Document:

exv10w1

 

Exhibit 10.1

IN STRICTEST CONFIDENCE

 

AGREEMENT

for the sale and purchase in PROJECT GAME

 

 

 

DATED 14 November 2007

GUYMONT SERVICES SA

- and -

MAD CATZ INTERACTIVE, INC

 

AGREEMENT

for the sale and purchase of

the entire issued share capital of

WINKLER ATLANTIC HOLDINGS LIMITED

 

 

 

INDEX

	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	1.	 	INTERPRETATION	 	 	1	 
	 

	 	 	1.1	 	 	Definitions
	 	 	1	 
	 

	 	 	1.2	 	 	Interpretation
	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	SALE AND PURCHASE	 	 	8	 
	 

	 	 	2.1	 	 	Agreement
	 	 	8	 
	 

	 	 	2.2	 	 	Severability
	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	CONSIDERATION	 	 	9	 
	 

	 	 	3.1	 	 	Definitions
	 	 	9	 
	 

	 	 	3.2	 	 	Amount of the Consideration
	 	 	10	 
	 

	 	 	3.3	 	 	Form of Consideration
	 	 	10	 
	 

	 	 	3.4	 	 	Payment of the Consideration
	 	 	10	 
	 

	 	 	3.5	 	 	Completion Accounts and Calculation of the Consideration
	 	 	10	 
	 

	 	 	3.6	 	 	Adjustment Payments
	 	 	13	 
	 

	 	 	3.7	 	 	Payments
	 	 	13	 
	 

	 	 	3.8	 	 	Interest
	 	 	14	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	COMPLETION	 	 	14	 
	 

	 	 	4.1	 	 	Completion Venue and Time
	 	 	14	 
	 

	 	 	4.2	 	 	Completion Events and Obligations of the Parties
	 	 	14	 
	 

	 	 	4.3	 	 	Completion Matters Inter-Conditional
	 	 	14	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	WARRANTIES	 	 	14	 
	 

	 	 	5.1	 	 	Warranties and Tax Covenant
	 	 	14	 
	 

	 	 	5.2	 	 	Limitations
	 	 	14	 
	 

	 	 	5.3	 	 	Non-Disclosed Information
	 	 	15	 
	 

	 	 	5.4	 	 	Set-off of Claims
	 	 	15	 
	 

	 	 	5.5	 	 	Mutual Warranties
	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	6.	 	MATTERS AFTER COMPLETION	 	 	19	 
	 

	 	 	6.1	 	 	Further Assurance
	 	 	19	 
	 

	 	 	6.2	 	 	Information
	 	 	19	 
	 

	 	 	6.3	 	 	Use of Facilities
	 	 	19	 
	 

	 	 	6.4	 	 	Discharge of Relevant Commitments
	 	 	20	 
	 

	 	 	6.5	 	 	Domain Names
	 	 	20	 
	 

	 	 	6.6	 	 	Name Change
	 	 	21	 
	 

	 	 	6.7	 	 	Tax and Accounts Undertakings
	 	 	21	 
	 
	 	 	 	 	 	 	 	 	 	 
	7.	 	RESTRICTIONS ON VENDOR	 	 	22	 
	 

	 	 	7.1	 	 	Trustee Covenant
	 	 	22	 
	 

	 	 	7.2	 	 	Benefit of Trustee Covenant
	 	 	23	 
	 

	 	 	7.3	 	 	Consideration
	 	 	23	 
	 

	 	 	7.4	 	 	Governance Matters
	 	 	23	 
	 
	 	 	 	 	 	 	 	 	 	 
	8.	 	RESOLUTION OF CLAIMS AND DISPUTES	 	 	23	 
	 

	 	 	8.1	 	 	Notification
	 	 	23	 
	 

	 	 	8.2	 	 	Discussion of Claim
	 	 	23	 
	 

	 	 	8.3	 	 	Mediation
	 	 	24	 
	 

	 	 	8.4	 	 	Legal Proceedings
	 	 	24	 
	 
	 	 	 	 	 	 	 	 	 	 
	9.	 	GENERAL	 	 	24	 
	 

	 	 	9.1	 	 	Costs
	 	 	24	 
	 

	 	 	9.2	 	 	Assignment
	 	 	24	 

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	9.3	 	 	Successors
	 	 	24	 
	 

	 	 	9.4	 	 	Collateral Agreements and Variations
	 	 	25	 
	 

	 	 	9.5	 	 	Continuing Effect
	 	 	25	 
	 

	 	 	9.6	 	 	Non-Waiver
	 	 	25	 
	 

	 	 	9.7	 	 	Circulars and Announcements
	 	 	26	 
	 

	 	 	9.8	 	 	Previous Agreements
	 	 	26	 
	 

	 	 	9.9	 	 	Counterparts
	 	 	26	 
	 

	 	 	9.10	 	 	Fraud
	 	 	26	 
	 

	 	 	9.11	 	 	Contracts (Rights of Third Parties) Act 1999
	 	 	26	 
	 

	 	 	9.12	 	 	Notices
	 	 	27	 
	 

	 	 	9.13	 	 	Service of Proceedings
	 	 	28	 
	 

	 	 	9.14	 	 	Appointment of Agent
	 	 	28	 
	 

	 	 	9.15	 	 	Governing Law and Jurisdiction
	 	 	28	 
	 
	 	 	 	 	 	 	 	 	 	 
	10.	 	INDEMNITIES	 	 	29	 
	 

	 	 	10.1	 	 	Undertaking to Indemnify
	 	 	29	 
	 

	 	 	10.3	 	 	Limitations
	 	 	29	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE 1 	 	 	 	31	 
	 

	 	 	Clause 1.1: Part I: Information concerning the Company
	 	31	 
	 

	 	 	Clause 1.1: Part II : Information concerning the Subsidiaries
	 	32	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE 2
	 	 	35	 
	 

	 	 	Part 1 — What the Trustee shall deliver to the Purchaser at Completion
	 	35	 
	 

	 	 	Part 2 — Matters for the board meetings at Completion
	 	36	 
	 
	 	 	 	 	 	 	 	 	 	 
	1.	 	OBLIGATIONS OF THE PURCHASER	 	 	36	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE 3
	 	 	 	38	 
	 

	 	 	Clause 5.1: Warranties by the Warrantor
	 	38	 
	 
	 	 	 	 	 	 	 	 	 	 
	1.	 	PRELIMINARY	 	 	38	 
	 

	 	 	1.1	 	 	Definitions
	 	 	38	 
	 

	 	 	1.2	 	 	Disclosures
	 	 	38	 
	 

	 	 	1.3	 	 	Warrantor’s claims against the Companies
	 	 	38	 
	 

	 	 	1.4	 	 	Independence of Warranties
	 	 	38	 
	 

	 	 	1.5	 	 	Application of Warranties
	 	 	38	 
	 

	 	 	1.6	 	 	Warranties
	 	 	39	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	COMPANIES INFORMATION	 	 	39	 
	 

	 	 	2.1	 	 	Incorporation, Constitution and Statutory Matters
	 	 	39	 
	 

	 	 	2.2	 	 	Share Capital and Shares
	 	 	40	 
	 

	 	 	2.3	 	 	Encumbrance on Shares
	 	 	40	 
	 

	 	 	2.4	 	 	Ownership of Shares and Branches
	 	 	40	 
	 

	 	 	2.5	 	 	Redemption of Shares and Financial Assistance
	 	 	41	 
	 

	 	 	2.6	 	 	Distributions
	 	 	41	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	ACCOUNTS AND RECORDS	 	 	41	 
	 

	 	 	3.1	 	 	Contents of Accounts
	 	 	41	 
	 

	 	 	3.2	 	 	Stock and Work in Progress
	 	 	41	 
	 

	 	 	3.3	 	 	Debts
	 	 	41	 
	 

	 	 	3.4	 	 	Management Accounts
	 	 	42	 
	 

	 	 	3.5	 	 	Books and Records
	 	 	42	 
	 

	 	 	3.6	 	 	Accounting Controls and Procedures
	 	 	42	 

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	FINANCIAL MATTERS	 	 	43	 
	 

	 	 	4.1	 	 	Financial Facilities
	 	 	43	 
	 

	 	 	4.2	 	 	Encumbrances
	 	 	43	 
	 

	 	 	4.3	 	 	Guarantees for the Companies
	 	 	43	 
	 

	 	 	4.4	 	 	Insolvency
	 	 	43	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	REAL PROPERTY	 	 	43	 
	 

	 	 	5.1	 	 	Identity and Information
	 	 	43	 
	 

	 	 	5.2	 	 	Title
	 	 	44	 
	 

	 	 	5.3	 	 	Possession
	 	 	44	 
	 

	 	 	5.4	 	 	Adverse Leases and Rights of Occupation
	 	 	44	 
	 
	 	 	 	 	 	 	 	 	 	 
	6.	 	PHYSICAL ASSETS	 	 	44	 
	 

	 	 	6.1	 	 	Ownership
	 	 	44	 
	 

	 	 	6.2	 	 	Leasing and Hire Purchase
	 	 	44	 
	 

	 	 	6.3	 	 	Condition
	 	 	45	 
	 
	 	 	 	 	 	 	 	 	 	 
	7.	 	CONDUCT OF BUSINESS	 	 	45	 
	 

	 	 	7.1	 	 	Business Since the Accounts Date
	 	 	45	 
	 

	 	 	7.2	 	 	Authorisations and Approvals
	 	 	45	 
	 

	 	 	7.3	 	 	Absence of Legal Proceedings
	 	 	46	 
	 

	 	 	7.4	 	 	Public Obligations
	 	 	46	 
	 

	 	 	7.5	 	 	Defective Products
	 	 	46	 
	 

	 	 	7.6	 	 	Orders and Judgments
	 	 	47	 
	 

	 	 	7.7	 	 	Contractual Characteristics
	 	 	47	 
	 

	 	 	7.8	 	 	Agency Distributorship and Similar Arrangements
	 	 	48	 
	 

	 	 	7.9	 	 	Material Contracts
	 	 	48	 
	 

	 	 	7.10	 	 	Adverse Matters
	 	 	49	 
	 

	 	 	7.11	 	 	Insurance
	 	 	49	 
	 

	 	 	7.12	 	 	Legal Documents
	 	 	50	 
	 

	 	 	7.13	 	 	Health & Safety
	 	 	50	 
	 

	 	 	7.14	 	 	Improper Practices
	 	 	50	 
	 
	 	 	 	 	 	 	 	 	 	 
	8.	 	EMPLOYMENT MATTERS	 	 	51	 
	 

	 	 	8.1	 	 	Employment Particulars
	 	 	51	 
	 

	 	 	8.2	 	 	Termination of Employment
	 	 	51	 
	 

	 	 	8.3	 	 	Disputes with Employees
	 	 	51	 
	 

	 	 	8.4	 	 	Employee Claims
	 	 	51	 
	 

	 	 	8.5	 	 	Incentive Schemes
	 	 	52	 
	 

	 	 	8.6	 	 	Long-Term Contracts
	 	 	52	 
	 

	 	 	8.7	 	 	Trade Unions
	 	 	52	 
	 

	 	 	8.8	 	 	Industrial Action
	 	 	52	 
	 
	 	 	 	 	 	 	 	 	 	 
	9.	 	PENSIONS	 	 	53	 
	 

	 	 	9.1	 	 	Benefit Obligations
	 	 	53	 
	 

	 	 	9.2	 	 	Disclosed Schemes
	 	 	53	 
	 

	 	 	9.3	 	 	Administration
	 	 	54	 
	 

	 	 	9.4	 	 	Documentation
	 	 	54	 
	 

	 	 	9.5	 	 	No Litigation or Complaints
	 	 	54	 
	 
	 	 	 	 	 	 	 	 	 	 
	10.	 	TAXATION	 	 	54	 
	 

	 	 	10.1	 	 	Submission of Returns
	 	 	54	 
	 

	 	 	10.2	 	 	Submission of Claims
	 	 	54	 
	 

	 	 	10.3	 	 	Payment of Tax Due
	 	 	54	 
	 

	 	 	10.4	 	 	Penalties and Interest
	 	 	54	 
	 

	 	 	10.5	 	 	Deduction of Tax
	 	 	54	 

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	10.6	 	 	Back Duty Claims
	 	 	55	 
	 

	 	 	10.7	 	 	Assets held by the Companies
	 	 	55	 
	 

	 	 	10.8	 	 	Company not a US Controlled Foreign Corporation
	 	 	55	 
	 

	 	 	10.9	 	 	Management and Control
	 	 	55	 
	 

	 	 	10.10	 	 	Residence
	 	 	55	 
	 

	 	 	10.11	 	 	Vendor’s Responsibility for Tax
	 	 	55	 
	 

	 	 	10.12	 	 	US Real Property Holding Corporation
	 	 	55	 
	 
	 	 	 	 	 	 	 	 	 	 
	11.	 	INTELLECTUAL PROPERTY	 	 	55	 
	 

	 	 	11.1	 	 	Details of Intellectual Property
	 	 	55	 
	 

	 	 	11.2	 	 	Licences
	 	 	55	 
	 

	 	 	11.3	 	 	Ownership
	 	 	56	 
	 

	 	 	11.4	 	 	Rights Required
	 	 	56	 
	 

	 	 	11.5	 	 	Validity and enforceability
	 	 	56	 
	 

	 	 	11.6	 	 	Business Name
	 	 	56	 
	 

	 	 	11.7	 	 	Software
	 	 	56	 
	 

	 	 	11.8	 	 	Omission
	 	 	57	 
	 

	 	 	11.9	 	 	Infringement
	 	 	57	 
	 

	 	 	11.10	 	 	Agreement and licences
	 	 	57	 
	 

	 	 	11.11	 	 	Change of Control
	 	 	57	 
	 

	 	 	11.12	 	 	Infringement and royalties
	 	 	57	 
	 
	 	 	 	 	 	 	 	 	 	 
	12.	 	INFORMATION TECHNOLOGY	 	 	58	 
	 

	 	 	12.1	 	 	Definition
	 	 	58	 
	 

	 	 	12.2	 	 	Owners of IT System
	 	 	58	 
	 

	 	 	12.3	 	 	Elements of IT System
	 	 	58	 
	 

	 	 	12.4	 	 	Disaster Recovery Plan
	 	 	58	 
	 

	 	 	12.5	 	 	Dates
	 	 	58	 
	 

	 	 	12.6	 	 	Currencies
	 	 	59	 
	 
	 	 	 	 	 	 	 	 	 	 
	13.	 	DATA PROTECTION	 	 	59	 
	 
	 	 	 	 	 	 	 	 	 	 
	14.	 	ENVIRONMENTAL MATTERS	 	 	59	 
	 

	 	 	14.1	 	 	Breach of Legislation
	 	 	59	 
	 

	 	 	14.2	 	 	Litigation
	 	 	59	 
	 

	 	 	14.3	 	 	Hazardous Substances
	 	 	59	 
	 

	 	 	14.4	 	 	Authorisations
	 	 	59	 
	 

	 	 	14.5	 	 	Authorisations withdrawn
	 	 	59	 
	 
	 	 	 	 	 	 	 	 	 	 
	15.	 	GENERAL	 	 	60	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE 4
	 	 	 	 	61	 
	 

	 	Tax Covenant
	 	 	 	61	 
	 
	 	 	 	 	 	 	 	 	 	 
	1.	 	INTERPRETATION	 	 	61	 
	 

	 	 	1.1	 	 	Definitions and Rules of Interpretation
	 	 	61	 
	 

	 	 	1.2	 	 	Status of definitions and rules of interpretation in this Agreement
	 	 	62	 
	 

	 	 	1.3	 	 	Further Interpretation
	 	 	62	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	COVENANT TO PAY	 	 	63	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	EXCLUSIONS	 	 	63	 
	 

	 	 	3.1	 	 	Specific Exclusions
	 	 	63	 
	 

	 	 	3.2	 	 	Other Limitations
	 	 	65	 

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	AMOUNT OF LIABILITY FOR TAX	 	 	65	 
	 

	 	 	4.1	 	 	Determination of Liability
	 	 	65	 
	 

	 	 	4.2	 	 	Actual Payments
	 	 	65	 
	 

	 	 	4.3	 	 	Purchaser’s Relief
	 	 	65	 
	 

	 	 	4.4	 	 	Loss of Relief
	 	 	65	 
	 

	 	 	4.5	 	 	Repayments
	 	 	65	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	TIME FOR PAYMENT	 	 	65	 
	 

	 	 	5.1	 	 	Due Date
	 	 	65	 
	 

	 	 	5.2	 	 	Actual Payments
	 	 	65	 
	 

	 	 	5.3	 	 	Reliefs
	 	 	66	 
	 

	 	 	5.4	 	 	Notice
	 	 	66	 
	 

	 	 	5.5	 	 	Interest
	 	 	66	 
	 
	 	 	 	 	 	 	 	 	 	 
	6.	 	OVER-PROVISIONS, RELIEFS ETC	 	 	66	 
	 

	 	 	6.1	 	 	Over-Provisions
	 	 	66	 
	 

	 	 	6.2	 	 	Reliefs
	 	 	66	 
	 

	 	 	6.3	 	 	The Relevant Amount
	 	 	67	 
	 

	 	 	6.4	 	 	Auditors Review
	 	 	67	 
	 

	 	 	6.5	 	 	Adjustment of Relevant Amount
	 	 	67	 
	 

	 	 	6.6	 	 	Auditors’ Certificate
	 	 	67	 
	 
	 	 	 	 	 	 	 	 	 	 
	7.	 	RECOVERY FROM OTHER PERSONS	 	 	68	 
	 
	 	 	 	 	 	 	 	 	 	 
	8.	 	CONDUCT OF CLAIMS	 	 	68	 
	 

	 	 	8.1	 	 	Purchaser to notify claims
	 	 	68	 
	 

	 	 	8.2	 	 	Purchaser to take action
	 	 	68	 
	 

	 	 	8.3	 	 	Purchaser at liberty to admit etc
	 	 	69	 
	 

	 	 	8.4	 	 	Indemnity for costs
	 	 	69	 
	 
	 	 	 	 	 	 	 	 	 	 
	9.	 	TAX ON PAYMENTS BY VENDOR OR PURCHASER	 	 	69	 
	 

	 	 	9.1	 	 	No Deduction
	 	 	69	 
	 

	 	 	9.2	 	 	Gross-up
	 	 	70	 
	 
	 	 	 	 	 	 	 	 	 	 
	10.	 	COUNTER INDEMNITY	 	 	70	 
	 

	 	 	10.1	 	 	Meaning of “Warrantor”
	 	 	70	 
	 

	 	 	10.2	 	 	Purchaser’s Covenant
	 	 	70	 
	 

	 	 	10.3	 	 	Provisions of this Schedule to apply in respect of Purchaser’s Covenant
	 	 	70	 
	 
	 	 	 	 	 	 	 	 	 	 
	11.	 	TAX RETURNS	 	 	70	 
	 

	 	 	11.1	 	 	Preparation of tax returns for periods ended on or before Accounting Date
	 	 	70	 
	 

	 	 	11.2	 	 	Submission of tax returns
	 	 	71	 
	 

	 	 	11.3	 	 	Conduct of matters relating to tax returns
	 	 	71	 
	 

	 	 	11.4	 	 	Access to books, accounts etc.
	 	 	71	 
	 

	 	 	11.5	 	 	Accounting period current at Completion
	 	 	71	 
	 

	 	 	11.6	 	 	Paragraph 8 (Conduct of Claims) to take precedence
	 	 	72	 
	 
	 	 	 	 	 	 	 	 	 	 
	12.	 	GENERAL	 	 	72	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE 5
	 	 	 	 	73	 
	 

	 	 	Clause 5.1 : Limitations on Claims
	 	73	 
	 
	 	 	 	 	 	 	 	 	 	 
	1.	 	LIMITATION OF LIABILITY	 	 	73	 
	 

	 	 	1.1	 	 	Time Limitations
	 	 	73	 
	 

	 	 	1.2	 	 	Exclusion of Limitation Acts
	 	 	73	 
	 

	 	 	1.3	 	 	Minor Claims
	 	 	73	 

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.4	 	 	Materiality Threshold
	 	 	73	 
	 

	 	 	1.5	 	 	Maximum Aggregate Liability
	 	 	74	 
	 

	 	 	1.6	 	 	No Claim for Breach
	 	 	74	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	MULTIPLE RECOVERY	 	 	74	 
	 

	 	 	2.1	 	 	Receipts from Third Parties
	 	 	74	 
	 

	 	 	2.2	 	 	Repayment to Warrantor
	 	 	75	 
	 

	 	 	2.3	 	 	Satisfaction of Claims
	 	 	75	 
	 

	 	 	2.4	 	 	No Double Recovery
	 	 	75	 
	 

	 	 	2.5	 	 	Tax Losses
	 	 	75	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	REDUCTION IN CONSIDERATION	 	 	75	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	GENERAL PROTECTIONS	 	 	75	 
	 

	 	 	4.1	 	 	Mitigation
	 	 	75	 
	 

	 	 	4.2	 	 	Contingent Liabilities
	 	 	76	 
	 

	 	 	4.3	 	 	Overriding Effect
	 	 	76	 
	 

	 	 	4.4	 	 	Conduct of Claims
	 	 	76	 
	 

	 	 	4.5	 	 	Rights of Subrogation
	 	 	77	 
	 

	 	 	4.6	 	 	Insurance
	 	 	77	 
	 

	 	 	4.7	 	 	Over Provisions
	 	 	78	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	TRUSTEE PROVISIONS	 	 	78	 
	 

	 	 	5.1	 	 	Limitation to Trust Assets
	 	 	78	 
	 

	 	 	5.2	 	 	Prohibition on Trust Distributions
	 	 	79	 
	 

	 	 	5.3	 	 	Disposals after Receipt of Claim
	 	 	79	 
	 

	 	 	5.4	 	 	Permitted Distributions to Beneficiaries
	 	 	79	 
	 

	 	 	5.5	 	 	Prohibited Acts
	 	 	80	 
	 

	 	 	5.6	 	 	Obligations in respect of New Trustees
	 	 	80	 
	 

	 	 	5.7	 	 	Restriction on Retirement as Trustee
	 	 	80	 
	 

	 	 	5.8	 	 	Release of Retiring Trustee
	 	 	81	 
	 

	 	 	5.9	 	 	Expiry of Obligations
	 	 	81	 
	 

	 	 	5.10	 	 	Actions with Purchaser’s Consent
	 	 	81	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE 6
	 	 	82	 
	 

	 	 	Clause 5.1: Warranties by the Purchaser
	 	 	82	 
	 
	 	 	 	 	 	 	 	 	 	 
	1.	 	PRELIMINARY	 	 	82	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	WARRANTIES	 	 	82	 
	 

	 	 	2.1	 	 	Incorporation and Status
	 	 	82	 
	 

	 	 	2.2	 	 	Constitutional Documents
	 	 	82	 
	 

	 	 	2.3	 	 	Share Capital
	 	 	82	 
	 

	 	 	2.4	 	 	Entitlement to Issue of Securities
	 	 	82	 
	 

	 	 	2.5	 	 	Accounts
	 	 	82	 
	 

	 	 	2.6	 	 	Insolvency
	 	 	83	 
	 

	 	 	2.7	 	 	Title to Assets
	 	 	83	 
	 

	 	 	2.8	 	 	Infringement of Intellectual Property Rights
	 	 	83	 
	 

	 	 	2.9	 	 	Continuance of Intellectual Property Rights
	 	 	83	 
	 

	 	 	2.10	 	 	Authorisations and Approvals
	 	 	83	 
	 

	 	 	2.11	 	 	Absence of Legal Proceedings
	 	 	84	 
	 

	 	 	2.12	 	 	Public Obligations
	 	 	84	 
	 

	 	 	2.13	 	 	Orders and Judgments
	 	 	84	 
	 

	 	 	2.14	 	 	Public body investigations
	 	 	84	 
	 

	 	 	2.15	 	 	Payment of Taxes
	 	 	84	 
	 

	 	 	2.16	 	 	Purchaser Claim Understanding
	 	 	84	 

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE 7
	 	 	85	 
	 

	 	 	 	The Properties
	 	 	85	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE 8
	 	 	88	 
	 

	 	 	 	Agreed Form Documents
	 	 	88	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE 9
	 	 	89	 
	 

	 	 	 	Clauses 1.1 and 6.5 : Relevant Commitments
	 	89	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE 10
	 	 	90	 
	 

	 	 	 	Clause 6.6 : Domain Names
	 	 	90	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE 11
	 	 	91	 
	 

	 	 	 	Company Intellectual Property
	 	 	91	 

 

 

THIS AGREEMENT is made on 14 November 2007

BETWEEN:

	(1)	 	GUYMONT SERVICES SA as trustee of The Winkler Atlantic Trust c/o: HSBC Guyerzeller Trust
Company AG Splugenstrasse 6 CH-8027 Zurich Switzerland (“the Trustee” or “the Vendor”);
and

	(2)	 	MAD CATZ INTERACTIVE, INC a company incorporated and existing under the laws of Canada with
incorporation no. 294869-9 having its registered office at Brookfield Place 181 Bay Street
Suite 2500 Toronto Ontario M5J 2T7 (“MCZ” or “the Purchaser” which terms shall include its
assigns)

WHEREAS:

	(A)	 	The Trustee is the registered holder of the entire issued share capital of the Company
	 
	(B)	 	The Company is the beneficial owner of the entire issued share capital of each of the
Subsidiaries
	 
	(C)	 	It has been agreed that the Trustee should sell and MCZ should purchase all the issued shares
in the capital of the Company upon the terms and conditions herein contained

NOW IT IS AGREED that:

	1.	 	INTERPRETATION
	 
	1.1	 	Definitions
	 
	 	 	In this Agreement including its recitals and (save as otherwise defined in sub-paragraph
1.1 of Schedule 3 or of Schedule 4) its schedules:

	 	 	 
	“the Accounts Date”

	 	means 28 February 2007;
	 
	 	 
	“the Accounting Policies”

	 	means the accounting policies of the Company applied
in the Accounts for the year ended on the Accounts
Date as stated therein;
	 
	 	 
	“the Accounting Principles”

	 	means generally accepted accounting principles
applicable to the Companies as at the date of this
Agreement in the respective jurisdictions in which the
Companies are incorporated (and for avoidance of
doubt, not International Financial Reporting
Standards);

1

 

	 	 	 
	“the Accounts”

	 	means the respective individual balance sheets, profit
and loss accounts and cash flow statements of the
Companies at and for the financial year ended on the
Accounts Date (including the notes thereto and the
directors’ and auditors’ reports thereon or attached
thereto) which (in the case of the Company) are
unaudited and (in the case of the Subsidiaries) are
audited;
	 
	 	 
	“agreed form”

	 	any reference herein to a document being “in agreed
form” means that document in terms agreed by the
parties or on their behalf and initialled by them or
on their behalf for identification;
	 
	 	 
	“Associate”

	 	means any person which is an associate of the person
concerned within the meaning of section 435 Companies
Act 2006;
	 
	 	 
	“aware”

	 	means known to any of Eric Winkler, David Inwood,
Stephen Roston, Bill McMahon, Stefan Wöger, Andrew
Young and BC Yu (Bing);
	 
	 	 
	“Cash Consideration”

	 	means the part of the Consideration payable in cash
pursuant to clause 3.3.2, as finally determined
pursuant to clause 3.5
	 
	 	 
	“Claim”

	 	means any claim by the Purchaser:
	 
	 	 
	 

	 	(a)     for breach of or any inaccuracy in any of the
Warranties;

	 
	 	 
	 

	 	(b)     under the Tax Covenant;

	 
	 	 
	 

	 	(c)     for breach of any covenant or agreement of the
Trustee under this Agreement or any other Transaction
Document;

	 
	 	 
	 

	 	(d)     for any failure of the Trustee to transfer to the
Purchaser free from Encumbrance the Shares;

	 
	 	 
	“the Code”

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

	 	means the Company and the Subsidiaries;
	 
	 	 
	“the Companies Acts”

	 	means the Companies Act 1985, the Companies Act 1989
and the Companies Act 2006 as the same have from time
to time been amended and are now in force;

2

 

	 	 	 
	“the Company”

	 	means Winkler Atlantic Holdings Limited, the company
of which details are set out in Part 1 of Schedule 1;
	 
	 	 
	“Completion”

	 	means actual completion of the sale and purchase
hereunder;
	 
	 	 
	“Completion Accounts”

	 	means the accounts prepared pursuant to clause 3.5
which have become final and conclusive as therein
provided;
	 
	 	 
	“the Consideration”

	 	means the aggregate consideration payable hereunder
for all the Shares;
	 
	 	 
	“the Consideration Notes”

	 	means the 7.5% Convertible Unsecured Loan Notes 2010
in agreed form and so entitled to be issued as part of
the Consideration pursuant to clause 3.3.1;
	 
	 	 
	“Disclosed”

	 	means fairly disclosed so as to identify the nature
and, to the extent known, the scope of the matter
Disclosed in or under the Disclosure Letter;
	 
	 	 
	“the Disclosure Letter”

	 	means the letter written by the Vendor to the
Purchaser of even date herewith and described as such
and includes the bundle of documents referred to
therein as the Disclosure Bundle;
	 
	 	 
	“Dollars” and “$”

	 	means US Dollars, the lawful currency of the United
States of America;
	 
	 	 
	“the Effective Time”

	 	means close of business on
18 November 2007;
	 
	 	 
	“Encumbrance”

	 	means any mortgage, charge, lien, pledge, security,
option, right to acquire, equity or other encumbrance
or adverse interest whatsoever or commitment to
constitute any of the same;
	 
	 	 
	“Environmental Claim”

	 	means any public or private claim, notice of
violation, prosecution, demand, action, official
warning, abatement or other order or notice
(conditional or otherwise) by any person or authority,
relating to any Environmental Matter and any
notification or order requiring compliance with the
terms of any Environmental Licence or Environmental
Law;
	 
	 	 
	“Environmental Law”

	 	includes all or any law, statute, rule, regulation,
treaty, directive, direction, by-law, code of
practice, circular,

3

 

	 	 	 
	 

	 	guidance note, order, notice,
demand, decision of the courts, code of practice and
guidance notes which are legally binding and in force
as at the date of this Agreement or anything like any
of the foregoing of any governmental authority or
agency or any regulatory body or any other government
or private court, tribunal, alternative dispute
resolution system, arbitration panel, special
prosecutor or investigating committee or any other
body whatsoever in any jurisdiction or the European
Union relating to Environmental Matters applicable for
the time being to any of the Companies and/or the
business carried on by any of the Companies;
	 
	 	 
	“Environmental Licence”

	 	means any permit, licence, authorisation, consent,
certificate, regulatory plan, compliance schedule or
other approval obtained or which ought to have been
obtained at any time by any of the Companies and/or in
relation to the business carried on by any of the
Companies pursuant to any Environmental Law;
	 
	 	 
	“Environmental Matters”

	 	means any of the following:
	 
	 	 
	 

	 	(a)     any generation, deposit, disposal, keeping,
treatment, transportation, transmission, handling,
emission, discharge, release, creation, storage or
manufacture of any noxious or hazardous item (whether
solid, liquid or gas) likely to cause harm to man or
to the natural or built environment;

	 
	 	 
	 

	 	(b)     any nuisance, noise, defective premises, health
and safety at work or elsewhere;

	 
	 	 
	 

	 	(c)     the pollution, conservation or protection of the
environment (which includes natural resources whether
pertaining to life or not, such as air, water, soil,
fauna and flora and the interactions between the same
factors and also the built environment) or of man or
any living organisms supported by the environment or
any other matter whatsoever

4

 

	 	 	 
	 

	 	          affecting the environment or any part of it;
	 
	 	 
	“Guarantee”

	 	means any guarantee, indemnity, suretyship, letter of
comfort or other assurance, security or right of
set-off given or undertaken by a person to secure or
support the obligations (actual or contingent) of any
third party and whether given directly or by way of
counter-indemnity to any third party who has provided
a Guarantee;
	 
	 	 
	“Initial Payment”

	 	means the sum of $14,956,000 payable on account of the
Cash Consideration pursuant to clause 3.4.1;
	 
	 	 
	“Intellectual Property”

	 	means:
	 
	 	 
	 

	 	(a)     all know-how, trade secrets, expertise,
technological information, data, formulae, designs,
processes, specifications and other knowledge and
information;

	 
	 	 
	 

	 	(b)     all drawings, writings and other papers, computer
programs and other tangible and non-tangible
manifestations of any items referred to in paragraph
(a) of this definition;

	 
	 	 
	 

	 	(c)     (i)      copyrights and copyrightable works and
registrations and applications for registration
thereof,

	 
	 	 
	 

	 	(ii)     patents, patent applications and patent
disclosures and inventions,

	 
	 	 
	 

	 	(iii)     trade marks, service marks, trade dress, trade
names, logos and corporate names and registrations and
applications for registration thereof,

	 
	 	 
	 

	 	(iv)     mask works and registrations and applications for
registration thereof,

	 
	 	 
	 

	 	(v)     software,

	 
	 	 
	 

	 	(vi)     Internet websites and domain names and rights
pertaining thereto,

	 
	 	 
	 

	 	(vii)    registered designs, design rights;
and other protection for or relating to the foregoing;
and

5

 

	 	 	 
	 

	 	(d)     all claims and rights in or arising from the
foregoing;

	 
	 	 
	“the Management Accounts”

	 	means the unaudited consolidated balance sheet, the
unaudited consolidated profit and loss account and the
unaudited cash flow statement of the Company and the
Subsidiaries (including, in each case, any notes
thereon) for the half-year ended on 30 September 2007
(a copy of which is attached to the Disclosure
Letter);.
	 
