TAKEN BY THE REGISTRAR OF COMPANIES FOR STRIKING
THE COMPANY OFF THE REGISTER AND DISSOLVING IT AS DEFUNCT, AND AS FAR AS THE
REGISTRAR IS AWARE:-
A) THE COMPANY IS NOT M LIQUIDATION OR SUBJECT TO AN ADMINISTRATION ORDER, AND
B) NO RECEIVER OR MANAGER OF THE COMPANY'S PROPERTY HAS BEEN
APPOINTED.*****************************************
Given at Companies House, Cardiff, the 27th June 1997
/s/ J. M. Mayor
MRS. J.M. MAYOR
for the Registrar of Companies
21337157
Exhibit H
[COOLEY GODWARD LLP LETTERHEAD]
June 30, 1997
Palmer & Webb Systems Ltd.
Moebius Business Training Ltd. JOHN L. CARDOZA
Fountain House, Cleave Road 415 693-2045
Surrey KT22 7LX cardozajl@cooley.com
United Kingdom
Ladies and Gentlemen:
We have acted as counsel for Zitel Corporation, a California corporation (the
"Company"), in connection with that certain Asset Purchase Agreement (the
"Purchase Agreement") dated June 30, 1997, by and among the Company, Zitel
Limited, a company incorporated in England and Wales ("Buyer"), Palmer & Webb
Systems Ltd., a company incorporated in England and Wales ("PWUK"), Reginald
Webb and Julian Palmer, as the sole shareholders of PWUK, Moebius Business
Training Ltd., a company incorporated in England and Wales ("Moebius"), and
PWUK, as a shareholder of Moebius, and the Escrow Agreement (the "Escrow
Agreement") and the Purchase Price and Indemnification Agreement (the "Purchase
Price and Indemnification Agreement") (the Purchase Agreement, the Escrow
Agreement and the Purchase Price and Indemnification Agreement are hereinafter
collectively referred to as, the "Agreements"). We are rendering this opinion
pursuant to Section 12.2.6 of the Purchase Agreement. Except as otherwise
defined herein, capitalized terms used but not defined herein have the
respective meanings given to them in the Purchase Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreements by the various parties and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreements), where authorization, execution and delivery
are prerequisites to the effectiveness of such documents. We have also assumed:
that all individuals executing and delivering documents had the legal capacity
to so execute and deliver; that you have received all documents you were to
receive under the Agreements; that the Agreements are obligations binding upon
you; that you have filed any required California franchise or income tax returns
and have paid any required California franchise or income taxes; and that there
are no extrinsic agreements or understandings among the parties to the
Agreements that would modify or
Palmer & Webb Systems Ltd.
June 30, 1997
Page 2
interpret the terms of the Agreements or the respective rights or obligations of
the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California. We express no
opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof. We are not
rendering any opinion as to compliance with any antifraud law, rule or
regulation relating to securities, or to the sale or issuance thereof.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of California.
2. The Company has the requisite corporate power and authority to enter
into and perform the Agreements in accordance with the terms thereof. The
Agreements have been duly and validly authorized, executed and delivered by the
Company and constitute valid and binding agreements of the Company enforceable
against the Company in accordance with their respective terms, except as rights
to indemnity under Section 11 of the Purchase Agreement may be limited by
applicable laws and except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting creditors' rights, and subject to general equity principles and
to limitations on availability of equitable relief, including specific
performance.
This opinion is intended solely for your benefit and is not to be made available
to, or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
Cooley Godward LLP
By: /s/ John L. Cardoza
------------------------------
John L. Cardoza