Exhibit 10.27


 


 


SHARE PURCHASE
AGREEMENT


 


BY AND AMONG


 


ALTRA INDUSTRIAL
MOTION, INC.,


 


AND


 


THE PERSONS LISTED
IN EXHIBIT A HERETO


 


Dated as of November 7,
2005


 





















 


TABLE OF CONTENTS


 


	
  Section

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Certain
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  SALE AND PURCHASE OF SHARES

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Sale
  and Purchase of Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Waiver
  of Preemption

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  PURCHASE PRICE

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Purchase
  Price

  	
   

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Payment
  of Purchase Price

  	
   

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Purchase
  Price Adjustment

  	
   

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Payment
  of Indebtedness

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  CLOSING AND TERMINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Closing
  Date

  	
   

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Closing
  Deliverables

  	
   

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Termination
  of Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Procedure
  Upon Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  4.5

  	
  Effect
  of Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REPRESENTATIONS AND WARRANTIES OF SELLERS

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Authorization
  of Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Ownership
  and Transfer of the Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Capitalization
  of the Company

  	
   

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  The
  Company and Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  5.5

  	
  Organization
  and Good Standing

  	
   

  
	
   

  	
   

  	
   

  
	
  5.6

  	
  Authorization
  of Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  5.7

  	
  Conflicts;
  Consents of Third Parties

  	
   

  
	
   

  	
   

  	
   

  
	
  5.8

  	
  Directors
  and Shadow Directors

  	
   

  
	
   

  	
   

  	
   

  
	
  5.9

  	
  Associated
  Companies

  	
   

  
	
   

  	
   

  	
   

  
	
  5.10

  	
  Corporate
  Records

  	
   

  
	
   

  	
   

  	
   

  
	
  5.11

  	
  Financial
  Statements

  	
   

  
	
   

  	
   

  	
   

  
	
  5.12

  	
  No
  Undisclosed Liabilities

  	
   

  
	
   

  	
   

  	
   

  
	
  5.13

  	
  Absence
  of Certain Developments

  	
   

  



 


i





















 


	
  5.14

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  5.15

  	
  Real Property

  	
   

  
	
   

  	
   

  	
   

  
	
  5.16

  	
  Tangible Personal Property

  	
   

  
	
   

  	
   

  	
   

  
	
  5.17

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  
	
  5.18

  	
  Material Contracts

  	
   

  
	
   

  	
   

  	
   

  
	
  5.19

  	
  Employee Benefits Plans

  	
   

  
	
   

  	
   

  	
   

  
	
  5.20

  	
  UK Pensions

  	
   

  
	
   

  	
   

  	
   

  
	
  5.21

  	
  Employees.

  	
   

  
	
   

  	
   

  	
   

  
	
  5.22

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  
	
  5.23

  	
  Compliance with Laws; Permits and Data
  Protection

  	
   

  
	
   

  	
   

  	
   

  
	
  5.24

  	
  Environmental Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  5.25

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  
	
  5.26

  	
  Inventories

  	
   

  
	
   

  	
   

  	
   

  
	
  5.27

  	
  Accounts and Notes Receivable and Payable

  	
   

  
	
   

  	
   

  	
   

  
	
  5.28

  	
  Related Party Transactions

  	
   

  
	
   

  	
   

  	
   

  
	
  5.29

  	
  Customers and Suppliers

  	
   

  
	
   

  	
   

  	
   

  
	
  5.30

  	
  Product Warranty; Product Liability

  	
   

  
	
   

  	
   

  	
   

  
	
  5.31

  	
  Banks

  	
   

  
	
   

  	
   

  	
   

  
	
  5.32

  	
  Financial and Other Advisors

  	
   

  
	
   

  	
   

  	
   

  
	
  5.33

  	
  Insolvency and Winding Up

  	
   

  
	
   

  	
   

  	
   

  
	
  5.34

  	
  Competition and Trade Regulation Law

  	
   

  
	
   

  	
   

  	
   

  
	
  5.35

  	
  Foreign Corrupt Trade Practices Act

  	
   

  
	
   

  	
   

  	
   

  
	
  5.36

  	
  Unusual or Onerous Commitments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  REPRESENTATIONS AND WARRANTIES OF
  PURCHASER

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Organization and Good Standing

  	
   

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Authorization of Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Conflicts; Consents of Third Parties

  	
   

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  
	
  6.5

  	
  Investment Intention

  	
   

  
	
   

  	
   

  	
   

  
	
  6.6

  	
  Financial Advisors

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Access to Information

  	
   

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Conduct of the Business Pending the Closing

  	
   

  



 


ii





















 


	
  7.3

  	
  Consents

  	
   

  
	
   

  	
   

  	
   

  
	
  7.4

  	
  Lease Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  7.5

  	
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  
	
  7.6

  	
  No Shop

  	
   

  
	
   

  	
   

  	
   

  
	
  7.7

  	
  Non-Competition; Non-Solicitation;
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  
	
  7.8

  	
  Preservation of Records

  	
   

  
	
   

  	
   

  	
   

  
	
  7.9

  	
  Publicity

  	
   

  
	
   

  	
   

  	
   

  
	
  7.10

  	
  Use of Name

  	
   

  
	
   

  	
   

  	
   

  
	
  7.11

  	
  Cooperation with Financing

  	
   

  
	
   

  	
   

  	
   

  
	
  7.12

  	
  Related-Party Transactions with
  Non-Management Affiliates

  	
   

  
	
   

  	
   

  	
   

  
	
  7.13

  	
  Notification of Certain Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  7.14

  	
  Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  7.15

  	
  Tax Credits

  	
   

  
	
   

  	
   

  	
   

  
	
  7.16

  	
  Updated Disclosure Schedule

  	
   

  
	
   

  	
   

  	
   

  
	
  7.17

  	
  Pre-Sale Reorganisation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  CONDITIONS TO CLOSING

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Conditions Precedent to Obligations of
  Purchaser

  	
   

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Conditions Precedent to Obligations of
  Sellers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Survival of Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Indemnification Procedures

  	
   

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Limitations on Indemnification for Breaches
  of Representations and Warranties and pre-Closing Liability not reflected in
  the Closing Balance Sheet

  	
   

  
	
   

  	
   

  	
   

  
	
  9.5

  	
  Indemnity Escrow

  	
   

  
	
   

  	
   

  	
   

  
	
  9.6

  	
  Tax Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  9.7

  	
  Tax Treatment of Indemnity Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Expenses

  	
   

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Specific Performance

  	
   

  
	
   

  	
   

  	
   

  
	
  10.3

  	
  Submission to Jurisdiction; Consent to
  Service of Process

  	
   

  
	
   

  	
   

  	
   

  
	
  10.4

  	
  Entire Agreement; Amendments and Waivers

  	
   

  



 


iii





















 


	
  10.5

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  10.6

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  10.7

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  10.8

  	
  Binding Effect; Assignment

  	
   

  
	
   

  	
   

  	
   

  
	
  10.9

  	
  Non-Recourse

  	
   

  
	
   

  	
   

  	
   

  
	
  10.10

  	
  Rights of Third Parties

  	
   

  
	
   

  	
   

  	
   

  
	
  10.11

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  10.12

  	
  Sellers’ Representative

  	
   

  



 


iv





















 


 


	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A –
  List of the Sellers and Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit B –
  List of all Subsidiaries in the Group and Structure Chart as at the date of
  this Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit B-1
  – List of the Excluded Subsidiaries (following the Pre-Sale Reorganisation)

  	
   

  
	
   

  	
   

  	
   

  



 


v





















 


SHARE PURCHASE AGREEMENT


 


This SHARE PURCHASE AGREEMENT is dated as of November 7,
2005 (the “Agreement”), by and among Altra Industrial Motion, Inc.,
a corporation existing under the laws of the State of Delaware (“Purchaser”)
and the several persons whose details are set out in Exhibit A
(together the “Sellers”).


 


RECITALS


 


1.             The
Sellers are on the date of this Agreement, the owners of certain shares in the
capital of Hay Hall Holdings Limited, a company organized and existing under
the laws of England and Wales (registered number 04895052) (the “Company”)
(as set forth in Exhibit A, Part I) and will, prior to Closing,
be the owners of the entire issued share capital of the Company in the
proportions set out against their names in Exhibit A, Part II
(the “Shares”), which Shares are further designated as “A Shares,”
“B Shares,” and “C Shares”, as more specifically set forth on Exhibit A.


 


2.             The
Company and its direct or indirect subsidiaries (listed on Exhibit B
(the “Subsidiaries”) together with the Company (the “Group”)) are
principally engaged in the business of designing, manufacturing and supplying
industrial brakes, couplings and clutches for a variety of industrial motion
control applications (the “Business”).


 


3.             Sellers
desire to sell the Shares with full title guarantee and free from any Lien to
Purchaser (or its designated Affiliate or Affiliates), and Purchaser (or its
designated Affiliate or Affiliates) desires to purchase from Sellers, the
Shares with all rights attaching to the Shares for the purchase price and upon
the terms and conditions hereinafter set forth, and thereby directly acquire
100% legal and beneficial ownership of the Company and, as a result, direct or
indirect legal and beneficial ownership of the Subsidiaries of the Company set
forth on Exhibit B (other than the Excluded Subsidiaries set forth
on Exhibit B-1).


 


4.             Certain
terms used in this Agreement are defined in Section 1.1:


 


NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements hereinafter contained, the parties hereby
agree as follows:


 


ARTICLE I



DEFINITIONS


 


1.1           Certain
Definitions.


 


(a)           For purposes of
this Agreement, the following terms shall have the meanings specified in this Section 1.1:


 


1





















 


“Accounts Date” means 31st December 2004.


 


“Affiliate” means, with respect to any Person,
any other Person that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such Person, and the term “control” (including the terms “controlled by” and “under
common control with”) means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities, by contract or
otherwise.


 


“Affiliated Group” means any group of entities
that files any Tax Returns or pays any Taxes, or is required to file any Tax
Returns or to pay any Taxes, on a combined, consolidated or unitary basis.


 


“Antitrust Laws” means any Laws, Orders or
administrative or judicial doctrines that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade.


 


“Baldrey Consultancy Agreement” means the
consultancy agreement to be entered into by the Company and Philip Baldrey at
or immediately prior to the Closing.


 


“Bank Debt” means the sums specified by Bank of
Scotland as being the amount due or owing to it at the Closing Date in relation
to the repayment of all monies lent to the Group under existing banking
facilities.


 


“Bank of Scotland” means the Governor and the
Company of the Bank of Scotland.


 


“Beagle Agreement” means the agreement in the
agreed form set forth as Exhibit K, pursuant to which the Company will
acquire certain shares in the capital of The Hay Hall Group Limited from Beagle
Assets LLC.


 


“Business Day” means any day of the year on
which national banking institutions in London are open to the public for
conducting business and are not required or authorized to close.


 


“Cash and Cash Equivalents” means cash and bank
deposits as reflected in bank statements, short term investments and
certificates of deposit less the amounts of any unpaid checks, drafts and wire
transfers issued, in each
case by the Company or its Subsidiaries, on or prior to the date of
determination, calculated on a basis consistent with the preparation of the
Financial Statements, and as set forth in the Closing Balance Sheet and the
Closing Cash Statement excluding any amounts subject to set off arrangements
within the Bank of Scotland working capital facility.


 


“Closing Cash” means the Cash and Cash
Equivalents of the Company and its Subsidiaries as of the open of business on
the Closing Date.


 


“Closing Indebtedness” means the Indebtedness
of the Company and its Subsidiaries as of the open of business on the Closing
Date, including, without limitation, the


 


2





















 


Bank Debt and any payments related to or arising from
or made by, or for the benefit of, the Company or any Subsidiary, in connection
with The Hay Hall Group Pension Scheme, the Employee Bonuses and the sale of certain
shares in the capital of The Hay Hall Group Limited as contemplated by the
Metlife Agreement and the Beagle Agreement (including any applicable stamp duty
and stamp duty reserve taxes related thereto) and the deferred consideration
payable by Huco Engineering Industries Limited pursuant to the Dynatork Acquisition,
whether such payments are funded by the Company’s existing banking facilities
or otherwise.


 


“Code” means the United States Internal Revenue
Code of 1986, as amended.


 


“Companies Act” means the Companies Act 1985
(as amended).


 


“Company’s Transaction Expenses” shall mean the
aggregate amount of all Employee Bonuses and all fees and expenses of the
brokers, counsel, accountants, investment banks and other advisors as set forth
on Schedule 5.32 of the Disclosure Schedule incurred on behalf
of the Company or the Subsidiaries in connection with, or in contemplation of,
the transactions contemplated by this Agreement, and representing all fees and
expenses due to such brokers, counsel, accountants, investment banks and other
advisors through the Closing Date; it being understood that any Company’s
Transactions Expenses that are not paid by the Company or the Subsidiaries prior
to the Closing Date shall be treated as the Company’s Indebtedness for purposes
of the Agreement.


 


“Compromise Agreements” means the compromise
agreements in the agreed form to be entered into by Philip Baldrey and Roger
Burdett with The Hay Hall Group Limited at or immediately prior to the Closing,
attached hereto as Exhibit C.


 


“Contract” means any contract, agreement,
indenture, note, bond, mortgage, loan, instrument, lease, license, commitment
or other arrangement, understanding, undertaking, commitment or obligation,
whether written or oral.


 


“Corporate Insolvency Event” means, in relation
to any company or partnership, that:


 


(i)            it
stops or suspends or threatens, or announces an intention to stop or suspend,
payment of its debts;


 


(ii)           it
is, for the purpose of section 123 of the Insolvency Act 1986 (on the
basis that the words “proved to the satisfaction of the court” are deemed
omitted from sections 123(1)(e) and 123(2) of that Act) or any other
applicable law, deemed to be insolvent or unable, or admits its inability, to
pay its debts as they fall due or becomes insolvent or a moratorium is declared
in relation to any of its Indebtedness;


 


(iii)          any
encumbrancer takes possession of, or a receiver, administrative receiver or
administrator or similar officer is appointed over or in relation to, all or
any material part of its assets;


 


(iv)          a
meeting is convened, an application is made or any other step is taken, or any
notice is given of the intention to convene a meeting or take any other step,
for the


 


3





















 


purpose
of appointing a receiver, administrative receiver or other similar officer of
or in relation to it;


 


(v)           an
application is made or any other such document is issued, a meeting is
convened, or any other step is taken, or any notice is given of the intention
to convene a meeting or take any other step, for the purpose of appointing an
administrator or other similar officer of, or for the making of an
administration order in relation to it;


 


(vi)          it
convenes a meeting of its creditors generally or takes any step with a view to
a moratorium or proposes or makes any arrangement or composition with, or any
assignment for the benefit of, its creditors generally;


 


(vii)         it
proposes or enters into any negotiations for or in connection with the
rescheduling, restructuring or re-adjustment of any Indebtedness by reason of,
or with a view to avoiding, financial difficulties;


 


(viii)        (other
than in connection with a solvent reorganization) any meeting is convened for
the purpose of considering any resolution for (or to petition for) its winding
up or any such resolution is passed;


 


(ix)           a
petition or any other such document is presented or an order is made for its
winding up (other than a frivolous or vexatious petition, or any other such
document, dismissed, withdrawn or discharged within 14 days of being presented
or any other petition which is contested on bona fide grounds and dismissed,
withdrawn or discharged prior to the winding-up order being made);


 


(x)            a
creditor attaches or takes possession of, or a distress, execution,
sequestration or other process is levied or enforced upon or against all or any
part of its assets in respect of Indebtedness exceeding $50,000 (or its
equivalent) in aggregate at any time and which is not discharged within 14 days
of such act;


 


(xi)           any
order is made, any resolution is passed or any other action is taken for the
suspension of payments by it, or protection from its creditors; or


 


(xii)          there
occurs in relation to it or any of its assets in any country or territory in
which it is incorporated or carries on business or to the jurisdiction of whose
courts it or any of its assets is subject any event which corresponds in that
country or territory with or is equivalent or analogous to any of those
mentioned in paragraphs (i) to (xi) (inclusive) of this definition.


 


“Deed of Termination” means the deed of
termination in the agreed form to be entered into by Bibby Group Limited and
Paul Selini in respect of the put and call option agreement relating to shares
in Bibby Group Limited dated 2 July 1999.


 


“Dynatork Acquisition Agreement” means the
agreement dated 31 July 2005 between Ian Thompson and others and Huco
Engineering Industries Limited relating to the sale and purchase of the entire
issued share capitals of Dynatork Limited and Dynatork Air Motors Limited.


 


4





















 


“Employee Bonuses” means the payments to be
made to certain employees by the Company or a Subsidiary, which payments are
more particularly described on Schedule 5.21(a) of the Disclosure Schedule provided
that, for the purposes of identifying the amount of any Employee Bonuses for
any of the purposes of this Agreement, the amount of any Employee Bonus shall
include the amount of any payment made to the employee or employees concerned
(before taking account of any requirement to deduct any applicable taxes or
national insurance contributions) together with any national insurance
contributions which the Company or Subsidiary concerned must account for to any
Taxing Authority other than those which fall to be deducted from any payment
made to the employee concerned and accounted for accordingly.  It shall be understood for the purposes of
this definition that the aggregate amount of the Employee Bonuses shall be
treated as the Company’s Indebtedness for purposes of the Agreement to the
extent that the Employee Bonuses are not paid from the Company’s existing
banking facilities.


 


“Engineered Systems Business” means the
business of the engineered systems division of Matrix International Limited, with
the assets set forth on Schedule 1.1 constituting the assets used exclusively
in the Engineered Systems Business.


 


“Environmental Costs and Liabilities” means,
with respect to any Person, all liabilities, obligations, responsibilities,
Remedial Actions, losses, damages, punitive damages, consequential damages, costs
and expenses relating to any such matter(including all reasonable fees,
disbursements and expenses of counsel, experts and consultants and costs of
investigation and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any claim or demand by any other Person or in
response to any violation of Environmental Law, whether known or unknown,
accrued or contingent, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, to the extent based
upon, related to, or arising under or pursuant to any Environmental Law,
Environmental Permit, Order or agreement with any Governmental Body or other
Person, which relates to any environmental, health or safety condition,
violation of Environmental Law or a Release or threatened Release of Hazardous
Materials.


 


“Environmental Law” means any applicable United
Kingdom, foreign, United States federal, state or local statute, regulation,
ordinance, rule of common law or other legal requirement or code of practice
or published guidance, in any such case, having the force of law, in any way
relating to the protection of human health and safety, the environment or
natural resources, or the condition of the workplace or the generation,
transportation, storage or disposal of any Hazardous Materials, including,
without limitation, the Environmental Protection Act 1990, the Pollution
Prevention and Control Act 1999 and the Water Resources Act 1991, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
§ 9601 et  seq.), the Hazardous Materials Transportation Act
(49 U.S.C. App. § 1801 et  seq.), the Resource
Conservation and Recovery Act (42 U.S.C. § 6901 et  seq.),
the Clean Water Act (33 U.S.C. § 1251 et  seq.), the Clean
Air Act (42 U.S.C. § 7401 et  seq.), the Toxic
Substances Control Act (15 U.S.C. § 2601 et  seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et
seq.), and the Occupational Safety and Health Act (29 U.S.C. § 651 et
seq.), and any analogous laws in Germany, Sweden, India and South
Africa, as each has been or may be amended and the regulations promulgated
pursuant thereto.


 


5





















 


“Environmental Permit” means any Permit
required by Environmental Laws for the operation of the Company and the
Subsidiaries.


 


“ERISA” means the Employment Retirement Income
Security Act of 1974, as amended.


 


“Escrow Agent” means such party serving as
escrow agent to Purchaser and Sellers pursuant to the Escrow Agreement, as set
forth therein.


 


“Escrow Agreement” means that certain Escrow
Agreement, dated as of the Closing Date, by and among Purchaser, Sellers and
the Escrow Agent, in substantially the form attached hereto as Exhibit D.


 


“Excluded Subsidiaries” shall mean such
Subsidiaries of the Company that, following the consummation of the
transactions contemplated by the Pre-Sale Reorganisation, will no longer be
Subsidiaries of the Company as of the Closing, as more specifically set forth
on Exhibit B-1.


 


“GAAP” means generally accepted accounting
principles in the United Kingdom as of the date hereof.


 


“Governmental Body”  means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether in the
United Kingdom, United States federal, state, local or foreign, national or
supranational, or any agency, instrumentality or authority thereof, or any
court or arbitrator (public or private).


 


“Hay Hall Leicester Loan” means the outstanding
loan between Hay Hall Leicester Limited and The Hay Hall Group Limited.


 


“Hazardous Material”  means any substance, material or waste that
is regulated, classified, or otherwise characterized under or pursuant to any
Environmental Law as “hazardous,” “toxic,” “pollutant,” “contaminant,” “radioactive,”
or words of similar meaning or effect, including without limitation, petroleum
and its by-products, asbestos, polychlorinated biphenyls, radon, mold, urea
formaldehyde insulation.


 


“ICTA” means the Income and Corporation Taxes
Act 1988.


 


“Indebtedness” of any Person means, without
duplication, (i) the outstanding principal, accrued and unpaid interest,
prepayment and redemption premium (if any), unpaid fees or expenses and other
monetary obligations in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable; (ii) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable and other accrued
current liabilities arising in the Ordinary Course of Business); (iii) all
obligations of such Person under leases required to be capitalized in
accordance with GAAP (not of any unamortized financing costs relating to such
leases); (iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker’s


 


6





















 


acceptance or similar credit transaction; (v) the
liquidation value, accrued and unpaid dividends and prepayment or redemption
premium (if any), unpaid fees or expenses and other monetary obligations in
respect of any redeemable preferred stock of such Person; (vi) all
obligations of the type referred to in clauses (i) through (v) of
any Persons for the payment of which such Person is responsible or liable,
directly or indirectly, as obligor, guarantor, surety or otherwise, including
guarantees of such obligations (but excluding guarantees issued by Bank of
Scotland on the Group’s behalf in the Ordinary Course of Business as the same
are more specifically set forth on Schedule 5.18(a) of the
Disclosure Schedule); and (vii) all obligations of the type referred to in
clauses (i) through (vi) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person).


 


“Intellectual Property” means all intellectual
property rights owned or used by the Company and the Subsidiaries arising from
or in respect of the following, whether protected, created or arising under the
laws of the United States, the United Kingdom or any other jurisdiction and whether
registered or unregistered and including applications for the grant of any such
rights and any and all forms of protection having equivalent or similar effect
including:  (i) all patents and
applications therefor, including continuations, divisionals,
continuations-in-part, or reissues of patent applications and patents issuing
thereon, and all similar rights arising under the Laws of any jurisdiction
(collectively, “Patents”), (ii) all trademarks, service marks,
trade names, service names, brand names, trade dress rights, logos, Internet
domain names and corporate names and general intangibles of a like nature,
together with the goodwill associated with any of the foregoing, and all
applications, registrations and renewals thereof, (collectively, “Marks”),
(iii) copyrights and registrations and applications therefor, database
rights, works of authorship, moral rights and mask work rights (collectively, “Copyrights”),
(iv) discoveries, concepts, ideas, research and development, know-how,
formulae, inventions, compositions, manufacturing and production processes and
techniques, technical data, procedures, designs, drawings, specifications,
databases, and other proprietary and confidential information, including
customer lists, supplier lists, pricing and cost information, and business and
marketing plans and proposals of the Company and the Subsidiaries, in each case
excluding any rights in respect of any of the foregoing that comprise or are
protected by Copyrights or Patents (collectively, “Trade Secrets”), (v) rights
in designs and registered designs (collectively “Designs”), and (vi) all
Software and Technology owned or used by the Company and the Subsidiaries.


 


“Intellectual Property Licenses” means (i) any
grant to a third Person of any right to use any of the Intellectual Property,
and (ii) any grant to the Company or any Subsidiary of a right to use a
third Person’s intellectual property rights included in the Intellectual
Property.


 


“IRS” means the United States Internal Revenue
Service and to the extent relevant, the United States Department of Treasury.


 


“Knowledge” means, with respect to any Person
that is not an individual, the actual knowledge after reasonable inquiry of
such Person’s directors and executive officers and all other officers and managers
having responsibility for the applicable matter or, in the case of the Sellers,
actual knowledge after reasonable inquiry of the individuals listed on Schedule 1.2.


 


“Key Employees” means a person (i) who is
or was engaged or employed by any member of the Group, at any time during the
12 month period immediately preceding the


 


7





















 


Closing Date, in a managerial, supervisory, technical
or sales capacity, or (ii) who is or was engaged or employed by any member
of the Group, at any time during the 12 month period immediately preceding the
Closing Date, as an employee, director or consultant earning more than £50,000
per annum.


 


“Law” means any foreign, United Kingdom, United
States federal, state or local law (including common law), statute, code,
ordinance, rule, regulation or other requirement.


 


“Lease Agreement” means the certain lease
agreement, dated as of the Closing Date, by and among Purchaser, Matrix
International Limited (f/k/a Matrix Engineering Limited) and Matrix Engineered
Systems Limited (f/k/a Matrix International Limited), in substantially the form
attached hereto as Exhibit E.


 


“Legal Proceeding” means any judicial,
administrative or arbitral actions, suits, investigations, proceedings or claims
by or before a Governmental Body.


 


“Liability” means any debt, loss, damage,
adverse claim, liability or obligation of whatever nature, and including all
costs and expenses relating thereto.


 


“Lien” means any lien, pledge, mortgage, deed
of trust, security interest or charge, and, in addition, in respect of the
Shares only, any claim or transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever,
having similar effect.


 


“Loan Notes” means the unsecured loan notes due
2006 to be issued by the Purchaser or its designated Affiliate to the Sellers
pursuant to this Agreement in the form attached hereto as Exhibit F.


 


“Loan Note Escrow Agreement” means the
agreement in substantially the form set out in Exhibit M to be entered
into between the escrow agent (named therein), the issuer of the Loan Notes and
the Sellers.


 


“Loan Note Redemption Amount” means the amount
in Dollars equal to the sum of £3,000,000.


 


“Material Adverse Effect” means (i) a material
adverse effect on the business, assets, properties, trading position or profit
or condition (financial or otherwise) of the Company or the Subsidiaries or (ii) any condition or event or
series of events that results in, or could reasonably be expected to result in,
Liability to the Company or any Subsidiary of $1,000,000 or more; provided,
however, that a Material Adverse Effect shall not include an effect
resulting from a change (a) in applicable laws, (b) in economic,
business or financial market conditions generally, so long as such conditions
do not disproportionately affect the Company and its Subsidiaries (in
comparison to the industry in general), or (c) due to acts of terrorism
that do not directly affect the Business, the Company or its Subsidiaries.


 


“Metlife Agreement” means the agreement in the agreed
form set forth as Exhibit G, pursuant to which the Company will
acquire certain shares in the capital of The Hay Hall Group Limited from
Metropolitan Life Insurance Company.


 


8





















 


“Minority Shares” means those Shares identified
on Schedule 1.3, which as at the date of this Agreement are owned
by PPMC Nominees Limited, Stuart Wallis and David Baker.


 


“Minority Share Purchase Agreements” means those
certain agreements in the agreed form, pursuant to which the Sellers have
agreed to purchase the Minority Shares from PPMC Nominees Limited, Stuart
Wallis and David Baker respectively.


 


“Nyquist Consultancy Agreement” means the
consultancy agreement to be entered into by Inertia Dynamics, Inc. and Inertia
Dynamics, LLC (or such other corporate entity reasonably acceptable to the Purchaser)
at or immediately prior to the Closing in respect of the provision of certain
services by Steve Nyquist to Inertia Dynamics, Inc.


 


“Order” means any order, injunction, judgment,
decree, ruling, writ, enforcement or prohibition notice, assessment or
arbitration award of a Governmental Body.


 


“Ordinary Course of Business” means the
ordinary and usual course of day-to-day operations of the Business through the
date hereof consistent with past practice.


 


“Permits” means any approvals, authorizations,
consents, licenses, permits or certificates of a Governmental Body or
otherwise.


