Document:

exv10w1

 

Exhibit 10.1

Dated September 6, 2005

 

NICHOLAS BOYES-HUNTER AND OTHERS

and

MIKOHN GAMING CORPORATION

 

 Share Purchase Agreement

for the sale and purchase of

all the issued share capital of

EndX Group Limited

 

Bird & Bird

90 Fetter Lane

London EC4A 1JP

Tel: 020 7415 6000

Fax: 020 7415 6111

Ref: MJD/MAC/MIKGA.0001

 

 

CONTENTS

	 	 	 	 	 	 	 
	Clause	 	     Heading	 	Page	 
	1.
	 	Definitions and Interpretation	 	 	3	 
	2.
	 	Sale of the Shares	 	 	3	 
	3.
	 	Consideration	 	 	4	 
	4.
	 	Condition Precedent, Covenants up to Completion and Rescission	 	 	5	 
	5.
	 	Documents upon Signature and Completion Requirements	 	 	7	 
	6.
	 	Warranties	 	 	9	 
	7.
	 	Indemnities	 	 	10	 
	8.
	 	Tax Covenant	 	 	11	 
	9.
	 	Further Assurance, Release of Guarantees and Indemnities	 	 	11	 
	10.
	 	Protective Covenants	 	 	12	 
	11.
	 	Confidentiality	 	 	12	 
	12.
	 	Announcements	 	 	14	 
	13.
	 	Payments	 	 	15	 
	14.
	 	Costs	 	 	16	 
	15.
	 	Constitution of this Agreement	 	 	16	 
	16.
	 	Rights	 	 	17	 
	17.
	 	Liabilities	 	 	17	 
	18.
	 	Successors and Assigns	 	 	18	 
	19.
	 	Illegality	 	 	19	 
	20.
	 	Notices	 	 	19	 
	21.
	 	Guarantee	 	 	20	 
	22.
	 	Ancillary Matters	 	 	20	 
	23.
	 	Governing law and Jurisdiction	 	 	20	 
	24.
	 	Exclusivity	 	 	21	 
	Schedule 1 Definitions and Interpretations	 	 	22	 
	Schedule 2	 	 	32	 
	The Sellers, their Shareholdings and Consideration	 	 	32	 
	Schedule 3	 	 	33	 
	Part 1 - Particulars of the Company	 	 	33	 
	Part 2 - Particulars of the Subsidiaries	 	 	34	 
	Schedule 4	 	 	36	 
	The Warranties	 	 	36	 
	Schedule 5	 	 	82	 
	Net Debt Adjustment Post Completion	 	 	82	 
	Schedule 6	 	 	84	 
	Covenants up to Completion	 	 	84	 
	Schedule 7	 	 	87	 
	Completion Obligations	 	 	87	 
	Schedule 8	 	 	92	 
	Limitations on Liabilities under the Warranties etc	 	 	92	 
	Part A – General	 	 	92	 
	Schedule 9	 	 	97	 
	Indemnities	 	 	97	 
	Schedule 10	 	 	99	 
	Retention	 	 	99	 
	Schedule 11	 	 	102	 

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	Clause	 	     Heading	 	Page	 
	Protective Covenants	 	 	102	 
	Schedule 12	 	 	106	 
	Addresses for Notices	 	 	106	 
	Schedule 13	 	 	107	 
	Deposit Account / Return of Deposit	 	 	107	 
	Schedule 14	 	 	108	 
	Tax Covenant	 	 	 	 

Documents in agreed terms:-

Deposit Letter

Disclosure Letter

Deed of Guarantee

Deed of Adherence

Escrow letter

Bank instruction letters

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THIS AGREEMENT dated September 6, 2005 is made

BETWEEN

	(1)	 	The persons whose names and addresses are shown in column (1) of Schedule 2 (each a “Seller” and together the “Sellers”); and
	 
	(2)	 	MIKOHN GAMING CORPORATION d/b/a Progressive Gaming International Corporation, a Corporation
incorporated in Nevada, USA with registration number C3599-1986 (the “Purchaser” or for the
purposes of clause 21 “PGIC”)

BACKGROUND

	(A)	 	End X Group Limited (the “Company”) is identified by the particulars set out in Part 1 of Schedule 3.
	 
	(B)	 	The Sellers are the registered holders and the beneficial owners or are otherwise able to
procure the transfer of the numbers of shares in the Company set opposite their respective
names in column (2) of Schedule 2 (the “Shares”) and such shares
together will at Completion comprise all the issued and allotted shares in the capital of the
Company. All those Shares in issue at the date of this Agreement have been issued fully paid
or credited as fully paid and all the Shares will either before or on Completion be issued
fully paid or credited as fully paid.
	 
	(C)	 	The Company is the beneficial owner of the entire issued share capital of each of the
companies, particulars of which are set out in Part 2 of Schedule 3.
	 
	(D)	 	The Sellers wish to sell and, in reliance upon (inter alia) the warranties and undertakings
set out in this Agreement, the Purchaser wishes to purchase all the issued share capital of
the Company on the terms and subject to the conditions set out in this Agreement.

OPERATIVE PROVISIONS

	1.	 	DEFINITIONS AND INTERPRETATION
	 
	 	 	The definitions and rules of interpretation set out in Schedule 1 shall have effect.
	 
	2.	 	SALE OF THE SHARES
	 
	2.1	 	Sale and Purchase
	 
	 	 	Each of the Sellers shall sell with full title guarantee those of the Shares set out
opposite his name in Schedule 2 and the Purchaser relying on the
warranties, covenants and undertakings of and indemnities by the Sellers set out in this
Agreement shall purchase the Shares on the terms of this Agreement free from all claims,
liens, charges encumbrances and equities and together with all rights attaching or accruing
to them.

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	2.2	 	Condition Precedent
	 
	 	 	The obligations under Clause 2.1 are subject to the satisfaction or, where permitted,
waiver of the Condition provided for under Clause 4.1.
	 
	2.3	 	Right to Sell
	 
	 	 	Each of the Sellers covenants with the Purchaser that he has or will at Completion have the
right to sell and transfer the full legal and beneficial interest in the Shares set out
opposite his name in Schedule 2 to the Purchaser on the terms set out in this Agreement.
	 
	2.4	 	Waiver of Pre-emption Rights
	 
	 	 	Each of the Sellers hereby waives any rights of pre-emption conferred upon him by the
Articles of Association of the Company or in any other way in respect of the Shares.
	 
	2.5	 	Purchase of all but not some only
	 
	 	 	The Purchaser shall not be obliged to complete the purchase of any of the Shares unless:

	 	(i)	 	the purchase of all the Shares is completed simultaneously in accordance with
this Agreement;
	 
	 	(ii)	 	the Shares at Completion comprise all the issued and allotted shares in the
capital of the Company;
	 
	 	(iii)	 	there exists no other rights in the share capital of the Company.

	3.	 	CONSIDERATION
	 
	3.1	 	Consideration
	 
	 	 	The consideration for the sale of the Shares shall be the sum of USD27,000,000 as adjusted
pursuant to clause 3.3.4 (“the Consideration”) payable in cash as follows:

	 	3.1.1	 	USD23,000,000 in cash plus or minus the Draft Net Debt on Completion;
	 
	 	3.1.2	 	USD2,000,000 in cash shall be payable by the Purchaser to the Sellers upon
exchange of this Agreement in accordance with the provisions of clause 3.2 (Deposit);
and
	 
	 	3.1.3	 	USD2,000,000 shall be treated in accordance with the provisions of Schedule 10 (Retention ).

	3.2	 	Deposit

	 	3.2.1	 	The Deposit paid in accordance with Clause 3.1.2 above shall be payable in
cash on execution of this Agreement to the client account of

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	 	 	 	the Sellers Solicitors. If the Purchaser completes the purchase of the Shares in
accordance with the terms of this Agreement the Deposit shall be deemed to have
been paid to the Sellers on account of the Consideration.
	 
	 	3.2.2	 	The provisions of Schedule 13 shall apply in relation to the Deposit.

	3.3	 	Calculation and Payment of the Net Debt

	 	3.3.1	 	The Sellers shall (following agreement between Stuart Payne and the
Purchaser’s Chief Financial Officer both acting reasonably) no less than five business
days prior to Completion prepare and deliver to the Purchaser an estimated calculation
(the “Draft Net Debt”) of the Net Debt at Completion.

	 	3.3.1.1	 	if the Draft Net Debt is a positive sum then the sum of US$23,000,000
referred to in clause 3.1.1 shall be increased by the Draft Net Debt;
	 
	 	3.3.1.2	 	if the Draft Net Debt is a negative sum then the sum of US$23,000,000
referred to in clause 3.1.1 shall be decreased by the Draft Net Debt.

	 	3.3.2	 	The Purchaser shall on Completion procure repayment by the Companies of the
amount owing by the Company pursuant to the Facility and the Loans at Completion and
for that purpose the Purchaser shall, at Completion, first pay to the Company the
aforesaid amounts outstanding under the Loans and the Facility.
	 
	 	3.3.3	 	As soon as practical following Completion and in any event within 12
business days the Sellers shall prepare and deliver to the Purchaser a statement of
the Net Debt at Completion (the “Completion Net Debt Statement”).
	 
	 	3.3.4	 	Following Completion the provisions of Schedule 5 shall take effect in
relation to any adjustment required to the Draft Net Debt and the Consideration.

	3.4	 	Apportionment
	 
	 	 	The Sellers shall be entitled to each tranche of the Consideration including the Deposit in
the proportions shown in column (3) of Schedule 2.
	 
	4.	 	CONDITION PRECEDENT, COVENANTS UP TO COMPLETION AND RESCISSION
	 
	4.1	 	Condition Precedent

	 	(a)	 	The obligations of the Purchaser to complete the purchase of the Shares is
subject to the condition precedent (“Condition”) that either:

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	 	(i)	 	the Office of Fair Trading (“OFT”) indicates in writing , in
terms reasonably satisfactory to the Purchaser, that it is not the intention
of the OFT to refer the Acquisition to the Competition Commission;

	 	 	 	OR

	 	(ii)	 	if the matter is referred to the Competition Commission the
Competition Commission giving clearance to the Acquisition in terms reasonably
satisfactory to the Purchaser;

	 	 	 	either of such indications being hereinafter described as “Clearance”.

	4.2	 	Application to Office of Fair Trading
	 
	 	 	The Purchaser shall submit a Merger Clearance Application to the OFT as soon as practicable
following the date of this Agreement.
	 
	4.3	 	Waiver
	 
	 	 	The Purchaser may elect to waive the Condition by written notice to the Sellers.
	 
	4.4	 	Procuring Satisfaction

	 	(a)	 	The parties will, in preparing the Merger Clearance
Application, use their best commercial endeavours to procure the
satisfaction of the Condition, and shall in any event use all reasonable
commercial endeavours to procure satisfaction of the Condition as soon as
practicable and in all instances they shall act reasonably. The Purchaser
shall be responsible for all fees payable to the OFT or any other relevant
regulatory body for the purposes of obtaining Clearance.
	 
	 	(b)	 	The Purchaser shall at all times keep the Sellers fully
and promptly informed as to the progress in obtaining Clearance, shall
consult with the Sellers in relation to the strategy to be adopted in
seeking Clearance and shall submit all proposed further submissions to the
OFT to the Sellers for approval. The Sellers shall at all times give all
assistance reasonably requested by the Purchaser for the purpose of
obtaining Clearance.
	 
	 	(c)	 	In the event that the Competition Commission or the OFT
(as the case may be) reaches or otherwise indicates to the Purchaser a
decision that is on terms not reasonably satisfactory to the Purchaser the
Purchaser shall inform the Sellers of that fact within 5 business days of
that decision and the provisions of clause 4.6 shall apply.

	4.5	 	Notification

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	 	 	If, at any time, any of the Sellers or the Purchaser becomes aware of a fact or
circumstance that might prevent the Condition being satisfied, it shall immediately inform
the other party.
	 
	4.6	 	Deadline for Satisfaction
	 
	 	 	If Clearance has not been obtained by 31 March 2006 and the Purchaser has not waived the
Condition by that date, then save where the parties otherwise agree in writing the
provisions of Schedule 13 shall take effect in relation to the Deposit and, other than
Clauses 3.2.2 (Deposit), 11 (Confidentiality) and 12 (Announcements) and Schedule 13
(Deposit) which shall continue in full effect, this Agreement shall thereupon lapse and be
deemed void and of no effect without any of the parties being liable to any other party in
any way whatsoever except for breaches of Clauses 3.2.2, 4.4, 11 and 12 and Schedule 13
and, to the extent necessary, provisions concerning interpretation and enforcement of those
Clauses in the remainder of this Agreement shall also have effect.
	 
	4.7	 	Sellers’ Pre-Completion Covenants
	 
	 	 	The Sellers hereby covenant with the Purchaser that except with the prior written consent
of the Purchaser they will comply with the requirements of Schedule 6 in the period to Completion.
	 
	5.	 	DOCUMENTS UPON SIGNATURE AND COMPLETION REQUIREMENTS
	 
	5.1	 	Documents upon Signature
	 
	 	 	Immediately after exchange of this Agreement the Sellers shall deliver to the Purchaser:

	 	(a)	 	the Disclosure Letter duly signed by the Sellers; and
	 
	 	(b)	 	the Deposit Letter duly signed by the Sellers’
Solicitors.

	5.2	 	Time for Completion
	 
	 	 	If the Condition is satisfied, or where applicable, waived, Completion shall take place at
a meeting commencing at 1600 hours on the Completion Date or such other time as the parties
may agree at the offices of the Sellers’ Solicitors (or such other place as the parties may
agree) when the parties shall undertake the matters specified in Schedule 7.
	 
	5.3	 	Sellers’ Completion Obligations
	 
	 	 	At Completion the Sellers shall comply with the requirements of Part 1 of Schedule 7.
	 
	5.4	 	Purchaser’s PIGC Completion Obligations

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	 	5.4.1	 	At Completion the Purchaser shall comply with the requirements of Part 2 of Schedule 7.
	 
	 	5.4.2	 	At Completion PGIC shall comply with the requirements of Part 3 of Schedule
7 if required pursuant to the provisions of clause 21.

	5.5	 	Consequences of Sellers’ Default
	 
	 	 	If any of the provisions of Part 1 of Schedule 7 is not complied with by the Sellers on the
Completion Date, the Purchaser shall not be obliged to complete this Agreement and may (in
addition and without prejudice to all other rights or remedies available to it):

	 	(a)	 	defer Completion to a date not more than 28 days after
the Completion Date (and so that the provisions of this Clause 5.5 shall
apply to Completion as so deferred);
	 
	 	(b)	 	proceed to Completion so far as practicable and without
prejudice to its rights under this Agreement;
	 
	 	(c)	 	waive all or any of the requirements contained in Part
1 of Schedule 7 at its discretion; or
	 
	 	(d)	 	if the non-compliance is either:-

	 	(i)	 	a failure to fully comply with
paragraph 1(a) in respect of 100% of the Shares or with
paragraph 4(b) (in each case of Part 1 of Schedule 7); or
	 
	 	(ii)	 	a failure to otherwise comply
with any provision of Part 1 of Schedule 7 which results
directly or indirectly in the Purchaser failing to become the
legal and beneficial owner of 100% of the Shares or which
results in any non-fulfilment of the provisions of Clause 2.1
(Sale and Purchase) and clause 2.5 (purchase of all but not
some only) in respect of 100% of the Shares;

	 	 	 	then pursuant to this clause 5.5(d) the Purchaser may rescind this
Agreement without prejudice to its rights and remedies under this
Agreement.

	5.6	 	Seller’s failure at Completion
	 
	 	 	If the Purchaser rescinds the Agreement in accordance with Clause 5.5(d) the full amount of
the Deposit (together with interest) shall immediately be returned to the Purchaser in
accordance with the provisions of Schedule 13,this Agreement (with the exception of
Schedule 13 and this clause) shall thereupon be terminated but save in respect of any
antecedent breaches, and any provisions concerning interpretation and enforcement of those
clauses.

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	6.	 	WARRANTIES
	 
	6.1	 	Warranties
	 
	 	 	The Sellers hereby severally warrant and undertake to the Purchaser in terms of the
Warranties.
	 
	6.2	 	Reliance
	 
	 	 	The Seller acknowledges and accepts that the Purchaser is entering into this Agreement in
reliance on each Warranty.
	 
	6.3	 	Disclosure
	 
	 	 	The Warranties are given subject to matters fairly disclosed in this Agreement and in the
Disclosure Letter.
	 
	6.4	 	Knowledge not to prevent claim
	 
	 	 	No knowledge (actual, constructive or imputed) other than specifically disclosed in the
Disclosure Letter shall prevent or limit a claim made by the Purchaser for breach of Clause
6.1. Subject to the provisions of clause 6.3 and the Purchaser’s warranties contained in
paragraph 2 of Part B of Schedule 8, the Sellers shall not invoke the Purchaser’s knowledge
(actual, constructive or imputed) of a fact or circumstance which might make a Warranty
untrue, inaccurate or misleading as a defence to a claim for breach of Clause 6.1. This
clause shall apply whether that knowledge was obtained as a result of an investigation made
by or on behalf of the Purchaser into the Company.
	 
	6.5	 	Construction of Warranties
	 
	 	 	Each of the Warranties set out in the several paragraphs of Schedule 4 is separate and
independent and, except as expressly provided to the contrary in this Agreement, is not
limited:

	 	(a)	 	by reference to any other paragraphs of Schedule 4; or
	 
	 	(b)	 	by anything in this agreement.

	6.6	 	Waiver of Rights
	 
	 	 	Each of the Sellers agrees with the Purchaser to waive any rights or claims which such
Seller may have in respect of any misrepresentation, inaccuracy or omission in, or from,
any information or advice supplied or given by any of the Companies or its directors or
employees on which the Sellers may have relied in connection with the giving of the
Warranties and the preparation of the Disclosure Letter , but so that this shall not
preclude any Seller from claiming against any other Seller under any express or implied
right of contribution or indemnity to which he may be entitled.

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	6.7	 	Non-discharge of Warranties
	 
	 	 	Subject to the provisions of paragraph 20 of Part A of Schedule 8, none of the Warranties
or the Tax Covenant shall be deemed in any way modified or discharged by reason of
Completion and accordingly none of those matters shall prejudice any claim which the
Purchaser shall be entitled to bring or shall operate to reduce any amount recoverable by
or through the Purchaser under this Agreement.
	 
	6.8	 	Reduction in Consideration
	 
	 	 	Any payment made by the Sellers for any breach of the Warranties or a liability under the
Tax Covenant shall be deemed to be a reduction in the Consideration.
	 
	6.9	 	No claim for Misrepresentation
	 
	 	 	Each party irrevocably waives any right it may have to claim rescission for any
misrepresentation whether or not contained in this Agreement unless such misrepresentations
or warranty was made fraudulently.
	 
	6.10	 	The Purchaser acknowledges and agrees that the Sellers make no representation or warranty as
to the accuracy of the financial forecasts or projections that relate to the period after the
date hereof and which have been provided to the Purchaser (in whatever form) prior to the
date of this Agreement or in the Disclosure Letter.
	 
	6.11	 	Sellers’ Protections
	 
	 	 	The provisions of Schedule 8 shall have effect so as to limit the
liability of the Sellers in respect of the Warranties (save for warranties A1 and A5, which
shall be excluded from the application of Schedule 8).
	 
	6.12	 	Retention
	 
	 	 	Schedule 10 shall have effect in relation to a retention from the Consideration towards
satisfaction of any claims in respect of the Warranties, the Indemnities and / or the Tax
Covenant. The retention amount shall not limit or affect in any way the Limitations on
Liabilities provisions set out in Schedule 8.
	 
	7.	 	INDEMNITIES
	 
	 	 	The Sellers undertake to the Purchaser (for itself and for the Companies as Third Parties)
to indemnify and keep the Purchaser and the Companies indemnified from and against and in
respect of all actions, proceedings, losses, fines, penalties, damages, liabilities,
claims, costs and expenses (including without limitation all legal fees and expenses
properly and reasonably incurred) which may be suffered or incurred by any of them
arising directly or indirectly out of or in connection with the Indemnified Matters as
provided in Schedule 9 which shall have effect accordingly.

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	8.	 	TAX COVENANT
	 
	 	 	The provisions of Schedule 14 (“the Tax Covenant”) shall have effect in respect of a
covenant in relation to the taxation of the Companies.
	 
	9.	 	FURTHER ASSURANCE, RELEASE OF GUARANTEES AND INDEMNITIES
	 
	9.1	 	Further Assurance
	 
	 	 	The Sellers covenant with the Purchaser that:

	 	(a)	 	on or after Completion the Sellers will (with any cost and expense to be
shared equally between the Sellers and the Purchaser) execute and do (or procure to be
executed and done by any necessary party) all such deeds, documents, acts and things
as the Purchaser may from time to time reasonably require in order to vest any of the
Shares in the Purchaser or otherwise as may be necessary to give full effect to this
Agreement, but excluding payment of stamp duty;
	 
	 	(b)	 	in relation to each of the Companies the Sellers shall procure to the extent
that they have the power to do so either as a shareholder of the Company or otherwise,
the convening of all meetings, the giving of all waivers and consents and the passing
of all resolutions as are necessary under the Companies Acts, its articles of
association or any agreement or obligations affecting it to give the Purchaser the
benefit of the provisions of this Agreement which the Sellers have agreed to give the
Purchaser under this Agreement;
	 
	 	(c)	 	for so long after Completion as a Seller remains the registered holder of any
of the Shares each of the Sellers will hold them and any distributions, property and
rights deriving from them in trust for the Purchaser and will deal with the Shares and
any distributions, property and rights deriving from them as the Purchaser directs and
will on request by the Purchaser, if he has not already done so, execute an instrument
of proxy or other document which enables the Purchaser or its representative to attend
and vote at any meeting of the Company in his place.

