Exhibit 10.1

SHARE SALE AGREEMENT

DATE JUNE 28, 2006

PARTIES

 

1 FERRARIS GROUP PLC (registered in England and Wales under number 531142) whose
registered office is at 39 Bennetts Hill, Birmingham B2 5SN (the “Vendor”); and

 

2 SPACELABS HEALTHCARE, INC. (a corporation established under the laws of the
state of Delaware) whose principal place of business is at 5150 220th Avenue SE,
Issaquah, Washington 98029, the United States of America (the “Purchaser”).

INTRODUCTION

 

A Details of the Companies are set out in Schedule 1. Details of the
Subsidiaries are set out in Schedule 2.

 

B The Vendor has agreed to sell, or procure the sale of, and the Purchaser has
agreed to buy, or procure the purchase of, the Shares on the terms and subject
to the conditions of this Agreement.

AGREEMENT

 

1 Definitions, interpretation and third party rights

 

1.1 The Schedules form part of this Agreement and have the same force and effect
as if set out in the body of this Agreement. Any reference to this Agreement
includes the Schedules.

 

1.2 In this Agreement, the following words and expressions have the following
meanings:

2006 EBITDA: earnings before interest, tax, depreciation and amortisation
attributable to the sales of the Products by any member of the Purchaser’s Group
and sales of Services and related products by Hertford Cardiology Limited, in
each case during the 13 month period ending on 30 September 2006 as shown in the
Unaudited Accounts multiplied by 12/13;

2007 Interim Sales Revenues: turnover (net of VAT, sales taxes, discounts and
refunds and commissions) in respect of sales of the Products and the Services
(excluding clinical trials) by any member of the Purchaser’s Group and 50
percent. of turnover attributable to clinical trials conducted by any member of
the Purchaser’s Group, in each case during the 6 month period ending on 31 March
2007;

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2006 Sales Revenues: turnover (net of VAT, sales taxes, discounts, refunds and
commissions) in respect of sales of the Products by any member of the
Purchaser’s Group and sales of Services and related products by Hertford
Cardiology Limited, in each case during the 13 month period ending on
30 September 2006 as shown in the Unaudited Accounts multiplied by 12/13;

2007 Sales Revenues: turnover (net of VAT, sales taxes, discounts and refunds
and commissions) in respect of sales of the Products and the Services (excluding
clinical trials) by any member of the Purchaser’s Group and 50 percent. of
turnover attributable to clinical trials conducted by any member of the
Purchaser’s Group during the 12 month period ending on 30 September 2007;

Accounts: the audited accounts of each of DMRML and the Subsidiaries other than
Reynolds Medical Sarl and DMR GmbH for the accounting reference period which
ended on the Accounts Date (comprising in each case a balance sheet and a profit
and loss account, notes and directors’ and auditor’s reports);

Accounts Date: 31 August 2005;

Agreed Form: the form agreed between and initialled for identification by or on
behalf of the Vendor and the Purchaser;

AIM: the market of that name operated by the London Stock Exchange plc;

Bank of America: Bank of America N.A.;

Barclays: Barclays Bank Plc;

Business Day: any day other than a Saturday, Sunday or any other day which is a
public holiday in England or a banking holiday in the United States of America;

Business Intellectual Property: all Intellectual Property owned or used by the
Target Group;

CAA: Capital Allowances Act 2001;

Cash Adjustment Amount: the amount calculated pursuant to Clause 7 based upon
the 2006 Sales Revenue and the 2006 EBITDA;

Cash Adjustment Payment Date: has the meaning given to it in Clause 7.2;

Claim: a claim brought by the Purchaser against the Vendor in respect of a
breach of any of the Vendor Warranties or under the Tax Covenant;

Code: the Internal Revenue Code of 1986, as amended, and any reference to any
particular Code section shall be interpreted to include any revision of or
successor to that section regardless of how numbered or classified;

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Companies: DMRML and DMRMI together and “Company” shall mean any of them;

Companies Acts: the Companies Act 1985, the Companies Consolidation
(Consequential Provisions) Act 1985, the Companies Act 1989 and Part V of the
Criminal Justice Act 1993;

Completion: completion of the sale and purchase of the Shares in accordance with
this Agreement;

Completion Date: the date two Business Days after the date on which the
condition specified in Clause 2 is satisfied;

Completion Payment: £4,218,069, (which is an amount equal to £14,000,000 less
the aggregate of Intercompany Debt and the Working Capital Retention Amount);

Completion Statement: the statement setting out the Target Group Actual Working
Capital Amount, the DMRML Actual Working Capital Amount and the DMRMI Actual
Working Capital Amount to be agreed or determined in accordance with Part 1 of
Schedule 6;

Confidential Information: all information not in the public domain, which the
Vendor or any member of the Continuing Vendor Group shall have received or
obtained at any time (i) by reason of or in connection with its relationship to
any member of the Target Group or which relates exclusively to the Target
Group’s business, affairs, customers or the marketing of any goods or services
of the Target Group and/or (ii) in relation to the Purchaser’s Group by reason
of or in connection with the transactions contemplated by this Agreement, in
each case including (without limitation) know-how, customer names and lists and
other details of customers, sales targets, sales statistics, market share
statistics, market research surveys and reports, information relating to future
business development or planning, future projects, commercial relationships,
information relating to litigation or legal advice, in each case, in whatever
form held by the relevant member of the Continuing Vendor Group prior to
Completion or pursuant to Clause 13.5;

Consideration: the aggregate consideration payable for the Shares, being the sum
referred to in Clause 4.1;

Consideration Shares: the Purchaser Shares (if any) to be allotted and issued to
the Vendor pursuant to Clause 8.6.2;

Continuing Vendor Group: each or (as the context so requires) all members of the
Vendor’s Group, other than the members of the Target Group;

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Customer: any person who at the Completion Date is, or who within a period of
one year before the Completion Date has been, a customer or client of any Target
Company;

DMR GmbH: Del Mar Reynolds GmbH, a Subsidiary;

DMR GmbH Accounts: the statutory reporting pack containing annual accounts of
DMR GmbH (comprising a balance sheet and a profit and loss account and related
notes) produced for the purpose of preparing the consolidated audited accounts
of the Vendor and its Group in respect of the accounting reference period ended
on the Accounts Date;

Disclosure Letter: the letter dated the date of this Agreement from the Vendor
to the Purchaser making certain disclosures against the Vendor Warranties;

DMRMI: Del Mar Reynolds Medical, Inc., further details of which are set out in
Schedule 1;

DMRMI Accounts: the statutory reporting pack containing annual accounts of DMRMI
(comprising a balance sheet and a profit and loss account and related notes)
produced for the purpose of preparing the consolidated audited accounts of the
Vendor and its Group in respect of the accounting reference period ended on the
Accounts Date;

DMRMI Actual Working Capital Amount: the amount by which the aggregate book
value of the current assets of DMRMI exceeds the aggregate amount of the current
liabilities of DMRMI (excluding, for the avoidance of doubt, the Intercompany
Debt attributable to DMRMI) at the Effective Time determined in accordance with
Part 1 of Schedule 6 and as set out in the Completion Statement;

DMRMI Additional Cash Amount: that proportion of the Cash Adjustment Amount
which is attributable to DMRMI in circumstances where there is a payment due
from the Purchaser to the Vendor in accordance with Clause 7.1.1;

DMRMI Earnout Amount: that proportion of the aggregate of the Interim Earnout
Amount and the Final Earnout Amount which is attributable to DMRMI;

DMRMI Estimated Working Capital Amount: £757,160;

DMRMI Returned Cash Amount: that proportion of the Cash Adjustment Amount which
is attributable to DMRMI in circumstances where there is a payment due from the
Vendor to the Purchaser in accordance with Clause 7.1.2;

DMRMI Working Capital Deficit: that proportion of the Working Capital Deficit
attributable to DMRMI;

DMRMI Working Capital Surplus: that proportion of the Working Capital Surplus
attributable to DMRMI;

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DMRMI Shares: the 200 shares of common stock, with par value of $1 per share, of
DMRMI constituting all of the issued and outstanding shares of all classes of
DMRMI and held by FGI;

DMRML: Del Mar Reynolds Medical Limited, further details of which are set out in
Schedule 1;

DMRML Actual Working Capital Amount: the amount by which the aggregate book
value of the consolidated current assets of DMRML and the Subsidiaries exceeds
the aggregate amount of the consolidated current liabilities (excluding, for the
avoidance of doubt, the Intercompany Debt attributable to DMRML) of DMRML and
the Subsidiaries at the Effective Time determined in accordance with Part 1 of
Schedule 6 and as set out in the Completion Statement;

DMRML Additional Cash Amount: that proportion of the Cash Adjustment Amount
which is attributable to DMRML and the Subsidiaries in circumstances where there
is a payment due from Purchaser to the Vendor in accordance with Clause 7.1.1;

DMRML Earnout Amount: that proportion of the aggregate of the Interim Earnout
Amount and the Final Earnout Amount which is attributable to DMRML and the
Subsidiaries;

DMRML Estimated Working Capital Amount: £2,271,479;

DMRML Returned Cash Amount: that proportion of the Cash Adjustment Amount which
is attributable to DMRML in circumstances where there is a payment due from the
Vendor to the Purchaser in accordance with Clause 7.1.2;

DMRML Working Capital Deficit: that proportion of the Working Capital Deficit
attributable to DMRML;

DMRML Working Capital Surplus: that proportion of the Working Capital Surplus
attributable to DMRML;

DMRML Shares: the 41,329 ordinary shares of £1 each in nominal value and 12,000
preferred ordinary shares of £1 each in nominal value in the capital of DMRML,
constituting all of the issued and outstanding shares of all classes and
registered in the name of the Vendor;

Earnout Amount: the amount calculated in accordance with Clause 8.2;

Earnout Payment Date: five Business Days after the final agreement or
determination of the 2007 Sales Revenues in accordance with Clause 9;

Earnout Undertaking Period: the period commencing on the Completion Date and
ending on 30 September 2007;

Effective Time: 11.59 p.m. on the Completion Date;

Encumbrance: means, whether imposed by agreement, operation of law, equity or
otherwise, any encumbrance or security interest of any kind whatsoever including

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without limitation a claim, mortgage, charge, pledge, lien, hypothecation,
restriction, right to acquire, right of pre-emption, option, conversion right,
third party right or interest, right of set-off or counterclaim, equities, trust
arrangement or any other type of preferential agreement (such as a retention of
title arrangement) having similar effect or any other rights exercisable by or
claims by third parties;

ERISA: the Employee Retirement Income Security Act of 1974, as amended;

Escrow Account: the escrow account to be established by the Vendor’s Solicitors
and the Purchaser’s Solicitors in their respective joint names upon instruction
by the Purchaser and the Vendor jointly in accordance with Clause 8.10.1.2;

FA 2003: Finance Act 2003;

Fairly Disclosed: means fairly disclosed in writing in the Disclosure Letter
with sufficient detail to identify the nature and the scope of the matter
disclosed;

Ferraris Services: those services set out in Column 1 of Part 1 of Schedule 9;

FGI: Ferraris Group, Inc., a company established under the laws of the state of
Colorado and a wholly owned subsidiary of the Vendor;

Final Earnout Amount: the amount calculated in accordance with Clause 8.4;

Group: in relation to any company, any body corporate which is from time to time
a holding company of that company, a subsidiary of that company or a subsidiary
of a holding company of that company;

Independent Accountants: an independent firm of professional chartered
accountants (other than the Vendor’s Accountants or the Purchaser’s Accountants)
to be agreed upon in writing by the Vendor and the Purchaser to be selected from
the list of preferred firms set out in paragraph 4, Part 1 of Schedule 6 but in
default of written agreement within 10 Business Days of the date on which either
the Purchaser or the Vendor has submitted an Adjudication Notice under Part 1 of
Schedule 6 or within 10 Business Days of the end of the Resolution Period under
Clause 9.5 (as the case may be) an independent firm of accountants nominated by
the President for the time being of the Institute of Chartered Accountants in
England and Wales on the application of either the Vendor or the Purchaser;