 


“Permitted Exceptions” means (i) all
defects, exceptions, restrictions, easements, rights of way and encumbrances
specifically and fairly disclosed in the Disclosure Schedule in respect of
policies of title insurance that have been delivered to Purchaser; (ii) statutory
liens for current Taxes, assessments or other governmental charges not yet
delinquent or the amount or validity of which is being contested in good faith
by appropriate proceedings, provided an appropriate reserve has been
established therefor on the Balance Sheet in accordance with GAAP; (iii) mechanics’,
carriers’, workers’, and repairers’ Liens arising or incurred in the Ordinary
Course of Business that are not material to the business, operations and
financial condition of the Company Property so encumbered and that are not
resulting from a breach, default or violation by the Company or any of the
Subsidiaries of any Contract or Law; and (iv) zoning, entitlement and
other land use and environmental regulations by any Governmental Body, provided
that such regulations have not been violated.


 


“Person” means any individual, corporation,
limited liability company, partnership, firm, joint venture, association,
joint-stock company, trust, unincorporated organization, Governmental Body or
other entity.


 


“Pre-Sale Reorganisation” means the following
transactions, as more specifically set forth in the BDO Step Paper set forth as
Exhibit H: (i) the transfer by Matrix International Limited (registered
number 356189) of certain assets directly held by Matrix International Limited
(and excluding the Shares of MEL Holdings Inc. and the assets relating to the
Engineered Systems Business (as specifically set forth on Schedule 1.1)
but including the Shares of Matrix International GmbH) to Matrix Engineering
Limited (registered number 3690656); (ii) the transfer by The Hay Hall
Group Limited or any of the other Subsidiaries to Matrix International Limited
of all of the capital stock of the Company’s dormant Subsidiaries set forth on Schedule 1.4,
Part I and the novation of the Hay Hall Leicester Loan; (iii) the
transfer of certain of the assets, and, with the exception of (i) Environmental
Costs and Liabilities arising


 


9





















 


out of or related to, or in connection with the Seller’s
previously-owned real estate property located at 134 & 146 Powder Mill
Rd., Collinsville, CT, 06070, and (ii) certain Tax Liabilities, all of the
liabilities, of Inertia Dynamics Inc. to Inertia Dynamics LLC (or such other
corporate entity reasonably acceptable to the Purchaser), a newly formed wholly
owned Subsidiary of The Hay Hall Group Limited (the “US Hive
Across”); (iv) the subsequent transfer of Matrix International
Limited to the Sellers such that immediately following the Pre-Sale
Reorganisation, Matrix Engineered Systems Limited (f/k/a Matrix International
Limited) will no longer be a member of the Group; (v) the change of names
of Matrix International Limited and Matrix Engineering Limited; (vi) the
change of name of Inertia Dynamics Inc. to MEL Inc.; and (vii) the
guarantee by Matrix Engineered Systems Limited (f/k/a Matrix International
Limited) of the obligations of its wholly owned subsidiary Inertia Dynamics Inc.


 


“Registered Intellectual Property” means all
Intellectual Property in respect of which applications for registration have
been made or registrations have been obtained anywhere in the world.


 


“Release” means any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, or
leaching into the indoor or outdoor environment, or into or out of any
property.


 


“Remedial Action” means all actions to (i) clean
up, remove, treat or in any other way address any Hazardous Material, the
presence of which violates Environmental Laws; (ii) prevent the unauthorized
Release of any Hazardous Material so it does not endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment; (iii) perform
pre-remedial studies and investigations or post-remedial monitoring and care;
or (iv) to correct a condition of noncompliance with Environmental Laws.


 


“RTPA” means the Restrictive Trade Practices
Act 1976.


 


“Sellers’ Transaction Expenses” shall mean the
fees and expenses of the brokers, counsel, accountants, investment banks and
other advisors incurred on behalf of the Sellers in connection with, or in
contemplation of, the transactions contemplated by this Agreement, and
representing all fees and expenses due to such brokers, counsel, accountants,
investment banks and other advisors through the Closing Date.


 


“Software” means any and all (i) computer
programs, including any and all software implementations of algorithms, models
and methodologies, whether in source code or object code; (ii) databases
and compilations, including any and all data and collections of data, whether
machine readable or otherwise; (iii) descriptions, flow-charts and other
work product used to design, plan, organize and develop any of the foregoing,
screens, user interfaces, report formats, firmware, development tools,
templates, menus, buttons and icons; and (iv) documentation including user
manuals and other training documentation related to any of the foregoing.


 


“Subsidiary” means any Person of which a
majority of the outstanding share capital, voting securities or other equity
interests are owned, directly or indirectly, by the Company.


 


10





















 


“Tax” or “Taxes” means (i) all
United States federal, state, local, foreign or United Kingdom taxes, charges,
fees, duties, imposts, levies or other assessments, including, without
limitation, all net income, gross receipts, capital, sales, use, ad valorem,
value added, transfer, franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, property and estimated taxes, customs duties,
fees, assessments and charges of any kind whatsoever, (ii) all interest,
penalties, fines, additions to tax or additional amounts imposed by any Taxing
Authority in connection with any item described in clause (i), and (iii) any
transferee liability in respect of any items described in clauses (i) and/or
(ii) payable by reason of Contract, assumption, transferee liability,
operation of Law, Treasury Regulation Section 1.1502-6(a) (or any
predecessor or successor thereof of any analogous or similar provision under
Law) or otherwise.


 


“Taxing Authority” means any Governmental Body
responsible for the administration of any Tax.


 


“Tax Return” means any return, report or
statement filed or required to be filed with respect to any Tax (including any
attachments thereto, and any amendment thereof) including any information
return, claim for refund, amended return or declaration of estimated Tax, and
including, where permitted or required, combined, consolidated or unitary
returns for any group of entities.


 


“Technology” means, collectively, all designs,
formulae, algorithms, procedures, methods, techniques, ideas, know-how,
research and development, technical data, programs, subroutines, tools,
materials, specifications, processes, inventions (whether patentable or
unpatentable and whether or not reduced to practice), apparatus, creations,
improvements, works of authorship and other similar materials, and all
recordings, graphs, drawings, reports, analyses, and other writings, and other
tangible embodiments of the foregoing, in any form whether or not specifically
listed herein, and all related technology, that are used in, incorporated in,
embodied in, displayed by or relate to, or are used by the Company or any
Subsidiary.


 


“Transitional Services Agreement” means the
certain transitional services agreement, dated as of the Closing Date, by and
among Matrix International Limited (f/k/a. Matrix Engineering Limited) and Matrix
Engineered Systems Limited (f/k/a Matrix International Limited), in
substantially the form attached hereto as Exhibit I.


 


“Transfer Taxes” means all sales, use, stamp,
documentary, filing, recording, transfer or similar Taxes imposed by any Taxing
Authority including (without limitation) United Kingdom stamp duty and stamp
duty reserve tax.


 


“US/UK Exchange Rate” means the exchange rate
calculated based upon One British Pound to US Dollars.


 


“WARN” means the Worker Adjustment and
Retraining Notification Act of 1988, as amended.


 


“Terms Defined Elsewhere in this Agreement.  For purposes of this Agreement, the following
terms have meanings set forth in the sections indicated:


 


11





















 


	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  A Shares

  	
   

  	
  Recitals

  
	
  Actual Closing
  Position

  	
   

  	
  3.3(b)(v)(B)

  
	
  Adjustment
  Escrow Account

  	
   

  	
  3.2(c)

  
	
  Adjustment
  Escrow Amount

  	
   

  	
  3.3(b)(vi)

  
	
  Agreed
  Principles

  	
   

  	
  3.3(a)(i)

  
	
  Agreement

  	
   

  	
  Recitals

  
	
  Arbiter

  	
   

  	
  3.3(b)(iii)

  
	
  B Shares

  	
   

  	
  Recitals

  
	
  Balance Sheet

  	
   

  	
  5.11(a)

  
	
  Balance Sheet
  Date

  	
   

  	
  5.11(a)

  
	
  Basket

  	
   

  	
  9.4(a)

  
	
  Business

  	
   

  	
  Recitals

  
	
  C Shares

  	
   

  	
  Recitals

  
	
  Cap

  	
   

  	
  9.4(b)

  
	
  Cash
  Consideration

  	
   

  	
  3.1(c)

  
	
  Closing

  	
   

  	
  4.1

  
	
  Closing Date

  	
   

  	
  4.1

  
	
  Closing Balance
  Sheet

  	
   

  	
  3.3(b)(ii)

  
	
  Closing
  Indebtedness Statement

  	
   

  	
  3.3(b)(ii)

  
	
  Closing Working
  Capital

  	
   

  	
  3.3(b)(i)

  
	
  Closing Working
  Capital Statement

  	
   

  	
  3.3(b)(ii)

  
	
  Company

  	
   

  	
  Recitals

  
	
  Company Marks

  	
   

  	
  7.10

  
	
  Company Permits

  	
   

  	
  5.23(b)

  
	
  Company Plans

  	
   

  	
  5.19(a)

  
	
  Company Property
  (ies)

  	
   

  	
  5.15(a)

  
	
  Confidential
  Information

  	
   

  	
  7.7(c)

  
	
  Copyrights

  	
   

  	
  1.1 (in
  Intellectual Property definition)

  
	
  Debt
  Determination Date

  	
   

  	
  7.14

  
	
  Designs

  	
   

  	
  1.1 (in
  Intellectual Property definition)

  
	
  Disclosure
  Schedule

  	
   

  	
  Article V
  preamble to Part II

  
	
  Employees

  	
   

  	
  5.19(a)

  
	
  ERISA Affiliate

  	
   

  	
  5.19(a)

  
	
  Estimated
  Closing Balance Sheet

  	
   

  	
  3.3(a)(i)

  
	
  Estimate Closing
  Working Capital

  	
   

  	
  3.3(a)(i)

  
	
  Estimate Working
  Capital Shortfall

  	
   

  	
  3.3(a)(ii)

  
	
  Financial
  Statements

  	
   

  	
  5.11(a)

  
	
  Financing

  	
   

  	
  7.11

  
	
  Group

  	
   

  	
  Recitals

  
	
  Included Current
  Assets

  	
   

  	
  3.3(b)(i)

  
	
  Included Current
  Liabilities

  	
   

  	
  3.3(b)(i)

  
	
  Indemnification
  Claim

  	
   

  	
  9.3(b)

  
	
  Indemnity Escrow
  Account

  	
   

  	
  3.2(c)

  
	
  Indemnity Escrow
  Amount

  	
   

  	
  9.5

  



 


12





















 


	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Loss(es)

  	
   

  	
  9.2(a)

  
	
  Marks

  	
   

  	
  1.1 (in
  Intellectual Property definition)

  
	
  Material
  Contracts

  	
   

  	
  5.18(a)

  
	
  Multiemployer
  Plan

  	
   

  	
  5.19(a)

  
	
  Net Closing
  Position

  	
   

  	
  3.3(a)(iii)

  
	
  Nondisclosure
  Agreement

  	
   

  	
  7.1

  
	
  Owned Property
  (ies)

  	
   

  	
  5.15(a)

  
	
  Patents

  	
   

  	
  1.1 (in
  Intellectual Property definition)

  
	
  Personal
  Property Leases

  	
   

  	
  5.16(b)

  
	
  Proprietary
  Information

  	
   

  	
  7.1

  
	
  Purchase Price

  	
   

  	
  3.1

  
	
  Purchaser

  	
   

  	
  Recitals

  
	
  Purchaser
  Documents

  	
   

  	
  6.2

  
	
  Purchaser
  Indemnified Parties

  	
   

  	
  9.2(a)

  
	
  Purchaser’s
  Negative Deficit

  	
   

  	
  3.3(b)(v)(B)(b)

  
	
  Purchaser’s
  Positive Surplus

  	
   

  	
  3.3(b)(v)(B)(d)

  
	
  Real Property
  Lease(s)

  	
   

  	
  5.15(a)

  
	
  Related Persons

  	
   

  	
  5.28

  
	
  Restricted
  Business

  	
   

  	
  7.7(a)

  
	
  Securities Act

  	
   

  	
  6.5

  
	
  Seller Documents

  	
   

  	
  5.1(a)

  
	
  Seller Indemnified
  Parties

  	
   

  	
  9.2(c)

  
	
  Seller’s
  Negative Deficit

  	
   

  	
  3.3(b)(v)(B)(a)

  
	
  Seller’s
  Positive Surplus

  	
   

  	
  3.3(b)(v)(B)(c)

  
	
  Sellers’
  Representative

  	
   

  	
  10.12

  
	
  Sellers

  	
   

  	
  Recitals

  
	
  Straddle Period

  	
   

  	
  9.6(c)

  
	
  Shares

  	
   

  	
  Recitals

  
	
  Sub-Basket

  	
   

  	
  9.4(a)

  
	
  Subsidiaries

  	
   

  	
  Recitals

  
	
  Survival Period

  	
   

  	
  9.1

  
	
  Target Working
  Capital

  	
   

  	
  3.3(a)(ii)

  
	
  Tax Credit

  	
   

  	
  7.15

  
	
  Termination Date

  	
   

  	
  4.3(a)

  
	
  Title IV Plans

  	
   

  	
  5.19(a)

  
	
  Trade Secrets

  	
   

  	
  1.1 (in
  Intellectual Property definition)

  
	
  Updated
  Disclosure Schedule

  	
   

  	
  Article V
  preamble to Part II

  
	
   

  	
   

  	
   

  



 


(b)           Other Definitional
and Interpretive Matters. 
Unless otherwise expressly provided, for purposes of this Agreement, the
following rules of interpretation shall apply:


 


Agreed Form.  Any references to documents in the “agreed
form” are to that document agreed to and initialed for the purposes of
identification by or on behalf of the parties.


 


13





















 


Calculation of Time Period.  When calculating the period of time before
which, within which or following which any act is to be done or step taken
pursuant to this Agreement, the date that is the reference date in calculating
such period shall be excluded.  If the
last day of such period is a non-Business Day, the period in question shall end
on the next succeeding Business Day.


 


Dollars and Pounds.  Any reference in this Agreement to $ shall
mean U.S. Dollars, and any reference in this Agreement to £ shall mean British
Pounds.  For purposes of Article V
(Representations and Warranties of Sellers), Section 7.2 (Conduct
of the Business Prior to Closing) and Article IX (Indemnification),
any U.S. Dollar amounts referenced therein shall be deemed to be equivalent to
an amount of British Pounds, as calculated based upon an assumed U.S./UK
Exchange Rate of £1.0/$1.80.  In
addition, for purposes of Section 3.1 and Section 3.3
(Purchase Price Adjustment), any British Pound amounts referenced therein shall
be deemed to be equivalent to an amount of U.S. Dollars, as calculated based
upon, the U.S./UK Exchange Rate as announced by The Wall Street Journal,
Eastern Edition, as of the Closing Date for purposes of adjusting the Purchase
Price.


 


Exhibits/Schedules.  The Exhibits and Schedules to this Agreement
are hereby incorporated and made a part hereof and are an integral part of this
Agreement.  All Exhibits and Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein.  Any capitalized terms used in any Schedule or
Exhibit but not otherwise defined therein shall be defined as set forth in
this Agreement.


 


Gender and Number.  Any reference in this Agreement to gender
shall include all genders, and words imparting the singular number only shall
include the plural and vice versa.


 


Headings.  The provision of a Table of Contents, the
division of this Agreement into Articles, Sections and other subdivisions and
the insertion of headings are for convenience of reference only and shall not
affect or be utilized in construing or interpreting this Agreement.  All references in this Agreement to any “Section”
are to the corresponding Section of this Agreement unless otherwise
specified.


 


Herein.  The words such as “herein,” “hereinafter,”
“hereof,” and “hereunder” refer to this Agreement as a whole and
not merely to a subdivision in which such words appear unless the context
otherwise requires.


 


Including.  The word “including” or any variation
thereof means “including, without limitation” and shall not be construed
to limit any general statement that it follows to the specific or similar items
or matters immediately following it.


 


Obligations.  All obligations of the Sellers under this
Agreement including any liability in respect of any claims or any other breach
of this Agreement are joint and several, other than warranties provided in Part I
of Article V and the obligations set forth in Section 7.7,
which shall be several only.


 


14





















 


ARTICLE II



SALE AND PURCHASE OF SHARES


 


2.1           Sale and Purchase of Shares.  Upon the terms and subject to the conditions
contained herein, on the Closing Date, each Seller agrees to sell, or cause the
sale, with full title guarantee, transfer and deliver to Purchaser (or its
designated Affiliate or Affiliates), free from any Lien, and Purchaser agrees
to, or cause its designated Affiliate or Affiliates to, purchase, accept and
acquire from each Seller, the Shares set forth next to such Seller’s name on Exhibit A,
Part II together with all rights attaching to the Shares.


 


2.2           Waiver of Preemption.  The Sellers waive and agree to procure the
waiver of any restrictions on transfer (including preemption rights) which may
exist in relation to the Shares under the Articles of Association of the
Company or otherwise.


 


ARTICLE III



PURCHASE PRICE


 


3.1           Purchase
Price.  The aggregate purchase price to
be paid by the Purchaser (or a designated Affiliate or Affiliates of the
Purchaser) for the Shares shall be $50,500,000 less the Closing Indebtedness of
the Company and its Subsidiaries as of the Closing Date (the “Purchase Price”)
and subject to adjustment as provided in Section 3.3.


 


(a)           Subject to Section 3.1(d),
the consideration for the A Shares will be the payment by the Purchaser (or a
designated Affiliate or Affiliates of the Purchaser) of a cash amount representing
7.59% of the Purchase Price, subject to adjustment as provided in Section 3.3,
as set forth on Exhibit A, Part II.


 


(b)           Subject to Section 3.1(d),
the consideration for the B Shares will be as follows:


 


(i)      the payment by
the Purchaser (or a designated Affiliate or Affiliates of the Purchaser) of a
cash amount representing 70.61% of the Purchase Price less the Loan Note
Redemption Amount, subject to adjustment as provided in Section 3.3,
as set forth on Exhibit A, Part II; and


 


(ii)     the issue by whichever
of the Purchaser or the designated Affiliate of the Purchaser who acquires the
B Shares of the Loan Notes in the agreed proportions as set forth on Exhibit A,
Part II with an aggregate principal amount for all Loan Notes equal to the
Loan Note Redemption Amount.


 


(c)           Subject to Section 3.1(d),
the consideration for the C Shares will be the payment by the Purchaser (or a
designated Affiliate or Affiliates of the Purchaser) of a cash amount
representing 21.8% of the Purchase Price as set forth on Exhibit A,
Part II (together with the amounts payable under Sections 3.1(a) and
3.1(b)(i) above, the “Cash Consideration”).


 


15





















 


(d)           If the US/UK
Exchange Rate is greater than £1.0/$1.83 as announced by The Wall Street
Journal, Eastern Edition on the Closing Date, the Cash Consideration will be
increased by $250,000 in accordance with the relative percentages set forth in Sections
3.1(a), 3.1(b)(i) and 3.1(c) above, subject to
adjustment as provided in Section 3.3.  If the US/UK Exchange Rate is lower than
£1.0/$1.75 as announced by The Wall Street Journal, Eastern Edition on the
Closing Date, the Cash Consideration will be decreased by $250,000 in
accordance with the relative percentages set forth in Sections 3.1(a), 3.1(b)(i) and
3.1(c) above, subject to adjustment as provided in Section 3.3.


 


3.2           Payment of Purchase Price.


 


(a)           On the Closing
Date, Purchaser shall, or shall cause its designated Affiliate or Affiliates
to, pay the Cash Consideration, less the sum of (i) the Adjustment Escrow
Amount, and (ii) the Indemnity Escrow Amount, to the Sellers by wire
transfer of immediately available funds into accounts designated in writing by
the Sellers not less than three Business Days prior to the Closing Date and
allocated among the Sellers as set forth on Exhibit A, Part II.


 


(b)           On the Closing
Date, Purchaser (or whichever designated Affiliate of Purchaser acquires the B
Shares) shall issue to the Sellers the Loan Notes in the agreed proportions as
set forth on Exhibit A, Part II.


 


(c)           On the Closing
Date, Purchaser shall, or shall cause its designated Affiliate or Affiliates
to, pay in cash payable by wire transfer of immediately available funds (i) the
Indemnity Escrow Amount to the Escrow Agent for deposit into the account
designated by the Escrow Agent (the “Indemnity Escrow Account”), (ii) the
Adjustment Escrow Amount to the Escrow Agent for deposit into the account
designated by the Escrow Agent (the “Adjustment Escrow Account”), and (iii) the
Loan Note Redemption Amount to Escrow Agent for deposit into the account
designated by Escrow Agent to be held pending redemption of the Loan Notes on
the terms of the Loan Note Escrow Agreement.


 


3.3           Purchase Price Adjustment.


 


(a)           Closing Date
Purchase Price Adjustment.


 


(i)      Not later than
three (3) Business Days prior to the Closing Date, the Sellers’
Representative shall provide Purchaser with an estimated balance sheet of the Company
and the Subsidiaries as of the open of business on the Closing Date (the “Estimated
Closing Balance Sheet”), a statement of the estimated Closing Working
Capital (as defined in Section 3.3(b)(i) below), derived from
the Estimated Closing Balance Sheet (“Estimated Closing Working Capital”),
a statement of the estimated Indebtedness of the Company as of the open of
business on the Closing Date, derived from the Estimated Closing Balance Sheet
(the “Estimated Closing Indebtedness”), and a statement of the estimated
Cash and Cash Equivalents of the Company as of the open of business on the
Closing Date (the “Estimated Closing Cash”), each in the form set out in
Schedule 3.3(b).  The
Estimated Closing Balance Sheet, Estimated Closing Working Capital, Estimated
Closing Indebtedness and Estimated Closing Cash shall be prepared by the Sellers
in accordance with GAAP applied using the same accounting methods, practices,
principles, policies and procedures, with consistent


 


16





















 


classifications, judgments and valuation and estimation and accrual
methodologies that were used in the preparation of the Company’s audited
Financial Statements for the most recent fiscal year end as if such Estimated
Closing Balance Sheet, Estimated Closing Working Capital, Estimated Closing
Indebtedness and Estimated Closing Cash were being prepared and audited as of a
fiscal year end, subject to the accounting principles set forth on Schedule 3.3(a)(i) (the
“Agreed Principles”).


 


(ii)     If Estimated
Closing Working Capital is less than Target Working Capital, the Cash
Consideration payable at the Closing will be decreased by the difference
between Estimated Closing Working Capital and Target Working Capital (the “Estimated
Working Capital Shortfall”).  If
Estimated Closing Working Capital is greater than Target Working Capital, no
adjustment to the Cash Consideration payable at the Closing shall be made.  “Target Working Capital” shall mean £9,300,000.


 


(iii)    The provisions
set forth below shall be used in determining any further payments that may be
due in accordance with the provisions of this Section 3.3:


 


	
  Estimated Closing
  Indebtedness

  	
   

  	
  (X)

  
	
   

  	
   

  	
   

  
	
  Plus:   Estimated
  Closing Cash

  	
   

  	
  Y

  
	
   

  	
   

  	
   

  
	
  Net Closing Position

  	
   

  	
  Z

  
	
   

  	
   

  	
   

  
	
  Actual Closing Position

  	
   

  	
  S

  



 


At the Closing, the Estimated Closing Indebtedness
((X)) shall be netted off against the Estimated Closing Cash (Y) to arrive at
the Company’s net closing position (Z) (the “Net Closing Position”).  If Z is a negative number, the Cash
Consideration payable at the Closing shall be reduced by such an amount as is
necessary to bring Z to zero. If Z is a positive number, the Cash Consideration
payable at the Closing shall be increased by the difference between zero and Z.  For the avoidance of doubt if Z is zero no
payment will be due.


 


(b)           Post-Closing
Date Purchase Price Adjustment.


 


(i)      Following the
Closing, the Cash Consideration shall be adjusted as provided herein to reflect
the difference between Closing Working Capital and Estimated Closing Working
Capital (provided that such difference, if payable to Sellers, shall not
exceed the Estimated Closing Working Capital Shortfall).  “Closing Working Capital” means (A) the
consolidated Included Current Assets of the Company and the Subsidiaries, less (B) the
consolidated Included Current Liabilities of the Company and the Subsidiaries,
determined as of the open of business on the Closing Date.  “Included Current Assets” means accounts receivable, inventory, deposits and prepaid
expenses, but excluding (i) deferred tax assets and receivables from any
of the Company’s Affiliates, directors, employees, officers or Stockholders and
any of their Affiliates, and (ii) accounts receivable, inventory, deposits
and prepaid expenses of the Engineered Systems Business, determined in
accordance with GAAP applied using the same accounting methods, practices,
principles, policies and procedures,


 


17





















 


with consistent classifications, judgments and valuation and estimation
methodologies that were used in the preparation of the Company’s audited
Financial Statements for the most recent fiscal year end as if such accounts
were being prepared and audited as of a fiscal year end, subject to the Agreed
Principles and in the form set out in Schedule 3.3(b).  “Included Current Liabilities” means accounts payable, accrued Taxes (other than corporate
taxes identified in the Closing Indebtedness Statement) and accrued expenses,
but excluding (i) deferred tax liabilities, (ii) payables to any of
the Subsidiaries being transferred with the Engineered Systems Business to the Sellers
pursuant to the Pre-Sale Reorganisation, and (iii) the current portion of
long term debt, determined in accordance with GAAP applied using the same
accounting methods, practices, principles, policies and procedures, with
consistent classifications, judgments and valuation and estimation
methodologies that were used in the preparation of the Company’s audited
Financial Statements for the most recent fiscal year end as if such accounts
were being prepared and audited as of a fiscal year end, subject to the Agreed
Principles and in the form set out in Schedule 3.3(b).


 


(ii)     Within 60 days
following the Closing Date, Purchaser shall deliver to the Sellers’
Representative (a) a balance sheet of the Company and the Subsidiaries as
of the open of business on the Closing Date (the “Closing Balance Sheet”),
(b) a statement of Closing Working Capital derived from the Closing
Balance Sheet (the “Closing Working Capital Statement”), (c) a
statement of Closing Indebtedness (the “Closing Indebtedness Statement”),
and (d) a statement of Closing Cash (the “Closing Cash Statement”),
each in the form set out in Schedule 3.3(b).  The Closing Balance Sheet, the Closing
Working Capital Statement, the Closing Indebtedness Statement and the Closing
Cash Statement shall be prepared in accordance with GAAP applied using the same
accounting methods, practices, principles, policies and procedures, with
consistent classifications, judgments and valuation and estimation
methodologies that were used in the preparation of the Company’s Financial
Statements for the most recent fiscal year end as if such Closing Balance Sheet
was as of a fiscal year end, subject to the Agreed Principles.


 


(iii)    Acceptance of
Statements; Dispute Procedures.  The Closing Balance Sheet, the Closing
Working Capital Statement (and the computation of Closing Working Capital
indicated thereon), the Closing Indebtedness Statement (and the computation of
Closing Indebtedness indicated thereon) and the Closing Cash Statement (and the
computation of Closing Cash indicated thereon) delivered by Purchaser to the Sellers’
Representative shall be conclusive and binding upon the parties unless the Sellers’
Representative, within 20 Business Days after delivery to the Sellers’
Representative of the Closing Balance Sheet, the Closing Working Capital
Statement, the Closing Indebtedness Statement and the Closing Cash Statement, notifies
Purchaser in writing that the Sellers’ Representative disputes any of the
amounts set forth therein, specifying the nature of the dispute and the basis
therefor.  The parties shall in good
faith attempt to resolve any dispute, in which event the Closing Balance Sheet,
the Closing Working Capital Statement (and the computation of Closing Working
Capital indicated thereon), the Closing Indebtedness Statement (and the
computation of Closing Indebtedness indicated thereon) and the Closing Cash
Statement (and the computation of Closing Cash indicated thereon), as amended
to the extent necessary to reflect the resolution of the dispute, shall be
conclusive and binding on the parties. 
If the parties do not reach agreement in resolving the dispute within 20
Business Days after notice is given by the Sellers’ Representative to Purchaser
pursuant to the second


 


18





















 


preceding sentence, the parties shall refer the dispute to a firm of
independent chartered accountants which is mutually agreeable to the parties
(the “Arbiter”) for resolution. 
If the parties cannot agree on the selection of a firm of independent chartered
accountants to act as Arbiter, the parties shall request the president of the
Institute of Chartered Accountants in England and Wales for the time being to
appoint such a firm, and such appointment shall be conclusive and binding on
the parties.  Promptly, but no later than
20 Business Days after acceptance of its appointment as Arbiter, the Arbiter
shall determine (it being understood that in making such determination, the
Arbiter shall be functioning as an expert and not as an arbitrator), based
solely on written submissions by Purchaser and the Sellers’ Representative, and
not by independent review, only those issues in dispute and shall render a
written report as to the resolution of the dispute and the resulting
computation of the Closing Working Capital, the Closing Indebtedness and the
Closing Cash which shall be conclusive and binding on the parties.  All proceedings conducted by the Arbiter
shall take place in the city of London. 
In resolving any disputed item, the Arbiter (a) shall be bound by
the provisions of this Section 3.3 and (b) may not assign a
value to any item greater than the greatest value for such items claimed by
either party or less than the smallest value for such items claimed by either
party.  The fees, costs and expenses of
the Arbiter (1) shall be borne by Purchaser and Sellers in such
proportions as finally determined by the Arbiter.