	9.2	 	Release of Guarantees
	 
	 	 	The Sellers agree that they shall procure on or before Completion that each of the
Companies is released from all guarantees and indemnities given by them other than the
Excluded Guarantees, and the Sellers hereby undertake with the Purchaser (for itself and as
trustee for each of the Companies as Third Parties) (without prejudice to any right of
subrogation that might otherwise apply) to indemnify and hold harmless the Purchaser and
the Companies in respect of all liabilities, costs, claims and expenses arising out of any
such guarantee or indemnity that ought to have been released as required by this paragraph,
but is not so released.

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	9.3	 	Services and Information
	 
	 	 	The Sellers covenant with the Purchaser that for a period of six months following
Completion, upon request by the Purchaser from time to time, and to the extent not already
required to do so pursuant to any terms of engagement or consultancy with the Companies,
they shall as soon as reasonably practicable make available to the Purchaser such
information relating to the business and affairs of the Companies as the Purchaser may
reasonably require, subject to the Purchaser paying any reasonable costs or expenses of any
such Seller requested to do so.
	 
	10.	 	PROTECTIVE COVENANTS
	 
	 	 	The provisions of Schedule 11 shall have effect.
	 
	11.	 	CONFIDENTIALITY
	 
	11.1	 	Obligation of Confidentiality
	 
	 	 	Subject to Clause 11.2 each of the Sellers hereby severally undertakes to the Purchaser
that as from the date hereof for a period of five years he will:

	 	(a)	 	not at any time after the date of this Agreement use, divulge or communicate
to any person other than to officers or employees of any of the Companies whose
province it is to know the same or on the instructions of the Board of Directors of
the Company any Confidential Information which may be in or come to his knowledge; and
	 
	 	(b)	 	use his reasonable endeavours to prevent publication or disclosure of any
Confidential Information;
	 
	 	(c)	 	not directly or indirectly divulge or communicate to any person, the terms
and conditions of this Agreement, or confidential information received as a result of
entering into or performing this Agreement or supplied by or on behalf of the
Purchaser and which relates to the negotiations of this Agreement, its contents or
which relates to the Purchaser.

	11.2	 	Exceptions
	 
	 	 	Clause 11.1 shall not apply if and to the extent that the party disclosing Confidential
Information can demonstrate that:

	 	(a)	 	such disclosure is required by law or by any securities exchange or
regulatory or governmental body having jurisdiction over it (including but not limited
to the NASDAQ, SEC, and the Serious Fraud Office) and whether or not the requirement
has the force of law; or

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	 	(b)	 	such disclosure is required to facilitate the satisfaction of the Condition;
or
	 
	 	(c)	 	such disclosure is to a professional or financial adviser for the purpose of
advising the Sellers in connection with the transactions contemplated by this
Agreement, provided that such disclosure is necessary for these purposes, such adviser
is made aware of the obligations of this Clause 11 and such adviser is bound by a duty
of confidentiality (whether express or implied); or
	 
	 	(d)	 	the Confidential Information concerned has come into the public domain other
than through its fault or the fault of any person to whom such Confidential
Information has been disclosed in accordance with Clause 11.1.

	11.3	 	Subject to Clause 11.4 the Purchaser hereby undertakes to each of the Sellers that as from
the date hereof for a period of five years it will:

	 	(a)	 	not divulge or communicate to any person other than to officers or employees
of Purchaser or any Purchaser Group Company whose province it is to know the same or
on the instructions of the Board of Directors of the Company any Confidential
Information which may be in or come to its knowledge; and
	 
	 	(b)	 	use its reasonable endeavours to prevent publication or disclosure of any
Confidential Information;
	 
	 	(c)	 	not directly or indirectly divulge or communicate to any person, the
existence, terms or conditions of this Agreement, or confidential information received
as a result of entering into or performing this Agreement and which relates to the
negotiations of this Agreement, its contents or which relates to any of the Sellers.

	11.4	 	Exceptions
	 
	 	 	Clause 11.3 shall not apply if and to the extent that the party disclosing Confidential
Information can demonstrate that:

	 	(a)	 	Completion has taken place in accordance with its terms;
	 
	 	(b)	 	such disclosure is required by law or by any securities exchange or
regulatory or governmental body having jurisdiction over it (including but not limited
to the NASDAQ, SEC, and the Serious Fraud Office) and whether or not the requirement
has the force of law; or
	 
	 	(c)	 	such disclosure is required to facilitate the satisfaction of the Condition;
or
	 
	 	(d)	 	such disclosure is to a professional or financial adviser for the purpose of
advising the Purchaser in connection with the transactions contemplated by this
Agreement, provided that such disclosure is necessary for these purposes, such adviser
is made aware of the obligations of this Clause 11

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	 	 	 	and such adviser is bound by a duty of confidentiality (whether express or
implied); or
	 
	 	(e)	 	the Confidential Information concerned has come into the public domain other
than through its fault or the fault of any person to whom such Confidential
Information has been disclosed in accordance with Clause 11.3.

	11.5	 	Assignment
	 
	 	 	The Sellers shall procure the assignment to, or declaration of trust in favour of, the
Purchaser (and, if the Purchaser so requests, the Company) of the benefit (in law and in
equity) of the confidentiality provisions of all confidentiality agreements and
undertakings given by (i) any other potential buyer of the Shares or (other than in the
normal course of business) the assets of any of the Companies and (ii) any professional or
financial adviser as envisaged in Clause 11.2(c), but only to the extent in either case
that:

	 	(a)	 	such assignment or declaration is not prevented by the terms of such
agreements and undertakings or, as the case may be, the professional rules applicable
or terms of engagement; and
	 
	 	(b)	 	such confidentiality provisions apply to Confidential Information;
	 
	 	(c)	 	so far as the Sellers are able.

	 	 	The Sellers will send a letter in a form agreed with the Purchaser to the other parties to
such agreements and undertakings authorising the Purchaser to recover all information to
which such agreements or undertakings apply or requesting certification to the Purchaser of
the destruction of such information in each case in accordance with the terms of such
agreements and undertakings.
	 
	11.6	 	Completion has no effect
	 
	 	 	The obligations contained in this Clause 11 shall survive Completion and shall continue for
three years from the date of this Agreement.
	 
	12.	 	ANNOUNCEMENTS
	 
	12.1	 	Obligation not to make Announcements
	 
	 	 	Subject to any communications required to be made with the Office of Fair Trading or any
other person in relation to the Condition and subject to Clauses 12.2 and 12.4, the
parties to this Agreement shall not hold any press conference or press briefing or make any
announcement (including, without limitation, any communication to the public, to any
customers or suppliers of the Companies, or to all or any of the employees of the
Companies) concerning the provisions or subject matter of this Agreement or containing any
information about any party without the prior written approval of the others (which shall
not be unreasonably withheld or delayed).

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	12.2	 	Exceptions
	 
	 	 	Clause 12.1 shall not apply if and to the extent that such announcement is:

	 	(a)	 	required by law; or
	 
	 	(b)	 	required by any securities exchange or regulatory or governmental body having
jurisdiction over it (including but not limited to NASDAQ/SEC) and whether or not the
requirement has the force of law; or
	 
	 	(c)	 	is to the financial community with the Purchaser following its normal
disclosure practices taking into account the regulations of the bodies referred to in
clause 12.2(b).

	 	 	and provided that any such announcement shall be made only after consultation with the
other parties.
	 
	12.3	 	Completion has no effect
	 
	 	 	The restrictions contained in this Clause 12 shall survive Completion and shall continue
without limit of time.
	 
	12.4	 	Joint Announcement
	 
	 	 	The Sellers and the Purchaser shall as soon as practicable after Completion procure that
announcements of the sale and purchase of the Shares are made to the regulatory authorities
relevant to the Purchaser and to customers and suppliers of the Company and each Subsidiary
and to the employees of the Companies.
	 
	13.	 	PAYMENTS
	 
	13.1	 	Method of Payment
	 
	 	 	Unless otherwise expressly stated all payments to be made under this Agreement shall be
made in US Dollars to the party to be paid by transfer in immediately available funds by
telegraphic transfer (through the CHAPS system) for the credit of such account in the
United Kingdom as the party to be paid may specify or in such other manner as the parties
may agree.
	 
	13.2	 	Sellers’ Solicitors
	 
	 	 	Any payment to be made, or document to be delivered, to the Sellers under any provision of
this Agreement may be made to the Sellers’ Solicitors, whose receipt shall be sufficient
discharge.
	 
	13.3	 	Free and Clear
	 
	 	 	Each payment to be made under this Agreement shall be made free and clear of all
deductions, withholdings, counterclaims or set-off of any kind except for those required by
law.

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	14.	 	COSTS
	 
	14.1	 	Own Costs
	 
	 	 	Each party shall pay the costs and expenses incurred by him or it in connection with the
entering into and completion of this Agreement.
	 
	14.2	 	No Professional Costs
	 
	 	 	The Sellers agree that none of the Companies shall pay, or be required to pay, any legal or
other professional charges and expenses in connection with any investigation of the affairs
of the Companies or the negotiation, preparation, execution and carrying into effect of
this Agreement.
	 
	15.	 	CONSTITUTION OF THIS AGREEMENT
	 
	15.1	 	Entire Agreement
	 
	 	 	This Agreement, together with the documents referred to in it, contain the entire agreement
between the parties relating to the transactions contemplated by this Agreement and
supersede all prior drafts, previous agreements, arrangements and understandings, whether
in writing or oral, between the parties relating to these transactions except to the extent
that they are repeated in this Agreement.
	 
	15.2	 	No Representations
	 
	 	 	The Sellers acknowledge to the Purchaser, and the Purchaser acknowledges to the Sellers,
that in agreeing to enter into this Agreement they, he or it has not relied on any
representation, warranty, undertaking, promise or other assurance (whether contractual or
otherwise) given by or on behalf of the other (including any given in favour of the Sellers
by any adviser or provider of finance to the Purchaser), except those set out in this
Agreement, and waives all rights and remedies, which, but for this Clause might be
available to them, him or it in respect of such representation, warranty or other
assurance, provided that nothing in this Clause shall limit or exclude any liability for
fraudulent misrepresentation.
	 
	15.3	 	Advisers
	 
	15.3.1	 	The Sellers agree that no professional, financial or technical adviser or provider of
finance to the Purchaser shall have any liability to the Sellers (in equity, contract or tort
(including negligence), under the Misrepresentation Act 1967 or in any other way) for a
representation, warranty or undertaking that is not set out in this Agreement.

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	15.3.2	 	The Purchaser agrees that no professional, financial or technical adviser or provider of
finance to the Sellers shall have any liability to the Purchaser (in equity, contract or tort
(including negligence), under the Misrepresentation Act 1967 or in any other way) for a
representation, warranty or undertaking that is not set out in this Agreement.
	 
	15.4	 	Counterparts
	 
	 	 	This Agreement may be executed in any number of counterparts, but shall not be effective
until each party has executed at least one counterpart, all of which, taken together shall
constitute one and the same Agreement and any party may enter into this Agreement by
executing a counterpart.
	 
	15.5	 	Variations
	 
	 	 	No variation of this Agreement shall be effective unless made in writing and signed by each
of the parties.
	 
	16.	 	RIGHTS
	 
	16.1	 	Rights Cumulative
	 
	 	 	The rights, powers, privileges and remedies provided in this Agreement are cumulative and
are not exclusive of any rights, powers, privileges or remedies provided by law or
otherwise.
	 
	16.2	 	Failure to Exercise No Prejudice
	 
	 	 	No failure to exercise nor any delay in exercising any right, power, privilege or remedy
under this Agreement shall in any way impair or affect the exercise thereof or operate as a
waiver thereof in whole or in part.
	 
	16.3	 	Repeated Exercise
	 
	 	 	No single or partial exercise of any right, power, privilege or remedy under this Agreement
shall prevent any further or other exercise thereof or the exercise of any other right,
power, privilege or remedy.
	 
	16.4	 	No Merger
	 
	 	 	The provisions of this Agreement shall remain in full force and effect notwithstanding
Completion.
	 
	17.	 	LIABILITIES
	 
	17.1	 	Continuance
	 
	 	 	Save where otherwise expressly provided each of the obligations, warranties and
undertakings set out in this Agreement which is not fully performed at

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	 	 	Completion will continue in force after Completion.
	 
	17.2	 	Release of One
	 
	 	 	The Purchaser may release or compromise in whole or in part the liability of any of the
Sellers under this Agreement or grant any time or other indulgence without affecting the
liability of any other of the Sellers.
	 
	17.3	 	Effect of Fraud
	 
	 	 	Nothing in this Agreement , or in any other document referred to in this Agreement shall be
read or construed as excluding or limiting any liability or remedy (a) arising as a result
of fraud, wilful misconduct or wilful concealment on the part of the person whose liability
is purportedly so excluded or limited or on the part of any other person who had knowledge
at the date of this Agreement of such fraud, wilful misconduct or wilful concealment or (b)
for personal injury or death resulting from negligence.
	 
	18.	 	SUCCESSORS AND ASSIGNS
	 
	 	 	This Agreement shall be binding upon and enure for the benefit of the successors of the
parties but none of the rights or obligations under this Agreement may be assigned or
transferred without the prior written consent of all the other parties, save that the
Purchaser may, in the context of a transaction which incorporates the sale of a substantial
part of the business, assets or undertaking of any of the Companies, or all of the shares
in any of the Companies owned by the Purchaser, assign the benefit of this Agreement to any
company within the Purchaser Group PROVIDED ALWAYS that in the event that the transferee
company ceases to be in the Purchaser Group then the benefit of this Agreement shall cease
to be legally enforceable unless and until the said transferee assigns back to a member
of the Purchaser Group the benefit of this Agreement, whereupon it shall become
enforceable.
	 
	18.1	 	Exclusion of other Third Party Rights
	 
	 	 	Except where expressly stated in this Agreement to the contrary:

	 	(a)	 	no person (including, for the avoidance of doubt, any of the Companies) who
is not a party to this Agreement (or his successors or permitted assignees under
Clause 18) has any rights under the Contracts (Rights of Third Parties) Act 1999 or
otherwise to enforce or enjoy the benefit of any term of this Agreement;
	 
	 	(b)	 	no right of any party to agree any amendment, variation, waiver or settlement
under or arising from, or in respect of, this Agreement, or to terminate this
Agreement, shall be subject under such Act or otherwise to the consent of any person
who is not a party to it or his successors and permitted assignees; and

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	 	(c)	 	nothing in this Clause 18 shall prejudice any right or benefit or cause of
action which any third party may have against the Purchaser or Sellers arising apart
from the Act as so applied by this Agreement.

	19.	 	ILLEGALITY
	 
	 	 	If any provision of this Agreement shall be held to be illegal, void, invalid or
unenforceable under the laws of any jurisdiction, the legality, validity and enforceability
of the remainder of this Agreement in that jurisdiction shall not be affected, and the
legality, validity and enforceability of the whole of this Agreement in any other
jurisdiction shall not be affected.
	 
	20.	 	NOTICES
	 
	20.1	 	Manner of Delivery
	 
	 	 	Any notice or other document to be served under this Agreement may be delivered or sent by
registered post or facsimile process to the party to be served at his address appearing in
this Agreement or at such other address as he may have notified to the other parties in
accordance with this Clause.
	 
	20.2	 	Deemed Delivery
	 
	 	 	Any notice or document shall be deemed to have been served:

	 	(a)	 	if delivered, at the time of delivery; or
	 
	 	(b)	 	if posted inland, at 10.00 hours on the second business day after it was put
into the post; or
	 
	 	(c)	 	if posted airmail, at 10.00 hours (local time at the recipient’s address) on
the fifth business day after it was put in the post; or
	 
	 	(d)	 	if sent by facsimile, at the expiration of two hours after the time of
dispatch, if dispatched before 15.00 hours on any business day, and in any other case
at 10.00 hours on the business day following the date of dispatch.

	20.3	 	Proof of Delivery
	 
	 	 	In proving service of a notice or document it shall be sufficient to prove that delivery
was made or that the envelope containing the notice or document was properly addressed and
posted (first class if UK inland) as a prepaid registered post letter or that the facsimile
message was properly addressed and despatched as the case may be.
	 
	20.4	 	Address
	 
	 	 	The address and facsimile details of the Sellers’ solicitors for the purposes of

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	 	 	this Clause are set out in Schedule 2.
	 
	20.5	 	Delivery to one Seller or Sellers’ Solicitors
	 
	 	 	A notice given or document supplied to the Sellers’ Solicitors shall be deemed to have been
given or supplied to all of the Sellers or, if given to the Sellers’ Solicitors.
	 
	21.	 	GUARANTEE
	 
	21.1	 	Notwithstanding the provisions of this Agreement, at Completion PGIC can elect that the
shares are purchased by a wholly owned subsidiary of PGIC (“the Purchasing Subsidiary”) in
which event the provisions of clause 21.2 shall apply.
	 
	21.2	 	In the event that the Purchasing Subsidiary shall purchase the shares pursuant to clause 21.1
then:

	 	21.2.1	 	All references in the Operative Provisions of this Agreement to the Purchaser shall
be references to the Purchasing Subsidiary; and
	 
	 	21.2.2	 	PGIC shall execute the Deed of Guarantee on Completion;
	 
	 	21.2.3	 	The Purchasing Subsidiary shall execute the Deed of Adherence on Completion.

	22.	 	ANCILLARY MATTERS
	 
	22.1	 	Carl Rushton will prior to Completion exercise the Rushton Option, (save as to payment of the
Option Price as defined therein, which shall be paid as part of the Completion procedure).
	 
	22.3	 	On Carl Rushton exercising the Rushton Option in accordance with its terms (save for the
payment of the Option Price as defined therein) the Sellers will procure that the Company
issues the appropriate number of Shares to Carl Rushton as nil paid.
	 
	23.	 	GOVERNING LAW AND JURISDICTION
	 
	23.1	 	Governing Law
	 
	 	 	This Agreement shall be governed by and construed in accordance with English law.

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	23.2	 	Submission to the Jurisdiction
	 
	 	 	In relation to any legal action or proceedings in relation to any claim, dispute or
difference concerning, or to enforce, this Agreement, any matter arising out of, or in
connection with, this Agreement (“proceedings”) each of the parties irrevocably submits to
the exclusive jurisdiction of the English courts, subject to the fact that any judgement
may be enforced in any jurisdiction.
	 
	23.3	 	Method of Service
	 
	 	 	Each party agrees that without preventing any other mode of service allowed by law, any
document in an action (including, but not limited to, a claim form or any other document to
be served under the Civil Procedure Rules in England and Wales) may be served on any party
by being delivered to or left for that party at its address for service of notices under
Clause 20.
	 
	24.	 	EXCLUSIVITY
	 
	 	 	The Sellers hereby agree with the Purchaser that the provisions of the Heads of Terms that
are expressed to be legally binding shall remain in force provided that the period of
exclusivity referred to in Clause 10 of those Heads of Terms shall now extend until 30
November 2005, and if Completion has not happened on or before that date, the period of
exclusivity shall automatically extend until Completion or termination or rescission of
this Agreement.

IN WITNESS of which this Agreement has been executed and delivered as a deed by the parties in the
case of those parties that are companies by the affixing of their common seal or their duly
authorised representatives on the date which appears first on the first page.

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Schedule 1

Definitions and Interpretations

	1.	 	Definitions
	 
	 	 	In this Agreement, unless the context otherwise requires:
	 
	 	 	“Accounts” means all or any one of:

	 	(a)	 	the audited balance sheet of the Company and the audited balance sheet of
EndX Limited and the unaudited accounts of all the other Companies save for the
Canadian subsidiaries at the Accounts Date; and
	 
	 	(b)	 	the audited consolidated profit and loss account of the Company and EndX
Limited and the unaudited accounts of the other Companies save for the Canadian
subsidiaries its subsidiary undertakings and the audited profit and loss account of
the Company and the audited profit and loss account of EndX Limited and the unaudited
profit and loss accounts for all the other Companies save for the Canadian
subsidiaries as at the Accounts Date;

	 	 	together with the notes to such accounts and the directors reports and the other documents
required by law to be annexed thereto;
	 
	 	 	“Accounts Date” means 30 September 2004;
	 
	 	 	“Acquisition” means the acquisition of the Shares in accordance with the terms of this
Agreement;
	 
	 	 	“agreed terms” means terms contained in a form which has been agreed and initialled by or
on behalf of the Sellers and the Purchaser for the purpose of identification immediately
prior to the signing of this Agreement;
	 
	 	 	“business day” means any day other than a Saturday or a Sunday or public holiday in
England;
	 
	 	 	“Canadian Disposal” means the transfer by the Company to the Sellers of all its interest in
6349609 Canada Limited, a corporation incorporated in the province of Ontario, Canada with
number 6349609;
	 
	 	 	“Canadian Subsidiaries” means 6349609 Canada Limited and 4028546 Canada Inc.;.
	 