Intellectual Property: all patents, trade marks, rights in design, trade or
business names and domain names, copyright (including (without limitation)
rights in computer software), rights in databases (whether or not any of these
are registered and including (without limitation) applications for registration)
and all rights throughout the world of a similar nature or with similar effect
to any of these together with all extensions and renewals thereof;

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Intercompany Debt: £9,631,931 being the amount of the debt owed by the members
of the Target Group to members of the Continuing Vendor Group (including accrued
but unpaid interest) as at the Completion Date;

Interim Earnout Amount: the amount calculated in accordance with Clause 8.1;

Interim Earnout Payment Date: five Business Days after the final agreement or
determination of the 2007 Interim Sales Revenue in accordance with Clause 9;

IHTA: Inheritance Taxes Act 1984;

Management Accounts: the monthly accounts of each of the Companies and the
Subsidiaries for the 9 month period which ended on 31 May 2006 (comprising in
each case a balance sheet and a profit and loss account) in the form attached to
the Disclosure Letter;

Parties: the parties to this Agreement;

Products: the products and products in development listed in Schedule 11;

Properties: the leasehold properties of the Companies and the Subsidiaries,
details of which are given in Schedule 8;

Property Owner: means in relation to each of the Properties, any or each of
DMRML, DMRMI and the Subsidiaries listed in Schedule 8 as the owner or lessee;

Prospective Customer: any person who at the Completion Date is, or who within a
period of one year before the Completion Date has been, engaged in negotiations
with any Target Company with a view to becoming a customer or client of any
Target Company;

Purchaser’s Accountants: Moss Adams LLP;

Purchaser’s Funding: any borrowings, credit facilities, equity raisings, or
other arrangement with any bank or other financial institution entered or to be
entered into by the Purchaser or any member of the Purchaser’s Group at any time
for the purposes of satisfying the Consideration;

Purchaser’s Group: the Purchaser and each member of its Group;

Purchaser Shares: ordinary shares of common stock of US$0.001 each in the
capital of the Purchaser;

Purchaser’s Solicitors: Kirkpatrick & Lockhart, Nicholson Graham LLP, of
110 Cannon Street, London EC4N 6AR;

Purchaser Warranties: the warranties set out in Part 2 of Schedule 4;

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Released Set Off Amount: has the meaning given to it in Clause 8.10.1.3;

Relevant Earnout Amount: the Interim Earnout Amount or the Earnout Amount, as
the case may be;

Relevant Earnout Payment Date: the Interim Earnout Payment Date or the Earnout
Payment Date, as the case may be;

Relevant Payment: payment of the Interim Earnout Amount, the Final Earnout
Amount, the Cash Adjustment Amount or Released Set Off Amount, as the case may
be;

Relevant Property: means, in relation to each Property Owner, the property
listed against its name in Schedule 8;

Resolution Period: has the meaning ascribed to it in Clause 9.5;

Restricted Business: the business of developing, manufacturing, marketing,
testing, evaluating and selling cardiovascular care products and services
(excluding (i) the provision of cardiac clinical trials and related services
pursuant to respiratory contracts with clients of any member of the Continuing
Vendor Group where such client requires the provision of both cardiac and
respiratory clinical trials as part of the same contract and (ii) the on-supply
by members of the Continuing Vendor Group of cardiovascular care products
supplied by DMRML pursuant to the terms of the transitional services agreement
between Ferraris Respiratory Europe Limited and DMRML on the date of this
Agreement) as carried on by the Target Group at the Completion Date and such
other arrangements as may be agreed in writing between members of the Continuing
Vendor Group and the Purchaser from time to time;

Sales Revenue Certificate: the certificate of sales revenues of the Target Group
for the purposes of calculating the Relevant Earnout Amount to be determined in
accordance with Clause9 and Part 1 of Schedule 10 and as set out in the form set
out in Part 2 of Schedule 10;

Scheme: the Ferraris Group Plc Group Personal Pension Plan administered by
Bartlett Life and Pensions Limited;

Securities Act: the United States Securities Act of 1933, as amended;

Service Charges: in relation to each Ferraris Service or Target Group Service,
this shall be either (i) the out of pocket cost to the Vendor of providing each
Ferraris Service or (ii) the out of pocket cost to any member of the Target
Group of providing each Target Group Service, as appropriate;

Services: (i) maintenance services relating to Products and (ii) clinical trials
as carried on by the Target Group at the date of this Agreement;

Shares: the DMRMI Shares and the DMRML Shares together;

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Subsidiaries: Hertford Cardiology Limited, Hertford Medical International
Limited, Reynolds Medical France Sarl and DMR GmbH, further details of each of
which are set out in Schedule 2 and “Subsidiary” shall mean any one of them;

Target Group: each of the Companies and the Subsidiaries together;

Target Group Actual Working Capital Amount: the aggregate of DMRMI Actual
Working Capital Amount and DMRML Actual Working Capital Amount;

Target Group Estimated Working Capital Amount: the aggregate of DMRML Estimated
Working Capital Amount and DMRML Estimated Working Capital Amount, being
£3,028,639;

Target Group Service: the service set out in Column 1 of Part 2 of Schedule 9;

taxation or tax: shall have the meaning set out in the Tax Covenant;

Tax Covenant: means the covenant set out in Schedule 7;

third party: any person other than the Parties;

Unaudited Accounts: the financial statements of the business attributable to the
sales of the Products and the Services by any member of the Purchaser’s Group as
at, and for the 13 month period to 30 September 2006 (including the balance
sheet, profit and loss account and all notes) prepared in accordance with Part 2
of Schedule 6;

US$ or $: United States dollars;

US Employee Plan: means any written plan, program, agreement, policy or
arrangement that is: (a) a Welfare Plan; (b) a pension benefit plan within the
meaning of Section 3(2) of ERISA; (c) a stock bonus, stock purchase, stock
option, restricted stock, stock appreciation right or similar equity-based plan;
or (d) any other deferred-compensation, retirement, welfare-benefit, bonus,
incentive or fringe benefit plan or arrangement, in each case established for
the benefit of the employees of the Target Group in the United States;

VAT: the tax as constituted by the VATA or any other analogous sales tax imposed
in any relevant jurisdiction and any other tax imposed in addition or in
substitution for it at the rate from time to time imposed;

VATA: Value Added Tax Act 1994;

Vendor’s Accountants: Deloitte and Touche LLP;

Vendor’s Group: the Vendor and each member of its Group;

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Vendor’s Solicitors: Macfarlanes of 10 Norwich Street, London, EC4A 1BD;

Vendor Warranties: the warranties set out in Part 1 of Schedule 4;

Welfare Plan: each employee benefit plan listed in the Disclosure Letter;

Working Capital Retention Amount: £150,000;

Working Capital Deficit: has the meaning given to it in paragraph 11.1 of Part 1
of Schedule 6; and

Working Capital Surplus: has the meaning given to it in paragraph 11.2 of Part 1
of Schedule 6.

 

1.3 In this Agreement (unless the context requires otherwise):

 

1.3.1 words and expressions which are defined in the Companies Acts have the
same meanings as are given to them in the Companies Acts;

 

1.3.2 any reference to a statute, statutory provision or subordinate legislation
(“legislation”) shall (except where the context requires otherwise) be construed
as referring to:

 

  1.3.2.1 such legislation as amended and in force from time to time and to any
legislation which (either with or without modification) re-enacts, consolidates
or enacts in rewritten form any such legislation; and

 

  1.3.2.2 any former legislation which it re-enacts, consolidates or enacts in
rewritten form

provided that in the case of those matters which fall within sub-Clauses 1.3.2.1
above, as between the Parties, no such amendment or modification after the date
of this Agreement shall apply for the purposes of this Agreement to the extent
that it would impose any new or extended obligation, liability or restriction
on, or otherwise adversely affect the rights of, any Party;

 

1.3.3 any gender or the neuter includes a reference to the other genders and the
neuter;

 

1.3.4 any reference to a “person” includes a natural person, partnership,
company, body corporate, association, organisation, government, state,
foundation and trust (in each case whether or not having separate legal
personality);

 

1.3.5 any reference to the Introduction, a Clause or Schedule is to the
Introduction, a Clause or Schedule (as the case may be) of or to this Agreement;

 

1.3.6 any reference to any other document is a reference to that other document
as amended, varied, supplemented, or novated (in each case, other than in breach
of the provisions of this Agreement) at any time;

 

1.3.7 references to time of the day are (save where otherwise stated) to London
time;

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1.3.8 “directly or indirectly” means (without limitation) either alone or
jointly with any other person and whether on his own account or in partnership
with another or others or as the holder of any interest in or as officer,
director, employee or agent of or consultant to any other person;

 

1.3.9 any phrase introduced by the terms “including”, “include”, “in particular”
or any similar expression shall be construed as illustrative and shall not limit
the sense of the words preceding those terms;

 

1.3.10 any reference to any English accounting term relating to any dispute,
remedy or method of calculation or proceeding or any accounting concept or thing
shall, in respect of any jurisdiction other than England, be deemed to include
what most nearly approximates in that jurisdiction to the English accounting
term; and

 

1.3.11 any reference to any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, court, official or any legal
concept or thing shall, in respect of any jurisdiction other than England, be
deemed to include what most nearly approximates in that jurisdiction to the
English legal term;

 

1.3.12 any reference to any apportionment of the Consideration as between the
DMRMI Shares and the DMRML Shares shall, prior to the date on which the
Consideration and such apportionment is finally determined shall be deemed to be
a reference to 75 per cent. of the relevant amount of the Consideration in
respect of the DMRML Shares and 25 per cent. in respect of the DMRMI Shares.

Provided that when calculating any element of the Consideration the position of
the Target Group as a whole shall be the subject of the calculation and any
apportionment as between DMRML and DMRMI shall be ignored.

 

1.4 The Index and Clause headings in this Agreement are included for convenience
only and do not affect the interpretation of this Agreement.

 

1.5 The Parties agree that, subject always to and save as expressly provided in
the provisions of this Clause 1.5 and Clauses 11.9.1 and 12.3:

 

1.5.1 no term of this Agreement shall be enforceable by a third party;

 

1.5.2 a person who is the permitted successor to or assignee of the rights of a
Party is deemed to be a party to this Agreement and the rights of such successor
or assignee shall, subject to and upon any succession or assignment permitted by
this Agreement, be regulated by the terms of this Agreement; and

 

1.5.3 the terms of this Agreement or any of them may be varied, amended or
modified or this Agreement may be suspended, cancelled, rescinded or terminated
by agreement in writing between the Parties without the consent of any such
third party.

 

2 Condition

 

2.1

Completion shall be conditional upon the due passing without amendment by the
shareholders of the Vendor in general meeting of the resolution set out in the
Notice of

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Extraordinary General Meeting of the Vendor in the Agreed Form marked “E” (the
“Notice of EGM”).

 

2.2 The Vendor shall, as soon as practicable following signing of this Agreement
and in any event not later than 15 July 2006, issue and circulate the Notice of
EGM to convene an extraordinary general meeting of the Vendor for the purpose of
considering and passing the resolution referred to in Clause 2.1, provided that
the Vendor shall consult with the Purchaser in respect of any description of the
Purchaser’s Group, its business, the terms of this Agreement and any description
of the business of the Target Group contained in the circular accompanying the
Notice of EGM and take account of, and to the extent practicable ensure that the
form of circular reflects, the comments supplied by the Purchaser and its
advisers to the Vendor and its advisers.

 

2.3 If the resolution referred to in Clause 2.1 is not passed on or before
31 July 2006, the Vendor shall pay to the Purchaser an amount equal to the
aggregate of all reasonable costs, charges and expenses (including irrecoverable
VAT) incurred by the Purchaser in connection with its entry into this Agreement
including (without limitation) the antecedent negotiations and costs associated
with any investigation of or enquiry into the Target Group carried out by or on
behalf of the Purchaser whether before or after entering into this Agreement
subject to a maximum aggregate amount of the lower of (i) £172,500 and (ii) such
amount as would be £1 less than that which would constitute a class one
transaction for the purposes of the Listing Rules.