 


(iv)    The Purchaser
shall procure that the Sellers and their accountants and the Sellers shall
procure that the Purchaser and its accountants, subject first to having
received 48 hours’ written notice of their intention to do so, are afforded
reasonable access at reasonable times to the accounting records and other
information of the other required for the production and review of the Closing
Working Capital Statement, Closing Indebtedness Statement, and Closing Cash
Statement.  For the avoidance of doubt,
there shall be no obligation on the Purchaser or the Sellers to disclose to the
other their internal papers relating to the preparation and review of the Closing
Working Capital Statement, Closing Indebtedness Statement, and Closing Cash
Statement.


 


(v)     Payment.


 


(A)          Upon final
determination of the Closing Working Capital, as provided in Section 3.3(b)(iii) above,
(A) if Closing Working Capital is greater than Estimated Closing Working
Capital, Purchaser shall promptly, but no later than five (5) Business
Days after such final determination, pay the amount of such difference,
together with interest thereon from the Closing Date to the date of payment
thereof, to be distributed to the Sellers, provided, however,
that in no event shall such payment exceed the amount of the Estimated Closing
Working Capital Shortfall, and (B) if Closing Working Capital is less than
Estimated Closing Working Capital, the Sellers shall promptly, but no later
than five (5) Business Days after such final determination, pay to
Purchaser the amount of such difference in cash, together with interest thereon
from the Closing Date to the date of payment thereof as determined below.


 


(B)           Upon final
determination of the Closing Indebtedness and the Closing Cash, as provided in Section 3.3(b)(iii) above,
the Closing Indebtedness shall be netted off against the Closing Cash to arrive
at the Company’s actual closing position (the “Actual Closing Position”):


 


19





















 


(a)           to the
extent that S is a negative amount greater than Z in absolute terms (the “Sellers’
Negative Deficit”) then the Sellers shall promptly, but no later than five (5) Business
Days after determination of the Actual Closing Position, pay the Sellers’
Negative Deficit, together with interest thereon from the Closing Date to the
date of payment thereof, to Purchaser;


 


(b)           to the
extent S is a negative amount less than Z in absolute terms (the “Purchaser’s
Negative Deficit”) then the Purchaser shall promptly, but no later than
five (5) Business Days after determination of the Actual Closing Position,
pay the Purchaser’s Negative Deficit together with interest thereon from the
Closing Date to the date of payment thereof, to the Sellers;


 


(c)           to the
extent S is a positive amount greater than Z (the “Seller’s Positive Surplus”)
then the Purchaser shall promptly, but no later than five (5) Business
Days after determination of the Actual Closing Position, pay the Seller’s
Positive Surplus together with interest thereon from the Closing Date to the
date of payment thereof, to the Sellers; or


 


(d)           to the
extent S is a positive amount less than Z (the “Purchaser’s Positive Surplus”)
then the Sellers shall promptly, but no later than five (5) Business Days
after determination of the Actual Closing Position, pay the Purchaser’s
Positive Surplus together with interest thereon from the Closing Date to the
date of payment thereof, to the Purchaser.


 


(vi)    As security for
the Sellers’ obligations under this Section 3.3, the sum of
$750,000 shall be paid in accordance with Section 3.2(c) into
the Adjustment Escrow Account to be held pending the final determination of the
Closing Working Capital and the Actual Closing Position (the “Adjustment Escrow
Amount”).  If any payment is due from
the Sellers pursuant to this Section 3.3, the Purchaser and the
Escrow Agent shall be authorized to make such payment out of the Adjustment
Escrow Account in accordance with the terms of the Escrow Agreement, and to
distribute the balance, if any, to the Sellers. 
In the event that the Adjustment Escrow Amount is not sufficient to
satisfy the Sellers’ liability under this Section 3.3, the Sellers
shall promptly, and in any event within five (5) Business Days of the
final determination of the Closing Working Capital and the Actual Closing
Position, pay the balance due to the Purchaser in immediately available funds
to such account as the Purchaser may specify.


 


(vii)   Interest.  For the purposes of this Section 3.3(b),
interest will be payable at the “prime” rate, as announced by The Wall Street
Journal, Eastern Edition, from time to time to be in effect, calculated based
on a 365 day year and the actual number of days elapsed.


 


3.4           Payment of Indebtedness.  On the Closing Date and immediately following
Closing, Purchaser shall procure that the Company shall pay by wire transfer of
immediately available funds the total amount of estimated Closing Indebtedness to
an account or accounts designated in writing not less than three Business Days
prior to the Closing Date.


 


20





















 


ARTICLE IV



CLOSING AND TERMINATION


 


4.1           Closing
Date.  The consummation of the sale
and purchase of the Shares provided for in Section 2.1 hereof (the “Closing”)
shall take place at the offices of Weil, Gotshal & Manges LLP located
at One South Place, London, EC2M 2WG (or at such other place as the parties may
designate in writing) at 9:00 a.m. (New York City time) on a date to be
specified by the parties (the “Closing Date”), which date shall be no
later than the third Business Day after the satisfaction or waiver of the
conditions set forth in Article VIII (other than conditions that by
their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions at such time), unless another time,
date or place is agreed to in writing by the parties hereto (such agreement not
to be unreasonably withheld).


 


4.2           Closing
Deliverables.


 


(a)           At the Closing,
the Sellers shall deliver or procure the delivery to the Purchaser of the
following:


 


(i)      evidence in a
form reasonably satisfactory to the Purchaser of the satisfaction of the
conditions set out in Section 8.1;


 


(ii)     duly executed
transfers of the Shares to the Purchaser and the relevant share certificates;


 


(iii)    a waiver in the
agreed form, executed as a deed by the Sellers, of any pre-emption or other
rights which they have under the articles of association or otherwise, and any
documents or consents necessary to enable the Purchaser to be registered as the
holder of the Shares;


 


(iv)    an executed
irrevocable power of attorney in favour of the Purchaser empowering the
Purchaser to exercise the Sellers’ rights as shareholders of the Company pending
stamping and registration of the transfers referred to in Section 4.2(a)(ii) above;


 


(v)     the articles of
association (or equivalent) of the Company and each Subsidiary and the
statutory books (or equivalent) of the Company and each Subsidiary and each
minute book or other book required to be kept by the Company and each
Subsidiary pursuant to the Companies Act (or equivalent) complete up to (but
not including) Closing and the common seal (if any) of the Company and each
Subsidiary;


 


(vi)    share certificates
for all of the issued shares in the capital of each Subsidiary and duly
executed transfers and declarations of trust in respect of any shares which are
beneficially owned by but not registered in the name of the Company or a
Subsidiary;


 


(vii)   subject to the
payment of the Bank Debt at Closing, a release in the agreed form (such
agreement not to be unreasonably withheld) from the Bank of Scotland


 


21





















 


in respect of each guarantee and charge of the Company or its Subsidiaries,
together with evidence that Forms 403 have been delivered to the Registrar of
Companies in respect of each charge of the Company and its Subsidiaries and a
release in the agreed form in respect of each guarantee or charge of the Company
and its Subsidiaries other than in connection with the Bank Debt;


 


(viii)  confirmation by
the Sellers in the agreed form that:


 


(A)          there are no
subsisting guarantees, indemnities or similar arrangements given by the Company
or a Subsidiary in favour of the Seller or any Affiliate of a Seller;


 


(B)           no Seller or
any Affiliate of a Seller is indebted to the Company or any Subsidiary; and


 


(C)           there are no
amounts owing to the Sellers or any Affiliate of a Seller by the Company or any
Subsidiary;


 


(ix)     resignation
letters in the agreed form signed by Philip Baldrey and Roger Burdett,
acknowledging that each has no claim against the Company or any Subsidiary in
respect of breach of contract, compensation for loss of office, redundancy,
unfair dismissal or on any other grounds whatsoever;


 


(x)      a certificate
in the agreed form attached at Exhibit J confirming that no fact or
circumstance has occurred which would make a representation or warranty set out
in Article V untrue or inaccurate when repeated at the Closing;


 


(xi)     the Escrow
Agreement and the Loan Note Escrow Agreement duly executed by the Sellers;


 


(xii)    the Compromise
Agreements in the agreed form attached at Exhibit C duly executed
by the relevant Sellers;


 


(xiii)   the Lease Agreement
duly executed by Matrix Engineered Systems Limited (f/k/a Matrix International
Limited);


 


(xiv)  the
Transitional Services Agreement duly executed by Matrix Engineered Systems
Limited (f/k/a Matrix International Limited);


 


(xv)   all documents
of title, certificates, deeds, written licenses and other documents and records
(in all media) relating to Intellectual Property;


 


(xvi)  the board
minutes of the Company in the agreed form authorizing the Employee Bonuses,
together with a certification in the agreed form, signed by each employee
entitled to such Employee Bonus;


 


(xvii) the Baldrey Consultancy Agreement duly
executed by the Company and Philip Baldrey;


 


22





















 


(xviii) the Nyquist Consultancy Agreement duly
executed by Inertia Dynamics, Inc and Inertia Dynamics, LLC (or such other
corporate entity reasonably acceptable to the Purchaser);


 


(xix)   the Deed of
Termination duly executed by Bibby Group Limited and Paul Selini;


 


(xx)    evidence, in a
form acceptable to the Purchaser, that (i) the accrued but unpaid
dividends payable in connection with the preference shares in Hay Hall Group
Limited have been waived and (ii) any and all consents and approvals
required in connection therewith have been obtained;


 


(xxi)   evidence, in a
form acceptable to the Purchaser, that any debts owed by Hay Hall Tyseley
Limited, Hay Hall Trustees Limited and Stainless Steel Tubes Limited to The Hay
Hall Group Limited have been capitalised; and


 


(xxii)  the written
members’ resolution and new articles of association, each in the agreed form,
in relation to the redesignation of the share capital of Hay Hall Holdings
Limited.


 


(b)           At the Closing
the Sellers shall procure that the directors of the Company and each
Subsidiary, where appropriate, shall hold a board meeting at which:


 


(i)      the transfer of
the Shares (subject to stamping) to the Purchaser be approved for registration
in the Company’s books;


 


(ii)     such persons as
the Purchaser nominates be appointed as directors and secretary and auditors of
the Company and the Subsidiaries for the purposes of the approval of the Baldrey
Consultancy Agreement, the Nyquist Consultancy Agreement and the Compromise
Agreements;


 


(iii)    the
resignations referred to in Section 4.2(a)(ix) are submitted and
accepted with effect from the close of the board meeting;


 


(iv)    the existing
bank mandate for the Company and each Subsidiary be revoked or amended to
include specimen signatures of persons nominated by the Purchaser;


 


(v)     the entering
into of the Compromise Agreements be approved; and


 


(vi)    the entering
into of Lease Agreement and the Transitional Services Agreement be approved.


 


(c)           At the Closing
the Sellers shall repay or procure to be repaid all amounts owing at the
Closing Date to the Company or any Subsidiary from any Seller or any Affiliate
of a Seller, whether due for payment or not.


 


23





















 


(d)           At the Closing
the Purchaser shall deliver or procure the delivery to the Sellers of the
following:


 


(i)      the Loan Notes
duly executed by or on behalf of the Purchaser or its designated Affiliate who
purchases the B Shares in the amounts set forth on Exhibit A;


 


(ii)     the Escrow
Agreement duly executed by the Purchaser;


 


(iii)    the Loan Note
Escrow Agreement duly executed by the Purchaser or its designated Affiliate;


 


(iv)    the payment of
the Purchase Price and other amounts as contemplated by Section 3.2;
and


 


(v)     the
Transitional Services Agreement duly executed by Matrix International Limited
(f.k.a. Matrix Engineering Limited).


 


(e)           The Purchaser
shall not be obliged to complete this Agreement until the Sellers fully comply
with the requirements of Sections 4.2(a), (b) and (c).


 


(f)            The Sellers
shall not be obliged to complete this Agreement until the Purchaser fully
complies with the requirements of Sections 4.2(d).


 


(g)           If either the
Sellers or the Purchaser shall default in any of their respective obligations
referred to in Sections 4.2(e) or 4.2(f) on the Closing
Date, the Sellers or the Purchaser (whichever is the non-defaulting party) may,
without prejudice to any other rights or remedies they may have:


 


(i)      defer the Closing
to a date not more than 20 Business Days after the date, or the Termination
Date, whichever is earlier (in which case this Section 4.2 shall
apply to the Closing as so deferred); or


 


(ii)     proceed to the
Closing so far as is practicable (including at the Purchaser’s option,
completion of purchase of only some of the Shares).


 


(h)           The Purchaser
shall not be obliged to complete the sale and purchase of any of the Shares
unless the sale and purchase of all of the Shares is completed simultaneously,
but the completion of the purchase of some of the Shares will not affect the
rights of the Purchaser with respect the purchase of the others.


 


4.3           Termination
of Agreement.  This
Agreement may be terminated prior to the Closing as follows:


 


(a)           At the election
of the Sellers’ Representative or Purchaser on or after December 31, 2005
(such date, as it may be extended under the proviso below, the “Termination
Date”), if the Closing shall not have occurred by the close of business on
such date, provided that the terminating party is not in material
default of any of its obligations hereunder; and provided, further,
that (A) the right to terminate this Agreement pursuant to this Section 4.3(a) shall
not be


 


24





















 


available to any party whose breach of any provision
of this Agreement has been the cause of, or resulted, directly or indirectly,
in, the failure of the Closing to be consummated by the Termination Date;


 


(b)           by mutual
written consent of the Sellers’ Representative and Purchaser;


 


(c)           by written
notice from Purchaser to the Sellers’ Representative that there has been an
event, change, occurrence or circumstance that has had or could reasonably be
expected to have a Material Adverse Effect;


 


(d)           by the Sellers’
Representative or Purchaser if there shall be in effect a final nonappealable
Order of a Governmental Body of competent jurisdiction restraining, enjoining
or otherwise prohibiting the consummation of the transactions contemplated
hereby; it being agreed that the parties hereto shall promptly appeal any
adverse determination which is not nonappealable (and pursue such appeal with
reasonable diligence); provided, however, that the right to
terminate this Agreement under this Section 4.3(d) shall not
be available to a party if such Order was primarily due to the failure of such
party to perform any of its obligations under this Agreement;


 


(e)           by Purchaser,
if Sellers shall have breached or failed to perform the conditions set forth in
Sections 8.1(a) or 8.1(b) and such breach is incapable
of being cured or, if capable of being cured, shall not have been cured within
ten (10) Business Days following receipt by the Sellers’ Representative of
notice of such breach from the Purchaser; or


 


(f)            by the Sellers’
Representative if Purchaser shall have breached or failed to perform the
conditions set forth in Sections 8.2(a) or 8.2(b) and
such breach is incapable of being cured or, if capable of being cured, shall
not have been cured within ten (10) Business Days following receipt by
Purchaser of notice of such breach from the Sellers’ Representative.


 


4.4           Procedure
Upon Termination.  In the
event of termination and abandonment by Purchaser or the Sellers’
Representative, or both, pursuant to Section 4.3 hereof: (i) written
notice thereof shall forthwith be given to the other party or parties, and,
subject to Section 4.4(ii) below this Agreement shall terminate, and
the purchase of the Shares hereunder shall be abandoned, without further action
by Purchaser or Sellers; and (ii) Purchaser shall destroy or return to the
Sellers any and all Confidential Information obtained or held by Purchaser or
any of its Affiliates and/or advisers and shall confirm in writing to the
Sellers’ Representative that all Confidential Information which cannot be
returned in tangible form will be kept confidential.


 


4.5           Effect
of Termination.  In the
event that this Agreement is validly terminated as provided herein, then each
of the parties shall be relieved of their duties and obligations arising under
this Agreement after the date of such termination and such termination shall be
without liability to Purchaser or Sellers; provided, however,
that the obligations of the parties set forth in this Section 4.5
and Article X hereof shall survive any such termination and shall
be enforceable hereunder; provided  further, however, that
nothing in this Section 4.5 shall relieve Purchaser or Sellers of
any liability for a breach of this Agreement prior to the effective date of
termination.


 


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ARTICLE V



REPRESENTATIONS AND WARRANTIES OF SELLERS


 


PART I


 


Each Seller severally represents and warrants to
Purchaser that in respect of himself only that each of the following
representations and warranties is true and accurate at the date of this
Agreement and will be true and accurate on the Closing Date and such
representations and warranties shall be deemed to be repeated on the Closing
Date:


 


5.1           Authorization
of Agreement.


 


(a)           He has all
requisite power, authority and legal capacity to execute and deliver this
Agreement and each other agreement, document, or instrument or certificate
contemplated by this Agreement or to be executed by him in connection with the
consummation of the transactions contemplated by this Agreement (the “Seller
Documents”), and to consummate the transactions contemplated hereby and
thereby.


 


(b)           The execution,
delivery and performance of this Agreement and each of the Seller Documents,
and the consummation of the transactions contemplated hereby and thereby, have
been duly authorized and approved by all required action on his part.


 


(c)           This Agreement
has been, and each of the Seller Documents to which he is a party will be at or
prior to the Closing, duly and validly executed and delivered by him and
(assuming due authorization, execution and delivery by the Purchaser) this
Agreement constitutes, and each of the Seller Documents when so executed and
delivered will constitute, legal, valid and binding obligations of him in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar Laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).


 


5.2           Ownership
and Transfer of the Shares.  He is the sole legal and beneficial owner of
certain Shares as at the date of this Agreement indicated as being owned by him
on Exhibit A, Part I and will be prior to Closing the sole
legal and beneficial owner of the Shares indicated as being owned by him on Exhibit A,
Part II and delivery of such Shares will convey to Purchaser (or its
designated Affiliate or Affiliates) good and marketable title to such Shares,
free and clear of any and all Liens, and there is no agreement or commitment to
create a Lien in relation to the shares or any unissued shares in the Company
in favour of any person, and no claim has been made by any person to be
entitled to any.


 


5.3           Capitalization
of the Company.  The Shares
constitute all the issued and allotted shares in the capital of the
Company.  All of the Shares have been
properly issued and allotted and are fully paid or credited as fully paid.  The Shares are free from any Lien and there
is no agreement or commitment outstanding to create a Lien in relation to the
Shares or any unissued shares in the Company in favor of any other person, and
no claim has been made by any person to be entitled to any.  There is no agreement or arrangement in force
(whether


 


26





















 


conditional or not) which requires the present or
future creation, allotment, issue, sale, transfer, redemption or repayment of
any share or loan capital of the Company, or grants or requires the grant to
any person of the right to call for the creation, allotment, issue, sale,
transfer, redemption or repayment of any share or loan capital of the
Company.  No person has claimed any right
to call for the creation, allotment, issue, sale, transfer, redemption or
repayment of any share or loan capital in the Company.  The Company has not, at any time (i) repaid
or redeemed or agreed to repay or redeem any shares of any class of its share
capital or otherwise reduced or agreed to reduce any class of its issued share
capital or purchased any of its own shares or carried out any transaction
having the effect of a reduction of capital; (ii) made, or resolved or
agreed to make, any issue of shares or other securities by way of
capitalization of profits or reserves; or (iii) given any financial
assistance in contravention of Section 151 of the Companies Act.


 


5.4           The
Company and Subsidiaries.


 


(a)           Schedule 5.4(a) of the
Disclosure Schedule sets forth the name of the Company and each of the
Subsidiaries, and, with respect to the Company and each of the Subsidiaries,
its registered number, its date of incorporation, its registered office, its
directors and secretary, the jurisdiction in which it is incorporated or
organized, the number of shares of its authorized capital stock, the number and
class of shares thereof duly issued and outstanding, the names of all
stockholders or other equity owners and the number of shares of stock owned by
each stockholder or the amount of equity owned by each equity owner.  Each allotted and issued share of each
Subsidiary is legally and beneficially owned by the Company or a Subsidiary and
all such shares have been properly issued and allotted and are fully paid or
credited as fully paid.  The shares in
each Subsidiary are free from any Lien and there is no agreement or commitment
outstanding to create a Lien in relation to any unissued shares in a Subsidiary
in favor of any other person, and no claim has been made by any person to be
entitled to any.  The outstanding shares
of capital stock or equity interests of the Company and each of the Subsidiaries
are validly issued, fully paid and non-assessable and were not issued in
violation of any preemptive or similar rights. 
All such shares or other equity interests represented as being owned by
the Company or any of the Subsidiaries are owned by them free and clear from
any Lien.  No shares of capital stock are
held by the Company or any of the Subsidiaries as treasury stock.  There is no existing option, warrant, call, right
or Contract to which the Company or any Subsidiary is a party requiring, and
there are no convertible securities of the Company or any of the Subsidiaries
outstanding which upon conversion would require, the issuance of any shares of
capital stock or other equity interests of the Company or any of the
Subsidiaries or other securities convertible into shares of capital stock or
other equity interests of the Company or any of the Subsidiaries.  The Company does not own, directly or
indirectly, any capital stock or equity securities of any Person other than the
Subsidiaries.


 


(b)           Since its
incorporation and up until the effective date of the consummation of the transactions
contemplated pursuant to the Pre-Sale Reorganisation, neither Matrix
Engineering Limited (registered number 3690656) nor any of the dormant
Subsidiaries set forth in Schedule 1.4, Part II has any
liabilities and has carried on any trade or business or entered into any
contract, arrangement or commitment save as in connection with incorporation,
the appointment of officers and filing of documents pursuant to the Companies
Act.


 


27





















 


PART II


 


Subject only to such exceptions as are fairly and
specifically disclosed with respect to specific numbered sections and lettered
subsections of this Article V Part II in the disclosure schedule and
schedule of exceptions, delivered herewith and dated as of the date
hereof, and organized with corresponding numbered sections and lettered
subsections (the “Disclosure Schedule”, as set forth on Exhibit L)
and the updated disclosure schedule in the agreed form to be delivered to
Purchaser in accordance with Section 7.16 below (the “Updated
Disclosure Schedule”), the Sellers hereby jointly and severally represent
and warrant to Purchaser that each of the following representations and warranties
is true and accurate at the date of this Agreement and, subject to the Disclosure
Schedule and the Updated Disclosure Schedule, will be true and accurate on
the Closing Date and such representations and warranties shall be deemed to be
repeated on the Closing Date:


 


5.5           Organization
and Good Standing.  Each of the
Company and the Subsidiaries is a corporation or other entity duly organized,
validly existing and in good standing (or its equivalent, if any) under the
Laws of the jurisdiction of its organization as set forth in the recitals
hereto or on Exhibit B hereto. 
Each of the Company and the Subsidiaries has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now conducted.  Each of the
Company and the Subsidiaries is duly qualified or authorized to do business and
is in good standing (or its equivalent) under the Laws of each jurisdiction in
which it owns or leases real property and each other jurisdiction in which the
conduct of its respective business or the ownership of its respective
properties requires such qualification or authorization, except where the
failure to be so qualified, authorized or in good standing would not have a
Material Adverse Effect.


 


5.6           Authorization
of Agreement.  This
Agreement has been, and each of the Seller Documents will be at or prior to the
Closing, duly and validly executed and delivered, as applicable, by each of the
Subsidiaries which is a party thereto and (assuming due authorization,
execution and delivery by the Purchaser) this Agreement constitutes, and each
of the Seller Documents when so executed and delivered will constitute, legal,
valid and binding obligations of each applicable Subsidiary in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar Laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).


 


5.7           Conflicts; Consents of Third Parties.


 


(a)           None of the
execution and delivery by any Seller, the Company or the Subsidiaries of this
Agreement or the Seller Documents (as applicable), the consummation of the
transactions contemplated hereby or thereby, or compliance by any Seller, the
Company or the Subsidiaries with any of the provisions hereof or thereof will
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a material
benefit under, or give rise to any obligation of any Seller, the Company or the
Subsidiaries to make any payment under, or to the increased, additional,
accelerated or guaranteed rights or


 


28





















 


entitlements of any Person under, or result in the
creation of any Liens upon any of the properties or assets of any Seller, the Company
or any of the Subsidiaries under, any provision of (i) the articles of
association, certificate of incorporation and by-laws or comparable
organizational documents of any Seller, the Company or any of the Subsidiaries;
(ii) any Contract, or Permit to which any Seller, the Company or any of the
Subsidiaries is a party or by which any of the properties or assets of any
Seller, the Company or any of the Subsidiaries are bound; (iii) any Order
of any Governmental Body applicable to any Seller, the Company or any of the
Subsidiaries or any of the properties or assets of any Seller, the Company or
any of the Subsidiaries; or (iv) any applicable Law.


 


(b)           No consent,
waiver, approval, Order, Permit or authorization of, or declaration or filing
with, or notification to, any Person or Governmental Body is required on the
part of any Seller, the Company or any of the Subsidiaries in connection with (i) the
execution and delivery of this Agreement and the Seller Documents, the
compliance by any Seller, the Company or any of the Subsidiaries with any of
the provisions hereof, the consummation of the transactions contemplated
hereby, or the taking of any other action contemplated hereby, or (ii) the
continuing validity and effectiveness immediately following the Closing of any
Permit or Contract of the Company or any of the Subsidiaries.


 


5.8           Directors
and Shadow Directors.  The only directors of the Company
and the Subsidiaries are the persons whose names are listed in Schedule 5.8
of the Disclosure Schedule and/or Schedule 5.4(a) of the
Disclosure Schedule.  The Company and the
Subsidiaries do not have any liability as a former member, officer or shadow
director of any Person, nor are there circumstances in which such liability
could arise.


 


5.9           Associated Companies.  The Company has no
associated companies, an associated company being an entity (other than a
subsidiary undertaking) (i) in which the Company has a participating
interest, being a beneficial interest in a holding of more than 10% of the
shares in such entity, or (ii) over whose operating and financial policies
the Company exercises a significant influence, in particular in terms of its
policy decisions relating to the expansion or contraction or activities of the
business and determining the balance between dividend and reinvestment.


 


5.10         Corporate Records.


 


(a)           Sellers have
delivered to Purchaser true, correct and complete copies of the memorandum of
association, articles of association and certificates of incorporation or
comparable organizational documents of the Company and each of the Subsidiaries.


 


(b)           The statutory
books (including all registers and minute books) of the Company and each of the
Subsidiaries previously made available to Purchaser have been properly kept and
contain in all material respects accurate records of all meetings and
accurately reflect all other corporate action of the stockholders and board of
directors (including committees thereof) of the Company and the Subsidiaries
which are required by the Companies Act (or comparable legislation) to be dealt
with in them, save that the register of members (or equivalent) of the Company
and each Subsidiary is true, correct and complete in all respects.  All returns, resolutions and other documents
required by the Companies Act (or comparable


 


29





















 


legislation) to be delivered to the Registrar of
Companies or any other governmental or other authority have been duly and
properly prepared and delivered.  All share
transfer taxes levied, if any, or payable with respect to all transfers of
shares of the Company and the Subsidiaries prior to the date hereof have been
paid and appropriate transfer tax stamps affixed.


 


5.11         Financial Statements.


 


(a)           Sellers have
delivered to Purchaser copies of (i) the audited consolidated balance
sheets of the Company and the Subsidiaries as at December 31, 2002, 2003
and 2004 and the related audited consolidated statements of income and of cash
flows of the Company and the Subsidiaries for the years then ended and (ii) the
unaudited consolidated balance sheet of the Company and the Subsidiaries as at September 30,
2005 and the related consolidated statements of income and cash flows of the
Company and the Subsidiaries for the 9-month period then ended (such audited
and unaudited statements, including the related notes and schedules thereto,
are referred to herein as the “Financial Statements”).  Each of the Financial Statements has been
prepared in accordance with GAAP (other than the absence of notes to the
unaudited statements) consistently applied by the Company without modification
of the accounting principles used in the preparation thereof throughout the
periods presented, and shows a true and fair view of the state of affairs of
the Company and the Subsidiaries for the financial period to which it relates,
and, in respect of the audited Financial Statements, has been prepared in
accordance with the requirements of the Companies Act and/or relevant local
Laws, as applicable.