	 	 	“Clearance” has the meaning given in Clause 4.1;
	 
	 	 	“Companies” means the Company and the Subsidiaries;
	 
	 	 	“Companies Acts” means the Companies Act 1985 and all other statutes and subordinate
legislation from time to time in force concerning companies and other bodies corporate;

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	 	 	“Completion” means completion of the sale and purchase of the Shares in accordance with
Clause 5;
	 
	 	 	“Completion Date” means 30 November 2005 or if later, the date falling seven business days
after satisfaction or waiver of the Condition or such other earlier date as the Sellers and
the Purchaser may from time to time agree in writing as being the date on which Completion
is to take place;
	 
	 	 	“Completion Net Debt Statement” means a statement of Net Debt as at Completion prepared in
accordance with Clause 3.3.3;
	 
	 	 	“Condition” means the condition precedent for the purposes of Clause 4.1;
	 
	 	 	“Confidential Information” means all information, of a confidential nature and not in the
public domain, which is used in or otherwise relates to the Companies or the business,
accounts, finance or contractual arrangements or other dealings, transactions or affairs of
any of the Companies including information relating to;

	 	(a)	 	the marketing of goods or services, including customer names and lists and
other details of customers, sales targets, sales statistics, market share statistics,
prices, market research reports and surveys, and advertising or other promotional
materials; or
	 
	 	(b)	 	future projects, between development or planning, commercial relationships
and negotiations;

	 	 	“Debt Creditors” means Lloyds TSB Bank plc pursuant to the Facility and the Sellers and
Martin Sykes pursuant to the Loans;
	 
	 	 	“Deed of Adherence” means the deed referred to in clause 21.2.3 in the agreed terms;
	 
	 	 	“Deed of Guarantee” means the deed referred to in clause 21.2.2 in the agreed terms;
	 
	 	 	“Deposit” means that part of the consideration for the sale of the Shares as is payable in
cash under Clause 3.2;
	 
	 	 	“Deposit Account” means the Wacks Caller Client Account, held at the Bank of Scotland,
19/21 Spring Gardens, Manchester M2 1FB, Account number : 00918133, Sort code : 12-08-95,
Swift Code : BOFSGB21256;
	 
	 	 	“Disclosure Letter” means the letter in the agreed terms from the Sellers to the Purchaser
of the same date as this Agreement together with the documents annexed thereto disclosing
information constituting exceptions to the Warranties and which has been delivered to the
Purchaser prior to the signing of this Agreement;
	 
	 	 	“Deposit Letter” means the letter in the agreed terms from the Sellers Solicitors to the
parties relating to the Deposit;

23

 

	 	 	“David Lobb Option” means the agreement entered into between the Company and David Lobb, a
copy of which is contained in the Disclosure Letter annexure 7G;
	 
	 	 	“encumbrance” includes any interest or equity of any person (including any right to
acquire, option or right of pre-emption), any debenture, mortgage, charge, pledge, lien,
deposit by way of security, restriction, assignment, hypothecation, security interest,
option, right of pre-emption or assignment or factoring or similar agreement (including any
created by law), title retention or transfer or other security or preferential agreement or
arrangement, and any rental, bill of sale, hire purchase, credit sale or other agreement
for payment on deferred terms or any agreement or commitment to give or create any of the
foregoing;
	 
	 	 	“Excluded Guarantees” means guarantees:

	 	i)	 	given in respect of the Facility and Lloyds Security Documents and which are
disclosed in the Disclosure Letter against Warranty [B.7.4];
	 
	 	ii)	 	in respect only of the liability of another of the Companies;
	 
	 	iii)	 	entered into in the ordinary course of business and which are disclosed in
the Disclosure Letter or contained the annexures to the Disclosure Letter.

	 	 	“Facility” means a £700,000 Term Loan facility made available to the Company by Lloyds
TSB Bank plc (“Lloyds”) as set out in a facility letter dated 28 November 2003 (as amended)
together with a £250,000 overdraft facility made available to the Company from Lloyds as
set out in a letter dated 1 July 2005;
	 
	 	 	“Heads of Terms means the heads of terms dated 18 July 2005 and signed by the parties
except Carl Rushton;
	 
	 	 	“Intellectual Property Rights” means:

	 	(i)	 	patents, designs, trade marks and trade names (whether registered or
unregistered), copyright and related rights, database rights, know how and
confidential information;
	 
	 	(ii)	 	all other intellectual property rights and similar or equivalent rights
anywhere in the world which currently exist or are recognised in the future; and
	 
	 	(iii)	 	applications, extensions and renewals in relation to any such rights;

	 	 	“iView Software “ means the source object and executable forms of the iView software
products developed owned and marketed by the Canadian Subsidiaries;
	 
	 	 	“Loans” means in the case of the Sellers the loans made by the Sellers to the Company dated
30 November 2004 and in the case of Martin Sykes the outstanding loan note issued to him by
the Company pursuant to the loan note instrument dated 28 November 2003;
	 
	 	 	“Lloyds Security Documents” means:

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	 	(a)	 	an Omnibus Guarantee & Set-Off Agreement dated 28 November 2003 and
entered into between the Company, End X Limited and Lloyds TSB Bank plc (“Lloyds”);
	 
	 	(b)	 	the Debenture dated 28 November 2003 between the Company and Lloyds; and
	 
	 	(c)	 	the Debenture dated 28 November 2003 between EndX Limited and Lloyds;

	 	 	“Management Accounts” means the unaudited consolidated (save for the Canadian
Subsidiaries) profit and loss accounts of the Company (copies of which are attached to, or
referred to in, the Disclosure Letter) for the ten month period up to 31 July 2005;
	 
	 	 	“MediaLink Licence” means the licence to be mutually and reasonably agreed upon by
Completion by the Sellers and the Purchaser pursuant to which the Company will grant to
Coppermoon Limited a perpetual, sole and exclusive, royalty free licence to to use, develop
and exploit the MediaLink Software Product for non gaming applications worldwide;
	 
	 	 	“MediaLink Software” means all the source object and executable versions of the Medialink
Manager, Medialink Controller, Minmax Bet Manager and Roulette Writer Service software
products developed by the Company;
	 
	 	 	“Net Debt” means at Completion the sum of :-

	 	(a)	 	the reconciled balance of cash held by the Companies at the Completion Date
excluding any amounts paid to the Company pursuant to clause 3.3.2;
	 
	 	(b)	 	the net balance of trade debtors less trade creditors (for the avoidance of
doubt excluding deferred income held as a creditor in the balance sheet);
	 
	 	(c)	 	the £60,000 sum owing to the Company from Carl Rushton being the strike price
on the exercise of his options;
	 
	 	(d)	 	the sum owing to the Company under the Canadian Sale Agreement;
	 
	 	 	 	Less the amounts owing by any and all of the Companies pursuant to the Facility and
the Loans on the Completion Date, and less £111,000 relating to a payment to be
made by the Company to Tim Parker;

	 	 	“Operative Provisions” means the whole of this Agreement from clause 1 to clause 23
(inclusive) and all the schedules to this Agreement;
	 
	 	 	“parties” means the parties to this Agreement and includes their respective successors and
permitted assigns;
	 
	 	 	“PGIC Loan” means a Loan from the Purchaser to the Company upon the terms set out in
Schedule 13;

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	 	 	“proceedings” means any action or proceedings before a court or tribunal or a statutory,
governmental or regulatory body (including an arbitration);
	 
	 	 	“Properties” means the property or properties (freehold and leasehold) short particulars of
which are set out in Annexure G entitled “Detail of Properties” and including any part or
parts of any of them and “Property” shall be construed accordingly;
	 
	 	 	“Proportion” means, in relation to any Seller, that fraction set out in column 3 opposite
that Sellers name in Schedule 2;
	 
	 	 	“Purchaser’s Solicitors” means Bird & Bird, 90 Fetter Lane, London EC4A 1JP [Ref: MJD/MAC];
	 
	 	 	“Put and Call Option” means the agreement to be mutually and reasonably agreed upon by
Completion by the Sellers and the Purchaser relating to the ultimate purchase by the
Sellers of the shares referred to in the David Lobb Option should those shares be put on
the Company pursuant to the David Lobb Option;
	 
	 	 	“Rushton Option” means the option over shares in the capital of the Company granted to Carl
Rushton and which is contained in the Disclosure Letter Annexure B11 of File 4;
	 
	 	 	“Sellers’ Debenture” means a Mortgage Debenture between the Company and: Nicholas John
Boyes-Hunter, Stuart Murray Payne, David Ian Waters, Cyril Boyes-Hunter dated 21 December
2004;
	 
	 	 	“Sellers’ Solicitors” means Wacks Caller, Steam Packet House, 76 Cross Street, Manchester,
M2 4JU [Ref: MSC/GMC];
	 
	 	 	“Shares” has the meaning given on page 1;
	 
	 	 	“Subsidiaries” means the companies brief particulars of which are set out in Schedule 3,
Part 2 of or any one or more of them, as the context requires;
	 
	 	 	“Sykes Debenture” means the mortgage debenture dated 28 November 2003 granted by the
Company to Martin Sykes;
	 
	 	 	“Tax” shall have the meaning ascribed to it in the Tax Covenant;
	 
	 	 	“Taxes Act 1988” means the Income and Corporation Taxes Act 1988;
	 
	 	 	“Tax Covenant” has the meaning given to it in clause 8;
	 
	 	 	“taxation warranties” means each and every warranty contained in the Part of Schedule 4
entitled “Taxation”;
	 
	 	 	“Third Party” means any person in whose favour any right or benefit under this Agreement is
extended by the express use of the term “Third Party”, in which case the terms of Clause
shall apply to the enjoyment or enforcement of such benefit and such person’s rights
thereto;

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	 	 	“Trade Marks” means those trade marks comprised within the Licensed-In IPRs, which are
owned by the Sellers and which are exclusively or predominantly used by the Company in the
course of its business, as listed in the Disclosure Letter;
	 
	 	 	“Warranties” means all and any of the representations, warranties and undertakings referred
to in Clause 6 and Schedule 4.
	 
	2.	 	Interpretation
	 
	 	 	In, and for the purposes of, this Agreement unless the context otherwise requires:
	 
	2.1	 	Gender, Number, Persons etc

	 	(a)	 	The masculine gender shall include the feminine and neuter and the singular
number shall include the plural and vice versa.
	 
	 	(b)	 	References to any person shall include any individual, partnership, firm,
corporation or other body corporate, corporation sole or aggregate, government state
or agency of a state, and any unincorporated association or organisation, works
council or employee representative body in each case whether or not having separate
legal personality and “Persons” shall be construed accordingly.
	 
	 	(c)	 	References to a company include any body corporate, wherever incorporated,
and includes any limited liability partnership under the law of the United Kingdom.
	 
	 	(d)	 	References to any party include a reference to the estate, legal personal
representative, successor, or permitted assigns of that party.
	 
	 	(e)	 	A person shall be deemed to be connected with another if that person is
connected with that other within the meaning of Section 839 of the Taxes Act 1988.

	2.2	 	Time
	 
	 	 	References to time are to GMT.
	 
	2.3	 	Currency

	 	(a)	 	References to “£” or “pounds” or “sterling” or “GBP” are to pounds sterling,
being the lawful currency for the time being of the United Kingdom provided that, if
the United Kingdom adopts the euro, and if sterling is no longer valid legal tender in
the United Kingdom at the relevant time, then any obligation to make a payment in
pounds shall be construed as an obligation to pay in euros and an obligation to pay an
amount expressed in pounds shall be construed as an obligation to pay an amount in
euros which is equal, at the official rate of exchange between the euro and pounds, to
the amount of pounds so payable.

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	 	(b)	 	References to “$”, “US $” or “USD” are to United States dollars being the
lawful currency for the time being of the United States of America.
	 
	 	(c)	 	US Dollar is the sole currency of account and payment for all sums payable
under or in connection with this Agreement, including damages.
	 
	 	(d)	 	Any monetary sum to be taken into account for the purposes of any Warranty or
for the purposes of Schedule 8 or clause 3 of the Tax Covenant where that sum is
expressed in a currency other than US Dollars shall be translated into US Dollars at
the closing mid-point pound spot rate applicable to the balance of all such amounts as
are expressed in that currency at close of business in London on the date of this
Agreement (or, if such date is not a Business Day, on the Business Day immediately
preceding such day) as shown in the Financial Times (London Edition) published on the
next following day or, if the Financial Times (London Edition) is not published on
that day, the closing mid-point spot rate quoted by The Royal Bank of Scotland PLC for
US Dollars applicable to amounts of USD100,000 or more.
	 
	 	(e)	 	Where it is necessary to determine whether a monetary limit or threshold set
out in Schedule 8 or in clause 3 of the Tax Covenant has been reached or exceeded and
the value of the Relevant Claim is expressed in a currency other than US Dollars, the
value of that Relevant Claim shall be translated into US Dollars at the closing
mid-point pound spot rate applicable to that amount of that currency at close of
business in London on the date of receipt by the Seller of written notification from
the existence of such claim (or, if such day is not a Business Day, on the Business
Day immediately preceding such day) as shown in the Financial Times (London Edition)
published on the next following day or, if the Financial Times (London Edition) is not
published on that day, the closing mid-point spot rate quoted by The Royal Bank of
Scotland PLC for US Dollars for that day applicable to amounts of USD100,000 or more.

28

 

	2.4	 	Concerning Warranties
	 
	 	 	Where any statement is qualified by the expression “so far as the Sellers are aware” or “to
the best of the Sellers’ knowledge information and belief” or any similar expression save
where otherwise stated that statement shall be deemed to include an additional statement
that it has been made after due and reasonable enquiry.
	 
	2.5	 	Parts of this Agreement

	 	(a)	 	Except where the contrary is stated, any reference to a Clause or Schedule is
to a Clause or Schedule of this Agreement, to an Annexure is to an Annexure to this
Agreement and any reference within a Clause or Schedule to a sub-clause, part,
paragraph or other sub-division is a reference to such sub-clause, part, paragraph or
other sub-division so numbered or lettered in that Clause or Schedule.
	 
	 	(b)	 	The headings and sub-headings are inserted for convenience only and shall not
affect the construction of this Agreement.
	 
	 	(c)	 	The Schedules and Annexures form part of this Agreement and shall have the
same force and effect as if set out in the body of this Agreement, and any reference
to this Agreement shall include the Schedules and the Annexures.

	2.6	 	Companies

	 	(a)	 	A “subsidiary” or “holding company” is to be construed in accordance with
section 736 and 736A of the Companies Act 1985, and are not limited to companies.
	 
	 	(b)	 	References to “Group” in relation to any company mean that company, its
subsidiaries, its holding companies and every subsidiary of each such holding company
from time to time, and “Seller’s Group” and “Purchaser’s Group” shall be construed
accordingly, and “Seller’s Residual Group” means the Seller’s Group excluding the
Companies and “Group Company” means the Company and each of the Subsidiaries.
	 
	 	(c)	 	Terms defined in Part XXVI of the Companies Act 1985 shall bear the same
meanings in this Agreement.

	2.7	 	Statute and Law

	 	(a)	 	Save where any change in any statutory provisions following the date of this
Agreement has the effect of increasing the Sellers’ liability under this Agreement
references to any statutory provisions shall (i) be construed as references to those
provisions as respectively amended, modified, consolidated or re-enacted from time to
time, and (ii) include any provisions of which they are consolidations or
re-enactments (whether with or without amendment) and (iii) also include any
subordinate legislation made under the statutory provisions (as so amended, modified,
consolidated or re-enacted) in each case before the

29

 

	 	 	 	date of this Agreement.
	 
	 	(b)	 	References to any law includes common or customary law and any constitution,
statute, directive, legislation, decree, judgment, decision, instrument, order,
ordinance, regulation, statute, treaty, by-law or other legislative measure, in each
case of any jurisdiction whatever (and “lawful” and “unlawful” shall be construed
accordingly).
	 
	 	(c)	 	Save where any change in any law following the date of this Agreement has the
effect of increasing the Sellers’ liability under this Agreement references to, or to
any provision of, any law of, or having effect in, any jurisdiction shall be construed
also as references to all other laws made under the law referred to, and to all such
laws as amended, re-enacted, consolidated or replaced or as their application is
modified by other laws from time to time, before the date of this Agreement.
	 
	 	(d)	 	Any headings or side notes or, in the case of any legislation specifically
referred to, the inclusion in parentheses of the title to the relevant Part, Section,
Schedule or paragraph contained in such legislation are for the sake of convenience
only and shall not affect the construction of this Agreement.
	 
	 	(e)	 	The Interpretation Act 1978 shall apply to this Agreement in the same way as
it applies to an enactment.

	2.8	 	Certain words
	 
	 	 	References to liability under, pursuant to or arising out of (or any analogous expression)
any agreement, contract, deed or other instrument shall include a reference to any
contingent liability under, pursuant to or arising out of (or any analogous expression)
that agreement, contract, deed or other instrument.

	 	(a)	 	Any undertaking by a party not to do any act or thing includes an undertaking
not to allow, cause or assist the doing of that act or thing and to exercise all
rights of control over the affairs of any other person which that party is able to
exercise (directly or indirectly) in order to secure performance of that undertaking.
	 
	 	(b)	 	Any reference to an agreement includes any form of arrangement, whether or
not in writing and whether or not legally binding.

	2.9	 	Writing
	 
	 	 	References to writing shall include any modes of reproducing words in a legible and
non-transitory form.
	 
	2.10	 	Accounts
	 
	 	 	A reference to a balance sheet or profit and loss account shall include a reference to any
note attached to or forming part of it.

30

 

	2.11	 	Canons of Construction

	 	(a)	 	The rule known as the ejusdem generis rule shall not apply and accordingly
general words introduced by the word “other” shall not be given a restrictive meaning
by reason of the fact that they are preceded by words indicating a particular class of
acts, matters or things.
	 
	 	(b)	 	General words shall not be given a restrictive meaning by reason of the fact
that they are followed by particular examples intended to be embraced by the general
terms.

	3.	 	Certain Implied Terms
	 
	 	 	The Law of Property (Miscellaneous Provisions) Act 1994 applies to the disposition of the
Shares and any other property made under or pursuant to this Agreement, save that:

	 	(a)	 	the word “reasonably” shall be deleted from the covenant set out in Section
2(1)(b) of that Act;
	 
	 	(b)	 	the covenant set out in Section 3(1) of that Act shall not be qualified by
the words “other than any charges, encumbrances or rights which that person does not
and could not reasonably be expected to know about”; and
	 
	 	(c)	 	the provisions of Section 6(2) of that Act are hereby excluded from this
Agreement.