	 	 
	“Net Working Capital”

	 	has the meaning assigned to it in clause 3.1.6;
	 
	 	 
	“person”

	 	includes any legal or natural person, partnership,
trust, company, government, local or public authority
department or other body or association of persons
(whether corporate or unincorporated);
	 
	 	 
	“the Properties”

	 	means the premises described in Schedule 7, for the
interest therein described;
	 
	 	 
	“Purchaser Group”

	 	means MCZ, any subsidiary of MCZ for the time being,
any holding company of MCZ for the time being (if any)
and any subsidiary for the time being of any such
holding company, but shall not include any of the
Companies;
	 
	 	 
	“the Purchaser’s Solicitors”

	 	means The Needle Partnership LLP (UK) of 6 Allerton
Park Chapel Allerton Leeds LS7 4ND and Durham Jones
& Pinegar, P.C. of 192 E 200 N Third Floor St.
George Utah 84770 USA ;
	 
	 	 
	“the Relevant Commitments”

	 	means the Guarantees described in Schedule 9 that have
been given for or in relation to any obligation of any
of the Subsidiaries);
	 
	 	 
	“the Shares”

	 	means all the shares in the capital of the Company in
issue or which have been agreed (whether contingently
or otherwise) to be issued;
	 
	 	 
	“the Subsidiaries”

	 	means the companies details of which are set out in
Part II of Schedule 1;
	 
	 	 
	“Tax”

	 	means any liability to any form of taxation or other
financial duty, levy, withholding or impost of any
kind and of any jurisdiction and whether of a
supra-national, national, regional, municipal or other
public authority and all sums paid in respect thereof
by way of

6

 

	 	 	 
	 

	 	deduction, in advance or otherwise and all
fines, penalties, charges, costs and interest
incidental or relating thereto but so that “Tax” shall
not include any liability to any Tax Authority in
respect of the occupation or right of occupation of
any immoveable property;
	 
	 	 
	“Tax Authority”

	 	means any fiscal or revenue authority of any
jurisdiction empowered to impose, assess and/or
collect Tax;
	 
	 	 
	“the Tax Covenant”

	 	means the provisions of Schedule 4 and the obligations
of the Warrantor thereunder;
	 
	 	 
	“Tax Warranties”

	 	means the warranted statements contained in paragraph
10 of Schedule 3;
	 
	 	 
	“Transaction Documents”

	 	means this Agreement and all documents which are in
agreed form and all documents which are required by
the terms of this Agreement or any such document to be
entered into by the parties or any of them and all
other documents entered into by the parties or any of
them in connection with this Agreement or any such
document;
	 
	 	 
	“the Trust”

	 	means the Winkler Atlantic Trust;
	 
	 	 
	“the Vendors’ Representative”

	 	means Stephen Alexander Roston or such other person as
from time to time the Vendor by written notice to the
Purchaser has appointed as Vendor’s Representative in
place of the previous appointee;
	 
	 	 
	“the Vendor’s Solicitors”

	 	means Laytons at Carmelite 50 Victoria Embankment
London EC4Y 0LS;
	 
	 	 
	“the Warranties”

	 	means the warranted statements by the Warrantor in
Schedule 3;
	 
	 	 
	“the Warrantor”

	 	means the Trustee;
	 
	 	 
	“Working Day”

	 	means a day not being a Saturday, Sunday or public

holiday in London, England or San Diego, California

	1.2	 	Interpretation
	 
	 	 	In this Agreement:

	 	1.2.1	 	Part 38 Companies Act 2006 shall apply for the purposes of interpretation
save in respect of the Tax Warranties, the Tax Covenant and otherwise as herein
expressly provided to the contrary

7

 

	 	1.2.2	 	References to statutory provisions shall be construed as references to
those provisions as respectively amended or re-enacted (whether before or after the
date hereof) from time to time and shall include any provisions of which they are
re-enactments (whether with or without modifications) and any statutory instruments
issued pursuant to them, to the extent that such amendment, re-enactment or statutory
instrument does not change the law in force as at the date of this Agreement
	 
	 	1.2.3	 	Each gender includes each other gender and (except in relation to
“Company” and “Companies”) the singular the plural and vice versa
	 
	 	1.2.4	 	Clause and Schedule headings shall be ignored in interpretation
	 
	 	1.2.5	 	References to clauses, sub-clauses, paragraphs, recitals, schedules and
annexes are to the same of or to this Agreement unless otherwise expressly stated
	 
	 	1.2.6	 	Any reference to this Agreement or any of the Transaction Documents or
other document or to any specified provision of the same is to the same as in force
for the time being and as varied from time to time in accordance with the terms of
the same or with the agreement of the relevant parties
	 
	 	1.2.7	 	Where any period is prescribed in this Agreement as being “from”, “after”
or “following” a date or event, that period shall commence on the day following that
date or event and shall end at midnight on the last day of the period so specified
	 
	 	1.2.8	 	The words and phrases “other”, “including” and “in particular” shall not
limit the generality of any preceding words or be construed as being limited to the
same class as the preceding words where a wider interpretation is possible
	 
	 	1.2.9	 	Any reference to a term or concept in English law (including without
limitation those for any action, remedy, dissolution, insolvency, method of judicial
proceeding, document, statute, court official, governmental authority or agency)
shall in the context of any jurisdiction other than England be construed as a
reference to the term or concept which most nearly corresponds to it in that
jurisdiction
	 
	 	1.2.10	 	References to dates and times are references to such date and time in London
England unless otherwise stated

	2.	 	SALE AND PURCHASE
	 
	2.1	 	Agreement
	 
	 	 	The Trustee with full title guarantee shall sell and MCZ shall purchase on the terms of
this Agreement, and with effect from Completion, the entire legal and beneficial ownership
of and in the Shares free from Encumbrance and together with all rights now or thereafter

8

 

	 	 	attaching thereto including, in particular, the right to receive all dividends and
distributions declared, made or paid on or after the date of this Agreement

	2.2	 	Severability
	 
	 	 	The Purchaser shall not be entitled nor obliged to complete its purchase of some of the
Shares hereunder if the sale and purchase of all the Shares is not completed
simultaneously in accordance with the terms hereof
	 
	3.	 	CONSIDERATION
	 
	3.1	 	Definitions
	 
	 	 	In this clause 3:

	 	3.1.1	 	“Borrowings” means the principal amount owing by any of the Companies at
the Effective Time of monies borrowed by any of the Companies from any person other
than another of the Companies;
	 
	 	3.1.2	 	“Cash” means any of the following held at the Effective Time by or to the
account of any of the Companies:

	 	(a)	 	any credit balance on any account with any bank or
other financial institution;
	 
	 	(b)	 	any monies on deposit with any bank or other financial
institution;
	 
	 	(c)	 	cash in hand

	 	3.1.3	 	“the Completion Accounts Items” means the Borrowings, the Cash, the Cash
Consideration, the Consideration, the Consolidated Current Assets, the Consolidated
Current Liabilities, the Net Working Capital and the Retention Payment Amount;
	 
	 	3.1.4	 	“the Consolidated Current Assets” means those consolidated assets of the
Companies viewed as a group at the Effective Time which fall to be treated as current
assets in accordance with the Accounting Policies and the Accounting Principles, but
excluding and disregarding Cash;
	 
	 	3.1.5	 	“the Consolidated Current Liabilities” means those consolidated
liabilities of the Companies viewed as a group at the Effective Time which fall to be
treated as current liabilities in accordance with the Accounting Policies and the
Accounting Principles but excluding and disregarding any Borrowings which would
otherwise fall to be so treated;
	 
	 	3.1.6	 	“the Net Working Capital” means the Consolidated Current Assets minus the
Consolidated Current Liabilities;
	 
	 	3.1.7	 	“Retention Payment Amount” means any and all sums which any of the
Companies are liable to pay to any person by way of finders fee, commission,
brokerage, professional fee, bonus or similar payment which in any case is

9

 

	 	 	 	payable by reason of the transaction hereby effected, together with any
irrecoverable value added tax or employers national insurance contributions for
which any of the Companies is liable in respect of the same

	3.2	 	Amount of the Consideration
	 
	 	 	The total consideration for the sale of all the Shares shall be the sum of THIRTY MILLION
DOLLARS:

	 	3.2.1	 	plus the amount of Cash;
	 
	 	3.2.2	 	plus any amount by which the Net Working Capital exceeds the sum of
$6,800,000 or minus any amount by which the Net Working Capital is less than the sum
of $6,800,000 (as the case may be);
	 
	 	3.2.3	 	minus any amount of Borrowings;
	 
	 	3.2.4	 	minus the Retention Payment Amount

	3.3	 	Form of Consideration
	 
	 	 	MCZ shall satisfy the Consideration by:

	 	3.3.1	 	the issue to the Trustee of the Consideration Notes having a principal
nominal value of Fourteen Million Five Hundred Thousand Dollars ($14,500,000);
	 
	 	3.3.2	 	the payment to the Trustee in cash of the balance of the Consideration

	3.4	 	Payment of the Consideration
	 
	 	 	The Consideration shall be paid as follows:

	 	3.4.1	 	upon Completion MCZ shall pay the Initial Payment in accordance with
clause 3.7.1 on account of the Cash Consideration;
	 
	 	3.4.2	 	upon Completion MCZ shall issue to the Trustee the Consideration Note;
	 
	 	3.4.3	 	any adjustment to the Initial Payment pursuant to clause 3.6 shall be paid
in accordance with that clause

	3.5	 	Completion Accounts and Calculation of the Consideration
	 
	 	 	The following shall apply to calculate the final amount of the Consideration and the Cash
Consideration:

	 	3.5.1	 	as soon as practicable following Completion and in any event within thirty
Working Days from Completion (or such longer period as MCZ and the Vendor’s
Representative may agree in writing) MCZ with the assistance of the accounts teams of
the Subsidiaries shall prepare in compliance with clause 3.5.2 a consolidated balance
sheet of the Companies and a statement of the Completion Accounts Items each as at
the time of Completion and shall cause a copy of the same to be delivered to the
Vendor’s Representative together with all relevant working papers and supporting
documentation relating to or used in the preparation of such balance sheet and
statement;

10

 

	 	3.5.2	 	the balance sheet and statement required by clause 3.5.1 and the amounts
to be shown therein shall be prepared and computed in compliance with the following:

	 	(a)	 	stock shall be valued in accordance with the stock
valuation policy applied in the Management Accounts and consistently with
application of that policy therein; save as required by such policy no
other provision shall be made in respect of stock;
	 
	 	(b)	 	provisions made in respect of claims, disputes, sums
receivable and contingent liabilities shall be the same as those made in
the Accounts save only to the extent that any variation of those provisions
or any new provision ought, on a basis consistent with treatment of such
matters in the Accounts, properly to be made solely by reason of an event
or material change in circumstance since the Accounts Date;
	 
	 	(c)	 	solely in order to calculate the Completion Accounts
Items, the earnings of the Companies in the period commencing on 1 November
2007 up to and including the Effective Time shall be taken as that
proportion of the earnings of the Companies in the whole of November 2007
as the revenues earned by the Companies in that period represents of the
revenues earned by the Companies in the whole of that month;
	 
	 	(d)	 	otherwise in accordance with the Accounting Policies,
on a going concern basis and consistently with the Accounts;
	 
	 	(e)	 	subject to the foregoing, in accordance with the
Accounting Principles;

	 	3.5.3	 	at any time within ten Working Days from receipt of such balance sheet and
statement the Vendor’s Representative may by written notice to the Purchaser’s
Solicitors elect to review (with advisers and representatives) the same and all
relevant working papers and supporting documentation, and upon reasonable notice to
interrogate relevant personnel; MCZ shall procure that the Companies shall provide
all reasonably available relevant information, answer all pertinent questions and
co-operate to enable a full understanding of such balance sheet and statement and the
amounts stated therein to be verified for the purposes of this clause 3.5;
	 
	 	3.5.4	 	at any time within thirty Working Days from delivery of a copy of such
balance sheet and statement to the Vendor’s Representative pursuant to clause 3.5.1,
the Vendor’s Representative by written notice to the Purchaser’s Solicitors stating
in reasonable detail the matters which it challenges (an “Objection Notice”) may
challenge the accuracy of the balance sheet and statement delivered pursuant to that
clause;

11

 

	 	3.5.5	 	if the balance sheet and statement required by clause 3.5.1 are not
delivered within the time therein allowed, or if in compliance with and within the
time allowed by clause 3.5.4 the Vendor’s Representative issues an Objection Notice
then:

	 	(a)	 	the Completion Accounts Items shall be such sums as are
agreed in writing between MCZ and the Vendor’s Representative or, in
default of such agreement being reached within ten Working Days from
service of the Objection Notice, either:

	 	(i)	 	certified by a firm of independent
accountants agreed between MCZ and the Vendor’s Representative;
or, if no such accountants are so agreed;
	 
	 	(ii)	 	certified by a firm of independent
chartered accountants appointed on the application of MCZ or the
Vendor’s Representative by the President for the time being of the
Institute of Chartered Accountants in England and Wales;

	 	(b)	 	any such agreement or certificate, when made or issued,
shall be final conclusive and binding as to the amount of the Completion
Accounts Items;
	 
	 	(c)	 	any such firm of independent accountants shall act as
experts and not arbitrators and its fees shall be borne by the prevailing
party or, if there is no clearly prevailing party, by the Trustee and MCZ
in such proportions as such firm shall decide;
	 
	 	(d)	 	the parties shall provide and MCZ shall cause the
Companies to provide, in confidence, to each other and to any independent
accountant appointed in accordance with this clause 3.5.5 such information
and assistance as may properly be required in connection with the
preparation or review and certification of the amount of the Completion
Accounts Items in accordance with this clause 3;

	 	3.5.6	 	unless an Objection Notice is served in compliance with and within the
time allowed by clause 3.5.4, the balance sheet and statement issued pursuant to
clause 3.5.1 shall be final and conclusive as to the matters stated therein;
	 
	 	3.5.7	 	the amounts of the Completion Accounts Items shall become final upon the
first to occur of the following:

	 	(a)	 	the same being agreed in writing between MCZ and the
Vendor’s Representative;

12

 

	 	(b)	 	(save in the case of manifest error) delivery to MCZ
and the Vendor’s Representative of an accountant’s certificate issued
pursuant to clause 3.5.5;
	 
	 	(c)	 	the expiry of the time allowed by clause 3.5.4 for
service of an Objection Notice without an Objection Notice being served in
compliance with that clause

	3.6	 	Adjustment Payments
	 
	 	 	Within ten Working Days from the amount of the Net Working Capital being finally agreed or
determined pursuant to clause 3.5:

	 	3.6.1	 	MCZ shall pay to the Trustee in accordance with clause 3.7.1 a sum equal
to any amount by which the Cash Consideration exceeds the Initial Payment; or
	 
	 	3.6.2	 	the Trustee shall repay or pay to MCZ in accordance with clause 3.7.2 a
sum equal to any amount by which the Initial Payment exceeds the Cash Consideration

	3.7	 	Payments
	 
	 	 	All sums payable under this Agreement shall be paid as follows:

	 	3.7.1	 	all sums payable to the Trustee shall be paid to the Vendor’s Solicitors
by transfer to their US$ clients account identified below or to such other person or
to such other account as the Trustee or the Vendor’s Solicitors may specify in
writing to MCZ at least forty eight hours before the relevant payment falls due
Credit of the payment to such account shall be a complete discharge of MCZ for the
relevant payment In the case of the Initial Payment it shall be paid to the said
account for value as cleared funds no later than the Effective Time and pending
Completion shall be held in US dollars in such US dollar account and not be
converted to any other currency unless requested by MCZ and the Trustee in writing.
The details of the Vendor’s Solicitors clients account are:

	 	 	 	 	 
	  

	 	Bank:
	 	The Royal Bank of Scotland plc
	 
	 	 	 	 
	 

	 	Branch:
	 	Child & Co 1 Fleet Street London EC4Y 1BD
	 
	 	 	 	 
	 

	 	Sort Code:
	 	15-80-00
	 
	 	 	 	 
	 

	 	IBAN:
	 	GB 44 RBOS 1663 0000 1268 81
	 
	 	 	 	 
	 

	 	IBAN BIC:
	 	RBOS GB 2L
	 
	 	 	 	 
	 

	 	Account Name:
	 	Laytons Clients Account
	 
	 	 	 	 
	 

	 	Account Number:
	 	LASHLA-USD1

	 	3.7.2	 	all sums payable to MCZ shall be paid to MCZ or to such other person or to
such other account as MCZ or the Purchaser’s Solicitors may specify in writing to the
Trustee at least forty eight hours before the relevant payment falls due Credit of

13

 

	 	 	 	the payment to such account shall be a complete discharge of MCZ for the
relevant payment The details of MCZ’s account are:

	 	 	 	 	 
	   

	 	Bank:
	 	Wells Fargo Bank, N.A.
	 

	 	 	 	Commercial Banking
	 
	 	 	 	 
	 

	 	Bank Address:
	 	420 Montgomery Street
	 

	 	 	 	San Francisco, CA 94104
	 
	 	 	 	 
	 

	 	Routing & Transit Number (MICR ABA #):
	 	121000248
	 
	 	 	 	 
	 

	 	Swift Code:
	 	WFBIUS6S
	 
	 	 	 	 
	 

	 	Account Name:
	 	Mad Catz, Inc.
	 
	 	 	 	 
	 

	 	Account Number:
	 	4496810201

	3.8	 	Interest
	 
	 	 	If any amount required to be paid pursuant to clause 3.5 is not paid when due the party
liable to make the payment shall pay to the payee (as well after as before judgment)
interest on the amount which is not paid when due calculated on that amount from the date
when it fell due until the date of actual payment at that rate which is two percentage
points above the prime rate from time to time as reported in the Wall Street Journal
	 
	4.	 	COMPLETION
	 
	4.1	 	Completion Venue and Time
	 
	 	 	Completion shall take place at the offices of the Vendor’s Solicitors immediately
following signature of this Agreement or at any other place or time as agreed in writing
by the Trustee and MCZ
	 
	4.2	 	Completion Events and Obligations of the Parties
	 
	 	 	Upon Completion the parties shall perform the obligations respectively required to be
performed by them pursuant to Schedule 2
	 
	4.3	 	Completion Matters Inter-Conditional
	 
	 	 	All matters required to be effected at Completion are inter-conditional and shall be
performed simultaneously
	 
	5.	 	WARRANTIES
	 
	5.1	 	Warranties and Tax Covenant
	 
	 	 	The provisions of Schedules 3, 4 and 6 shall have effect as if set out herein at length
5.2 Limitations
	 
	5.2	 	
 Limitations
	 
	 	 	Except where any Claim arises by reason of fraud or dishonest wilful concealment by the
Warrantor:

14

 

	 	5.2.1	 	the provisions of Schedule 5 shall have effect as if herein set out at
length in order to limit the liability of the Warrantor ;
	 
	 	5.2.2	 	the aggregate liability of MCZ in respect of all claims for breach of a
warranty given in Schedule 6 (including costs) shall in any event not exceed the
amount of the Cash Consideration as finally agreed or determined
	 
	 	5.2.3	 	the liability of MCZ in respect of claims for breach of warranty given in
Schedule 6 shall terminate at midnight on the second anniversary of Completion except
in respect of claims thereunder of which notice is given to MCZ before that time and,
in the case of any claim of which notice is so given, such liability shall terminate
twelve months from the date upon which notice of the claim is so given unless legal
proceedings in respect of it are commenced and served upon MCZ within that twelve
month period

	5.3	 	Non-Disclosed Information
	 
	 	 	With the exception of the matters Disclosed, no information of which the Purchaser and/or
their agents and/or advisers have knowledge (actual, constructive or imputed) or which
could have been discovered (whether by investigation made by the Purchaser or made on
their behalf) shall prejudice or prevent any Claim or reduce any amount recoverable
thereunder.
	 
	5.4	 	Set-off of Claims

	 	5.4.1	 	In this clause 5.4:

	 	 	 
	“Approved Counsel”

	 	means either
	 
	 	 
	 

	 	(a)     any barrister of
Erskine Chambers of at least eight years’ call
experienced in the handling of claims under an agreement
of the nature of this Agreement or

	 
	 	 
	 

	 	(b)     a barrister
called to the Bar of England agreed in writing between
the Vendor’s Solicitors and the Purchaser’s Solicitors
or in default of agreement selected by the Purchaser’s
Solicitors from a list of three legal counsel of at
least eight years’ call submitted to the Purchaser’s
Solicitors by the Vendor’s Solicitors;

	 
	 	 
	“Dismissed Claim”

	 	a Claim shall be a Dismissed Claim:
	 
	 	 
	 

	 	(a)     if counter-notice
is given in respect of it pursuant to clause 5.4.3 and
MCZ does not deliver to the Vendor’s Solicitors a copy
of Approved Counsel’s

15

 

	 	 	 
	 

	 	         Opinion pursuant to clause 5.4.5 within the one
month therein referred to;
	 
	 	 
	 

	 	(b)     if and to the
extent that MCZ agrees in writing that the amount of the
Claim is not recoverable from the Warrantor;

	 
	 	 
	 

	 	(c)     if and to the
extent that a court of competent jurisdiction from which
there is no appeal or from which MCZ does not appeal
within the time permitted dismisses the Claim;

	 
	 	 
	“Provisional Claim”

	 	means (with the exception of any contingent Claim which has not given
rise to an actual liability within the provisions of clause 4.2 of Schedule 5 at the
relevant date):
	 
	 	 
	 

	 	(a)     any Claim which
the Warrantor agrees in writing should be treated as a
Provisional Claim, until twenty days after the Warrantor
gives notice to MCZ withdrawing agreement to such
treatment;

	 
	 	 
	 

	 	(b)     any Claim that is
for the time being the subject of actual legal
proceedings in a court of competent jurisdiction which
have not been dismissed;

	 
	 	 
	 

	 	(c)     any Claim that is
not subject to actual legal proceedings pending (1) the
giving of a counter-notice pursuant to clause 5.4.3 and
(2) sixty days before the due date for any payment under
the Consideration Notes and, after the giving of such
counter-notice and the day sixty days before the due
date for such payment, until the earliest of:

	 
	 	 
	 

	 	(i)     sixty days from the earlier of MCZ electing or
the Warrantor requiring MCZ to elect to obtain
the opinion of Approved Counsel

	 
	 	 
	 

	 	(ii)     the date of delivery to the Vendors’ Solicitors
of a copy of counsel’s opinion pursuant to
clause 5.4.5; and

	 
	 	 
	 

	 	(d)     any Claim deemed
to be a Provisional Claim pursuant to clause 5.4.5, to
the extent so deemed;

	 
	 	 
	“Substantiated Claim”

	 	means either

16

 

	 	 	 
	 

	 	(a)     any Claim to the extent so agreed in writing by the
Warrantor (including pursuant to the mediation provisions of
clause 8.3) or so determined by a court of competent
jurisdiction from which there is no appeal (or from which the
Warrantor does not appeal within the time permitted) or;

	 
	 	 
	 

	 	(b)     any claim under
clause 10

	 	5.4.2	 	Notification of Claim: MCZ may at any time notify the Warrantor and the
Vendor’s Representative in writing in accordance with clause 9.12 that it believes it
has a Claim and with such notification shall give such information as is available to
it and is reasonably necessary to identify the subject-matter and quantum of the
Claim
	 
	 	5.4.3	 	Counter Notice: The Warrantor may dispute the Claim in whole or in part
by counter-notice to MCZ given in writing in accordance with clause 9.12 within
twenty Working Days of receipt of MCZ’s notice of Claim and setting out the basis
upon which and the extent to which it does not accept the Claim
	 
	 	5.4.4	 	Resolution of Claims: Following notification of a Claim pursuant to
clause 5.4.2 and the giving of a counter-notice pursuant to clause 5.4.3, such Claim
shall be resolved in accordance with the provisions of clause 8
	 
	 	5.4.5	 	Justification of Claims: If counter-notice is given to MCZ in accordance
with clause 5.4.3, MCZ may obtain the written determination of Approved Counsel
(acting as expert not arbitrator) that such Claim if formulated into a Statement of
Case would not be struck out pursuant to Part 3.4(2)(a) or (b) of the Civil Procedure
Rules 1998 and if that be the case stating a reasonable pre-estimate of the amount
recoverable for the purposes of clause 5.4.6 below; for this purpose, MCZ shall
deliver to the Vendor’s Solicitors a draft of the relevant instructions including
attachments and allow them ten Working Days from their receipt to comment upon and to
approve the same; following such approval MCZ may submit the agreed instructions and
attachments to the Approved Counsel or (if such instructions are not approved) shall
submit to the Approved Counsel both such instructions and any comments upon them
given to MCZ within the said ten Working Days; if within one month after such
instructions and attachments (if any) are delivered to the Approved Counsel MCZ
submits to the Vendor’s Solicitors the determination referred to above in this clause
5.4.5 then, to the extent that the Claim is so supported by such opinion, it shall be
a Provisional Claim For the avoidance of doubt the determination of the Approved
Counsel shall be in such form as the Approved Counsel shall in his discretion
consider appropriate and the Approved Counsel shall not be required to deliver
reasons

17

 

	 	5.4.6	 	Set-Off: Subject to and as provided by the provisions of the
Consideration Notes, MCZ may set off against an amount of any monies payable to the
holder of any of the Consideration Notes equal to the amounts of any Substantiated
Claim and of any Provisional Claim, as applicable, and in this respect the amount to
be set-off (in the case of a Substantiated Claim) shall be the amount of the
Substantiated Claim and (in the case of a Provisional Claim) shall be such sum as
Approved Counsel may have stated to be a reasonable pre-estimate of the amount
recoverable in respect of that Provisional Claim and such set off of a Provisional
Claim shall continue until it becomes a Substantiated Claim or a Dismissed Claim
	 
	 	5.4.7	 	Satisfaction of Substantiated Claims: Upon a Claim becoming a
Substantiated Claim, MCZ shall give notice to the Warrantor requiring discharge of
that Substantiated Claim and save to the extent that within fifteen Working Days from
receipt of such notice the Warrantor pays to MCZ in cash or otherwise discharges to
the satisfaction of MCZ the amount of such Substantiated Claim, MCZ may set off
against any monies payable to the holder of any of the Consideration Notes the amount
of that Substantiated Claim in accordance with the provisions of the Consideration
Notes and in this respect the amount to be set-off shall be the amount of the
Substantiated Claim Any such set-off shall satisfy and discharge the liability of
the Warrantor in respect of the Substantiated Claim to the extent of the amount so
set-off If no additional monies are available for set off under the Consideration
Notes, then the Warrantor shall promptly pay any additional amount to Purchaser
	 
	 	5.4.8	 	Order of Set-Off: Any set-off or cancellation pursuant to the preceding
clauses 5.4.6 and 5.4.7 shall be against Consideration Notes which mature in 2009 or
2010 as specified by the holder of the Consideration Notes at the time of the set-off

	5.5	 	Mutual Warranties
	 
	 	 	The Trustee warrants to MCZ and MCZ warrants to the Trustee that:

	 	5.5.1	 	it has full power and authority without requiring the consent of any
person — except in the case of MCZ who requires consent from Wachovia Capital Finance
Corporation (Central) to enter into this Agreement and the instrument constituting
the Consideration Notes — (and has duly exercised such power and authority) to enter
into and perform its obligations under each of the Transaction Documents to which it
is party;

18

 

	 	5.5.2	 	(in the case of MCZ) it has obtained the consent of Wachovia Capital
Finance Corporation (Central) to enter into and perform its obligations under this
Agreement and the instrument constituting the Consideration Notes;
	 
	 	5.5.3	 	it has taken all necessary corporate or other action to authorise the
execution, delivery and performance of each of the Transaction Documents to which it
is party;
	 
	 	5.5.4	 	each of the Transaction Documents to which it is party will when executed
constitute lawful valid obligations binding upon it in accordance with its terms
subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally and
subject, as to enforceability, to general principles of equity;
	 
	 	5.5.5	 	the execution, delivery and performance of or compliance with the
provisions of each of the Transaction Documents to which it is party will not cause
or constitute any breach or default of or under any instrument to which it is party
or under any law or regulation in any jurisdiction or of any order, judgement or
decree of any court or governmental agency

	6.	 	MATTERS AFTER COMPLETION
	 
	6.1	 	Further Assurance
	 
	 	 	The Trustee shall do, execute and perform and procure to be done, executed and performed
such further acts, deeds, documents and things as MCZ may from time to time reasonably
require effectively to vest the full legal and beneficial ownership of the Shares in MCZ
free from all Encumbrances subsisting at Completion
	 
	6.2	 	Information
	 
	 	 	The Trustee shall cause to be made available to the Purchaser all information in its
possession or under its control which the Purchaser may from time to time reasonably
require (before or after Completion) relating to the business and affairs of the Companies
	 
	6.3	 	Use of Facilities

	 	6.3.1	 	MCZ shall procure that, until 31 March 2008 the outgoing group management
team (“the Management Team”) consisting of Eric Winkler, Stephen Roston and Jacki
Spratley are allowed, free of cost or charge, full exclusive use of the executive
suite together with associated car parking spaces (on an undesignated first come,
first served basis) and continuance of the existing utilities and cleaning
arrangements at MCZ’s Bristol premises presently used by them and the Management Team
shall enter into such reasonable confidentiality agreements relating to the business
of MCZ as MCZ shall determine. The Vendor agrees to

19

 

	 	 	 	use commercially reasonable efforts to relocate to alternative premises prior to
the expiration of such time period.

	 	6.3.2	 	Vendor shall procure that until 31 March 2008 the Purchaser Group’s VO
team are allowed, free of cost or charge, access and use of Vendor’s Shenzhen SEZ
facilities and continuance of the existing utilities and cleaning arrangements. MCZ
agrees to use commercially reasonable efforts to relocate the VO employees to
alternative premises prior to such time.