 


The unaudited consolidated balance sheet of the
Company and the Subsidiaries as at September 30, 2005 is referred to
herein as the “Balance Sheet” and September 30, 2005 is referred to
herein as the “Balance Sheet Date.”


 


(b)           All books, records
and accounts of the Company and the Subsidiaries are accurate and complete and
are maintained in all material respects in accordance with good business
practice and all applicable Laws.  The
Company and the Subsidiaries maintain systems of internal accounting controls
sufficient to provide reasonable assurances that:  (i) transactions are executed in
accordance with management’s general or specific authorization; (ii) transactions
are recorded as necessary to permit the preparation of financial statements in
conformity with GAAP and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared
with the actual levels at reasonable intervals and appropriate action is taken
with respect to any differences.


 


(c)           Sellers have
provided to Purchaser copies of all issued auditors’ reports, letters to
management regarding accounting practices and systems of internal controls, and
all responses to such letters from management for the two year period preceding
the date of this Agreement, in each case to the extent relating to the Business
and the operation thereof, whether the same are issued to the Company or any of
its respective Subsidiaries.


 


5.12         No Undisclosed Liabilities.  Neither the Company nor any of the
Subsidiaries has any Indebtedness, Liabilities (whether or not required under
GAAP to be reflected on a balance sheet or the notes thereto) or obligations of
any kind other than those


 


30





















 


(i) specifically reflected on and fully
reserved against in the Balance Sheet, or (ii) incurred in the Ordinary
Course of Business since the Balance Sheet Date consistent with past practice.


 


5.13         Absence of Certain Developments.  Except as expressly contemplated by this
Agreement or as set forth on Schedule 5.13 of the Disclosure
Schedule, since January 1, 2005 (i) the Company and the Subsidiaries
have conducted the Business only in the Ordinary Course of Business and (ii) there
has not been any event, change, occurrence or circumstance that has had or
could reasonably be expected to have a Material Adverse Effect.  Without limiting the generality of the
foregoing, since January 1, 2005:


 


(i)      there has not
been any damage, destruction or loss, whether or not covered by insurance, with
respect to the property and assets of the Company or any of the Subsidiaries
having a replacement cost of more than $50,000 for any single loss or $250,000
for all such losses;


 


(ii)     there has not
been any declaration, setting aside or payment of any dividend or other
distribution in respect of any shares of capital stock of the Company or any of
the Subsidiaries or any repurchase, redemption or other acquisition by the
Company or any of the Subsidiaries of any outstanding shares of capital stock
or other securities of, or other ownership interest in, the Company or any of the
Subsidiaries;


 


(iii)    neither the
Company nor any of the Subsidiaries has awarded or paid any bonuses to
employees of the Company or any of the Subsidiaries with respect to the fiscal
year ended December 31, 2005, except (a) to the extent accrued on the
Balance Sheet, or (b) less than $200,000 in the aggregate, or entered into
any employment, deferred compensation, severance or similar agreement (nor
amended any such agreement) or increased or agreed to increase the compensation
payable or to become payable by it to any of the Company’s or the Subsidiaries’
respective directors, officers, senior employees, agents or representatives or
increased or agreed to increase the coverage or benefits available under any
severance pay, termination pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with such directors, officers, senior
employees, agents or representatives (with a “senior employee” meaning an
employee in respect of remuneration in excess of £50,000 for UK-based employees
and $50,000 for US-based employees);


 


(iv)    there has not
been any change by the Company or any of the Subsidiaries in accounting or Tax
reporting principles, methods or policies other than a change required to
comply with Law or generally accepted accounting principles, methods or
policies;


 


(v)     neither the
Company nor any of the Subsidiaries has made or rescinded any election relating
to Taxes or settled or compromised any Legal Proceeding relating to Taxes other
than as part of the Ordinary Course of Business;


 


(vi)    neither the
Company nor any of the Subsidiaries has failed to promptly pay and discharge
current liabilities when due except where disputed in good faith


 


31





















 


by appropriate proceedings (which disputes are set forth in Schedule 5.13(vi) of
the Disclosure Schedule);


 


(vii)   neither the
Company nor any of the Subsidiaries has made any loans, advances or capital
contributions to, or investments in, any Person other than advances for
reasonable business expenses to employees made in the Ordinary Course of
Business;


 


(viii)  neither the
Company nor any of the Subsidiaries has (A) mortgaged, pledged or
subjected to any Lien any of its assets, or (B) acquired any fixed assets
or sold, assigned, transferred, conveyed, leased or otherwise disposed of any fixed
assets of the Company or any of the Subsidiaries, except in the case of clause (B) for
assets acquired, sold, assigned, transferred, conveyed, leased or otherwise
disposed of in the Ordinary Course of Business;


 


(ix)     neither the
Company nor any of the Subsidiaries has discharged or satisfied any Lien, or
paid any obligation or Liability, except in the Ordinary Course of Business;


 


(x)      neither the
Company nor any of the Subsidiaries has cancelled or compromised any debt or
claim or amended, canceled, terminated, relinquished, waived or released any
Contract or right except in the Ordinary Course of Business and which would not
be material to the Group taken as a whole;


 


(xi)     neither the
Company nor any of the Subsidiaries has made or committed to make any capital
expenditures or capital additions or betterments in excess of $50,000 individually
or $250,000 in the aggregate;


 


(xii)    neither the Company
nor any of the Subsidiaries has issued, created, incurred, assumed or
guaranteed any Indebtedness in an amount in excess of $50,000 in the aggregate;


 


(xiii)   neither the
Company nor any of the Subsidiaries has granted any license or sublicense of any
rights under or with respect to any Intellectual Property except in the
Ordinary Course of Business;


 


(xiv)  neither the
Company nor any of the Subsidiaries has instituted or settled any material
Legal Proceeding; and


 


(xv)   neither the
Company nor any of the Subsidiaries has agreed, committed, arranged or entered
into any understanding to do anything set forth in this Section 5.13.


 


5.14         Taxes.


 


(a)           (i) All
Returns required to be filed by or on behalf of the Company or any of the
Subsidiaries or any Affiliated Group of which the Company or any of the
Subsidiaries is or was a member have been duly and timely filed with the
appropriate Taxing Authority in all jurisdictions in which such Tax Returns are
required to be filed (after giving effect to any valid


 


32





















 


extensions of time in which to make such filings),
and all such Tax Returns are true, complete and correct in all material
respects; and (ii) all Taxes which are required to be paid by Closing by
or on behalf of the Company or any of the Subsidiaries or any Affiliated Group
of which the Company or any of the Subsidiaries is or was a member have been
fully and timely paid.  All required
estimated Tax payments sufficient to avoid any underpayment penalties or
interest (on the information known on or prior to the date hereof) have been
made by or on behalf of the Company and all of the Subsidiaries.


 


(b)           Each of the Company
and the Subsidiaries has complied in all material respects with all applicable
Laws relating to the payment and withholding of Taxes and has duly and timely
withheld and paid over to the appropriate Taxing Authority all amounts required
to be so withheld and paid under all applicable Laws.


 


(c)           Sellers have
made available and Purchaser has received complete and accurate copies of (i) all
United Kingdom, United States federal, state, local and foreign income or
franchise Tax Returns of the Company and the Subsidiaries relating to the
taxable periods since December 31, 2001, and (ii) all audit reports
issued within the last three years relating to any Taxes due from or with
respect to each of the Company and the Subsidiaries.


 


(d)           No claim has
been made by a Taxing Authority in a jurisdiction where the Company or any of the
Subsidiaries does not file Tax Returns such that it is or may be subject to Tax
in that jurisdiction.


 


(e)           Neither the
Company nor any of the Subsidiaries are subject to Tax in any jurisdiction
other than its place of incorporation.


 


(f)            All
deficiencies asserted or assessments made as a result of any examinations by
any Taxing Authority of the Tax Returns of, or including, the Company or any of
the Subsidiaries has been fully paid, and there are no other audits or
investigations by any Taxing Authority in progress, nor has the Company or any
of the Subsidiaries received any notice from any Taxing Authority that it
intends to conduct such an audit or investigation.  No issue has been raised by a Taxing
Authority in any prior examination of the Company or any of the Subsidiaries which,
by application of the same or similar principles, could reasonably be expected
to result in a proposed deficiency for any subsequent taxable period.


 


(g)           Neither the
Company nor any of the Subsidiaries nor any other Person on their behalf has (i) requested
any extension of time within which to file any Tax Return, which Tax Return has
since not been filed, (ii) been granted any extension for the assessment
or collection of Taxes, which Taxes have not since been paid, or (iii) granted
to any Person any power of attorney that is currently in force with respect to
any Tax matter.


 


(h)           No property
owned by the Company or any of the Subsidiaries is property required to be
treated as being owned by another Person for any Tax purposes.


 


(i)            Neither the
Company nor any of the Subsidiaries is a party to any tax sharing, allocation,
indemnity or similar agreement or arrangement (whether or not written) pursuant
to which it will have any obligation to make any payments in respect of or on
account of Taxes after the Closing.


 


33




















 


(j)            Neither the
Company nor any of the Subsidiaries is subject to any private letter ruling of
the IRS or comparable rulings of any Taxing Authority.


 


(k)           There are no
liens as a result of any unpaid Taxes upon any of the assets of the Company or the
Subsidiaries.


 


(l)            Neither the
Company nor any of the Subsidiaries has ever been a member of any group, other
than the group which consists solely of (i) Sellers, (ii) the
Subsidiaries and (iii) the Excluded Subsidiaries.


 


(m)          There is no
taxable income of the Company or any of the Subsidiaries that will be required
under applicable Tax Law to be reported by the Purchaser or any of its
Affiliates, including the Company and the Subsidiaries, for a taxable period
beginning after the Closing Date which taxable income was realized (and
reflects economic income) arising prior to the Closing Date.


 


(n)           Neither the
Company nor any of the Subsidiaries that are organized or created in the United
States or any political subdivision thereof is or was within the past five years
a “United States real property holding corporation” within the meaning of section 897(c) of
the Code.


 


5.15         Real Property.


 


(a)           Schedule 5.15(a) of the
Disclosure Schedule sets forth a complete list of (i) all real
property and interests in real property, including improvements thereon and
easements appurtenant thereto owned in fee simple by the Company and the Subsidiaries
(individually, an “Owned Property” and collectively, the “Owned
Properties”), and (ii) all real property and interests in real property
leased to or by the Company and the Subsidiaries (individually, a “Real
Property Lease” and collectively, the “Real Property Leases” and,
together with the Owned Properties, being referred to herein individually as a “Company
Property” and collectively as the “Company Properties”) as lessee or
lessor, including a description of each such Real Property Lease (including the
name of the third party lessor or lessee and the date of the lease or sublease
and all documents ancillary thereto). 
The Company and the Subsidiaries have good and marketable fee title to
all Owned Property, free and clear of all Liens of any nature whatsoever,
except (A) those Liens set forth on Schedule 5.15(a) of
the Disclosure Schedule and (B) Permitted Exceptions.  The Company Property constitutes all
interests in real property currently owned, used, occupied or currently held
for use in connection with the Business and which are necessary for the
continued operation of the Business as currently conducted.  The Company Property and all buildings,
fixtures and improvements thereon owned or leased or occupied by the Company
and the Subsidiaries are (i) in satisfactory condition without structural
defects, and all mechanical and other systems located thereon are in good
operating condition, and no condition exists requiring material repairs,
alterations or corrections, and (ii) appropriate in all respects for their
current and contemplated uses.  None of
the improvements located on the Company Properties constitute a legal
non-conforming use or otherwise require any special dispensation, variance or
special permit under any laws.  Sellers
have delivered to Purchaser true, correct and complete copies of (i) all
deeds, title reports and surveys commissioned by the Group for the Owned Properties
and (ii) the Real Property Leases, together with all supplemental


 


34





















 


documents, if any, thereto.  The Company Properties are not subject to any
leases, rights of first refusal, options to purchase or rights of occupancy,
except the Real Property Leases set forth on Schedule 5.15(a) of
the Disclosure Schedule.


 


(b)           The Company and
the Subsidiaries, as applicable, have a valid and enforceable leasehold
interest under each of the Real Property Leases, free and clear of all Liens
other than Permitted Exceptions, and each of the Real Property Leases is in
full force and effect.  Neither the
Company nor any of the Subsidiaries is in material default under any Lease, and
no events have occurred and no circumstances exist which, if not remedied, and
whether with or without notice or the passage of time or both, will result in
such a default.  Neither the Company nor
any of the Subsidiaries has received or given any notice (whether written, oral
or otherwise) of any default or event affecting any of the Real Property Leases
and, to the Knowledge of Sellers, there are no circumstances known to the
Company or any of its Subsidiaries which may entitle any Person to restrict or
terminate the continued sole and exclusive possession of the Real Property
Leases.


 


(c)           The Company and
the Subsidiaries have all Permits of any Governmental Body necessary or material
to the current use and operation of each Company Property, and the Company and
the Subsidiaries have fully complied with all material conditions of the
Permits applicable to them and, to the Knowledge of Sellers, there is no
intended or contemplated revocation of any of the Permits.


 


(d)           There does not
exist any actual or, to the Knowledge of Sellers, threatened or contemplated
condemnation or eminent domain proceedings that affect any Company Property or
any part thereof, and neither the Company nor any of the Subsidiaries has
received any notice, whether oral, written or otherwise, of the intention of
any Governmental Body or other Person to take or use all or any part thereof.


 


(e)           Neither the
Company nor any of the Subsidiaries has received any written notice from any
insurance company or any landlord that has issued a policy with respect to any
Company Property requiring performance of any structural or other repairs or
alterations to such Company Property.


 


5.16         Tangible Personal
Property.


 


(a)           The Company and
the Subsidiaries have good and marketable title to all of the items of tangible
personal property reflected on the Balance Sheet (except as sold or disposed of
subsequent to the date thereof in the Ordinary Course of Business and not in
violation of this Agreement), free and clear of any and all Liens, other than
the Permitted Exceptions.  All such items
of tangible personal property which, individually or in the aggregate, are
material to the operation of the Business are in satisfactory condition and in
a state of good maintenance and repair (ordinary wear and tear excepted) and
are suitable for the purposes used.


 


(b)           Schedule 5.16(b) of the
Disclosure Schedule sets forth all leases of personal property (“Personal
Property Leases”) involving annual payments in excess of $50,000 relating
to personal property used in the Business or to which the Company or any of the
Subsidiaries is a party or by which the properties or assets of the Company or
any of the


 


35





















 


Subsidiaries is bound, and such property is in all
material respects in the condition required of such property by the terms of
the lease applicable thereto during the term of the lease.  Sellers have delivered to Purchaser true,
correct and complete copies of the Personal Property Leases, together with all
amendments, modifications or supplements thereto.


 


(c)           The Company and
each of the Subsidiaries has a valid and enforceable leasehold interest under
each of the Personal Property Leases under which it is a lessee, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).  Each of the Personal Property Leases is in
full force and effect and neither the Company nor any of the Subsidiaries has
received or given any written notice of any default or event that with notice
or lapse of time, or both, would constitute a default by the Company or any of
the Subsidiaries under any of the Personal Property Leases and, to the
Knowledge of Sellers, no other party is in default thereof, and no party to the
Personal Property Leases has exercised any termination rights with respect
thereto.


 


(d)           Schedule 5.16(d) of the
Disclosure Schedule comprises a complete and accurate record of the plant,
machinery, vehicles and equipment owned or used by the Company and the
Subsidiaries with a value in excess of $25,000.


 


(e)           Notwithstanding
anything contained in the sale agreement between Matrix International Limited
(registered number 3690656) and Matrix Engineering Limited (registered number
3690656) pursuant to the Pre-Sale Reorganisation, all assets transferred and
sold to the Subsidiaries pursuant to the transactions contemplated under the
Pre-Sale Reorganisation will be transferred and sold with full title guarantee
with the benefit of the representations, warranties and undertakings contained
in this Agreement.


 


(f)            All assets
transferred and sold pursuant to the transactions contemplated under the
Pre-Sale Reorganisation will be sold and purchased at fair market value.


 


(g)           Notwithstanding
anything contained in the sale agreement between Matrix International Limited
(registered number 0356189) and Matrix Engineering Limited (registered number
3690656) pursuant to the Pre-Sale Reorganisation, the asset transfer and sale
transactions contemplated under the Pre-Sale Reorganisation will convey to the
applicable Subsidiaries good and marketable title to such assets, free and
clear of any and all Liens (other than Permitted Exceptions and subject to
repayment of the Bank Debt), and there is no agreement or commitment to create
a Lien in relation to such assets in favour of any Person, and no claim has
been made by any Person to be entitled to any. 
For avoidance of doubt, following the consummation of the transactions
contemplated under the Pre-Sale Reorganisation and as of the Closing Date, the assets
of the Company and the Subsidiaries (including such assets transferred and sold
to the Subsidiaries of the Group pursuant to the transactions contemplated
under the Pre-Sale Reorganisation) shall constitute all of the assets used in
or held for use in the Business and are sufficient for the Purchaser to conduct
the Business from and after the Closing Date without interruption and in the
Ordinary Course of Business.


 


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5.17         Intellectual Property.


 


(a)           Schedule 5.17(a) of the
Disclosure Schedule sets forth an accurate and complete list of all Registered
Intellectual Property owned by the Company or any of the Subsidiaries,
including the jurisdictions in which each such item of Intellectual Property
has been issued or registered or in which any such application for such
issuance and registration has been filed, together with material and accurate
particulars of all unregistered trade marks, service marks, logos, designs, and
inventions used in the Business within 12 months of the date of this Agreement
and all other material unregistered Intellectual Property owned or used by the
Company or any of the Subsidiaries.


 


(b)           The Company or
the Subsidiaries are the sole legal and beneficial owners of all of the
Registered Intellectual Property and are recorded on the relevant register as
the sole legal and beneficial owner of such Intellectual Property.  The Company or the Subsidiaries are the sole
legal and beneficial owners of the unregistered Intellectual Property,
including Copyrights in any works of authorship prepared by or for the Company
or the Subsidiaries, that resulted from or arose out of any work performed by
or on behalf of the Company or the Subsidiaries or by any employee, officer,
consultant or contractor of the Company or the Subsidiaries.  All renewal and maintenance fees and taxes
due and payable prior to Closing in respect of each of the Registered Intellectual
Property owned by the Company and the Subsidiaries have been, or will be, paid
in full and each action required to maintain and protect such Intellectual
Property has been, or will be, taken.  No
act has been done or omitted to be done and no event has occurred or is likely
to occur which may render any of the Intellectual Property owned by the Company
and the Subsidiaries subject to revocation, compulsory license, cancellation or
amendment or may prevent the grant or registration of a valid Registered Intellectual
Property pursuant to a pending application. 
The Company or the Subsidiaries are the sole and exclusive owners of, or
have valid and continuing rights to use, sell and license, as the case may be,
all Intellectual Property used, sold or licensed in the Business as presently
conducted and as currently proposed to be conducted, and all Intellectual
Property are free and clear of all liens, mortgage, pledge, charge, option,
restriction, third party right, encumbrance or security interest of any kind or
obligations to others (except for those specified licenses included in Schedule 5.18(a) of
the Disclosure Schedule).


 


(c)           The
Intellectual Property owned, used, practiced or otherwise commercially
exploited by the Company or the Subsidiaries, the development, manufacturing,
licensing, marketing, importation, offer for sale, sale or use of the products
or services in connection with the Business or other activities of the Business
as presently and as currently proposed to be conducted, and the Company’s or
the Subsidiaries’ present and currently proposed business practices and methods
do not infringe, violate or constitute an unauthorized use or misappropriation
of any patent, copyright, trademark, trade secret (or other similar right), or
any other intellectual property of any Person (including pursuant to any
non-disclosure agreements or obligations to which the Company or the
Subsidiaries or any of their present or former employees is a party).  The Intellectual Property
owned by or licensed to the Company or the Subsidiaries includes all of the
intellectual property rights used by the Company and the Subsidiaries to
conduct the Business in the manner in which such Business is currently being
conducted and, to the Knowledge of Sellers, as currently proposed to be
conducted.


 


(d)           Except pursuant
to the Intellectual Property Licenses listed in Schedule 5.17(d) of
the Disclosure Schedule (which is an accurate and complete list of all


 


37





















 


Intellectual Property Licenses other than those
referred to in Section 5.17(m)), neither the Company nor any of the
Subsidiaries is required, obligated, or under any liability whatsoever, to make
any payments by way of royalties, fees or otherwise or provide any other
consideration of any kind, to any owner, licensor of, or other claimant to any
Intellectual Property, or other Person, with respect to the use thereof or in
connection with the conduct of the Business as currently conducted or proposed
to be conducted.


 


(e)           Schedules 5.17(d) and 5.18(a) of
the Disclosure Schedule set forth a complete and accurate list of all
Contracts to which the Company or the Subsidiaries is a party (i) granting
any Intellectual Property Licenses, (ii) containing a covenant not to
compete or otherwise limiting its ability to use or exploit fully any of the
Intellectual Property or (iii) containing an agreement to indemnify any
other person against any claim of infringement of, violation, misappropriation
or unauthorized use of any Intellectual Property.  Sellers have delivered to Purchaser true,
correct and complete copies of each Contract set forth on Schedules 5.17(d) and
5.18(a) of the Disclosure Schedule, together with all amendments,
modifications or supplements thereto.


 


(f)            Each of the
Intellectual Property Licenses is in full force and effect.  Neither the Company nor any of the
Subsidiaries is in default under any Intellectual Property License, nor, to the
Knowledge of Sellers, is any other party to any Intellectual Property License
in default thereunder, and no event has occurred that with the lapse of time or
the giving of notice or both would constitute a default thereunder.  No party to any of the Intellectual Property
Licenses has exercised any termination rights with respect thereto.


 


(g)           No Trade Secret
or any other non-public, proprietary information material to the Business as
presently conducted or as presently proposed to be conducted has been
authorized to be disclosed or has been actually disclosed by the Company or the
Subsidiaries to any employee or any third party other than pursuant to obligations
of confidence contained in their employment contract or a written
non-disclosure agreement including restrictions on the disclosure and use of
the Intellectual Property consistent with best practices in the industry in
which the Company and the Subsidiaries operate. 
Each of the Company and the Subsidiaries have taken adequate security
measures to protect the secrecy, confidentiality and value of all the Trade
Secrets of the Company and the Subsidiaries and any other material confidential
information, including invention disclosures, not the subject of any patents
owned or patent applications filed by the Company or any of the Subsidiaries,
which measures are consistent with best practices in the industry in which the Company
and the Subsidiaries operate.  Each
employee, consultant and independent contractor of the Company and the
Subsidiaries who create Intellectual Property for the Company or the
Subsidiaries, has entered into an employment contract containing obligations of
confidence and an assignment of Intellectual Property or a written
non-disclosure and invention assignment agreement with the Company or such
Subsidiary in a form provided to Purchaser.


 


(h)           As of the date
hereof, neither the Company nor any of the Subsidiaries is the subject of any
pending or, to the Knowledge of Sellers, threatened Legal Proceedings which
involve a claim of infringement, misappropriation, unauthorized use, or
violation of any intellectual property rights by any Person against the Company
or the Subsidiaries or challenging the ownership, use, validity or
enforceability of, any Intellectual Property. 
Neither the Company


 


38





















 


nor the Subsidiaries has received notice of any such
threatened claim and, to the Knowledge of Sellers, there are no facts or
circumstances that would form the basis for any claim of infringement,
unauthorized use, misappropriation or violation of any intellectual property
rights by any Person against the Company or any Subsidiary, or challenging the
ownership, use, validity or enforceability of any material Intellectual
Property.


 


(i)            To the Knowledge
of Sellers, no Person is infringing, violating, misusing or misappropriating
(or to the Knowledge of Sellers likely to undertake any of the foregoing) any
Intellectual Property of the Company or the Subsidiaries, and no such claims
have been made against any Person by the Company or the Subsidiaries.


 


(j)            There are no
Orders to which the Company or the Subsidiaries is a party or by which the Company
or any of the Subsidiaries is bound which restrict, in any material respect,
the right to use any of the Intellectual Property.


 


(k)           The
consummation of the transactions contemplated hereby will not result in the
loss or impairment of Purchaser’s right to own or use any of the Intellectual
Property or any of the Intellectual Property pursuant to the Intellectual
Property Licenses.


 


(l)            Neither the
Sellers nor any present or, to the Knowledge of Sellers, former employees of
the Company, the Company or the Subsidiaries have any right, title, or
interest, directly or indirectly, in whole or in part, in any Intellectual
Property owned or used by the Company or the Subsidiaries.  No employee, consultant or independent
contractor of the Company or the Subsidiaries is, as a result of or in the
course of such employee’s, consultant’s or independent contractor’s engagement
by the Company or the Subsidiaries, in default or breach of any material term
of any employment agreement, non-disclosure agreement, assignment of invention
agreement or similar agreement with the Company or the Subsidiaries.


 


(m)          Schedule 5.17(m) of the
Disclosure Schedule sets forth a complete and accurate list of (i) all
Software that is owned and used exclusively by the Company or any Subsidiary
that is material to the operation of the Business and (ii) all Software
that is used by the Company or any Subsidiary in the Business that is not exclusively
owned by the Company or any Subsidiary, excluding Software available on standard
terms through commercial distributors or in consumer retail stores for a
license fee of no more than $10,000.  The
Company and the Subsidiaries will enjoy the use, possession and control in
accordance with the relevant license agreements, of all of the Software as set
forth in Schedule 5.17(m) of the Disclosure Schedule after
Closing and no third party agreements or consents are required to enable the Company
and the Subsidiaries such use following completion of the transaction
contemplated by this Agreement.  There
are no material defects relating to any element of the Software which have
caused any material interruption to the Business at any time during the 12
months prior to the date of this Agreement. 
The Software is covered by maintenance agreements which are fully
enforceable.


 


5.18         Material Contracts.


 


(a)           Schedule 5.18(a) of the
Disclosure Schedule sets forth, by reference to the applicable subsection of
this Section 5.18(a), all of the following Contracts to which the


 


39





















 


Company or any of the Subsidiaries is a party or by
which any of them or their respective assets of properties are bound (collectively,
the “Material Contracts”):


 


(i)      Contracts with
any current officer, director, stockholder or Affiliate of the Company or any
of the Subsidiaries;


 


(ii)     Contracts with
any labor union or association representing any employee of the Company or any of
the Subsidiaries;


 


(iii)    Contracts for (i) the
sale of any of the assets of the Company or any of the Subsidiaries other than
in the Ordinary Course of Business, or (ii) for the grant to any person of
any preferential rights to purchase any of its assets and involves a payment of
more than $25,000 per annum or $100,000 in the aggregate;


 


(iv)    Contracts for
joint ventures, strategic alliances, partnerships licensing arrangements, or
sharing of profits or proprietary information;


 


(v)     Contracts
containing covenants of the Company or any of the Subsidiaries not to compete
in a line of business competitive with the Business or not to solicit or hire
any Person with respect to employment or covenants of any other Person not to
compete with the Company or any of the Subsidiaries in any line of business competitive
with the Business or in any geographical area or not to solicit or hire any
Person with respect to employment;


 


(vi)    Contracts
relating to the acquisition (by merger, purchase of stock or assets or otherwise)
by the Company or any of the Subsidiaries of any operating business or material
assets or the capital stock of any other Person;


 


(vii)   Contracts
relating to the incurrence, assumption or guarantee of any Indebtedness or
imposing a Lien on any of its assets, including indentures, guarantees, loan or
credit agreements, sale and leaseback agreements, purchase money obligations
incurred in connection with the acquisition of property, mortgages, pledge
agreements, security agreements, or conditional sale or title retention
agreements;


 


(viii)  purchase
Contracts giving rise to Liabilities of the Company or any of the Subsidiaries
in excess of $50,000;


 


(ix)     all Contracts
providing for payments by or to the Company or any of the Subsidiaries in
excess of $50,000 in any fiscal year or $100,000 in the aggregate during the
term thereof excluding any employment or service contracts;


 


(x)      all Contracts
obligating the Company or any of the Subsidiaries to provide or obtain products
of services for a period of one year or more or requiring the Company or any of
the Subsidiaries to purchase or sell a stated portion of its requirements or
outputs;


 


(xi)     Contracts under
which the Company or any of the Subsidiaries has made advances or loans to any
other Person;


 


40





















 


(xii)    outstanding
agreements of guaranty, surety or indemnification, direct or indirect, by the Company
or any of the Subsidiaries;


 


(xiii)   Contracts (or
group of related contracts) which involve the expenditure of more than $50,000
annually or $100,000 in the aggregate or require performance by any party more
than one year from the date hereof.