31

 

Schedule 2

The Sellers, their Shareholdings and Consideration at Completion

	 	 	 	 	 	 	 	 	 
	(1)	 	(2)	 	(3)
	Name & Address	 	Number of Shares	 	Proportion
	NICHOLAS
JOHN
BOYES-HUNTER
of 1 Holmlee Way,
	 	 	929,482	 	 	 	43.8722	%
	Prestbury,
Cheshire
SK10 4BQ
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	DAVID
IAN
WATERS of 1
Armoury Towers,
	 	 	410,000	 	 	 	19.3523	%
	Barracks
Square,
Macclesfield,
Cheshire SK11 8HF
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	CYRIL
BOYES-
HUNTER of 22 St
Marys Walk,
	 	 	159,130	 	 	 	7.511	%
	Mirfield,
West
Yorkshire, WF14
0QB
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	STUART
MURRAY
PAYNE
of 6 Augusta Drive,
	 	 	380,000	 	 	 	17.9363	%
	Tytherington,
Macclesfield,
Cheshire
SK10

2UR
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	CARL
RUSHTON
of 994 Blossom
Meadows Place,
	 	 	40,000	 	 	 	1.888	%
	Henderson
NV
89052
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	GEORGE
PAYNE
of 39 Packsaddle

	 	 	200,000	 	 	 	9.4402	%
	Park,
Prestbury,
Cheshire SK10 4PU
	 	 	 	 	 	 	 	 

32

 

Schedule 3

Part 1 — Particulars of the Company

	 	 	 	 	 
	(1)

	 	Company name:
	 	End X Group Limited
	 
	 	 	 	 
	(2)

	 	Jurisdiction of incorporation:
	 	England and Wales
	 
	 	 	 	 
	(3)

	 	Incorporating law:
	 	Companies Act 1985
	 
	 	 	 	 
	(4)

	 	Status:
	 	Private company limited by shares
	 
	 	 	 	 
	(5)

	 	Company number:
	 	4956051
	 
	 	 	 	 
	(6)

	 	Date of incorporation:
	 	6 November 2003
	 
	 	 	 	 
	(7)

	 	Share capital — Authorised:
	 	£10,000,000 divided into
40,000,000 ordinary shares of
£0.25 each
	 
	 	 	 	 
	(8)

	 	Share capital — Issued:
	 	£529,653 divided into 2,118,612
ordinary shares of £0.25 each
	 
	 	 	 	 
	(9)

	 	Share capital — Payment Up:
	 	All of the issued shares in the
capital of the Company have been
issued as fully paid or credited
as fully paid
	 
	 	 	 	 
	(10)

	 	Registered holders:
	 	As specified in Schedule 1
	 
	 	 	 	 
	(11)

	 	Beneficial owners:
	 	As specified in Schedule 1
	 
	 	 	 	 
	(12)

	 	Registered office:
	 	Hollinwood Business Centre,

Albert Street, Oldham, Lancashire

OL8 3QL
	 
	 	 	 	 
	(13)

	 	Directors:
	 	Nicholas John Boyes-Hunter

Stuart Payne

David Ian Waters
	 
	 	 	 	 
	(14)

	 	Secretary:
	 	Cyril George Boyes-Hunter
	 
	 	 	 	 
	(15)

	 	Auditors:
	 	KPMG LLP
	 
	 	 	 	 
	(16)

	 	Accounting reference date:
	 	30 September

33

 

Part 2 — Particulars of the Subsidiaries

	 	 	 	 	 
	(1)

	 	Company name:
	 	End X Limited
	 
	 	 	 	 
	(2)

	 	Jurisdiction of incorporation:
	 	England and Wales
	 
	 	 	 	 
	(3)

	 	Incorporating law:
	 	English
	 
	 	 	 	 
	(4)

	 	Status:
	 	Private company limited by shares
	 
	 	 	 	 
	(5)

	 	Company number:
	 	3418744
	 
	 	 	 	 
	(6)

	 	Date of incorporation:
	 	13 August 1997
	 
	 	 	 	 
	(7)

	 	Share capital — Authorised:
	 	£1,000 divided into 1,000
	 

	 	 	 	ordinary shares of £1 each
	 
	 	 	 	 
	(8)

	 	Share capital — Issued:
	 	£1,000 divided into 1,000
ordinary shares of £1 each
	 
	 	 	 	 
	(9)

	 	Share capital — Payment Up:
	 	All of the issued shares in the
capital of the Company have been
issued as fully paid or credited
as fully paid
	 
	 	 	 	 
	(10)

	 	Registered holders:
	 	The Company
	 
	 	 	 	 
	(11)

	 	Beneficial owners:
	 	The Company
	 
	 	 	 	 
	(12)

	 	Registered office:
	 	Hollinwood Business Centre,

Albert Street, Oldham, Lancashire

OL8 3QL
	 
	 	 	 	 
	(13)

	 	Directors:
	 	Nicholas John Boyes-Hunter

Stuart Payne

David Ian Waters
	 
	 	 	 	 
	(14)

	 	Secretary:
	 	Cyril George Boyes-Hunter
	 
	 	 	 	 
	(15)

	 	Auditors:
	 	KPMG LLP
	 
	 	 	 	 
	(16)

	 	Accounting reference date:
	 	30 September

34

 

	 	 	 	 	 
	(1)

	 	Name:
	 	EndX Inc.
	 
	 	 	 	 
	(2)

	 	Place of Incorporation:
	 	Nevada, USA
	 
	 	 	 	 
	(3)

	 	Date of Incorporation:
	 	15 August 2002
	 
	 	 	 	 
	(4)

	 	Registered Office:
	 	920 Pilot Road, Las Vegas, NV 89119
	 
	 	 	 	 
	(5)

	 	Issued Share Capital:
	 	500 shares of common stock of no par value
	 
	 	 	 	 
	(6)

	 	Shareholder:
	 	EndX Limited
	 
	 	 	 	 
	(7)

	 	Directors:
	 	Nick Boyes-Hunter — President

David Ian Waters — Secretary

Carl Rushton — Treasurer

	 	 	 	 	 
	(1)

	 	Name:
	 	EndX Pty Ltd
	 
	 	 	 	 
	(2)

	 	Place of Incorporation:
	 	New South Wales, Australia
	 
	 	 	 	 
	(3)

	 	Number:
	 	ACN 107 573 375
	 
	 	 	 	 
	(4)

	 	Date of Incorporation:
	 	9 January 2004
	 
	 	 	 	 
	(5)

	 	Registered Office:
	 	Suite 601, 8-20 Orion Road, Lane Cove
NSW 2066
	 
	 	 	 	 
	(6)

	 	Authorised Share Capital:
	 	AUS$10,000 divided into 10,000 ordinary
shares of AUS$1.00 each
	 
	 	 	 	 
	(7)

	 	Issued Share Capital:
	 	AUS$10,000 divided into 10,000 ordinary
shares of AUS$1.00 each
	 
	 	 	 	 
	(8)

	 	Shareholder:
	 	EndX Limited
	 
	 	 	 	 
	(9)

	 	Directors:
	 	Gary Denham, Nick Boyes-Hunter, David

Waters, Stuart Payne

35

 

Schedule 4

The Warranties

Contents

A.    Legal

B.    Accounts/Financial

C.    Assets

D.    Business

E.    Taxation

F.    IPR and Technology

G.    Properties

H.    Environment

I.    Employees

J.    Health and Safety

K.    Pension Schemes

Interpretation

In this Schedule, unless the context otherwise requires:

	(a)	 	“Company”, means any or all of the Company and the Subsidiaries, and “Principal Company”
means the Company itself and excludes the Subsidiaries; and
	 
	(b)	 	“Seller” means any and all of the Sellers.
	 
	A.	 	LEGAL

			
	A.1.	 	Seller’s authority and capacity

	 	 	 	 	 
	 

	 	A.1.1
	 	The Sellers have the requisite power and authority to enter into and perform
this Agreement and such entry and performance will not breach violate, infringe or
otherwise affect the rights of any other person.
	 
	 	 	 	 
	 

	 	A.1.2
	 	The execution and delivery of and the performance by the Seller of its
obligations under this Agreement will not:

	 	(a)	 	constitute a default under any instrument or arrangement
binding or otherwise to which the Sellers are a party;
	 
	 	(b)	 	result in a breach of any order judgment or decree of any
court or governmental agency to which the Sellers are a party or by which
the Sellers are bound;
	 
	 	(c)	 	relieve any other party to a contract with the Company of
its obligations or enable that party to vary or terminate its rights or
obligations under that contract;

36

 

	 	(d)	 	result in the creation or imposition of any encumbrance
on any of the property or assets of the Company;
	 
	 	(e)	 	conflict with, or result in the breach of, or constitute
a default under, or create or accelerate any obligation of the Company
under, or cause or require the Company to lose or dispose of any right or
asset or any interest in any asset or impose or crystallise any encumbrance
on any asset under any of the terms, conditions or provisions of, any
agreement or instrument to which the Company is now a party or any loan to
or mortgage created by the Company; or
	 
	 	(f)	 	result in any present or future indebtedness of the
Company becoming due and payable or capable of being declared due and
payable prior to its stated maturity.

	 	 	 	 	 
	 

	 	A.1.3
	 	All consents, permissions, approvals and agreements of third parties which
are necessary for the Seller to obtain in order to enter into and perform this
Agreement in accordance with its terms have been unconditionally obtained in writing
and have been disclosed in writing to the Purchaser.
	 
	 	 	 	 
	 

	 	A.1.4
	 	The Company has not effected or been involved in any merger, demerger or
other re-organisation under the Companies Acts.

			
	A.2.	 	Memorandum and Articles of Association

The copies of the Memoranda and Articles of Association of the Company delivered by the
Seller to the Purchaser are true complete and accurate in all respects and have embodied in
them or annexed to them true, accurate and complete copies of all resolutions, agreements
and consents required by law to be embodied, and the Company has complied with all the
provisions of its memorandum and articles of association and, in particular, has not
entered into any ultra vires transaction.

			
	A.3.	 	Compliance with Companies Acts etc.

	 	 	 	 	 
	 

	 	A.3.1
	 	As far as the Sellers are aware having made no specific enquiries, the
Company and its officers (in their capacities as such) have complied with the
provisions of the Companies Act 1985 and, in particular:

	 	(a)	 	all returns and particulars, resolutions, prospectuses,
listing particulars, non-listing prospectus, offer documents, and other
documents which the Company is required by law to file with or deliver to
the Registrar of Companies or any other governmental, regulatory or other
authority of competent jurisdiction have been correctly made up and duly
filed or delivered;
	 
	 	(b)	 	all legal requirements have been complied with in
connection with the formation of the Company and with the issues of their
respective shares and other securities; and

37

 

	 	(c)	 	all charges by or in favour of the Company have (if
appropriate) been registered in accordance with the provisions of sections
395 and 396 of the Companies Act 1985 and are valid and enforceable.

	 	 	 	 	 
	 

	 	A.3.2
	 	In relation to the statutory books of the Company:

	 	(a)	 	So far as the Sellers are aware they have been properly
written up and contain a true accurate and complete record of the matters
which should be dealt with in such books; and
	 
	 	(b)	 	no notice or allegation that any of them is incorrect or
should be rectified has been received.

For the purposes of this paragraph:

“statutory books” includes the register of members, the register of applications
and allotments, the register of transfers, the register of directors, the
register of secretaries, the register of directors’ interests, the register of
mortgages and charges.

			
	A.4.	 	Seller’s interests

Neither the Seller nor any person connected with any of them has any interest, directly or
indirectly:

	 	(a)	 	in any business which has a close trading relationship with is or is likely
to be competitive with the business of the Company; or
	 
	 	(b)	 	in any asset which within the two years preceding the date of this Agreement
has been acquired or disposed of by or leased to the Company.

			
	A.5.	 	Ownership of the Shares

	 	 	 	 	 
	 

	 	A.5.1
	 	The Shares constitute the whole of the issued and allotted share capital of
the Principal Company.
	 
	 	 	 	 
	 

	 	A.5.2
	 	No person is entitled, or has claimed to be entitled, to require the Company
to issue any share or loan capital either now or at any future date whether
contingently or not.
	 
	 	 	 	 
	 

	 	A.5.3
	 	There is no option, warrant, right of pre-emption, right to acquire,
mortgage, charge, pledge, lien or other form of interest in, security or encumbrance
on, over or affecting any of the Shares or any other share or any loan capital of the
Company (whether issued or unissued) nor is there any commitment to give or create any
of the foregoing and no person has claimed to be entitled to any of the foregoing.
	 
	 	 	 	 
	 

	 	A.5.4
	 	All of the Shares or issued shares in any of the Subsidiaries are fully paid
up and the Company has not exercised or purported to exercise or claimed any lien over
any of them.

38

 

	 	 	 	 	 
	 
	 	 	 	 
	 

	 	A.5.5
	 	The Sellers are entitled to sell and procure the transfer of the full legal
and beneficial ownership in the Shares to the Purchaser on the terms set out in this
Agreement.
	 
	 	 	 	 
	 

	 	A.5.6
	 	The particulars of the Subsidiaries set out in Schedule 2 are true and
complete and the shares in the Subsidiaries are legally and beneficially owned by the
Company or, as the case may be, otherwise as specified in the Schedule free from all
encumbrances.
	 
	 	 	 	 
	 

	 	A.5.7
	 	The Company has not at any time purchased its own shares or redeemed or
forfeited any shares or agreed to do so, or granted an option whereby it might become
liable to do so.

			
	A.6.	 	Subsidiaries, associations and branches

The Company:

	 	(a)	 	does not hold or beneficially own or has agreed to acquire any securities of
any other corporation (whether incorporated in the United Kingdom or elsewhere), other
than shares of the Subsidiaries; or
	 
	 	(b)	 	is not or has not agreed to become a member of any partnership, limited
liability partnership or other unincorporated association, joint venture or consortium
(other than recognised trade associations, details of which are given in the
Disclosure Letter) or entered into any agreement or arrangement for sharing
commissions or other income, profits, losses or expenses; or
	 
	 	(c)	 	has not any branch or any permanent establishment outside the United Kingdom;
	 
	 	(d)	 	has not agreed to become a subsidiary of any other body corporate or under
the control of any group of bodies corporate or consortium; or
	 
	 	(e)	 	save as disclosed in relation to paragraphs (a) to (d), has not any interest,
legal or beneficial, in any shares or other capital or securities or become a member
of or otherwise howsoever interested in any other firm, company, association, venture
or legal person or entity.

			
	A.7.	 	Vulnerable transactions

	 	 	 	 	 
	 

	 	A.7.1
	 	The Company has not been party to a transaction pursuant to or as a result
of which an asset owned, purportedly owned or otherwise held by it is liable to be
transferred or re-transferred to another person or which gives or may give rise to a
right of compensation or other payment in favour of another person in the event of the
insolvency of any person other than such Company, including:

	 	(a)	 	any transaction at an undervalue with a person within
Sections 238 or 339 of the Insolvency Act 1986; and

39

 

	 	(b)	 	receipt of any preference from a person within Sections
239 or 240 of the Insolvency Act 1986.

	 	 	 	 	 
	 

	 	A.7.2
	 	No transaction at an undervalue (within the meaning of Section 423 of the
Insolvency Act 1986) (a) relating to any of the Shares or shares in any of the
Subsidiaries or (b) to which the Company has been a party, has been effected prior to
the date of this Agreement.

			
	A.8.	 	Directors and Shadow Directors

	 	 	 	 	 
	 

	 	A.8.1
	 	The only directors of the Company are the persons whose names are listed in
relation to such Company in Schedule 2.
	 
	 	 	 	 
	 

	 	A.8.2
	 	The Company has no liability as a former member, officer or shadow director
of any person, and there are no circumstances in which such liability could arise.
	 
	 	 	 	 
	 

	 	A.8.3
	 	No person is or has been a shadow director (within the meaning of section
741(2) Companies Act 1985) of the Company.

			
	A.9.	 	Compliance with statutes

Neither the Company, nor, so far as the Sellers are aware, having made no specific
enquiries, any of their respective officers, agents or employees (during the course of
their duties), has done or omitted to do anything which is a contravention of any statute,
order, regulation or the like giving rise to any fine, penalty or other liability on the
part of such Company.

			
	A.10.	 	Licences

	 	 	 	 	 
	 

	 	A.10.1
	 	So far as the Sellers are aware the Company has all licences (including statutory
licences), permits, consents and authorisations (public and private) (“Licences”)
necessary to own and operate its assets and properly to carry on its business in the
manner in which its business is now carried on.
	 
	 	 	 	 
	 

	 	A.10.2
	 	So far as the Sellers are aware, all such Licences, are valid and subsisting.
	 
	 	 	 	 
	 

	 	A.10.3
	 	So far as the Sellers are aware, the Company is not restricted by contract from
carrying on any activity in any part of the world.

			
	A.11.	 	Regulated activities and financial promotion

	 	 	 	 	 
	 

	 	A.11.1
	 	The Company does not carry on, and has not carried on since the date falling six
years prior to the Accounts Date, in the United Kingdom any regulated activity, as
that term is understood for the purposes of Section 19 of the Financial Services and
Markets Act 2000 (“FSMA”), whether comprising an activity involving investments,
banking or insurance or otherwise and whether or not prior to the coming into force of
the FSMA on 1 December 2001.

40

 

	 	 	 	 	 
	 

	 	A.11.2
	 	The Company has not:

	 	(a)	 	in the course of business, communicated an invitation or
inducement to engage in an investment activity, as that term is understood
for the purposes of Section 21 FSMA, in contravention of that Section; or
	 
	 	(b)	 	(prior to 1 December 2001 but since the date falling six
years prior to the Accounts Date) issued an investment advertisement, as
that term was understood for the purposes of Section 57 of the Financial
Services Act 1986 (as then in force), in contravention of that Section,

in either case, unless approved by an authorised person or some other exemption
to the prohibition in such section at the relevant time applied.

			
	A.12.	 	Takeover and Prospectuses

During the ten years prior to the date of this Agreement, the Company has not:

	 	(a)	 	had at any time any equity share capital listed on the London Stock Exchange;
or
	 
	 	(b)	 	had any dealings in its equity share capital advertised in a newspaper on a
regular basis for a continuous period of at least six months; or
	 
	 	(c)	 	had at any time any equity share capital subject to a marketing arrangement
as described in Section 163(2)(b) Companies Act 1985, being by way of example, subject
to dealings on the Unlisted Securities Market or Alternative Investment Market; or
	 
	 	(d)	 	has issued, or has caused to be issued on its behalf, or filed with the
Registrar of Companies any listing particulars, supplementary listing particulars,
prospectus or supplementary prospectus (as those terms are understood for the purposes
of Part VI of the FSMA or, prior to 1 December 2001, were understood for the purposes
of Part IV of the FSA), prospectus (as that term is understood for the purposes of the
Public Offer of Securities Regulations 1995) or offer document (as that term is
understood for the purposes of The City Code on Takeovers and Mergers).

			
	A.13.	 	Financial Assistance

The Company has not directly or indirectly provided any financial assistance for the
purpose of the acquisition of shares in the Company or any holding company of such Company
from time to time or for the purpose of reducing or discharging any liability incurred in
such an acquisition, whether pursuant to Sections 155 and 156 of the Companies Act 1985 or
otherwise.

41

 

			
	A.14.	 	Insider Contracts

	 	 	 	 	 
	 

	 	A.14.1
	 	The Company is not a party to any contract or arrangement with the Sellers nor is
any person connected with them interested, directly or indirectly in such a contract
or arrangement, nor has there been any such contract or arrangement at any time during
the six years up to the Accounts Date.
	 
	 	 	 	 
	 

	 	A.14.2
	 	The Company is not a party to, nor have its profits or financial position since the
date falling six years prior to the Accounts Date on the Accounts Date been affected
by, any contract or arrangement which is not of an entirely arm’s length nature.
	 
	 	 	 	 
	 

	 	A.14.3
	 	None of the Sellers nor any person connected with any of them is a party to any
outstanding agreement or arrangement for the provision of finance, goods, services or
other facilities to, or by, the Company or in any way relating to the Company or its
affairs.

			
	A.15.	 	Litigation, Defaults and Unlawful Acts

	 	 	 	 	 
	 

	 	A.15.1
	 	The Company is not engaged or proposing to engage in any litigation, arbitration,
prosecution or other legal proceedings, except as plaintiff for collection of debts
not exceeding an aggregate of £10,000 and there are no claims or actions (whether
criminal or civil) in progress, outstanding, pending or threatened (whether or not
formal notice of proceedings has been given) by or against the Company, any of its
assets or any of its directors or in respect of which the Company is liable to
indemnify any party concerned.
	 
	 	 	 	 
	 

	 	A.15.2
	 	So far as the Sellers are aware the Company has not, nor have any of its officers or
employees, by any act or default committed:

	 	(i)	 	any criminal or unlawful act in connection with the
business of the Company, other than minor road traffic offences; or
	 
	 	(ii)	 	any breach of trust in relation to the business or
affairs of the Company; or
	 
	 	(iii)	 	any breach of contract or statutory duty or any
tortious act which could entitle any third party to terminate any contract
to which the Company is a party or could lead to a claim against the
Company for damages, compensation or an injunction.

	 	 	 	 	 
	 

	 	A.15.3
	 	The Company has received no notices or proceedings giving rise to any litigation or
arbitration proceedings by or against the Company or any person for whose acts or
defaults the Company may be vicariously liable.
	 
	 	 	 	 
	 

	 	A.15.4
	 	No party with whom the Company has entered into any material contract is so far as
the Sellers are aware having made no specific enquiry in default in any material
respect under it.

42

 

	 	 	 	 	 
	 

	 	A.15.5
	 	None of the Companies have received any notification that it is in breach of any
material contract to which it is a party. As far as the Sellers are aware having made
no specific enquiry the terms of all material contracts to which the Company is a
party have been complied with by such Company in all material respects.
	 
	 	 	 	 
	 

	 	A.15.6
	 	The Company has no knowledge of the invalidity of, or grounds for rescission,
avoidance or repudiation of, any agreement or other transaction to which the Company
is a party and has received no notice of any intention to terminate, repudiate or
disclaim any such agreement or other transaction.
	 
	 	 	 	 
	 

	 	A.15.7
	 	The Company is not the subject of nor has been threatened with, any investigation,
inquiry or enforcement proceedings by any governmental, administrative or regulatory
body or agency and the Company is not in dispute with any such body or agency. So far
as the Sellers are aware having made no specific enquiry, there are no circumstances
which are likely to give rise to any such investigation, inquiry or enforcement
proceedings.
	 
	 	 	 	 
	 

	 	A.15.8
	 	No order, ruling, procurement, direction or decision (other than one of general
application) of any governmental, administrative or regulatory body or agency is
pending in respect of the Company. As far as the Sellers are aware having made no
specific enquiry the Company is not affected, directly or indirectly by any regulatory
action to resolve a dispute or enforce a licence at the regulatory body’s own
initiative or on behalf of a third party or at the request of the Company.
	 
	 	 	 	 
	 

	 	A.15.9
	 	The Company has not, in the last three years preceding the Accounts Date or since
then, been involved in any litigation, arbitration or material dispute with any person
who is or was a supplier or customer of material importance to the Company or its
business.
	 
	 	 	 	 
	 

	 	A.15.10
	 	No injunction or order for specific performance which is still in force has been
granted against the Company.
	 
	 	 	 	 
	 

	 	A.15.11
	 	The Company is not subject to any order or judgment given by any court or
governmental agency which is still in force and has not given any undertaking to any
court or to any third party arising out of any legal proceedings.
	 