 

2.4 The Vendor shall use its reasonable endeavours to procure the fulfilment of
the condition set out in Clause 2.

 

2.5 If the condition set out in this Clause 2 shall not have been satisfied or
waived (if capable of being waived) by 11.59 p.m. on 31 July 2006 (or such later
date as the Parties may agree in writing), this Agreement (except for the
provisions of this Clause and of Clauses 1 (Definitions, interpretation and
third party rights), 17 (Confidentiality and announcements), 19.5 (Costs), 20
(Notices) and 21 (Governing law and jurisdiction) shall be null and void and of
no further effect and the Parties shall be released and discharged from their
respective obligations under this Agreement.

 

2.6 The Vendor shall keep the Purchaser regularly informed of its progress
towards satisfaction of the condition set out in Clause 2.

 

3 Sale and purchase

 

3.1 The Vendor shall sell and deliver the DMRML Shares and shall procure the
sale and delivery by FGI of the DMRMI Shares, in each case free from all
Encumbrances, and the Purchaser shall purchase the Shares, with effect from and
including the Completion Date to the effect that as from that date all rights
and advantages accruing to the Shares, including any dividends or distributions
declared or paid on the Shares after that date, shall belong to the Purchaser.

 

3.2 Without prejudice to Clause 3.1:

 

3.2.1 the Vendor warrants that the Shares shall be sold with full title
guarantee and agrees that Section 6(2) of the Law of Property (Miscellaneous
Provisions) Act 1994 shall not apply; and

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3.2.2 if the Purchaser so directs the Vendor in writing not less than two
Business Days prior to Completion the Vendor shall, and shall procure that FGI
shall, transfer the Shares to one or more of the Purchaser’s nominated
wholly-owned subsidiaries in satisfaction of the Vendor’s obligations pursuant
to Clause 3.1.

 

3.3 Neither Party shall be obliged to complete the sale of any of the Shares
unless the sale of all of the Shares is completed simultaneously.

 

4 Consideration

 

4.1 Subject to the terms of this Agreement, the consideration:

 

4.1.1 for the DMRMI Shares shall be an amount of cash equal to the aggregate of
A, B, C and D less the aggregate of E and F where:

A = £1,054,517

B = the DMRMI Earnout Amount

C = the DMRMI Working Capital Surplus (if any)

D = the DMRMI Additional Cash Amount (if any)

E = the DMRMI Working Capital Deficit (if any)

F = the DMRMI Returned Cash Amount (if any)

 

4.1.2 for the DMRML Shares shall be an amount of cash equal to the aggregate of
G, H, I and J less the aggregate of K and L where:

G = £3,163,552

H = the DMRML Earnout Amount

I = the DMRML Working Capital Surplus (if any)

J = the DMRML Additional Cash Amount (if any)

K = the DMRML Working Capital Deficit (if any)

L = the DMRML Returned Cash Amount (if any)

(the aggregate of the amounts set out above in Clauses 4.1.1 and 4.1.2 being the
“Consideration”).

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4.2 The Consideration, subject to adjustment (if any) and satisfaction of such
adjustment (if any) in accordance with paragraph 11 of Part 1 of Schedule 6,
shall be satisfied as follows:

 

4.2.1 on account of the Consideration, as to the Completion Payment, on
Completion in accordance with Clause 5.3;

 

4.2.2 as to the Cash Adjustment Amount (if any), in accordance with Clause 7.2;
and

 

4.2.3 as to the Interim Earnout Amount (if any) and the Final Earnout Amount (if
any) in accordance with Clause 8.6.

 

4.3 Receipt by the Vendor’s Solicitors (as agent for and on behalf of the
Vendor) of the monies referred to in Clause 4.2 shall be a complete discharge to
the Purchaser.

 

4.4 Any amount paid (each a “Relevant Payment”) in respect of a breach of any of
the Vendor Warranties or the Purchaser Warranties shall, so far as possible, be
deemed to give rise to a corresponding adjustment in the Consideration and to
the extent that the Relevant Payment is attributable:

 

4.4.1 to the DMRMI Shares shall (so far as possible) be treated as an adjustment
to the consideration paid for the DMRMI Shares; and

 

4.4.2 to the DMRML Shares shall (so far as possible) be treated as an adjustment
to the consideration paid for the DMRML Shares.

 

5 Completion

Completion shall take place on the Completion Date at the offices of the
Purchaser’s Solicitors (or at such other time and place as the Vendor and
Purchaser may agree) when:

 

5.1 the Vendor shall deliver to the Purchaser, or procure the delivery to the
Purchaser of, the documents and other items referred to in Schedule 3;

 

5.2 the Vendor and the Purchaser shall jointly procure that there shall be held
a Meeting of the Board of Directors of each of the Companies at which there
shall be duly passed Resolutions set out and contained in Board Minutes of each
of member of the Target Group in the Agreed Forms marked “D1” to “D3”;

 

5.3 the Purchaser shall:

 

5.3.1 pay the Completion Payment to the Vendor by way of same day transfer of
funds for value on that date to the Client Account of the Vendor’s Solicitors at
Royal Bank of Scotland plc, City Office, 62/63 Threadneedle Street, London EC2R
8LA (Client No 1 Account 15388776; Sort Code 15-10-00) marked with the following
reference: RBKP/SRM:592241; and

 

5.3.2

immediately following Completion, procure that the Companies discharge the
Intercompany Debt by way of transfer on the Completion Date of funds for value
equal to the amount of the Intercompany Debt to the Client Account of the
Vendor’s Solicitors,

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the details of which are set out in Clause 5.3.1, with the following reference:
RBKP/SRM: 592241.

 

5.4 If all the provisions of Schedule 3 are not complied with in full on
Completion the Purchaser may:

 

5.4.1 defer Completion by not more than 28 days in which event the provisions of
this Clause shall apply to Completion as so deferred;

 

5.4.2 proceed to Completion as far as practicable without prejudice to its
rights under this Agreement or otherwise; or

 

5.4.3 terminate this Agreement save that Clauses 1 (Definitions, interpretation
and third party rights), 17 (Confidentiality and announcements), 19.5 (Costs),
20 (Notices) and 21 (Governing law and jurisdiction) shall continue to apply.

 

6 Period before Completion

 

6.1 The Vendor undertakes to and covenants with the Purchaser that it will
procure that, between the date of this Agreement and Completion, without the
prior written consent of the Purchaser (in the case of Clauses 6.1.5, 6.1.7 and
6.1.12, such consent not to be unreasonably withhold or delayed and in the case
of the all the other sub-clauses of this Clause 6.1, such consent to be given in
the absolute discretion of the Purchaser), no member of the Target Group shall:

 

6.1.1 enter into, modify or terminate any contract deemed material by the
Purchaser other than in the ordinary course of business (other than pursuant to
the terms of this Agreement);

 

6.1.2 dispose of any material part of its business or undertaking or (otherwise
than in the ordinary course of trading) dispose of or acquire any business or
undertaking (otherwise that in the ordinary course of trading) nor enter into
any joint venture arrangement or agreement or partnership;

 

6.1.3 knowingly act or fail to act so as to allow any of its Business
Intellectual Property to lapse;

 

6.1.4 knowingly take or omit to take any action which would allow any licence of
any Business Intellectual Property to be varied in any material respect or
terminated;

 

6.1.5 save as provided for by this Agreement, discharge or redeem any
Encumbrance over any of its assets or create or allow to subsist any Encumbrance
over any of its assets except:

 

  6.1.5.1 which shall have arisen in the ordinary course under either normal
retention of title clauses, in supply contracts or being liens arising by
operation of law; and

 

  6.1.5.2 subsisting Encumbrances disclosed in the Disclosure Letter;

 

6.1.6 acquire any material asset on lease or hire-purchase or contract-hire or
deferred payment terms (except for normal trade credit);

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6.1.7 incur any capital expenditure or enter into any capital commitment in
excess of £5,000 for each individual item and £50,000 in aggregate;

 

6.1.8 amend the terms of its borrowings or create or incur any borrowing and for
the purposes of this Clause 6.1.8 “borrowing” shall include indebtedness in the
nature of borrowing;

 

6.1.9 give any guarantees, securities or indemnities for the obligations of any
other person;

 

6.1.10 (except in the ordinary course of business or as required by applicable
policies of insurance) release, discharge or compound any material liability,
claim, action, demand or dispute and shall not initiate or compromise or settle
any material litigation or arbitration proceedings or waive any right in
relation to or the subject of material litigation or arbitration proceedings;

 

6.1.11 enter into or modify any agreement or arrangement (legally enforceable or
not) in which any of its directors or the Vendor or any other Vendor Group
Company is interested;

 

6.1.12 employ or engage or terminate the employment or engagement of any
director, employee or consultant or amend the terms of employment (including as
to pay) or engagement of any director, employee or consultant earning over
$100,000 in the United States or £45,000 in the United Kingdom per annum;

 

6.1.13 amend or discontinue (whether in whole or in part) the Scheme;

 

6.1.14 create, allot, issue, repay or redeem any share or loan capital;

 

6.1.15 grant any option or other Encumbrance over the whole or any part of its
share capital, whether issued or unissued;

 

6.1.16 declare, pay or make any dividend or distribution;

 

6.1.17 amend the articles of incorporation, bylaws, articles of association,
memorandum of association of any member of the Target Group;

 

6.1.18 pass any members’ or shareholders’ resolution (save as required by this
Agreement); or

 

6.1.19 incur any material liability or expense (whether actual or contingent) or
make any payment except in the ordinary course of business;

 

6.1.20 do or omit to do anything which would lead to any of the policies of
insurance maintained by or on behalf of the members of the Target Group ceasing
to be in full force or effect prior to Completion;

 

6.1.21 (conditionally or unconditionally) agree to do any of the things referred
to in any of the foregoing paragraphs.

 

6.2 The Vendor further undertakes and covenants with the Purchaser that it will
procure that, between the date of this Agreement and Completion, without the
prior written consent of the Purchaser each member of the Target Group shall:

 

6.2.1 duly perform and discharge all its contractual obligations and in
particular, but without limitation, pay its creditors in the ordinary course of
its business;

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6.2.2 carry on its business as a going concern in its ordinary course as carried
on at the date of this Agreement; and

 

6.2.3 subject always to all laws and regulations to which the Vendor reasonably
believes in good faith it or any member of the Target Group are subject, only
take actions or make decisions in relation to the Target Group, which at the
time such actions are taken or decisions made, are taken or made in good faith
for the benefit of the Target Group.

 

6.3 Neither Clause 6.1 nor Clause 6.2 shall not operate so as to restrict or
prevent:

 

6.3.1 the incurring of any capital expenditure or capital commitment of less
than, in aggregate, £50,000;

 

6.3.2 any matter reasonably undertaken by any member of the Target Group in any
emergency or disaster situation with the intention of minimising any adverse
effect of such situation (and the Vendor shall in any event promptly notify the
Purchaser of such situation);

 

6.3.3 the completion or performance of any obligations undertaken pursuant to
any contract or arrangement entered into by any member of the Target Group prior
to the date of this Agreement, provided that such contract or arrangement was
entered into in the ordinary and usual course of business;

 

6.3.4 any action pursuant to a requirement of law or applicable regulation (and
the Vendor shall in any event promptly notify the Purchaser of such
requirement); or

 

6.3.5 any action specifically provided for in this Agreement.

 

6.4 The Vendor shall not knowingly terminate any policy of insurance in respect
of the assets and businesses of the Target Group current as at the date of this
Agreement and shall procure that all requisite premiums are paid in order to
maintain in force until Completion such policies of insurance in force in
respect of the Target Group as at the date of this Agreement and that none of
such policies shall be modified by the Vendor or any member of the Vendor’s
Group so as to reduce any insurance coverage provided by such policies in
respect of the business and assets of the Target Group prior to Completion.