 


(b)           Each of the
Material Contracts is in full force and effect and is the legal, valid and
binding obligation of the Company and/or its Subsidiary, enforceable against
it/them in accordance with its terms.  Neither
the Company nor any of the Subsidiaries is in default under any Material
Contract, nor, to the Knowledge of Sellers, is any other party to any Material
Contract in default thereunder, and neither the Company nor any Subsidiary has
received any notice (whether written, oral or otherwise) that an event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder.  No
party to any of the Material Contracts has exercised any termination rights
with respect thereto, and no party has given notice of any significant dispute
with respect to any Material Contract. 
Sellers have delivered to Purchaser true, correct and complete copies of
all of the Material Contracts, together with all amendments, modifications or
supplements thereto.


 


5.19         Employee Benefits Plans.


 


(a)           Schedule 5.19(a) of the
Disclosure Schedule sets forth a correct and complete list, by country,
of:  (i) all “employee benefit plans”
(as defined in Section 3(3) of ERISA), and all other employee benefit
plans, programs, agreements, policies, arrangements or payroll practices,
including without limitation, bonus plans, employment, consulting or other
compensation agreements, collective bargaining agreements, incentive, equity or
equity-based compensation, or deferred compensation arrangements, change in
control, termination or severance plans or arrangements, stock purchase,
severance pay, sick leave, vacation pay, salary continuation for disability,
hospitalization, medical insurance, life insurance, pensions (other than United
Kingdom pensions) and scholarship plans and programs maintained by the Company
or any of the Subsidiaries or to which the Company or any of the Subsidiaries
contributed or is obligated to contribute thereunder for current or former
employees of the Company or any of the Subsidiaries (the “Employees”)
(collectively, the “Company Plans”), and (ii) all “employee pension
plans” (as defined in Section 3(2) of ERISA, subject to Title IV of
ERISA or Section 412 of the Code, maintained by the Company or any of its
Affiliates and any trade or business (whether or not incorporated) that is or
has ever been under common control, or that is or has ever been treated as a
single employer, with any of them under Section 414(b), (c), (m) or (o) of
the Code (each, an “ERISA Affiliate”) or to which the Company or any
ERISA Affiliate contributed or has ever been obligated to contribute thereunder
(the “Title IV Plans”).  Schedule 5.19(a) of
the Disclosure Schedule sets forth each Company Plan and Title IV Plan
that is a “multiemployer plan” (as defined in Section 3(37) of ERISA (a “Multiemployer
Plan”)), or is or has been subject to Sections 4063 or 4064 of ERISA.


 


(b)           Correct and
complete copies of the following documents, with respect to each of the Company
Plans (other than a Multiemployer Plan), have been made available or delivered
to Purchaser by the Sellers, to the extent applicable:  (i) any plans, all amendments thereto
and related trust documents, insurance contracts or other funding arrangements,
and


 


41





















 


amendments thereto; (ii) the most recent
Forms 5500 and all schedules thereto and the most recent actuarial report, if
any; (iii) the most recent IRS determination letter or HMR&C approval
letter; (iv) summary plan descriptions; (v) written communications to
employees relating to the Company Plans; and (vi) written descriptions of
all non-written agreements relating to the Company Plans.


 


(c)           The Company
Plans have been maintained in all material respects in accordance with their
terms and with all applicable Laws.


 


(d)           The Company
Plans intended to qualify under Section 401 of the Code are so qualified and
any trusts intended to be exempt from federal income taxation under Section 501
of the Code are so exempt, and nothing has occurred with respect to the
operation of the Company Plans that could cause the loss of such qualification
or exemption or the imposition of any liability, penalty or tax under ERISA or
the Code.


 


(e)           Each Company
Plan that is intended to meet the requirements for tax-favored treatment under
Subchapter B of Chapter 1 of Subtitle A of the Code meets such requirements.


 


(f)            Neither the
Company nor any of the Subsidiaries nor any ERISA Affiliate has withdrawn in a
complete or partial withdrawal from any Multiemployer Plan prior to the Closing
Date, nor has any of them incurred any liability due to the termination or
reorganization of a Multiemployer Plan. 
Purchaser shall not have (i) any obligation to make any
contribution to any Multiemployer Plan or (ii) any withdrawal liability
from any Multiemployer Plan under Section 4201 of ERISA, which it would
not have had but for the consummation of the transactions contemplated by this
Agreement.


 


(g)           Schedule 5.19(g) of the
Disclosure Schedule sets forth on a plan by plan basis, the present value
of benefits payable presently or in the future to Employees under each unfunded
Company Plan.


 


(h)           All
contributions (including all employer contributions and employee salary
reduction contributions) required to have been made under any of the Company
Plans (including workers compensation) or Title IV Plans or by Law (without
regard to any waivers granted under Section 412 of the Code), to any funds
or trusts established thereunder or in connection therewith have been made by
the due date thereof (including any valid extension), and all contributions for
any period ending on or before the Closing Date that are not yet due will have
been paid or sufficient accruals for such contributions and other payments in
accordance with GAAP are duly and fully provided for on the Balance Sheet.  No accumulated funding deficiencies exist in
any of the Company Plans or Title IV Plans subject to Section 412 of the
Code.


 


(i)            There is no “amount
of unfunded benefit liabilities” (as defined in Section 4001(a)(18) of
ERISA) in any of the Title IV Plans. 
Each of the Title IV Plans are fully funded in accordance with the actuarial
assumptions used by the Pension Benefit Guaranty Corporation (“PBGC”) to
determine the level of funding required in the event of the termination of a
Title IV


 


42





















 


Plan and the “benefit liabilities” (as defined in Section 4001(a)(16)
of ERISA) of such Title IV Plan using such PBGC assumptions do not exceed the
assets of such Title IV Plan.


 


(j)            There has been
no “reportable event” (as defined in Section 4043 of ERISA) with respect
to the Title IV Plans that would require the giving of notice or any event
requiring disclosure under Section 4041(c)(3)(C) or 4063(a) of
ERISA.


 


(k)           Neither the
Company nor the Subsidiaries nor any ERISA Affiliate has terminated any Title
IV Plan, or incurred any outstanding liability under Section 4062 of ERISA
to the PBGC or to a trustee appointed under Section 4042 of ERISA.  All premiums due the PBGC with respect to the
Title IV Plans have been paid.


 


(l)            No liability
under any Company Plan or Title IV Plan has been funded nor had any such
obligation been satisfied with the purchase of a contract from an insurance
company that is not rated AA by Standard & Poor’s Corporation or the
equivalent by any other nationally recognized rating agency.


 


(m)          Neither the
Company nor the Subsidiaries nor any ERISA Affiliate or any organization to
which the Company is a successor or parent corporation within the meaning of Section 4069(b) of
ERISA has engaged in any transaction within the meaning of Section 4069 or
4212(c) of ERISA.


 


(n)           There are no
pending actions, claims or lawsuits that have been asserted or instituted
against the Company Plans, the assets of any of the trusts under the Company
Plans or the sponsor or administrator of any of the Company Plans, or against
any fiduciary of the Company Plans with respect to the operation of any of the
Company Plans (other than routine benefit claims), nor does the Company or any
Subsidiary have any Knowledge of facts that could form the basis for any such
claim or lawsuit.


 


(o)           There is no material
violation of ERISA, the Code or other applicable Laws with respect to the
filing of applicable reports, documents and notices regarding the Company Plans
with applicable Governmental Body or the furnishing of such documents to the
participants in or beneficiaries of the Company Plans.  All amendments and actions required to bring
the Company Plans into conformity in all material respects with all of the
applicable provisions of the Code, ERISA and other applicable Laws have been
made or taken.


 


(p)           None of the
Company Plans provides for post-employment life, disability or health
insurance, benefits or coverage for any participant or any beneficiary of a
participant, except as may be required by applicable Law (including, without
limitation the Consolidate Omnibus Budget Reconciliation Act of 1985, as
amended (“COBRA”)), and at the expense of the participant or the participant’s
beneficiary.  Each of the Company and any
ERISA Affiliate which maintains a “group health plan” within the meaning Section 5000(b)(1) of
the Code has complied with the notice and continuation requirements of Section 4980B
of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the
regulations thereunder.


 


(q)           Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming
due to any Employee, (ii) increase any benefits otherwise payable under
any Company Plan or


 


43





















 


Title IV Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefits under any
Company Plan or Title IV Plan.


 


(r)            Neither the Company
nor any of the Subsidiaries has a contract, plan or commitment, whether legally
binding or not, to create any additional Company Plan or to modify any existing
Company Plan.


 


(s)           No stock or
other security issued by the Company or any of the Subsidiaries forms or has
formed a material part of the assets of any Company Plan.


 


(t)            Any individual
who performs services for the Company or any of the Subsidiaries (other than
through a contract with an organization other than such individual) and who is
not treated as an employee of the Company or any of the Subsidiaries for income
tax purposes by the Company or any of the Subsidiaries is not an employee for
such purposes.


 


5.20         UK
Pensions.


 


(a)           Neither the
Company nor any Subsidiary operates or has in the past operated and no proposal
has been announced to enter into or establish any arrangement or practice (whether
legally enforceable or not and whether tax approved or not) to provide
pensions, gratuities, lump sums or other “relevant benefits” within the meaning
of Section 612 of the Income and Corporation Taxes Act 1988 to or for the
benefit of any of its past or present directors or employees or their
dependants and there are no retirement benefit or pension or death benefit or
similar schemes or arrangements in relation to which the Company or any
Subsidiary contributes.


 


(b)           Neither the
Company nor any Subsidiary has been issued with or as at the Closing is subject
to a contribution notice or financial support direction issued by the UK
Pensions Regulator in accordance with its powers under Sections 38 to 51 of the
Pensions Act 2004 and neither the Company or any Subsidiary or any person
connected with or an associate of the Company or any Subsidiary have committed
any act or failure to act which could fall within subsection (5) of Section 38
of the Pensions Act 2004.


 


(c)           Neither the
Company nor any Subsidiary has or could have any liability arising under Section 75
or Section 75A of the Pensions Act 1995 arising as a result of the Company
or the relevant Subsidiary operating or participating in any retirement benefit
or pension or similar scheme prior to Closing and neither the Company nor any
Subsidiary has any outstanding commitments, obligations or liabilities in
connection with the Hay Hall Group Pension Scheme and no payment obligations
will or may be triggered as a result of the cessation of participation by the
Company and/or any Subsidiary in any such retirement benefit or pension or
similar scheme with effect from the Closing Date.


 


5.21         Employees.


 


(a)           Schedule 5.21 of the
Disclosure Schedule sets out or has annexed to it the following details of
all employees of the Company and the Subsidiaries:


 


44





















 


(i)      the total
number of employees (including those who have been absent for more than a month
or are on long term sickness leave, maternity leave or other long term leave of
absence and have a contractual or statutory right to return to work);


 


(ii)     the full name,
age, date of start of employment, period of continuous employment, notice
period, job title, salary, bonus, commission, redundancy entitlement and entitlement
to any employment or benefits policies including share incentives, share
options, profit sharing or other incentive schemes and any other benefits e.g.
related to sales, profits or performance;


 


(iii)    copies of all
contracts of employment or details of any unwritten agreements with each
director or employee of the Company and the Subsidiaries earning more than $100,000
per annum;


 


(iv)    details of
periods of absence and any payments received or due to those employees who have
been absent for more than a month or are on long term sickness leave, maternity
leave or other long term leave of absence and have a contractual or statutory
right to return to work;


 


(v)     details of and,
where applicable, copies of policy booklets for all share incentive, share
option, profit sharing, bonus or other incentive scheme to which any director
or employee of the Company and the Subsidiaries is entitled;


 


(vi)    full
particulars of the terms of all consultancy or other services of personnel (including
agency workers) to the Company and the Subsidiaries and of the terms applicable
to the secondment or engagement to the Company and the Subsidiaries of any
person;


 


(b)           Neither the
Company nor any of the Subsidiaries has made any loan or advance to any
employee, or past or prospective employee, which is outstanding.


 


(c)           Neither the
Company nor any of the Subsidiaries has recognized, or carried out any act
which might be construed as recognizing, a trade union, works council and/or
staff association or other body representing employees.


 


(d)           There are no
terms of employment for any employee of the Company or the Subsidiaries which
provide that a change of control of any company shall amount to a breach of
contract or entitle an employee to terminate a contract, claim for a payment or
benefit or entitle him to treat himself as redundant or otherwise dismissed.


 


(e)           Neither the
Company nor any of the Subsidiaries has or is proposing to introduce any scheme
under which any employee, director or officer of the Company or a Subsidiary is
entitled to a commission or remuneration of any other sort calculated by
reference to the whole or part of the turnover, profits or sales of the Company
or any of the Subsidiaries.


 


(f)            Neither the
Company nor any of the Subsidiaries operates a profit-related pay scheme as
defined in Section 169 ICTA or an approved share option scheme or an
approved profit sharing scheme for the purposes of Sections 185 and 186 ICTA.


 


45





















 


(g)           All employment
contracts between the Company and the Subsidiaries and their directors or
employees are terminable without compensation (except statutory redundancy or
statutory compensation for unfair dismissal or discrimination) by either party
giving no more than three months’ notice.


 


(h)           Neither the
Company nor any of the Subsidiaries has received or given notice of resignation
from or to any officer or employee, and no officer or employee will be entitled
under the terms of his control of employment to give notice as a direct result
of the provisions of this Agreement, or, to the Knowledge of Sellers, has notified
the Company or any of the Subsidiaries of an intention to terminate his
employment.


 


(i)            The Company and
each of the Subsidiaries has in relation to each of its present and former
officers and employees:


 


(i)      complied in all
material respects with its obligations under all relevant laws, rules,
regulations and codes of practice having mandatory effect, and each order and
award made under statute, regulation, code of conduct and practice relevant to
its relations with employees and trade unions and/or employee representatives
(including but without limitation concerning health and safety at work) and
with any collective agreements from time to time in force;


 


(ii)     complied with
all the conditions of service of the relevant employee including its
obligations to pay all salaries, wages, commissions, bonuses, overtime pay,
holiday pay, sick pay, accrued entitlement under incentive schemes, PAYE and
national insurance contributions and other benefits of or connected with
employment up to the date of this Agreement.


 


(iii)    maintained
adequate and suitable records regarding the service of each of its employees
including (without limitation) details of terms of employment, payments of
statutory sick pay and statutory maternity pay, PAYE and National Insurance
deductions, disciplinary and health and safety matters, and records of working
time;


 


(iv)    not incurred
any liability in respect of any accident or injury which is not fully covered
by insurance.


 


(v)     The Company and
each of the Subsidiaries has complied with all recommendations made by the
Advisory Conciliation and Arbitration Service and with all awards and
declarations made by the Central Arbitration Committee.


 


(j)            There has not
at any time been any actual or, to the Knowledge of Sellers, threatened strike
or other industrial action which has disrupted the business of the Company or
any of the Subsidiaries and there is no dispute threatened by any trade union
or any of the Company’s or any of the Subsidiaries’ employees or former
employees and, to the Knowledge of Sellers, there are no circumstances likely
to give rise to such action or dispute.


 


(k)           There are no employment
tribunal claims outstanding nor has the Company or any Subsidiary received
notice (whether written, oral or otherwise) of any such claims threatened
against the Company or any of the Subsidiaries by any employee or former


 


46





















 


employee of the Company or any of the Subsidiaries
and the Sellers are not aware of any facts or circumstances that will give rise
to such a claim.


 


(l)            Neither the
Company nor any of the Subsidiaries is liable to make any payment to any
present or former employee by way of damages or compensation for loss of office
or employment or redundancy or unfair dismissal.


 


(m)          There are no
current or outstanding actions being taken by an employee or the Company or any
of the Subsidiaries in respect of disciplinary or grievance matters.


 


(n)           During the
period of twelve months ending with the date of this Agreement, neither the Company
nor any of the Subsidiaries has given notice of any redundancies to the
relevant Secretary of State or started consultations with any trade union or
employee representatives under Chapter II, Part IV of the Trade Union and
Labour Relations (Consolidation) Act 1992 and neither the Company nor any
Subsidiary has failed to comply with any obligation under that Act.


 


(o)           During the
period of twelve months ending with the date of this Agreement, neither the Company
nor any of the Subsidiaries has been a party to a relevant transfer (as defined
in the Transfer of Undertakings (Protection of Employment) Regulations 1981 or
the Acquired Right Directive 77/1871 EEC) or failed to comply with a duty to
inform and consult a trade union under those Regulations.


 


(p)           Neither the
Company or any Subsidiary has received any notice (whether written, oral or
otherwise) of any enquiries or investigations pending or threatened against the
Company or any Subsidiary by the Equal Opportunities Commission, the Commission
for Racial Equality, in relation to the Disability Discrimination Act 1995 or
by any health and safety enforcement body and, to the Knowledge of Sellers,
there are no facts or circumstances which will give rise to such claim or
investigation.


 


(q)           Save for the Employee
Bonuses as more particularly described on Schedule 5.21 of the
Disclosure Schedule, there are no amounts owing or payable to any employee in
connection with or arising from the transactions contemplated by this Agreement
(including, for the avoidance of doubt, the Pre-Sale Reorganisation).


 


5.22         Litigation.  There is no Legal Proceeding pending or, to
the Knowledge of Sellers, threatened against the Company or any of the
Subsidiaries (or to the Knowledge of Sellers, pending or threatened, against
any of the officers, directors or employees of the Company or any of the
Subsidiaries with respect to their business activities on behalf of the
Company), or to which the Company or any of the Subsidiaries is otherwise a
party before any Governmental Body; nor to the Knowledge of Sellers is there
any reasonable basis for any such Legal Proceeding.  Neither the Company nor any of the
Subsidiaries is subject to any Order except to the extent the same are not
reasonably likely to have a Material Adverse Effect, and neither the Company
nor any of the Subsidiaries is engaged in any legal action to recover monies
due it or for damages sustained by it other than debt recovery in the Ordinary
Course of Business.  There are no Legal
Proceedings pending or, to the Knowledge of Sellers, threatened


 


47





















 


that are reasonably likely to prohibit or restrain
the ability of Sellers to perform their obligations under this Agreement or
consummate the transactions contemplated hereby.


 


5.23         Compliance with
Laws;
Permits
and
Data
Protection.


 


(a)           The Company and
the Subsidiaries are in compliance in all material respects with all Laws of
any Governmental Body applicable to their business, operations or assets.  Neither the Company nor any of the
Subsidiaries has received any written notice of or been charged with the
violation of any Laws.  To the Knowledge
of Sellers, neither the Company nor any of the Subsidiaries is under
investigation with respect to the violation of any Laws and, to the Knowledge
of Sellers, there are no facts or circumstances that could reasonably be
expected to form the basis for any such violation.


 


(b)           Schedule 5.23(b) of the Disclosure
Schedule contains a list of all Permits which are required for the
operation of the Business as presently conducted (“Company Permits”), other
than those the failure of which to possess is immaterial.  The Company and the Subsidiaries currently
have all Company Permits which are required for the operation of the Business
as presently conducted, other than those the failure of which to possess is
immaterial.  All such Company Permits are
valid and subsisting.  Neither the
Company nor any of the Subsidiaries is in default or violation, and no event
has occurred which, with notice or the lapse of time or both, would constitute
a default or violation, in any material respect of any term, condition or
provision of any Company Permit, and to the Knowledge of Sellers, none of the
Company Permits will be impaired or in any way affected by the consummation of
the transactions contemplated by this Agreement.


 


(c)           The Company and
each of the Subsidiaries has complied in all material respects with all
relevant requirements under the Data Protection Act 1998.


 


(d)           Neither the
Company nor any of the Subsidiaries has received notice from, nor been subject
to, enquiries by the Information Commissioner regarding non-compliance or
alleged non-compliance by the Company or any of the Subsidiaries with any
provision of the Data Protection Act 1998.


 


(e)           No individual
has alleged that the Company or any of the Subsidiaries has failed to comply
with the provisions of the Data Protection Act 1998 or claimed compensation
from the Company or any of the Subsidiaries under that Act, including for
unauthorized disclosure of personal data.


 


(f)            The personal
data held by the Company or a Subsidiary as applicable, that will be
transferred to the Purchaser has been processed in accordance with the Data
Protection Act 1998 in all material respects, and the transfer of the personal
data to the Purchaser is within the ambit of the Company’s and each of the
Subsidiaries’ notification.


 


(g)           All references
to the Data Protection Act 1998 within this section include all
regulations and codes of practices thereunder.


 


48





















 


5.24         Environmental Matters.  Except as set forth on Schedule 5.24
of the Disclosure Schedule hereto or conditions that would not reasonably
be expected to result in the Company or the Subsidiaries incurring material unbudgeted
Environmental Costs and Liabilities:


 


(a)           the operations
of the Company or the Subsidiaries, with respect to the Business, are and have
been in compliance with all applicable Environmental Laws which compliance
includes obtaining, maintaining in good standing and complying with all
Environmental Permits necessary to operate the Business and no action or
proceeding is pending or, to the Knowledge of Sellers, threatened to revoke,
modify or terminate any such Environmental Permit, and, to the Knowledge of Sellers,
no facts, circumstances or conditions currently exist that could reasonably be
expected to adversely affect such continued compliance with Environmental Laws
and Environmental Permits or require currently unbudgeted capital expenditures
to achieve or maintain such continued compliance with Environmental Laws and
Environmental Permits;


 


(b)           neither the
Company nor any of the Subsidiaries is the subject of any outstanding written
Order or Contract with any governmental authority or person with respect to (i) Environmental
Laws, (ii) Remedial Action or (iii) any Release or threatened Release
of a Hazardous Material;


 


(c)           no claim is
pending, or to the Knowledge of Sellers, threatened against the Company or any
of the Subsidiaries alleging either or both that the Company or any of the
Subsidiaries may be in material violation of any Environmental Law or
Environmental Permit, or may have any material liability under any
Environmental Law;


 


(d)           to the Knowledge
of Sellers, no facts, circumstances or conditions currently exist with respect
to the Company or any of the Subsidiaries or any property currently or formerly
owned, operated or leased by the Company or any of the Subsidiaries or any
property to which the Company or any of the Subsidiaries arranged for the
disposal or treatment of Hazardous Materials that could reasonably be expected
to result in the Company or any of the Subsidiaries incurring material unbudgeted
Environmental Costs and Liabilities; provided that this warranty shall not be
taken to imply that any environmental survey has been commissioned by the Sellers
for the specific purpose of considering the accuracy of this warranty;


 


(e)           there are no
investigations of the business, operations, or currently or, to the Knowledge
of Sellers, previously owned, operated or leased property of the Company or any
of the Subsidiaries pending or, to the Knowledge of Sellers, threatened which
could reasonably be expected to result in the Company or the Subsidiaries
incurring any material Environmental Costs and Liabilities or resulting in the
imposition of any Liens under Environmental Law on any Company Property;


 


(f)            the
transactions contemplated hereunder do not require the consent of or filings
with any Governmental Body with jurisdiction over Sellers and environmental
matters;


 


(g)           neither the
Company nor any of the Subsidiaries has manufactured or otherwise distributed
in commerce any products containing asbestos or has been named as a


 


49





















 


defendant in any lawsuit seeking damages as a result
of exposure to asbestos or asbestos-containing materials.


 


(h)           Sellers have
provided to Purchaser all material environmentally related audits, studies,
reports, analyses, and results of investigations or assessments which, to the
Knowledge of Sellers, are in the possession of the Sellers that have been
performed with respect to the currently or previously owned, leased or operated
properties of the Company or any of the Subsidiaries and any material
documentation related to any outstanding unresolved Environmental Costs and
Liabilities.


 


5.25         Insurance.  The Company and the Subsidiaries have
insurance policies in full force and effect for such amounts as are sufficient
for all requirements of Law and all agreements to which the Company or any of
the Subsidiaries is a party or by which it is bound.  Set forth in Schedule 5.25 of the
Disclosure Schedule is a complete and an accurate list and accurate and
complete copies of all policies now in force of all insurance policies and all
fidelity bonds maintained by the Company or any of the Subsidiaries.  Except as set forth on Schedule 5.25
of the Disclosure Schedule, no event relating to the Company or any of the Subsidiaries
has occurred which could reasonably be expected to result in a retroactive
upward adjustment in premiums under any such insurance policies or which could
reasonably be expected to result in a prospective upward adjustment in such
premiums.  Excluding insurance policies
that have expired and been replaced in the Ordinary Course of Business, no
insurance policy has been cancelled within the last two (2) years and, to
the Knowledge of Sellers, no threat has been made to cancel any insurance
policy of the Company or any of the Subsidiaries during such period.  Except as noted on Schedule 5.25
of the Disclosure Schedule, all such insurance will remain in full force and
effect immediately following the consummation of the transactions contemplated
hereby.  No event has occurred,
including, without limitation, the failure by the Company or any of the
Subsidiaries to give any notice or information or the Company or any of the
Subsidiaries giving any inaccurate or erroneous notice or information, which has
rendered or, in the reasonable opinion of the Sellers, may render such insurance
policies void or voidable.


 


5.26         Inventories.


 


(a)           The inventories
of the Company and the Subsidiaries are in good and marketable condition, and are
usable and of a quantity and quality saleable in the Ordinary Course of
Business.  The inventories of the Company
and the Subsidiaries set forth in the Balance Sheet were valued at the lower of
cost (on a FIFO/LIFO basis) or market and were properly stated therein in
accordance with GAAP consistently applied. 
Adequate reserves have been reflected in the Balance Sheet for obsolete,
excess, damaged or otherwise unusable inventory, which reserves were calculated
in a manner consistent with past practice and in accordance with GAAP
consistently applied.  The inventories of
the Company and the Subsidiaries constitute sufficient quantities for the
normal operation of the Business in accordance with past practice.


 


5.27         Accounts and Notes Receivable and Payable.


 


(a)           All accounts
and notes receivable of the Company and the Subsidiaries have arisen from bona
fide transactions in the Ordinary Course of Business consistent with past


 


50





















 


practice and are payable on ordinary trade
terms.  All accounts and notes receivable
of the Company and the Subsidiaries reflected on the Balance Sheet are good and
collectible at the aggregate recorded amounts thereof, net of any applicable
reserve for returns or doubtful accounts reflected thereon, which reserves are
adequate and were calculated in a manner consistent with past practice and in
accordance with GAAP consistently applied. 
All accounts and notes receivable arising after the Balance Sheet Date
are good and collectible at the aggregate recorded amounts thereof, net of any
applicable reserve for returns or doubtful accounts, which reserves are
adequate and were calculated in a manner consistent with past practice and in
accordance with GAAP consistently applied. 
None of the accounts or the notes receivable of the Company or any of the
Subsidiaries (i) are subject to any setoffs or counterclaims or (ii) represent
obligations for goods sold on consignment, on approval or on a sale-or-return
basis or subject to any other repurchase or return arrangement.


 


(b)           All accounts
payable of the Company and the Subsidiaries reflected in the Balance Sheet or
arising after the date thereof are the result of bona fide transactions in the
Ordinary Course of Business and have been paid or are not yet due and payable.


 


5.28         Related Party Transactions.  No employee, officer, director, shareholder,
partner or member of the Company or any of the Subsidiaries, any member of his
or her immediate family or any of their respective Affiliates (“Related
Persons”) (i) owes any amount to the Company or any of the
Subsidiaries nor does the Company or any of the Subsidiaries owe any amount to,
or has the Company or any of the Subsidiaries committed to make any loan or
extend or guarantee credit to or for the benefit of, any Related Person, (ii) is
involved in any business arrangement or other relationship with the Company or
any of the Subsidiaries (whether written or oral), (iii) owns any property
or right, tangible or intangible, that is used by the Company or any of the
Subsidiaries (other than employment agreements set forth on Schedule 5.21
or (iv) to the Knowledge of Sellers, has any claim or cause of action
against the Company or any of the Subsidiaries.