	6.4	 	Discharge of Relevant Commitments
	 
	 	 	The following shall apply in respect of each Relevant Commitment:

	 	6.4.1	 	MCZ shall as soon as practicable and within ninety days from Completion
use commercially reasonable efforts to procure the release of each Relevant
Commitment;
	 
	 	6.4.2	 	MCZ shall indemnify the person which incurred any Relevant Commitment
against all costs, claims, liability and expense suffered or incurred by such person
under or arising from that Relevant Commitment

	6.5	 	Domain Names
	 
	 	 	The following shall apply in respect of the domain names listed in Schedule 10 (“the
Domain Names”) which are held by the Companies and serve also Saitek Electronic
Manufacturing Services Limited, its related companies and other companies in which the
Vendor has an interest (“the Retained Companies”):

	 	6.5.1	 	such Domain Names shall be retained by the Companies;
	 
	 	6.5.2	 	for a period of twelve months from Completion, (a) MCZ shall cause the
Companies, promptly upon receipt of the same, to forward to the Vendor’s
Representative all communications received for members of the Management Team
referred to in clause 6.3 by the Companies by email or to a website using any of the
Domain Names; without limiting the foregoing, such forwarding shall be effected
automatically by electronic rule, which MCZ shall cause to be established and
maintained throughout the said twelve months and (b) the Vendor shall cause Eric
Winkler, promptly upon receipt of the same, to forward to MCZ all communications
received by Mr. Winkler or any entity under his control by email or to a website
using any of the Domain Names; without limiting the foregoing, such forwarding shall
be effected automatically by electronic rule, which the Vendor shall cause Mr.
Winkler to establish and maintain throughout the said twelve months;
	 
	 	6.5.3	 	for a period of twelve months from Completion, (a) MCZ shall procure that
the Companies maintain on the websites using the Domain Names the existing links to
the website(s) of the Retained Companies (and to any successor website) and

20

 

	 	 	 	(b) the Vendor shall procure that Mr. Winkler and any entity under his control
maintain on such website specified by Eric Winkler (and to any successor
website) a link in agreed form to the Domain Names

	 	6.5.4	 	Not later than the twelve months from Completion, the Vendor shall
discontinue use of the word “Saitek” in any website used or controlled by Vendor

	6.6	 	Name Change
	 
	 	 	Within a reasonable time following Completion, Vendor shall file registrations that cause
the names of Saitek Ltd. and Saitek Electronics (Shenzhen) Ltd. to be changed to Ryder
Ltd. and Ryder Electronics (Shenzhen) Ltd, or other name which does not use any word
confusingly similar to “Saitek” and the company registered in England and Wales under the
name Saitek Industries Limited to change its name to a name not including “Saitek” or any
confusingly similar word
	 
	6.7	 	Tax and Accounts Undertakings

	 	6.7.1	 	The Vendor agrees to join in an election under section 338 of the Code to
treat the sale of the Shares pursuant to this Agreement as a deemed asset sale. Such
election will be prepared by or on behalf of the Purchaser at its own expense and
submitted to the Vendor within twelve months after Completion and shall be subject to
approval by the Vendor, such approval not to be unreasonably withheld or delayed
	 
	 	6.7.2	 	Subject to the Vendor being advised by its US accountants that it and its
beneficiaries will suffer no prejudice in doing so, the Vendor agrees to elect that
the Company be treated for the purpose of Treasury Regulation section 301.7701-1 to
301.7701-3 promulgated under the Code as disregarded through a “check the box”
election if requested by the Purchaser. Such election will be prepared by or on
behalf of the Purchaser at its expense and submitted to the Vendor within twelve
months after Completion and shall be subject to approval by the Vendor, such approval
not to be unreasonably withheld or delayed
	 
	 	6.7.3	 	The Vendor will procure that Eric Winkler and Stephen Roston will sign the
management representation letter in a form requested by MCZ’s auditors for the audit
of the consolidation of the financial statements of the Companies for the twelve
month periods ended on 31 March in 2005, 2006 and 2007. Such letter will be prepared
by the Companies’ auditors at the Purchaser’s expense and submitted to the Vendor
within twelve months after Completion and shall be subject to approval by the Vendor,
such approval not to be unreasonably withheld or delayed

21

 

	7.	 	RESTRICTIONS ON VENDOR
	 
	7.1	 	Trustee Covenant
	 
	 	 	The Trustee covenants with the Purchaser that it shall not at any time during the period
of three years commencing on the date of Completion apply any of the assets of the Trust
for the time being in investment in or support of (whether by equity subscription, loan,
gift, guarantee or other financial assistance) any undertaking under the control of the
trustees or beneficiaries of the Trust within the meaning of clause 7.1.4 which or any
subsidiary of which carries on or is directly or indirectly engaged or interested in the
business conducted by the Companies as at the date of Completion, which is agreed to
comprise the origination (being the conception and initial design), marketing control
(being decisions upon pricing, distribution, target markets and similar matters) and sale
directly to the using public and directly or indirectly to retailers (or distributors
selling to retailers) of the following products:

	 	(a)	 	chess or other intelligent games;
	 
	 	(b)	 	PC games controllers;
	 
	 	(c)	 	PC input devices;
	 
	 	(d)	 	digital media speakers (meaning amplified speakers
designed for use with PC’s or with portable digital audio sources);
	 
	 	(e)	 	video games accessories;
	 
	 	(f)	 	products comprising a software game plus one or more PC
game controllers or video game accessories

	 	 	PROVIDED THAT:

	 	7.1.1	 	for the avoidance of doubt, this undertaking shall not prohibit support of
or investment in undertakings by reason of their direct or indirect interest in the
production design, production development or production of any products which such
business did not originate and control (“originate” and “control” having cognate
meanings to the words “origination” and “marketing control” in the foregoing
provisions of this clause 7.1) nor any marketing, promotion or sale of such services
to others;
	 
	 	7.1.2	 	this undertaking shall not prohibit the application of funds in stock
exchange investments where the securities held by the Trust are less than four per
cent of the total issued securities of the class invested in, nor investment in
general investment products such as unit trusts, investment trusts, investment funds
marketed to the public and the like where neither the Vendor nor any beneficiary has
any involvement in the undertaking in which such investment is made except through
the investment;

22

 

	 	7.1.3	 	this undertaking shall not prohibit the Trustee or any entity in which the
Trustee is interested holding or having any interest in any share in the capital of
MCZ or of any company which is a direct or indirect holding company of MCZ or a
direct or indirect subsidiary of such holding company, or in any loan notes or other
security issued by any of the foregoing, or being otherwise employed or engaged by or
otherwise interested in any of the foregoing;
	 
	 	7.1.4	 	for this purpose the Trust has control of any entity if the Trust or any
person which the Trust controls or who is the settlor or beneficiary of the Trust:

	 	(a)	 	holds more than one half of the voting rights attached
to shares in its issued capital or otherwise holds the power to pass
general resolutions of the entity; or
	 
	 	(b)	 	is entitled to more than one half of the profits or,
upon a winding-up, the assets of the entity; or
	 
	 	(c)	 	has the ability to control the composition of the board
of directors or other governing body of the entity or to determine the
decisions of such board or body

	7.2	 	Benefit of Trustee Covenant
	 
	 	 	The covenant in clause 7.1 is intended for the benefit of the Purchaser, the Company and
the Subsidiaries
	 
	7.3	 	Consideration
	 
	 	 	The consideration for the undertaking contained in clause 7.1 is included in the
Consideration
	 
	7.4	 	Governance Matters
	 
	 	 	Until the third anniversary of the date of this Agreement, the Vendor agrees not to vote
any shares of the Purchaser’s capital stock held by the Vendor against the nominees for
director chosen by the Nominating Committee of the Purchaser’s Board of Directors
	 
	8.	 	RESOLUTION OF CLAIMS AND DISPUTES
	 
	8.1	 	Notification
	 
	 	 	If any party considers that it has a claim, including a Claim, against another party under
this Agreement, whether for breach of the Warranties or under the Tax Covenant or
otherwise, it shall promptly give to the party against which it considers it has such
claim notification of the claim with reasonable information identifying the nature and
extent of the claim in the possession of the claimant
	 
	8.2	 	Discussion of Claim
	 
	 	 	Promptly following receipt of any notification pursuant to the preceding clause 8.1 and in
any event within fifteen Working Days after such receipt, the parties shall meet together

23

 

	 	 	and in good faith discuss the claim and seek to reach agreement upon it and to resolve the
claim or dispute

	8.3	 	Mediation
	 
	 	 	If after endeavours to resolve the claim or dispute have failed to do so either party may
require that the matter be submitted to independent mediation by the Centre for Dispute
Resolution (“CEDR”) and the parties shall then comply with the mediator’s timetable and
procedural instructions; the mediator shall be appointed by the parties and in default of
agreement by CEDR and the costs of the mediation shall be borne equally by the parties
unless otherwise decided by the mediator or by agreement between the parties
	 
	8.4	 	Legal Proceedings
	 
	 	 	If discussions between the parties and, if requested pursuant to clause 8.3, mediation by
CEDR fails to resolve the dispute or claim then either party may bring court proceedings
in respect of it and in any event either party may bring court proceedings without
recourse to mediation if it seeks interim relief from the court; subject to any binding
agreement resolving a dispute, nothing in this clause 8 shall prevent or restrict any
party exercising its rights and remedies in law
	 
	9.	 	GENERAL
	 
	9.1	 	Costs
	 
	 	 	Each party hereto shall pay its own costs of and incidental hereto and to the sale and
purchase hereby contracted and other matters herein provided for
	 
	9.2	 	Assignment
	 
	 	 	The Purchaser may assign the benefit of this Agreement vested in it in whole or in part to
any other member of the Purchaser Group or by way of security to Wachovia Capital Finance
Corporation (Central) provided that:

	 	9.2.1	 	no assignment shall relieve the party making such assignment of any
obligation;
	 
	 	9.2.2	 	if the assignee ceases to be a member of the Purchaser Group it shall, and
MCZ shall procure that it shall, reassign the rights transferred to it to another
group company of the assigning party;
	 
	 	9.2.3	 	the Trustee shall have no greater liability to any assignee than it would
have had to the assigning party if no such assignment had been made and without
limiting this provision the Warrantor shall be entitled to the benefit of Schedule 5
as well in relation to the assignee as it does in relation to the parties to this
Agreement herein named

	9.3	 	Successors
	 
	 	 	Subject as hereinafter provided, this Agreement and all warranties, undertakings and
provisions contained herein shall be binding upon and enure for the benefit of the

24

 

	 	 	successors and permitted assigns of the parties hereto including their legal personal
representatives and estates

	9.4	 	Collateral Agreements and Variations
	 
	 	 	Each of the parties acknowledges and agrees that:

	 	9.4.1	 	the Transaction Documents set forth the entire agreement between the
parties with respect to the subject matter covered by them and supersede and replace
all prior communications, drafts, representations, warranties, stipulations,
undertakings and agreements of whatsoever nature, whether oral or written, between
the parties relating to them;
	 
	 	9.4.2	 	it does not enter into this Agreement in reliance upon and will not make
any claim in respect of any warranty, representation, undertaking, stipulation,
statement or agreement other than those contained in this Agreement or another
Transaction Document (including without limitation any representation or statement
contained in any letter or other communication, whether written or oral, provided by
any party to another party prior to the date of this Agreement) and all other
warranties, representations, undertakings, stipulations and agreements are hereby
expressly excluded;
	 
	 	9.4.3	 	its only remedies are for breach of contract;
	 
	 	9.4.4	 	it has no right to rescind this Agreement either for breach of contract or
for negligent or innocent misrepresentation;
	 
	 	9.4.5	 	the Consideration has been agreed by the parties having regard (inter
alia) to the provisions of this clause 9.4

	 	 	Provided that the provisions of this clause 9.4 will not exclude any
liability which the parties would otherwise have, or any right which
the parties may have to rescind this Agreement, in respect of any
statements made fraudulently by another party prior to the execution
of this Agreement
	 
	9.5	 	Continuing Effect
	 
	 	 	The provisions of this Agreement and of the Schedules (insofar as the same have not been
wholly performed at Completion) shall remain in full force and effect for so long as may
be necessary to give full effect thereto Completion shall in no circumstances constitute
a waiver of any of the rights or remedies of the parties
	 
	9.6	 	Non-Waiver
	 
	 	 	No time or other indulgence granted by any party to another shall constitute any waiver of
or otherwise affect any right or remedy hereunder Subject as herein provided all rights
and remedies shall be cumulative and not mutually exclusive

25

 

	9.7	 	Circulars and Announcements
	 
	 	 	Any announcements, reports and circulars which any party hereto shall be required or wish
to have prepared resulting from this transaction shall be subject to the approval of the
other parties hereto (which shall not be unreasonably withheld) save that:

	 	9.7.1	 	after consultation with the other parties hereto, or without such
consultation in the absence of a response to a request for such consultation within
two Working Days from the date a party communicated such proposed statement to the
other party, any party may make or issue any public communication which it is
required to make by law or by any regulatory authority;
	 
	 	9.7.2	 	the parties may agree the general content and style of a statement to form
the basis of any public communication and thereafter each of them may make any public
communication which is not inconsistent with that statement

	9.8	 	Previous Agreements
	 
	 	 	This Agreement replaces any previous agreement, understanding or arrangement in the matter
between the parties, all of which shall by mutual consent cease to have effect upon the
signing hereof; without limiting the foregoing, the Heads of Agreement between the Trustee
and MCZ dated 27 September 2007 cease to have effect upon the signing hereof
Notwithstanding the foregoing the Confidentiality Undertakings exchanged between the
parties and dated respectively 29 May 2007 (by MCZ) and 10 October 2007 (by the Trustee
and the Companies) shall continue in effect until Completion and if this Agreement is
discharged other than by Completion shall continue in effect thereafter in accordance with
their terms
	 
	9.9	 	Counterparts
	 
	 	 	This Agreement may be executed in any number of counterparts each bearing the signature of
one or more of the parties hereto and each such counterpart shall be an original and shall
be effective once every party hereto has executed one or more such counterparts (whether
the same or different counterparts) and together shall constitute a single Agreement
	 
	9.10	 	Fraud
	 
	 	 	Nothing in this Agreement shall prevent or restrict liability for fraud
	 
	9.11	 	Contracts (Rights of Third Parties) Act 1999
	 
	 	 	Clauses 6.3, 6.4, 6.5 and 7.1 shall be directly enforceable by the persons therein named
or referred to but their consent shall not be required for a variation of this Agreement
Subject thereto, the parties to this Agreement do not intend that any term of this
Agreement should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act
1999, by any person who is not a party to this Agreement

26

 

	9.12	 	Notices
	 
	 	 	Any notice or other communication hereunder shall be in writing in the English language
and (without prejudice to service in any other manner) shall be validly served:

	 	9.12.1	 	if handed personally to the addressee or to an officer of the addressee (in which
case it shall be deemed served at the time that it is so handed to him); or
	 
	 	9.12.2	 	if delivered to an authorised address of the addressee (in which case it shall be
deemed served at the time that it is so delivered unless such delivery is not on a
Working Day or is after 5.00pm local time in which case it shall be deemed served at
9.00am local time on the following Working Day); or
	 
	 	9.12.3	 	if sent by facsimile transmission to an authorised address of the addressee — in
which case it shall be deemed to be given on the day when it is transmitted and
confirmation received of a successful transmission unless this is not a Working Day
or is after 5.00pm local time for the addressee, in which event it shall be deemed
served at 9.00am local time on the next following Working Day Provided That any
notice given by facsimile transmission shall be confirmed in writing by notice
delivered in accordance with sub-clauses 9.12.1 or 9.12.2 and given within ten
Working Days of the date of transmission (but so that, if so confirmed, the notice
shall be deemed given at the time of such transmission) and any notice not so
confirmed shall be of no effect;
	 
	 	9.12.4	 	and the authorised addresses for the parties are as set out below provided that any
party may by notice hereunder to each other party change its authorised address for
service of notices and such new address shall be substituted for that previously
applicable as from the date such notice of change is given
For the Vendor any notice shall be sent to the following address and a copy
shall at the same time be sent to the Vendor’s Solicitors:

	 	•	 	4 West Point Row

Great Park Road

Bristol BS32 4OG

England
	 
	 	•	 	Marked for the attention of the Vendor’s Representative

	 	 	 	For the Purchaser:

	 	•	 	7480 Mission Valley Road, Suite 101

San Diego, California
	 
	 	•	 	Facsimile number 619 683 9839 and 619 683 2813
	 
	 	•	 	Marked for the attention of: Chief Executive Officer;

	 	 	 	For Vendor’s Representative

27

 

	 	•	 	4 West Point Row

Great Park Road

Bristol BS32 4OG

England

	 	9.12.5	 	in the case of a notice given to the Purchaser’s Solicitors, if given to each of
the firms comprised therein

	9.13	 	Service of Proceedings
	 
	 	 	Each party irrevocably consents to any process in any legal action or proceedings arising
out of or in connection with this Agreement being served on it in accordance with the
provisions of this Agreement relating to service of notices Nothing contained in this
Agreement shall affect the right to serve process in any other manner permitted by law
	 
	9.14	 	Appointment of Agent

	 	9.14.1	 	Trustee’s Appointment: The Trustee appoints the Vendor’s Representative as its
agent to receive on its behalf in England or Wales service of any proceedings arising
out of or in connection with this Agreement. Such service shall be deemed completed
on delivery to such agent (whether or not it is forwarded to and received by the
Trustee and shall be valid until such time as MCZ has received prior written notice
(“Notice”) from the Trustee that such agent has ceased to act as their agent. If for
any reason such agent ceases to be able to act as agent or no longer has an address
in England or Wales, the Trustee shall forthwith appoint a substitute acceptable to
MCZ and deliver to MCZ within seven Working Days from the Notice the new agent’s
name, address and fax number within England and Wales
	 
	 	9.14.2	 	Purchaser’ Appointment: The Purchaser appoints Purchaser’s UK Solicitors as its
agent to receive on its behalf in England or Wales service of any proceedings arising
out of or in connection with this Agreement. Such service shall be deemed completed
on delivery to such agent (whether or not it is forwarded to and received by the
Purchaser and shall be valid until such time as the Trustee has received prior
written notice (“Notice”) from MCZ that such agent has ceased to act as the
Purchaser’s agent. If for any reason such agent ceases to be able to act as agent or
no longer has an address in England or Wales, MCZ shall forthwith appoint a
substitute acceptable to the Trustee and deliver to the Trustee within seven Working
Days from the Notice the new agent’s name, address and fax number within England and
Wales

	9.15	 	Governing Law and Jurisdiction
	 
	 	 	This Agreement shall be governed and construed in accordance with the laws of England and
each of the parties irrevocably submits to the exclusive jurisdiction of the courts of

28

 

	 	 	England and agrees not to commence proceedings in any other jurisdiction save to enforce a
judgment given by a court of England

	10.	 	INDEMNITIES
	 
	10.1	 	Undertaking to Indemnify
	 
	 	 	The Vendor shall indemnify the Purchaser against the following (“Indemnified Sums”)
suffered or incurred by the Purchaser and/or the Companies and their directors and
officers and arising out of or in connection with:

	 	10.1.1	 	any out of pocket costs incurred by the Purchaser or any of the Companies in
respect of the revocation by the German WEEE Regulation Authority in Germany under
the EAR Stiftung scheme of the registration by that body of Saitek Elektronik
Vertriebs GmbH (“GmbH”)
	 
	 	10.1.2	 	the cost of replacing any share certificates (or such similar evidence of
shareholding in a jurisdiction where no share certificates are issued) in respect of
the Company’s shareholdings in any of the Subsidiaries, and generally any liability
to a third party that may be incurred by the Purchaser and or the Companies by reason
of the absence of such certificates or other evidence, together with the legal costs
incurred by any of the Companies in relation to the same;
	 
	 	10.1.3	 	any liabilities of the Companies and their respective directors and officers to pay
compensation to an ex-employee, who was employed as a regional sales manager for
Bavaria and Austria, was dismissed prior to Completion and who has brought an action
for unfair dismissal against GmbH, together with any out of pocket costs incurred by
the Companies in relation to such dismissal;
	 
	 	10.1.4	 	any liability of the Purchaser or any of the Companies or any of their directors
and officers to pay to HM Revenue & Customs any amount claimed by it in its letter to
Saitek plc dated 5 October 2007 under reference 705/ECOMP/F?070?EXC1180/SMC, together
with any fines, penalties and interest and any professional costs in relation to the
same

	10.2	 	No Requirement for Negligence
	 
	 	 	These indemnities shall apply whether or not the Vendors have been negligent.
	 
	10.3	 	Limitations
	 
	 	 	The following paragraphs of Schedule 5 (Limitations) shall apply to claims under this
clause 10 and for the purposes of those paragraphs any such claim shall be a Claim:

	 	1.1.1	 	the time limits shall apply as if the liability under this clause were a liability
under the Warranties;
	 
	 	1.5	 	shall apply as if all such claims were Claims under the Warranties;

29

 

	 	2	 	shall apply as if the claim were a claim under the Warranties;
	 
	 	3	 	shall apply;

	 	 	4.2, 4.3 and (to the extent applicable and as if the matter constituted a breach
of the Warranties) 4.6 shall apply;
	 
	 	 	For the avoidance of doubt the indemnities in this clause 10 and the obligations of the
Warrantor in respect of them are not qualified by anything Disclosed
	 
	10.4	 	Process
	 
	 	 	If any of the Companies or the Purchaser receive any claim which is the subject of an
indemnity in clause 10.1 the Purchaser shall consult upon the same with the Warrantor and
if after such consultation the Purchaser believes that it is obliged to make the payment
which is the subject of the claim, the Warrantor shall pay to the Purchaser the amount
indemnified which is so required to be paid and if and to the extent that such payment is
subsequently recovered by the Purchaser or any of the Companies the Purchaser shall repay
the amount recovered to the Warrantor

AS WITNESS the hands of the parties or their duly authorised representatives the date first above
written

30

 

SCHEDULE 1

Clause 1.1: Part I: Information concerning the Company

	 	 	 
	Name:

	 	Winkler Atlantic Holdings Limited
	 
	 	 
	Place of Incorporation:

	 	Incorporated in the Bahamas then migrated to
British Virgin Islands
	 
	 	 
	Corporate Status:

	 	Private Company limited by shares
	 
	 	 
	Date of Incorporation

	 	30 November 1993
	 
	 	 
	Registration Number

	 	18,818B
	 
	 	 
	Registered Office

	 	c/o Rawlinson & Hunter Limited Woodbourne Hall Road Town Tortola British Virgin Isles
	 
	 	 
	Directors

	 	Cordico Management AG
	 
	 	 
	Secretary

	 	n/a
	 
	 	 
	Authorised Share Capital

	 	5,000 shares at US$1.00
	 
	 	 
	Issued Share Capital

	 	2 shares at US$1.00

31

 

Clause 1.1: Part II : Information concerning the Subsidiaries

	 	 	 
	Name:

	 	Saitek Industries Limited
	 
	 	 
	Place of Incorporation:

	 	Delaware, United States of America
	 
	 	 
	Corporate Status:

	 	Private company limited by shares
	 
	 	 
	Date of Incorporation:

	 	3 November 1980
	 
	 	 
	Registration Number:

	 	Federal ID # 13-3060067

California State ID #302-1341-7
	 
	 	 
	Registered Office:

	 	2295 W Jefferson Street Torrance CA 90501 USA
	 
	 	 
	Directors:

	 	William McMahon
	 
	 	 
	Other Officers:

	 	n/a
	 
	 	 
	Authorised share capital:

	 	1,000 shares
	 
	 	 
	Issued share capital:

	 	1,000 shares
	 
	 	 
	Registered shareholders:

	 	Winkler Atlantic Holdings Limited
	 
	 	 
	Name:

	 	Saitek Elektronik Vertriebs GmbH
	 
	 	 
	Place of Incorporation:

	 	Munich, Germany
	 
	 	 
	Corporate Status:

	 	GmbH
	 
	 	 
	Date of Incorporation:

	 	23 September 1992
	 
	 	 
	Registration Number:

	 	HRB 104004
	 
	 	 
	Registered Office:

	 	Landsbergerstrasse 400 Postfach 600 555 D81241 Munchen Germany
	 
	 	 
	Directors:

	 	Stefan Wöger
	 
	 	 
	Other Officers:

	 	Prokurist : Martin Eberle
	 
	 	 
	Authorised share capital:

	 	€306,775.13
	 
	 	 
	Issued share capital:

	 	€306,775.13
	 
	 	 
	Registered shareholders:

	 	Winkler Atlantic Holdings Limited

32

 

	 	 	 
	Name:
	 	Saitek plc
	 
	 	 
	Place of Incorporation:
	 	England and Wales
	 
	 	 
	Corporate Status:
	 	Public limited company
	 
	 	 
	Date of Incorporation:
	 	18 November 1982
	 
	 	 
	Registration Number:
	 	1679281
	 
	 	 
	Registered Office:
	 	4 West Point Row  Great Park Road  Bristol  BS32 4QG
	 
	 	 
	Directors:
	 	Christopher John Rupert Fielden
	 
	 	Rosemary Fielden
	 
	 	Andrew Young
	 
	 	David John Inwood
	 
	 	 
	Other Officers:
	 	Secretary:  Stephen Alexander Roston
	 
	 	 
	Authorised share capital:
	 	2,000,000 ordinary shares @ £1.00 each
	 
	 	3,900,000 preference shares @ £1.00 each
	 
	 	 
	Issued share capital:
	 	1,942,504 ordinary shares
	 
	 	3,440,000 preference shares
	 
	 	 
	Registered shareholders:
	 	Winkler Atlantic Holdings Limited
	 
	 	Saitek Elektronik Vertriebs GmbH
	 
	 	 
	Name:
	 	Saitek SA
	 
	 	 
	Place of Incorporation:
	 	France
	 
	 	 
	Corporate Status:
	 	Societe Anonyme
	 
	 	 
	Date of Incorporation:
	 	22 January 1988
	 
	 	 
	Registration Number:
	 	317371136
	 
	 	 
	Registered Office:
	 	21 Rue d’Hauteville  Bte B  75010  Paris
	 
	 	 
	Directors:
	 	Stefan Wöger
	 
	 	Jean Gaston Mercier
	 
	 	Marie-Therese Mercier
	 
	 	Marie-Christine Mercier
	 
	 	 
	Other Officers:
	 	n/a
	 
	 	 
	Authorised share capital:
	 	€400,000
	 
	 	 
	Issued share capital:
	 	€400,000  -  32,883 shares of  12€16434 cents each
	 
	 	 
	Registered shareholders:
	 	Winkler Atlantic Holdings Limited
	 
	 	Isabelle Mercier
	 
	 	Jean Gaston Mercier
	 
	 	Marie-Christine Mercier
	 
	 	Marie-Therese Mercier
	 
	 	Veronique Mercier
	 
	 	Stefan Wöger

33

 

	 	 	 
	Name:
	 	Saitek Industries Limited
	 
	 	 
	Place of Incorporation:
	 	Hong Kong
	 
	 	 
	Corporate Status:
	 	Private company limited by shares
	 
	 	 
	Date of Incorporation:
	 	13 June 1980
	 
	 	 
	Registration Number:
	 	82995
	 
	 	 
	Registered Office:
	 	405 Camelpaint Centre 1 Hing Yip Street  Kwun Tong  Hong Kong
	 
	 	 
	Directors:
	 	Eric Ernest Winkler
	 
	 	Stephen Alexander Roston
	 
	 	Judy Au Siu Fong
	 
	 	 
	Other Officers:
	 	Secretary:  Secretaries Limited
	 
	 	 
	Authorised share capital:
	 	100,000 ordinary shares at HK$1.00 each
	 
	 	 
	Issued share capital:
	 	100 ordinary shares at HK$1.00 each
	 
	 	 
	Registered shareholders:
	 	Winkler Atlantic Holdings Limited

34

 

SCHEDULE 2

Part 1 — What the Trustee shall deliver to the Purchaser at Completion

At Completion, the Trustee shall deliver or cause to be delivered to the Purchaser the following
documents and evidence:

	 	(a)	 	a transfer of the Shares executed by the registered holder in favour of the
Purchaser;
	 
	 	(b)	 	the share certificate for the Shares in the name of the registered holder;
	 
	 	(c)	 	an irrevocable power of attorney in agreed form given by the Trustee in
favour of MCZ to enable the beneficiary (or its proxies) to exercise all voting and
other rights attaching to the Shares before the transfer of the Shares is registered
in the register of members;
	 
	 	(d)	 	the original of any power of attorney under which this Agreement or any
document to be delivered to the Purchaser under this Agreement has been executed by
the Vendor;
	 
	 	(e)	 	certificates or indemnities in respect of all issued shares in the capital
of each of the Subsidiaries other than Saitek SA and Saitek Elektronik Vertriebs GmbH
and transfers, in favour of any person the Purchaser directs, of all shares in any
Subsidiary held by a nominee for the Company or another Subsidiary;
	 
	 	(f)	 	in relation to each of the Subsidiaries apart from Saitek Elektronik
Vertriebs GmbH, the statutory registers and minute books, the common seal (if any),
certificate of incorporation (if any) and any certificates of incorporation on change
of name;
	 
	 	(g)	 	the written resignation, executed as a deed and in the agreed form, of the
directors and secretaries of each of the Subsidiaries from their offices and
employment with the applicable Subsidiary, except for the following persons who are
not resigning:

	 	(i)	 	Stefan Wöger; and
	 
	 	(ii)	 	Andrew Young and William McMahon;

	 	(h)	 	the written resignation of the auditors of Saitek plc and Saitek Industries
Limited (Hong Kong) accompanied in each case by a statement that there are no
circumstances connected with the auditors  ́ resignation which should be brought to the
notice of the members or creditors of the Subsidiary;
	 
	 	(i)	 	a certified copy of the minutes of the board meetings held pursuant to Part
2 of this Schedule 2;
	 
	 	(j)	 	a certified copy of the resolution adopted by the board of directors of the
Trustee authorising and approving the Transaction;

35

 

	 	(k)	 	the consultancy agreement in agreed form between MCZ, Saitek Industries
Limited (UK) and Eric Winkler duly executed by Eric Winkler;
	 
	 	(l)	 	a deed of restrictive covenant in agreed form duly executed by Eric
Winkler;
	 
	 	(m)	 	Compromise agreements complying with the requirements of section 203(1) of
the Employment Rights Act 1996 shall be entered into between Saitek plc and David
Inwood;
	 
	 	(n)	 	a legal opinion upon the due execution by the Trustee of the Transaction
Documents to which it is party.

Part 2 — Matters for the board meetings at Completion

	(a)	 	A resolution to register the transfer of the Shares shall be passed at board meeting, subject
to the transfer(s) being stamped at the cost of the Purchaser.
	 
	(b)	 	All directors, secretaries and auditors of each of the Companies shall resign from their
offices and employment with the applicable Companies with effect from the end of the relevant
board meeting, except for the following persons:
	 
	(c)	 	The persons MCZ nominates shall be appointed as directors and secretary of each of the
Subsidiaries (but not exceeding any maximum number of directors contained in the relevant
company’s articles of association). The appointments shall take effect at the end of the board
meeting.
	 
	(d)	 	KPMG LLP shall be appointed as the auditors of each of the Companies except Saitek SA with
effect from the end of the relevant board meeting.
	 
	(e)	 	The address of the registered office of each of the Subsidiaries shall be changed to the
address required by MCZ.
	 
	(f)	 	All existing bank instructions and authorities for the Subsidiaries shall be revised to
remove Eric Winkler, David Inwood and Stephen Roston.
	 
	(g)	 	The accounting reference date of each of the Subsidiaries shall be changed to the date
required by MCZ.
	 