	 	 	 	 
	 

	 	A.15.12
	 	No officer and as far as the Sellers are aware no employee of the Company has made
or received any Sensitive Payment in connection with any contract or otherwise. For
the purposes of this paragraph the expression “Sensitive Payments” (whether or not
illegal) shall include in any jurisdiction:

	 	(i)	 	commercial bribes, bribes or kickbacks paid to any
person, firm or company including central or local government officials,
trade union officials or employees; or

43

 

	 	(ii)	 	amounts received with an understanding that rebates or
refunds will be made in contravention of the laws of any jurisdiction
either directly or through a third party; or
	 
	 	(iii)	 	political contributions; or
	 
	 	(iv)	 	payments or commitments (whether made in the form of
commissions, payments or fees for goods received or otherwise) made with
the understanding or under circumstances that would indicate that all or
part thereof is to be paid by the recipient to central or local government
officials or as a commercial bribe, influence payment or kickback; or
	 
	 	(v)	 	any payment deemed illegal under the Prevention of
Corruption Acts 1889 to 1916.

			
	A.16.	 	Insolvency

	 	 	 	 	 
	 

	 	A.16.1
	 	The Company has not ceased, or threatened to cease, the whole, or a material part,
of its business for any reason.
	 
	 	 	 	 
	 

	 	A.16.2
	 	No receiver, receiver and/or manager or administrative receiver has been appointed
in respect of the Company or in respect of the whole or any part of the assets or
undertaking of the Company and no step has been taken to enforce any charge, mortgage
or other security interest or encumbrance over all or any part of the assets of the
Company.
	 
	 	 	 	 
	 

	 	A.16.3
	 	No administration order has been made and no petition has been presented for such an
order in respect of the Company.
	 
	 	 	 	 
	 

	 	A.16.4
	 	No notice has been issued for convening a meeting at which a resolution is to be
proposed nor has any resolution been passed nor has any petition been presented or
order made for the winding up of, or a provisional liquidator to be appointed in
respect of, the Company.
	 
	 	 	 	 
	 

	 	A.16.5
	 	At the date of this Agreement, the Company is able to pay its debts as they fall due
and the Company has not stopped or suspended, or declared any intention to stop or
suspend, payment of its debts or any class of its debts generally, become unable to
pay its debts (within the meaning of Section 123 of the Insolvency Act 1986) or
otherwise become insolvent.
	 
	 	 	 	 
	 

	 	A.16.6
	 	No unsatisfied judgment, decree, order or award made against the Company is
outstanding and no written demand under Section 123(1)(a) of the Insolvency Act 1986
has been served against the Company and no distress, execution or sequestration has
been levied on, or other process commenced against, any asset of the Company.
	 
	 	 	 	 
	 

	 	A.16.7
	 	No voluntary arrangement under Section 1 of the Insolvency Act 1986, scheme or
arrangement under Section 425 of the Companies Act 1985 or other arrangement,
composition, moratorium or compromise of its debts generally or any class of its debts
is proposed or negotiations

44

 

	 	 	 	 	 
	 

	 	 	 	therefore commenced by the Company nor has any meeting of creditors or any class
of them for such purpose been convened or is proposed.
	 
	 	 	 	 
	 

	 	A.16.8
	 	No procedure has been commenced by the Registrar of Companies or any other person
with a view to striking off the Company under section 652 of the Companies Act 1985.
	 
	 	 	 	 
	 

	 	A.16.9
	 	The Sellers have received no notification from any third party claiming that
circumstances have arisen which entitle any person to take any action, appoint any
person, commence proceedings or obtain any order of the type mentioned in paragraphs
A.16.1 to A.16.8.
	 
	 	 	 	 
	 

	 	A.16.10
	 	The Sellers have received no notification from any third party claiming that
circumstances or events have occurred in relation to the Company in any country or
territory in which it carries on business or to the jurisdiction of whose courts it or
any of its assets is subject which correspond with or have an effect equivalent or
similar to any of those mentioned in paragraphs A.16.1 to A.16.9 (inclusive) and the
Company has not otherwise become subject in any such country or territory to its laws
relating to insolvency, bankruptcy or liquidation.

45

 

			
	B.	 	ACCOUNTS AND FINANCIAL

			
	B.1.	 	Accounts

	 	 	 	 	 
	 

	 	B.1.1
	 	The Accounts:

	 	(a)	 	have been properly prepared in accordance with the
Companies Act and generally accepted accounting principles, policies,
practices and conventions in the United Kingdom; and
	 
	 	(b)	 	show a true and fair view of the state of affairs of the
Principal Company and its subsidiary undertakings as at the Accounts Date
and of its profit or loss for the period ended on the Accounts Date and
correctly state the assets of the Principal Company and its subsidiary
undertakings and contain either provisions adequate to cover, or full
particulars in the notes, of all liabilities (whether quantified, contingent
or otherwise) of the Company and its subsidiary undertakings as at the
Accounts Date.

	 	 	 	 	 
	 

	 	B.1.2
	 	As far as the Sellers are aware having made no specific enquiries no debt
owing to the Company at the date of this Agreement (other than debts included in the
Accounts) will not realise its nominal amount plus any accrued interest within six
weeks of the date of invoice.
	 
	 	 	 	 
	 

	 	B.1.3
	 	There are no debts owing to the Company (whether or not due for payment)
other than trade debts incurred in the ordinary course of business not exceeding
£5,000 each.
	 
	 	 	 	 
	 

	 	B.1.4
	 	There is no material difference between the accounting and taxation
treatment of any item in the Accounts and of any asset acquired since the Accounts
Date.

			
	B.2.	 	Accounting Reference Date

The Company has not at any time used any accounting reference date (for the purposes of the
Companies Act) other than the date set out in Schedule 2.

			
	B.3.	 	Management Accounts and Reports

	 	 	 	 	 
	 

	 	B.3.1
	 	The Management Accounts have been carefully prepared for internal purposes
in accordance with accounting policies reasonably consistent with those used in
preparing the management accounts in the preceding financial year.
	 
	 	 	 	 
	 

	 	B.3.2
	 	The Management Accounts fairly present the income and expenditure and the
assets and liabilities of the Principal Company and the Subsidiaries (on a
consolidated basis) for the period in question.
	 
	 	 	 	 
	 

	 	B.3.3
	 	There have been no reports concerning the Company commissioned by the
Company or the Sellers by financial, accounting (other than statutory audit reports),
management, safety, property, environmental, employee benefit, information technology,
legal or other external

46

 

	 	 	 	 	 
	 

	 	 	 	consultants within the period of three years since the date three years prior to
the Accounts Date.

			
	B.4.	 	Accounting Records and Systems

	 	 	 	 	 
	 

	 	B.4.1
	 	As far as the Sellers are aware, all the accounts, books, registers, ledgers
and financial and other material records of whatsoever kind of the Company (including
all invoices and other records required for VAT purposes) that are required to be kept
by such Company under the Companies Act 1985 or any other legislation:

	 	(a)	 	are in its possession or under its direct control and
subject to unrestricted access by it;
	 
	 	(b)	 	have been properly maintained and are up to date;
	 
	 	(c)	 	contain a complete and accurate record of all the matters
required to be entered in them by the Companies Act 1985 an other relevant
legislation.

			
	B.5.	 	Position since the Accounts Date

	 	 	 	 	 
	 

	 	B.5.1
	 	Since the Accounts Date, the business of the Company has been carried on in
the ordinary and proper course without any interruption or alteration in the nature,
scope or manner of its business and there has not been any material adverse change in
the financial or trading position of the Company or in the nature of the assets and
liabilities shown in the Accounts.
	 
	 	 	 	 
	 

	 	B.5.2
	 	Since the Accounts Date, without limitation to the preceding paragraph, in
particular:

	 	(a)	 	there has not been any adverse change in the value of the
net assets of the Company using the same basis of valuation as adopted in
the Accounts;
	 
	 	(b)	 	no directors fees have been paid and no resolution
(whether by the appropriate board of directors or by the appropriate general
meeting) that such fees be paid in respect of the current or any previous
financial year has been proposed or passed by the Company;
	 
	 	(c)	 	the Company has not disbursed any cash, except in the
ordinary course of its business, and all amounts received by the Company
have been deposited with the Company’s bankers and appear in the appropriate
books of account;
	 
	 	(d)	 	no dividends or other distributions (whether an actual or
deemed distribution) have been declared, paid or made on or by the Company;

47

 

	 	(e)	 	the Company has not entered into any capital transaction
as seller, purchaser, lessor or lessee or otherwise undertaken capital
expenditure or commitment in an amount exceeding £10,000 in the aggregate;
	 
	 	(f)	 	the Company has not paid any service, management or
similar charges or any interest or amount in the nature of interest to any
other person or incurred any liability to make such a payment;
	 
	 	(g)	 	the Company has not disposed of or acquired, or agreed
(and is not negotiating to dispose of or acquire), any business or any
shares in a body corporate, or any other asset, or any interest in any
business or shares or other asset, other than in the ordinary and proper
course of business;
	 
	 	(h)	 	no customer of or supplier of importance to the Company
or who would materially adversely affect the Company has ceased to deal, or
has indicated an intention to cease to deal or deal on a smaller scale, with
the Company, or has changed or indicated that it wishes to change the terms
on which it deals with the Company;
	 
	 	(i)	 	the Company has not repaid all or part of any debt in
advance of the due date for repayment, or agreed to do so;
	 
	 	(j)	 	no share or loan capital has been created or issued;
	 
	 	(k)	 	no resolution of the shareholders of the Company has been
passed

			
	B.6.	 	Borrowings etc

	 	 	 	 	 
	 

	 	B.6.1
	 	The Company does not have outstanding any obligation for the payment or
repayment of money, whether present or future, actual or contingent, in respect of:

	 	(a)	 	monies borrowed or raised whether by term loan, overdraft
or otherwise;
	 
	 	(b)	 	any recourse to a company selling or discounting
receivables in respect of receivables sold or discounted;
	 
	 	(c)	 	moneys raised under any bond, note, stock, or other
security;
	 
	 	(d)	 	moneys raised under or in respect of acceptance credit
and documentary credit facilities;
	 
	 	(e)	 	the acquisition cost of assets or services to the extent
payable after the time of acquisition or possession;

48

 

	 	(f)	 	rental payments under chattel leases and hire purchase
agreement;
	 
	 	(g)	 	any loan, or debt owing to the Company by, any of the
Sellers or any director of the Company or any person connected with any of
them;
	 
	 	(h)	 	any agreement or arrangement to which the Company is a
party and in which any of the Seller or any director of a Company or any
person connected with any of them is interested;
	 
	 	(i)	 	any agreement or arrangement between the Company and any
company of which it is a subsidiary or another subsidiary of any such
company (including, but not limited to, any such agreement or arrangement
under which such Company is, or may in the future become, liable to pay any
service, management or similar charge or to make any payment of interest or
in the nature of interest); or
	 
	 	(j)	 	any guarantee, indemnity or other assurance against or
arrangement intended to prevent or limit loss in respect of any obligation
for the payment or repayment of money described in paragraphs (a) to (i)
above,
	 
	 	any such obligation being referred to below as a “Borrowing”.

	 	 	 	 	 
	 

	 	B.6.2
	 	To the extent that the Company has any Borrowings, the Disclosure Letter
contains adequate details thereof to identify it and the Sellers have provided to the
Purchaser copies of all relevant documents relating to Borrowings to identify the
amount outstanding or available to each of the Companies and all encumbrances to which
any asset of the Company is subject.
	 
	 	 	 	 
	 

	 	B.6.3
	 	The Company have not received notice (whether formal or informal) from any
person who is currently, or who has at any time since the Accounts Date been a lender
to it, requiring repayment of any Borrowing or intimating the enforcement by any such
lender of any encumbrance which it may hold over any assets of the Company and the
Sellers are not aware of any circumstances likely to give rise to any such notice
being given or which would enable any such notice to be given.
	 
	 	 	 	 
	 

	 	B.6.4
	 	No event or circumstance has occurred, or may occur with the giving of
notice, lapse of time, determination of materiality or satisfaction of any other
condition such as to entitle any person to require the payment or repayment of any
Borrowing before its normal or originally stated maturity or which is or shall be such
as to terminate, cancel or render incapable of exercise any entitlement to draw money
or otherwise exercise the rights of the Company.
	 
	 	 	 	 
	 

	 	B.6.5
	 	The total Borrowings of the Company from its bankers or any other source
does not exceed, and has not at any time exceeded, any

49

 

limitation on its borrowings contained in its articles of association or in any
facilities as set out in the Disclosure Letter, and there has been no
contravention of, or non-compliance with, any terms of any of the facilities.

	 	B.6.6	 	The Company has no outstanding liability (whether present or future) for the
indebtedness of any other person, nor is a party to any option or pre-emption right or
any guarantee, suretyship or any other obligation (whatever called) to pay, purchase
or provide funds (whether by the advance of money, the purchase of or subscription for
shares or other securities or the purchase of assets or services or otherwise) for the
payment of, or as an indemnity against the consequence of default in the payment of,
any indebtedness of any other person.
	 
	 	B.6.7	 	No person other than another Company has given any guarantee of or security
for any Borrowing granted to any of the Companies.
	 
	 	B.6.8	 	None of the facilities is dependent on the guarantee or indemnity of or any
security provided by a third party.

	B.7.	 	Liabilities and Guarantees

	 	B.7.1	 	The Company has no debts or other liabilities (including contingent
liabilities) other than those liabilities disclosed in the Accounts or incurred in the
ordinary and proper course of trading since the Accounts Date.
	 
	 	B.7.2	 	The Company has not disposed of or sub-let any interest in any lease in any
land or buildings the term of which has not expired, or otherwise in respect of which
the Company has an outstanding liability (including a contingent liability).
	 
	 	B.7.3	 	The Company has no outstanding liabilities (including contingent
liabilities) in respect of any guarantee or indemnity or in respect of any agreement
or arrangement pursuant to which the Company has disposed of any interest in any land
or buildings or other assets or business, and remains subject to any actual or
contingent liability.
	 
	 	B.7.4	 	To the extent that there are any, the Disclosure Letter contains details of
all outstanding guarantees, indemnities, security agreements, comfort letters or other
analogous or similar agreement given by, or for the benefit of, the Company.
	 
	 	B.7.5	 	The Company does not hold any guarantee or indemnity which is not valid and
enforceable by the Company in accordance with its terms.

	B.8.	 	Plant and equipment

Of the properties, buildings, plant, machinery, fixtures, fittings, equipment, vehicles,
furniture, materials and other assets (not being current assets) included in the Accounts
or acquired by the Company since the Accounts Date:

50

 

	 	(a)	 	none has been sold or disposed of at a figure lower than book value or an
open market arm’s length value whichever is the higher;
	 
	 	(b)	 	none has been or has been agreed to be let on hire or hire purchase or sold
on deferred terms;
	 
	 	(c)	 	none was acquired at a price in excess of market value at the time of
acquisition.

	B.9.	 	Government grants

	 	B.9.1	 	The Company has not applied for, or received, any grant or investment or
subsidy or financial assistance (“Grant”) from any government department or agency or
any local or other authority whether under any of the Industry Acts or as a regional
development grant or temporary employment subsidy or otherwise.
	 
	 	B.9.2	 	The Company has not done, or omitted to do, any act or thing which could
result in all or any part of any such Grant or other similar payment made or due to be
made to it becoming repayable or being forfeited or withheld in whole or in part.

	B.10.	 	Loans

	 	B.10.1	 	The Company has not lent any money which has not been repaid to it or owns the
benefit of any debt (whether present or future), other than, in either case, debts
accrued to it in the ordinary course of its business.
	 
	 	B.10.2	 	The Company has not lent any money which has not been repaid to it or acquired the
benefit of any debt (present or future), save for debts in respect of the sale of
trading stock in the normal course of trading.
	 
	 	B.10.3	 	The Company has not factored or discounted any debt owing to it or agreed to do so.
	 
	 	B.10.4	 	The Company has not made any loan or quasi-loan contrary to Part X of the Companies
Act 1985 or agreed to do so.

51

 

	C.	 	ASSETS
	 
	C.1.	 	Ownership and Possession of Assets

	 	C.1.1	 	The Company owned at the Accounts Date and had good and marketable title to
and (except for current assets subsequently sold or realised in the ordinary course of
business) still owns and has good and marketable title to all the assets included, or
which ought to have been included, in the Accounts.
	 
	 	C.1.2	 	Except as disclosed in the Accounts, none of the property, assets,
undertaking, goodwill or uncalled capital of the Company is subject to any
encumbrance, and no person has claimed to be entitled to an encumbrance in respect of
any such asset.
	 
	 	C.1.3	 	All of the tangible assets owned by the Company, or which the Company has
the right to use, are located at the Properties or are under the control of the
Company.

	C.2.	 	Leased Assets

	 	C.2.1	 	In respect of all plant, machinery and other tangible assets (other than
land and buildings) held by any of the Company under any lease or similar agreement:
	 
	 	(a)	 	no circumstance has arisen, in relation to any asset held by the Company
under a lease or similar agreement by which the rental payable has been, increased;
	 
	 	(b)	 	the amount of the last rental due from the Company is stated in the
Disclosure Letter and was no less than the amount properly payable under the lease
having regard to all its terms and, at the date of this Agreement, no circumstance
exists by which the lessor is or might be entitled to require an upward adjustment to
the rental; and
	 
	 	(c)	 	no inquiry or investigation is being conducted by the Inland Revenue
concerning the availability to the lessor of capital allowances in respect of the
plant and machinery concerned.

	C.3.	 	Retention of Title

The Company has not acquired or agreed to acquire any goods (including any plant or
equipment) or materials on terms that title to them does not pass until full payment is
made or all indebtedness discharged.

	C.4.	 	Rental payments

Rentals payable by each of the Companies under any leasing, hire-purchase or other similar
agreement to which that Company is a party are set out in the Disclosure Letter and have
not been and are not likely to be increased and all such rentals are fully deductible by
that Company for tax purposes.

52

 

	C.5.	 	Insurance

	 	C.5.1	 	All of the Policies of Insurance currently in force in relation to the
Company are set out in the Disclosure Letter. There are no claims currently being
pursued in respect of such insurance.

53

 

	D.	 	BUSINESS
	 
	D.1.	 	Conduct of Business

	 	D.1.1	 	The Company has at all times carried on business and conducted its affairs
in all material respects in accordance with its articles of association for the time
being in force and as far as the Sellers are aware having made no specific enquiries
any other documents to which it is, or has been, a party.
	 
	 	D.1.2	 	As far as the Sellers are aware the Company is empowered and duly qualified
to carry on business in all jurisdictions in which it now carries on business.
	 
	 	D.1.3	 	The Company has not received any process, notice or letter of complaint
(formal or informal) by or on behalf of the European Commission, the EFTA Surveillance
Authority, the Office of Fair Trading, the Competition Commission, the Secretary of
State for Trade and Industry, or any other competition or other authority having
jurisdiction in competition or anti-trust matters in relation to any agreement,
arrangement, concerted practice or course of conduct to which the Company is or is
alleged to be a party under or in respect of the competition law of the European
Community or of the European Economic Area or any competition or anti-trust
legislation or regulation(s) of any country in which the Company has assets or carries
on or intends to carry on business, or where its activities may have an effect.
	 
	 	D.1.4	 	The Company has not:

	 	(a)	 	given any undertaking or assurance (whether or not
legally binding) to; or
	 
	 	(b)	 	become or been made subject to any order of or
investigation by; or
	 
	 	(c)	 	received any request for information from;

any court or the European Commission, the EFTA Surveillance Authority, the Office
of Fair Trading, the Competition Commission, the Secretary of State for Trade and
Industry, or any other competition or other authority having jurisdiction in
competition or anti-trust law or regulatory matters in any country in which the
Company has assets or carries on or intends to carry on business or where its
activities may have an effect.

	 	D.1.5	 	The Company is not and has not been a party to or concerned in any
agreement, arrangement or concerted practice or any acts or conduct in respect of
which:

54

 

	 	(a)	 	any application under Article 81 and/or Article 82 of the
EC Treaty for negative clearance and/or notification for exemption has been
made to the European Commission; and/or
	 
	 	(b)	 	any application or notification under sections 13, 14, 21
or 22 of the Competition Act 1998 has been made to the Director General of
Fair Trading or the Office of Fair Trading or any sectoral regulator.

	 	D.1.6	 	The Company is not and has not been in receipt of any aid which could be
construed as falling within Article 87(1) of the EC Treaty other than aid which has
been duly notified to the European Commission pursuant to Article 88(3) of the EC
Treaty or which is de minimis within the meaning of Commission Regulation (EC) No.
69/2001, and the Sellers are not aware of any investigation, complaint, action or
negative decision in relation to the receipt or alleged receipt by the Business of any
aid or alleged aid or any threatened such investigation, complaint, action or negative
decision.

	D.2.	 	Undertakings, etc.

	 	D.2.1	 	The Company is not a party to any undertaking or assurance given to any
national or supra-national authority or any court or governmental or other agency or
regulatory body or in respect of which an order has been made by any such body which
is still in force.
	 
	 	D.2.2	 	The Company has not received any request for information, statement of
objections or similar matter from any body within paragraph A.D.2.1.

	D.3.	 	Suppliers and customers

	 	D.3.1	 	To the best of the Sellers’ knowledge, information and belief no material
supplier, customer or person who has had repeated dealings with the Company since the
date 12 months prior to the Accounts Date:

	 	(a)	 	has ceased dealing with the Company; or
	 
	 	(b)	 	has substantially reduced its dealings with the Company;
or
	 
	 	(c)	 	has changed substantially the terms on which it is
prepared to trade with the Company.