 

6.5 The Vendor shall, and shall procure that the officers and employees of and
the professional advisers to the members of the Target Group shall, between the
date of this Agreement and Completion, at the request of the Purchaser and
subject to being given reasonable prior written notice:

 

6.5.1 give the Purchaser and any person authorised by it access to the
Properties and to all the books and records of the Target Group at reasonable
times during business hours; and

 

6.5.2 supply the Purchaser and/or its professional advisers (at the Purchaser’s
cost) with such information concerning the Target Group as the Purchaser or its
professional advisers may reasonably require.

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7 Cash Adjustment Amount

 

7.1 The Cash Adjustment Amount (if any) shall be:

 

7.1.1 where the 2006 EBITDA is equal to or greater than £1.7m and the 2006 Sales
Revenue equal to or greater than £22m, an amount due from the Purchaser to the
Vendor calculated in accordance with the following formula:

A x 1.25

Where:

A = the amount by which the 2006 EBITDA exceeds £1.7m PROVIDED THAT if A is
greater than £800,000 the Cash Adjustment Amount shall be deemed to be £1m; and

 

7.1.2 where the 2006 EBITDA is less than £1.7m or the 2006 Sales Revenue is less
than £20.5m, £1m due from the Vendor to the Purchaser,

PROVIDED ALWAYS that if Clauses 7.1.1 or 7.1.2 do not apply the Cash Adjustment
Amount shall be zero.

 

7.2 Any payment referred to in Clause 7.1 shall be paid in cash by same day
transfer of funds within five Business Days of the agreement or determination of
the Unaudited Accounts (the “Cash Adjustment Payment Date”):

 

7.2.1 in the case of a payment to the Vendor, to the client account of the
Vendor’s Solicitors, the details of which are set out in Clause 5.3.1; or

 

7.2.2 in the case of a payment to the Purchaser, to such account as it shall
specify in writing to the Vendor’s Solicitors.

 

8 Earnout Amount and Interim Earnout Amount

 

8.1 The Interim Earnout Amount shall be:

 

  (a) where 2007 Interim Sales Revenues are equal to or greater than £11.5m but
less than £12.5m, the sum calculated in accordance with the following formula:

A x 0.25

Where:

A = the amount by which 2007 Interim Sales Revenues exceed £11.5m

 

  (b) where 2007 Interim Sales Revenues are equal to or greater than £12.5m but
less than £13m, the sum calculated in accordance with the following formula:

A+B

Where:

A = £0.25m

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B = the amount by which 2007 Interim Sales Revenues exceed £12.5m

 

  (c) where 2007 Interim Sales Revenues are equal to or greater than £13m but
less than £13.5m, the sum calculated in accordance with the following formula:

A+B+(C x 1.5)

Where:

A = £0.25m

B = £0.5m

C = the amount by which 2007 Interim Sales Revenues exceed £13m

 

  (d) where 2007 Interim Sales Revenues are equal to or greater than £13.5m, the
sum calculated in accordance with the following formula:

A+B+C+D

Where:

A = £0.25m

B = £0.5m

C = £0.75m

D = the amount by which 2007 Interim Sales Revenues exceed £13.5m

PROVIDED THAT if the formula produces a figure greater than £2.5m the Interim
Earnout Amount shall be deemed to be £2.5m.

PROVIDED ALWAYS THAT if 2007 Interim Sales Revenues are less than £11.5m the
Interim Earnout Amount shall be deemed to be zero.

 

8.2 The Earnout Amount shall be:

 

  (a) where 2007 Sales Revenues are equal to or greater than £23m but less than
£25m, the sum calculated in accordance with the following formula:

A x 0.25

Where:

A = the amount by which 2007 Sales Revenues exceed £23m

--------------------------------------------------------------------------------

  (b) where 2007 Sales Revenues are equal to or greater than £25m but less than
£26m, the sum calculated in accordance with the following formula:

A+B

Where:

A = £0.5m

B = the amount by which 2007 Sales Revenues exceed £25m

 

  (c) where 2007 Sales Revenues are equal to or greater than £26m but less than
£27m, the sum calculated in accordance with the following formula:

A+B+(C x 1.5)

Where:

A = £0.5m

B = £1m

C = the amount by which 2007 Sales Revenues exceed £26m

 

  (d) where 2007 Sales Revenues are equal to or greater than £27m, the sum
calculated in accordance with the following formula:

A+B+C+D

Where:

A = £0.5m

B = £1m

C = £1.5m

D = the amount by which 2007 Sales Revenues exceed £27m

PROVIDED THAT if the formula produces a figure greater than £5m the Earnout
Amount shall be deemed to be the aggregate of £5m.

PROVIDED ALWAYS THAT if 2007 Sales Revenues are less than £23m the Earnout
Amount shall be deemed to be zero.

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8.3 Subject to Clauses 8.6 and 8.10, on the Interim Earnout Payment Date the
Purchaser shall pay to the Vendor the Interim Earnout Amount which shall be
calculated in accordance with Clause 8.1 above.

 

8.4 Subject to Clauses 8.5, 8.6 and 8.10, on the Earnout Payment Date:

 

8.4.1 if the Earnout Amount is less than the Interim Earnout Amount, the Vendor
shall pay to the Purchaser an amount equal to the amount by which the Earnout
Amount is less than the Interim Earnout Amount; or

 

8.4.2 if the Earnout Amount is greater than the Interim Earnout Amount, the
Purchaser shall pay to the Vendor an amount equal to the amount by which the
Earnout Amount exceeds the Interim Earnout Amount (the “Final Earnout Amount”).

 

8.5 Subject to Clause 8.6, any payment referred to in Clause 8.4 due from the
Vendor to the Purchaser shall be satisfied by a payment in cash by same day
transfer of funds within five Business Days of the Relevant Earnout Payment Date
to such account as the Purchaser shall specify in writing to the Vendor’s
Solicitors.

 

8.6 Any payments referred to in Clauses 8.3 and 8.4 due from the Purchaser to
the Vendor shall be satisfied (at the option of the Purchaser) either by:

 

8.6.1 the payment by the Purchaser in cash by same day transfer of funds within
five Business Days of the Relevant Earnout Payment Date to the client account of
the Vendor’s Solicitors, the details of which are set out in Clause 5.3.1; or

 

8.6.2 the allotment and issue to the Vendor of such number of Consideration
Shares as soon as practicable but in any event within twenty Business Days of
the Relevant Earnout Payment Date determined in accordance with Clauses 8.7 to
8.9.

 

8.7 The number of Consideration Shares to be allotted pursuant to Clause 8.6.2
shall be determined in accordance with the following formula:

the number of Consideration Shares to be allotted = Y / (Z x 0.95)

Where:

Y = the amount due from the Purchaser to the Vendor pursuant to Clause 8.3 or
8.4 (as the case may be); and

Z = the price certified by the Purchaser’s brokers to be the average of the
middle market quotation for shares in the Purchaser as shown on the AIM Appendix
to the Official List to of the London Stock Exchange plc for a period of 5
Business Days ending on the Business Day before the Relevant Earnout Payment
Date (or if such date is not a trading day on AIM, the next trading day on AIM
immediately proceeding).

 

8.8

The Consideration Shares shall be allotted and issued to the Vendor free from
any Encumbrance and credited as fully paid so as to rank pari passu with all
Purchaser Shares in issue on the relevant date of allotment of such shares and
together with all rights and privileges attaching to Purchaser Shares at the
relevant date of allotment of such shares including without limitation the full
benefit of any dividend or distribution and any rights

--------------------------------------------------------------------------------

 

issue or bonus issue payable or to be taken up or made by reference to a record
date on or after such date.

 

8.9 The Purchaser shall as soon as reasonably practicable after the allotment
and issue of the Consideration Shares and in any event within ten Business Days
apply to the London Stock Exchange Plc and use its reasonable endeavours to
procure that the Consideration Shares (if any) are admitted to trading on AIM.

 

8.10 Set Off

 

8.10.1 In the event that, not less than 10 Business Days prior to the Cash
Adjustment Payment Date, Interim Payment Date, Earnout Payment Date or the due
date for payment of a Released Set Off Amount under Clause 8.10.1.3 (each, a
“Relevant Payment Date”) and subject to Clause 8.10.5, the Purchaser shall have
given notice of a Claim:

 

  8.10.1.1 to the extent that any Claim shall have been settled but the amount
due shall not have been paid to the Purchaser prior to the Relevant Payment
Date, the Purchaser shall be entitled to deduct and retain from the Relevant
Payment the settled amount of such Claim and treat its obligation to make the
Relevant Payment as being reduced, pro tanto, by the settled amount of such
Claim (in which event the Vendor’s obligation in respect of such Claim shall be
reduced by the amount of such deduction);

 

  8.10.1.2 to the extent that such Claim has not been settled or withdrawn then,
provided the condition in Clause 8.10.2 is satisfied and subject to Clause
8.10.5, the Purchaser shall be entitled to reduce the Relevant Payment by an
amount equal to the Barrister’s Estimate (in accordance with Clause 8.10.2 and
subject to Clause 8.10.5) of the likely amount of the Purchaser’s recovery in
respect of such Claim (the “Set Off Amount”) PROVIDED ALWAYS that the Purchaser
and the Vendor shall jointly instruct the Purchaser’s Solicitors and the
Vendor’s Solicitors to open the Escrow Account (if not already established) and
the Purchaser shall pay into such account an amount equal to the Set Off Amount;

 

  8.10.1.3 following settlement or withdrawal of any Claim falling within Clause
8.10.1.2 and subject to Clause 8.10.1, the Purchaser and the Vendor shall,
within ten Business Days, respectively instruct the Purchaser’s Solicitors and
the Vendor’s Solicitors to release from the Escrow Account an amount equal to
the Set Off Amount in respect of the settled or withdrawn Claim (the “Released
Set Off Amount”), of which:

 

  (a) an amount equal to (i) the Set Off Amount less (ii) a sum equal to the
amount (if any) for which such Claim shall have been settled plus (iii) interest
calculated at the rate applicable to the Escrow Account on the amount of
(i) less (ii), shall be paid to the Vendor; and

 

  (b)

the balance of the Set Off Amount plus interest on such balance shall be paid to
the Purchaser,

--------------------------------------------------------------------------------

 

and the Purchaser shall be entitled to treat the obligation to make the Relevant
Payment as reduced pro tanto by such amount for which the Claim has been settled
and the Vendor’s obligation in respect of such Claim shall have been discharged
up to the amount of such reduction.

 

8.10.2 The condition referred to in Clause 8.10.1.2 is that any Claim falling
within such Clause shall have been referred by the Purchaser to a barrister of
at least ten years’ standing (well versed in the law relating to the Claim)
selected by the Purchaser and the Vendor (or, in default of such agreement
within 10 Business Days of the Purchaser giving notice to the Vendor, on the
application of either of the Purchaser or the Vendor to the President for the
time being of The Law Society of England and Wales), that such barrister shall
be instructed to report back his advice within 15 Business Days and that such
barrister (acting independently) shall have advised on the basis of the evidence
presented to him and on the assumption that no further evidence shall be
produced that: (i) the Claim in his opinion has a reasonable prospect of success
and (ii) the amount claimed is a reasonable estimate of the amount which the
Purchaser is likely to recover in respect of such Claim, or if not, his opinion
of such likely amount (the “Barrister’s Estimate”);

 

8.10.3 For the purposes of Clause 8.10.2 the Purchaser and the Vendor shall
provide the barrister instructed with access to or copies of all documentation
or information reasonably required by him and the parties shall at all times
co-operate with him to enable him to properly assess the Claim. Each of the
Purchaser and Vendor shall have an adequate opportunity to comment upon or rebut
anything submitted to the barrister by the other. The costs of such barrister
shall be borne by the Purchaser although, if the Claim when settled results in
the Purchaser being entitled under Clause 8.10.1.3 to some or all of the Set Off
Amount, the Vendor shall reimburse the Purchaser for a proportion of the amount
of such costs incurred under Clause 8.10.2 which is equal to the proportion
which the Set Off Amount to which the Purchaser is entitled bears to the total
amount of the Set Off Amount and the Purchaser and the Vendor agree that an
amount equal to such costs shall be deducted from the amount referred to in
Clause 8.10.1.3(a);

 

8.10.4 A Claim shall be regarded as settled or withdrawn for the purposes of
Clauses 8.10 and 11.10 if and to the extent that either:

 

  8.10.4.1 the Vendor and the Purchaser expressly agree so in writing;

 

  8.10.4.2 a court has awarded judgment in respect of a Claim in respect of
which no right of appeal exists; or

 

  8.10.4.3 the Claim has been withdrawn by the Purchaser or has otherwise been
struck out, discontinued or dismissed with no order for costs or other monetary
award in favour of the Purchaser (in which case the Claim shall, for the purpose
of Clause 8.10.1.3 be treated as having been settled for no sum and, subject to
Clause 8.10.1, all of the Set Off Amount and the interest thereon shall be
payable from the Escrow Account to the Vendor in accordance with Clause
8.10.1.3(a));

 

8.10.5

If a Barrister’s Estimate is required to be given in relation to any Relevant
Earnout Amount and such Barrister’s Estimate has not been given by the date
which would otherwise be the Relevant Payment Date, the Relevant Payment
(subject to the rights of

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set off under this Clause 8.10) shall be deferred to the third Business Day
following receipt of such Barrister’s Estimate.