	1.	 	OBLIGATIONS OF THE PURCHASER
	 
	 	 	Subject to due performance by the Trustee of its obligations hereunder MCZ shall upon
Completion:

	 	1.1.1	 	pay the Initial Payment in accordance with clause 3.7.1;

36

 

	 	1.1.2	 	constitute and issue to the Vendor the Consideration Notes (and for the
avoidance of doubt “issue” means enter the name of the Vendor in a Register of
Noteholders as holder of the Consideration Notes);
	 
	 	1.1.3	 	deliver to the Vendor’s Solicitors, duly executed by the Purchaser, the
following documents:

	 	(a)	 	the certificate for the Consideration Note together
with an original of the instrument constituting the same, each duly
executed by the Purchaser, together with a copy of the Register of
Noteholders showing the Vendor as holder of the Consideration Notes;
	 
	 	(b)	 	board minutes of the Purchaser resolving upon
Completion, the issue of the Consideration Notes and execution of
certificates for the same and all other things required to be done by this
Agreement, duly certified by the secretary of the Purchaser;
	 
	 	(c)	 	the consultancy agreement referred to in paragraph (n)
of Part 1 of this Schedule duly executed by the Purchaser;
	 
	 	(d)	 	a legal opinion in agreed form upon the due execution
by the Purchaser of the Transaction Documents to which it is party

37

 

SCHEDULE 3

Clause 5.1: Warranties by the Warrantor

	1.	 	PRELIMINARY
	 
	1.1	 	Definitions

	 	1.1.1	 	In this Schedule “the Agreement” means the Agreement to which this is
scheduled (including the other Schedules and Annexes thereto)
	 
	 	1.1.2	 	References to any Schedule (unless otherwise stated and other than
statutory references) are references to a Schedule to the Agreement
	 
	 	1.1.3	 	Save for the foregoing the definitions applicable to the Agreement apply
to this Schedule

	1.2	 	Disclosures
	 
	 	 	The Warranties are given subject to matters Disclosed; the Purchaser shall have no claim
and the Warrantor shall have no liability in respect of any matter which has been
Disclosed

	1.3	 	Warrantor’s claims against the Companies
	 
	 	 	The Warrantor:

	 	1.3.1	 	agrees and acknowledges that no information given by or on behalf of the
Companies, or any officer or employee of the Companies, to it or to persons acting on
its behalf or to the Purchaser or persons acting on behalf of the Purchaser in
relation to any provision (including this Schedule) of the Agreement or in connection
with the Disclosure Letter or otherwise in respect of the Agreement was or is in any
way warranted or represented to be correct or complete;
	 
	 	1.3.2	 	releases and waives all claims and rights against the Companies, its
officers and employees which it might have in respect of any such information;
	 
	 	1.3.3	 	undertakes to execute any further waiver of such claims and rights as MCZ
may from time to time request;
	 
	 	1.3.4	 	agrees and acknowledges that any such right or claim or fact of the
provision of any such information by the Companies its officers or employees, shall
not be nor be raised as a defence to any claim by the Purchaser under this Agreement

	1.4	 	Independence of Warranties
	 
	 	 	The Warranties set out in each paragraph and sub-paragraph of this Schedule shall be
entirely separate and independent from each other and save as expressly provided shall not
be in any way construed or limited by reference to any other sub paragraph or anything in
the Agreement
	 
	1.5	 	Application of Warranties
	 
	 	 	Notwithstanding any other provision of this Agreement:

38

 

	 	1.5.1	 	the only Warranties applicable to land or buildings or interests in the
same and related matters are those set out in paragraph 5 (Real Property), paragraph
7.9 (Material Contracts), paragraph 7.11 (Insurance), and paragraph 15 (Environmental
Matters) of this Schedule and no other Warranties shall apply to the same;
	 
	 	1.5.2	 	the only Warranties applicable to Intellectual Property are those in
paragraph 11 (Intellectual Property), paragraph 12 (Information Technology) and
paragraph 13 (Data Protection) of this Schedule and no other Warranties shall have
effect in relation to the same;
	 
	 	1.5.3	 	the only Warranties applicable to Tax are the Tax Warranties and no other
Warranties shall have any effect in respect to Tax

	1.6	 	Warranties
	 
	 	 	The Warrantor warrants to and with the Purchaser in the terms of the statements in
paragraphs 2 to 13 of this Schedule
	 
	2.	 	COMPANIES INFORMATION
	 
	2.1	 	Incorporation, Constitution and Statutory Matters

	 	2.1.1	 	Capacity: The Trustee is the registered holder of the Shares and under the
terms of its appointment and capacity as trustee of the Trust has the power to sell
the Shares and to give the Warranties (and any indemnities contained within this
Agreement) without seeking consent from any other party.
	 
	 	2.1.2	 	Incorporation: Each of the Companies has been duly incorporated in, and is
validly existing under, the laws of the place of incorporation stated in respect of
it in Schedule 1 and has all requisite corporate power and authority to own, lease
and operate its assets and to carry on its business
	 
	 	2.1.3	 	Memoranda and Articles of Association: The copy of the Memorandum and
Articles of Association and the equivalent constitutional documents in the relevant
jurisdiction of the Companies attached to the Disclosure Letter are true and complete
	 
	 	2.1.4	 	Group Membership: The Company:

	 	(a)	 	does not have any direct or indirect subsidiary except
the Subsidiaries;
	 
	 	(b)	 	does not hold or own any interest in any shares in the
capital of any other company save the Subsidiaries

	 	2.1.5	 	Information: The information contained in Schedule 1 is complete and
accurate in all respects
	 
	 	2.1.6	 	With respect to the Information Memorandum, a copy of which is attached to
the Disclosure Letter:

39

 

	 	(a)	 	It was prepared in good faith and taken as a whole
provides a representation of the Companies that is not misleading.
	 
	 	(b)	 	Except, in the case of financial statements therein, to
the extent that they have been superseded by the Accounts or the Management
Accounts, the statements of fact therein relating to the Companies or their
business were true in all material respects as of their date.
	 
	 	(c)	 	The expressions of opinion and judgement therein were
prepared in good faith and after proper consideration.

	2.2	 	Share Capital and Shares

	 	2.2.1	 	The Subsidiaries: All the Shares in the capital of the Subsidiaries are
beneficially owned by the Company and are registered in the respective names stated
in Part II of Schedule 1 and there is no Encumbrance relating to or affecting any
            shares in the capital of any of the Subsidiaries
	 
	 	2.2.2	 	Issues of Capital: Since the Accounts Date no share or loan capital has
been created, constituted or issued by the Companies or agreed to be created
constituted or issued
	 
	 	2.2.3	 	Entitlement to Issue of Securities: No person has the right (whether now
or later and whether absolutely or contingently) to call for the issue of any share
or loan capital of the Companies and there is no outstanding resolution of the
Companies for capitalisation of any sum as shares, debentures or other securities nor
have the Companies agreed to pass such a resolution
	 
	 	2.2.4	 	Statutory Registers: The register of members and all other corporate
records required by law to be maintained by the Companies are in all respects correct
and complete and there has been no notice of any proceedings to rectify any such
register or record and there are no circumstances which might lead to any application
for rectification of the same

	2.3	 	Encumbrance on Shares
	 
	 	 	No commitment has been given to create an Encumbrance affecting the Shares (or any
unissued shares or debentures or other unissued securities of the Company or any of the
Subsidiaries) or for any of them to issue any share capital and no person has claimed any
rights in connection with any of those things
	 
	2.4	 	Ownership of Shares and Branches
	 
	 	 	Neither the Company nor any of the Subsidiaries:

	 	2.4.1	 	holds or beneficially owns, or has agreed to acquire, any securities of
any corporation other than its own subsidiaries; or
	 
	 	2.4.2	 	has, outside its country of incorporation, any branch or permanent
establishment;
	 
	 	2.4.3	 	has allotted or issued any securities that are convertible into shares

40

 

	2.5	 	Redemption of Shares and Financial Assistance
	 
	 	 	Neither the Company nor any of the Subsidiaries has at any time:

	 	2.5.1	 	purchased, redeemed or repaid any of its own share capital; or
	 
	 	2.5.2	 	in the case of any of the Subsidiaries incorporated in the UK given any
financial assistance in contravention of section 151 of the Companies Act 1985 and in
the case of each of the Subsidiaries incorporated and subject to the laws of
jurisdictions other than the United Kingdom that each such Subsidiary has not
undertaken, either directly or not, any transactions analogous to those contemplated
by this warranty 2.5 which would be unlawful in the relevant jurisdiction

	2.6	 	Distributions
	 
	 	 	All dividends or distributions declared, made or paid by the Company and the Subsidiaries
have been declared, made or paid in accordance with their respective memoranda, articles
of association, the applicable provisions of the Companies Acts and any agreements or
arrangements made with any third party regulating the payment of dividends and
distributions.
	 
	3.	 	ACCOUNTS AND RECORDS
	 
	3.1	 	Contents of Accounts
	 
	 	 	The Accounts:

	 	3.1.1	 	gave a true and fair view of the respective Companies to which they relate
in all respects as at their date;
	 
	 	3.1.2	 	comply with the requirements of all relevant statutes;
	 
	 	3.1.3	 	have been prepared in accordance with the Accounting Policies and the
Accounting Principles and on a basis consistent with three preceding accounting
periods

	3.2	 	Stock and Work in Progress
	 
	 	 	The method of valuing stock-in-trade and work-in-progress for the Accounts was consistent
with that adopted in the Management Accounts which has been and remains consistently
applied in the past twelve month period
	 
	3.3	 	Debts

	 	3.3.1	 	No part of the amounts included in the Accounts or in the Management
Accounts or in the accounting records of the Companies as owing from debtors has been
released on terms that any debtor has paid or shall pay less than the book value of
his debt or has been written off

41

 

	 	3.3.2	 	None of the book debts owing or which may become owing to the Companies
have been assigned or made the subject of any factoring or similar agreement or
arrangement

	3.4	 	Management Accounts
	 
	 	 	The Management Accounts (which it is acknowledged have not been the subject of an audit report):

	 	3.4.1	 	have been prepared by competent accountancy personnel with due care and
attention;
	 
	 	3.4.2	 	have been prepared in compliance with generally accepted accountancy
principles for management accounts and good commercial practice;
	 
	 	3.4.3	 	have been prepared on a consistent basis over the past twelve month period

	3.5	 	Books and Records
	 
	 	 	The books and records of the Companies have been properly and in all material respects
accurately maintained in accordance with good commercial practice
	 
	3.6	 	Accounting Controls and Procedures

	 	3.6.1	 	Each of the Companies maintains sufficient procedures to provide
reasonably adequate controls over the operations of the business that are
commensurate with the size and nature of its business and reflecting that it is not a
public company, including without limitation that access to assets are covered by
appropriate authorization policies and reconciliation of assets is undertaken
periodically with physical stock checks performed at least annually with
corresponding appropriate adjustments being made
	 
	 	3.6.2	 	True and accurate copies of the Companies’ written authorisation
procedures for each location and finance and policies procedures are attached to the
Disclosure Letter
	 
	 	3.6.3	 	None of the Companies nor, as far as the Warrantor is aware, any director,
officer, employee, auditor, accountant or representative of the Companies has
received or otherwise had or, as far as the Warrantor is aware, obtained knowledge of
any material complaint, allegation, assertion or claim, whether written or oral,
regarding the accounting or auditing practices, procedures, methodologies or methods
of the Companies or their respective accounting controls, including any material
complaint, allegation, assertion or claim that any of the Companies has engaged in
questionable accounting or auditing practices

42

 

	4.	 	FINANCIAL MATTERS
	 
	4.1	 	Financial Facilities
	 
	 	 	All material details of all overdraft, loan, banking and other financial facilities of any
kind available to the Companies, including all bank authorizations and signatories, are
set out or referred to in paragraph 4.1 of Part 3 of the Disclosure Letter
	 
	4.2	 	Encumbrances
	 
	 	 	No Encumbrance (other than a lien arising by operation of law in the ordinary course of
trading which is not being or about to be exercised) licence, right to use or other
adverse interest whatsoever on, over or affecting the whole or any part of the undertaking
or assets of the Companies is outstanding and there is no agreement or commitment to give
or create any of the foregoing and no claim has been made by any person to be entitled to
any of the foregoing
	 
	4.3	 	Guarantees for the Companies
	 
	 	 	No person has granted any Guarantee for or in respect of any loan, overdraft, financial
facility, lease, performance bond, contract or other commitment or obligation of the
Companies
	 
	4.4	 	Insolvency

	 	4.4.1	 	Winding-Up: No order has been made or petition presented or resolution
passed for the winding up of the Companies; there are no grounds on which any such
order or petition could be made or presented and no such resolution is contemplated
by the members or any of them
	 
	 	4.4.2	 	Execution: No distress, execution or other process has been levied on any
of the Companies’ assets
	 
	 	4.4.3	 	Receivership: No power to appoint a receiver has been exercised or has
arisen or become exercisable in respect of the business or any of the assets of the
Companies and there is no unfulfilled or unsatisfied judgment or court order
outstanding against it
	 
	 	4.4.4	 	Administration: No administration order in respect of the Companies or
order for the appointment of an administrative receiver or receiver and manager over
all or part of the Companies is outstanding
	 
	 	4.4.5	 	Protection from Creditors: The Companies are not the subject of any
proceedings or court order for protection from its creditors

	5.	 	REAL PROPERTY
	 
	5.1	 	Identity and Information
	 
	 	 	The Properties comprise all the land and buildings of any tenure or interest owned,
occupied or used by the Companies and all the rights vested in the Companies relating to

43

 

	 	 	any land and the information contained in Schedule 7 is correct in all respects and not
misleading

	5.2	 	Title
	 
	 	 	The relevant one of the Companies is the legal and beneficial owner of the interest in the
Properties specified in Schedule 7
	 
	5.3	 	Possession
	 
	 	 	The Subsidiaries have exclusive possession and are in actual sole occupation of all the
Properties
	 
	5.4	 	Adverse Leases and Rights of Occupation
	 
	 	 	Save as referred to in Schedule 7 none of the Properties is subject to any lease, tenancy,
licence to occupy or agreement to grant any of the same and all such leases, tenancies,
licences and agreements referred to in Schedule 7 are in the terms Disclosed
	 
	6.	 	PHYSICAL ASSETS
	 
	6.1	 	Ownership
	 
	 	 	Except for items held under a lease, hire or hire purchase agreement requiring total
annual payments under the relevant agreement by a Subsidiary (exclusive of value added
tax) not exceeding $15,000 individually or $50,000 in total and save for current assets
disposed of in the ordinary course of trading, the Subsidiaries are the absolute owners
having actual possession and control of, free from any leasing, hire or hire purchase
agreement, conditional sale, agreement for payment on deferred terms, bill of sale or
other Encumbrance (or agreement to grant any of the same) to all assets included in the
Accounts or in the Management Accounts and to all assets which have been acquired by the
Subsidiaries since the Accounts Date
	 
	6.2	 	Leasing and Hire Purchase
	 
	 	 	In respect of all chattels which are assets of the Subsidiaries or used in the conduct or
operation of their respective businesses and are held by the Subsidiaries under any
leasing, hire, hire purchase, conditional sale or similar agreement or arrangement:

	 	6.2.1	 	a complete schedule showing true and accurate particulars of all such
agreements and arrangements (except a lease, hire or hire purchase agreement
requiring total annual payments thereunder by a Subsidiary (exclusive of value added
tax) of less than $15,000) is attached the Disclosure Letter together with complete
and correct copies of the same;
	 
	 	6.2.2	 	the Subsidiaries are party to no more than ten such agreements and
arrangements in total requiring total annual payments thereunder by a Subsidiary
(exclusive of value added tax) of less than $15,000;

44

 

	 	6.2.3	 	all amounts due and payable by any Subsidiary under the agreements
disclosed against Warranty 6.2.1 have been paid;
	 
	 	6.2.4	 	there is no entitlement or circumstance giving rise to an entitlement of
any other party thereto to vary the terms of the agreements disclosed against
Warranty 6.2.1 or to increase any amount payable by any Subsidiary under the same;
	 
	 	6.2.5	 	no Subsidiary is in material breach of any of the agreements disclosed
against Warranty 6.2.1;
	 
	 	6.2.6	 	no circumstance has arisen which would entitle any other party to the
agreements disclosed against Warranty 6.2.1 to vary, to terminate it or otherwise
vary or terminate the applicable Subsidiary’s right to use any such chattel and this
Agreement will not entitle any third party to exercise such right or constitute a
breach of any of the same

	6.3	 	Condition
	 
	 	 	The equipment used by the Companies is in working order for the purpose for which it is
used, subject to usual wear and tear
	 
	7.	 	CONDUCT OF BUSINESS
	 
	7.1	 	Business Since the Accounts Date
	 
	 	 	Since the Accounts Date:

	 	7.1.1	 	Conduct of Business: The Companies have:

	 	(a)	 	carried on business in the ordinary, proper and usual
course so as to maintain the same as a going concern;
	 
	 	(b)	 	not suffered any event, change, development or
occurrence which specifically relates to the Companies that individually or
in the aggregate has resulted in or would reasonably be expected to result
in a material adverse effect upon the business, results or operations,
assets, liabilities or financial condition of the Companies taken as a
whole

	 	7.1.2	 	New Operations: Each of the Companies in each jurisdiction in which it
operates and conducts its business has not acquired or established (or agreed to
acquire or establish) any new business, branch or subsidiary

	7.2	 	Authorisations and Approvals

	 	7.2.1	 	General: The Subsidiaries, in each of their respective jurisdictions hold
all necessary licences, agreements, consents, permits, approvals and authorities
(whether public or private) to enable it to carry on its business effectively and
without hindrance in the places and in the manner in which such business is now
carried on; all the same are valid and subsisting and the Warrantor is not aware of

45

 

	 	 	 	any reason why any of them should be suspended, altered, cancelled or revoked;
and the Subsidiaries have complied in all material respects with all conditions
of or imposed by the same

	 	7.2.2	 	Product Approvals: Each of the Subsidiaries holds all appropriate legal
and public authority approvals, registrations and authorisations in respect of
products produced or sold by it for use in the USA, China, the European Union and the
United Kingdom and:

	 	(a)	 	complies with all requirements of law or any competent
authority in relation to such approvals, registrations and authorisations;
	 
	 	(b)	 	the same are current and subsisting and no matter or
event has occurred which might prejudice or invalidate the same;
	 
	 	(c)	 	none of the same has been or is threatened to be
cancelled or withdrawn;

	7.3	 	Absence of Legal Proceedings
	 
	 	 	Neither the Company, the Subsidiaries, nor any person on any of their behalf or for whose
acts or defaults any of them are or may be vicariously liable is involved in any
litigation or arbitration proceedings or proceedings or hearings (whether civil or
criminal) before any court, commission, tribunal, board, investigation, government body or
other person; no such litigation, proceedings or hearings are pending by or are threatened
against the Company or any Subsidiaries and so far as the Warrantor is aware there are no
facts or matters which might or could give rise to any such proceedings
	 
	7.4	 	Public Obligations
	 
	 	 	Neither the Company nor any Subsidiary has committed any breach of or default under any
statute or any regulation having effect under any statute or any court order, decree or
other applicable law of any country nor has the Company or any Subsidiary any dispute with
any authority of competent jurisdiction of any country regarding any of its affairs
	 
	7.5	 	Defective Products

	 	7.5.1	 	Neither the Vendor nor any Subsidiary has received any material claim
which remains outstanding that any product supplied by it is defective in design,
workmanship or materials; for this purpose a claim is material if the Companies’
liability exceeds, or when determined does exceed, the sum of $50,000
	 
	 	7.5.2	 	To the extent that any of the Companies’ products at the time of their
manufacture were not materially fit for the purpose intended for such products in the
country for which they were supplied by the Companies or have not been manufactured
in all material respects in accordance with the warranties given by the Company or
any Subsidiary to end customers, the total liability of the Companies to third
parties for all claims for such defects would not exceed 2.5%

46

 

	 	 	 	of the aggregate sales of the Companies in the financial year ended 28 February
2007 as shown in the Accounts

	 	7.5.3	 	The Disclosure Letter includes a complete and accurate list of every claim
made during the three years prior to Completion against the Companies for defective
products in which damages were asserted or realized in excess of $500,000

	7.6	 	Orders and Judgments
	 
	 	 	Neither the Company nor any Subsidiary is subject to any order or judgment of any court,
tribunal or governmental authority or agency and has not been party to any subsisting
undertaking or assurance given to any of the same
	 
	7.7	 	Contractual Characteristics
	 
	 	 	Neither the Company nor any Subsidiary is now party to:

	 	7.7.1	 	Guarantees: any Guarantee given by the Company or any Subsidiary (save
for any guarantee or warranty in relation to goods implied by law or contained in its
standard terms of business); or
	 
	 	7.7.2	 	Joint Ventures: any joint venture, consortium or partnership arrangement
or agreement or participation in any unincorporated association;
	 
	 	7.7.3	 	Artificial: any agreement, arrangement, practice or benefit with or at
the instigation of the Vendor or any Associate of the Vendor or of any director,
officer or senior employee of the Company or any Subsidiary or any Associate of such
person the effect of which has been to artificially increase the net profit of the
Company or any Subsidiary, whether by affording to it goods or services below the
fair commercial rate or taking from it goods or services in excess of the fair
commercial rate, or otherwise;
	 
	 	7.7.4	 	Connected Persons: any agreement or arrangement with, obligation or
benefit to or loans owing by the Vendor or Associate of the Vendor or any other
agreement or arrangement in which the Vendor or any Associate of the Vendor is
directly or indirectly interested or which is not on arm’s length commercial terms;
	 
	 	7.7.5	 	Authorisations to Bind the Companies: any power of attorney or other
agency or similar authority (express, implied or ostensible) to any person to enter
into any contract or commitment on the Companies’ behalf other than to its employees
to enter into routine trading contracts in the normal course of their duties
	 
	 	7.7.6	 	Restrictive Covenants: any agreement, covenant, undertaking or commitment
restricting, limiting or excluding its conduct of business in any field or
geographical area or (save those entered into in connection with a sale of the
Companies or with customers, suppliers or distributors in the ordinary course of
business) imposing confidentiality obligations on one or more of the parties thereto

47

 

	 	7.7.7	 	Sale of Undertaking: any agreement, undertaking or commitment (whether
conditional or unconditional) under which any of the Companies has any obligation to
sell all or any substantial part of its undertaking and assets other than in the
ordinary course of trading
	 
	 	7.7.8	 	Capital Expenditures: any agreement, undertaking or commitment (whether
conditional or unconditional) providing for actual future capital expenditure by the
Companies in an individual amount in excess of $50,000
	 
	 	7.7.9	 	Indebtedness: any agreement, undertaking or commitment (whether
conditional or unconditional) that involves the borrowing or lending of money
	 
	 	7.7.10	 	Indemnity: save those entered into in the ordinary course of business, any
agreement, undertaking or commitment (whether conditional or unconditional) to
indemnify any person or entity
	 
	 	7.7.11	 	Regulatory Agreements: any agreement, undertaking or commitment (whether
conditional or unconditional) to supply or receive supplies from any government or
regulatory agency
	 
	 	7.7.12	 	Extraordinary Agreements: any agreement, undertaking or commitment (whether
conditional or unconditional) not made in the ordinary course of the Companies’
business which involves an aggregate payment by or to the Company or any Subsidiary
in excess of $US10,000 per annum

	7.8	 	Agency Distributorship and Similar Arrangements
	 
	 	 	Neither the Company nor any Subsidiary is party to any contract or arrangement of any kind
under which:

	 	7.8.1	 	it acts as agent, distributor or representative of any other person or
under which it is entitled to receive any commission, rebate, allowance or benefit in
return for recommending, supplying or otherwise relating to the supply to any person
of any goods or services supplied by any third party; or
	 
	 	7.8.2	 	the Company or any Subsidiary has appointed any third party its agent,
distributor or representative or pursuant to which the Company or any Subsidiary is
liable to pay or allow to any third party any commission, rebate, allowance or other
benefit in return for recommending, supplying or otherwise in relation to the supply
of goods or services by any of the Companies

	7.9	 	Material Contracts
	 
	 	 	There is attached to clause 7.9 of the Disclosure Letter a true and complete copy of every
material contract under which the Company or any Subsidiary has any continuing or future
obligation. For the purposes of this warranty a contract is material if:

48

 

	 	7.9.1	 	the amount payable to the Company or the applicable Subsidiary pursuant to
its terms exceeds the sum of $500,000 per annum in the case of a contract for the
supply of goods or services by such party; or
	 
	 	7.9.2	 	it is one of the supplier agreements attached to clause 7.9.2 of the
Disclosure Letter; or
	 
	 	7.9.3	 	it is for a term exceeding twelve months or is not capable of being
terminated without payment of compensation by the Company or any Subsidiary on less
than 90 days’ notice; or
	 
	 	7.9.4	 	it materially restricts the conduct of the business of the Company or any
Subsidiary or imposes a material unusual burden on it

	7.10	 	Adverse Matters
	 
	 	 	In respect of any contract the subject of the preceding warranty 7.9:

	 	7.10.1	 	Neither the Company nor any Subsidiary has received any claim or notice or
intimation of intention to claim in respect of the same or to terminate, repudiate,
rescind or disclaim any such contract;
	 
	 	7.10.2	 	neither the Company nor any Subsidiary nor so far as the Warrantor is aware any
other contracting party is in breach or default or considered by the Company to be in
breach or default of any of the same nor, so far as the Warrantor is aware, does any
circumstance exist which with the passing of time or the giving of notice would place
the Company, such Subsidiary or any other contracting party in breach or default;
	 
	 	7.10.3	 	there is no subsisting, or so far as the Warrantor is aware envisaged, contractual
dispute involving the Company or any Subsidiary;
	 
	 	7.10.4	 	no such contract is liable according to its terms to be terminated, varied or
withdrawn by another party as a result of any change in the control, management or
shareholders of the Company or any Subsidiary or otherwise as a consequence of the
Agreement and neither the execution nor the performance of the Agreement will place
the Company or any Subsidiary in breach of any such contract;
	 
	 	7.10.5	 	there is no reason to believe that any of the same may be terminated or varied in a
material respect prior to their normal expiry in accordance with their terms

	7.11	 	Insurance

	 	7.11.1	 	Policies: There is attached to the Disclosure Letter a complete and accurate
schedule of all insurances maintained by the Company or any Subsidiary which are in
force at the date of the Agreement together with a complete and accurate copy of all
such policies

49

 

	 	7.11.2	 	Claims: There is no outstanding claim under any such insurances nor has any event
or occurrence taken place which is or ought to be the subject of any such insurances
	 
	 	7.11.3	 	the Disclosure Letter includes an accurate list of all claims made during the prior
three years under any such insurance policy

	7.12	 	Legal Documents
	 
	 	 	All title deeds, agreements and other documents to which the Company or any Subsidiary is
a party or under which the Company or any Subsidiary derives benefit and all other
documents owned by or which ought to be in the possession of the Company or any such
Subsidiary are in its possession
	 
	7.13	 	Health & Safety
	 
	 	 	The Companies:

	 	7.13.1	 	have established procedures under applicable laws and regulations (including codes
of practice) regarding the health and safety of those who work for or visit the
Companies or are otherwise affected by it and the Companies have consistently applied
and enforced such procedures;
	 
	 	7.13.2	 	have complied with applicable laws and regulations (including codes of practice)
regarding the health and safety of those who work for or visit the Companies or are
otherwise affected by it;
	 
	 	7.13.3	 	have not received and are not aware of any claim that they have failed to comply
with the requirements of any applicable law, regulation or code of practice;
	 
	 	7.13.4	 	have not received any communication of any actual or threatened claim,
investigation or proceeding against the Companies or its officers or employees in
respect of accidents, injuries, disease or other harm to the health and safety of
employees, contractors or others under or as a result of any breach of health and
safety laws, regulations or codes of practice

	7.14	 	Improper Practices
	 
	 	 	Neither the Company nor any Subsidiary has, nor has any officer, employee, agent or
representative of the Companies, directly or indirectly offered, paid, promised to pay or
authorised the payment of any money, benefit or other thing of value to any person who is
an official, officer, agent, employee or representative of any government, government
authority or agency, existing or prospective customer, any holder or candidate for
political office or to any other person in the knowledge that any such payment or
provision would be offered, given or promised directly or indirectly to any such official,
officer, agent, employee or representative, in each case as an inducement or reward for
doing or forbearing to do or for having done or forborne to do anything

50

 

	8.	 	EMPLOYMENT MATTERS
	 
	8.1	 	Employment Particulars
	 
	 	 	The particulars shown in the Schedule of Officers and Employees specifically Disclosed
against Warranty 8.1 of the Disclosure Letter are true and complete in all respects and in
particular correctly show in respect of each employee of the Companies the following
information:

	 	8.1.1	 	personnel reference;
	 
	 	8.1.2	 	age;
	 
	 	8.1.3	 	job title;
	 
	 	8.1.4	 	all remuneration of any kind actually paid on any basis (whether salary,
commission, bonus, incentive or otherwise) and other benefits provided since the
Accounts Date;
	 
	 	8.1.5	 	all remuneration of any kind payable or which may become payable on any
basis (whether salary, commission, bonus, incentive or otherwise) and other benefits
provided or which the Companies are legally or morally bound to pay or provide (now
or at or from some future date);
	 
	 	8.1.6	 	date of commencement of employment or of any previous employment with
which such employment is continuous;
	 
	 	8.1.7	 	notice period required to be given by the Companies and by the employee
respectively for termination of the employment;
	 
	 	8.1.8	 	whether or not a member of a trade union;
	 
	 	8.1.9	 	date of last increase in salary;
	 
	 	8.1.10	 	contractual and actual place of employment

	8.2	 	Termination of Employment
	 
	 	 	In relation to any employee or officer or former employee or former officer of any of the
Companies:

	 	8.2.1	 	neither the Company nor any Subsidiary has in any manner terminated the
office or employment of any individual within six months preceding this Agreement;
	 
	 	8.2.2	 	no employee or officer of any of the Companies is under notice of
termination of his engagement

	8.3	 	Disputes with Employees
	 
	 	 	None of the employees or officers of the Company is in dispute, or so far as the Warrantor
is aware is reasonably expected or likely to be in dispute with the Company regarding his
employment
	 
	8.4	 	Employee Claims
	 
	 	 	No present or former officer or employee of any of the Companies has made or threatened to
make against any of the Companies any claim of any kind, whether for or based upon an

51

 

	 	 	allegation of breach of contract, unfair dismissal, stress, injury or disease, actions of
another officer or employee, harassment, discrimination, breach of statutory duty or
failure to perform any other obligation in law of an employer The Warrantor is not aware
of any actions, events or reasons why any employee (including but not limited to any
person contracted to the Companies) may bring an allegation of breach of contract, unfair
dismissal, stress, injury or disease, actions of another officer or employee, harassment,
discrimination, breach of statutory duty or failure to perform any other obligation
against the Companies

	8.5	 	Incentive Schemes
	 
	 	 	There is attached to the Disclosure Letter a true and complete copy of the rules and all
other material information relating to any (whether written or oral) profit sharing,
bonus, share option or other incentive scheme, arrangement or practice (whether or not
legally binding) (“Incentive Arrangement”) for any officer, employee or consultant of or
to any of the Companies or for any group of such persons (whether or not together with
other persons) and save for the Incentive Arrangements so Disclosed neither the Company
nor any Subsidiary is party to any Incentive Arrangements
	 
	8.6	 	Long-Term Contracts
	 
	 	 	There is not outstanding any contract of service between any of the Companies and any of
their respective officers or employees which is not terminable without compensation (save
statutory compensation) on three months’ notice or less nor any consultancy agreement to
which any of the Companies is a party
	 
	8.7	 	Trade Unions
	 
	 	 	The Company does not recognise any trade union (or association of analogous effect in any
jurisdiction in which it operates) and is not party to any trade union agreement, house
agreement or collective bargaining agreement or other agreement or arrangement (whether
formal or informal legally binding or otherwise) relating in any way to employees or their
terms or conditions of employment or employment matters;
	 
	8.8	 	Industrial Action
	 
	 	 	The Company has not been within the past twelve months involved in and is not presently in
any jurisdiction involved in any industrial or trade dispute or dispute or negotiation
with any trade union or organisation or body of employees and so far as the Warrantor is
aware there are no circumstances which would indicate the likelihood of such industrial or
trade dispute in any jurisdiction