	 	D.3.2	 	As far as the Sellers are aware having made no specific enquiry there are no
special circumstances which might lead to the manufacture by any Company of any goods,
or the supply by that Company by or to it of any goods or services being restricted or
hindered.
	 
	 	D.3.3	 	The Disclosure Letter contains details of all customers (or groups of
connected customers) responsible for 10% or more of the turnover of the Company, since
the Accounts Date or in the financial period ended on the Accounts Date.

55

 

	D.4.	 	Trading contracts and outstanding offers

	 	D.4.1	 	The Company will not be required after the date of this Agreement to
undertake any work or supply any goods or services except on normal commercial terms
under a contract entered into on or before the date of this Agreement.
	 
	 	D.4.2	 	No offer, tender or the like which is capable of being converted into an
obligation of the Company by an acceptance or other act of some other person is
outstanding, except offers or tenders of a non-material nature in the ordinary course
of its business.

	D.5.	 	Defective products and installation

	 	D.5.1	 	The Company has not accepted any obligation to service, repair or maintain
any system or product installed, serviced or repaired by it or by any third party
other than on arm’s length terms in the normal course of business.
	 
	 	D.5.2	 	The Company has not experienced significant defects with the performance of
any of its software products which it has licensed and/or sold beyond routine
maintenance requirements.

	D.6.	 	Material contracts

	 	D.6.1	 	The Company is not a party to any contract, arrangement, or obligation
which, whether by reason of its nature, term, scope, price or otherwise, is or is
likely to be of material importance to its business, profits or assets, or which:

	 	(a)	 	is not in the ordinary course of its business; or
	 
	 	(b)	 	is of major significance to the Company;

	D.7.	 	No powers of attorney

	 	D.7.1	 	None of the Companies has granted any power of attorney which remains in
force; and
	 
	 	D.7.2	 	No other authority (express, implied or ostensible) has been given by the
Company which remains in force to any person to enter into any contract or commitment
or do anything on its behalf other than any authority of employees to enter into
routine trading contracts in the normal course of their duties.

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	E.	 	TAXATION
	 
	E.1.	 	General/ Compliance

	 	E.1.1	 	All Tax prior to the date of this Agreement for which the Company is liable
or for which it is liable to account has been duly paid (insofar as such Tax ought to
have been paid) and the Company has made all such deductions and retentions as it was
obliged or entitled to make, including, for the avoidance of doubt, all VAT, sums
payable under the PAYE system and any amounts of a corresponding nature payable to any
foreign Tax Authority.
	 
	 	E.1.2	 	Since the Accounts Date, the Company has not been involved in any
transaction which has given or so far as the Sellers are aware is likely to give rise
to a liability to Tax on the Company (or would have given rise to such a liability but
for the availability of any relief) other than Tax in respect of normal trading income
or receipts of the Company arising from transactions entered into in the ordinary
course of business.
	 
	 	E.1.3	 	All necessary information, notices, computations and returns which are
required by law to have been submitted by the Company to any relevant Tax Authorities
have been submitted within the prescribed time limits, including for the avoidance of
doubt all claims, disclaimers and elections which on or before the date of this
Agreement are required by law to have been made, given or delivered for Tax purposes.
All such information, notices, computations and returns were and, so far as the
Sellers are aware, remain true and accurate in all material respects, no adjustment
relating to such returns has been suggested and no return is the subject of any
questions or dispute . All records which are required to be maintained in respect of
the aforementioned information have been maintained, so far as the Sellers are aware,
in all material respects.
	 
	 	E.1.4	 	Since the Accounts Date, no accounting period of the Company for the
purposes or any Tax has ended.
	 
	 	E.1.5	 	The Company has not, within the statutory limitation period in each relevant
jurisdiction ending on the date of this Agreement, paid or become liable to pay to any
Tax Authority, and so far as the Sellers are aware there are no circumstances as at
the date hereof by reason of which it may become liable to pay, any material penalty,
fine, surcharge or interest in respect of Tax.
	 
	 	E.1.6	 	There is not, and has not in the last three years been, any material
enquiry, dispute or disagreement with any Tax Authority nor so far as the Sellers or
the Company are aware are there any circumstances at the date hereof which make it
likely that an investigation, enquiry or non-routine visit will be made by any Tax
Authority within the next twelve months.
	 
	 	E.1.7	 	No Tax Authority has operated or agreed to operate any special arrangement
(being an arrangement which is not based on relevant

57

 

legislation or any published practice) in relation to the affairs of the Company.

	E.2.	 	Claims and Clearances

	 	E.2.1	 	The Company has not entered into any transaction in respect of which any
consent or clearance was required or sought from any Tax Authority without such
consent or clearance having first been properly obtained, any application for such
clearance or consent has been made on the basis of full and accurate disclosure of all
relevant material facts and considerations, and all such transactions have been
carried into effect only in accordance with the terms of the relevant clearance or
consent.
	 
	 	E.2.2	 	The Disclosure Letter gives full details of all claims (including
supplementary claims) for relief or repayment, elections for a basis, system, method
or type of relief from Tax, applications for postponement or appeals (including a
further appeal) against an assessment to Tax assumed to have been made for the
purposes of the Accounts that have not actually been made at the date hereof and any
such claim, election, application or appeal which the Company has at the date hereof
an outstanding entitlement or obligation to make.

	E.3.	 	Capital Expenditure

	 	E.3.1	 	No balancing charge under the Capital Allowances Act 2001 or any other
legislation relating to capital allowances would be made on the disposal of any pool
of assets or of any asset not in such a pool, on the assumption that the disposals are
made for a consideration equal to the book value shown in or adopted for the purpose
of the Accounts for the assets in the pool or (as the case may be) for the asset.
	 
	 	E.3.2	 	So far as the Sellers are aware, no event has occurred since the Accounts
Date otherwise than in the ordinary course of business whereby any balancing charge
may fall to be made against, or any disposal value may fall to be brought into account
by the Company under the Capital Allowances Act 2001 or any other legislation relating
to any capital allowances.
	 
	 	E.3.3	 	None of the assets of the Company is a wasting asset within the meaning of
section 44 of the Taxation of Chargeable Gains Act 1992.
	 
	 	E.3.4	 	The Company has not elected to have any asset treated as a short-life asset
as defined in section 83 of the Capital Allowances Act 2001 nor been taken to have
made an election under section 89(4) of the Capital Allowances Act 2001.
	 
	 	E.3.5	 	The Company has not made any claim for capital allowances in respect of any
asset which is leased to or from or hired to or from the Company and no election
affecting the Company has been made or agreed to be

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made under sections 177 (equipment lessors) or 183 (incoming lessee) of the
Capital Allowances Act 2001.

	 	E.3.6	 	The Disclosure Letter gives full details of any disclaimers of capital
allowances.
	 
	 	E.3.7	 	The Company has not claimed any research and development Tax relief or Tax
credit.

	E.4.	 	Chargeable Gains

	 	E.4.1	 	The Company has not, within seven years before Completion, disposed of any
asset otherwise than in the ordinary course of its trade.
	 
	 	E.4.2	 	In respect of any disposal by the Company immediately following Completion
of an asset which it owns at the date of this Agreement:

	 	(a)	 	for a consideration equal to the value of that asset
taken for the purposes of the Accounts (if it was owned by the Company on
the Accounts Date), the Tax liability thereby incurred would not exceed the
amount taken into account in computing the provision for deferred Tax as
stated in the Accounts; and
	 
	 	(b)	 	for a consideration equal to that for which the asset was
acquired (if it was acquired after the Accounts Date), no liability to Tax
would arise.

	E.5.	 	Intangible Assets

	 	E.5.1	 	The Disclosure Letter sets out the amount of expenditure on each of the
intangible fixed assets (within the meaning of Schedule 29 to the Finance Act 2002
(“Schedule 29”)) of the Company and provides the basis on which any debit relating to
that expenditure has been taken into account in the Accounts or, in relation to
expenditure incurred since the Accounts Date, will be available to the Company. So
far as the Sellers are aware, no circumstances have arisen since the Accounts Date by
reason of which that basis might change.
	 
	 	E.5.2	 	The Company does not own any asset which has, since the Accounts Date,
ceased to be a chargeable intangible asset in the circumstances described in paragraph
108 of Schedule 29 and has not since the Accounts Date realised or acquired an
intangible fixed asset for the purposes of Schedule 29.
	 
	 	E.5.3	 	No claims or elections have been made by the Company under Part 7 (rollover
relief) or paragraph 86 (postponement of charge on transfer of assets to non-resident
company) of Schedule 29 to the Finance Act 2002 in respect of any intangible fixed
asset of the Company.

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	E.6.	 	Distributions and Other Payments

	 	E.6.1	 	The Company has not at any time made any distribution or deemed distribution
within the meanings of sections 209 or 210 of the Taxes Act 1988, except dividends
shown in its audited accounts, nor issued any share capital which is of a relevant
class as defined in section 249(2) of the Taxes Act 1988, nor is it bound to do so.
	 
	 	E.6.2	 	The Company has not, within seven years before Completion, repaid, redeemed
or purchased or agreed to repay, redeem or purchase any of its share capital, or
capitalised or agreed to capitalise in the form of shares or debentures, any profits
or reserves of any class or description, or otherwise agreed to issue share capital
otherwise than wholly for new consideration.
	 
	 	E.6.3	 	The Company has not, within seven years before Completion, been a party to
any of the transactions set out in sections 213 to 218 of the Taxes Act 1988 (exempt
distributions on demerger).
	 
	 	E.6.4	 	To the best of the Sellers’ knowledge, information and belief all rents,
interest, annual payments and other sums of an income nature paid or payable by the
Company are wholly allowable as deductions, management expenses or charges in
computing income for the purposes of corporation tax.

	E.7.	 	Close Companies

	 	E.7.1	 	The Company has never been a close investment holding company as defined in
section 13A of the Taxes Act 1988.
	 
	 	E.7.2	 	No loan or advance within section 419 of the Taxes Act 1988 has been made or
released by the Company and there is no agreement or arrangement for such loan advance
or debt to be made or released.
	 
	 	E.7.3	 	To the best of the Sellers’ knowledge, information and belief, the Company
has not met any expenses for participators treated as a distribution by virtue of
sections 418 of the Taxes Act 1988 and there has been no alteration of the share or
loan capital of the Company within section 98 of the Inheritance Tax Act 1984.

	E.8.	 	Groups

	 	E.8.1	 	The Company has not entered into or agreed to enter into an election
pursuant to sections 171A or 179A of the Taxation of Chargeable Gains Act 1992 or
paragraph 66 of Schedule 29 to the Finance Act 2002.
	 
	 	E.8.2	 	So far as the Sellers are aware, the Company has not incurred any liability
or contingent liability under section 176 of the Taxation of Chargeable Gains Act 1992
(depreciatory transactions within a group).

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	 	E.8.3	 	The Company has not entered into or become subject to any group arrangement
under section 36 of the Finance Act 1998 for the payment of corporation tax.
	 
	 	E.8.4	 	So far as the Sellers are aware, neither the execution nor completion of
this Agreement nor any other event since the Accounts Date will result in any
chargeable asset being deemed to have been disposed of and reacquired by virtue of
section 179 of the Taxation of Chargeable Gains Act 1992 or paragraphs 58 to 60 of
Schedule 9 to the Finance Act 2002.
	 
	 	E.8.5	 	Except as provided in the Accounts, the Company will not be obliged to make
or entitled to receive any payment for group relief as defined in section 402(6) of
the Taxes Act 1988 in respect of any period ending on or before the Accounts Date.
	 
	 	E.8.6	 	Except as provided in the Accounts, the Company will not be obliged to make
or entitled to receive any balancing payment within paragraph 7A of Schedule 28AA to
the Taxes Act 1988.

	E.9.	 	Secondary Liabilities

The Company is not, and so far as the Sellers are aware will not become, liable to pay any
Tax or be deprived of any relief otherwise available to it or to make reimbursement or
indemnity in respect of any Tax, for which any other person or company is primarily liable.

	E.10.	 	Loan Relationships and Derivative Contracts

	 	E.10.1	 	All interests, discounts or premiums payable by the Company in respect of its loan
relationships (within the meaning of section 81 of the Finance Act 1996) are eligible
to be brought into account by the Company as a debit for the purposes of Chapter II of
Part IV of the Finance Act 1996 at the time and to the extent that such debits are
recognised in the Company’s statutory accounts.
	 
	 	E.10.2	 	In relation to each of its loan relationships, the Company operates and has in each
accounting period of the Company ending after 31 March 1996 operated, an accruals
basis of accounting authorised pursuant to section 85 of the Finance Act 1996.
	 
	 	E.10.3	 	No debtor relationship of the Company (within the meaning of section 103 of the
Finance Act 1996) constitutes a relevant discounted security as defined in paragraph 3
of Schedule 13 to the Finance Act 1996 to which paragraphs 17 or 18 of Schedule 9 to
the Finance Act 1996 applies.
	 
	 	E.10.4	 	The Company has not been a party to a loan relationship which has an unallowable
purpose within the meaning of paragraph 13 of Schedule 9 to the Finance Act 1996.
	 
	 	E.10.5	 	The Company is not a party to a derivative contract for the purposes of Schedule 26
to the Finance Act 2002.

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	E.11.	 	Share Scheme Incentives

	 	E.11.1	 	The Disclosure Letter contains details of all rights granted over or in respect of
any shares of the Company and any arrangement to which the Company has been party in
connection with the grant of such right, to, or in relation to, any employee or
officer or former employee or officer of the Company or any other company, including:

	 	(a)	 	any legislation under which the scheme has been approved
or operates;
	 
	 	(b)	 	the names of grantees and numbers of shares granted, or
shares over which rights are granted, to each grantee; and
	 
	 	(c)	 	in relation to options over shares, details of vesting
schedules and whether exercise will be accelerated by any of the
transactions contemplated by this Agreement.

	 	E.11.2	 	The Company has not issued any restricted securities, convertible securities or
securities with an artificially enhanced or depressed value within the meanings given
in the Income Tax (Earnings and Pensions) Act 2003.

	E.12.	 	Inheritance Tax

	 	E.12.1	 	The Company has not at any time:

	 	(a)	 	made a transfer of value (as defined in Part I of the
Inheritance Tax Act 1984);
	 
	 	(b)	 	been party to associated operations in relation to a
transfer of value as defined by section 268 of the Inheritance Tax Act 1984;
or
	 
	 	(c)	 	received any value such that liability may arise under
section 199 of the Inheritance Tax Act 1984.

	 	E.12.2	 	No HM Revenue & Customs charge (as defined in sections 237 and 238 of the
Inheritance Tax Act 1984) is outstanding over any asset of the Company or in relation
to any of the Shares.

	 	E.12.3	 	So far as the Sellers are aware, no circumstances exist whereby the power of sale
mentioned in section 212(1) of the Inheritance Tax Act 1984 could be exercised in
relation to the Shares or any assets of the Company.

	E.13.	 	Stamp Duty

	 	E.13.1	 	All documents in the possession or under the control of the Company or to the
production of which the Company is entitled which establish or are necessary to
establish the title of the Company to any asset owned by the Company as at Completion
have been duly stamped or

62

 

adjudicated not liable, and so far as the Sellers are aware, no such documents
which are outside the United Kingdom would attract stamp duty if they were
brought into the United Kingdom and the Company has no outstanding liabilities to
stamp duty land tax or stamp duty reserve tax.

	 	E.13.2	 	Neither the sale and purchase of the Shares as contemplated by this Agreement nor
any other event since the Accounts Date will, so far as the Sellers are aware, give
rise to the withdrawal of a stamp duty or stamp duty land tax relief granted to the
Company on or before Completion.

	E.14.	 	Value Added Tax

	 	E.14.1	 	The Principal Company is duly registered for the purposes of VAT with quarterly
prescribed accounting periods, such registration not being subject to any conditions
imposed by or agreed with any Tax Authority and each Subsidiary is duly registered for
VAT or any equivalent sales or turnover tax in its jurisdiction of incorporation.
	 
	 	E.14.2	 	The Company is not nor has been treated for VAT purposes as a member of any group
within Section 43 of the Value Added Tax Act 1994, other than a group comprising of
the Principal Company and the Subsidiaries alone, and no direction has been given by
any Tax Authority as a result of which the Company would be treated for the purposes
of VAT as a member of any such group under Schedule 9A to the Value Added Tax Act
1994.
	 
	 	E.14.3	 	The Company is not partially exempt for the purposes of VAT.
	 
	 	E.14.4	 	The Disclosure Letter contains all particulars of all elections to waive exemption
in relation to any of the Properties made or agreed to be made under Schedule 10 to
the Value Added Tax Act 1994 (“Schedule 10”) by the Company or a relevant associate of
the Company (within the meaning of paragraph 3(7) of Schedule 10). No such election
has or will be disapplied by virtue of a building being used for exempt purposes or
because the Company is a developer for the purposes of paragraph 2(3AA) of Schedule
10.
	 
	 	E.14.5	 	The Company is not liable under parts XVIII or XIX of the Value Added Tax
Regulations 1995 to repay any VAT refunded to it.
	 
	 	E.14.6	 	The Company is not operating any special arrangement or special scheme relating to
VAT and is not and has not agreed to be an agent for any other person in relation to
any supply.
	 
	 	E.14.7	 	The Company is not the owner or to be treated as the owner of a capital item to
which Part XV of the Value Added Tax Regulations 1995 applies.

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	E.15.	 	Company Residence and Overseas Dealings

	 	E.15.1	 	The Principal Company has always exclusively been resident in the United Kingdom for
Tax purposes and has not been treated for the purposes of any double taxation
arrangements having effect by virtue of section 249 of the Finance Act 1994 and
section 788 of the Taxes Act 1988 as resident in any other jurisdiction and no
circumstance or arrangement exists which would or may cause the Principal Company to
cease to be exclusively resident in the United Kingdom for Tax purposes.
	 
	 	E.15.2	 	The Company:

	 	(a)	 	has never carried on and does not carry on any trade,
business or other activity (including, without limitation, the ownership or
entitlement to any asset or interest in any asset or the deriving of any
income, profits or gains) outside the United Kingdom; and
	 
	 	(b)	 	does not have and has not at any time had any branch,
agency or permanent establishment outside the United Kingdom or any interest
in any non-resident body corporate or entity.

	 	E.15.3	 	The Company has not, without the prior consent of HM Treasury, caused, permitted or
entered into any of the transactions specified in section 765 of the Taxes Act 1988
(migration of companies) and has not done so without satisfying the requirements of
section 130(2) and (3) of the Finance Act 1988.

	E.16.	 	Tax Avoidance

	 	E.16.1	 	The Company has never entered into, been party to or otherwise been concerned with
any event as a result of which any of the following provisions applies or so far as
the Sellers are aware may apply:

	 	(a)	 	Part XVII of the Taxes Act 1988; or
	 
	 	(b)	 	sections 29 to 34 of the Taxation Capital Gains Act 1992.

	 	E.16.2	 	All transactions or arrangements made by the Company have been made on fully arm’s
length terms and so far as the Sellers are aware there are no circumstances existing
in which section 770A of, or Schedule 28AA to, the Taxes Act 1988 or any other
provision could apply such that any Tax Authority would make an adjustment to the
terms on which such transaction or arrangement is treated as being made for Tax
purposes.
	 
	 	E.16.3	 	The Company has not been involved in any transaction or series of transactions the
sole or one of the main purposes of which is a reduction in the Tax liability of any
person.
	 
	 	E.16.4	 	The Company has not been involved in any transaction or series of transactions to
which Part 7 of the Finance Act 2004 or section 58A of or
Schedule 11A to the Value Added Tax Act 1994 or any regulations made under any of
these provisions apply.

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	F.	 	IPR AND TECHNOLOGY

Interpretation

For purposes of this Part, unless the context otherwise requires:

“Annexure” means one of the annexures numbered 1 to 12 to the Agreement entitled “Details
of IPR and Technology” identifying the matters referred to in this Part;

“Commercially Significant Unregistered Company IPRs” means all unregistered IPRs which are
used by the Company in the course of its businesses (other than the Licensed-In IPRs) and
which are commercially material to the carrying on of its business;

“Company IPRs” means the Registered Company IPRs and the Commercially Significant
Unregistered Company IPRs;

“Company IT System” means all core computer software and hardware, and telecommunications,
network and internet-related equipment which is owned or used by the Company in the course
of its business, together with the Company Websites excluding the Company Software
Products;

“Company Software Products” means any software products developed by or on behalf of the
Company which are currently marketed or intended to be marketed by or on behalf of the
Company;

“Company Websites” means the websites operated by or on behalf of the Company, as listed in
Annexure 10;

“Domain Names” means the domain names used by, or obtained for use, by the Company in the
course of carrying on its business;

“IPR Licences-out” means all agreements, arrangements and understandings under which the
Company permits any third party to use (i) any Company IPRs or (ii) any Licensed-In IPRs in
a manner authorised by the relevant Third Party IPR Agreement, and which (in either case)
are currently in force excluding sales to customers;

“IPRs” means:

	 	(i)	 	patents, designs and trade marks (whether registered or unregistered),
copyright and related rights, database rights, know-how and confidential information;
	 
	 	(ii)	 	all other intellectual property rights and similar or equivalent rights
anywhere in the world which currently exist or are recognised in the future; and
	 
	 	(iii)	 	applications, extensions and renewals in relation to any such rights;

“Licensed-In IPRs” means all IPRs which are licensed from a third party (whether a member
of the Seller’s Group or an arms length entity) and which (in

65

 

either case) are or have been used by the Company under the terms of a Third Party IPR
Agreement;

“Registered Company IPRs” means all IPRs which are registered, or have been applied for, by
or on behalf of the Company; and

“Third Party IPR Agreement” means:

	 	(i)	 	all agreements listed in Annexure 4 which contain a licence of any
Licensed-In IPRs to the Company;
	 
	 	(ii)	 	all information technology-related agreements listed in Annexure 4 which
contain a licence of Licensed-In IPRs (in relation to software or otherwise) to the
Company; and
	 
	 	(iii)	 	all other agreements, arrangements and understandings (written or oral)
under which a third party permits the Company to use Licensed-In IPRs.