 


5.29         Customers and Suppliers.


 


(a)           Schedule 5.29(a) of the
Disclosure Schedule sets forth a list of the ten (10) largest
customers and the ten (10) largest suppliers of the Company and each of the
Subsidiaries, as measured by the dollar amount of purchases therefrom or
thereby, during each of the fiscal years ended December 31, 2003 and December 31,
2004, showing the approximate total sales by the Company and each of the
Subsidiaries to each such customer and the approximate total purchases by the Company
and each of the Subsidiaries from each such supplier, during such period.


 


(b)           Since the
Balance Sheet Date, no customer or supplier listed on Schedule 5.29(a) of
the Disclosure Schedule has terminated its relationship with the Company
or any of the Subsidiaries or materially changed its terms of business with the
Company or any of the Subsidiaries and, to the Knowledge of Sellers, no
customer or supplier listed on Schedule 5.29(a) of the
Disclosure Schedule has notified the Company or any of the Subsidiaries
that it intends to terminate or materially change its terms of business with
the Company or any of the Subsidiaries.


 


51





















 


5.30         Product Warranty;
Product
Liability.


 


(a)           Except as set
forth on Schedule 5.30(a) of the Disclosure Schedule, each
product manufactured, sold or delivered by the Company or any of the
Subsidiaries in conducting the Business has been in conformity with all product
specifications and all express and implied warranties.  Neither the Company nor any of the Subsidiaries
has any liability for replacement or repair of any such products or other
damages in connection therewith or any other customer or product obligations
not reserved against on the Balance Sheet. 
Neither the Company nor any of the Subsidiaries has sold any products or
delivered any services that included a warranty for a period of longer than 18
months.


 


(b)           Neither the
Company nor any of the Subsidiaries has committed any act or failed to commit
any act, which would result in, and there has been no occurrence which would give
rise to or form the basis of, any product liability or liability for breach of
warranty (whether covered by insurance or not) on the part of the Company or
any of the Subsidiaries with respect to products designed, manufactured,
assembled, repaired, maintained, delivered or installed or services rendered
prior to the Closing.


 


5.31         Banks.  Schedule 5.31 of the Disclosure Schedule contains
a complete and correct list of the names and locations of all banks in which
the Company or any of the Subsidiaries has accounts or safe deposit boxes and
the names of all persons authorized to draw thereon or to have access
thereto.  No person holds a power of
attorney to act on behalf of the Company or any of the Subsidiaries.


 


5.32         Financial and Other Advisors.  Except as set forth on Schedule 5.32
of the Disclosure Schedule, no Person has acted, directly or indirectly, as a
broker, finder or financial advisor for Sellers in connection with the
transactions contemplated by this Agreement and no Person is or will be entitled
to any fee or commission or like payment in respect thereof.  Schedule 5.32 of the Disclosure Schedule sets
forth all brokers, counsel, accountants, investment banks and other advisors entitled
to any Company’s Transaction Expenses, and the Seller’s good faith estimate of
all Company’s Transaction Expenses expected to be incurred in connection with
the negotiation and effectuation of the terms and conditions of this Agreement
and the Seller Documents and the transactions contemplated hereby and thereby.


 


5.33         Insolvency
and Winding Up.


 


(a)           No Corporate
Insolvency Event has occurred in relation to the Company or any of the
Subsidiaries or any Seller that is a corporate entity or any individual Seller.


 


(b)           No procedure
has been commenced by the registrar of companies or any other person with a
view to striking off the Company or any of the Subsidiaries under Section 652
of the Companies Act.


 


(c)           Neither the Company
nor any of the Subsidiaries has at any time during the two years preceding the
date of this Agreement entered into a transaction with any person at an
undervalue as defined in Section 238 of the Insolvency Act 1986 nor has it
given or been given any preference as defined in Section 239 of the
Insolvency Act 1986.


 


52





















 


5.34         Competition and Trade Regulation Law.


 


(a)           Neither the Company
nor any of the Subsidiaries is or has been a party to or is or has been
concerned in any agreement or arrangement or is conducting or has conducted
itself (whether by omission or otherwise) in a manner which:


 


(i)      has been
registered under the RTPA;


 


(ii)     infringes Section 2
or Section 18 of the Competition Act 1998;


 


(iii)    infringes Article 81
or 82 of the Treaty establishing the European Economic Community or any other
anti-trust or similar legislation in any jurisdiction in which the Company or any
of the Subsidiaries has assets or carries or intends to carry on business or
where its activities may have an effect; or


 


(iv)    is registrable,
unenforceable or void (whether in whole or in part) or renders any of them
liable to civil, criminal or administrative proceedings by virtue of any
Antitrust Laws in any jurisdiction in which the Company or any of the
Subsidiaries has assets or carries on or intends to carry on business or where its
activities may have an effect.


 


(b)           Neither the
Company nor any of the Subsidiaries has given an undertaking to, or is subject
to any Order of, or has received any request for information from, or, to the
Knowledge of Sellers, is subject to an investigation by, any Governmental
Authority (including, without limitation, any national competition authority
and the Commission of the European Community) under any Antitrust Laws in any
jurisdiction in which the Company or any of the Subsidiaries has assets or
carries on or intends to carry on business or where its activities may have an effect.


 


(c)           Neither the Company
or any of the Subsidiaries is or has been a party to or is or has been
concerned in any agreement or arrangement in respect of which:


 


(i)      an application
for guidance has been made to and/or a decision has been made by the Office of
Fair Trading; or


 


(ii)     an application
for negative clearance and/or exemption has been made to the Commission of the
European Community.


 


(d)           No officer,
director or authorized employee, agent or representative of the Company or the
Subsidiaries has agreed to make or implement or cause to be made or implemented
any arrangement of the kind set out in Section 188(2) of the
Enterprise Act 2002.


 


(e)           None of the
business or activities of the Company or any of the Subsidiaries as currently
conducted could give rise to the imposition of any anti-dumping duty or other
sanction under any trade regulation legislation in respect of any products
manufactured by the Company or any of the Subsidiaries or in which the Company
or any of the Subsidiaries trades.


 


53





















 


(f)            No anti-dumping
duty regime or other sanction under any trade regulation legislation is or has
been in force in any area in or to which the Company or any of the Subsidiaries
manufactures, trades or sells in respect of products manufactured by the Company
or any of the Subsidiaries or in which the Company or any of the Subsidiaries
trades.


 


(g)           No undertaking
has been given by the Company or any of the Subsidiaries to any governmental
authority (including, without limitation, the authorities of the European
Community) under any anti-dumping or other trade regulation legislation.


 


(h)           Neither the Company
or any of the Subsidiaries is or has been in receipt of any aid which could be
construed as falling within Article 87(1) of the Treaty establishing
the European Economic Community other than:


 


(i)      aid in
operation at the date of UK Accession to the Community which is treated as
existing aid pursuant to Article 88(1); or


 


(ii)     aid or any
alteration to existing aid falling within Article 87(3) which has
been duly notified to the Commission of the European Community pursuant to Article 88(3).


 


(i)            Neither the Company
or any of the Subsidiaries is or has been in receipt of any aid which could be
construed as falling within Article 4(c) of the ECSC Treaty other
than aid duly notified to, and, where required by any regulation, approved by,
the Commission of the European Community.


 


(j)            Neither the Company
or any of the Subsidiaries is aware of any investigation complaint, action or
negative decision in relation to the receipt or alleged receipt by any of them
of any aid or alleged aid or of any such threatened investigation, complaint,
action or negative decision.


 


5.35         Foreign
Corrupt Trade Practices Act


 


(a)           Neither the
Company nor any of the Subsidiaries, nor any of their respective officers,
directors or authorised employees, agents or representatives has authorized the
payment of any bribes.


 


(b)           There is not
now, and, to the Knowledge of Sellers, there has never been, any employment by
the Company or any of the Subsidiaries of, or beneficial ownership in the
Company or any of the Subsidiaries by, any governmental or political official.


 


5.36         Unusual
or Onerous Commitments


 


(a)           Neither the
Company nor the Subsidiaries is under any obligation, nor party to any
agreement or arrangement which:


 


(i)      in the
reasonable opinion of Sellers cannot be fulfilled or performed by it on time
and without undue or unusual expenditure of money or effort;


 


54





















 


(ii)     restricts its
freedom to carry on its business or to use or exploit its assets in any part of
the world in such a manner as it may see fit;


 


(iii)    provides for
the grant by or to the Company or the Subsidiaries of sole or exclusive rights;


 


(iv)    in the
reasonable opinion of Sellers cannot be performed in accordance with its terms
within six months of the date on which it was entered or undertaken or is of a
duration which exceeds that which is normal in the circumstances;


 


(v)     cannot be
terminated by the Company or its Subsidiaries on less than three months’ notice
in accordance with its terms; provided, however, that this warranty
shall not apply to agreements with distributors that are (i) in
substantially the same form as the Company or any of its Subsidiaries’ standard
form of distribution agreement, or (ii) entered in the Ordinary Course of
Business;


 


(vi)    will be
terminated in the event of change in the underlying ownership or control of the
Company or the Subsidiaries or would be materially affected by such change;


 


(vii)   was entered
into or carried out other than in the ordinary or usual course of business or
by way of a bargain at arm’s length;


 


(viii)  is of a value
which has material consequences in terms of expenditure or revenue expectations
or is expected to result in a loss to the Company or the Subsidiaries on
completion;


 


(ix)     provides for
the Company or the Subsidiaries to receive any sum, right or other asset, or
discharge any liability, whose amount or value is expressed in or by reference
to any currency other than sterling or any change in foreign exchange rates;


 


(x)      is for any sale
or purchase option or similar agreement or arrangement affecting any assets
owned or used by the Company or the Subsidiaries; or


 


(xi)     is for the
provision of management or similar services to the Company or the Subsidiaries
and which is not terminable by the Company or the Subsidiaries on less than
three months notice without compensation.


 


(b)           Neither the
Company nor its Subsidiaries (excluding Rathi Turboflex Pty Ltd) are subject to
any shareholder or investor agreements or arrangements and any shareholder or
investor arrangements previously in force have been validly terminated with no
liability attaching to the Company or the relevant Subsidiary.


 


55





















 


ARTICLE VI



REPRESENTATIONS AND WARRANTIES OF PURCHASER


 


Purchaser hereby represents and warrants to Sellers
that each of the following representations and warranties is true and accurate
at the date of this agreement and such representations and warranties shall be
deemed to be repeated on the Closing Date:


 


6.1           Organization and Good Standing.  Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.


 


6.2           Authorization of Agreement.  Purchaser has full corporate power and
authority to execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by Purchaser in connection with the consummation of the transactions
contemplated hereby and thereby (the “Purchaser Documents”), and to
consummate the transactions contemplated hereby and thereby.  The execution, delivery and performance by
Purchaser of this Agreement and each Purchaser Document have been duly
authorized by all necessary corporate action on behalf of Purchaser.  This Agreement has been, and each Purchaser
Document will be at or prior to the Closing, duly executed and delivered
by Purchaser and (assuming the due authorization, execution and delivery by the
other parties hereto and thereto) this Agreement constitutes, and each Purchaser
Document when so executed and delivered will constitute, the legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).


 


6.3           Conflicts; Consents
of
Third
Parties.


 


(a)           Except as set
forth on Schedule 6.3(a) hereto, neither of the execution and
delivery by Purchaser of this Agreement and of the Purchaser Documents, the
consummation of the transactions contemplated hereby or thereby, nor the
compliance by Purchaser with any of the provisions hereof or thereof will (i) conflict
with, or result in the breach of, any provision of the certificate of
incorporation or by-laws of Purchaser, (ii) conflict with, violate, result
in the breach of, or constitute a default under any note, bond, mortgage,
indenture, license, agreement or other obligation to which Purchaser is a party
or by which Purchaser or its properties or assets are bound or (iii) violate
any statute, rule, regulation or Order of any Governmental Body by which
Purchaser is bound, except, in the case of clauses (ii) and (iii), for
such violations, breaches or defaults as would not, individually or in the
aggregate, have a material adverse effect on the ability of Purchaser to
consummate the transactions contemplated by this Agreement.


 


(b)           No consent,
waiver, approval, Order, Permit or authorization of, or declaration or filing
with, or notification to, any Person or Governmental Body is required on the
part of Purchaser in connection with the execution and delivery of this
Agreement or the Purchaser Documents or the compliance by Purchaser with any of
the provisions hereof or thereof, except for (i) compliance with the
applicable requirements of Antitrust Laws, to the


 


56





















 


extent applicable, and (ii) such consents,
waivers, approvals, Orders, Permits, authorizations, declarations, filings, or
notifications that, if not obtained, made or given, would not, individually or
in the aggregate, have a material adverse effect on the ability of Purchaser to
consummate the transactions contemplated by this Agreement.


 


6.4           Litigation.  There are no Legal Proceedings pending or, to
the Knowledge of Purchaser, threatened that are reasonably likely to prohibit
or restrain the ability of Purchaser to enter into this Agreement or the
Purchaser Documents or consummate the transactions contemplated hereby and
thereby.


 


6.5           Investment Intention.  Purchaser is acquiring the Shares for its own
account, for investment purposes only and not with a view to the distribution
(as such term is used in Section 2(11) of the Securities Act of 1933, as
amended (the “Securities Act”) thereof. 
Purchaser understands that the Shares have not been registered under the
Securities Act and cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available.


 


6.6           Financial Advisors.  No Person has acted, directly or indirectly,
as a broker, finder or financial advisor for Purchaser in connection with the
transactions contemplated by this Agreement and no Person is entitled to any
fee or commission or like payment in respect thereof.


 


ARTICLE VII



COVENANTS


 


7.1           Access to Information.  Sellers shall, and Sellers shall cause the Company
and the Subsidiaries to, afford to Purchaser and its accountants, counsel,
financial advisors and other representatives, and to prospective lenders,
placement agents and other financing sources and each of their respective
representatives, reasonable access, during normal business hours upon
reasonable notice throughout the period prior to the Closing, to their
respective properties and facilities (including all real property owned or
leased by the Company and the Subsidiaries and the buildings, structures,
fixtures, appurtenances and improvements erected, attached or located thereon),
books, financial information (including working papers and data in the
possession of the Company’s independent public accountants, internal audit
reports, and “management letters” from such accountants with respect to the
Company’s systems of internal control), Contracts, commitments and records and,
during such period, shall furnish promptly such information concerning its
businesses, properties and personnel as Purchaser shall reasonably request; provided,
however, such investigation shall not unreasonably disrupt the Company’s
or the Subsidiaries’ operations; provided, further, that any
request for access shall be initiated through Philip Baldrey.  Prior to the Closing, Sellers shall generally
keep Purchaser informed as to all material matters involving the Business.  Sellers shall authorize and direct the
appropriate directors, managers and employees of the Company and each other
Subsidiary to discuss matters involving the Business of the Company or other
Subsidiary with representatives of Purchaser and its prospective lenders or
placement agents and other financial sources, provided, further,
that any such discussions shall be initiated through Philip Baldrey.  All nonpublic information provided to, or
obtained by, Purchaser in connection with the transactions


 


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contemplated hereby shall be “Proprietary Information”
for purposes of the existing Nondisclosure Agreement by and among Purchaser and
the Company (the “Nondisclosure Agreement”), the terms of which shall
continue in force in accordance with its terms; provided that Purchaser
and the Company may disclose such information as may be necessary in connection
with (i) seeking necessary consents and approvals as contemplated hereby
and (ii) completing the Financing. 
Notwithstanding the foregoing, Sellers shall not be required to provide
any information which it reasonably believes it may not provide to Purchaser by
reason of applicable Law or the rules and regulations of any Governmental
Body.  No information provided to or
obtained by Purchaser pursuant to this Section 7.1 shall limit or
otherwise affect the remedies available hereunder to Purchaser (including, but
not limited to, Purchaser’s right to seek indemnification pursuant to Article IX),
or the representations or warranties of, or the conditions to the obligations
of, the parties hereto.


 


7.2           Conduct of
the
Business
Pending
the
Closing.


 


(a)           Except as
otherwise expressly provided in this Agreement, or as expressly required to
effect the Pre-Sale Reorganization or with the prior written consent of
Purchaser (such consent not to be unreasonably withheld or delayed), Sellers
shall, and Sellers shall cause the Company and the Subsidiaries, pending
Closing, to:


 


(i)      conduct the
Business only in the Ordinary Course of Business;


 


(ii)     use their
commercially reasonable efforts to preserve its present business operations,
organization (including officers and employees) and goodwill of the Company and
the Subsidiaries;


 


(iii)    maintain (A) all
of the properties and assets (whether tangible or intangible) of the Company
and the Subsidiaries in their current condition, ordinary wear and tear
excepted, and (B) insurance upon all of the properties and assets (whether
tangible or intangible) of the Company and the Subsidiaries in such amounts and
of such kinds comparable to that in effect on the date of this Agreement;


 


(iv)    (A) maintain
the books, accounts and records of the Company, the Company and the
Subsidiaries in the Ordinary Course of Business, (B) continue to collect
accounts receivable and pay accounts payable utilizing normal procedures and
without discounting or accelerating payment of such accounts, and (C) comply
with all contractual and other obligations of the Company and the Subsidiaries;


 


(v)     subject to Section 7.2(xi),
make on a timely basis and not delay the making of planned capital
expenditures; and


 


(vi)    comply in all
material respects with all applicable Laws.


 


(b)           Without
limiting the generality of the foregoing, except as otherwise expressly
provided in this Agreement or with the prior written consent of Purchaser (such
consent not to be unreasonably withheld or delayed), Sellers shall not, and
Sellers shall cause the Company and the Subsidiaries not to:


 


58





















 


(i)      declare, set
aside, make or pay any dividend or other distribution in respect of the capital
stock of, or other ownership interests in, the Company or any of the
Subsidiaries or repurchase, redeem or otherwise acquire any outstanding shares
of the capital stock or other securities of, or other ownership interests in,
the Company or any of the Subsidiaries;


 


(ii)     transfer,
issue, sell, pledge, encumber or dispose of any shares of capital stock or
other securities of, or interests in, the Company or any of the Subsidiaries or
grant options, warrants, calls or other rights to purchase or otherwise acquire
shares of the capital stock or other securities of, or interests in, the Company
or any of the Subsidiaries;


 


(iii)    effect any
recapitalization, reclassification, stock split, combination or like change in
the capitalization of the Company or any of the Subsidiaries, or amend the
terms of any outstanding securities of the Company or any of the Subsidiaries;


 


(iv)    amend the
memorandum of association, articles of association, certificate of
incorporation or by-laws or equivalent organizational documents of the Company
or any of the Subsidiaries;


 


(v)     other than in
the Ordinary Course of Business (A) increase the salary or other
compensation of any officer or employee of the Company or any of the
Subsidiaries, except for normal year-end increases, (B) grant any unusual
or extraordinary bonus (excluding any Employee Bonus), benefit or other direct
or indirect compensation to any employee, director or consultant, (C) increase
the coverage or benefits available under any (or create any new) severance pay,
termination pay, vacation pay, company awards, salary continuation for
disability, sick leave, deferred compensation, bonus or other incentive
compensation, insurance, pension or other employee benefit plan or arrangement
made to, for, or with any of the directors, officers, employees, agents or
representatives of the Company or any of the Subsidiaries or otherwise modify
or amend or terminate any such plan or arrangement or (D) enter into any
employment, deferred compensation, severance, special pay, consulting, non-competition
or similar agreement or arrangement with any directors or officers of the Company
or any of the Subsidiaries (or amend any such agreement to which the Company or
any of the Subsidiaries is a party);


 


(vi)    (A) create,
incur, assume, guarantee, endorse or otherwise become liable or responsible
with respect to (whether directly, contingently, or otherwise) any
Indebtedness; (B) except in the Ordinary Course of Business, pay, repay,
discharge, purchase, repurchase or satisfy any Indebtedness issued or
guaranteed by the Company or any of the Subsidiaries; (C) modify the terms
of any Indebtedness or other Liability; or (D) make any loans, advances of
capital contributions to, or investments in, any other Person (other than to
wholly-owned Subsidiaries in the Ordinary Course of Business);


 


(vii)   subject to any
Lien or otherwise encumber or, except for Permitted Exceptions, permit, allow
or suffer to be encumbered, any of the properties or assets (whether tangible
or intangible) of the Company or any of the Subsidiaries;


 


59





















 


(viii)  acquire any
material properties or assets (whether tangible or intangible) or sell, assign,
license, transfer, convey, lease or otherwise dispose of any of the material
properties or assets (whether tangible or intangible) of the Company and the
Subsidiaries, other than in the Ordinary Course of Business or in connection
with the Pre-Sale Reorganisation;


 


(ix)     enter into or
agree to enter into any merger or consolidation with, any corporation or other
entity, and not engage in any new business or invest in, make a loan, advance
or capital contribution to, or otherwise acquire the securities of any other
Person;


 


(x)      cancel or
compromise any debt or claim or waive or release any material right of the Company
or any of the Subsidiaries except in the Ordinary Course of Business;


 


(xi)     enter into any
commitment for capital expenditures of the Company and the Subsidiaries in
excess of $50,000 for any individual commitment and $100,000 for all
commitments in the aggregate;


 


(xii)    enter into,
modify or terminate any labor or collective bargaining agreement of the Company
or any of the Subsidiaries or, through negotiation or otherwise, make any
commitment or incur any liability to any labor organization with respect to the
Company or any of the Subsidiaries;


 


(xiii)   introduce any
material change with respect to the operation of the Company or any of the
Subsidiaries, including any material change in the types, nature, composition
or quality of its products or services, or, other than in the Ordinary Course
of Business, make any change in product specifications or prices or terms of
distributions of such products;


 


(xiv)  except for
transfers of cash pursuant to normal cash management practices in the Ordinary
Course of Business, permit the Company or any of the Subsidiaries to make any
investments in or loans to, or pay any fees or expenses to, or enter into or
modify any Contract with any Affiliate of the Company or any of the
Subsidiaries, or any director, officer or employee of the Company or any of the
Subsidiaries;


 


(xv)   make a change
in its accounting or Tax reporting principles, methods or policies other than
in the Ordinary Course of Business;


 


(xvi)  other than in
the Ordinary Course of Business, make or revoke any material Tax election, or
settle or compromise any material Tax liability or enter into a settlement or
compromise with respect thereto, or change (or make a request to any taxing
authority to change) any material aspect of its method of accounting for Tax
purposes;


 


(xvii) enter into any
Contract, understanding or commitment that restrains, restricts, limits or
impedes the ability of Business, or the ability of the Company or any of the
Subsidiaries to compete with or conduct any business or line of business in any
geographic area or solicit the employment of any persons;


 


60





















 


(xviii) terminate, amend, restate, supplement or
waive any rights under any Permit, Material Contract, Real Property Lease,
Personal Property Lease or Intellectual Property License, other than in the
Ordinary Course of Business;


 


(xix)   settle or
compromise any pending or threatened Legal Proceeding or any claim or claims
for, or that would result in a loss of revenue of, an amount that could,
individually or in the aggregate, reasonably be expected to be greater than $50,000;


 


(xx)    change or
modify its credit, collection or payment policies, procedures or practices,
including acceleration of collections or receivables (whether or not past due)
or fail to pay or delay payment of payables or other liabilities;


 


(xxi)   take any action
which would adversely affect the ability of the parties to consummate the
transactions contemplated by this Agreement; and


 


(xxii)   agree to do
anything (A) prohibited by this Section 7.2(b) or (B) that
would be reasonably expected to have a Material Adverse Effect.


 


7.3           Consents.  Sellers shall use, and Sellers shall cause
the Company and the Subsidiaries to use, their commercially reasonable efforts
to obtain at the earliest practicable date all consents and approvals required
to consummate the transactions contemplated by this Agreement and in connection
with the Pre-Sale Reorganisation, including the consents and approvals referred
to in Section 5.7 and 6.3 hereof.


 


7.4           Lease Agreement.  Prior to
Closing, the Sellers will procure, at the cost of the landlord, the preparation
of a schedule of condition in respect of those parts of the property at
East Mill, Brechin, Angus which are to be leased to Matrix International
Limited (f/k/a Matrix Engineering Limited) pursuant to the Lease
Agreement.  The schedule of
condition shall be prepared by, or under the supervision of, a fellow of the
Scottish branch of The Royal Institution of Chartered Surveyors and may be
photographic, written or both as such surveyor shall in his expert opinion
decide.  The Purchaser and the Sellers
shall use reasonable endeavours to reach agreement on the terms of the schedule of
condition prior to Closing and the Purchaser shall have the opportunity to
comment upon a draft of the schedule.


 


7.5           Further Assurances.  Each of Sellers and Purchaser shall, and
Sellers shall cause the Company and each of the Subsidiaries to, use its
commercially reasonable efforts to (i) take all actions necessary or
appropriate to consummate the transactions contemplated by this Agreement and (ii) cause
the fulfillment at the earliest practicable date of all of the conditions to
their respective obligations to consummate the transactions contemplated by
this Agreement.


 


7.6           No Shop.  During the period from the date of this
Agreement through the Closing or the earlier termination of this Agreement
pursuant to Article IV, neither Sellers nor any of their Affiliates
nor any of their respective officers, employees, representatives or agents,
shall, directly or indirectly, solicit, encourage, initiate or engage in
discussions or negotiations with, or provide any information to, or otherwise
cooperate in any manner with, any Person (other than Purchaser and Purchaser’s representatives)
concerning any purchase of the Business or any of the equity interests of any
of the Company or the Subsidiaries, any merger involving or


 


61





















 


affecting the Business, the Company or any of the
Subsidiaries, any sale of all or substantially all of the assets of the
Business, the Company or any of the Subsidiaries (in one transaction or a
series of related transactions) (other than assets sold in the Ordinary Course
of Business).


 


7.7           Non-Competition; Non-Solicitation; Confidentiality.


 


(a)           For a period two
(2) years from and after the Closing Date, each of the Sellers severally
covenants that he shall not, and shall cause his Affiliates not to, directly or
indirectly, own, manage, engage in, operate, control, work for, consult with,
render services for, do business with, maintain any interest in (proprietary,
financial or otherwise) or participate in the ownership, management, operation
or control of, any business, whether in corporate, proprietorship or
partnership form or otherwise, engaged in the Business or that otherwise
competes with the Company or any of the Subsidiaries (a “Restricted Business”);
provided, however, that the restrictions contained in this Section 7.7(a) shall
not (i) restrict the acquisition by Sellers, directly or indirectly, of
less than 10% of the outstanding capital stock of any publicly traded company
engaged in a Restricted Business or (ii) restrict the operation by Sellers
of the Engineered Systems Business as such business is currently conducted.  The parties hereto specifically acknowledge
and agree that the remedy at law for any breach of the foregoing may be
inadequate and that Purchaser, in addition to any other relief available to it,
may be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damage or posting any bond whatsoever.


 


(b)           For a period three
(3) years from and after the Closing Date, each of the Sellers severally
covenants that he shall not, and shall cause his Affiliates not to, directly or
indirectly:  (i) cause, solicit,
induce or encourage any Key Employee to leave his employment with the Company
or any Subsidiary or offer employment to or employ or conclude any contract for
services with any Key Employees of the Company or the Subsidiaries who are or
become employees of Purchaser or its Affiliates; or (ii) cause, induce or
encourage any material client, customer, supplier, or licensor of the Business
to terminate or modify any such actual or prospective relationship; provided,
however, that nothing in this Section 7.7(b) shall
prevent Matrix Engineering Systems Limited (f/k/a Matrix International Limited)
from continuing to provide services that do not compete directly with the
Business to Goss Graphics Limited.


 


(c)           Each Seller
severally covenants that it shall not, from and after the Closing Date, and
shall use its respective best efforts to cause its Affiliates not to, directly
or indirectly, disclose, reveal, divulge or communicate to any Person other
than authorized officers, directors and employees of Purchaser or use or
otherwise exploit for its own benefit or for the benefit of anyone other than
Purchaser, any Confidential Information (as defined below).  Sellers shall not have any obligation to keep
confidential (or cause its officers, directors or Affiliates to keep
confidential) any Confidential Information if and to the extent disclosure
thereof is specifically required by Law or Order or pursuant to the regulations
of any securities exchange; provided, however, that in the event
disclosure is required by applicable Law or Order or pursuant to the
regulations of any securities exchange, the Sellers shall, to the extent
reasonably possible, provide Purchaser with reasonably prompt notice of such
requirement prior to making any disclosure so that Purchaser may seek an
appropriate protective order.  For
purposes of this Section 7.7(c), “Confidential Information”
shall mean any confidential information with respect to the Business, the Company
or any of the Subsidiaries, including methods of operation,


 


62





















 


customer lists, products, prices, fees, costs,
Technology, inventions, Trade Secrets, know-how, Software, marketing methods,
plans, personnel, suppliers, competitors, markets or other specialized
information or proprietary matters.  “Confidential
Information” does not include, and there shall be no obligation hereunder
with respect to, information that (i) is generally available to the public
on the date of this Agreement or (ii) becomes generally available to the
public other than as a result of a disclosure not otherwise permissible
hereunder.