52

 

	9.	 	PENSIONS
	 
	9.1	 	Benefit Obligations
	 
	 	 	Save in relation to any scheme Disclosed (“the Disclosed Schemes”) neither the Company nor
any Subsidiary:

	 	9.1.1	 	is under any commitment (whether legally binding or established by custom)
to make payment of any pension, allowance, lump sums or other like benefit on or
following the death, retirement or disability of any existing or former employee or
director of the Company or any Subsidiary or for the benefit of any dependants of
such persons;
	 
	 	9.1.2	 	is party to any pension, life assurance or retirement benefit scheme
agreement or arrangement of any kind and has maintained and effected, and continues
so to do, its whole obligations in each jurisdiction in which the Companies operate
to provide pension, assurance, retirement and sickness cover policies;
	 
	 	9.1.3	 	has given or made any undertaking or assurance as to the introduction,
continuance, increase or improvement of any pension or other benefit referred to in
this paragraph 9.1;
	 
	 	9.1.4	 	has paid or promised to pay any ex gratia pensions

	9.2	 	Disclosed Schemes
	 
	 	 	In relation to each Disclosed Scheme:

	 	9.2.1	 	Variation of Benefits: No power to increase or vary the benefits to
members under the Disclosed Schemes has been exercised or promised to any existing or
potential beneficiary
	 
	 	9.2.2	 	Membership: The names of the persons who are the current members of each
Disclosed Scheme have been Disclosed and no discretion to admit any further or other
members has been exercised nor have the criteria for eligibility to membership been
altered or varied in any way and full details of the provisions relating to
eligibility for membership have been Disclosed;
	 
	 	9.2.3	 	Death and Disability: All benefits payable under the Disclosed Schemes in
respect of the death or disability of any member during service are fully insured
under policies effected with an insurance company of good repute and standing and
each member of the Disclosed Schemes is fully covered by such insurances at normal
premium rates on normal terms for persons in good health;
	 
	 	9.2.4	 	Unpaid Contributions and Benefits: There are not at the date hereof any
payments to members of, or contributions to, or payments of any levy or tax or duty
payable by, the Disclosed Schemes which have fallen or are accrued due and payable
and are unpaid;

53

 

	9.3	 	Administration
	 
	 	 	Each Disclosed Scheme has in all material respects been operated in accordance with the
trusts, powers and provisions of their governing documentation and with all applicable
legislation and the general requirements of law
	 
	9.4	 	Documentation
	 
	 	 	Full and correct copies of all material deeds, rules and other documentation constituting
or governing the Disclosed Schemes are attached to the Disclosure Letter
	 
	9.5	 	No Litigation or Complaints
	 
	 	 	There is no current or threatened litigation in relation to the Disclosed Schemes, nor any
complaint to any public body in respect of the Disclosed Schemes
	 
	10.	 	TAXATION
	 
	10.1	 	Submission of Returns
	 
	 	 	All necessary information, notices, computations and returns (all of which are true and
accurate and none of which is disputed by the relevant Tax Authority) have been submitted
within the time limits prescribed by law by the Company or any Subsidiary to the relevant
Tax Authority in respect of Tax for all periods up to and including Completion and there
is no reason to suppose that any of such computations and returns will not in due course
be accepted as true and accurate by the relevant Tax Authority
	 
	10.2	 	Submission of Claims
	 
	 	 	The Company and each Subsidiary has duly submitted all claims and disclaimers which have
been assumed to be made for the purposes of the Accounts details of which claims and
disclaimers are Disclosed in clause 10.2 of the Disclosure Letter
	 
	10.3	 	Payment of Tax Due
	 
	 	 	All Tax for which the Company and each Subsidiary is liable and which has fallen due for
payment has been paid
	 
	10.4	 	Penalties and Interest
	 
	 	 	Neither the Company nor any Subsidiary has within the six years prior to Completion paid
or become liable to pay any penalty or interest in excess of $5,000 in respect of any Tax
assessed upon it
	 
	10.5	 	Deduction of Tax
	 
	 	 	All payments made or procured by the Company and each of the Subsidiaries to any person
which ought to have been made under deduction of tax have been so made and (if and to the
extent required by law to do so) the Company and each of the Subsidiaries has duly and
promptly accounted to the Tax Authority for the tax so deducted

54

 

	10.6	 	Back Duty Claims
	 
	 	 	Except for routine inspections, the Company and each of the Subsidiaries has not been
subject to any visit, audit, investigation, discovery or access order by any Tax Authority
	 
	10.7	 	Assets held by the Companies
	 
	 	 	All assets held by the Companies are substantially dedicated to the active trade and
business of the Companies
	 
	10.8	 	Company not a US Controlled Foreign Corporation
	 
	 	 	The Company is not a US Controlled Foreign Corporation as defined by the United States
Internal Revenue Code of 1986 as amended (“the Code”)
	 
	10.9	 	Management and Control
	 
	 	 	The Companies are managed and controlled in their respective country of incorporation and
in no other jurisdiction
	 
	10.10	 	Residence
	 
	 	 	Each of the Companies is a tax resident of the jurisdiction in which it is incorporated
 
	 
	10.11	 	Vendor’s Responsibility for Tax
	 
	 	 	The Vendor is responsible for any and all tax for which it is primarily liable resulting
from the sale of the Shares pursuant to this Agreement
	 
	10.12	 	US Real Property Holding Corporation
	 
	 	 	None of the Companies is considered to be a US Real Property Holding Corporation as that
term is defined in section 879 of the Code
	 
	11.	 	INTELLECTUAL PROPERTY
	 
	11.1	 	Details of Intellectual Property
	 
	 	 	Accurate particulars are set out in Part 1 of Schedule 11 of all registered Intellectual
Property (including applications for such rights) and in Part 2 of Schedule 11 of all
material unregistered Intellectual Property owned, used or held for use by the Company or
the Subsidiaries.
	 
	11.2	 	Licences
	 
	 	 	Accurate particulars are set out in Parts 3 and 4 of Schedule 11 respectively of all
licences, agreements, authorisations and permissions (in whatever form and whether express
or implied) under which:

	 	11.2.1	 	the Company or any of the Subsidiaries uses or exploits Intellectual Property
(other than off the shelf software or open source software that is generally
available for amounts of less than $15,000 per annum) owned by any third party; or

55

 

	 	11.2.2	 	the Company or any of the Subsidiaries has licensed or agreed to license
Intellectual Property to, or otherwise permitted the use of any Intellectual Property
by, any third party.

	11.3	 	Ownership
	 
	 	 	Except as set out in Parts 3 and 4 of Schedule 11 and in the Disclosure Letter, the
relevant specified Subsidiary is the sole legal and beneficial owner of (or applicant for)
the Intellectual Property set out in Parts 1 and 2 of Schedule 11, free from all
Encumbrances.
	 
	11.4	 	Rights Required
	 
	 	 	The Subsidiaries do not require any Intellectual Property other than the Intellectual
Property set out in Schedule 11 in order to carry on their respective activities as at the
Completion Date.
	 
	11.5	 	Validity and enforceability
	 
	 	 	The Intellectual Property set out in Parts 1 and 2 of Schedule 11 are valid, subsisting
and enforceable and nothing has been done or not been done as a result of which any of
them has ceased or might cease to be valid, subsisting or enforceable. In particular all
application and renewal fees and other steps required for the maintenance or protection of
such rights have been paid on time or taken
	 
	11.6	 	Business Name
	 
	 	 	The Company and each of the Subsidiaries does not use for any purpose nor carry on
business under any name other than its full corporate name
	 
	11.7	 	Software
	 
	 	 	In respect of computer software used by the Company and each of the Subsidiaries:

	 	11.7.1	 	save for off the shelf-software or open source software that is generally available
for amounts of less than $15,000 per annum and the software used under the licences
set out in Part 3 of Schedule 11 the Subsidiaries are the beneficial owners of all
copyright and other rights in the same;
	 
	 	11.7.2	 	all software written for the any Subsidiary has been written by its employees and
not by consultants or other persons engaged under contracts for services and no
licence in respect of the same has been granted to any third party, and no such
software has been written for the Company The Disclosure Letter contains a complete
and accurate list of each piece of software which has been developed or created by
the Company or by any of the Subsidiaries (or which may be deemed to have been so
created) which is or which has been made available to the general public.;
	 
	 	11.7.3	 	all confidential information (including know-how and trade secrets) owned or used
by the Company or the Subsidiaries has been kept confidential and has not been
disclosed to third parties (other than parties who have signed written

56

 

	 	 	 	confidentiality undertakings in respect of such confidential information,
details of which are Disclosed and are set out in the Disclosure Letter);

	 	11.7.4	 	there are no claims, challenges, disputes or proceedings, pending or threatened, in
relation to the ownership, validity or use of such rights.

	11.8	 	Omission
	 
	 	 	As far as the Warrantor is aware, nothing is due to be done within 30 days of Completion
the omission of which would jeopardise the maintenance or prosecution of any of the
Intellectual Property owned or used by the Subsidiaries which are registered or the
subject of an application for registration.
	 
	11.9	 	Infringement
	 
	 	 	As far as the Warrantor is aware, there has been no infringement by any third party of any
Intellectual Property nor any third party breach of confidence, passing off or actionable
act of unfair competition in relation to the business or assets of the Companies or any of
the Subsidiaries, and no such infringement, breach of confidence, passing off or
actionable act of unfair competition is current or anticipated.
	 
	11.10	 	Agreement and licences
	 
	 	 	The agreements and licences set out in Part 3 and 4 of Schedule 11:

	 	11.10.1	 	are valid and binding;
	 
	 	11.10.2	 	have not been the subject of any breach or default which is material by the
Company or any Subsidiary or, as far as the Warrantor is aware, by any other party
thereto or of any event which, with the giving of notice or lapse of time, would
constitute a material default;
	 
	 	11.10.3	 	are not the subject of any pending or threatened claim, dispute or proceeding,;
and
	 
	 	11.10.4	 	have, where required, been duly recorded or registered.

	11.11	 	Change of Control
	 
	 	 	A change of control of the Company or any of the Subsidiaries will not result in the
termination of the licences set out in Part 3 and 4 of Schedule 11.
	 
	11.12	 	Infringement and royalties

	 	11.12.1	 	Subject to and on the basis stated in paragraph 11.12.2 of this Schedule, the
manufacture and sale of goods sold by the Companies:

	 	(a)	 	have not infringed and do not infringe the Intellectual
Property Rights of any third party;
	 
	 	(b)	 	have not constituted and do not constitute any breach
of confidence, passing off or actionable act of unfair competition;
	 
	 	(c)	 	have not given and do not give rise to any obligation
to pay any royalty, fee compensation or any other sum whatsoever.

57

 

	 	11.12.2	 	Insofar as the warranty in the preceding paragraph 11.12.1 applies to products and
components which the Companies sourced from third parties and did not originate and
develop themselves, it shall cease to have effect three months after Completion
except in respect of claims received by the Purchaser or the Companies within three
months from Completion

	12.	 	INFORMATION TECHNOLOGY
	 
	12.1	 	Definition
	 
	 	 	In this paragraph “IT System” means all computer hardware (including network and
telecommunications equipment) and software (including associated preparatory materials,
user manuals and other related documentation) owned, used, leased or licensed by or to the
Company or any of the Subsidiaries.
	 
	12.2	 	Owners of IT System
	 
	 	 	The Subsidiaries are the owners of the IT System free from Encumbrances. The Subsidiaries
have obtained all necessary rights from third parties to enable them to make exclusive and
unrestricted use of the IT System.
	 
	12.3	 	Elements of IT System
	 
	 	 	The elements of the IT System:

	 	12.3.1	 	are functioning properly and in accordance with all materially applicable
specifications;
	 
	 	12.3.2	 	are not defective in any material respect and have not been materially defective or
materially failed to function during the last twelve months;
	 
	 	12.3.3	 	have sufficient capacity and performance to meet the current business requirements
of the Subsidiaries;
	 
	 	12.3.4	 	have been satisfactorily and regularly maintained and the IT System has the benefit
of appropriate maintenance and support agreements.

	12.4	 	Disaster Recovery Plan
	 
	 	 	The Subsidiaries have in place a disaster recovery plan which is fully documented and
would enable the business of the Subsidiaries to continue if there were significant damage
to or destruction of some or all of the IT System. A copy of the plan is attached to the
Disclosure Letter.
	 
	12.5	 	Dates
	 
	 	 	The performance and functionality of the IT System (and any other equipment and systems
owned or used by the Subsidiaries which depend on date-programmed control devices) has not
been affected by any changes in dates. In particular:

	 	12.5.1	 	no value for a current date has caused any interruption in operation; and
	 
	 	12.5.2	 	date-based functionality has behaved consistently for all dates.

58

 

	12.6	 	Currencies
	 
	 	 	The IT System is capable of:

	 	12.6.1	 	performing its functions in the euro and the Dollar; and
	 
	 	12.6.2	 	displaying and printing the generally accepted symbols for the euro and the Dollar.

	13.	 	DATA PROTECTION
	 
	 	 	The Company and the Subsidiaries have complied in all respects with the Data Protection
Act 1984 and the Data Protection Act 1998 as applicable to them.
	 
	14.	 	ENVIRONMENTAL MATTERS
	 
	14.1	 	Breach of Legislation
	 
	 	 	Neither the Company nor any Subsidiary has breached or been notified of any breach of any
Environmental Law and so far as the Warrantor is aware there are no circumstances which
would entitle or require any competent authority or any other third party to serve notice
or commence proceedings as a result of any such breach
	 
	14.2	 	Litigation
	 
	 	 	There are no disputes affecting the Companies and no ongoing litigation or claim made by
or against the Companies relating to any Environmental Law
	 
	14.3	 	Hazardous Substances
	 
	 	 	Neither the Company nor any Subsidiary uses, stores, spills, transports or disposes of
hazardous substances
	 
	14.4	 	Authorisations
	 
	 	 	In respect of any process or activity or matter which may require consent, licence or
authority (written or otherwise) pursuant to any Environmental Law:

	 	14.4.1	 	all authorisations to be granted by any competent authority have been obtained;
	 
	 	14.4.2	 	the conditions to which such authorisation is subject have been complied with; and
	 
	 	14.4.3	 	no notice of any breach of such conditions has been received

	14.5	 	Authorisations withdrawn
	 
	 	 	Neither the Company nor any Subsidiary has received any notification of withdrawal of such
authorisation nor is there any circumstance that would entitle or require the competent
authority to withdraw such authorisation

59

 

	15.	 	GENERAL
	 
	 	 	There is no agreement or arrangement pursuant to which the Company or any Subsidiary is or
may become liable to pay to any person any finders fee, commission, brokerage or
professional fees in relation to or by reason of the transaction effected by the Agreement

60

 

SCHEDULE 4

Tax Covenant

	1.	 	INTERPRETATION
	 
	1.1	 	Definitions and Rules of Interpretation
	 
	 	 	The definitions and rules of interpretation in this paragraph apply in this Tax Covenant

	 	 	 
	“Event”

	 	means any event, act, transaction or series of
transactions (including entering into and/or
completion of this Agreement) or omission and without
limitation the receipt or accrual of any income, the
realisation of any gains, any distribution or failure
to distribute, and the acquisition, disposal,
transfer, payment, loan or advance;
	 
	 	 
	“Liability for Tax”

	 	means:
	 
	 	 
	 

	 	(a)     any liability to make a payment or increased
payment of Tax;

	 
	 	 
	 

	 	(b)     any liability to make a payment or increased
payment of Tax which would have arisen but for being
satisfied, avoided or reduced by any Purchaser’s
Relief;

	 
	 	 
	 

	 	(c)     the loss or utilisation of any Purchaser’s Relief
within paragraph (b) of its definition;

	 
	 	 
	 

	 	and in paragraphs 3 (Exclusions), 6 (Over-provisions,
reliefs etc), 7 (Recovery from other persons) and 8
(Conduct of Claims) “Liability for Tax” shall also
mean a Claim under the Tax Warranties;
	 
	 	 
	“Purchaser’s Relief”

	 	means:
	 
	 	 
	 

	 	(a)     any Relief which arises wholly in respect of or
by reference to or in consequence of any period after
Completion or any Event occurring after Completion;
and

	 
	 	 
	 

	 	(b)     any Relief which was treated as an asset in the
Completion Accounts;

	 
	 	 
	“Relief”

	 	means any loss, allowance, exemption, set-off,
deduction, right to repayment or credit or other
relief available in relation to Tax or to the
computation of income, profits or gains for the
purposes of any Tax

61

 

	1.2	 	Status of definitions and rules of interpretation in this Agreement
	 
	 	 	Save as otherwise defined in this Tax Covenant or where the context clearly otherwise
requires, words and expressions defined in this Agreement shall have the same meanings
herein as therein and clause 1 of this Agreement and any other provisions in this
Agreement concerning matters of construction or interpretation shall also apply in this
Tax Covenant
	 
	1.3	 	Further Interpretation
	 
	 	 	In this Tax Covenant:

	 	1.3.1	 	references to income or profits or gains earned, accrued, received or
realised, as the case may be, include income or profits or gains deemed to have been
earned, accrued, received or realised, as the case may be, for the purposes of any
legislation relating to Tax;
	 
	 	1.3.2	 	a reference to the loss of a Relief or of a right to repayment of Tax
includes a reference to any loss, reduction, restriction, withdrawal, nullification
or cancellation of a Relief or right to repayment of Tax;
	 
	 	1.3.3	 	a reference to the utilisation of a Relief or of a right to repayment of
Tax includes a reference to the utilisation or setting-off of a Relief or a right to
repayment of Tax;
	 
	 	1.3.4	 	a reference to income, profits or gains includes receipts, value and any
other criteria used in establishing the incidence of any Tax or measure in
establishing the amount of any Liability for Tax;
	 
	 	1.3.5	 	a reference to any statute, statutory provision or statutory instrument
shall be construed first as a reference to such statute, statutory provision or
statutory instrument as in force at the date of this Tax Covenant and as subsequently
re-enacted or consolidated and second as a reference to any statute, statutory
provision or statutory instrument of which such statute, statutory provision or
statutory instrument is a re-enactment or consolidation;
	 
	 	1.3.6	 	any words or phrases which are not defined in this Tax Covenant or in this
Agreement but which are defined or used in any legislation relating to Tax which is
relevant to the context shall have the same meaning in this Tax Covenant in relation
to that context as it has in the relevant legislation;
	 
	 	1.3.7	 	references to a paragraph or sub-paragraph are, unless otherwise stated,
to a paragraph or sub-paragraph in this Schedule

62

 

	2.	 	COVENANT TO PAY

	 	2.1.1	 	Subject to the following provisions of this Tax Covenant the Warrantor
covenants with the Purchaser to pay to the Purchaser an amount equal to any Liability
for Tax of any of the Companies in consequence of:

	 	(a)	 	any income, profits or gains earned, accrued, received
or realised on or before Completion; or
	 
	 	(b)	 	any Event occurring on or before Completion.

	 	2.1.2	 	The Warrantor covenants with the Purchaser to pay to the Purchaser an
amount equal to any costs or expenses reasonably and properly incurred by any of the
Companies and/or the Purchaser after Completion in connection with any Liability for
Tax for which a successful claim is made under paragraph 2.1.1

	3.	 	EXCLUSIONS
	 
	3.1	 	Specific Exclusions
	 
	 	 	The covenant contained in paragraph 2 shall not apply and the Purchaser shall have no
Claim against the Warrantor under it and the Purchaser shall have no Claim against the
Warrantor under the Tax Warranties to the extent that:

	 	3.1.1	 	provision or reserve in respect of the Liability for Tax in question
(including any provision or reserve made in respect of deferred Tax) is made or
reflected in the Accounts, the Management Accounts or the Completion Accounts or
referred to in the notes thereto or to the extent that payment or discharge of such
Liability for Tax has been taken into account in the Accounts, the Management
Accounts or the Completion Accounts;
	 
	 	3.1.2	 	the Purchaser has been compensated by the Warrantor for breach of any of
the Warranties in respect of the same liability;
	 
	 	3.1.3	 	Reliefs other than Purchaser’s Reliefs are available to set against the
Liability for Tax in question;
	 
	 	3.1.4	 	the Liability for Tax arises or is increased as a result only of any
increase in rates of Tax or any change in law or published practice or any withdrawal
of any published extra-statutory concession by a Tax Authority, being an increase,
withdrawal or change made, in any such case, after Completion with retrospective
effect;
	 
	 	3.1.5	 	such Liability for Tax would not have arisen but for a voluntary act
carried out or effected by any of the Companies or any member of the Purchaser Group
at any time after Completion, other than any such act:-

	 	(a)	 	carried out or effected under a legally binding
commitment created on or before Completion; or

63

 

	 	(b)	 	carried out or effected in the ordinary course of the
business carried on at the time of Completion by the Company or any
relevant Subsidiary;

	 	3.1.6	 	such Liability for Tax arises by reason of a disclaimer or revocation by
any of the Companies or a revision to a claim by any of the Companies after
Completion of the whole or part of any claim for Relief made (whether provisionally
or otherwise) by any of the Companies prior to Completion; or
	 
	 	3.1.7	 	such Liability for Tax arises as a result of any changes after Completion
in the bases, methods or policies of accounting of any of the Companies;
	 
	 	3.1.8	 	a claim arising out of the same circumstances under this Tax Covenant or
the Tax Warranties has been satisfied;
	 
	 	3.1.9	 	such Liability for Tax arises from the cessation of any business of any of
the Companies after Completion;
	 
	 	3.1.10	 	such Liability for Tax would not have arisen or would have been reduced or
eliminated but for a failure or omission on the part of any of the Companies after
Completion to make any claim, election, surrender or disclaimer or to give any notice
or consent or to do any other thing the making or giving or doing of which was taken
into account in preparing the Accounts, the Management Accounts or the Completion
Accounts;
	 
	 	3.1.11	 	such Liability for Tax arises as a result of transactions in the ordinary course of
business of any of the Companies since the Accounts Date;
	 
	 	3.1.12	 	any income, profits, gains or receipts in respect of which such Liability for Tax
arises were earned, accrued or received by any of the Companies but were not
reflected in the Completion Accounts;
	 
	 	3.1.13	 	such Liability for Tax has been or is able to be discharged, or the Purchaser or
the Companies have been otherwise compensated for it, at no cost to the Purchaser or
the Companies;
	 
	 	3.1.14	 	such Liability for Tax comprises stamp duty or stamp duty reserve tax chargeable on
or in respect of this Agreement or on or in respect of any document executed pursuant
to the terms of this Agreement or for the purpose of giving effect to it;
	 
	 	3.1.15	 	such Liability for Tax arises or is increased as a consequence of any failure by
the Purchaser and/or any of the Companies to comply with any of their respective
obligations under this Tax Covenant;
	 
	 	3.1.16	 	such Liability for Tax arises or is increased as a consequence of the Agreement or
any Event or other matter provided for in or effected pursuant to the Agreement

64

 

	3.2	 	Other Limitations
	 
	 	 	The liability of the Warrantor shall be further limited in accordance with the provisions
(to the extent specified therein) of Schedule 5 (Limitations on Claims)
	 
	4.	 	AMOUNT OF LIABILITY FOR TAX
	 
	4.1	 	Determination of Liability
	 
	 	 	The amount of any Liability for Tax shall be determined in accordance with the provisions
of this paragraph 4
	 
	4.2	 	Actual Payments
	 
	 	 	In the case of a Liability for Tax which involves a liability of any of the Companies to
make an actual payment or increased payment of Tax, the amount of the Liability for Tax
shall be the amount of such payment or increased payment
	 
	4.3	 	Purchaser’s Relief
	 
	 	 	In the case of a Liability for Tax which involves a liability of any of the Companies to
make a payment or increased payment of Tax which would have arisen but for being
satisfied, avoided or reduced by the set off of any Purchaser’s Relief against such
Liability for Tax, the amount of the Liability for Tax shall be the amount of Tax which
would have arisen but for such setting off of a Purchaser’s Relief
	 
	4.4	 	Loss of Relief
	 
	 	 	In the case of a Liability for Tax which involves the loss of any Purchaser’s Relief
(other than a right to a repayment of Tax), the amount of the Liability for Tax shall be
the amount of the Purchaser’s Relief lost
	 
	4.5	 	Repayments
	 
	 	 	In the case of a Liability for Tax which involves the loss of a Purchaser’s Relief which
is a right to a repayment of Tax, the amount of the Liability for Tax shall be the amount
of the repayment so lost
	 
	5.	 	TIME FOR PAYMENT
	 
	5.1	 	Due Date
	 
	 	 	The due date for payment of any amount payable by the Warrantor to the Purchaser under
this Tax Covenant shall be determined in accordance with the provisions of this paragraph
5
	 
	5.2	 	Actual Payments
	 
	 	 	In the case of a Liability for Tax which involves a liability of any of the Companies to
make an actual payment or increased payment of Tax, the due date for payment shall be the
later of the third Working Day prior to the date on which the Tax is finally due to the
relevant Taxing Authority (taking into account any postponement of such Tax obtained by

65

 

	 	 	the Company or any relevant Subsidiary) and the date which is seven Working Days after the
Purchaser has served notice on the Warrantor demanding payment

	5.3	 	Reliefs
	 
	 	 	In the case of a Liability for Tax which involves a liability of any of the Companies to
make a payment or increased payment of Tax which would have arisen but for being
satisfied, avoided or reduced by the use by the Company or any relevant Subsidiary of any
Purchaser’s Relief, the due date for payment shall be the later of the third Working Day
prior to the date on which the Tax (if any) (being the Tax which would, but for such
Purchaser’s Relief being utilised against such Liability for Tax, otherwise have been
satisfied, avoided or reduced by such Purchaser’s Relief) would have been payable to the
relevant Tax Authority and the date which is seven Working Days after the Purchaser has
served notice on the Warrantor demanding payment
	 
	5.4	 	Notice
	 
	 	 	In any other case the due date for payment shall be the seventh Working Day after the date
on which the Purchaser demands payment in writing
	 
	5.5	 	Interest
	 
	 	 	If any amount payable by the Warrantor to the Purchaser or any amount payable by the
Purchaser to the Warrantor under this Tax Covenant is not paid on the due date for
payment, then, except and to the extent that the Warrantor’s liability hereunder
compensates the Purchaser for the late payment by virtue of the definition of “Tax”
including interest, the person by whom that sum is payable shall pay to the person to whom
it is payable interest upon it (as well after as before judgment) at that rate which is
two percentage points above the base rate from time to time declared by The Royal Bank of
Scotland plc from the date payment fell due until the date payment is made
	 
	6.	 	OVER-PROVISIONS, RELIEFS ETC
	 
	6.1	 	Over-Provisions
	 
	 	 	If the auditors for the time being of the Company or any relevant Subsidiary shall certify
(at the request and expense of the Warrantor) that any provision for Tax in the Accounts,
the Management Accounts or the Completion Accounts has proved to be an over-provision,
then the amount of such over-provision shall be dealt with in accordance with paragraph
6.3
	 
	6.2	 	Reliefs
	 
	 	 	If the auditors for the time being of the Company or any relevant Subsidiary shall certify
(at the request and expense of the Warrantor) that any Liability for Tax which has
resulted in a payment having been made or becoming due from the Vendor under this Tax
Covenant or the Tax Warranties will give rise to a Relief for any of the Companies which

66

 

	 	 	would not otherwise have arisen, then the amount of that Relief shall be dealt with in
accordance with paragraph 6.3; provided that if the Relief in question is a deduction from
or set off against income, profits or gains the amount to be so dealt with shall be a sum
equal to the amount of Tax that would be saved through the use of that Relief on the basis
of the rates of tax current at the date of the certification made by the auditors under
this paragraph

	6.3	 	The Relevant Amount
	 
	 	 	Where it is provided under paragraph 6.1 or 6.2 that any amount (the “Relevant Amount”) is
to be dealt with in accordance with this paragraph:

	 	6.3.1	 	the Relevant Amount shall first be set off against any payment then due
from the Warrantor under this Tax Covenant or the Tax Warranties; and
	 
	 	6.3.2	 	to the extent there is an excess, a refund shall be made to the Vendor of
any previous payment or payments made by the Warrantor under this Tax Covenant or the
Tax Warranties and not previously refunded under this paragraph up to the amount of
such excess; and
	 
	 	6.3.3	 	to the extent that the excess referred to in sub-paragraph 6.3.2 is not
exhausted under that sub-paragraph, the remainder of that excess shall be carried
forward and set off against any future payment or payments which become due from the
Warrantor under this Tax Covenant or the Tax Warranties

	6.4	 	Auditors Review
	 
	 	 	Where any such certification as is mentioned in paragraph 6.1 or 6.2 has been made, the
Warrantor or the Purchaser may request the auditors for the time being of the Company to
review such certification in the light of all relevant circumstances, including any facts
which have become known only since such certification, and to certify whether such
certification remains correct or whether, in the light of those circumstances, the amount
that was the subject of such certification should be amended
	 
	6.5	 	Adjustment of Relevant Amount
	 
	 	 	If the auditors certify under paragraph 6.4 that an amount previously certified should be
amended, that amended amount shall be substituted for the purposes of paragraph 6.3 as the
Relevant Amount in respect of the certification in question in place of the amount
originally certified, and such adjusting payment (if any) as may be required by virtue of
the above-mentioned substitution shall be made as soon as practicable by the Warrantor or
(as the case may be) to the Warrantor
	 
	6.6	 	Auditors’ Certificate
	 
	 	 	If the Warrantor requests the Company’s auditors give a certificate under or pursuant to
paragraph 6.2 or 6.5, the Purchaser shall procure, so far as it is able, that the
Company’s auditors will not unreasonably withhold or delay the issue of such certificate
and, where

67

 

	 	 	there are no such auditors at the time of such request, the Purchaser shall procure, so
far as it is able, that such certificate is issued by the Company’s auditors immediately
prior to Completion or (if such auditors have ceased to exist) the person practicing in
succession to such auditors or (if there is no such person) a suitable independent person
who shall be appointed by the Purchaser and approved by the Vendor (such approval not to
be unreasonably withheld)

	7.	 	RECOVERY FROM OTHER PERSONS
	 
	 	 	If, in the event of any payment having been made by the Warrantor under paragraph 2 or the
Tax Warranties or in the event of the Warrantor being or becoming liable to make such a
payment, any of the Companies are entitled to recover from any person, including any Tax
Authority but excluding any of the Companies or the Warrantor, any sum in respect of the
Liability for Tax which has resulted in such payment having been made by or becoming due
from the Warrantor, the Purchaser shall procure that the Warrantor is promptly notified of
such entitlement and shall, if so required by the Warrantor and at the Warrantor’s
expense, take all steps which the Warrantor shall reasonably request in writing to enforce
that recovery and the Purchaser shall account to the Warrantor for whichever is the lesser
of:

	 	7.1.1	 	any sum so recovered or recoverable by the Company or any relevant
Subsidiary in respect of such Liability for Tax (but after deducting all costs
(including any additional Taxation), liabilities and expenses incurred by the
Purchaser and/or the Company or any relevant Subsidiary under or pursuant to this
paragraph); and
	 
	 	7.1.2	 	the amount paid or payable by the Warrantor under paragraph 2 or the Tax
Warranties in respect of such Liability for Tax

	8.	 	CONDUCT OF CLAIMS
	 
	8.1	 	Purchaser to notify claims
	 
	 	 	If any member of the Purchaser Group or any of the Companies receives notice of any
assessment, notice or demand (referred to below as a “Tax Claim”) from which it appears
that the Warrantor may have a liability under this Tax Covenant or the Tax Warranties the
Purchaser shall within ten Working Days give written notice thereof to the Warrantor
	 