	F.1.	 	Confidential Information

	 	F.1.1	 	The Company does not use any processes or business methods, and is not
engaged in any activities, which involve the misuse or alleged misuse of any
confidential information belonging to any third party, nor does the Company require
access to such confidential information, other than under agreements which are valid
and in force.
	 
	 	F.1.2	 	The Sellers are not aware of any actual or alleged misuse by any person of
any of the confidential information (including customer lists and other business
databases which are maintained by or on behalf of the Company in any format or
medium).
	 
	 	F.1.3	 	The Company has not disclosed to any person any of its Confidential
Information, except:

	 	(a)	 	to its professional advisers under circumstances where;
or
	 
	 	(b)	 	where such disclosure was properly made in the normal
course of the Company’s business;
	 
	 	(c)	 	the recipient is obliged to maintain the secrecy of the
Confidential Information by law or under rules of professional conduct or,
as the case may be, under a written agreement, and is restrained from
further disclosing or using it other than for the purposes for which it was
disclosed by the Company.

	F.2.	 	Intellectual Property Rights

	 	F.2.1	 	To the best of the Sellers’ knowledge and belief annexures 1 and 2 contain
complete, accurate and up-to-date details of the following Intellectual Property
Rights:

	 	(a)	 	the Registered Company IPRs (Annexure 1); and

66

 

	 	(b)	 	the Commercially Significant Unregistered Company IPRs
(Annexure 2).

	 	F.2.2	 	The relevant Company identified in Annexures 1 and 2 is the sole legal and
beneficial owner and, where registered or applied for, the sole registered proprietor
of all Company IPRs, free of all Encumbrances.
	 
	 	F.2.3	 	All Company IPRs have been created or developed by employees of the relevant
Company on written terms vesting ownership of those IPRs in that Company. The
Disclosure Letter contains a copy of the standard terms and conditions of employment
of the Company. The ownership of Company IPRs which were created or developed by any
third party (including consultants, service providers, sub-contractors or otherwise)
is determined by written contracts which transfer ownership to the relevant Company
without conditions or restrictions, or with conditions which have been satisfied.
	 
	 	F.2.4	 	The Company IPRs and the Licensed-In IPRs are all the IPRs which the Company
has required in the last 12 months to carry on its business.
	 
	 	F.2.5	 	To the best of the Sellers’ knowledge and belief the transaction envisaged
by this Agreement will not affect either the validity or the subsistence of any
Company IPRs, nor the right of the Company to use the Licensed-In IPRs.
	 
	 	F.2.6	 	To the best of the Sellers’ knowledge and belief none of the activities of
the Company, and none of the Company IPRs, infringe or have been alleged or claimed to
infringe, the IPRs of any third party, or to constitute an unauthorised use of any
confidential information or trade secrets of any third party.
	 
	 	F.2.7	 	The Registered Company IPRs are valid and enforceable and not subject to any
claims, challenges, or proceedings.
	 
	 	F.2.8	 	The Company has made all material payments of fees, costs, charges and taxes
which are necessary in order to apply for, prosecute, maintain and renew the
Registered Company IPRs. Such payments have been made at the due time. The Sellers
are unaware of any act or omission of any third party (including licensors under Third
Party IPR Agreements which could jeopardise the validity or subsistence of any Company
IPRs, or Licensed-In IPRs.
	 
	 	F.2.9	 	Annexure 3 contains a complete and up-to-date list of all IPR Licences-out,
excluding Company Software Products.
	 
	 	F.2.10	 	To the best of the Sellers’ knowledge and belief, no licensee under any IPR
Licence-out is in material breach of agreement, and there are no material disputes or
threatened or pending disputes in relation to any of them.

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	 	F.2.11	 	To the best of the Seller’s knowledge and belief, no third party has made
unauthorised use of any Company IPRs or any exclusively Licensed-In IPRs, or
threatened to do so.
	 
	 	F.2.12	 	Annexure 4 contains complete copies of all Third Party IPR Agreements, or, where no
written agreement exists, full descriptions of all relevant arrangements and
understandings. All trade marks comprised within the Licensed-In IPRs, and Trade
Marks, as defined in this Agreement, are listed in the Disclosure Letter.
	 
	 	F.2.13	 	All material Third Party IPR Agreements are valid and in force. The Company has and,
to the best of the knowledge and belief of the Sellers, all counterparties have
complied with their respective obligations under all Third Party IPR Agreements. No
third party licensor has notified the Company of its intention to terminate any Third
Party IPR Agreement, and no disputes are pending or threatened in relation to any
Third Party IPR Agreement.
	 
	 	F.2.14	 	To the best of the Sellers’ knowledge and belief annexure 6 contains an accurate,
complete and up-to-date list of all Domain Names. All Domain Names are registered in
the name of the Company as specified in that part of the Schedule. All Domain Name
registrations have been renewed when due, and the Sellers are not aware of any misuse
or threatened misuse of any of the Domain Names by any third party.

	F.3.	 	Business names

The Company does not use on its letterhead, business cards, brochures, other stationery,
books, websites, intranet, e-mails, vehicles, nor otherwise any name other that its own
corporate name nor does it otherwise carry on in business under such other name.

	F.4.	 	Data Protection and Customer Lists

	 	F.4.1	 	End X Limited has a current notification under the UK Data Protection Act
1998 (“the DPA 1998”) on terms which are appropriate to cover their current and
foreseeable activities in relation to their respective businesses.
	 
	 	F.4.2	 	As far as the Sellers are aware having made no specific enquiries, End X
Limited has complied in all material respects with the DPA 1998, and its preceding
legislation the Data Protection Act 1984 (“the DPA 1984”).
	 
	 	F.4.3	 	The Company has provided all information to individuals, and obtained all
consents from individuals, which are required under the DPA 1998 and the DPA 1984 in
order to use personal data about those individuals for the purposes of the business of
the Company.
	 
	 	F.4.4	 	The Company has created and maintains its customer lists and databases in
accordance with the requirements of the DPA 1998, and all other applicable laws.

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	 	F.4.5	 	No notices, complaints or other correspondence have been received by the
Company from the UK Information Commissioner, or from any third party, and to the best
of the Sellers’ knowledge and belief no such notices have been received by the UK
Information Commissioner, regarding breach or alleged breach by the Company of its
obligations under the DPA 1998 or the DPA 1984, and no dispute has arisen or is
threatened in relation to the same.

	F.5.	 	Information Technology and Company Websites

	 	F.5.1	 	To the best of the Sellers’ knowledge and belief annexure 7 contains a
complete, accurate and up-to-date list of all material software hardware and other
equipment which are used as part of the Company IT System, and the agreements relating
to that software, hardware and equipment.
	 
	 	F.5.2	 	To the best of the Sellers’ knowledge and belief the Company either owns or
has the right to use all material elements of the Company IT System under licences,
leases or other written agreements which are currently in force and have been complied
with by the Company.
	 
	 	F.5.3	 	The Company IT System is free from material defects and has operated
substantially in accordance with the requirements of the Company.
	 
	 	F.5.4	 	The Company IT System has the capacity and performance features necessary to
fulfil the requirements of the Company as at the date of this Agreement.
	 
	 	F.5.5	 	No part of the Company IT System is the subject of any dispute or challenge
involving the Company, whether as to ownership, performance, rights of use, quality,
security, maintenance or otherwise.
	 
	 	F.5.6	 	The occurrence of the Year 2000 date change had no impact on or after 1
January 2000 upon the business or operations of the Company or on the Company IT
System.
	 
	 	F.5.7	 	All products and services provided by third parties to the Company in
relation to the Company IT System, including development, hardware and product supply,
systems integration, support, maintenance, disaster recovery, telecoms, network and
internet services, hosting and outsourcing, have been supplied and/or performed in
accordance with all applicable agreements, arrangements and understandings (together
“IT agreements”), and are appropriate to meet the current requirements of the business
of the Company.
	 
	 	F.5.8	 	Annexure 9 contains a list of all third party software used by the Company
where the source code for the software is held in escrow. To the best of the Sellers’
knowledge and belief, the materials held in escrow are complete and up-to-date and
meet the requirements of all relevant source code escrow agreements.
	 
	 	F.5.9	 	If any person fails to provide maintenance or support or similar services to
any of the Companies in relation to the Company IT System, the

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relevant Company has the necessary rights and information to ensure that such
services are substantially provided either by its employees or by another third
party.

	 	F.5.10	 	Neither the Sellers nor the Company has disclosed to any third party any source code
or algorithms relating to the Company IT System.
	 
	 	F.5.11	 	All data relating to the business and operations of each of the Companies is
processed on IT systems which are owned by and under the control of the Company.
	 
	 	F.5.12	 	To the best of the Sellers’ knowledge and belief without making any enquiries the
Company has operated the parts of the Company Websites within their power and control
in accordance with all applicable laws, regulations and codes of practice.
	 
	 	F.5.13	 	No content supplied by the Sellers or the Company to any of the Company Websites
and, to the best of the Sellers’ knowledge and belief, no content supplied by any
third party, violates the IPRs or other rights of any third party, or is defamatory,
obscene or otherwise unlawful or improper, or breaches any terms of use governing any
of the Company Websites.
	 
	 	F.5.14	 	The Company own all Intellectual Property Rights in the design and layout of the
Company Websites.
	 
	 	F.5.15	 	The Company has acquired all rights which are required in order to make available
the content of the Company Websites. To the best of the Sellers’ knowledge and
belief, all third party providers of content and services to the Company Websites have
all rights which are necessary to make that content and those services available in
that manner.
	 
	 	F.5.16	 	So far as the Sellers are aware, there are no unauthorised hyperlinks to any of the
Company Websites, nor has any third party framed or co-branded any of the Company
Websites without the prior written consent of the Company.
	 
	 	F.5.17	 	To the best of the Sellers’ knowledge and belief there have been no disputes, actual
or threatened, involving the Company relating to any of the Company Websites.
	 
	 	F.5.18	 	So far as the Sellers are aware, there have been no virus or hacking attacks,
“denial of service” attacks or security breaches in relation to any of the Company
Websites or in relation to any other part of the Company IT System.
	 
	 	F.5.19	 	To the best of the knowledge and belief of the Sellers, there have been no breaches
of the Company’s currently applicable IT security policies. Each of the Companies has
appropriate procedures in place for preventing unauthorised access, for protection
against viruses, and for the taking and storing of back-up copies of data and software
processed

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by the Company IT System, in accordance with good industry standards.

	F.6.	 	Further Warranties in relation to Company Software Products

For purposes of this section:

“Third Party Reseller Products” means such products supplied to the Company under
distribution, value-added reseller or similar arrangements for onward supply to customers
by the Company.

	 	F.6.1	 	Annexure 11 contains a complete, accurate and up-to-date list of all Company
Software Products.
	 
	 	F.6.2	 	The Company owns all IPRs in the Company Software Products and has the right
to market the Third Party Reseller Products. All agreements relating to Third Party
Reseller Products are valid and in force. The Company and each third party
counterparty to those agreements has complied with them in all material respects and
there are no actual or pending disputes in relation to any of them.
	 
	 	F.6.3	 	To the best of the Sellers’ knowledge and belief the Company Software
Products comply with all legal and regulatory requirements in all territories in which
they are sold.
	 
	 	F.6.4	 	So far as the Sellers are aware, no user of any Company Software Products
has made any material complaint in relation to it, or threatened to withhold payment
otherwise due to the Company in relation to such use.
	 
	 	F.6.5	 	So far as the Sellers are aware, no customer or third party has used any
Company Software Products except in the manner permitted by the Company under relevant
licence agreements.
	 
	 	F.6.6	 	So far as the Sellers are aware, completion of the transaction contemplated
by this Agreement will have no effect as such upon the willingness of any customer to
continue to use Company Software Products.
	 
	 	F.6.7	 	Save in accordance with the Company’s escrow arrangements for the source
code of the Company Software Products, the Company has not disclosed any part of the
source code for any Company Software Products to any third party.
	 
	 	F.6.8	 	So far as the Sellers are aware having made no specific enquiry no reseller
of any of the Company’s Software Products has made any material complaint in relation
to it.
	 
	 	F.6.9	 	No user of any Company Software Products has sought to enforce an indemnity
in any of the IPR licence against the Company.

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	F.7.	 	Further Warranties in relation to Company Websites

	 	F.7.1	 	Annexure 6 contains a complete, accurate and up-to-date list of all material
agreements relating to the hosting of the Company Websites. Copies of these
agreements are attached with the Disclosure Letter.
	 
	 	F.7.2	 	The Sellers are not aware of any patents or patent applications of third
parties which could reasonably be used to challenge the method by which the Company
operates any of the Company Websites or the technology or business methods or
techniques used in connection with those websites.
	 
	 	F.7.3	 	To the best of the Sellers’ knowledge and belief the operation of the
Company Websites complies with the Consumer Protection (Distance Selling) Regulations
2000, and the corresponding European Distance Selling Directive, to the extent that
this Regulation and the Directive apply to the Company Websites.
	 
	 	F.7.4	 	To the best of the knowledge and belief of the Sellers, the conduct of all
users of the Company Websites has been lawful, and has complied with all rules and
procedures established by the Company relating to the use of the Company Websites
(including acceptable use policies, online privacy policies, and trading, auction and
other rules for the conduct of business via Company Websites).

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	G.	 	PROPERTIES

Interpretation

For the purpose of this Part, unless the context otherwise requires:

“Annexure” means the annexure to the Agreement entitled “Details of
Properties” identifying matters referred to in this Part G of the
Warranties.

	G.1.	 	Title

	 	G.1.1	 	The Properties are the only properties, used or occupied by the Company.
	 
	 	G.1.2	 	The Company is in exclusive occupation of the Properties.
	 
	 	G.1.3	 	The rents and any other monies due in relation to the Properties have been
paid and neither the Seller nor the Company has received notice of any outstanding
breach of covenant as regards any Property.

	G.2.	 	Contingent leasehold liabilities

	 	G.2.1	 	The Company is not or has not been a guarantor of a tenant’s covenants in
any lease.
	 
	 	G.2.2	 	The Company has not assigned any “old lease” (as defined in the Landlord and
Tenant (Covenants) Act 1995) under which it was the original tenant or of which it was
not the original tenant but in respect of which it entered into a covenant with the
landlord to observe and perform the tenant’s covenants under that lease.

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Annexure relevant to Section G of the Warranties in Schedule 4

to the Share Purchase Agreement

Details of Properties

Part 1: Registered Land

Freehold

	 
	Brief Description	 	Registered proprietor	 	 	Title number	 	 	Present use

Leasehold

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Date of	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Lease and	 	 	 	 	 	 	 	Rent	 	 	 	 
	Brief	 	Registered	 	Title	 	Original	 	Unexpired	 	Current	 	Review	 	 	 	New or
	Description	 	Proprietor	 	Number	 	Parties	 	Term	 	Rent	 	Dates	 	Present Use	 	Old Lease
	 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 

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	H.	 	ENVIRONMENT
	 
	 	 	So far as the Sellers are aware having made no enquiries, the Company has at all times
carried on its business in all respects in compliance with all applicable environmental
Acts or Orders or Regulations, has not carried out any act which will or may give rise to
any fine or penalty or default proceedings or other liability in relation to the Company
and the Seller has disclosed to the Purchaser in relation to the Company all circumstances
which could (through receipt of any notice or order or otherwise) give rise to a liability
pursuant to the Environmental Act 1985 nor is aware of any adverse environmental issues or
hazardous substances affecting the Property.

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	I.	 	EMPLOYEES
	 
	I.1.	 	Employees/Workers and Terms of Employment/Engagement

	 	I.1.1	 	   

	 	(a)	 	Full particulars of the identities and dates of
commencement of employment or engagement or appointment to office and all
material express terms and conditions of employment (including all
information required by law to be included in particulars of terms of
employment) and engagement of all the persons employed or engaged by the
Company (whether under a contract of service or a contract for services)
including (without limitation) all remuneration, incentives, bonuses,
expenses, profit sharing or commission arrangements and other payments,
share option schemes, contracts or policies of insurance and other benefits
whatsoever whether provided on a contractual or discretionary basis are
accurately set out or referred to in the Disclosure Letter.

	 	I.1.2	 	  

	 	(a)	 	The Disclosure Letter contains full and accurate
particulars of any outstanding offer of employment or engagement made to any
person by the Company; and
	 
	 	(b)	 	there is no person who has accepted an offer of
employment or engagement by the Company, but whose employment or engagement
has not yet started.

	 	I.1.3	 	There are no agreements or other arrangements, whether or not legally
binding, between the Company and any trade union or other body representing employees
or workers, nor has the Company recognised any trade union nor have any requests for
recognition, pursuant to Schedule A1 of the Trade Union and Labour Relations
(Consolidation) Act 1992 as amended, or otherwise, been received by the Company, nor
are there any works councils or staff associations or other employee representatives
in place.
	 
	 	I.1.4	 	In relation to each of the persons presently employed or engaged by the
Company (and so far as relevant to each person formerly employed or engaged by the
Company) the Company has:

	 	(a)	 	not received any complaint that it has not complied with
any obligations imposed on it by Articles of the Treaty of Rome, European
Commission Regulations and Directives and all statutes and regulations
relevant to the relations between it and its employees and workers or it and
any recognised trade union or the terms and conditions of employment or
engagement or conditions of work of such employees and workers;

76

 

	 	(b)	 	complied with all collective agreements for the time
being dealing with relations or the conditions or services of its employees
and workers; and
	 
	 	(c)	 	complied with all relevant orders and awards made under
any statute affecting the conditions of service of its employees and
workers.

	 	I.1.5	 	No person who has previously worked for the Company now has a right to
return to work or a right to be reinstated or re-engaged by the Company or to any
other compensation.
	 
	 	I.1.6	 	Save as disclosed in the Disclosure Letter there is no agreement,
arrangement, scheme or obligation for the payment of any pensions, allowances, lump
sums or other like benefits on retirement or on death or during periods of sickness or
disablement for the benefit of any of the persons employed or engaged or formerly
employed or engaged by the Company or for the benefit of dependants of such persons.
	 
	 	I.1.7	 	The Disclosure Letter contains full and accurate particulars of any
currently active agreement for the provision of consultancy services or other services
of personnel of or to the Company and of the terms applicable to the secondment to or
from the Company of any person.
	 
	 	I.1.8	 	There are no terms of employment or engagement for any person employed or
engaged by the Company which provide that a change in control of the Company (however
change of control may be defined, if at all) shall entitle the employee or worker to
treat the change of control as amounting to a breach of contract or entitling him to
any payment or benefit whatsoever or entitling him to treat himself as redundant or
otherwise dismissed or released from any obligation.
	 
	 	I.1.9	 	The Company has no obligation to make any payment on redundancy in excess of
the statutory redundancy payment and the Company has not operated any discretionary
practice of making any such excess payments.
	 
	 	I.1.10	 	No contract of service or contract for services exists between the Company and any
director or employee in relation to which any relevant requirements of section 319
Companies Act 1985 have not been fulfilled.
	 
	 	I.1.11	 	There are no agents of the Company who are subject to the Commercial Agents
Regulations 1985.
	 
	 	I.1.12	 	So far as the Sellers are aware having made no enquiries there are no acts or
omissions by the Company in relation to any of its employees officers or workers, or
their trade union or worker representatives, which could give rise to a successful
claim against the Company or the Purchaser.

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	 	I.1.13	 	No employee, officer or worker of the Company is subject to a current disciplinary
warning, proceeding or procedure.
	 
	 	I.1.14	 	So far as the Sellers are aware (without making enquiry) no employee or worker of
the Company is subject to any legally binding restrictive covenant with any previous
employer or otherwise which affects the performance of their duties for the Company.

	I.2.	 	Bonus, Profit Sharing and Share Option Schemes

	 	I.2.1	 	There are no schemes in operation by the Company under which any employee,
officer or worker of the Company is entitled to a commission or remuneration of any
other sort from the Company calculated by reference to the whole or part of the
turnover, profits or sales of the Company.
	 
	 	I.2.2	 	The Company does not operate an approved share option scheme or an approved
profit sharing scheme or company share option plan for the purposes of Sections 185
and 186 of the Taxes Act 1988 or Chapter 7 of Part 7 of the Income Tax (Earnings and
Pensions) Act 2003 (“Part 7”) or enterprise management incentives or an employee share
ownership plan or approved share incentive plan for the purposes of Sections 47 and 62
Finance Act 2000 or Chapter 6 or Chapter 9 of Part 7 or any unapproved share scheme
under which share benefits are provided for any employee, officer, worker or
consultant of the Company.