PROVIDED ALWAYS THAT nothing in this Clause 8.10 shall prevent or prejudice the
Purchaser from making any claim in respect of the full amount of the Claim in
the event that the amount of Claim exceeds the amount of the Relevant Payment
outstanding at the date on which a Claim is notified to the Vendor and that for
the purposes of this Clause 8.10 proceedings shall not be treated as having been
commenced by the Purchaser unless they shall have been issued and served on the
Vendor; and the provisions of this Clause 8.10 shall not be regarded as imposing
any limit to the amount of any claims under this Agreement or date by which such
claims shall be made.

 

9 Determination of Relevant Earnout Amount

 

9.1 In relation to each Relevant Earnout Amount, the Purchaser shall deliver, or
procure that the Target Group delivers, to the Vendor and the Vendor’s
Accountants (in accordance with the notice provisions set out in Clause 20) a
first draft of the Sales Revenue Certificate in respect of the Target Group for
the relevant period not later than 45 days after the end of the last month of
the relevant period included in which shall be the calculation of such Relevant
Earnout Amount together with all working papers in relation thereto. The
Purchaser shall thereafter procure that the Vendor is promptly provided with
such other information, explanations, books, records and accounts in respect of
the Target Group as they may reasonably require in relation thereto for the
purposes of agreeing the Relevant Earnout Amount.

 

9.2 The Purchaser shall:

 

9.2.1 determine the amount of the 2007 Interim Sales Revenues (“the Interim
Earnout Determination”) by 15 May 2007; and

 

9.2.2 determine the amount of the 2007 Sales Revenues (“the Final Earnout
Determination”) by 15 November 2007;

and, in each case, send (or procure that the Purchaser’s Accountants send) in
accordance with the notice provisions set out in Clause 20 a copy of whichever
of the Interim Earnout Determination or the Final Earnout Determination as is
relevant (“the Relevant Determination”) to each of the Vendor and the Vendor’s
Accountants.

 

9.3 Unless the Vendor serves written notice (a “Dispute Notice”), specifying in
reasonable detail the nature of the potential dispute and so far as practicable
the amount in dispute, on the Purchaser disputing a Relevant Determination prior
to the day which falls 30 days after receipt of such Relevant Determination, the
amount or amounts stated in such Relevant Determination shall be final and
binding upon the Vendor and the Purchaser for the purposes of this Agreement.
Any such Dispute Notice must state the amounts in dispute and the reasons
therefor.

 

9.4

In the event of service of a Dispute Notice in relation to any Relevant
Determination produced in accordance with Clause 9.2 then the Vendor and the
Purchaser shall each use all reasonable endeavours (with the assistance, to the
extent appropriate, of the Vendor’s

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Accountants and the Purchaser’s Accountants at the respective party’s expense)
to agree any such amount in dispute as soon as reasonably practicable.

 

9.5 In the event that the Vendor and the Purchaser are unable to agree as to any
such amount in dispute within 30 days of the date of service of the Dispute
Notice (“the Resolution Period”), the amount or amounts in dispute shall be
determined as soon as practicable by Independent Accountants who shall be
instructed to complete such determination within 30 days of the end of the
Resolution Period.

 

9.6 The fees of any such independent firm of accountants appointed pursuant to
Clause 9.5 shall be paid by the Vendor and/or the Purchaser in the proportions
determined by such firm (or, in default of any such determination as to fees, as
to half by the Vendor and half by the Purchaser). Any firm appointed pursuant to
Clause 9.5 shall act as experts and not as arbitrators and their determination
shall be final and binding on the Vendor and the Purchaser.

 

9.7 Each of the Vendor and the Purchaser shall procure that the other, the
Vendor’s Accountants, the Purchaser’s Accountants and any firm of independent
accountants appointed pursuant to Clause 9.5 is given all such assistance and
access to all such information in the relevant Party’s possession or control as
such person may reasonably require in order to assess and/or determine the
Relevant Earnout Amount.

 

10 Purchaser Undertakings during the Earnout Period

 

10.1 Subject always to the Vendor being entitled (or potentially entitled) to an
Earnout Amount pursuant to the proviso in Clause 8.2(d) the Purchaser undertakes
and covenants with the Vendor that, during the Earnout Undertaking Period, it
will and will procure that each member of the Purchaser’s Group will, save as
contemplated by this Agreement or unless otherwise agreed with the Vendor:

 

10.1.1 not actively take any steps to cause the business of the Target Group to
be carried on other than in the ordinary course whether by any member of the
Target Group or any successor member within the Purchaser’s Group;

 

10.1.2 not require the sale, transfer or disposal of the whole or a substantial
part of the business or undertaking of the Companies or the Subsidiaries
(including, without limitation, any sale, transfer or other disposal of any
Business Intellectual Property the effect of which would be to prevent or
restrict sales of Products or Services by any company in the Purchaser’s Group)
other than in connection with the enforcement of any security granted for the
purpose of or pursuant to the financing by the Purchaser of its obligations
under this Agreement or as between members of the Purchaser’s Group;

 

10.1.3 maintain adequate budgetary, reporting and accounting systems to ensure
that the sales generated by the Target Group can be identified separately from
those of the other members of the Purchaser’s Group following Completion; and

 

10.1.4

not do any act or omit to do any act in relation to the Products or the Services
the intention of which is to (i) deprive the Vendor from receiving a Cash
Adjustment Amount in accordance with Clause 7.1.1, (ii) diminish the likelihood
of the Vendor being entitled

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to receive an Interim Earnout Payment or a Final Earnout Payment or (iii) reduce
the amount of any Interim Earnout Payment or Final Earnout Payment.

 

11 Vendor Warranties and Indemnities

 

11.1 The Vendor warrants to the Purchaser that each of the Vendor Warranties is
true and accurate and is not misleading at the date of this Agreement and (as if
any express or implied reference to the time of this Agreement were a reference
to each such time) at all times up to and at Completion.

 

11.2 The Vendor Warranties:

 

11.2.1 are qualified by reference to those matters Fairly Disclosed;

 

11.2.2 where qualified by the knowledge, information, belief or awareness of the
Vendor, are deemed to include a statement that such knowledge, information,
belief or awareness has been acquired after all reasonable enquiries by the
Vendor of Bruce Blessington (Ferraris CEO), Simon Dighton (Ferraris CFO), Gary
Grenter (Division President, Cardiac Division), Rob Lines (CFO, Cardiac
Division), Raphael Henkin, Pam Davies (in respect of Clinical Trials only),
Alistair Mutch (in respect of Research and Development, Intellectual Property
and IT Systems only) and, in respect of DMR GmbH only, Paul Neilson (Managing
Director of DMR GmbH) in respect of the relevant subject matter of such Vendor
Warranties but not otherwise;

 

11.2.3 apply to each of the Subsidiaries as well as to the Companies as if the
word “Company” was defined to mean each of the Subsidiaries and the Companies;
and

 

11.2.4 shall not in any respect be extinguished or affected by Completion.

 

11.3 If, from the signing of this Agreement until Completion, any event shall
occur or matter shall arise which, subject to Clause 11.2, results or may result
in a material breach of any Vendor Warranty given pursuant to Clause 11.1 or a
claim under the Tax Covenant the Vendor undertakes to disclose to the Purchaser
in writing as soon as practicable such matter or event, setting out such details
as are available.

 

11.4 The Vendor waives any claims which it might otherwise have against any
Target Company and/or any director or employee of any Target Company in respect
of the completeness or accuracy of any information supplied, or for any failure
to supply information, to all or any of the Vendor, the Purchaser or any of
their respective advisers in connection with this Agreement, the Tax Covenant,
the Disclosure Letter or otherwise, save in respect of the fraud or fraudulent
misrepresentation by such director or employee.

 

11.5.1 If, at any time prior to Completion it is found that any of the Vendor
Warranties are untrue or incorrect or a claim arises under the Tax Covenant and
such breach of Vendor Warranty or claim is material in the context of the Target
Group taken as a whole in which case the Purchaser shall be entitled by notice
in writing to:

 

  11.5.1.1

terminate this Agreement save that Clauses 1 (Definitions, interpretation and
third party rights), 17 (Confidentiality and announcements), 19.5

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(Costs), 20 (Notices) and 21 (Governing Law and Jurisdiction) shall continue to
apply; or

 

  11.5.1.2 complete this Agreement in accordance (or as nearly as possible in
accordance) with its terms but without prejudice to any right to damages or any
other right or remedy available to the Purchaser had the Purchaser completed
this Agreement without becoming aware of the matter;

PROVIDED ALWAYS that “material” for the purposes of Clauses 11.3 and 11.5.1
shall mean a breach or series of breaches which gives rise to, or would be
reasonably likely to give rise to, a Claim or series of Claims amounting in
aggregate to not less than £1,000,000; and

 

11.5.2 if at any time prior to Completion:

 

  11.5.2.1 an event occurs or circumstance arise which is or are either an act
of God, war, riot, civil commotion, malicious damage, accident, breakdown of
plant or machinery, fire, flood or storm which prevents the Target Group from
carrying on a material part of its business in the ordinary course or (ii) the
direct effect of which renders a material proportion of the products and
services provided by the Target Group obsolete or redundant,

 

  11.5.2.2 the reimbursement arrangement in respect of the supply or use of the
Products is changed or restructured;

 

  11.5.2.3 any act or omission amounting to fraud occurs;

 

  11.5.2.4 any event occurs or circumstances arise which is or are either a
requirement to comply with any law or governmental order, rule, regulation or
direction;

 

  11.5.2.5 any event occurs or circumstances arise pursuant to which there is a
product recall of any of the Products or an initiation of an investigation by a
regulatory body of any alleged Product defects;

 

  11.5.2.6 there are any changes in any laws or governmental regulations
applying to any of the Products;

 

  11.5.2.7 there is any direction by any governmental authority or body
requiring the business of any member of the Target Group to cease (whether
temporarily or permanently); or

 

  11.5.2.8 there is any class action against any member of the Target Group;

then the Purchaser shall be entitled by notice in writing to terminate this
Agreement save that Clauses 1 (Definitions, interpretation and third party
rights), 17 (Confidentiality and announcements), 19.5 (Costs), 20 (Notices) and
21 (Governing Law and Jurisdiction) shall continue to apply;

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PROVIDED ALWAYS THAT for the purpose of Clause 11.5.2 the matter, event or
occurrence must have an adverse economic effect on the Target Group with a value
in excess of £1,000,000.

 

11.6 The provisions of Schedule 5 shall (where relevant) apply to limit the
liability of the Vendor under the Vendor Warranties (excluding those matters set
out in Part 1 of Schedule 4 paragraphs 4.1 and 4.2). The only limitations to the
Vendor Warranties are set out in Schedule 5 and any matter disclosed to the
Purchaser shall be limited to matters Fairly Disclosed.