 


(d)           The covenants
and undertakings contained in this Section 7.7 relate to matters
which are of a special, unique and extraordinary character and a violation of
any of the terms of this Section 7.7 may cause irreparable injury
to the parties, the amount of which will be impossible to estimate or determine
and which cannot be adequately compensated. 
Therefore, Purchaser may seek an injunction, restraining order or other
equitable relief from any court of competent jurisdiction in the event of any
breach of this Section 7.7. 
The rights and remedies provided by this Section 7.7 are
cumulative and in addition to any other rights and remedies which Purchaser may
have hereunder or at law or in equity.


 


(e)           Each covenant
and undertaking contained in Section 7.7 shall be read and
construed independently of the other undertakings herein, as an entirely separate
and severable undertaking.


 


(f)            Even though the
covenants and undertakings in Section 7.7 are considered by the
parties to be reasonable in all the circumstances, the parties hereto agree
that, if any court of competent jurisdiction in a final nonappealable judgment
determines that a specified time period, a specified geographical area, a
specified business limitation or any other relevant feature of this Section 7.7
is unreasonable, arbitrary or against public policy, then a lesser period of
time, geographical area, business limitation or other relevant feature which is
determined to be reasonable, not arbitrary and not against public policy may be
enforced against the applicable party.


 


7.8           Preservation of Records.  The Sellers and Purchaser agree that each of
them shall (and shall cause the Company and the Subsidiaries to) preserve and
keep the records held by them relating to the Business for a period of seven (7) years
from the Closing Date and shall make such records and personnel available to the
other upon demand as may be reasonably required by such party in connection
with, among other things, any insurance claims by, legal proceedings against or
governmental investigations of the Sellers, the Company or the Subsidiaries or
Purchaser or any of their Affiliates or in order to enable the Sellers or
Purchaser to comply with their respective obligations under this Agreement and
each other agreement, document or instrument contemplated hereby or
thereby.  In the event the Sellers or
Purchaser wishes to destroy (or permit to be destroyed) such records after that
time, such party shall first give ninety (90) days prior written notice to the
other and such other party shall have the right at its option and expense, upon
prior written notice given to such party within that ninety (90) day period, to
take possession of the records within one hundred and eighty (180) days after
the date of such notice.


 


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7.9           Publicity.


 


(a)           Neither Sellers
or Purchaser shall issue any press release or public announcement concerning
this Agreement or the transactions contemplated hereby without obtaining the
prior written approval of the other party hereto, which approval will not be
unreasonably withheld or delayed, unless disclosure is otherwise required by
applicable Law or by the applicable rules of any stock exchange on which
Purchaser or its Affiliates lists securities, provided that, to the
extent required by applicable Law, the party intending to make such release shall
use its commercially reasonable efforts consistent with such applicable Law to
consult with the other party with respect to the text thereof.


 


(b)           Each of
Purchaser and Sellers agrees that the terms of this Agreement shall not be
disclosed or otherwise made available to the public and that copies of this
Agreement shall not be publicly filed or otherwise made available to the
public, except where such disclosure, availability or filing is required by
applicable Law or Order or pursuant to the regulations of any securities
exchange and only to the extent required by such Law.  In the event that such disclosure,
availability or filing is required by applicable Law, each of Purchaser and
Sellers agrees to use its commercially reasonable efforts to obtain “confidential
treatment” of this Agreement and to redact such terms of this Agreement the
other party shall reasonably request.


 


7.10         Use of Name.  Sellers hereby agree that upon the
consummation of the transactions contemplated hereby, Purchaser shall have the
sole and exclusive right to the use of the Marks listed on Schedule 5.17(a) of
the Disclosure Schedule (the “Company Marks”).  Sellers shall not, and shall not permit their
Affiliates to, use any of the Company Marks. 
Sellers shall, and shall cause their Affiliates to, immediately after
the Closing, cease to hold itself out as having any affiliation with the Company
or any of its Affiliates.


 


7.11         Cooperation with Financing.  In order to assist with obtaining the debt
financing to be used in connection with the transactions contemplated hereby
(the “Financing”), Sellers shall, and Sellers shall cause the Company
and the Subsidiaries to, provide such assistance and cooperation as Purchaser
and its Affiliates may reasonably request, including, but not limited to, (i) assisting
Purchaser in preparing any prospectus offering memorandum or similar document,
cooperating with initial purchasers or placements agents, (ii) making
senior management of Sellers, the Company and the Subsidiaries reasonably
available for customary telephonic “roadshow” presentations, lender meetings
and rating agencies presentations, (iii) cooperating with prospective
lenders, underwriters, placement agents or initial purchasers in performing
their due diligence, and (iv) help procure other definitive financing
documents or other reasonably requested certificates or documents, including a
customary certificate of the chief financial officer of the Company with
respect to solvency matters, legal opinions and real estate title documentation.  Purchaser agrees to reimburse Sellers for any
out-of-pocket expenses incurred by Sellers in connection with such assistance
and cooperation with the Financing.


 


7.12         Related-Party Transactions with Non-Management
Affiliates.  On or prior
to the Closing Date, the Company and the Subsidiaries shall terminate all
Contracts with Affiliates and their respective Affiliates (other than (i) those
Contracts set forth on Schedule 7.12 and (ii) Contracts
between the Company and the Subsidiaries, Contracts between the Company and the
Subsidiaries and their respective officers and employees and Contracts whose


 


64





















 


continuance Purchaser has approved in writing) and
deliver releases executed by such Affiliates with whom the Company has
terminated such Contracts pursuant to this Section 7.12 providing
that no further payments are due, or may become due, under or in respect of any
such terminated Contacts; provided that in no event shall the Company or
any of the Subsidiaries pay any consideration with respect to any such
termination or release.


 


7.13         Notification of Certain Matters.  Sellers shall give notice to Purchaser and
Purchaser shall give notice to Sellers, as promptly as reasonably practicable
upon becoming aware of (a) any occurrence, or failure to occur, of any
event, which occurrence or failure to occur has caused or is reasonably likely
to cause any representation or warranty in this Agreement made by it to be
untrue or inaccurate in any respect at any time after the date hereof and prior
to the Closing, except where such occurrences or failures to occur could not,
individually or in the aggregate, reasonably be expected to result in a failure
of the conditions set forth in Section 8.1(a) or 8.2(a),
as applicable, to be satisfied and (b) any material failure on its part to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided that the delivery of any notice
pursuant to this Section 7.13(a)  shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice, or
the representations or warranties of, or the conditions to the obligations of,
the parties hereto.


 


7.14         Debt.  No later than three (3) Business Days
prior to the Closing Date (the “Debt Determination Date”), the Sellers
will provide Purchaser with customary pay-off letters or deeds of release or
other applicable documentation from all holders of Indebtedness (including the
Bank Debt) to be repaid as of the Closing, and make arrangements reasonably
satisfactory to Purchaser for such holders to provide to Purchaser recordable
form mortgage and lien releases, canceled notes and other documents reasonably
requested by Purchaser prior to the Closing.


 


7.15         Tax Credits.  Purchaser shall, and shall procure that the
Company or the relevant Subsidiary shall, promptly repay to Sellers an amount
equal to the actual savings of United Kingdom Taxes which arise as a result of
the utilization of a deduction from taxable profits available in respect of (a) payments
other than those made to the Hay Hall Group Pension Scheme made by the Company
or any Subsidiary prior to the Closing (where such utilization occurs within 36
months following the Closing Date) or (b) payments made to the Hay Hall
Group Pension Scheme (where such utilization occurs within 48 months following
the Closing Date), in each case other than (i) any saving relating to
Taxes for which the Sellers would otherwise be liable under this Agreement, and
(ii) any saving which has been reflected in the Closing Balance Sheet (a “Tax
Credit”).  For the purposes of the
preceding sentence, a payment made by way of cheque where the cheque is signed
on behalf of the Company or the relevant Subsidiary and dated before Closing,
but where the cheque is cleared following Closing, shall be treated as made
before Closing.  The Purchaser shall, and
shall procure that the Company or the relevant Subsidiary shall, use its
commercially reasonable efforts to fully utilize the Tax Credit within 12
months following the Closing Date to the extent permitted by law.  For a period of 36 months following the
Closing Date (or, in the case of a Tax Credit relating to a payment to the Hay
Hall Group Pension Scheme, for a period of 48 months following the Closing
Date), the Purchaser shall, and shall procure that the Company or the relevant
Subsidiary shall, use its commercially reasonable efforts to utilize the Tax
Credit in priority to other credits or reliefs that may be available and shall
use its commercially reasonable efforts to avoid taking any action that


 


65





















 


may
result in the loss or reduction in the amount of the Tax Credit or which would
result in any material delay in its utilization; provided that no action shall be required to be taken
by the Purchaser, Company or any Subsidiary under this Section 7.15
where either (i) any such action would have a material adverse effect on
the Tax position of the Company or the Subsidiaries or (ii) any such
action would otherwise have a material adverse effect on the ability of the
Purchaser, Company or any Subsidiary to conduct and/or develop their respective
businesses.  Purchaser agrees with the
Sellers to provide the Sellers promptly with such information as they may
reasonably request for the purposes of establishing whether any Tax Credit has
been utilized as provided for in this Section 7.15, such information to
include (if the Sellers so reasonably request) copies of any tax returns or tax
computations prepared for or filed by the Company or any of the Subsidiaries.  To the extent, however, that it is
subsequently determined (on audit or otherwise) at any time prior to the sixth
anniversary of the end of the Straddle Period, that a Tax Credit is not
available in circumstances where a payment has been made (or is treated as
having been made), the Sellers shall be required to promptly repay to Purchaser
an amount equal to that portion of that Tax Credit which is no longer
available.


 


7.16         Updated Disclosure Schedule.  No later than three (3) Business Days
prior to the Closing Date, the Sellers will provide Purchaser with a draft of
the Updated Disclosure Schedule, which draft Updated Disclosure Schedule shall
be subject to review, finalization and agreement (not to be unreasonably
withheld) by Purchaser prior to the Closing. 
It is agreed by the parties that the Updated Disclosure Schedule shall
only contain reference to matters arising in respect of the period after the
date of this Agreement.


 


7.17         Pre-Sale
Reorganisation.  If, at the
Closing, any of the assets to be transferred pursuant to the transactions
contemplated under the Pre-Sale Reorganisation have not been transferred, the Sellers
shall procure that such assets will be transferred as soon as possible
thereafter.  Until the relevant third
party consent in relation to any contract has been obtained or achieved under
the Pre-Sale Reorganisation, the Sellers shall do each act and thing reasonably
requested by the Purchaser to enable proper performance of that contract and to
provide for the Purchaser or the relevant member of the Group to enjoy the
benefit of that contract.


 


ARTICLE VIII



CONDITIONS TO CLOSING


 


8.1           Conditions Precedent to Obligations of Purchaser.  The obligation of Purchaser to consummate the
transactions contemplated by this Agreement is subject to the fulfillment, on
or prior to the Closing Date, of each of the following conditions precedent
(any or all of which may be waived by Purchaser in whole or in part to the
extent permitted by applicable Law):


 


(a)           the
representations and warranties of Sellers contained herein shall be true and
correct (without giving effect to any materiality, “Material Adverse Effect” or
similar qualification) at and as of the date of this Agreement and at and as of
the Closing Date as though then made (other than those representations and
warranties made as of a particular date, which shall be true and correct at and
as of such date), except where the failure of such representations


 


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and warranties to be so true and correct would not,
in the aggregate, have a Material Adverse Effect;


 


(b)           Sellers and
Purchaser shall have performed and complied in all material respects with all
obligations and agreements required in this Agreement to be performed or
complied with by them prior to the Closing Date;


 


(c)           there shall not
have been or occurred any event, change, occurrence or circumstance that has
had or could reasonably be expected to have a Material Adverse Effect since the
Accounts Date (except as otherwise expressly set forth in the Disclosure Schedule delivered
on the date of this Agreement);


 


(d)           no Legal
Proceedings shall have been instituted or threatened or claim or demand made
against Sellers, the Company or any of the Subsidiaries, or Purchaser seeking
to restrain or prohibit or to obtain substantial damages with respect to the
consummation of the transactions contemplated hereby, and there shall not be in
effect any Order by a Governmental Body of competent jurisdiction restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby;


 


(e)           Purchaser shall
have received written evidence that the Pre-Sale Reorganisation has been
completed in a manner acceptable to Purchaser in its reasonable discretion
including, without limitation, evidence that all the approvals and requirements
of ss151 to 156 of the Companies Act have been complied with by each relevant
member of the Group in respect of the transactions contemplated hereunder;


 


(f)            Sellers shall
have obtained those consents listed on Schedule 8.1(f) in a
form satisfactory to Purchaser;


 


(g)           Purchaser shall
have received evidence to its reasonable satisfaction that (i) the sale
and purchase of the Minority Shares has been completed pursuant to the terms of
the Minority Share Purchase Agreements, and (ii) the Sellers are
registered in the register of members of the Company as the legal and
beneficial holders of such Minority Shares;


 


(h)           Purchaser shall
have received (i) the written consent of the lenders under the Purchaser’s
senior credit agreement, dated as of November 30, 2004, to allow for the
consummation of the transactions contemplated by this Agreement, (ii) the
requisite written consent of the holders of the senior secured notes issued
pursuant to the Purchaser’s existing indenture, dated as of November 30,
2004, as amended to date, to allow for the consummation of the transactions
contemplated by this Agreement, and (iii) the funds contemplated by the
Financing;


 


(i)            the Company or
the Subsidiaries shall have obtained (or made the requisite filings for) the
issuance, reissuance or transfer of all Environmental Permits required under
Environmental Laws for Purchaser to conduct the operations of the Business as
of the Closing Date, and the Company or the Subsidiaries shall have satisfied
all property transfer requirements arising under Environmental Laws;


 


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(j)            Sellers shall
have delivered to Purchaser certificates of good standing as of a recent date
with respect to Sellers, the Company and the Subsidiaries for each jurisdiction
in which Sellers, the Company and the Subsidiaries are qualified to do business
either as a domestic or foreign corporation, together with the certificate of
incorporation (including any certificate of incorporation on change of name) of
the Company and each of the Subsidiaries except for the Subsidiaries
incorporated in South Africa, Sweden and India;


 


(k)           Purchaser shall
have received a certificate complying with U.S. Treasury Regulations Section 1.897-2(g)(1)(ii) that
states that neither the Company nor the Subsidiaries is a “United States real
property holding corporation”;


 


(l)            the Sellers
shall have delivered the Updated Disclosure Schedule in a form acceptable
to the Purchaser (such acceptance not to be unreasonably withheld);


 


(m)          the Sellers
shall have delivered to the Purchaser evidence (in a form reasonably acceptable
to the Purchaser) of completion of the transactions contemplated under the
terms of the Metlife Agreement and the Beagle Agreement such that the Company
is the legal and beneficial owner of the entire issued share capital of The Hay
Hall Group Limited;


 


(n)           Sellers shall
have delivered, or caused to be delivered, to the Purchaser (i) a
certificate of determination from the Pensions Regulator that a withdrawal
arrangement has been approved in accordance with the Occupational Pension
Schemes (Employer Debt) Regulations 2005 and that clearance has been granted in
respect of the Hay Hall Group Pension Scheme, and (ii) a certified copy in
relation to the Hay Hall Group Pension Scheme of the deed of substitution of
principal employer to change the principal employer of the Hay Hall Group
Pension Scheme from the Hay Hall Group Limited to Matrix Engineered Systems
Limited (f/k/a Matrix International Limited); and


 


(o)           that the period of 28 calendar days from the date on
which the Pensions Regulator provided the certificate referred to in Section 8.1(n)(ii) shall
have expired, and that during this period no representations shall have been
made to the Pensions Regulator in relation to either the clearance or the
withdrawal arrangement referred to in Section 8.1(n)(ii).


 


8.2           Conditions Precedent to Obligations of Sellers.  The obligations of Sellers to consummate the
transactions contemplated by this Agreement are subject to the fulfillment,
prior to or on the Closing Date, of each of the following conditions precedent
(any or all of which may be waived by Sellers in whole or in part to the extent
permitted by applicable Law):


 


(a)           the
representations and warranties of Purchaser set forth in this Agreement
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, in each case, as
of the date of this Agreement and as of the Closing as though made at and as of
the Closing, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, on and as of such
earlier date);


 


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(b)           Purchaser shall
have performed and complied in all respects with all obligations and agreements
required by this Agreement to be performed or complied with by Purchaser on or
prior to the Closing Date;


 


(c)           there shall not
be in effect any Order by a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby; and


 


(d)           that the period of 28 calendar days from the date on
which the Pensions Regulator provided the certificate referred to in Section 8.1(n)(ii) shall
have expired, and that during this period no representations shall have been
made to the Pensions Regulator in relation to either the clearance or the
withdrawal arrangement referred to in Section 8.1(n)(ii).


 


ARTICLE IX



INDEMNIFICATION


 


9.1           Survival of Representations and Warranties.  The representations and warranties of the
parties contained in this Agreement, any certificate delivered pursuant hereto
or any Seller Document or Purchaser Document and the indemnities contained in
sections 9.2(a)(i), 9.2(b)(vi) and 9.6(a) shall (subject to the
provisions contained in Section 9.6(c)(iv)) survive the Closing through
and including the date which is 18 months after the Closing Date; provided,
however, that, notwithstanding the foregoing, (i) the
representations and warranties of the Sellers as set forth in Sections 5.1
(Authorization of Agreement),  5.2 (Ownership and Transfer of the Shares),
5.3 (Capitalization of the Company) and 5.4 (The Company and the
Subsidiaries) shall survive the Closing indefinitely (in each case, the “Survival
Period”); provided, however, that any obligations to
indemnify and hold harmless shall not terminate with respect to any Losses as
to which the Person to be indemnified shall have given written notice (stating
in reasonable detail the nature of the claim, the matter giving rise to it, and
so far as is practicable, the amount claimed) to the indemnifying party (and in
the case of the Sellers, the Sellers’ Representative) in accordance with Section 9.3(a) before
the termination of the applicable Survival Period.


 


9.2           Indemnification.


 


(a)           Sellers hereby
agree, jointly and severally, to indemnify and hold Purchaser, the Company, the
Subsidiaries and their respective Affiliates (collectively, the “Purchaser
Indemnified Parties”) harmless from and against, and pay to the Purchaser
the amount of any and all losses, liabilities, claims, obligations,
deficiencies, demands, judgments, damages (including incidental and
consequential damages), interest, fines, penalties, claims, suits, actions,
causes of action, assessments, costs and expenses (including costs of
investigation and defense and attorneys’ and other professionals’ fees), or any
diminution in value, whether or not involving a third party claim
(individually, a “Loss” and, collectively, “Losses”):


 


(i)      subject to Sections
9.1 and 9.4, based upon, attributable to or resulting from the
failure of any of the representations or warranties made by Sellers in this
Agreement (other than the representations or warranties made by the Seller contained
in Sections 5.13(iv) and (v) and 5.14, which
shall be governed exclusively by Section 9.6), any


 


69





















 


certificate delivered pursuant hereto or in any Seller Document to be
true and accurate in all respects at and as of the date hereof and at and as of
the Closing Date; and


 


(ii)     based upon,
attributable to or resulting from the breach of any covenant or other agreement
on the part of Sellers under this Agreement (except for any covenant or
agreement relating to Taxes, which shall be subject to the exclusivity
provisions of Section 9.6(f), any certificate delivered pursuant hereto or
any Seller Document.


 


(b)           The Sellers hereby
agree jointly and severally to indemnify and hold Purchaser, the Company, the
Subsidiaries and their respective Affiliates harmless from and against and pay
to the Purchaser the amount of any and all Losses (other than Losses which are,
pursuant to Section 9.2(a), stated to be governed exclusively by Section 9.6),
whether or not involving a third party claim:


 


(i)      based upon,
attributable to or resulting from the change of principal employer or any
failure to effectively change the principal employer of the Hay Hall Group
Pension Scheme from Hay Hall Group Limited to Matrix Engineered Systems Limited
(f/k/a Matrix International Limited);


 


(ii)     based upon,
attributable to or resulting from the withdrawal agreement in connection with the
Hay Hall Group Pension Scheme or any failure of such agreement to be
enforceable;


 


(iii)    based upon,
attributable to or resulting from any liability, requirement or obligation to
make any payment or contribution to or in respect of the Hay Hall Group Pension
Scheme after Closing including without limitation any liability requirement or obligation
arising as a consequence of or in connection with the cessation of
participation of the Company and the Subsidiaries in the Hay Hall Group Pension
Scheme whether such claim arises under the governing documentation or under
statute;


 


(iv)    arising out of
or in connection with a contribution notice or financial support direction
being issued by the UK Pensions Regulator in accordance with the Regulator’s
powers under sections 38 to 51 of the Pensions Act 2004 in connection with (a) Hay
Hall Group Pension Scheme; (b) any other retirement benefit scheme in
which the Company or the Subsidiaries participated prior to Closing; or (c) any
other retirement benefit scheme sponsored by the Sellers;


 


(v)     arising out of
or in connection with the closure of the Hay Hall Group Pension Scheme to
future accrual and/or future contributions on or prior to Closing;


 


(vi)    arising out of
or in connection with or relating to any pre-Closing Liability that is not
reflected in the Closing Balance Sheet;


 


(vii)   arising out of
or in connection with or relating to the Engineered Systems Business;


 


(viii)  arising out of
or in connection with or relating to the Pre-Sale Reorganisation (other than
the US Hive Across) including without limitation arising out of or


 


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in connection with any requirement in the future for the Company or any
of the Subsidiaries to pay any amounts in connection with the Hay Hall
Leicester Loan;


 


(ix)     resulting from
the failure of the representation and warranty made by the Sellers in Section 5.16(f) to
be true and correct;


 


(x)      based upon,
attributable to or resulting from any Sellers’ Transaction Expenses;


 


(xi)     arising out of
or in connection with or relating to the purchase of the Minority Shares by the
Sellers;


 


(xii)    arising out of
or in connection with or relating to the statutory books of the Company and the
Subsidiaries including any errors, omissions or inaccuracies in respect
thereof; and


 


(xiii)   arising out of
or in connection with the US Hive Across.


 


(c)           Purchaser
hereby agrees to indemnify and hold Sellers and their respective Affiliates
(collectively, the “Seller Indemnified Parties”) harmless from and
against, and pay to the applicable Seller Indemnified Parties the amount of any
and all Losses:


 


(i)      subject to Sections
9.1 and 9.4, based upon, attributable to or resulting from the
failure of any of the representations or warranties made by Purchaser in this
Agreement or in any Purchaser Document to be true and correct in all respects
at the date hereof and as of the Closing Date; and


 


(ii)     based upon,
attributable to or resulting from the breach of any covenant or other agreement
on the part of Purchaser under this Agreement or any Purchaser Document.


 


(d)           The right to
indemnification or any other remedy based on representations, warranties,
covenants and agreements in this Agreement shall not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant
or agreement.  The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or agreements, will not affect the right to
indemnification or any other remedy based on such representations, warranties,
covenants and agreements.


 


(e)           Without
prejudice to Section 9.2(d) and for the avoidance of doubt, the
indemnities contained in Section 9.2(b) and Section 9.6
shall not in any way be qualified by the matters disclosed in the Disclosure
Schedules or the Updated Disclosure Schedule and shall not be qualified,
nor shall a claim by any Purchaser Indemnified Party against the Sellers under Section 9.2
be prevented or limited by any actual or constructive knowledge on the part of
the Purchaser or any of its directors, officers, employees or advisers, whether
obtained through the Disclosure Schedule, Updated Disclosure Schedule or
otherwise, of a matter which would make


 


71





















 


any Warranty or the subject matter of any indemnity
inaccurate, untrue, incomplete or misleading.  In particular, but without limitation, the
rights and remedies of any Purchaser Indemnified Party in respect of the
indemnities set out in Section 9.2 shall not be affected by an
investigation made by or on behalf of the Purchaser in to the affairs of the
Company or the Subsidiaries.


 


9.3           Indemnification Procedures.


 


(a)           A claim for
indemnification for any matter not involving a third party claim may be
asserted by written notice to the party from whom indemnification is sought
which, in the case of the Sellers, shall be addressed to the Sellers’
Representative.


 


(b)           In the event
that any Legal Proceedings shall be instituted or that any claim or demand
shall be asserted by any third party in respect of which payment may be sought
under Section 9.2 hereof or Section 9.6 (regardless of
the limitations set forth in Section 9.4 or Section 9.6)
(“Indemnification Claim”), the indemnified party shall promptly cause
written notice of the assertion of any Indemnification Claim of which it has
knowledge which is covered by this indemnity to be forwarded to the
indemnifying party specifying in reasonable detail the matter or event in
question.  The failure of the indemnified
party to give reasonably prompt notice of any Indemnification Claim shall not
release, waive or otherwise affect the indemnifying party’s obligations with
respect thereto except to the extent that the indemnifying party can
demonstrate actual loss and prejudice as a result of such failure.  In circumstances where the Sellers are the
indemnifying party the Purchaser shall to the extent reasonably practicable,
consult with the Sellers’ Representative as regards the conduct of any
proceedings arising out of such Indemnification Claim (and shall provide to the
Sellers’ Representative such information as he may reasonably require in
respect thereof (subject to any duties of confidentiality or the requirements
of any legal, professional or litigation privilege)) and shall consider the
Sellers’ Representative’s view on such conduct (including the Sellers’ Representative’s
views as to such action and conduct of the proceedings as the Sellers’
Representative may reasonably request to dispute, assist, appeal, compromise,
defend, remedy or mitigate the matter); provided, however, the
Purchaser shall not be required, whether as a result of the consultation with
the Sellers’ Representative or otherwise to take any action which would in its reasonable
opinion, interfere with the conduct of the Business of the Group or the
business of the Purchaser or would harm the reputation of any member of the
Group or the Purchaser or would be prejudicial to the Purchaser’s or the Group’s
business interests.  In circumstances
where the Purchaser is the indemnifying party it shall have the right, at its
sole expense, to be represented by counsel of its choice and to defend against,
negotiate, settle or otherwise deal with any Indemnification Claim which
relates to any Losses indemnified against hereunder.  If the Purchaser elects not to defend
against, negotiate, settle or otherwise deal with any Indemnification Claim
which relates to any Losses indemnified against hereunder, fails to notify the Sellers
of its election or contests its obligation to indemnify the Sellers for such
Losses under this Agreement, the Sellers may defend against, negotiate, settle
or otherwise deal with such Indemnification Claim.  If the Sellers defend any such Indemnification
Claim, then the Purchaser shall reimburse the Sellers for the expenses of
defending such Indemnification Claim upon submission of periodic bills.  If the Purchaser shall assume the defense of
any such Indemnification Claim, the Sellers may participate, at their own
expense, in the defense of such Indemnification Claim; provided, however,
that the Sellers shall be entitled to participate in any such defense with
separate counsel


 


72





















 


at the expense of the Purchaser if (i) so
requested by the Purchaser to participate or (ii) in the reasonable
opinion of counsel to the Sellers, a conflict or potential conflict exists
between the Sellers and the Purchaser that would make such separate
representation advisable; and provided, further, that the Purchaser
shall not be required to pay for more than one such counsel for all indemnified
parties in connection with any Indemnification Claim.  The parties hereto agree to cooperate fully
with each other in connection with the defense, negotiation or settlement of
any such Indemnification Claim.


 


(c)           After any final
decision, judgment or award shall have been rendered by a Governmental Body of
competent jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement shall have been consummated, or the indemnified
party and the indemnifying party shall have arrived at a mutually binding
agreement with respect to an Indemnification Claim hereunder, the indemnified
party shall forward to the indemnifying party notice of any sums due and owing
by the indemnifying party pursuant to this Agreement with respect to such
matter and the indemnifying party shall be required to pay all of such
remaining sums so due and owing to the indemnified party in accordance with Section 9.5.