	8.2	 	Purchaser to take action
	 
	 	 	Subject to the following provisions of this paragraph, the Purchaser will promptly take
(and procure that the Company or any relevant Subsidiary takes) such action as the Vendor
may reasonably request in writing to dispute, avoid, resist, appeal, compromise or defend
the Tax Claim and (without limitation and if the Vendor so requests) shall permit the

68

 

	 	 	Vendor to take over the conduct of the Tax Claim or of any proceedings in connection with
the Claim

	8.3	 	Purchaser at liberty to admit etc
	 
	 	 	The Purchaser or the Company or any relevant Subsidiary shall be at liberty without
reference to the Warrantor to admit, compromise, settle, discharge or otherwise deal with
any Tax Claim on such terms as they shall in their reasonable discretion think fit,
without prejudice to their remedies under this Tax Covenant or the Tax Warranties, after
whichever is the earliest of:

	 	8.3.1	 	the expiry of forty Working Days after the Warrantor has been given notice
of the Tax Claim (which notice shall expressly mention such time limit) in accordance
with paragraph 8.1 if upon the expiry of such period the Purchaser has not received
instructions in writing in respect of the Tax Claim in accordance with paragraph 8.2;
	 
	 	8.3.2	 	the expiry of a period of twenty Working Days following the service of a
bona fide notice (which notice shall expressly mention such time limit) by or on
behalf of the Purchaser on the Warrantor requiring the Warrantor to clarify or
explain the terms of any request made under paragraph 8.2 during which period no such
clarification or explanation has been sent to the Purchaser;
	 
	 	8.3.3	 	the Purchaser being notified in writing by the Warrantor that it considers
that the Tax Claim should no longer be resisted

	8.4	 	Indemnity for costs
	 
	 	 	Notwithstanding paragraph 8.2 neither the Purchaser nor any of the Companies shall be
bound to take any action requested by the Warrantor unless and until the Warrantor has
agreed in writing to indemnify the Purchaser and the Companies against all costs
(including any additional Tax), liabilities and expenses which may be incurred by the
Purchaser and/or the Companies under or pursuant to paragraph 8.2
	 
	9.	 	TAX ON PAYMENTS BY VENDOR OR PURCHASER
	 
	9.1	 	No Deduction
	 
	 	 	Save in respect of interest payable by virtue of paragraph 5.5, all payments by the
Warrantor or the Purchaser under this Tax Covenant shall be made in full without any
deduction or withholding (whether in respect of Tax, set-off, counter claim or otherwise)
unless the deduction or withholding is required by law, in which case the Warrantor or the
Purchaser (as the case may be) shall forthwith pay such additional amount as will ensure
that the Purchaser or the Warrantor (as the case may be) receive a net amount equal to the
full amount which they would have received but for such deduction or withholding

69

 

	9.2	 	Gross-up
	 
	 	 	If any payment (other than a payment of interest pursuant to paragraph 5.5) received by
the Purchaser or the Warrantor under this Tax Covenant is subject to Tax, the Warrantor or
the Purchaser (as the case may be) shall pay to the Purchaser or the Warrantor (as the
case may be) such additional amount (after taking into account any Tax payable in respect
of such additional amount) as will ensure that the Purchaser or the Warrantor (as the case
may be) receive and retain a net amount equal to the full amount which they would have
received and retained had the payment not been subject to Taxation
	 
	10.	 	COUNTER INDEMNITY
	 
	10.1	 	Meaning of “Warrantor”
	 
	 	 	In this paragraph 10 “Warrantor” includes the Trustee, any other person who is at any time
a trustee of the Trust or an officer or employee of any such trustee or is a beneficiary
of the Trust and the covenant in this clause 10 shall be enforceable by each of such
persons
	 
	10.2	 	Purchaser’s Covenant
	 
	 	 	The Purchaser hereby covenants with the Warrantor to pay to the Warrantor an amount equal
to:-

	 	10.2.1	 	any Liability for Tax of the Warrantor by reason of Tax (not being Tax in respect
of which the Warrantor is liable to make a payment under paragraph 2) assessed by a
Tax Authority on any of the Companies for any accounting period beginning before
Completion remaining unpaid; and
	 
	 	10.2.2	 	any costs reasonably and properly incurred by the Warrantor after Completion in
connection with any Liability for Tax for which a successful claim is made under
paragraph 10.2.1

	10.3	 	Provisions of this Schedule to apply in respect of Purchaser’s Covenant
	 
	 	 	Paragraphs 5 (Time for Payment) and 8 (Conduct of Claims) shall apply to this paragraph
mutatis mutandis as if references to the Warrantor were references to the Purchaser and
vice versa
	 
	11.	 	TAX RETURNS
	 
	11.1	 	Preparation of tax returns for periods ended on or before Accounting Date
	 
	 	 	The Warrantor or its duly authorised agent shall prepare the tax returns and computations
of the Companies for all accounting periods ended on or before the Accounts Date to the
extent that the same have not been prepared before Completion, and submit them to the
Purchaser. The costs reasonably and properly incurred of preparing such returns and
computations shall be borne by the Warrantor, save and to the extent that provision for

70

 

	 	 	such costs is made in the Completion Accounts, in which event and to such extent such
costs shall be borne by the Company or any relevant Subsidiary

	11.2	 	Submission of tax returns
	 
	 	 	The Purchaser shall procure that the returns and computations referred to in paragraph
11.1 shall be authorised, signed and submitted to the relevant Tax Authority without
amendment or with such amendments as the Purchaser reasonably considers to be necessary
and shall give the Warrantor or its agent all such assistance as may reasonably be
required to agree those returns and computations with the relevant Tax Authority, provided
that the Purchaser shall not be obliged to take any such action as is mentioned in this
paragraph 11.2 in relation to any return that is not full, true and accurate in all
material respects
	 
	11.3	 	Conduct of matters relating to tax returns
	 
	 	 	The Warrantor or its duly authorised agent shall prepare all documentation and shall have
conduct of all matters (including correspondence) relating to the tax returns and
computations of the Companies for all accounting periods ended on or prior to the Accounts
Date, provided that the Warrantor shall not, without the prior written consent of the
Purchaser (not to be unreasonably withheld or delayed), transmit any communication
(written or otherwise) to the relevant Tax Authority or agree any matter with the relevant
Tax Authority. The reasonable and proper costs of any professional fees in relation to
such matters shall be borne by the Warrantor
	 
	11.4	 	Access to books, accounts etc.
	 
	 	 	The Purchaser shall procure that the Companies afford such access to their books, accounts
and records as is necessary and reasonable to enable the Warrantor or their duly
authorised agent to prepare the corporation tax returns and computations of the Companies
for all accounting periods ended on or before the Accounts Date and conduct matters
relating to them in accordance with this paragraph 11 and the reasonable and proper costs
of any professional fees incurred by any of the Companies under this paragraph 11.4 shall
be borne by the Warrantor
	 
	11.5	 	Accounting period current at Completion
	 
	 	 	The Purchaser or its duly authorised agent shall prepare the tax returns and computation
for the Companies for the accounting period current at Completion and shall send drafts of
such returns and computations to the Vendor or its duly authorised agent for review and
comment prior to submission to the relevant Tax Authority. The Purchaser shall
incorporate into such returns and computations any reasonable comments of the Vendor or
its duly authorised agent prior to such returns and computations being submitted to the
relevant Tax Authority

71

 

	11.6	 	Paragraph 8 (Conduct of Claims) to take precedence
	 
	 	 	For the avoidance of doubt:

	 	11.6.1	 	where any matter relating to Tax gives rise to a Claim, the provisions of paragraph
8 (Conduct of Claims) shall take precedence over the provisions of this paragraph 11;
and
	 
	 	11.6.2	 	the provisions of this paragraph 11 shall not prejudice the rights of the Purchaser
to make a claim under this Tax Covenant in respect of any Liability for Tax

	12.	 	GENERAL
	 
	 	 	Any sum paid by the Warrantor or repaid by the Purchaser hereunder shall (so far as
possible) be by way of an adjustment to the Consideration given by the Purchaser for the
Shares

72

 

SCHEDULE 5

Clause 5.1 : Limitations on Claims

	1.	 	LIMITATION OF LIABILITY
	 
	 	 	In this Schedule any reference to the Trustee or the Vendor includes a reference to the
Warrantor and vice versa.
	 
	1.1	 	Time Limitations
	 
	 	 	The liability of the Warrantor shall terminate as follows:

	 	1.1.1	 	all liability under the Warranties, other than the Tax Warranties, shall
terminate at midnight on the second anniversary of Completion except in respect of
Claims thereunder of which notice is given both to the Warrantor and to the Vendor’s
Representative before that time and, in the case of any Claim of which notice is so
given, such liability shall terminate twelve months from the date upon which notice
of the Claim is so given unless legal proceedings in respect of it are commenced and
served upon the Warrantor within that twelve month period;
	 
	 	1.1.2	 	all liability under the Tax Warranties and the Tax Covenant shall
terminate at midnight on the sixth anniversary of Completion except in respect of
Claims thereunder of which notice is given both to the Warrantor and to the Vendor’s
Representative before that time and, in the case of any Claim of which notice is so
given, such liability shall terminate twelve months from the date upon which notice
of the Claim is so given unless legal proceedings in respect of it are commenced and
served upon the Warrantor within that twelve month period

	1.2	 	Exclusion of Limitation Acts
	 
	 	 	The Warrantor shall not plead the Limitation Act 1980 in respect of any Claims made under
the Tax Warranties or Tax Covenant up to seven years after the Completion Date.
	 
	1.3	 	Minor Claims
	 
	 	 	The Warrantor shall not be liable in respect of any Claim for breach of a Warranty or
under the Tax Covenant unless the amount for which the Warrantor would be liable under
such Claim but for this paragraph 1.3 (disregarding costs) is greater than $10,000.
	 
	1.4	 	Materiality Threshold
	 
	 	 	The Warrantor shall not be liable in respect of any Claim for breach of a Warranty or
under the Tax Covenant unless the aggregate liability of the Warrantor (disregarding this
paragraph 1.4 and disregarding costs) in respect of all such Claims (other than those to
be disregarded under paragraph 1.3 above) exceeds $300,000 in aggregate (in which event
the Warrantor shall be liable for the entire amount and not merely the amount in excess of
$300,000).

73

 

	1.5	 	Maximum Aggregate Liability
	 
	 	 	The aggregate liability of the Warrantor in respect of all Claims for breach of a Warranty
or under the Tax Covenant (including costs) shall in any event not exceed the amount of
the Cash Consideration as finally agreed or determined.
	 
	1.6	 	No Claim for Breach
	 
	 	 	The Purchaser shall not be entitled to make any Claim under the Warranties (not being a
claim under the Tax Warranties) and the Warrantor shall not be liable:

1.6.1 to the extent that the subject matter of that Claim is Disclosed;

	 	1.6.2	 	to the extent that the Claim would not have arisen but for a change in any
law or regulation made after Completion or withdrawal of any published concession or
published change in practice of any Tax Authority after the Effective Time (whether
or not the change purports to be effective retrospectively in whole or in part); or
	 
	 	1.6.3	 	to the extent that the Claim arises as a result of any change in any
accounting principles or practices introduced after Completion; or
	 
	 	1.6.4	 	to the extent that the Claim has been previously satisfied under the Tax
Covenant or by an indemnity claim hereunder; or
	 
	 	1.6.5	 	to the extent that the matter giving rise to the Claim arises from any
voluntary act, transaction or arrangement by or involving any of the Companies or any
member of the Purchaser Group which is:

	 	(a)	 	outside the ordinary course of the business of the
Companies as conducted at the date of this Agreement and which occurs after
Completion; and
	 
	 	(b)	 	not carried out pursuant to any obligation of the
Companies incurred before Completion

	 	1.6.6	 	Without prejudice to whether a matter is Disclosed, it is agreed that the
full content of each document included in the disclosure bundle forming part of the
Disclosure Letter is Disclosed regardless of the language in which it is written and
that it is the responsibility of the Purchaser to obtain any translation that it
considers appropriate and to study and understand the same

	2.	 	MULTIPLE RECOVERY
	 
	2.1	 	Receipts from Third Parties
	 
	 	 	If the Warrantor makes any payment in connection with any Claim under the Warranties (not
being a claim under the Tax Warranties) and any of the Companies or any member of the
Purchaser Group receives any payment (other than from the Warrantor) in connection with
the circumstances giving rise to such Claim in respect of which such payment was

74

 

	 	 	made, the Purchaser shall, once such payment has been received and to the extent only that
retention of the payment made by the Warrantor would leave the Purchaser compensated more
than once for the same loss and extent of loss and thereby constitute multiple recovery,
repay to that Warrantor an amount equal to the lesser of the amount of the payment which
has been so received and the payment made by that Warrantor so as to eliminate any double
recovery.

	2.2	 	Repayment to Warrantor
	 
	 	 	Where the Purchaser recovers from some other person any sum in respect of any matter or
event which gives rise to a Claim under the Warranties (not being a claim under the Tax
Warranties), the sum recovered will reduce the amount of such Claim (and, in the event of
the recovery being delayed until after such Claim has been satisfied by the Warrantor, the
sum recovered will be paid to the Warrantor after deduction of all reasonable costs and
expenses of the recovery) but only to the extent that but for the reduction and repayment
the Purchaser would receive compensation greater than the amount of its loss.
	 
	2.3	 	Satisfaction of Claims
	 
	 	 	Payment of any Claim will to the extent of such payment satisfy and preclude any other
Claim which is capable of being made in respect of the same loss.
	 
	2.4	 	No Double Recovery
	 
	 	 	In no circumstances shall the Purchaser be entitled to recover or obtain compensation more
than once in respect of the same loss.
	 
	2.5	 	Tax Losses
	 
	 	 	No warranty is given that any loss suffered or incurred by any of the Companies will be
available to be set against or allowed as a deduction from any income or gains of any of
the Companies and the Warrantor shall have no liability, under the Warranties or the Tax
Covenant, if any such loss is not so available or allowed.
	 
	3.	 	REDUCTION IN CONSIDERATION
	 
	 	 	Any payment made by the Warrantor in respect of a Claim shall be treated as a reduction in
the Cash Consideration.
	 
	4.	 	GENERAL PROTECTIONS
	 
	4.1	 	Mitigation
	 
	 	 	If it comes to the knowledge of any of the Purchaser Group or the Companies that
circumstances exist which could give rise to a Claim under the Warranties it shall take
all commercially reasonable steps to mitigate the loss which it suffers by reason of those
circumstances.

75

 

	4.2	 	Contingent Liabilities
	 
	 	 	The Warrantor shall have no liability under the Warranties in respect of any matter which
is contingent only until such time as the contingent liability ceases to be contingent and
becomes actual. If a Claim arises in respect of a contingent liability notice of that
Claim must be given within the applicable time limit specified in paragraph 1 of this
Schedule and the Warrantor’s liability in respect of the Claim so notified shall be
limited to so much of the contingent liability as becomes an actual liability before the
second anniversary of that applicable time limit provided that, in the case of a
contingent liability which is a claim by a third party against any of the Companies, if
before that anniversary legal proceedings are commenced against any of the Companies by
the claimant the time period shall be extended from that second anniversary until the
proceedings have been finally disposed of.
	 
	4.3	 	Overriding Effect
	 
	 	 	The provisions of this Schedule apply notwithstanding any other provision to the contrary
of this Agreement or its Schedules and will not cease to have effect in consequence of any
rescission or termination by the Purchaser of any other provisions of this Agreement.
	 
	4.4	 	Conduct of Claims
	 
	 	 	Wherever under this Agreement any of the Purchaser Group or the Companies has reasonable
cause to consider that it has or may have a Claim under the Warranties (not being a claim
under the Tax Warranties) the Purchaser shall procure that:

	 	4.4.1	 	it shall notify the Vendor’s Representative of the same as soon as
reasonably practicable, stating in reasonable detail the nature of the matter the
subject of such Claim, all available material relevant information concerning such
Claim and if practicable the amount claimed;
	 
	 	4.4.2	 	it shall promptly consult with the Vendor’s Representative in respect of
such Claim and shall not admit, compromise, settle or negotiate with any third party
upon any matter which is the subject of the Claim;
	 
	 	4.4.3	 	with respect to such Claims which relate to claims made by a third party,
it shall afford to the Vendor’s Representative the entire conduct of such claim and
all proceedings and negotiations in relation to it and shall cooperate in any such
proceedings; provided that if the Vendor’s Representative does not promptly assume or
if there is any conflict of interest or potential conflict of interest between the
Companies and the Warrantor, then the Companies shall be permitted to procure its own
counsel and to participate in the conduct of such Claim;
	 
	 	4.4.4	 	The Vendor’s Representative shall not make any settlement or compromise of
any such third party claim, or agree to any matter in the conduct of such

76

 

	 	 	 	proceedings which may affect the amount of the liability in connection with such
third party claim without the prior approval of the Purchaser, such approval not
to be unreasonably withheld or delayed and provided always that, in the event of
the Purchaser refusing approval of such settlement or compromise, the Vendor’s
Representative shall have no liability in respect of any claim arising therefrom
in excess of the figure at which it could have settled or compromised the
relevant third party claim;
	 
	 	4.4.5	 	the Purchaser, upon being indemnified against any liability, costs,
claims, losses or expenses (including legal fees) which it might reasonably incur in
respect or as a result of the action taken by the Vendor’s Representative or by
reason of complying with such request, shall provide and procure that the Companies
provide such assistance and information within its possession as the Vendor’s
Representative reasonably requests;
	 
	 	4.4.6	 	the Purchaser shall make or procure to be made available to the Vendor’s
Representative and provide copies of all relevant books of account, records and
correspondence of any of the Companies and permit the Vendor’s Representative and his
advisers and representatives to ascertain or copy any relevant information therein to
the extent relevant to the subject matter of such Claim, except if such access,
disclosure and/or copying is not permitted by law.

	4.5	 	Rights of Subrogation
	 
	 	 	If the Warrantor satisfies any Claim under the Warranties (other than the Tax Warranties)
it shall be entitled to full subrogation to the rights of the relevant one of the
Companies or of the Purchaser against any third party to the extent that the Warrantor has
so satisfied the Claim and the Purchaser shall and shall procure that the relevant member
of the Purchaser Group and the Companies shall co-operate with all reasonable requests of
the Warrantor to assist in collection from the third party provided that the Warrantor
shall reimburse the Purchaser and the Companies against all reasonable out-of-pocket
expenses incurred in complying with any request by them.
	 
	4.6	 	Insurance
	 
	 	 	The following shall apply in respect of insurance:

	 	4.6.1	 	The Purchaser shall procure that for at least two years from Completion,
the Companies maintain insurance at least to cover materially similar risks with not
materially less than the extent of cover as the Companies maintain at the date of
Completion
	 
	 	4.6.2	 	If and to the extent that any matter, fact or circumstance which
constitutes a breach of any of the Warranties is the subject of any insurance cover
which at the relevant time is held by the relevant one of the Companies:

77

 

	 	(a)	 	the Purchaser shall procure that the relevant claim is
duly made to the insurer in accordance with the terms of the policy and is
diligently pursued in good faith (but without obligation to commence legal
proceedings);
	 
	 	(b)	 	if after the Purchaser has expended commercially
reasonable efforts to recover from the insurer the full amount of the loss
associated with the claim under the relevant policy and full recovery is
not obtained, the Purchaser shall consult with the Warrantor in good faith
regarding the same; if after good faith consultation agreement is not
reached regarding the utility of additional efforts to seek recovery from
the insurer the Purchaser may make a claim hereunder ;
	 
	 	(c)	 	the Warrantor shall be liable only for such amount of
the loss suffered by reason of the breach which exceeds the amount
recovered or recoverable under such insurance (or which would have been
recoverable under any policy of insurance had the Purchaser performed its
obligations under paragraph 4.6.1 of this Schedule);
	 
	 	(d)	 	the Purchaser shall permit the Warrantor to pursue the
claim against the insurer in the name and on behalf of the relevant one of
the Companies and paragraphs 2.1, 2.2 and 4.5 shall apply

	4.7	 	Over Provisions
	 
	 	 	If any provision or reserve made or reflected in the Accounts or in the Completion
Accounts is subsequently found to exceed the liability or matter for which it was made,
the amount of such excess shall be set against any liability of the Warrantor in respect
of any Claim under the Warranties (other than the Tax Warranties); and if after the
Warrantor has made any payment in respect of any Claim any such provision or reserve is so
found to be excessive the amount of such excess shall be repaid by the Purchaser to the
Warrantor. A provision or reserve shall be found to be excessive when it is released in
any audited accounts of any of the Companies
	 
	5.	 	TRUSTEE PROVISIONS
	 
	5.1	 	Limitation to Trust Assets
	 
	 	 	Without prejudice to any other limitation on the liability of the Vendor under this
Agreement, the liability of the Vendor in respect of all claims under or in connection
with this Agreement shall extend only to the realisable value, at the date such claim
falls due to be discharged, of the assets comprised in the Trust under the direct control
of the Vendor as trustee of the Trust from time to time.

78

 

	5.2	 	Prohibition on Trust Distributions
	 
	 	 	The Warrantor undertakes that, with the exception of payment of their fees and expenses as
are properly payable out of the assets the subject of the Trust, any taxation for which
the Trust is or becomes liable and except as expressly provided in this paragraph 5 it
will not before the sixth anniversary of Completion pay, transfer, appoint, disburse, lend
or otherwise dispose (whether absolutely or otherwise) in any manner to any person (except
by way of security or pursuant to enforcement of security granted to a third party not
connected with the Warrantor) any part of the assets the subject of the Trust (a
“disposal”) which will result in the value of the remaining assets having a realisable
value immediately following such disposal less than:

	 	5.2.1	 	where the disposal occurs during the first year after Completion, one
hundred per cent of the amount of the Cash Consideration;
	 
	 	5.2.2	 	where the disposal occurs during the second year after Completion, seventy
five per cent of the amount of the Cash Consideration;
	 
	 	5.2.3	 	where the disposal occurs during the third year after Completion, fifty
per cent of the amount of the Cash Consideration;
	 
	 	5.2.4	 	where the disposal occurs after the third year after Completion but before
the sixth anniversary of Completion, thirty per cent of the amount of the Cash
Consideration

	5.3	 	Disposals after Receipt of Claim
	 
	 	 	Notwithstanding the provisions of the preceding paragraph 5.2 the Warrantor shall not at
any time after it has received notice of a Claim and until such Claim has been finally
resolved and any liability in respect of it settled in full, make any disposal of any
assets the subject of the Trust without first setting aside and retaining as part of the
assets of the Trust assets having a realisable value not less than the lesser of the
amount of the Warrantor’s liability in respect of such Claim and the maximum amount for
which the Warrantor could then be held liable having regard to the limitations contained
in this Agreement.
	 
	5.4	 	Permitted Distributions to Beneficiaries
	 
	 	 	Notwithstanding the provisions of the preceding paragraphs 5.2 and 5.3, the Warrantor
shall be entitled to make a distribution of assets the subject of the Trust in favour of a
beneficiary of the Trust if, before such distribution is made, such beneficiary has
entered into a deed of adherence containing a direct covenant and undertaking in favour of
the Purchaser in a form approved by the Purchaser (such approval not to be unreasonably
withheld or delayed) whereby the beneficiary shall agree to observe and be bound by the
provisions of this Agreement on the part of the Warrantor and to accept several liability
in respect of Claims, in each case only to the extent of the lesser of the value of the
assets the subject of the distribution (determined at the date of distribution) and that
proportion of the maximum

79

 

	 	 	liability of the Warrantor under this Agreement immediately prior to the distribution
which is represented by the amount of the distribution and the Warrantor shall be released
from liability in respect of such Claims to the extent of such value.
	 
	5.5	 	Prohibited Acts
	 
	 	 	The Warrantor undertakes that it will not exercise any right or power in respect of the
Trust where the sole primary purpose is to avoid any of its obligations under this
Agreement:

	 	5.5.1	 	to change the proper law of the Trust (as to which the consent of the
Purchaser shall not be unreasonably withheld or delayed);
	 
	 	5.5.2	 	to appoint or to remove a trustee of the Trust unless the requirements of
paragraph 5.6 relating to the execution of a deed of adherence are complied with;
	 
	 	5.5.3	 	to wind up the Trust unless the persons who receive on such winding-up an
amount of the assets of the Trust required at that time to be retained pursuant to
paragraphs 5.2 and 5.3 of this Schedule enter into a deed of adherence undertaking in
respect of that amount of such assets in the terms referred to in paragraph 5.6 of
this Schedule;
	 
	 	5.5.4	 	to act in such a way that it would or might be precluded from exercising
in full all rights which it may have to indemnity or reimbursement from the assets of
the Trust in respect of any liability under this Agreement (including under the Tax
Covenant).

	5.6	 	Obligations in respect of New Trustees
	 
	 	 	The Warrantor undertakes that it will not exercise any right or power which it may have to
appoint any person as a trustee of the Trust (a “New Trustee”) unless the New Trustee
shall prior to the date of the appointment have delivered to the Purchaser:

	 	5.6.1	 	a deed of adherence duly executed by the New Trustee containing a direct
undertaking in favour of the Purchaser to observe and be bound by the provisions of
this Agreement binding on the New Trustee and subject to the provisions of this
Agreement (a “Deed of Adherence”); and
	 
	 	5.6.2	 	(in circumstances where the Trust or the New Trustee is governed by the
laws of any jurisdiction outside England and Wales) a written legal opinion from a
reputable firm of lawyers in the relevant jurisdiction to the effect that the New
Trustee has the requisite power and is duly authorised to execute such Deed of
Adherence and that such Deed of Adherence and the relevant obligations under this
Agreement will be binding on the New Trustee.

	5.7	 	Restriction on Retirement as Trustee
	 
	 	 	The Warrantor undertakes with the Purchaser that it will not retire as a Warrantor without
first procuring that a New Trustee has been appointed and complied with the obligations in
paragraph 5.6 regarding the appointment of New Trustees.

80

 

	5.8	 	Release of Retiring Trustee
	 
	 	 	If the Warrantor retires as a trustee of the Trust in circumstances where the Trust
continues in existence with one or more trustees in office who are bound by this Agreement
(whether as original Parties or by virtue of the execution of a Deed of Adherence), the
retiring trustee shall be released and discharged from all obligations and liabilities
under this Agreement in respect of his capacity as a trustee of the Trust with effect from
the latest of the following dates:

	 	5.8.1	 	the date of his retirement as a trustee; and
	 
	 	5.8.2	 	if he is to be replaced with a New Trustee with effect from his
retirement, the date the New Trustee executes a binding and unconditional Deed of
Adherence.

	5.9	 	Expiry of Obligations
	 
	 	 	The obligations of the Warrantor under this paragraph 5 (to the extent they then remain
outstanding) shall cease on the later of the sixth anniversary of Completion and the date
on which any Claim outstanding on that anniversary has been finally disposed of.
	 
	5.10	 	Actions with Purchaser’s Consent
	 
	 	 	Nothing in this paragraph 5 shall prohibit any action by the Warrantor with the written
consent of the Purchaser, which shall not be unreasonably withheld, delayed or
conditioned.

81

 

SCHEDULE 6

Clause 5.1: Warranties by the Purchaser

	1.	 	PRELIMINARY

	 	1.1.1	 	In this Schedule “the Purchaser” means Mad Catz Interactive, Inc
	 
	 	1.1.2	 	Save as fairly disclosed by the Purchaser to the Trustee by a disclosure
statement in agreed form the Purchaser warrants to and with the Trustee in the terms
of the statements in the remaining paragraphs of this Schedule

	2.	 	WARRANTIES
	 
	2.1	 	Incorporation and Status
	 
	 	 	The Purchaser and each other material operating subsidiary of the Purchaser has been duly
incorporated in and is validly existing under the laws of the place of incorporation
stated in respect of it below, is in good standing and has all requisite corporate power
and authority to own, lease and operate its assets and to carry on its business:

	 	 	 
	Company

	 	Jurisdiction of Incorporation
	 
	 	 
	Mad Catz Interactive. Inc.

	 	Canada
	 
	 	 
	Mad Catz Inc

	 	Delaware
	 
	 	 
	1328158 Ontario Inc

	 	Canada
	 
	 	 
	Mad Catz Europe Limited

	 	England and Wales

	2.2	 	Constitutional Documents
	 
	 	 	The statutes and by-laws of the Purchaser of which a copy has been provided to the
Vendor’s Solicitors is true and complete
	 
	2.3	 	Share Capital
	 
	 	 	The Purchaser has unlimited shares of common stock, no par value, authorized and
54,873,549 shares issued and outstanding as of September 30, 2007
	 
	2.4	 	Entitlement to Issue of Securities
	 
	 	 	Other than outstanding employee stock options which relate to a maximum of 6,500,000
shares of common stock and any notes to be issued hereunder, no person has the right
(whether now or later and whether absolutely or contingently) to call for the issue of any
share or loan capital of the Purchaser and there is no outstanding resolution of the
Purchaser for capitalisation of any sum as shares, debentures or other securities nor has
the Purchaser agreed to pass such a resolution
	 
	2.5	 	Accounts
	 
	 	 	The annual consolidated financial statements of the Purchaser set forth in its most recent
Annual Report on Form 10-K filed with the United States Securities and Exchange Commission
(“SEC”) and the interim consolidated financial statements of the Purchaser

82

 

	 	 	set forth in filings with the SEC since the filing of its most recent Annual Report on
Form 10-K (a) comply in all material respects with the requirements of the United States
Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder by
the SEC, (b) have been prepared in conformity with United States generally accepted
accounting principles, and (c) fairly present in all material respects the financial
condition of the Purchaser as of the dates stated and the results of operations and cash
flows of the Purchaser for the periods then ended in accordance with such practices,
subject in the case of quarterly financial statements, to normal, recurring year-end
adjustments and the absence of all required notes.
	 