 

11.7 No limitation placed upon the liability of the Vendor by this Clause or
Schedule 5 or otherwise (whether as to amount, time or otherwise) shall apply in
relation to any claim by the Purchaser which (or the delay in discovery of the
subject matter of the claim or that it is claimable under this Clause) is the
consequence of wilful and knowing non disclosure, fraud or fraudulent
misrepresentation by the Vendor or any person who shall have been involved on
behalf of the Vendor in the transaction the subject of this Agreement (including
the provision of information contained or reflected in the Disclosure Letter).

 

11.8 Subject to Clause 11.9 the Vendor shall at all times after Completion
indemnify the Purchaser and each member of the Target Group (and for this
purpose the Purchaser is acting as agent of each member of the Target Group) and
keep each of them fully indemnified against all claims, demands, liabilities,
actions, proceedings, judgements, assessments, damages, losses, and reasonable
costs and expenses (including without limitation interest, penalties, attorneys
and accountant fees but excluding, save for Clause 11.8.10, any taxation
liability as defined for the purposes of the Tax Covenant which, for the
avoidance of doubt, shall be governed by the Tax Covenant) asserted, suffered or
incurred by or made against the Purchaser or any member of the Target Group
(including related parties) under or in connection with:

 

11.8.1 all liabilities of Reynolds Medical Sarl to third parties including the
costs of the winding up of Reynolds Medical Sarl which shall include, for the
avoidance of doubt, those of its auditors, the fees of which shall continue to
be paid up by the Vendor;

 

11.8.2 all liabilities of each of Hertford Medical International Limited or
Hertford Cardiology Limited to third parties other than liabilities incurred by
them in respect of the Restricted Business as carried on by such company, in the
case of Hertford Medical International Limited, on or prior to 30 September 2005
and, in the case of Hertford Cardiology Limited, on or prior to 1 April 2003;

 

11.8.3 the payment by DMRMI of $250,000 due to Del Mar Medical Systems LLC
and/or Marna Schnabel in accordance with the terms of the asset purchase
agreement between Del Mar Medical Systems LLC and others and the Vendor dated
3 January 2003 (the “Asset Purchase Agreement”) and the non-payment of any
amount by DMRMI pursuant to (i) the earnout provisions of such contract,
(ii) the settlement reached in respect of the mediation in respect of such
contract and (iii) the restrictive covenant agreement entered into between Marna
Schnabel and the Vendor pursuant to the Asset Purchase Agreement;

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11.8.4 any non-payment prior to Completion by DMRML of all or any sums due prior
to Completion under the settlement agreement between the University of Glasgow
and DMRML dated 8 February 2006 as set out in the Disclosure Letter;

 

11.8.5 all liabilities in the nature of long-term liabilities of the Target
Group being any outstanding borrowing or indebtedness in the nature of
borrowing, any borrowings from or facilities made available by any banking or
other financial institution to any member of the Target Group, any indebtedness
or monies borrowed or raised under any acceptance, credit, loan notes, bills of
exchange, trade bills, forward sale agreements, the acquisition of any assets on
deferred terms or any factored debts but shall exclude for the purposes of this
Clause 11.8.5 and for the avoidance of doubt, trade debts incurred in the
ordinary and usual course of business since the Accounts Date, discounted
letters of credit in respect of which deductions have been made, contract hire,
rental agreements, finance and operating leases and the pension fund liability
in respect of DMR GmbH;

 

11.8.6 the costs of developing, licensing or purchasing any Intellectual
Property to the extent that the rights to use such Intellectual Property arising
under the software licensing agreement between Del Mar Avionics and
Massachusetts Institute of Technology dated 1 July 1989 have not been assigned:

 

  11.8.6.1 from Del Mar Avionics to Del Mar Systems LLC pursuant to the
quitclaim deed dated 3 January 2005; and

 

  11.8.6.2 from Del Mar Systems LLC to DMRMI pursuant to the asset purchase
agreement between Del Mar Systems LLC and the Vendor dated 3 January 2005;

 

11.8.7 any matter arising from the transfer of the entire issued share capital
of Hertford Medical International Limited from the Vendor to Hertford Cardiology
Limited pursuant to a share sale agreement between the Vendor and Hertford
Cardiology Limited dated 27 April 2006;

 

11.8.8 the customer complaint from Malmo disclosed at paragraph 7.1 of the
Disclosure Letter, including without limitation any write off of all or part of
the outstanding payments owed by Malmo to DMRML in respect of the alleged faulty
equipment and any cost incurred by any member of the Purchaser’s Group or the
Target Group in resolving to Malmo’s satisfaction the circumstances giving rise
to the complaint;

 

11.8.9 any breach of Clause 11.12 by the Vendor;

 

11.8.10 any liabilities of DMR GmbH for taxation in respect of any event (as
defined in the Tax Covenant) accruing on or before Completion, save to the
extent that such liability to taxation arises by reason of the Purchaser’s
failure to ensure that DMRML issues invoices prior to 31 August 2006 in respect
of the amount of the aggregate of (i) the market value of goods and services
supplied by DMRML to DMR GmbH less (ii) the invoiced cost of such goods and
services, as calculated for transfer pricing purposes; and

 

11.8.11 DMRML serving notice at any time to terminate the OEM supply agreement
between DMRML and SunTech Medical Instruments, Inc. dated 20 July 2000 on not
less than 120 days written notice pursuant to clause 6 of such agreement and
such notice not validly terminating such agreement upon the expiry of any such
notice.

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11.9.1 Any member of the Target Group may enforce, or otherwise avail itself of,
the terms of Clause 11.8 in accordance with the Contracts (Rights of Third
Parties) Act 1999.

 

11.9.2 If any third party makes a claim against, or notifies an intention to
make a claim against, the Purchaser or any member of the Target Group which may
reasonably be considered as likely to give rise to a liability under the
indemnity set out in Clause 11.8 (“a relevant claim”), the Purchaser shall and
shall procure that any relevant member of the Target Group shall:

 

  11.9.2.1 as soon as reasonably practicable give written notice of that matter
to the Vendor, specifying in reasonable detail the nature of the relevant claim;

 

  11.9.2.2 not make any admission of liability, agreement or compromise in
relation to the relevant claim without the prior written consent of the Vendor
(such consent not to be unreasonably withheld);

 

  11.9.2.3 give the Vendor and its professional advisers reasonable access to
the premises and personnel of the Purchaser and each relevant member of the
Target Group and to any relevant assets, accounts, documents and records within
the power or control of the Purchaser and the Target Group so as to enable the
Vendor and its professional advisers to examine such premises, assets, accounts,
documents and records, and to take copies at their own expense for the purpose
of assessing the merits of the relevant claim;

 

  11.9.2.4 subject to the Vendor indemnifying the Purchaser and the relevant
member of the Target Group to the Purchaser’s reasonable satisfaction against
any liability, costs, damages or expenses which may be reasonably incurred and
save where it would (in the reasonable opinion of the Purchaser) harm the
customer or supplier relationships of the Target Group, take such action as the
Vendor may reasonably request to avoid, dispute, resist, compromise or defend
the relevant claim.

 

11.10 In the event that, prior to the seventh anniversary of Completion, a
resolution is presented to the members of the Vendor for the winding up of the
Vendor, or a voluntary arrangement under Section 1 of the Insolvency Act or a
scheme of arrangements under Section 425 of the Companies Act 1985 is proposed,
then:

 

11.10.1 the Vendor and the Purchaser shall, prior to taking any further steps in
connection with such winding up or arrangement, jointly instruct the Purchaser’s
Solicitors and the Vendor’s Solicitors to open the Escrow Account (if not
already established); and

 

11.10.2 the Vendor shall pay into the Escrow Account an amount equal to:

 

  11.10.2.1 10 per cent. of the aggregate of (i) the Consideration received by
the Vendor for the Shares and (ii) the Intercompany Debt; and

 

  11.10.2.2

in the event that the Purchaser has given notice of a Claim and such Claim has
not been settled or withdrawn (as defined in Clause 8.10.4),

--------------------------------------------------------------------------------

 

then provided the condition set out in Clause 8.10.2 is satisfied and subject to
Clause 11.10.6, the Vendor shall, in addition to the amount specified in Clause
11.10.2.1, pay into the Escrow Account an amount equal to Barrister’s Estimate
(in accordance with Clause 8.10.2 and subject to Clause 11) of the likely amount
of the purchaser’s recovery in respect of such Claim (the “Liquidation Escrow
Amount”).

 

11.10.3 following settlement or withdrawal of any Claim falling within Clause
11.10.2, the Purchaser and the Vendor shall, within ten Business days,
respectively instruct the Purchaser’s Solicitors and the Vendor’s Solicitors to
release from the Escrow Account an amount equal to the Liquidation Escrow Amount
of which

 

11.10.4 an amount equal to (i) the Liquidation Escrow Amount less (ii) a sum
equal to the amount (if any) for which such Claim shall have been settled plus
(iii) interest calculated at the rate applicable on the Escrow Account and the
amount of (i) less (ii) shall be paid to the Vendor; and the balance of the
Liquidation Escrow Amount plus interest on such balance shall be paid to the
Purchaser;

 

11.10.5 upon the seventh anniversary of Completion, an amount equal to the
aggregate of (i) the amount standing to the balance of the Escrow Account less
(ii) the aggregate of all Liquidation Escrow Amounts (to the extent that the
relevant Claim has not been settled or withdrawn or has been settled but the
amount due has not been paid) and a sum equal to interest on such Liquidation
Escrow Amounts shall be paid to the Vendor; and

 

11.10.6 if a Barrister’s Estimate is required to be given in relation to any
Claim and such Barrister’s Estimate has not been given by the seventh
anniversary of the Completion Date, payment pursuant to Clause 11.10.5 shall be
deferred to the third Business Day following receipt of such Barrister’s
Estimate.

PROVIDED ALWAYS THAT nothing in this Clause 11.10 shall prevent or prejudice the
Vendor from or in effecting any refinancing or restructuring of Vendor for the
benefit of its creditors.

 

11.11 The Vendor shall following Completion, within ten Business Days of receipt
of any valid notification of exercise in respect of any share option held by an
employee of any member of the Target Group pursuant to which such employee will
acquire shares in the Vendor, notify the relevant member of the Target Group and
the Purchaser in writing of the receipt of such notification of exercise.

 

11.12 Simultaneously with Completion, the Vendor shall procure that Bank of
America (at no cost to any member of the Target Group or the Purchaser and
without causing any of them to incur any liability), is repaid all sums owed to
it by any member of the Target Group and that the Bank of America redeems and/or
releases absolutely and unconditionally all Encumbrances it has over any of the
assets or shares of any member of the Target Group.

 

11.13

All sums payable by the Vendor to the Purchaser or any member of the Purchaser’s
Group under the Vendor Warranties, the Tax Covenant and the indemnity in Clause
11.8 of this Agreement shall be paid direct to the Purchaser and shall be
treated as an adjustment to the Consideration. All such sums payable by the
Vendor to the Purchaser

--------------------------------------------------------------------------------

 

shall be paid free and clear of any set off, counterclaim, deduction or
withholding whatsoever save only as provided in this Clause 11.13 or as may be
required by law.

 

11.13.1 If any deduction or withholding is required by law from any sum payable
by the Vendor to the Purchaser under this Clause 11.13, the amount so due shall
be increased to the extent necessary to ensure that, after the making of such
deduction or withholding, the Purchaser receives, on the due date for such
payment, a net sum equal to the sum which it would have received had no such
deduction or withholding been required to be made.

 

11.13.2 If any deduction or withholding is required as referred to in Clause
11.13.1, the Vendor shall:

 

  11.13.2.1 make such deduction or withholding; and

 

  11.13.2.2 pay or account for the full amount deducted or withheld to the
relevant taxation authority in accordance with applicable law; and

 

  11.13.2.3 furnish to the Purchaser the original, or a certified copy, of a
receipt or other document reasonably satisfactory to the Purchaser evidencing
such payment to the relevant taxation authority.