 


9.4           Limitations on Indemnification for Breaches of
Representations and Warranties and pre-Closing Liability not reflected in the
Closing Balance Sheet.


 


(a)           The Sellers shall
not have any indemnification obligations for Losses under Part II of Article V
or Section 9.2(a)(i), 9.2(b)(vi), 9.2(b)(xiii), or 9.6(a) hereof
for any individual item, or group of items arising out of the same event, where
the Loss relating thereto is less than $10,000 (the “Sub-Basket”).  In addition, the Sellers shall not have any
liability under Part II of Article V, Section 9.2(a)(i),
9.2(b)(vi), 9.2(b)(xiii), or 9.6(a) hereof unless the
aggregate amount of Losses to the indemnified parties finally determined to
arise thereunder based upon, attributable to or resulting from (i) the
failure of any of the representations or warranties to be true and correct or (ii) the
pre-Closing Liability that is not reflected on the Closing Balance Sheet exceeds
$250,000 (the “Basket”) and, in such event, the Sellers shall be
required to pay the entire amount of all such Losses; provided that the
Basket and Sub-Basket limitation shall not apply to Losses related to the
failure to be true and correct of any of the representations and warranties set
forth in Sections 5.1, 5.2, 5.3, or 5.4.


 


(b)           The Sellers shall
not be required to indemnify any Person under Sections 9.2(a)(i), 9.2(b)(vi),
9.2(b)(ix). 9.2(b)(xiii) or 9.6(a) in connection with Losses related
to (i) the failure to be true and accurate of any of the representations
or warranties of the Sellers in Part II of Article V, or under
Section 9.6(a) or (ii) any pre-Closing Liability that is
not reflected on the Closing Balance Sheet or for any claim arising under Part II
of Article V for an aggregate amount of Losses exceeding $2,500,000
(the “Cap”); provided that the Cap limitation shall not apply to
Losses related to the failure to be true and correct of any of the
representations or warranties contained in Sections 5.1, 5.2, 5.3,
or 5.4.


 


(c)           For purposes of
determining the failure of representations, warranties to be true and correct,
the breach of covenants and agreements, and calculating Losses hereunder, any
materiality or Material Adverse Effect qualifications in the representations,
warranties, covenants and agreements shall be disregarded.


 


73




















 


(d)           Purchaser shall
not be entitled to seek indemnification from the Sellers pursuant to this Article IX
more than once in respect of the same Loss suffered.


 


(e)           If, in respect
of any claim, the liability of the Sellers is contingent, then the Sellers shall
not be under any obligation to make any payment to the Purchaser until such
time as the contingent liability ceases to be contingent and becomes actual; provided,
however, a reasonable amount of money may be held in the Escrow Account
beyond the initial 18 month term to the extent such contingent liability has
not become an actual liability within the first 18 months following the Closing
Date.


 


(f)            Any amount paid
by Purchaser, the Sellers in satisfaction of any claim for Loss shall, to the
extent lawful, be treated as an adjustment to the Purchase Price.


 


(g)           Nothing in this
Agreement shall limit or restrict any party’s obligation that would otherwise
exist under applicable legal principles to mitigate Losses which such party may
incur in consequence of any matter giving rise to a potential claim under this
Agreement; provided, further, that Purchaser shall use its
commercially reasonable efforts to mitigate any Loss upon becoming aware of any
event which would reasonably be expected to, or does, give rise thereto; provided,
further, however, that no action to mitigate shall be required to
be taken by the Purchaser under this Section 9.4(g) where either (i) any
such action would have a material adverse effect on Purchaser, the Company or
the Subsidiaries or (ii) any such action would otherwise have a material
adverse effect on the ability of the Purchaser, Company or any Subsidiary to
conduct their respective businesses in the ordinary course.


 


(h)           The limitations
set out and referred to in Sections 9.4(a) and 9.4(b) do
not apply to a breach of any representation or warranty resulting from fraud,
deliberate non-disclosure or willful concealment.  For the avoidance of doubt, the limitations
set out and referred to in Sections 9.4(a) and (b) apply
to the indemnities contained in Sections 9.2(a)(i), 9.2(b)(vi), 9.2(b)(ix) and
9.2(b)(xiii) but do not apply to the indemnities contained in Sections
9.2(a)(ii), 9.2(b)(i), 9.2(b)(ii), 9.2(b)(iii), 9.2(b)(iv), 9.2(h)(v),
9.2(b)(vii), 9.2(b)(viii), 9.2(b)(x), 9.2(b)(xi), and 9.2(b)(xii).


 


9.5           Indemnity Escrow.  On the Closing Date, Purchaser shall, on
behalf of Sellers, pay to the Escrow Agent in cash payable by wire transfer of immediately
available funds, to the Indemnity Escrow Account, an amount equal to $2,500,000
(the “Indemnity Escrow Amount”), in accordance with the terms of this
Agreement and the Escrow Agreement.  Any
payment Sellers are obligated to make to the Purchaser pursuant to this Article IX
shall be paid first, to the extent there are sufficient funds in the Indemnity
Escrow Account, by release of funds to the Purchaser from the Indemnity Escrow
Account by the Escrow Agent in accordance with the terms of the Escrow
Agreement and shall accordingly reduce the Indemnity Escrow Amount and, second,
to the extent the Indemnity Escrow Amount is insufficient to pay any remaining
sums due, then Sellers shall be required to pay all of such additional sums due
and owing to the Purchaser by wire transfer of immediately available funds
within five (5) Business Days after the date of such notice.


 


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9.6           Tax Matters.


 


(a)           Tax
Indemnification.  Sellers
hereby agree, jointly and severally, to be liable for and to indemnify and hold
the Purchaser Indemnified Parties harmless from and against any and all Losses
in respect of (i) all Taxes of the Company and the Subsidiaries (or any
predecessor thereof) (to be satisfied by way of payment to the Purchaser only) (A) for
any taxable period ending on or before the Closing Date, and (B) for the
portion of any Straddle Period ending at the close of business on the Closing
Date (determined as provided in Section 9.6(c)); (ii) any and
all Taxes arising in relation to any taxable period ending after the Closing
Date and for which the Company or any of the Subsidiaries is liable and would
not have been liable but for having at any time on or before the Closing Date
been a member of a group for Tax purposes with any company other than the
Company or any Subsidiary, including, without limitation, pursuant to Treasury
Regulation Section 1.1502-6(a) (or any predecessor or successor
thereof or any analogous or similar provision under United States federal,
state, local or foreign (whether in the United Kingdom or elsewhere) Law); (iii) the
failure of any of the representations and warranties contained in Sections 5.13(iv) and
(v) and 5.14 to be true and correct in all respects
(determined without regard to any qualification related to materiality
contained therein) or the failure to perform any covenant contained in this
Agreement with respect to Taxes; and (iv) any Taxes arising from or in
respect of the transactions described in the BDO Step Paper; provided,
that the Sellers shall have no liability to the Purchaser under this Section 9.6
with respect to (w) Taxes which are taken into account in the calculation of
Indebtedness (x) Taxes which are solely attributable to voluntary acts of the
Purchaser or the Company and any of the Subsidiaries that are not required by
Law where such acts occur after Closing and outside the Ordinary Course of
Business, (y) Taxes attributable to a change in legislation or published
practice of any Taxing Authority occurring in either case after Closing, and
(z) any Transfer Taxes payable in connection the transactions contemplated by
this Agreement.


 


(b)           Refunds and
credits.  For a period of 36 months
following the Closing Date, Purchaser shall promptly pay to the Seller any
refund or credit received from a Taxing Authority (including any interest paid
or credited with respect thereto and net of any reasonable cost incurred in
obtaining it and any Taxes payable with respect thereto) by the Purchaser, the
Company, or the Subsidiaries of Taxes (i) relating to the Company, the
Subsidiaries or the Sellers for taxable periods or portions thereof ending on
or before the Closing Date or (ii) in respect of which the Seller has made
a payment under Section 9.6(a) hereof; provided, in either
case that such amount was not included in the Closing Balance Sheet as an asset
and does not arise from the use of a relief attributable to an event occurring
or period commencing after the Closing Date. 
If the Seller so requests and at the Seller’s expense, and provided that
any such filing would not have any material adverse effect on the Tax position
of the Company or the Subsidiaries, the Purchaser shall file for and in good
faith attempt to obtain and shall cause either the Company or the Subsidiaries,
to file for and in good faith attempt to obtain, any refund to which the Seller
may be entitled under this Section 9.6(b).


 


(c)           Filing of Tax
Returns; Payment of Taxes.


 


(i)      Sellers shall,
and shall cause the Company and the Subsidiaries to, prepare and timely file
all Tax Returns required to be filed by them in respect of periods ending on or
prior to the Closing Date and shall pay or cause to be paid all Taxes shown due
thereon.  All such Tax Returns shall be
prepared in a manner consistent with prior practice


 


75





















 


except where to so prepare would render the Tax Returns incomplete,
misleading or materially incorrect. 
Sellers shall, and shall cause the Company and the Subsidiaries to,
provide Purchaser with copies of such completed Tax Returns and any other
amended Tax Returns at least twenty (20) days prior to the filing thereof,
along with supporting workpapers, for Purchaser’s review and approval (such
approval not to be unreasonably withheld or delayed).  Sellers and Purchaser shall attempt in good
faith to resolve any disagreements regarding such Tax Returns prior to the due
date for filing.  In the event that
Sellers and the Purchaser are unable to resolve any dispute with respect to
such Tax Return at least ten (10) days prior to the due date for filing,
such dispute shall be resolved pursuant to Section 9.6(f), which
resolution shall be binding on the parties.


 


(ii)     Straddle Period
Tax Return.  In respect
of the Tax Returns relating to the taxable period which includes the Closing
Date (but does not begin or end on that date) (a “Straddle Period”) the
Purchaser shall cause the Company and the Subsidiaries to prepare the Tax
Returns in a manner consistent with prior practice except where to so prepare
would render the Tax Returns incomplete, misleading or materially incorrect.  Purchaser shall, and shall cause the Company
and the Subsidiaries to, provide the Sellers with copies of such draft Tax
Returns at least twenty (20) days prior to the filing thereof, along with
supporting workpapers, for Purchaser’s review and shall undertake to consider and
incorporate all reasonable comments made by the Sellers.


 


(iii)    Following the
Closing, Purchaser shall cause to be timely filed all Tax Returns required to
be filed by the Company and the Subsidiaries after the Closing Date and,
subject to the rights to payment from Sellers under Section 9.6(c)(iv),
pay or cause to be paid all Taxes shown due thereon.


 


(iv)    Not later than
ten (10) days prior to the due date for the payment of Taxes on any Tax
Returns which Purchaser has the responsibility to cause to be filed pursuant to
Section 9.6(c)(iii), Sellers shall pay to Purchaser the amount of
Taxes that the Sellers and the Purchaser agree is owed by Sellers pursuant to
the provisions of Section 9.6(a). 
No payment pursuant to this Section 9.6(c)(iv) shall
excuse Sellers from their indemnification obligations pursuant to Section 9.6(a) if
the amount of Taxes as ultimately determined (on audit or otherwise) for the
periods covered by such Tax Returns exceeds the amount of Sellers’ payment
under this Section 9.6(c)(iv). 
In particular, to the extent that the amount of Taxes so ultimately
determined exceeds the amount of the Sellers’ payment under this Section 9.6(c)(iv) as
a result of the disallowance in whole or in part of the Employee Bonuses as a
deduction against United Kingdom Taxes, the 18 month time limit contained
within Section 9.1 shall not apply to any claim made by the Purchaser
under section 9.6(a) but shall be replaced by a time limit of the
sixth anniversary of the end of the Straddle Period which shall then apply
instead to any such claim.


 


(d)           Straddle Period
Tax Allocation.  In any case
in which a Tax is assessed with respect to the Straddle Period, the Taxes, if
any, attributable to a Straddle Period shall be allocated (i) to Sellers for
the period up to and including the close of business on the Closing Date, and (ii) to
Purchaser for the period subsequent to the Closing Date.  Any allocation of income or deductions
required to determine any Taxes attributable to a Straddle Period shall be made
by means of a closing of the books and records of the Company and the
Subsidiaries as of


 


76





















 


the close of the Closing Date, provided that
exemptions, allowances or deductions that are calculated on an annual basis
(including, but not limited to, depreciation and amortization deductions) shall
be allocated between the period ending on the Closing Date and the period after
the Closing Date in proportion to the number of days in each such period.


 


(e)           Time Limits.  Any claim for indemnity under this Section 9.6
may be made at any time prior to the date which is 18 months after the Closing
Date.


 


(f)            Exclusivity.  The indemnification provided for in Section 9.5
and this Section 9.6 shall be the sole remedy for any claim in
respect of Taxes (other than any claim in respect of Taxes arising out of or in
connection with or relating to the Pre-Sale Reorganisation or resulting from
the failure of the representation and warranty made by the Sellers in Section 5.16(f) to
be true and correct (see Section 9.2(b)(viii)), including any claim
arising out of or relating to a breach of Section 5.12.  In the event of a conflict between the
provisions of this Section 9.6, on the one hand, and the provisions
of Sections 9.1 through 9.4, on the other, the provisions of this
Section 9.6 shall control.


 


9.7           Tax Treatment of Indemnity Payments.


 


(a)           Sellers and
Purchaser agree, so far as possible, to treat any payment made pursuant to this
Article IX as an adjustment to the Purchase Price for all tax
purposes.  If, notwithstanding the
treatment required by the preceding sentence, any payment under Article IX
(including this Section 9.7) is determined to be taxable to the
party receiving such payment by any Taxing Authority, or any such payment is
subject to any withholding obligations pursuant to any provision of Law, the
paying party shall pay to the party receiving such payment any Expenses
incurred by the party receiving such payment in connection with such Taxes (or
any asserted deficiency, claim, demand, action, suit, proceeding, judgment or
assessment, including the defense or settlement thereof, relating to such
Taxes) plus an additional amount such that the net after-Tax amount received by
the party receiving such payment shall be equal to the amount that such party
would have received had such payments not been taxable to the party receiving
such payments or subject to withholding.


 


(b)           Section 9.7(a) shall not apply
to the extent that the party receiving a payment made pursuant to Article IX
is not an original party to this Agreement.


 


ARTICLE X


 


MISCELLANEOUS


 


10.1         Expenses.  Except as otherwise provided in this
Agreement, Sellers and Purchaser shall each bear their own expenses incurred in
connection with the negotiation and execution of this Agreement and each other
agreement, document and instrument contemplated by this Agreement and the
consummation of the transactions contemplated hereby and thereby, it being
understood that in no event shall the Company bear any of such costs and
expenses.


 


10.2         Specific Performance.  Each Seller acknowledges and agrees that the
breach of this Agreement would cause irreparable damage to Purchaser and that
Purchaser will not have an adequate remedy at law.  Therefore, the obligations of Sellers under
this Agreement,


 


77





















 


including Sellers’ obligation to sell the Shares to
Purchaser, shall be enforceable by a decree of specific performance issued by
any court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith.  Such remedies shall, however, be cumulative
and not exclusive and shall be in addition to any other remedies which any
party may have under this Agreement or otherwise.


 


10.3         Submission to Jurisdiction; Consent to Service of
Process.


 


(a)           The parties
hereto hereby irrevocably submit to the exclusive jurisdiction of the courts of
England over any dispute arising out of or relating to this Agreement or any of
the transactions contemplated hereby and each party hereby irrevocably agrees
that all claims in respect of such dispute or any suit, action proceeding
related thereto may be heard and determined in such courts.  The parties hereby irrevocably waive, to the
fullest extent permitted by applicable law, any objection which they may now or
hereafter have to the laying of venue of any such dispute brought in such court
or any defense of inconvenient forum for the maintenance of such dispute.  Each of the parties hereto agrees that a
judgment in any such dispute may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.


 


(b)           Each of the
parties hereto hereby consents to process being served by any party to this
Agreement in any suit, action or proceeding by delivery of a copy thereof in
accordance with the provisions of Section 10.6.


 


10.4         Entire Agreement; Amendments and Waivers.  This Agreement (including the schedules and
exhibits hereto), the Seller Documents and the Purchaser Documents represent
the entire understanding and agreement between the parties hereto with respect
to the subject matter hereof.  This
Agreement can be amended, supplemented or changed, and any provision hereof can
be waived, only by written instrument making specific reference to this
Agreement signed by the party against whom enforcement of any such amendment,
supplement, modification or waiver is sought. 
No action taken pursuant to this Agreement, including, without limitation,
any investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein.  The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a further
or continuing waiver of such breach or as a waiver of any other or subsequent
breach.  No failure on the part of any
party to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of such right, power or remedy by such party preclude any other or
further exercise thereof or the exercise of any other right, power or
remedy.  All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law.


 


10.5         Governing Law.  This Agreement shall be governed by and
construed in accordance with English law.


 


10.6         Notices.  All notices and other communications under
this Agreement shall be in writing and shall be deemed given (i) when
delivered personally by hand (with written confirmation of receipt),
(ii) when sent by facsimile (with written confirmation of transmission) or
(iii) one Business Day following the day sent by overnight courier (with
written confirmation


 


78





















 


of receipt), in each case at the following addresses
and facsimile numbers (or to such other address or facsimile number as a party
may have specified by notice given to the other party pursuant to this
provision):


 


If to Sellers, to:


 


Philip Baldrey


34 St Bernard Road


Solihull


B92 7BB


 


Roger Burdett


2 Pennyfields Boulevard


Long Eaton


NG10 3QJ


 


With a copy to:


 


Berwin Leighton Paisner


Adelaide House


London Bridge


London, EC4R 9HA


Facsimile:


Attn: Daljit Singh, Esq.


 


If to Purchaser, to:


 


Altra Industrial Motion


14 Hayward St.


Quincy, MA 02171


Facsimile:  (617) 479-6238


Attn: Michael L. Hurt


 


With a copy to:


 


Weil, Gotshal & Manges LLP


201 Redwood Shores Parkway


Redwood Shores, CA 94065


Facsimile: (650) 802-3100


Attention: Craig W. Adas, Esq.


 


and


 


Weil, Gotshal & Manges LLP


One South Place


London, EC2M2WG


Facsimile: 011 44 20 7903 0990


Attention: William Rosen, Esq.


 


79





















 


10.7         Severability.  If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any law or
public policy, all other terms or provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.  Upon
such determination that any term or other provision is invalid, illegal, or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to the greatest
extent possible.


 


10.8         Binding Effect; Assignment.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.  Nothing in this
Agreement shall create or be deemed to create any third party beneficiary
rights in any person or entity not a party to this Agreement except as provided
below.  No assignment of this Agreement
or of any rights or obligations hereunder may be made by either Sellers or
Purchaser (by operation of law or otherwise) without the prior written consent
of the other parties hereto and any attempted assignment without the required
consents shall be void; provided, however, that Purchaser may
assign this Agreement and any or all rights or obligations hereunder (including
Purchaser’s rights to purchase the Shares and Purchaser’s rights to seek
indemnification hereunder) to any Affiliate of Purchaser; provided, further
that notwithstanding any such assignment of this Agreement, Purchaser shall
remain responsible for its obligations hereunder.  Upon any such permitted assignment, the
references in this Agreement to Purchaser shall also apply to any such assignee
unless the context otherwise requires.


 


10.9         Non-Recourse.  No past, present or future director, officer,
employee, incorporator, member, partner, stockholder, Affiliate, agent,
attorney or representative of Purchaser shall have any liability for any
obligations or liabilities of Purchaser under this Agreement or for any claim
based on, in respect of, or by reason of, the transactions contemplated hereby.


 


10.10       Rights of Third Parties.  Except as otherwise provide
for in this Agreement, a person who is not a party to this Agreement has no
rights under the Contract (Rights of Third Parties) Act 1999 or otherwise to
enforce any term of this Agreement but this does not affect any right or remedy
of a third party which exists or is available apart from that act.


 


10.11       Counterparts.  This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.


 


10.12       Sellers’
Representative.


 


(a)           Each Seller
hereby irrevocably appoints Philip Baldrey (the “Sellers’ Representative”) as the
Sellers’ representative, attorney-in-fact and agent, with full power of
substitution to act in the name, place and stead of such Seller with respect to
the transfer of such


 


80





















 


Seller’s Shares to Purchaser in accordance with the
terms and provisions of this Agreement and to act on behalf of such Seller in
any amendment of or litigation or arbitration involving this Agreement or the
Escrow Agreement and to do or refrain from doing all such further acts and
things, and to execute all such documents, as such Sellers’ Representative
shall deem necessary or appropriate in conjunction with any of the transactions
contemplated by this Agreement or the Escrow Agreement, including the power:


 


(i)      to take all
action necessary or desirable in connection with the waiver of any condition to
the obligations of the Sellers to consummate the transactions contemplated by
this Agreement;


 


(ii)     to negotiate,
execute and deliver all ancillary agreements, statements, certificates,
statements, notices, approvals, extensions, waivers, undertakings, amendments
and other documents required or permitted to be given in connection with the
consummation of the transactions contemplated by this Agreement or the Escrow
Agreement (it being understood that such Seller shall execute and deliver any
such documents which the Sellers’ Representative agrees to execute);


 


(iii)    to terminate
this Agreement if the Sellers are entitled to do so;


 


(iv)    to give and
receive all notices and communications to be given or received under this
Agreement or the Escrow Agreement and to receive service of process in
connection with any claims under this Agreement or the Escrow Agreement,
including service of process in connection with arbitration; and


 


(v)     to take all
actions which under this Agreement or the Escrow Agreement may be taken by the
Sellers and to do or refrain from doing any further act or deed on behalf of
the Seller which the Sellers’ Representative deems necessary or appropriate in
his sole discretion relating to the subject matter of this Agreement or the
Escrow Agreement as fully and completely as such Seller could do if personally
present.


 


(b)           If Philip
Baldrey becomes unable to serve as Sellers’ Representative, Roger Burdett shall
succeed him as the Sellers’ Representative.


 


**REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK**


 


81





















 


IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed and delivered as a deed on the date as set out on
page 1.


 


	
  Executed as a
  deed

  	
  )

  	
   

  
	
  for and on
  behalf of:

  	
  )

  	
   

  
	
  Altra
  Industrial

  	
  )

  	
   

  
	
  Motion, Inc.

  	
  )

  	
   

  
	
   

  	
   

  	
  /s/ Michael
  L. Hurt

  	
   

  
	
   

  	
   

  	
  Michael L. Hurt

  
	
   

  	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Executed as a
  deed by

  	
  )

  	
   

  
	
  Roger
  Burdett

  	
  )

  	
  /s/ Roger
  Burdett

  
	
  in the presence
  of:

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Occupation:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Executed as a
  deed by

  	
  )

  	
   

  
	
  Philip
  Baldrey

  	
  )

  	
  /s/ Philip
  Baldrey

  
	
  in the presence
  of:

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Occupation:

  	
   

  	
   

  



 





















 


EXHIBIT A


 


LIST OF SELLERS AND SHARES


 


PART I


 


	
  Sellers

  	
   

  	
  Number of Ordinary £1 Shares held at the date of

  this Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  R L Burdett

  	
   

  	
  833,022

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  P N Baldrey

  	
   

  	
  832,883

  	
   

  



 


PART II


 


	
  Name of Seller

  	
   

  	
  Number of A

  Ordinary

  Shares held

  at Closing

  	
   

  	
  % Cash

  received

  for A

  Ordinary

  Shares

  	
   

  	
  Number

  of B

  Ordinary

  Shares

  held at

  Closing

  	
   

  	
  % Cash

  received

  for B

  Ordinary

  Shares

  	
   

  	
  Loan

  Notes

  received

  for B

  Ordinary

  Shares

  	
   

  	
  Number

  of C

  Ordinary

  Shares

  held at

  Closing

  	
   

  	
  % Cash

  received

  for C

  Ordinary

  Shares

  	
   

  
	
  Philip Baldrey

  	
   

  	
  80,756

  	
   

  	
  3.791

  	
  %

  	
  752,127

  	
   

  	
  35.305

  	
  %

  	
  £

  	
  1,500,000

  	
   

  	
  232,248

  	
   

  	
  10.9

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Roger Burdett

  	
   

  	
  80,895

  	
   

  	
  3.798

  	
  %

  	
  752,127

  	
   

  	
  35.305

  	
  %

  	
  £

  	
  1,500,000

  	
   

  	
  232,247

  	
   

  	
  10.9

  	
  %

  



 


Payment
adjustment principles:


 


1.             If
Estimated Closing Working Capital is less than Target Working Capital, the Purchase
Price payable at Closing will be decreased by the difference between Estimated
Closing Working Capital and Target Working Capital (the “Estimated Working
Capital Shortfall”).


 


The
amount of the Estimated Working Capital Shortfall shall be deemed to be
deducted from the cash payable for the A, B and C Ordinary Shares on a pro rata
basis.


 


2.             Following
the Post Closing Date purchase price adjustment:


 


2.1.1        any
payment due from the Sellers to the Purchaser shall, in the first instance, be
taken from the Adjustment Escrow Account. 
To the extent that the Adjustment Escrow Account is not sufficient to
satisfy the Seller’s liability under Section 3.3, the Seller shall
promptly pay the balance due in cash. 
Such cash payment shall be deemed to be deducted from the cash payable
for the A, B and C Ordinary Shares and treated as a reduction in the purchase
price accordingly; and


 


2.1.2        any
payment due from the Purchaser to the Sellers shall be deemed to be an addition
to the cash payable for the A, B and C Ordinary Shares on a pro rata basis.


 


82





















 


3.             Any
payments to or from the Sellers shall reduce or increase (as appropriate) the
amount of cash received by each of them pro rata to their respective holdings
of A, B and C Ordinary Shares.


 


83





















 


EXHIBIT B


 


LIST OF THE DIRECT AND INDIRECT SUBSIDIARIES OF
THE COMPANY THAT

CONSTITUTE THE GROUP AS OF THE DATE OF THE AGREEMENT AND A

STRUCTURE CHART SHOWING THE GROUP STRUCTURE AS AT THE DATE OF

THIS AGREEMENT


 


The Hay Hall Group
Limited (company no 03141672)


 


Matrix International
Limited (company no 0356189)


 


Matrix Engineering
Limited (company no 03690656)


 


Bibby Group Limited
(company no 03198843)


 


Hay Hall Leicester Limited
(company no 00336937)


 


Hay Hall Tyseley Limited
(company no 00062731)


 


The Hay Hall Trustees
Limited (company no 03529842)


 


Stainless Steel Tubes
Limited (company no 03193046)


 


Huco Power Transmission
Limited (company no 03323696)


 


Twiflex Limited (company
no 00404531)


 


MEL Holdings Inc (USA)


 


Matrix International GmbH
(Germany)


 


Bibby Transmissions
Limited (company no 00158829)


 


Huco Engineering
Industries Limited (company no 00836225)


 


Saftek Limited (company
no 04443916)


 


Inertia Dynamics Inc
(USA)


 


Scandicom AB (Sweden)


 


Bibby Turboflex SA (South
Africa)


 


Turboflex Limited
(company no 00839728)


 


Rathi Turboflex Pty Ltd
(India)


 


Motion Developments
Limited (company no 00664313)


 


84





















 


Dynatork Limited (company
no 02107032)


 


Dynatork Air Motors
Limited (company no 04504970)


 


T. & A. Nash
(Penn) Limited (company no 00578405)


 


Torsiflex Limited
(company no 00983238)


 


85





















 


STRUCTURE CHART AS AT THE DATE OF THIS AGREEMENT


 





 


86





















 


EXHIBIT B-1


 


LIST OF THE EXCLUDED SUBSIDIARIES


FOLLOWING THE PRE-SALE REORGANISATION THAT WILL
NOT BE A PART

OF THE GROUP AT THE CLOSING


 


1.               Matrix
Engineered Systems Limited (f/k/a Matrix International Limited)


2.               Hay
Hall Leicester Limited


3.               Hay
Hall Tyseley Limited


4.               Stainless
Steel Tubes Limited


5.               Hay
Hall Trustees Limited


6.               T&A
Nash (Penn) Limited


7.               Motion
Developments Limited


8.               MEL
Holdings Inc.


9.               Inertia
Dynamics Inc.


 


87