	2.6	 	Insolvency

	 	2.6.1	 	Winding-Up: No order has been made or petition presented or resolution
passed for the winding up, dissolution or liquidation of the Purchaser or any of its
subsidiaries; there are no grounds on which any such order or petition could be made
or presented and no such resolution is contemplated by the members or any of them
	 
	 	2.6.2	 	Execution: No distress, execution or other process has been levied on any
assets of the Purchaser or any of its subsidiaries
	 
	 	2.6.3	 	Enforcement of Security: No encumbrancer has taken any step to enforce
its security over any assets of the Purchaser or any of its subsidiaries
	 
	 	2.6.4	 	Protection from Creditors: Neither the Purchaser nor any of its
subsidiaries is the subject of any proceedings or court order for protection from its
creditors

	2.7	 	Title to Assets
	 
	 	 	The Purchaser or a wholly-owned subsidiary of the Purchaser is the legal and beneficial
owner of all assets included in its financial statements referred to in paragraph 2.5 of
this Schedule
	 
	2.8	 	Infringement of Intellectual Property Rights
	 
	 	 	There is no subsisting claim by any person that the Purchaser or any subsidiary of the
Purchaser infringes their intellectual property rights in any way or that the Intellectual
Property Rights of the Purchaser or any of its subsidiaries are not enforceable
	 
	2.9	 	Continuance of Intellectual Property Rights
	 
	 	 	All of the material licences of the Purchaser Group are in full force and effect and no as
far as the Purchaser is aware no discussions are underway to terminate any such material
license agreement prior to its intended expiration in accordance with its terms
	 
	2.10	 	Authorisations and Approvals
	 
	 	 	The Purchaser and its subsidiaries each hold all necessary licences, agreements, consents,
permits, approvals and authorities (whether public or private) to enable it to carry on
its business effectively and without hindrance in the places and in the manner in which
such

83

 

	 	 	business is now carried on; all the same are valid and subsisting and there is no reason
to consider that any of them should be suspended, altered, cancelled or revoked; and the
Purchaser and its subsidiaries has each complied in all material respects with all
conditions of or imposed by the same
	 
	2.11	 	Absence of Legal Proceedings
	 
	 	 	Except as disclosed its in most recent Annual Report on Form 10-K filed with the SEC and
in filings with the SEC since the filing of its most recent Annual Report on Form 10-K,
neither the Purchaser nor its subsidiaries nor any person on its behalf or for whose acts
or defaults it is or may be vicariously liable is involved in any litigation or
arbitration proceedings or proceedings or hearings (whether civil or criminal) before any
court, commission, tribunal, board, investigation, government body or other person; no
such litigation, proceedings or hearings are pending by or are threatened against the
Purchaser and its subsidiaries and so far as the Vendor is aware there are no facts or
matters which might or could give rise to any such
	 
	2.12	 	Public Obligations
	 
	 	 	Neither the Purchaser nor any of its subsidiaries has received any written notice that it
has committed any material breach of or material default under any statute or any
regulation having effect under any statute or any court order, decree or other applicable
law of any country applicable to the Purchaser or any such subsidiary
	 
	2.13	 	Orders and Judgments
	 
	 	 	The Purchaser and its subsidiaries are not subject to any order or judgment of any court,
tribunal or governmental authority or agency and has not been party to any subsisting
undertaking or assurance given to any of the same
	 
	2.14	 	Public body investigations
	 
	 	 	Neither the Purchaser nor any subsidiary of the Purchaser is the subject of any formal
enquiry, investigation, audit or similar activity from any regulatory or public authority
	 
	2.15	 	Payment of Taxes
	 
	 	 	All Tax for which the Purchaser or any subsidiary of the Purchaser is liable and which has
fallen due for payment has been paid
	 
	2.16	 	Purchaser Claim Understanding
	 
	 	 	The Purchaser has not recognised (which the parties agree to require that the executive
officers of the Purchaser have actual substantiated knowledge of the same) any matter as a
breach of the Warranties or as giving rise to a Claim or potential Claim under the Tax
Covenant and in respect of which, in either case, the Purchaser has considered making a
Claim

84

 

	 	 	 	 	 	 	 
	SIGNED BY

	 	 	)	 	 	/s/ Werner Schweiter
	 

	 	 	)	 	 	Werner Schweiter
	for and on behalf of

	 	 	)	 	 	 
	GUYMONT SERVICES SA

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	/s/ Marina Schlegel
	 

	 	 	 	 	 	Marina Schlegel
	 
	 	 	 	 	 	 
	Witness Signature:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Occupation:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED BY

	 	 	)	 	 	/s/ Darren Richardson
	 

	 	 	)	 	 	Darren Richardson
	for and on behalf of MAD

	 	 	)	 	 	 
	CATZ INTERACTIVE, INC.

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 

	 	 	 
	Witness Signature:

	 	/s/ E W Hughes
	 
	 	 
	Name:

	 	Eleri Hughes
	 
	 	 
	Address:

	 	Carmelite
	 

	 	50 Victoria Embankment
	 

	 	Blackfriars
	 

	 	London
	 
	 	 
	Occupation:

	 	Solicitorexv10w2

 

Exhibit 10.2

DATED
20 November 2007

MAD CATZ INTERACTIVE, INC

 

CONSIDERATION LOAN NOTE INSTRUMENT

constituting $14,500,000 7.5% Convertible

Unsecured Loan Notes 2010

 

Ref: RJK/7100540

 

 

INDEX

	 	 	 	 	 
	1. PRELIMINARY
	 	 	1	 
	2. TITLE, AMOUNT AND STATUS
	 	 	1	 
	2.1 Title
	 	 	1	 
	2.2 Nominal and Maximum Amounts
	 	 	2	 
	2.3 Issue and Conditions
	 	 	2	 
	2.4 Status
	 	 	2	 
	2.5 Ranking
	 	 	2	 
	2.6 Consideration to Noteholders
	 	 	2	 
	3. CONDITIONS AND COVENANTS BY THE COMPANY
	 	 	2	 
	4. PRINCIPAL AND INTEREST
	 	 	2	 
	5. VARIATIONS
	 	 	2	 
	6. TRANSFER AND REGISTER
	 	 	3	 
	7. GENERAL
	 	 	3	 
	7.1 Provision of Copies
	 	 	3	 
	7.2 Enforcement
	 	 	3	 
	7.3 Law and Proceedings
	 	 	3	 
	8. THIRD PARTY RIGHTS
	 	 	3	 
	SCHEDULE 1
	 	 	4	 
	Clause 1 : Form of Loan Note Certificate and Conditions
	 	 	4	 
	SCHEDULE TO LOAN NOTE CERTIFICATE
	 	 	5	 
	Conditions
	 	 	5	 
	1. PRELIMINARY
	 	 	5	 
	1.1 Constitution by the Instrument
	 	 	5	 
	1.2 Definitions
	 	 	5	 
	1.3 Acquisition Agreement Definitions
	 	 	8	 
	1.4 Interpretation
	 	 	8	 
	2. AMOUNT, TERMS AND STATUS
	 	 	8	 
	2.1 Amount and Terms
	 	 	8	 
	2.2 Status
	 	 	8	 
	2.3 Public Offers and Quotations
	 	 	9	 
	3. PRINCIPAL AND INTEREST
	 	 	9	 
	3.1 Payment of Principal and Interest
	 	 	9	 
	3.2 Interest Accrual
	 	 	9	 
	3.3 Compounding of Interest
	 	 	9	 
	4. REPAYMENT
	 	 	10	 
	4.1 Repayment Dates and Circumstances
	 	 	10	 
	4.2 Surrender of Certificate(s) upon Redemption
	 	 	10	 
	4.3 Balance Certificate
	 	 	10	 
	4.4 Cancellation of Loan Notes upon Repayment
	 	 	10	 
	4.5 Purchase of Loan Notes
	 	 	10	 

 

 

	 	 	 	 	 
	5. REPAYMENT FOLLOWING SERIOUS EVENT
	 	 	10	 
	5.1 Serious Events
	 	 	10	 
	5.2 Notification
	 	 	12	 
	5.3 Immediate Repayment on Notice
	 	 	12	 
	5.4 Senior Lender Agreement
	 	 	12	 
	6. PAYMENTS
	 	 	12	 
	6.1 Manner of Payment
	 	 	12	 
	6.2 Payments to be on a Business Day
	 	 	12	 
	6.3 Currency
	 	 	12	 
	6.4 Recognition of Owner
	 	 	13	 
	6.5 Deductions and Withholdings
	 	 	13	 
	7. SET-OFF AGAINST ACQUISITION AGREEMENT CLAIMS
	 	 	13	 
	7.1 Relevant Proportion
	 	 	13	 
	7.2 Specific Set-Off and Cancellation
	 	 	13	 
	7.3 Interest
	 	 	14	 
	7.4 Dismissed Claim
	 	 	15	 
	7.5 Claims after the First Maturity Date
	 	 	15	 
	7.6 Set-Off Payment into Escrow
	 	 	15	 
	8. UNDERTAKINGS BY THE COMPANY
	 	 	16	 
	8.1 Undertakings
	 	 	16	 
	8.2 Continuance of Undertakings
	 	 	17	 
	9. CONVERSION RIGHTS
	 	 	17	 
	9.1 Notice of Conversion
	 	 	17	 
	9.2 Issue of Shares upon Conversion
	 	 	18	 
	9.3 Limit upon Share Issue
	 	 	19	 
	9.4 Variation of Capital
	 	 	19	 
	9.5 Share Issue Pre-Emption
	 	 	20	 
	9.6 Change of Control
	 	 	21	 
	10. CERTIFICATES
	 	 	22	 
	10.1 Form and Issue
	 	 	22	 
	10.2 The Conditions
	 	 	22	 
	10.3 Loss of Certificates
	 	 	22	 
	11. TRANSFERS OF LOAN NOTES
	 	 	23	 
	11.1 Restrictions on Transfer
	 	 	23	 
	11.2 Form of Transfers
	 	 	23	 
	11.3 Submission for Registration
	 	 	23	 
	11.4 Transfers by Personal Representatives
	 	 	24	 
	12. REGISTER OF LOAN NOTES
	 	 	24	 
	12.1 Maintenance of Register
	 	 	24	 
	12.2 Notification of Changes
	 	 	24	 
	12.3 Inspection
	 	 	24	 
	13. TITLE TO LOAN NOTES
	 	 	24	 
	13.1 Exclusive Recognition of Registered Holder
	 	 	24	 
	13.2 Death of Sole Registered Holder
	 	 	25	 
	13.3 Death of one of Joint Registered Holders
	 	 	25	 
	14. NOTEHOLDER’S REPRESENTATIVE
	 	 	25	 
	14.1 Appointment
	 	 	25	 

 

 

	 	 	 	 	 
	14.2 Absence of Noteholder’s Representative
	 	 	25	 
	15. NOTICES
	 	 	25	 
	16. LAW AND PROCEEDINGS
	 	 	26	 

 

 

THIS INSTRUMENT is made on 20 November 2007

BY
mad catz interactive, inc
a company incorporated and existing under the laws of Canada with
incorporation number 294869-9 having its registered office at Brookfield Place 181 Bay Street
Suite 2500 Toronto Ontario M5J 2T7 (“the Company”)

WHEREAS

	(A)	 	The Company is party to the Acquisition Agreement which provides for the constitution and
issue of the Loan Notes
	 
	(B)	 	Accordingly, by a resolution of its Board passed on 9 November 2007 the Company has created
$14,500,000 7.5% Convertible Unsecured Loan Notes 2010 to be constituted as hereinafter
provided subject to and with the benefit of the schedules hereto, which form part of this
Instrument

NOW THIS INSTRUMENT WITNESSES that:

	1.	 	PRELIMINARY
	 
	 	 	In this Instrument (including its recitals and schedules):

	 	 	 
	“Conditions”

	 	means the conditions set out in the schedule to the form of loan note
certificate set out in Schedule 1 to this Instrument as the same may be amended,
varied or supplemented in accordance with the provisions of this Instrument and such
Conditions (and a reference to a Condition is to one of such conditions as numbered
in that reference);

	 	 	The provisions of Condition 1 shall have effect throughout this Instrument, including its
Schedules
	 
	2.	 	TITLE, AMOUNT AND STATUS
	 
	2.1	 	Title
	 
	 	 	The Loan Notes shall be known as 7.5% Convertible Unsecured Loan Notes 2010 and shall
constitute a single series

1

 

	2.2	 	Nominal and Maximum Amounts
	 
	 	 	The nominal amount of each Loan Note is multiples of $1,000 and the aggregate maximum
principal nominal amount of the Loan Notes is limited to FOURTEEN MILLION FIVE HUNDRED
THOUSAND DOLLARS ($14,500,000)
	 
	2.3	 	Issue and Conditions
	 
	 	 	The Loan Notes shall be issued in registered form to such persons, in such amounts and on
such terms as to consideration and otherwise as the Board from time to time (pursuant to
the provisions of the Acquisition Agreement) resolves and each outstanding Loan Note shall
be held upon and subject to the Conditions
	 
	2.4	 	Status
	 
	 	 	The Loan Notes for the time being outstanding represent a direct unsecured obligation of
the Company for the payment when due of the principal and interest in respect of them and
for the due performance of all its obligations under or in relation to them
	 
	2.5	 	Ranking
	 
	 	 	The Loan Notes for the time being outstanding shall among themselves rank pari passu
equally and rateably without discrimination or preference as unsecured obligations of the
Company and with all other unsecured indebtedness of the Company except to the extent
provided by law of general application
	 
	2.6	 	Consideration to Noteholders
	 
	 	 	Each Noteholder agrees and acknowledges that such Noteholder has received sufficient and
adequate consideration for the issuance of the Note and the terms and conditions thereof
	 
	3.	 	CONDITIONS AND COVENANTS BY THE COMPANY
	 
	 	 	The Company covenants with the Noteholders and each of them to comply with the terms of
the Notes and to observe and perform the Conditions, which shall be deemed to be
incorporated in this Instrument and shall be binding on the Company and the Noteholders
and all persons claiming through or under them respectively
	 
	4.	 	PRINCIPAL AND INTEREST
	 
	 	 	The Company shall pay to Noteholders in accordance with the Conditions principal and
interest in respect of the Loan Notes respectively held by them
	 
	5.	 	VARIATIONS
	 
	 	 	The Company may from time to time (by deed expressed to be supplemental to this
Instrument) amend any provisions of this Instrument (including the Conditions) if the
amendment is previously agreed in writing by the Noteholders Representative or is fairly

2

 

	 	 	considered, in the opinion of a merchant bank or stockbroker appointed for the purpose by
the Company, not to be materially prejudicial to the holders of outstanding Loan Notes and
to be of a formal, minor or technical nature or to be necessary to correct a manifest
error.

	6.	 	TRANSFER AND REGISTER
	 
	 	 	Noteholders may transfer the Loan Notes from time to time respectively held by them
subject to and in accordance with Condition 11 (but not otherwise) and the Company shall
maintain a register of Noteholders in accordance with Condition 12
	 
	7.	 	GENERAL
	 
	7.1	 	Provision of Copies
	 
	 	 	A copy of this Instrument shall be supplied free of charge to any Noteholder on receipt by
the Company of his written request
	 
	7.2	 	Enforcement
	 
	 	 	This Instrument shall enure for the benefit of every Noteholder, each of whom (subject to
the Conditions) may enforce the same in respect of his holding of Loan Notes
	 
	7.3	 	Law and Proceedings
	 
	 	 	This Instrument, the Conditions, the Schedules and the Loan Notes shall be governed by and
construed in accordance with English Law and the Company and all Noteholders hereby
irrevocably submit to the non-exclusive jurisdiction of the Courts of England
	 
	8.	 	THIRD PARTY RIGHTS
	 
	 	 	Without prejudice to the rights of Noteholders, each of whom shall be entitled to enforce
this Instrument in respect of his holding of Loan Notes, and of the Noteholder’s
Representative, nothing in this Instrument is intended to confer on any person any right
to enforce any term of this Instrument which that person would not have but for the
Contracts (Rights of Third Parties) Act 1999

IN WITNESS this Instrument has been executed and delivered as a Deed by the Company on the date
first above written

3

 

SCHEDULE 1

Clause 1 : Form of Loan Note Certificate and Conditions

Certificate No.          representing $      Nominal Amount of Loan Notes

MAD CATZ INTERACTIVE, INC

A company incorporated in Canada

corporate ID number 294869-9

(“the Company”)

ISSUE OF $14,500,000 7.5% CONVERTIBLE

UNSECURED LOAN NOTES 2010

(“the Loan Notes”)

Issued under the authority of the statutes and by-laws of the Company and pursuant to a Resolution
of the Board of Directors of the Company passed on {               } 2007

THIS IS TO CERTIFY THAT                 of                 is the registered holder of           
US DOLLARS ($     ) nominal amount of the Loan Notes which Loan Notes are constituted by an
Instrument entered into by the Company on {               } 2007 (“the Instrument”) and
are issued with the benefit of and subject to the provisions contained in the Instrument and the
Conditions endorsed on or attached to this certificate (“the Conditions”)

DATED                2007

	 	 	 
	DULY EXECUTED

by MAD CATZ INTERACTIVE, INC

acting by its authorised officer

	 	)

)

)

Name:

Status:

	 	 	 	 	 	 	 
	Notes:

	 	 	(1	)	 	The Company will not register any transfer of
any Loan Notes unless the Certificate or a
suitable indemnity is produced relating to
such Loan Notes. The Certificate or a
suitable indemnity must be surrendered before
any transfer, whether for the whole or any
part of the Loan Notes represented hereby,
can be registered or a new certificate issued
in exchange.
	 
	 	 	 	 	 	 
	 

	 	 	(2	)	 	The Loan Notes are transferable in part in amounts of not less than $1,000
nominal or as a whole, subject to the restrictions on transfer contained in the
Conditions.
	 
	 	 	 	 	 	 
	 

	 	 	(3	)	 	The Loan Notes are not and will not be the subject of any listing, permission to
deal or registration on any investment exchange or with any other authority.
	 
	 	 	 	 	 	 
	 

	 	 	(4	)	 	The Loan Notes shall not be offered to the public for purchase.
	 
	 	 	 	 	 	 
	 

	 	 	(5	)	 	The address of the Transfer Office is 7840 Mission Valley Road Suite 101 San
Diego 92108.
	 
	 	 	 	 	 	 
	 

	 	 	(6	)	 	The Loan Notes are subject to set-off of any Provisional Claims and any
Substantiated Claims as provided in the Conditions and amounts of the Loan Notes the
subject of this Certificate may be cancelled to the extent necessary to satisfy such
Substantiated Claims.
	 
	 	 	 	 	 	 
	 

	 	 	(7	)	 	Accelerated payment of the Loan Notes following the occurrence of a Serious Event
under the Conditions is restricted under the terms of the Senior Lender Agreement (as
those terms are defined in the Conditions)

4

 

SCHEDULE TO LOAN NOTE CERTIFICATE

Conditions

	1.	 	PRELIMINARY
	 
	1.1	 	Constitution by the Instrument
	 
	 	 	The Loan Notes the subject of this certificate have been constituted by an Instrument
executed as a deed by Mad Catz Interactive, Inc dated in mid-November 2007 (“the
Instrument”) and a copy of the Instrument may be obtained from the Company free of charge
upon written request to it at its registered office
	 
	1.2	 	Definitions
	 
	 	 	In the Instrument (including its recitals and schedules) and this Schedule:

	 	 	 
	“the Acquisition Agreement”

	 	means an agreement dated on or about 14 November
2007 and made between Guymont Services SA (1) and the Company (2) providing for the
sale to the Company of the issued share capital of Winkler Atlantic Holdings Limited;
	 
	 	 
	“Board”

	 	means the board of directors for the time being of the Company or a duly appointed
committee thereof;
	 
	 	 
	“Business Day”

	 	means a day on which clearing banks are open for normal business in the
City of London or San Diego, California;
	 
	 	 
	“Change of Control”

	 	means:
	 
	 	 
	 

	 	(i)     a merger or consolidation of the Company with or
into another corporation or any other entity or
the exchange of substantially all of the
outstanding stock of the Company for shares of
another entity or other property in which, after
any such transaction the prior shareholders of the
Company own less than fifty percent (50%) of the
voting shares of the continuing or surviving
entity;

	 
	 	 
	 

	 	(ii)     the sale of all or substantially all of the assets of
the Company;

	 
	 	 
	 

	 	(iii)    any “person” (as used in Section 13(d) and 14(d) of
the Exchange Act) becoming the “beneficial owner”
(as defined in Rule 13(d)-3 under the Exchange
Act) directly or indirectly,

5

 

	 	 	 
	 

	 	of securities of the Company representing more
than fifty percent (50%) of the voting power
of the Company’s then outstanding securities;
or

	 
	 	 
	 

	 	(iv)    during any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board of Directors, and any new
director (other than a director designated by a
person who has entered into an agreement with
Company to effect a Change of Control) whose
election by the Board or nomination for election
by the Company’s stockholders was approved by a
vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at
the beginning of the period or whose election or
nomination for election was previously so
approved, cease for any reason to constitute at
least a majority thereof;

	 
	 	 
	“the Conditions”

	 	means the conditions set out in this Schedule as the same may
be amended, varied or supplemented in accordance with the provisions of the
Instrument (and a reference to a Condition is to one of such conditions as numbered
in that reference);
	 
	 	 
	“Conversion Notice”

	 	means a notice of conversion given or deemed to be given pursuant to
condition 9;
	 
	 	 
	“the Conversion Rate”

	 	means the rate of one share of common stock in the capital
of the Company for every $1.4191 of principal, as such rate is adjusted pursuant to
condition 9.4;
	 
	 	 
	“Conversion Shares”

	 	means, as the context requires, shares of common stock in the capital
of the Company which at the relevant time have been or are to be issued pursuant to
the right of conversion conferred by condition 9;
	 
	 	 
	“Dismissed Claim”

	 	has the meaning ascribed to it by clause 5.4.1 of the Acquisition
Agreement;
	 
	 	 
	“Dollar” and “$”

	 	means US Dollars, the lawful currency of the United States of America;

6

 

	 	 	 
	“Emergency Credit Interest Rate”

	 	means the rate of eleven per cent (11%) per annum;
	 
	 	 
	“First Maturity Date”

	 	means 31 October 2009;
	 
	 	 
	“Instrument”

	 	means this instrument as amended from time to time;
	 
	 	 
	“Interest Rate”

	 	means the rate of seven decimal point five per cent (7.5%) per annum;
	 
	 	 
	“the Loan Notes”

	 	means, as appropriate to the context, the Loan Notes of the
Company constituted by the Instrument or the amount thereof for the time being issued
and outstanding or a specific proportion thereof, or any of the same;
	 
	 	 
	“Material Adverse Effect”

	 	means any event, change, development or occurrence which
specifically relates to the Company that individually or in the aggregate has
resulted in a material adverse effect upon the business, results or operations,
assets, liabilities or financial condition of the Company taken as a whole;
	 
	 	 
	“the Noteholder’s Representative”

	 	means such person as the Noteholders have
appointed to and who at the relevant time holds such position pursuant to condition 14;
	 
	 	 
	“Noteholders”

	 	means the person or several persons whose names are from time to time
entered in the Register as the holder or holders of the Loan Notes;
	 
	 	 
	“Provisional Claim”

	 	has the meaning ascribed to it by clause 5.4.1 of the Acquisition Agreement;
	 
	 	 
	“Register”

	 	means the register of Noteholders kept for the time being by the Company in
accordance with condition 12;
	 
	 	 
	“Second Maturity Date”

	 	means 31 October 2010;
	 
	 	 
	“Senior Lender”

	 	means such financial institution or syndicate of financial institutions as
at the relevant time has loans outstanding to the Company secured by security over
its assets ranking ahead of any other security over its assets; the first Senior
Lender is Wachovia Capital Finance Corporation (Central);
	 
	 	 
	“Senior Lender Agreement”

	 	means that certain Agreement by and between Guymont Services SA
(1), the Company (2) and Wachovia Capital Finance Corporation (Central) (3)

7

 

	 	 	 
	 

	 	dated on or around the date of the Instrument, including any amendment or modification thereto;
	 
	 	 
	“Serious Event”

	 	means an event stated by condition 5.1 to be a serious event;
	 
	 	 
	“Substantiated Claim”

	 	has the meaning ascribed to it by clause 5.4.1 of the Acquisition Agreement

	1.3	 	Acquisition Agreement Definitions
	 
	 	 	Save as otherwise defined in the Instrument or this Schedule, definitions contained in
clause 1.1 of the Acquisition Agreement (except the definition therein contained of “the
Company”) shall have effect in the Instrument and this Schedule unless otherwise stated
	 
	1.4	 	Interpretation
	 
	 	 	In the Instrument (including its recitals and schedules) and this Schedule:

	 	1.4.1	 	each gender includes each other gender, the plural the singular and vice
versa and “person” includes natural and legal persons and unincorporated bodies;
	 
	 	1.4.2	 	the headings to clauses, conditions and paragraphs shall be ignored in
interpretation;
	 
	 	1.4.3	 	references to recitals, clauses, sub-clauses and schedules are to the same
in the Instrument unless otherwise stated and references to Conditions are to the
conditions set out in this Schedule unless otherwise stated;
	 
	 	1.4.4	 	references in the Instrument or this Schedule to documents (including the
Instrument and this Schedule) or any provision of the same shall be construed as a
reference to that document or provision as from time to time amended, supplemented,
varied or replaced (in whole or in part)

	2.	 	AMOUNT, TERMS AND STATUS
	 
	2.1	 	Amount and Terms
	 
	 	 	The aggregate maximum principal nominal amount of the Loan Notes is limited to $14,500,000
and, if resolved to be issued by the Board, will be issued in registrable form in amounts
or multiples of $1,000 nominal in accordance with the provisions of the Instrument and the
Acquisition Agreement, and each outstanding Loan Note shall be held on and subject to the
Conditions
	 
	2.2	 	Status
	 
	 	 	The outstanding Loan Notes rank among themselves pari passu and equally and rateably
without discrimination or preference as an unsecured obligation of the Company and shall
form a single series

8

 

	2.3	 	Public Offers and Quotations
	 
	 	 	No public offer for subscription of the Loan Notes shall be made and the Loan Notes shall
not be capable of being dealt in on any stock exchange or any other investment exchange in
any jurisdiction; accordingly no application shall be made to any such exchange for
permission to deal in or for an official or other quotation in respect of any of the Loan
Notes
	 
	3.	 	PRINCIPAL AND INTEREST
	 
	3.1	 	Payment of Principal and Interest
	 
	 	 	Subject to and in accordance with the Conditions the Company shall pay to the Noteholders
entitled to the same:

	 	3.1.1	 	the principal nominal amount of the Loan Notes or any part of the Loan
Notes as and when the same falls due for payment under the Conditions;
	 
	 	3.1.2	 	upon any repayment or conversion of any amount of the Loan Notes, interest
accrued under the Conditions on the amount so repaid or converted up to and including
the actual date of payment or conversion

	3.2	 	Interest Accrual
	 
	 	 	Subject to the Conditions, until the Loan Notes have been fully repaid, cancelled or
converted pursuant to the Conditions, interest shall accrue from day to day (as well after
as before judgment) on the principal amount of Loan Notes outstanding from time to time as
from their respective dates of issue:

	 	3.2.1	 	for so long as no part of any principal monies or interest is overdue for
payment and no Serious Event has occurred which remains uncured — at a gross rate
equal to the Interest Rate;
	 
	 	3.2.2	 	for so long as any part of any principal monies or interest is overdue for
payment or any Serious Event has occurred which remains uncured — at a gross rate
equal to the Emergency Credit Interest Rate Provided That if within thirty days from
the due date for payment of the principal monies or interest or the occurrence of the
Serious Event the principal monies or interest are paid or the Serious Event is cured
(as the case may be) the rate of interest payable during that period shall be the
Interest Rate payable pursuant to condition 3.2.1 and not the Emergency Credit
Interest Rate pursuant to this condition 3.2.2

	3.3	 	Compounding of Interest
	 
	 	 	Interest accrued hereunder shall compound quarterly at the applicable rate provided by
condition 3.2

9

 

	4.	 	REPAYMENT
	 
	4.1	 	Repayment Dates and Circumstances
	 
	 	 	Subject to these Conditions, the Loan Notes shall be redeemed as follows:

	 	4.1.1	 	Following Serious Event: The Company shall redeem the Loan Notes at par
by payment to the Noteholders if and as so required and permitted by condition 5.3
	 
	 	4.1.2	 	First Maturity Date: Subject to any election to the contrary pursuant to
condition 7.2.2(c) and subject to the statement contained in a Conversion Notice
pursuant to condition 9.1.1, the Company shall repay at par nine twenty-ninths of
every Loan Note then outstanding on the First Maturity Date
	 
	 	4.1.3	 	Second Maturity Date: Subject to any election to the contrary pursuant to
condition 7.2.2(c) and subject to the statement contained in a Conversion Notice
pursuant to condition 9.1.1 the Company shall repay at par twenty twenty-ninths of
every Loan Note then outstanding on the Second Maturity Date

	4.2	 	Surrender of Certificate(s) upon Redemption
	 
	 	 	On or before the date upon which any Loan Notes are to be repaid, the Noteholder shall
deliver to the Company the certificate for the Loan Notes which are to be repaid (or in
the case of a lost certificate an indemnity in respect thereof in terms reasonably
required by the Company)
	 
	4.3	 	Balance Certificate
	 
	 	 	Upon repayment of part only of any Loan Notes comprised in a certificate the Company shall
issue free of charge to the relevant Noteholder a fresh certificate for the balance of
such Loan Notes not so repaid
	 
	4.4	 	Cancellation of Loan Notes upon Repayment
	 
	 	 	All Loan Notes fully repaid by the Company will be cancelled and will not be available for
reissue
	 
	4.5	 	Purchase of Loan Notes
	 
	 	 	The Company may at any time or times purchase any Loan Notes by tender or by private
treaty at any price but any tender shall be available to all Noteholders on the like terms
	 
	5.	 	REPAYMENT FOLLOWING SERIOUS EVENT
	 
	5.1	 	Serious Events
	 
	 	 	Each of the following shall constitute a Serious Event:

	 	5.1.1	 	if the Company fails to make any payment in the manner herein provided of
any principal amount or interest due in respect of the Loan Notes within five
Business Days of its due date for payment; or

	 	5.1.2	 	if the Company makes default in the performance or observance of or
compliance with any of its obligations and/or undertakings contained in this
Instrument (other

10

 

	 	 	 	than obligations relating to the payment of principal or interest) and such
default, if capable of remedy or cure, is not remedied or cured within twenty
Business Days after notice to the Company is given by any Noteholder; or
	 
	 	5.1.3	 	if any indebtedness of the Company in the nature of borrowing, other than
under this Instrument, in excess of $1,000,000 is not paid when due (after allowing
for any applicable grace period) or is declared to be or otherwise becomes due and
payable prior to its specified maturity and is not paid; or
	 
	 	5.1.4	 	if any indebtedness of the Company not in the nature of borrowing and not
to factory suppliers and in an aggregate sum in excess of $1,000,000 is not paid
within thirty days of falling due and is not the subject of any bona fide dispute as
to whether it is due and payable; or
	 
	 	5.1.5	 	if the Company takes or consents to proceedings relating to itself under
any applicable insolvency laws (including for protection from creditors) or enters
into any arrangement, compromise or composition with its creditors generally; or
	 
	 	5.1.6	 	if the Company stops or is unable generally to pay its debts as they come
due; or
	 
	 	5.1.7	 	if the Senior Lender takes any material step to enforce its security over
the Company or any of the assets of the Company; or
	 
	 	5.1.8	 	if any encumbrancer takes any step to enforce its security over the
Company or any of the assets of the Company in respect of indebtedness greater than
$1,000,000;
	 
	 	5.1.9	 	if the Company takes any corporate action or any steps are taken or legal
proceedings are started, in any jurisdiction, for the winding-up, dissolution,
liquidation or similar action unless (in the case only of a petition or application
to a court) such proceedings are discharged within twenty Business Days of their
commencement;
	 
	 	5.1.10	 	if any distress or execution is levied or enforced upon or against the whole or any
material part of the property or undertaking of the Company and is not discharged
within fifteen Business Days of such levy or enforcement; or
	 
	 	5.1.11	 	if anything analogous to or having a substantially similar effect to any of the
events specified in any of the foregoing provisions of this condition 5.1 occurs in
any applicable jurisdiction in relation to the Company; or
	 
	 	5.1.12	 	if any licence, agreement, consent, permit, approval or authorisation (whether
public or private) which is requisite for the Company to carry on its business is
cancelled, revoked or otherwise terminated which substantially impairs the Company’s
ability to continue as a going concern; or
	 
	 	5.1.13	 	if any litigation, arbitration or other proceedings before any court, commission,
tribunal, board, investigation, government body or other person are instituted

11

 

	 	 	 	against the Company which results in a judgement of any court of competent
jurisdiction and substantially impairs the Company’s ability to continue as a
going concern; or

	 	5.1.14	 	if the shares of common stock in the capital of the Company cease to be quoted,
listed or traded on any stock exchange;
	 
	 	5.1.15	 	if any event referred to in the preceding provisions of this clause 5.1 occurs in
relation to any direct or indirect material operating subsidiary of the Company; or
	 
	 	5.1.16	 	if there occurs any Material Adverse Effect upon the Company or any of its material
direct or indirect operating subsidiaries which will or is likely to cause the
Company not to perform and observe its obligations under the Instrument and the
Conditions as they fall due.