 

11.13.3 If any sum payable by the Vendor to the Purchaser under the Vendor
Warranties, the Tax Covenant and the indemnity in Clause 11.8 of this Agreement
shall be chargeable to tax by any taxation authority in the hands of the
Purchaser, or would be chargeable to tax but for the availability of an Accounts
relief or a Post Accounts-Date relief (as defined in the Tax Covenant), then the
amount so due shall be increased to the extent necessary to ensure that, after
payment of the tax, the Purchaser receives a net sum equal to the sum which it
would have received had the sum in question not been so charged to tax.

 

11.13.4 If the Purchaser receives a credit for or a refund of any taxation
payable by it or similar benefit by reason of

 

  11.13.4.1 in a case falling within Clause 11.13.2, any deduction or
withholding or any matter giving rise thereto; or

 

  11.13.4.2 in a case falling within Clause 11.13.3, the receipt by the
Purchaser of the payment on which it is subject to tax,

the Purchaser shall reimburse to the Vendor such part of such additional amounts
paid to it pursuant to Clause 11.13.2 or, as the case may be, Clause 11.13.3
above as the Purchaser (acting in good faith) certifies to the Vendor will leave
the Purchaser (after such reimbursement) in no better and no worse position than
it would have been in if the Vendor had not been required to make such deduction
or withholding or, as the case may be, the Purchaser had not been subject to tax
on the receipt of such payment.

 

11.14

For a period of six years from Completion, where the Purchaser wishes to make an
insurance claim in respect of a matter or circumstance occurring prior to
Completion, which claim would have been covered by policies of insurance
maintained by or on behalf of the Target Group prior to Completion, the Vendor
will, to the extent the same are relevant to the claim in question, make all
books, records and documents which relate to the Companies and the Subsidiaries
(insofar as the same record matters occurring on or

--------------------------------------------------------------------------------

 

before Completion) available for inspection by representatives of the Purchaser
at all reasonable times during business hours on reasonable advance notice being
given and solely for the purpose of the Purchaser pursuing such claim. The
Vendor will allow the Purchaser’s representatives to take copies (at the
Purchaser’s expense) of any of such books, records and documents reasonably
required by them.

 

12 Restrictions on the Vendor

 

12.1 Subject to Clause 12.2, the Vendor covenants with the Purchaser that (save
with the prior written consent of the Purchaser) it will, and shall procure that
each member of the Continuing Vendor Group will, (whether directly or
indirectly):

 

12.1.1 not following the Completion Date, save as required by applicable law or
regulation:

 

  12.1.1.1 communicate or divulge to any person; or

 

  12.1.1.2 make use or permit the use of

any Confidential Information concerning the business, finances or affairs of any
member of (i) the Purchaser’s Group or (ii) the Target Group or of any of their
respective customers or suppliers (insofar as, and solely to the extent that,
such Confidential Information of the Target Group relates to the Restricted
Business);

 

12.1.2 for the period of 24 months following the Completion Date, not anywhere
in the world, in competition with any member of the Target Group carry on any
business which competes with the Restricted Business;

 

12.1.3 for the period of 24 months following the Completion Date, not anywhere
in the world:

 

  12.1.3.1 solicit business from any Prospective Customer or Customer for the
purpose of providing to that Prospective Customer or Customer goods related to
the Restricted Business which are the same as or similar to those which any
member of the Target Group provided at any time in the six months preceding the
Completion Date; or

 

  12.1.3.2 solicit, offer employment to or seek to engage or engage the services
of any officer, director, consultant or senior or managerial employee of any
member of the Purchaser’s Group or the Target Group at the Completion Date
(whether or not such person would commit any breach of his contract of
employment or engagement by reason of leaving the service of such company);

 

12.1.4 following the Completion Date for so long as it is used by or registered
in the name of the Purchaser or any member of the Purchaser’s Group:

 

  12.1.4.1 not use; or

 

  12.1.4.2

not apply to register on any public register

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any trade or business name used by any member (i) of the Purchaser’s Group or
(ii) of the Target Group during the period of one year preceding the Completion
Date (including in particular but without limitation the names that include
either “Del Mar Reynolds” or “Hertford” (whether alone or in conjunction with
other names)) or any name similar to or likely to be confused with those names.

The Vendor acknowledges that in the event of a breach by the Vendor of any of
its obligations concerning confidentiality or this Clause 12 the Purchaser’s
Group may be caused injury, including loss of goodwill and harm to reputation
which cannot be adequately compensated in monetary damages. Accordingly, in
addition to any other legal remedies, the Vendor acknowledges that the Purchaser
may have the right to injunctive or other equitable relief.

 

12.2 Clauses 12.1.2 and 12.1.3 shall not restrict or otherwise prevent any
member of the Continuing Vendor Group:

 

12.2.1 from acquiring, and thereafter continuing to own and to operate, any
concern, undertaking, firm or body corporate (or any interest therein) which is
engaged or interested in the Restricted Business, provided that:

 

  12.2.1.1 the turnover attributable to the Restricted Business concerned does
not represent more than 10 per cent. of the total turnover of the concern,
undertaking, firm or body corporate so acquired, as at any time; and

 

  12.2.1.2 the turnover attributable to the Restricted Business concerned does
represent more than 10 per cent. of the total turnover of the concern,
undertaking, firm or body corporate so acquired, as at the time of its
acquisition, but the Vendor or a Group Company of the Vendor has participated in
such acquisition only with third parties (whether by consortia, joint venture,
partnership or otherwise) and only in order to acquire businesses or other
activities forming part of or carried on by such concern, undertaking, firm or
body corporate which are not Restricted Business; and

in either case such Restricted Business is disposed of by the relevant member or
members of the Continuing Vendor Group to a bona fide third party within 12
months of the date of such acquisition and the Vendor shall procure that the
Purchaser is offered a right of first refusal to acquire the Restricted Business
on such terms as the Vendor and the Purchaser may agree and in respect of such
right the Vendor shall act bona fide and such terms on which the Restricted
Business is offered to the Purchaser by the Vendor shall be no less favourable
than those offered by the Vendor to any third party.

 

12.2.2 from being interested solely for investment purposes in less than 3 per
cent. of any securities of any company whose securities are listed or quoted on
any recognised investment exchange in the United Kingdom; or

 

12.2.3

from disclosing, for the purpose of (i) preparing its tax returns in respect of
periods ending on or before the Completion Date or for the purpose of any
investigation, enquiry, audit or dispute in relation to its tax affairs in
respect of such periods, Confidential Information acquired pursuant to Clause
13.5 to (a) the relevant competent taxation authorities to the extent such
authorities require it and (b) to its professional advisers to

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the extent necessary for such purpose, provided that prior to such disclosure
such advisers are made aware of the confidential nature of the information or
(ii) as may be required during the course of any legal proceeding or by any
applicable law, rule or regulation.

 

12.2.4 The Vendor acknowledges and agrees that the duration, extent and
application of the restrictions in Clauses 12.1 and 12.2 are no greater than is
reasonable and necessary for the protection of the interests of the Purchaser.

 

12.3 Any member of the Continuing Vendor Group may enforce, or otherwise avail
itself of, the terms of Clause 12.2 in accordance with the Contracts (Rights of
Third Parties) Act 1999.

 

13 Purchaser Warranties

 

13.1 The Purchaser warrants to the Vendor that each of the Purchaser Warranties
is true and accurate and is not misleading at the date of this Agreement.

 

13.2 The Purchaser Warranties shall not in any respect be extinguished or
affected by Completion.

 

13.3 Without prejudice to the provision of Clause 19.2 (entire agreement, etc)
and of Schedule 5, the Purchaser acknowledges and agrees that upon Completion
all insurance cover provided in relation to the Target Group pursuant to
policies maintained by or on behalf of the Vendor or the Companies or any of the
Subsidiaries shall cease but (subject always to the terms of any relevant
policy) without prejudice to any accrued claims. Nothing in this Clause 13.3
shall, however, operate to limit or exclude any liability for fraud or
fraudulent misrepresentation.

 

13.4 The Purchaser Warranties are separate and independent and are not limited
or restricted by reference to or inference from the terms of any other provision
of this Agreement or any other Purchaser Warranty.

 

13.5 For a period of six years from Completion, the Purchaser will make all
books, records and documents which relate to the Companies and the Subsidiaries
(insofar as the same record matters occurring on or before Completion) available
for inspection by representatives of the Vendor at all reasonable times during
business hours on reasonable advance notice being given and solely for the
purpose of the Vendor complying with all statutes and regulations. The Purchaser
will allow the Vendor’s representatives to take copies (at the Vendor’s expense)
of any of such books, records and documents reasonably required by them.

 

14 Transitional Services

 

14.1

Subject to payment of the Service Charges in respect of the Ferraris Services by
the Purchaser, the Vendor shall provide, or procure the provision of, the
Ferraris Services to the Target Group for a period ending on the date falling
three months after the Completion Date for the purpose of providing continuity
of the services provided by the Vendor to the Target Group as at the date of
Completion. To the extent that any service required to ensure such continuity
does not comprise the Ferraris Services or to the extent such service does
comprise the Ferraris Services beyond the three month period referred

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to above (including in particular the DOC Control System Master Control
Services), the Parties shall negotiate in good faith with a view to agreeing the
nature of such additional services to be provided, and the Parties agree that
such services (to the extent and only to the extent that they ensure continuity
of such services), once agreed shall be provided at cost.

 

14.2 The Vendor shall provide the Purchaser with a calculation of the Service
Charges in respect of the Ferraris Services for each month and a valid VAT
invoice in relation thereto within ten Business Days of the end of that month,
and the Purchaser shall pay such Service Charges without any deduction, set off
or counterclaim within fifteen Business days of the date of such invoice.

 

14.3 Invoices in respect of the Ferraris Services shall be sent to Scott Stewart
(Finance Director of Spacelabs Healthcare, Issaquah, Washington) at the
Purchaser and shall be in the format agreed by the Parties from time to time,
or, if no form is agreed by the parties, in the form reasonably prescribed by
the Vendor from time to time.

 

14.4 Subject to payment of the Service Charges in respect of the Target Group
Services by the Vendor, the Purchaser shall provide, or procure the provision
of, the Target Group Services to the Continuing Vendor Group for a period ending
on the date falling three months after the Completion Date for the purpose of
providing continuity of the services provided by the Target Group to the Vendor
as at the date of Completion. To the extent that any service required to ensure
such continuity does not comprise the Target Group Services, the Parties shall
negotiate in good faith with a view to agreeing the nature of such additional
services to be provided, and the Parties agree that such services (to the extent
and only to the extent that they ensure continuity of such services), once
agreed shall be provided at cost.

 

14.5 The Purchaser shall provide the Vendor with a calculation of the Target
Group Service Charges in respect of the Target Group Services for each month and
a valid VAT invoice in relation thereto within ten Business Days of the end of
that month, and the Vendor shall pay such Target Group Service Charges without
any deduction, set off or counterclaim within fifteen Business days of the date
of such invoice.

 

14.6 Invoices in respect of the Target Group Services shall be sent to the
Vendor marked for the attention of Andrew Möring and shall be in the format
agreed by the Parties from time to time, or, no form is agreed by the parties,
in the form prescribed by the Purchaser from time to time.

 

15 Release

 

15.1 The Vendor confirms that as at Completion, save as acknowledged or provided
for by this Agreement, neither it nor any member of the Continuing Vendor Group
will have any claim (whether in respect of any breach of contract, right of
contribution or monies due to it or on any account whatsoever) outstanding
against any Target Company or against any of the directors, officers or
employees of any Target Company and that no agreement or arrangement will be
outstanding under which any Target Company or any of such persons has or could
have any obligation of any kind to it or any member of the Continuing Vendor
Group.

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15.2 To the extent that any such claim or obligation as is referred to in Clause
15.1 exists or may exist, the Vendor irrevocably and unconditionally waives (and
will procure the waiver of) such claim or obligation and releases (and will
procure the release of) each member of the Target Group and any such other
persons from any liability whatsoever in respect of such claim or obligation.

 

16 Taxation

 

16.1 The provisions of Schedule 7 shall have effect.

 

16.2 S338(h)(10)

 

   Code: The Internal Revenue Code of 1986

 

16.3 Both parties acknowledge that entering into elections to have the
provisions of Section 338(h)(10) of the Code (and the regulations thereunder and
similar provisions of state income tax law where permissible) may be in the
mutual best interests of the parties and both parties agree to discuss in good
faith such elections with a view to entering into such elections and agreeing a
reasonable division of the resulting benefits and assuming agreement thereon, to
proceed with the submission of such elections as soon as reasonably practicable
after Completion.

 

17 Confidentiality and announcements

 

17.1 Subject to the provisions of Clause 17.3 and save as expressly provided by
this Agreement, each of the Parties undertakes with the other that it:

 

17.1.1 will not communicate or permit communication of the terms of this
Agreement (including the names of the Parties) to any third party other than to;

 

  17.1.1.1 its professional advisers specifically instructed by it in connection
with the transaction referred to in this Agreement;

 

  17.1.1.2 to any person providing finance to enable the Purchaser to complete
the purchase of the Shares; and

 

  17.1.1.3 any proposed purchaser of a controlling interest in the Vendor
whether by way of takeover offer, a scheme of arrangement under Section 425 of
the Companies Act 1985 or otherwise; and

 

17.1.2 will instruct those professional advisers, providers of finance and
proposed purchasers not to communicate or permit communication of the terms of
this Agreement (including the names of the Parties) to any third party.

 

17.2 Subject to the provisions of Clause 17.3, neither Party shall issue any
press release or publish any circular to shareholders or any other public
document in each case relating to this Agreement or the matters contained in it,
without obtaining the prior written approval of the other Party to its contents
and the manner and extent of its presentation and publication or disclosure.

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17.3 The provisions of Clauses 17.1 and 17.2 do not apply to any communication
or announcement relating to or connected with or arising out of this Agreement
required to be made by the Purchaser, any member of the Purchaser’s Group, the
Target Group, the Vendor or any member of the Continuing Vendor Group:

 

17.3.1 by virtue of the regulations of the UK Listing Authority, the London
Stock Exchange (including the AIM market of the London Stock Exchange), the U.S.
Securities and Exchange Commission or the Panel on Takeovers and Mergers or any
other overseas regulated exchange or regulatory body; or

 

17.3.2 by any court or governmental or administrative authority competent to
require the same; or

 

17.3.3 by any applicable law or regulation.

 

18 Assignment

 

18.1 Subject to this Clause 18, this Agreement shall be binding upon and ensure
for the benefit of the successors and assignees of the Parties.

 

18.2 The benefit of, or any right or interest in or under or arising from, this
Agreement may be assigned by the Purchaser to any member of the Purchaser’s
Group save that any assignment so permitted shall provide that, immediately
prior to the assignee ceasing to be a member of the Purchaser’s Group, the
assignee shall re-assign the benefit, or any right or interest assigned, to the
Purchaser or another member of the Purchaser’s Group.

 

18.3 Save where an assignment of the benefit of this Agreement is required of
the Purchaser in favour of the Purchaser’s financing banks by the terms of the
Purchaser’s Funding and subject to Clause 18.2, each Party and its respective
successors and assignees shall not be entitled to (i) assign, (ii) transfer,
(iii) charge (iv) declare or create a trust or other interest over or (v) deal
in any other manner with this Agreement or any of its rights or obligations
under it without the prior written consent of the other Party.

 

19 General

 

19.1.1 The Vendor shall do or procure to be done all such further acts and
things and execute or procure the execution of all such other documents as the
Purchaser may from time to time reasonably require for the purpose of
(a) ensuring the transfer of the Shares in accordance with this Agreement and
(b) assisting the Purchaser, at the Purchaser’s cost, to bring up to date or
completing any registration of the Business Intellectual Property.

 

19.1.2 The Vendor will use its reasonable endeavours to assist the Purchaser in
complying with the Carve Out Audit required by the Securities Exchange
Commission regulations.

 

19.2.1 This Agreement, the documents in the Agreed Form and the other documents
referred to in them constitute the entire agreement between, and understanding
of, the Parties with respect to the subject matter of this Agreement and such
documents supersede any prior written or oral agreement(s) or arrangement(s)
between the Parties in relation thereto.

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19.2.2 Each party acknowledges and agrees that in entering into this Agreement,
and the documents referred to in it, it does not rely on, and shall have no
remedy in respect of, any statement, representation, warranty or understanding
(whether negligently or innocently made) of any person (whether party to this
Agreement or not) other than as expressly set out or referred to in (i) this
Agreement, (ii) the Agreed Form documents listed on the contents page and
(iii) the transitional services agreement entered into by DMRML and Ferraris
Respiratory Europe Limited on the date of this Agreement, the property agreement
entered into by the Purchaser, the Vendor, Ferraris Respiratory Europe Limited,
Ferraris Medical Limited and DMRML on the date of this Agreement (and the
licences to occupy to be entered into pursuant thereto) and the Kokolink
software licence agreement entered into by DMRML and Ferraris Respiratory Europe
Limited on or before Completion, whether as a Vendor Warranty or Purchaser
Warranty (as the case may be) or otherwise. Nothing in this Clause shall,
however, operate to limit or exclude any liability for fraud.

 

19.3 The Vendor waives, and shall procure that FGI waives, any rights of
pre-emption over the Shares conferred on or held by either of them either by
virtue of the Articles of Association, Certificate or Articles of Incorporation
Bye-Laws or any other governing instrument of either of the Companies or by
express agreement or otherwise.

 

19.4 Save as provided in Clauses 2.5, 5.4.3 and 11.5, the Purchaser shall not be
entitled to rescind or otherwise terminate this Agreement in the event of any
breach of this Agreement or in any other circumstances.

 

19.5 Subject to the indemnity for costs in favour of the Purchaser set out in
Clause 2.3 and to the remaining provisions of this Clause 19.5, each Party shall
pay its own costs and expenses of and incidental to the negotiation,
preparation, execution and implementation by it of this Agreement, of each
document referred to in it and the sale and purchase of the Shares provided that
if the Purchaser shall terminate this Agreement in accordance with Clause 5.4.3
or Clause 11.5, then the Vendor shall pay the reasonable costs of the Purchaser
in accordance with Clause 2.3 subject to the maximum amount set out therein.

 

19.6 Without prejudice to Clause 19.5, all stamp, transfer, registration and
other similar taxes, duties and charges payable in connection with the transfer
of the Shares, shall be paid by the Purchaser.

 

19.7 Subject to Clauses 10.10 and 11.10, all payments to be made by the
Purchaser under this Agreement or any of the documents referred to in it, shall
be made free from any set off, counterclaim or other deduction of any nature
whatsoever except for deductions required to be made by law.

 

19.8 The failure or delay of either Party at any time or times to require
performance of any provision of this Agreement shall not affect its right to
enforce such provision at a later time.

 

19.9.1 No waiver by either Party of any condition or of the breach of any term,
covenant, representation, warranty or undertaking contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed to
be or construed as a further or continuing waiver of any such condition or
breach or a waiver of any other condition or of the breach of any other term,
covenant, representation, warranty or undertaking in this Agreement.

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19.9.2 Any liability to either Party under this Agreement may in whole or in
part be released, compounded or compromised and time or indulgence may be given
by the other Party in its absolute discretion under such liability without in
any way prejudicing or affecting its rights against any other Party under the
same or a like liability.

 

19.9.3 This Agreement shall, as to any of its provisions remaining to be
performed or capable of having or taking effect following Completion, remain in
full force and effect notwithstanding Completion.

 

19.10 If any provision of this Agreement shall be found by any court or
administrative body of competent jurisdiction to be invalid or unenforceable,
such invalidity or unenforceability shall not affect the other provisions of
this Agreement which shall remain in full force and effect, and the provision(s)
found to be unenforceable shall be limited or redrawn to the extent possible to
give effect to the intentions of the parties.

 

19.11 This Agreement or any of the documents referred to in it may be amended,
modified, superseded or cancelled and any of its terms, covenants,
representations, warranties, undertakings or conditions may be waived only by an
instrument in writing signed by (or by some person duly authorised by) each of
the Parties or, in the case of a waiver, by the Party waiving compliance.

 

19.12 This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be an original, and all the
counterparts together shall constitute one and the same instrument.

 

20 Notices

 

   Any notice given under this Agreement shall be in writing and shall be served
by delivering it personally or sending it by pre-paid recorded delivery or
registered post or fax to the address and for the attention of the relevant
Party set out in Clause 20.2 (or as otherwise notified by that Party under this
Agreement). Any such notice shall be deemed to have been received:

 

20.1.1 if delivered personally, at the time of delivery;

 

20.1.2 in the case of pre-paid recorded delivery or registered post, 72 hours
from the date of posting;

 

20.1.3 in the case of fax, at the time of transmission.

 

   provided that if deemed receipt (but for this proviso) would have occurred
before 9 a.m. on a Business Day the notice shall be deemed to have been received
at 9 a.m. on that day, and if deemed receipt (but for this proviso) would have
occurred after 5 p.m. on a Business Day, or on a day which is not a Business
Day, the notice shall be deemed to have been received at 9 a.m. on the next
Business Day.

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20.2 The addresses and fax numbers of the Parties for the purposes of Clause
20.1 are:

 

The Vendor

  

Address:

  

6th Floor

Bennetts Hill

Birmingham

B2 5SN

For the attention of:

  

Simon Dighton, CFO

Fax number:

  

+44 (0) 121 200 3034

The Purchaser

Address:

  

5150 220th Avenue SE

Issaquah

Washington 98029

The United States of America

 

   The addresses and fax numbers of the Parties’ respective accountants for the
purposes of this Agreement are:

 

The Vendor’s Accountant

  

Address:

  

4 Brindley Place

Birmingham

B1 2HZ

For the attention of:

  

Peter Hartill

Fax number:

  

+44(0) 121 695 5793

The Purchaser’s Accountant

  

Address:

  

Moss Adams LLP

 

   or such other address or fax number in the United Kingdom as may be notified
in writing from time to time by the relevant Party to the other Party for the
purposes of this Clause.

 

20.3 The Purchaser irrevocably appoints the Purchaser’s Solicitors as its agent
to receive on its behalf in England service of any proceedings arising out of or
in connection with this Agreement. Such service shall be deemed completed on
delivery to such agent (whether or not it is forwarded to and received by the
Purchaser.

 

20.4 In proving such service it shall be sufficient to prove that the envelope
containing such notice was addressed to the address of the relevant Party set
out in Clause 20.2 (or as otherwise notified by that Party under this Agreement)
and delivered either to that address or into the custody of the postal
authorities as a pre-paid recorded delivery or registered post letter, or that
the notice was transmitted by fax to the fax number of the relevant Party set
out in Clause 20.2 (or as otherwise notified by that Party under this
Agreement).

 

20.5 For the avoidance of doubt, notice given under this Agreement shall not be
validly served if sent by e-mail.

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21 Governing law and jurisdiction

 

21.1 This Agreement shall be governed by and construed in accordance with the
laws of England.

 

21.2 In the case of any claim, dispute or matter:

 

21.2.1 arising prior to Completion out of or relating to this Agreement or any
of the documents to be executed pursuant to this Agreement, the Parties submit
to the exclusive jurisdiction of the courts of England and Wales; and

 

21.2.2 arising after Completion out of or relating to this Agreement or any of
the documents to be executed pursuant to this Agreement, the Parties submit to
the exclusive jurisdiction of the courts of the defendant, being the courts of
the State of California in the case of the Purchaser and the courts of England
and Wales in the case of the Vendor.

 

21.3 Each Party irrevocably consents to any process in any legal action or
proceedings arising out of or in connection with this Agreement being served on
it in accordance with the provisions of this Agreement relating to service of
notices. Nothing contained in this Agreement shall affect the right to serve
process in any other manner permitted by law.

EXECUTED by the Parties on the date set out at the head of this Agreement.