	5.2	 	Notification
	 
	 	 	The Company shall notify the Noteholders within five Business Days of its becoming aware
of any Serious Event
	 
	5.3	 	Immediate Repayment on Notice
	 
	 	 	Subject to and only to the extent permitted by the terms of the Senior Lender Agreement or
any successor agreement between the Senior Lender and the Noteholders, the Noteholders
shall be entitled to require repayment of all or any of the Loan Notes at any time during
the continuance of a Serious Event
	 
	5.4	 	Senior Lender Agreement
	 
	 	 	Each Noteholder acknowledges that the right of Noteholders to require repayment of all or
any of the Loan Notes pursuant to condition 5.3 and their right to transfer any of the
Loan Notes is restricted by the terms of the Senior Lender Agreement and each Noteholder
agrees to be bound by such restriction
	 
	6.	 	PAYMENTS
	 
	6.1	 	Manner of Payment
	 
	 	 	All principal monies and interest payable by the Company in respect of the Loan Notes
shall be paid in such manner as each Noteholder may from time to time agree with the
Company and subject to any such agreement shall be paid by bank transfer to such bank
account as the Noteholder (or any of joint Noteholders) may from time to time direct in
writing
	 
	6.2	 	Payments to be on a Business Day
	 
	 	 	Any payment which but for this condition 6.2 would fall due for payment on a day which is
not a Business Day shall instead be due for payment on the next following Business Day
	 
	6.3	 	Currency
	 
	 	 	All payments hereunder shall be in Dollars

12

 

	6.4	 	Recognition of Owner
	 
	 	 	The Company shall recognise and treat each Noteholder as alone entitled to receive and
give effectual discharges for principal and interest payable in respect of those Loan
Notes In the case of joint holders any of them may give an effective receipt and
discharge for principal and interest in respect of the Loan Notes registered in their
joint names The Company shall not be affected by notice of any trust whether express,
implied or constructive to which the Loan Notes or any part of the Loan Notes may be
subject or of any right, title or claim of any person other than the Noteholder to such
Loan Notes
	 
	6.5	 	Deductions and Withholdings
	 
	 	 	Subject to condition 7, the Company shall make any payment of principal and interest which
falls due for payment by it in respect of the Loan Notes without any deduction,
withholding or set-off save those required by law or expressly permitted by the Instrument
or these Conditions and if it makes any deduction, withholding or set-off from any such
payment it shall deliver to the Noteholders, within fourteen days after making the
relevant payment, a certificate as to the gross amount of such payment and the amount of
tax or other sum deducted, withheld or set-off
	 
	7.	 	SET-OFF AGAINST ACQUISITION AGREEMENT CLAIMS
	 
	7.1	 	Relevant Proportion
	 
	 	 	In this condition 7:

	 	 	 
	“Relevant Amount”

	 	means the lower of the Relevant Proportion of $14,500,000 and the
Relevant Proportion of the Substantiated Claim or Provisional Claim to which the
set-off or cancellation under this Condition relates
	 
	 	 
	“Relevant Proportion”

	 	means that proportion of the total $14,500,000 nominal amount of all
the Loan Notes constituted by the Instrument as is represented by the Loan Notes the
subject of the particular certificate

	7.2	 	Specific Set-Off and Cancellation
	 
	 	 	Subject to conditions 7.5 and 7.6 but notwithstanding any other provision of the
Instrument or these Conditions the Company, in accordance with clause 5.4 of the
Acquisition Agreement and by notice to the Noteholder:

	 	7.2.1	 	if there arises a Provisional Claim — shall be entitled to set-off the
Relevant Amount in respect of such Claim against any principal of and accrued unpaid
interest on the Loan Notes held by a Noteholder and the amount so set off, and
interest accrued on such amount, shall not be due for payment unless the relevant
Provisional Claim becomes a Dismissed Claim and then not until the later of the

13

 

	 	 	 	date upon which the relevant Provisional Claim becomes a Dismissed Claim in
accordance with the Acquisition Agreement and the date upon which (but for this
condition 7.2) it would have fallen due for payment under this Instrument;

	 	7.2.2	 	if there arises a Substantiated Claim — upon becoming entitled to do so
under clause 5.4.7 of the Acquisition Agreement, shall be entitled to (and if the
Noteholder by notice to the Company so elects, the Company shall) cancel an amount
outstanding on the Loan Notes held by that Noteholder which equals the Relevant
Amount in respect of that Substantiated Claim and in that event:

	 	(a)	 	if and to the extent so cancelled the Company shall have no
obligation for payment of the amount cancelled or for interest thereon
accrued from the date upon which the Loan Note was issued;
	 
	 	(b)	 	such cancellation shall satisfy a like amount of all
obligations of the Warrantor in respect of the Substantiated Claim to which
the cancellation relates;
	 
	 	(c)	 	such cancellation shall apply to the portion of the Loan
Notes due for redemption on the First Maturity Date or on the Second Maturity
Date as partly one and partly the other, as the Noteholder’s Representative
by notice to the Company shall elect and condition 4.1 shall have effect
accordingly;
	 
	 	(d)	 	the Company shall not be concerned with any arrangement
between the relevant Noteholder and the Warrantor for reimbursement of any
amounts so cancelled or otherwise

	 	 	For the avoidance of doubt, the Noteholders agree to be bound by the determination
under the Acquisition Agreement of what constitutes a Substantiated Claim, a Provisional
Claim and/or a Dismissed Claim
	 
	7.3	 	Interest
	 
	 	 	The following shall apply in respect of interest accruing on amounts set off pursuant to
condition 7.2:

	 	7.3.1	 	all interest accrued and due for payment pursuant to conditions 3.2 and
3.3 on the amount set-off shall be paid as it falls due into the escrow account in
accordance with condition 7.6
	 
	 	7.3.2	 	upon and to the extent of a claim becoming a Substantiated Claim, the
interest accrued and paid into the escrow account shall be paid to the Company to the
extent that it relates to the amount that has become a Substantiated Claim;
	 
	 	7.3.3	 	upon and to the extent of a claim becoming a Dismissed Claim, the interest
accrued and paid into the escrow account shall be paid to the Noteholders to the
extent that it relates to the amount that has become a Dismissed Claim;

14

 

	 	7.3.4	 	all interest earned on amounts held in the escrow account shall be paid to
the Company and the Noteholders in proportion to the amounts respectively released to
them under conditions 7.3.2 and 7.3.3

	7.4	 	Dismissed Claim
	 
	 	 	If a Provisional Claim becomes a Dismissed Claim after the amount set-off in respect of it
has, disregarding condition 7.2, fallen due for payment to the Noteholder under the
Conditions, the Company shall pay the amount of principal and interest so set-off to the
Noteholder within five Business Days from the Provisional Claim becoming a Dismissed Claim
	 
	7.5	 	Claims after the First Maturity Date
	 
	 	 	The Company shall not be entitled to and shall not set-off any claim under the Acquisition
Agreement of which notice has not been given to the Warrantor and to the Vendor’s
Representative in accordance with the Acquisition Agreement on or before the First
Maturity Date
	 
	7.6	 	Set-Off Payment into Escrow
	 
	 	 	If (when or at some time after the Company becomes entitled to exercise its right of
set-off under condition 7.2) any amount of principal or interest (disregarding condition
7.2) is or falls due for payment upon the Loan Notes, the Noteholder’s Representative by
written notice to the Company may require that the following shall have effect and if such
a notice is given the following shall apply as a condition of the Company’s entitlement to
set-off under condition 7.2:

	 	7.6.1	 	such notice shall state the escrow agent nominated by the Noteholder’s
Representative and the bank at which the escrow account is to be held;
	 
	 	7.6.2	 	promptly upon receipt of any such notice the Company shall nominate its
escrow agent and cause it to co-operate fully and promptly with the escrow agent
nominated by the Noteholder’s Representative in establishing the escrow account with
the bank specified in the notice given by the Noteholder’s Representative;
	 
	 	7.6.3	 	if within ten Business Days the Company has not nominated its escrow agent
or if within fifteen Business Days the escrow account has not been established (other
than by reason of conduct of the Noteholder’s Representative or its nominated escrow
agent) the sole escrow agent shall be that nominated by the Noteholder’s
Representative;
	 
	 	7.6.4	 	the escrow account shall be with a prime western bank in London England,
the Channel Islands, Switzerland or New York nominated by the Noteholder’s
Representative;
	 
	 	7.6.5	 	as soon as the escrow account has been set up and thereafter as sums from
time to time become due for payment upon the Loan Notes (disregarding the right of
set-

15

 

	 	 	 	off) the Company shall pay into the escrow account all sums as (disregarding
condition 7.2) are or fall due for payment and which the Company is entitled to
set-off pursuant to condition 7.2 until the relevant Provisional Claim becomes a
Substantiated Claim or a Dismissed Claim (whereupon they shall be dealt with in
accordance with the provisions of this condition 7); any failure to do so within
five Business Days of such payment falling due shall be a Serious Event and the
Company shall thereupon cease to be entitled to exercise the set-off under
condition 7.2

	8.	 	UNDERTAKINGS BY THE COMPANY
	 
	8.1	 	Undertakings
	 
	 	 	The Company undertakes with Noteholders that:

	 	8.1.1	 	it will at the same time as the same are dispatched to shareholders or
otherwise published, send to Noteholders copies of all notices, reports,
announcements and other communications dispatched by the Company to its shareholders;
	 
	 	8.1.2	 	it will send to Noteholders financial statements promptly following filing
with the United States Securities and Exchange Commission;
	 
	 	8.1.3	 	subject to condition 9.3 and 9.5, it will ensure that for so long as the
rights of conversion conferred by condition 9 remain exercisable the Company holds
all necessary consents, approvals and other corporate actions to enable it to issue
shares pursuant to the exercise of such rights of conversion after taking into
account all other subsisting rights to require the Company to issue shares in its
capital (whether conditional or otherwise and whether constituted by option to
subscribe, conversion rights or otherwise);
	 
	 	8.1.4	 	it will pay reasonable out of pocket costs (on production of relevant
receipts and or invoices) following occurrence and during the continuance of a
Serious Event which remains uncured
	 
	 	8.1.5	 	except with the consent of the Noteholder’s Representative (which will not
be unreasonably withheld or delayed) it will not issue any share in the capital of
the Company having in any respect any rights ranking in priority to shares of common
stock which are the subject of the conversion rights conferred by condition 9 or
which have been issued pursuant to exercise of those rights;
	 
	 	8.1.6	 	it will duly observe and perform all its obligations under any agreement
with the Senior Lender which is in force at the relevant time and provides for or
regulates the borrowing of money by the Company and/or any of its subsidiaries;

16

 

	 	8.1.7	 	it will not issue to any person for any form of consideration any
promissory note or obligation of similar kind which has any rights to payment ranking
in priority to the rights conferred by the Loan Notes;
	 
	 	8.1.8	 	it will not without the prior written consent of the Noteholder’s
Representative grant to any person other than (a) its bankers as security for normal
working capital, (b) other lenders to secure funding provided for the purchase of
equipment or (c) licensors in the ordinary course of business any mortgage, charge,
lien, pledge, security or other encumbrance whatsoever over any of the assets of the
Company;
	 
	 	8.1.9	 	it will procure that no material operating subsidiary of the Company does
anything which if it were done by the Company would be a breach of the foregoing
undertakings of this condition 8.1

	8.2	 	Continuance of Undertakings
	 
	 	 	The undertakings by the Company in this condition 8 shall continue to have effect until
the final repayment of all principal and interest owing upon the Loan Notes;
	 
	9.	 	CONVERSION RIGHTS
	 
	9.1	 	Notice of Conversion

	 	9.1.1	 	Subject to condition 9.3, any Noteholder by notice to the Company (a
“Conversion Notice”) may elect to convert all or part of the principal amount of the
Loan Notes specified in that notice into shares of common stock of the Company at the
Conversion Rate; if the Conversion Notice does not relate to all the Loan Notes held
by the Noteholder giving that Conversion Notice it shall state whether the Loan Notes
to be converted are those due for repayment on the First Maturity Date or the Second
Maturity Date and such statement shall have effect for all purposes of the
Conditions; the conversion rights attached to the Loan Notes not specified in the
Conversion Notice shall continue to be exercisable until they expire under the
Conditions
	 
	 	9.1.2	 	Any such notice shall be irrevocable save as otherwise provided in
conditions 9.2.5 and 9.6 and save if there occurs anything which has a Material
Adverse Effect on the Company before the conversion is effected pursuant to condition
9.2
	 
	 	9.1.3	 	Any Conversion Notice shall be accompanied by the certificate for the Loan
Notes to which the Conversion Notice relates
	 
	 	9.1.4	 	Subject to condition 9.3, no Conversion Notice shall be effective if given
after the Second Maturity Date PROVIDED THAT if at the Second Maturity Date any
amount of principal is withheld by the Company or placed in escrow by reason of

17

 

	 	 	 	set-off against a Provisional Claim, the conversion rights shall be postponed
and remain exercisable until the expiration of sixty days from the date upon
which such Provisional Claim becomes a Substantiated Claim or a Dismissed Claim,
as the case may be

	9.2	 	Issue of Shares upon Conversion
	 
	 	 	Subject to condition 9.2.5

	 	9.2.1	 	within ten Business Days from its receipt or deemed receipt of a
Conversion Notice pursuant to conditions 9.1 (or, in the case of a conditional notice
given pursuant to condition 9.6, immediately upon the condition being satisfied) the
Company shall allot and issue to the Noteholder the number of shares of common stock
of the Company which results from application of the Conversion Rate to the nominal
amount of Loan Notes specified in the Conversion Notice, to the nearest whole share,
with fractional amounts of principal being paid by the Company in cash to the
Noteholder; the shares so allotted and issued shall be duly authorised, validly
issued, fully paid and non-assessible and shall be issued in compliance with the
by-laws and other constitutional documents of the Company and in compliance with all
applicable federal and state securities laws;
	 
	 	9.2.2	 	within twenty Business Days from its receipt or deemed receipt of a
Conversion Notice pursuant to conditions 9.1 the Company shall:

	 	(a)	 	cause its transfer agent to issue and send to the
Noteholder a duly executed certificate for the Conversion Shares issued
pursuant to the conversion together with a certificate for any balance of the
Loan Notes included in a certificate lodged with the Conversion Notice which
are not then converted;
	 
	 	(b)	 	pay to the Noteholder the interest accrued under the
Conditions upon the amount converted;

	 	9.2.3	 	as soon as practicable following issue of the Conversion Shares, the
Company shall cause the same to be admitted to the same listing, quotation or trading
as other shares of common stock of the Company on any stock exchange;
	 
	 	9.2.4	 	the Conversion Shares shall rank in all respects rateably with all other
shares of common stock in the capital of the Company save that they shall not rank
for any dividend declared or resolved upon prior to the date of the relevant
Conversion Notice;
	 
	 	9.2.5	 	no conversion of the Notes into common stock of the Company will be
effected until the Personal Information Form referred to in the letter of the Toronto
Stock Exchange dated October 29, 2007 issued in respect of this transaction (the
“Initial PIF”), has been cleared by the Toronto Stock Exchange. Thereafter, and
subject

18

 

	 	 	 	to clearance of the Initial PIF by the Toronto Stock Exchange, if at the date of
the Conversion Notice the shares of common stock of the Company are quoted upon
the Toronto Stock Exchange and it requires to approve a Personal Information
Form in respect of the Noteholder effecting conversion:

	 	(a)	 	conversion shall not be effected until that Personal
Information Form has been approved by the Toronto Stock Exchange;
	 
	 	(b)	 	in that respect, a Personal Information Form may be
submitted or have been submitted at any time and once approved shall be
deemed approved thereafter;
	 
	 	(c)	 	the Company and the converting Noteholder shall act
diligently and in good faith to procure the giving of such approval as soon
as practicable after its submission;
	 
	 	(d)	 	if at the date of the Conversion Notice an approval
required by this condition 9.2.5 has not been granted the converting
Noteholder may withdraw his Conversion Notice at any time before the approval
is granted

	9.3	 	Limit upon Share Issue

	 	9.3.1	 	Notwithstanding the foregoing, the Company shall not be obliged to allot
and issue shares to Noteholders if and to the extent that such issue would cause the
total amount of Conversion Shares issued to Noteholders at the time of the relevant
conversion to represent twenty per cent or more of the total issued common stock of
the Company immediately after such issue and under applicable regulatory requirements
the Company would need the approval of shareholders to such issue;
	 
	 	9.3.2	 	If by reason of the preceding condition 9.3.1 any Loan Notes the subject
of a Conversion Notice are not converted the Conversion Notice shall have effect in
respect of all the Loan Notes subject to the same except those not converted by
reason of condition 9.3.1 and the right of conversion in respect of the unconverted
Loan Notes shall continue in effect and be exercisable at any time prior to the
repayment, redemption or cancellation of such Loan Notes

	9.4	 	Variation of Capital

	 	9.4.1	 	Upon the occurrence of any variation in the share capital of the Company
arising from a reduction of capital or sub-division or consolidation of capital, or
if the common stock of the Company is converted, exchanged or reclassified or in any
way substituted for (including without limitation pursuant to an amalgamation
arrangement or merger), or there occurs any issue of shares by way of capitalisation
of profits or reserves or by way of rights or otherwise, or if there is declared and
paid a stock dividend upon the common stock of the Company —

19

 

	 	 	 	then and in any such event the number of shares of common stock into which Loan
Notes may be converted and/or the Conversion Rate shall be adjusted in such
manner as the Company and the Noteholder’s Representative agree is fair and
reasonable so as to leave the Noteholders in no worse position by reason of the
variation than they were in prior to the variation taking effect;
	 
	 	9.4.2	 	If the Company and the Noteholder’s Representative fail to agree as to
whether any adjustment, or what adjustment, is fair and reasonable the matter shall
be referred to such firm of chartered accountants as the Company and the Noteholder’s
Representative may agree or in default of agreement by an independent firm of
chartered accountants appointed on the application of either of them by the President
for the time being of the Institute of Chartered Accountants in England and Wales
Any such firm of chartered accountants shall determine the matter in their sole
discretion acting as experts not arbitrators and their decision shall be final and
binding on the Company and all Noteholders

	9.5	 	Share Issue Pre-Emption

	 	9.5.1	 	In this condition 9.5:
	 
	 	 	 	“Noteholder Proportion” means that proportion by nominal value of the Loan Note
Entitlement which the Loan Notes held by a particular Noteholder represent of
all the Loan Notes in issue at the date of the Pre-Emption Notice; and

“Loan Note Entitlement” means that proportion of all the shares proposed to be
allotted or issued as referred to in the Pre-Emption Notice which the number of
shares of common stock into which, at the date of the Pre-Emption Notice,
Noteholders would be entitled to convert the Loan Notes pursuant to this
condition 9 represent of all the shares of common stock of the Company then in
issue
	 
	 	9.5.2	 	The following shall apply if, at any time whilst any of the conversion
rights conferred by condition 9 remain exercisable, the Company proposes to allot or
issue for cash any shares of common stock or other shares in the capital of the
Company of any class or having any rights (other than options to purchase shares of
common stock pursuant to equity incentive plans outstanding from time to time):

	 	(a)	 	the Company shall give and not withdraw a notice (“a
Pre-emption Notice”) to each Noteholder stating the number of shares proposed
to be allotted or issued, the subscription price, the class and rights of the
            shares and any other applicable terms of the proposed allotment or issue;
such Pre-emption Notice shall also state the date (being no earlier than
twenty Business Days after the date on which the Pre-emption Notice is given)

20

 

	 	 	 	on or before which any election to take up any of the shares the subject
of the Pre-Emption Notice must be given to the Company;

	 	(b)	 	at any time on or before (but not after) the date stated in
the Pre-Emption Notice pursuant to the preceding paragraph (a) any Noteholder
by written notice to the Company may elect to take up all or any of his
Noteholder Proportion of the shares specified in the Pre-Emption Notice;
	 
	 	(c)	 	the Pre-Emption Notice may specify a date (not being
earlier than twenty Business Days after the date on which the Pre-Emption
Notice is given) on or before which a Noteholder electing to take up all or
any of his Noteholder Proportion of the shares or securities proposed to be
issued must deliver a form of subscription and pay to the Company the
subscription monies for the same and if a Noteholder fails to deliver such
subscription and pay such subscription monies within the time so allowed (or
longer time allowed by the Company) his election to take up the shares shall
lapse;
	 
	 	(d)	 	if a Noteholder elects to take up all or any of the shares
pursuant to condition 9.5.2(b) and complies with condition 9.5.2(c) the
Company shall allot and issue those shares to the Noteholder concurrently
with the issuance of shares in the transaction requiring such notice;
	 
	 	(e)	 	the Company shall not allot or issue for cash any shares on
any terms different to those which have been the subject of a Pre-Emption
Notice given in accordance with this condition 9.5 without giving to the
Noteholders a fresh Pre-Emption Notice on those revised terms in accordance
with this condition 9

	9.6	 	Change of Control
	 
	 	 	In connection with any Change of Control:

	 	9.6.1	 	the Company shall promptly give notice of such event to the Noteholders;
	 
	 	9.6.2	 	the Noteholders may then immediately exercise their right of conversion
pursuant to condition 9; any such exercise may, in the option of the Noteholder, be
either unconditional or conditional upon the transaction taking place within the
timescale stated in the Conversion Notice and if such condition is not satisfied the
Conversion Notice shall be of no effect and conversion shall not be effected;
	 
	 	9.6.3	 	alternatively, if the acquisition is in consideration or partly in
consideration of the issue of shares in the acquiring entity in exchange for shares
in the capital of the Company, the Noteholder may require the Company to do all
things within its power to cause the right of conversion conferred by this condition
9 to be exercisable and have effect in respect of shares in the acquiring entity so
as to

21

 

	 	 	 	give the Noteholder upon conversion (and subject to subsequent adjustment
pursuant to condition 9.4) such number of shares in the capital of the acquiring
entity as such Noteholder would have if it had exercised the right of conversion
conferred by condition 9.1 immediately prior to such acquisition and exchanged
the shares which it thereby acquired for shares in the capital of the acquiring
entity

	10.	 	CERTIFICATES
	 
	10.1	 	Form and Issue
	 
	 	 	The certificates in respect of the Loan Notes shall be executed as a deed of the Company
in the form set out in Schedule 1 to the Instrument Every Noteholder shall be entitled to
receive without payment of any fee one certificate in respect of his entitlement to Loan
Notes and a certificate in respect of any balance of Loan Notes held by him arising from
any partial payment or conversion or any permitted transfer of part of his holding Joint
holders of Loan Notes shall be entitled to receive only one certificate in respect of
their joint holding and that certificate shall be delivered to the joint holder whose name
is shown first in the Company’s register of Noteholders; delivery of the certificate to
such first-named holder shall be sufficient delivery to all
	 
	10.2	 	The Conditions
	 
	 	 	Every certificate shall have attached to it or endorsed on it a copy of the Conditions
The Company shall comply with the terms and provisions of the certificates issued in
respect of the Loan Notes and the Conditions, all of which are deemed to be incorporated
in the Instrument and shall be binding on the Company and the holders of the Loan Notes
and all persons claiming through or under them respectively
	 
	10.3	 	Loss of Certificates
	 
	 	 	If any certificate issued in respect of the Loan Notes shall be worn out or defaced, then
on production of the certificate to the Company it may cancel the same and at the relevant
Noteholder’s request shall issue a new certificate in lieu of that certificate If any
certificate is lost or destroyed then on evidence thereof to the satisfaction of the Board
or in default of evidence on such indemnity as the Board may in their absolute discretion
deem adequate being given, a new certificate in lieu of that certificate shall be given to
the person entitled to such lost or damaged certificate An entry as to the issue of the
new certificate and indemnity (if any) shall be made in the Register forthwith

22

 

	11.	 	TRANSFERS OF LOAN NOTES
	 
	11.1	 	Restrictions on Transfer
	 
	 	 	Subject to the remaining provisions of this condition 11 and subject to the Senior Lender
Agreement, any Noteholder may transfer all or any part of his holding in any of the
following circumstances but shall otherwise not be permitted to transfer all or any part
of the Loan Notes:

	 	11.1.1	 	any Loan Note for the time being held by the trustee of a trust may be transferred
to new trustees of that trust;
	 
	 	11.1.2	 	any Loan Notes for the time being held by the trustees of a trust may be
transferred to any beneficiary of that trust in accordance with the terms of the
trust;
	 
	 	11.1.3	 	any Loan Notes may be transferred to any relative of the Noteholder or to any trust
the principal beneficiaries of which are relatives of the Noteholder; for this
purpose “relative” means spouse, parent, sibling, issue, nephew or niece;
	 
	 	11.1.4	 	upon the death of a Noteholder the Loan Notes then held by him may be registered in
the names of his personal representatives who may hold the same under the terms of
his will or intestacy and may transfer the same to any person to whom the Noteholder,
if alive, would have been permitted to transfer them pursuant to this condition 11.1;
	 
	 	11.1.5	 	any Loan Notes may be transferred to any person with the prior written consent of
the Board (which may grant such consent conditionally or unconditionally or withhold
such consent, as it in good faith considers appropriate in the best interests of the
Company)

	11.2	 	Form of Transfers
	 
	 	 	Any transfer of any part of a holding shall be in an amount not less than $1,000 and any
transfer of the whole or part of a holding shall be effected by an instrument in writing
in any usual or common form or in any other form approved by the Board, save that no
transfer may be made to more than four joint holders Every such instrument of transfer
shall be signed by the transferor and the transferor shall be deemed to remain the owner
of such Loan Notes until the name of the transferee(s) is/are entered in the Register in
respect thereof, which entry the Company shall effect upon production (if relevant) of the
transfer
	 
	11.3	 	Submission for Registration
	 
	 	 	Every instrument of transfer must be left at the registered office of the Company for
registration accompanied by the certificate for the Loan Notes transferred (or in the case
of a lost certificate an indemnity in respect thereof or such other evidence as the Board
may reasonably require to procure the title of the transferor or his right to transfer the
Loan Notes) and the Company shall then register such transfer and enter in the Register
the

23

 

	 	 	transferee as the holder of the Loan Notes transferred All instruments of transfer which
are registered shall be retained by the Company

	11.4	 	Transfers by Personal Representatives
	 
	 	 	A transfer of Loan Notes by the personal representatives of a Noteholder will be as valid
as if they had been a registered Noteholder at the time of the making of the transfer
	 
	12.	 	REGISTER OF LOAN NOTES
	 
	12.1	 	Maintenance of Register
	 
	 	 	A register of the Loan Notes shall be kept by the Company at such place and in such form
as the Board may determine and there shall be entered in such Register:

	 	12.1.1	 	the name and address of each of the holders for the time being of the Loan Notes;
	 
	 	12.1.2	 	the nominal amount of the Loan Notes held by every registered holder;
	 
	 	12.1.3	 	the date on which the name of every such registered holder is entered in respect of
the Loan Notes standing in his name;
	 
	 	12.1.4	 	the serial number of each Certificate issued in respect of the Loan Notes and the
date of the issue of each of the Certificates; and
	 
	 	12.1.5	 	particulars of repayment, transfer and other changes of ownership of the Loan Notes

	12.2	 	Notification of Changes
	 
	 	 	Any change of name or address on the part of any Noteholder shall be notified to the
Company and the Register shall forthwith be altered accordingly
	 
	12.3	 	Inspection
	 
	 	 	The Company shall upon request by any Noteholder inform him of the location and
arrangements for inspection of the Register and the Noteholders or any of them and any
person authorised in writing by any of them may at all reasonable times during office
hours inspect the Register and take copies of and extracts from the Register or any part
thereof at his or their own expense
	 
	13.	 	TITLE TO LOAN NOTES
	 
	13.1	 	Exclusive Recognition of Registered Holder
	 
	 	 	The Company will recognise the registered holder of any Loan Notes as the sole and
absolute owner of those Loan Notes and will not be bound to take notice of or to see to
the execution of any trust whether express, implied or constructive to which any Loan
Notes may be subject The receipt of the registered holder or of any one of joint
registered holders for the interest on or for the moneys payable upon the redemption or
repayment of the Loan Notes shall be a good and valid discharge to the Company
notwithstanding any notice it may have, whether express or otherwise, of the right, title,
interest or claim of any

24

 

	 	 	other person to or in the Loan Notes, interest or monies Except as provided by any
statutory provision or as required by an order of a court of competent jurisdiction, no
notice of any trust whether express, implied or constructive shall be entered on the
Register in respect of any Loan Notes

	13.2	 	Death of Sole Registered Holder
	 
	 	 	The executors or administrators of a deceased holder of Loan Notes (not being one of
several joint holders) shall be the only persons recognised by the Company as having title
to or interest in such Loan Notes and such personal representatives may be registered as
holders of the Loan Note Provided that such personal representatives shall supply to the
Board such evidence as it reasonably requests as evidence of their valid appointment
	 
	13.3	 	Death of one of Joint Registered Holders
	 
	 	 	In case of the death of any of joint holders of Loan Notes the survivors or survivor will
be the only persons or person recognised by the Company as having title to or interest in
such Loan Notes
	 
	14.	 	NOTEHOLDER’S REPRESENTATIVE
	 
	14.1	 	Appointment
	 
	 	 	The holder or holders of a majority in nominal value of the Loan Notes may from time to
time by written notice to the Company appoint any person who is a Noteholder or to whom
Loan Notes may be transferred in compliance with condition 11.1 to be the Noteholder’s
Representative and by similar notice may remove any person previously so appointed and may
appoint any other person so qualified to act under this condition and the person who is
for the time being holding such appointment in compliance with this condition shall be the
Noteholder’s Representative for all purposes of the Instrument and the Conditions
	 
	14.2	 	Absence of Noteholder’s Representative
	 
	 	 	If at any time there is no Noteholder’s Representative appointed pursuant to condition
14.1, the Noteholder’s Representative shall be the holder or holders of a majority in
nominal value of the Loan Notes (or if the Loan Notes are for the time being registered in
the joint names of more than one person, the holder whose name appears first in the
register of Loan Notes)
	 
	15.	 	NOTICES
	 
	 	 	Any notice or other communication hereunder shall be in writing in the English language
and (without prejudice to service in any other manner) shall be validly served:

	 	15.1.1	 	if handed personally to the addressee or to an officer of the addressee (in which
case it shall be deemed served at the time that it is so handed to him); or

25

 

	 	15.1.2	 	if delivered to an authorised address of the addressee (in which case it shall be
deemed served at the time that it is so delivered unless such delivery is not on a
Working Day or is after 5.00pm local time in which case it shall be deemed served at
9.00am local time on the following Working Day); or
	 
	 	15.1.3	 	if sent by facsimile transmission to an authorised address of the addressee — in
which case it shall be deemed to be given on the day when it is transmitted and
confirmation received of a successful transmission unless this is not a Working Day
or is after 5.00pm local time for the addressee, in which event it shall be deemed
served at 9.00am local time on the next following Working Day Provided That any
notice given by facsimile transmission shall be confirmed in writing by notice
delivered in accordance with conditions 15.1.1 or 15.1.2 and given within ten
Business Days of the date of transmission (but so that, if so confirmed, the notice
shall be deemed given at the time of such transmission) and any notice not so
confirmed shall be of no effect

	 	 	and the authorised addresses for the parties are as set out below provided that any party
may by notice hereunder to each other party change its authorised address for service of
notices and such new address shall be substituted for that previously applicable as from
the date such notice of change is given

	 	 	 	For the Company:

	 	•	 	7480 Mission Valley Road, Suite 101
	 
	 	•	 	San Diego, California
	 
	 	•	 	Facsimile Number 619 683 9839 and 619 683 2813
	 
	 	•	 	Marked for the attention of: Chief Executive Officer

	 	 	 	For each Noteholder: his address and communication details last notified by him
to the Company for the purpose of the service of notices in respect of Loan
Notes

	16.	 	LAW AND PROCEEDINGS
	 
	 	 	These Conditions shall be governed by and construed in accordance with English Law and the
Company and all Noteholders hereby irrevocably submit to the non-exclusive jurisdiction of
the Courts of England

26

 

	 	 	 	 	 
	DULY EXECUTED by

	 	 	)	 
	MAD CATZ INTERACTIVE, INC

	 	 	)	 
	acting by its authorised officer

	 	 	)	 

/s/ Stewart Halpern

Name: Stewart Halpern

Status: Chief Financial Officer

27

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}]]