	I.3.	 	Changes in Remuneration

	 	I.3.1	 	Since the Accounts Date or (where employment or engagement or holding of
office commenced after the beginning of that period) since the commencement date of
the employment or engagement or holding of office:

	 	(a)	 	(other than those required by law) no material change has
been made in the rate of remuneration or the emoluments or pension benefits
of any officer or senior executive of the Company (a senior executive being
a person in receipt of remuneration in excess of £30,000 per annum);
	 
	 	(b)	 	no material change has been made in the terms of
employment or engagement of any officer or senior executive.

	 	I.3.2	 	No amounts due to or in respect of any person employed or engaged or
formerly employed or engaged by the Company (including all taxes, National Insurance
contributions and pensions contributions and any other levies) are in arrear or unpaid
other than reimbursement of expenses, wages for the current salary period and holiday
pay for the current holiday year.
	 
	 	I.3.3	 	No negotiations for any increase in the remuneration or benefit of any
officer, employee or worker of the Company are current,

78

 

	 	I.3.4	 	No proposal, assurance or commitment has been communicated to any employee
or other person working for the Company regarding any material change to his terms of
employment or engagement or working conditions or regarding the continuance,
introduction, increase or improvement of any benefit or any discretionary arrangement
and no negotiations have commenced for any such matter.

	I.4.	 	Termination of Contracts of Employment or Engagement

	 	I.4.1	 	All subsisting contracts of service and all contracts for services with any
individual to which the Company is a party are determinable on three months’ notice or
less without giving rise to a claim for damages for breach of contract.
	 
	 	I.4.2	 	No employee, worker or officer of the Company
	 
	 	 	 	has given or received notice terminating his employment or engagement except as
expressly contemplated in this Agreement;

	I.5.	 	Industrial Disputes, Employee and other claims

	 	I.5.1	 	The Company is not and none of its employees or workers are involved in any
industrial dispute with the Company and so far as the Sellers are aware without making
any enquiry, no industrial dispute involving the Company is threatened or anticipated.
	 
	 	I.5.2	 	There is no outstanding or (so far as the Sellers are aware, without making
any enquiry) threatened claim, dispute, legal proceeding or grievance against the
Company by any person who is now or has been employed or engaged by, or an officer of,
the Company, or any dispute between the Company and a material number or class of its
employees or workers whether arising under applicable legislation or otherwise.
“Applicable Legislation” means any statute, statutory or community regulation or
directive referred to in parts 1, 2 or 3 of the current edition of Butterworth
Employment Handbook.
	 
	 	 	 	and so far as the Sellers are aware (without making any
enquiry) there are no present facts or circumstances likely to result in
any such dispute, claim or proceedings
	 
	 	I.5.3	 	No enquiry into or investigation of the Company is pending (so far as the
Sellers are aware without making any enquiry) or has been made or threatened (so far
as the Sellers are aware without making enquiry) by the Commission for Racial
Equality, the Equal Opportunities Commission, any health and safety enforcement body
or any other similar authority and to the Seller’s knowledge (without making any
enquiry), there are no circumstances which are likely to give rise to any such
investigation.
	 
	 	I.5.4	 	During the period of twelve months before the date of this Agreement, the
Company has not given or been required to give notice of any

79

 

	 	 	 	redundancies to the relevant Secretary of State or started consultations with any
trade union or employee representatives under Chapter II, Part IV of the Trade
Union and Labour Relations (Consolidation) Act 1992.
	 
	 	I.5.5	 	To the Seller’s knowledge (without making enquiry) there is no actual or
threatened protected disclosure under the Public Interest Disclosure Act 1998.
	 
	 	I.5.6	 	So far as the Sellers are aware without making enquiry no employee or worker
of the Company is suffering from a disability (as defined for the purposes of the
Disability Discrimination Act 1985) which impairs his ability to perform his duties
and/or which requires or might require any adjustment within the work place.
	 
	 	I.5.7	 	There is no requirement for a work permit in relation to any employee,
officer or worker of the Company and the provisions of the Asylum and Immigration Act
1996 have been complied with in respect of every employee, officer and worker of each
Company in relation to that persons ability to work for the Company.

	I.6.	 	Loans to Employees or Workers
	 
	 	 	The Company has not made any loan or advance, to any past or prospective employee, officer
or worker, which is outstanding or guaranteed any financial obligations of theirs.
	 
	I.7.	 	Employer’s Liability Insurance
	 
	 	 	The Sellers believe, having made no enquiries, that the Company has adequate employer’s
liability and public liability insurance cover having regard to the activities carried out
it. No claims have been made or are presently likely under such insurance policies.
	 
	J.	 	HEALTH AND SAFETY
	 
	J.1	 	So far as the Sellers are aware there are no events, states of
affairs, conditions, circumstances, activities, practices, incidents
or actions which have occurred and have not been remedied or are
occurring or have been or are in existence in connection with the
conduct of the business of the Company which are liable to give rise
to liability under any applicable legislation concerning health and
safety matters and all and any regulations or orders made or issued
under any such legislation and any relevant codes of practice,
guidance notes and the like issued by government agencies (the “Health
and Safety Legislation”)
	 
	J.2	 	The Company has not received any notice, claim or other communication
alleging any contravention of or actual or potential liability under
the Health and Safety Legislation which is unresolved.

	K.	 	PENSION SCHEMES
	 
	K.1	 	The Company has not in the two years before the date of this Agreement paid, provided or
contributed towards, and the Company is not under any legal

80

 

	 	 	obligation or commitment to pay, provide or contribute towards, any
retirement/death/disability benefit for or in respect of any present or past
employee (or any spouse, child or dependant of any of them) of the Company or
of any predecessor in business of the Company.
	 
	K.2	 	There are no agreements or arrangements for the
provision of any relevant benefits (as defined in
Section 612(1) of the Taxes Act with the omission of
the exception in that definition) for any employee or
officer or former employee or officer of the Company
or for any spouse or dependant of any such person nor
has any proposal been announced to establish any such
agreement or arrangement.
	 
	K.3	 	Full particulars of any arrangements for the
provision of medical, sickness, permanent health or
similar cover for employees or offices or former
employees or officers of the Company or for any
spouse or dependant of any such person have been
provided to the Purchaser.
	 
	K.4	 	The Company has no obligation to contribute to any
personal pension scheme (as defined in Section 630 of
the Income and Corporation Taxes Act 1988) in respect
of any employee or officer or former employee or
officer of the Company.
	 
	K.5	 	The Company is not providing and has not at any time
provided or promised to provide ex gratia pensions or
other benefits in respect of any person and which
remain outstanding.

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Schedule 5

Net Debt Adjustment Post Completion

Part 1 — Calculation of Adjustment

	1.	 	This Schedule shall take effect following Completion.
	 
	2.	 	If the Purchaser:

	 	(a)	 	Agrees with the Completion Net Debt Statement then paragraph 4 of this
Schedule shall apply and the relevant payment shall be made within 10 Business Days of
the Purchaser notifying the Sellers of its agreement;
	 
	 	(b)	 	Does not agree with the Completion Net Debt Statement, it shall within 10
business days after receiving the Completion Net Debt Statement notify the Sellers of
its calculation of Net Debt, accompanied by all relevant calculations and workings
(“Purchaser Notification”). If the Sellers and the Purchaser do not agree the Net Debt
within 10 business days of the Purchaser’s Notification above then the further
provisions of this Schedule shall take effect;
	 
	 	(c)	 	Fails to either agree with Completion Net Debt Statement pursuant to
paragraph 2(a) of this Schedule or fails to serve a Purchaser Notification pursuant to
paragraph 2(b) of this Schedule within 10 Business Days after receiving the Completion
Net Debt Statement then the Purchaser shall be deemed to have agreed with the
Completion Net Debt Statement and paragraph 4 of this Schedule shall apply as if the
Purchaser had agreed with the Completion Net Debt Statement pursuant to paragraph 2(a)
of this Schedule.

	3.	 	In this Schedule, unless the context otherwise requires:
	 
	 	 	“Actual Net Debt” means the Net Debt figure agreed at any time between the parties or
determined in accordance with this Schedule;
	 
	 	 	“Adjustment” means the amount calculated and payable in accordance with this Schedule.
	 
	4.	 	The Adjustment to the Consideration shall be calculated and payable as follows:

	 	(a)	 	if the Actual Net Debt is a value greater than the Draft Net Debt, the
Purchaser shall pay the Adjustment to the Sellers which shall be equal to the amount
by which Actual Net Debt is more than the Draft Net Debt;
	 
	 	(b)	 	if the Actual Net Debt is a value smaller than the Draft Net Debt, the
Sellers shall pay the Adjustment to the Purchaser which shall be equal to the amount
by which Actual Net Debt is less than the Draft Net Debt;

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	5.	 	If the Sellers and the Purchaser do not agree upon the Net Debt within 10 Business Days of
the Purchaser’s Notification either party may refer the matter to be determined by:

	 	(a)	 	such firm of chartered accountants as the parties may agree in writing; or
	 
	 	(b)	 	failing agreement on the identity of the firm of chartered accountants (“the
Accountants”) within a further seven days from the expiry of the period of 14 days
referred to above, such firm of chartered accountants as may be appointed for this
purpose on the application of any party to this Agreement by the President for the
time being of the Institute of Chartered Accountants in England and Wales.

	6.	 	The Adjustment shall be payable within 21 days of its being ascertained under paragraph 5 of
this Schedule.
	 
	7.	 	The Adjustment shall be paid together with interest calculated on a daily basis on such
amount at a margin of two per cent. per annum over the base rate of Lloyds TSB Bank PLC (net
of any tax required by law to be deducted therefrom) from the Completion Date to the date of
payment.
	 
	8.	 	The Adjustment shall be paid to the relevant party/ies in immediately available funds by
electronic transfer under the CHAPS system.
	 
	9.	 	The Adjustment shall be deemed to be an increase in or, as the case may be, reduction in the
Consideration.
	 
	10.	 	The Sellers shall be entitled to the Adjustment or, as the case may be, shall be liable to
make any repayment in the proportions shown in column (3) of Schedule 2.

Part 2 — Basis on which Independent Accountants are to act

	11.	 	The accountants appointed under Part 1 above (the “Independent Accountants”) shall act on the
following basis:

	 	(a)	 	the Independent Accountants shall act as experts and not as arbitrators;
	 
	 	(b)	 	their terms of reference shall be to determine an amount which in their
opinion represents the Net Debt at Completion;
	 
	 	(c)	 	the Sellers and the Purchaser shall each provide the Independent Accountants
with all information which they reasonably require and the Independent Accountants
shall be entitled (to the extent they consider it appropriate) to base their opinion
on such information and on the accounting and other records of the Companies;
	 
	 	(d)	 	the determination of the Independent Accountants shall (in the absence of
manifest error) be conclusive; and
	 
	 	(e)	 	their costs shall be borne as between the Sellers on the one hand and the
Purchaser on the other hand as they shall specify, or in the absence of such
specification, equally by the Sellers and the Purchaser respectively.

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Schedule 6

Covenants up to Completion

The Sellers’ covenants for the purpose of Clause 4.7 are as follows:

	1.	 	Upon execution of this Agreement the Sellers shall procure the formation of a management
committee (the “Management Committee”) which shall be entitled to monitor the management of
the Company and the Subsidiaries. The Purchaser shall appoint 3 persons, being Mike Sicuro,
Tom Galanty and Neil Crossan (or such other persons as the Purchaser shall choose and notify
to the Sellers) and the Sellers shall appoint Nicholas Boyes-Hunter, Stuart Payne and David
Waters. Each member of the Management Committee shall be entitled to attend at the Companies
offices, to receive notice of and to attend and speak at all meetings of the board and
shareholders’ meetings (but not to vote thereat unless they are directors and/or shareholders
of the Company (as appropriate) in their own right) and shall be provided with such
information as to enable them to monitor those matters set out in paragraph 7 of this Schedule
6.
	 
	2.	 	The Sellers shall procure that from the date of this Agreement the Management Committee shall
be kept informed of and consulted with in relation to the business, strategy and prospects of
the Companies.
	 
	3.	 	From the date of this Agreement the Management Committee shall meet at intervals of no less
than once per month upon reasonable notice to discuss the business of the Companies, their
prospects and strategy. Such meetings shall be at the offices of the Company, or, if the
representatives of the Purchaser require them elsewhere the Sellers shall be entitled to be
reimbursed all their reasonable costs of attending such meetings by the Purchaser.
	 
	4.	 	From the date of this Agreement the Management Committee shall hold a conference call at
intervals of no less than once per week or upon reasonable notice to discuss the business of
the Companies, their prospects and strategy.
	 
	5.	 	The Sellers undertake that they shall as soon as reasonably practicable promptly notify the
Purchaser and the Management Committee of the following matters which come to their attention:

	 	(a)	 	all material developments relating to the market, competition, and price
levels in respect of the business of the Companies;
	 
	 	(b)	 	any event or circumstance which is likely to any material extent affect the
results of the Companies;
	 
	 	(c)	 	any claim against any Company received from, or any proceedings initiated by,
any third party against any Company which has or may reasonably be expected to have
any material effect on the financial position of any Company together with details of
the action proposed to be taken by the relevant Company in relation thereto;

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	 	(d)	 	the receipt of any notice from any employee of any Company terminating or
indicating their intention to terminate their employment with such Company;
	 
	 	(e)	 	any bona fide written offer or informal approach (providing all relevant
details) from any person for the whole or any part of the issued share capital of any
Company or for the whole or a substantial part of the undertaking or assets of any
Group Company; and
	 
	 	(f)	 	any new Intellectual Property Rights of any material importance to any
Company.

	6.	 	The Sellers undertake to provide all reasonable assistance and information to the Management
Committee which any member of the Management Committee shall reasonably request, including
without limitation all management accounts.
	 
	7.	 	The Sellers shall, without prejudice to the generality of paragraph 7(b) which shall have
overriding effect and save with the written consent of the Purchaser, procure that until
Completion:

	 	(a)	 	the business of the Companies is carried on in the usual and normal course;
	 
	 	(b)	 	the Company uses reasonable endeavours to meet its financial revenue
forecasts as provided to the Purchaser;
	 
	 	(c)	 	the Companies take such reasonable steps as may be required to preserve the
goodwill of their respective businesses and encourage customers and suppliers to
continue to deal with the same and shall do nothing which will or is calculated to
injure such goodwill; and
	 
	 	(d)	 	none of the Companies shall enter into any contract or commitment or do
anything which, in any such case, is either out of the ordinary and usual course of
its business or of a material nature without the prior consent in writing of the
Purchaser. In particular, but without limiting the foregoing, the Sellers shall
procure that from the date of this Agreement until Completion, save with the prior
consent in writing of the Purchaser, none of the Companies shall:

	 	(i)	 	incur any expenditure exceeding £50,000 on capital account;
or
	 
	 	(ii)	 	dispose of or grant any option or right of pre-emption in
respect of any part of its assets except in the ordinary course of trading; or
	 
	 	(iii)	 	borrow any money (except borrowings from its bankers not
exceeding its current Facility) or make any payments out of or drawings on its
bank account(s) (except payments in the ordinary course of business); or
	 
	 	(iv)	 	enter into any unusual or abnormal contract or commitment or:

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	 	(A)	 	grant any lease or third party right in
respect of any of the Properties or transfer or otherwise dispose of
any of the Properties;
	 
	 	(B)	 	make any loan;
	 
	 	(C)	 	enter into any leasing, hire purchase or
other agreement or arrangements for payment on deferred terms; or

	 	(v)	 	declare, make or pay any dividend or other distribution; or
	 
	 	(vi)	 	grant, issue or redeem any mortgage, charge, debenture or
other security or give any guarantee or indemnity; or
	 
	 	(vii)	 	make any changes in the terms and conditions of employment
of any of its Directors or employees or employ or terminate (except in good
cause) the employment of any person; or
	 
	 	(viii)	 	make, or announce to any person any proposal to make, any change or addition
to any retirement/disability benefit of or in respect of any of its directors
or employees or former directors or former employees (or any dependant of any
such person) (other than any change required by law and proposed change which
is mentioned in the Disclosure Letter) or grant or create any additional
retirement/death/disability benefit; or
	 
	 	(ix)	 	knowingly permit any of its insurances to lapse or do any
thing which they know would make any policy of insurance void or voidable; or
	 
	 	(x)	 	create, issue, purchase or redeem any class of share or loan
capital; or
	 
	 	(xi)	 	agree, conditionally or otherwise, to do any of the
foregoing; or
	 
	 	(xii)	 	in any other way depart from the ordinary course of its
day-to-day business as presently carried on either as regards the scope or the
manner of conducting the same; and

	8.	 	The Sellers undertake to the Purchaser that:

	 	(a)	 	they shall not dispose of any interest in the Shares or any of them or grant
any option over, or mortgage, charge or otherwise encumber the Shares or any of them;
	 
	 	(b)	 	they shall not permit any of the Companies to pass any resolution in general
meeting
	 
	 	(c)	 	they will forthwith notify to the Purchaser in writing any matter or thing
which may arise or become known to him after the date of this
Agreement and prior to Completion which he is aware at that time (having no
obligation to make any particular enquiry) constitutes a breach of any of the
Warranties or undertakings contained in this Agreement.

	9.	 	Notwithstanding the above neither the Purchaser nor any of their nominated representatives
on the Management Committee shall be entitled to access to any source code or algorithms
relating to the software products of the Companies.

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Schedule 7

Completion Obligations

Part 1 — Sellers’ Completion Obligations

The matters to be undertaken by the Sellers at Completion for the purposes of Clause 5.1 are as
follows:

	1.	 	The Sellers shall deliver or cause to be delivered to the Purchaser:

	 	(a)	 	transfers of the Shares duly executed and completed in favour of the
Purchaser;
	 
	 	(b)	 	any power of attorney under which any document is executed on behalf of the
relevant transferors;
	 
	 	(c)	 	in the case of a transferor who is not registered as the holder of any of the
Shares sold by him only, evidence to the Purchaser’s satisfaction of his title or
right to sell those Shares;
	 
	 	(d)	 	any waivers, consents or other documents required to vest in the Purchaser
the full beneficial ownership of the Shares and enable the Purchaser to procure them
to be registered in the name of the Purchaser or its nominee;
	 
	 	(e)	 	the share certificates representing the Shares (or an express indemnity in a
form satisfactory to the Purchaser in the case of any found to be missing);
	 
	 	(f)	 	powers of attorney in agreed terms;
	 
	 	(g)	 	letters of resignation (expressed to be with effect from the end of the
meeting of the Board of the Company [or (as the case may be) of the Boards of each of
the Subsidiaries]) referred to in paragraph 6 below, from such of the Directors and of
the Secretary of the Company [and of each of the Subsidiaries] as the Purchaser may
nominate, acknowledging that he has no claim outstanding for compensation or otherwise
and without any payment under the Employment Rights Act 1996, executed as a deed by
each of them in the agreed terms;
	 
	 	(h)	 	in terms reasonably satisfactory to the Purchaser a release duly executed as
a deed by Lloyds TSB Bank plc, releasing the Company and each other Company from the
charges created by the Lloyds Security Documents;
	 
	 	(i)	 	in terms reasonably satisfactory to the Purchaser release duly executed as a
deed by Martin Sykes, releasing the Company and each other Company from the charges
created by the Sykes Debenture and acknowledging that he has no claim against the
Company for any indebtedness;

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	 	(j)	 	in terms reasonably satisfactory to the Purchaser releases duly executed as a
deed by each of the Sellers (other than Carl Rushton and George Payne), releasing the
Company and each other Company from the charges created by the Sellers Debenture;
	 
	 	(k)	 	in terms reasonably satisfactory to the Purchaser deeds from each of the
Sellers acknowledging that neither the Sellers nor any spouse or child of the Sellers
nor any company of which the Sellers, spouse or child has control (as defined in
section 840 ICTA) has any claim against the Company or any of the Subsidiaries for any
matter, including any indebtedness, and that there is no agreement or arrangement
under which the Company or any of the Subsidiaries has any actual, contingent or
prospective obligation to any such person and to the extent that any such claim exists
the Sellers irrevocably and unconditionally waive any rights or remedies they may have
relation thereto;
	 
	 	(l)	 	written confirmations as to the respective bank balances of each Company as
at the close of business on the last business day prior to Completion, together with
directions, in the agreed form, varying and/or replacing the mandates given to such
banks by each Company;
	 
	 	(m)	 	a letter from the Bankers to the Company and dated with the date of
Completion, confirming that the existing fixed and floating charges created by the
Company and/or by each of the Subsidiaries in favour of such Bankers have not
crystallised and confirming that such Bankers do not have any claim over any of the
assets of either the Company or any of the Subsidiaries;
	 
	 	(n)	 	the resignation of the auditors of the Company and EndX Limited in accordance
with Section 392 of the Companies Act 1985, in each case confirming, in accordance
with Section 394 of such Act, that there are no circumstances connected with their
resignation which should be brought to the notice of the members or creditors of the
Company concerned and that there are no fees due to them;
	 
	 	(o)	 	in terms reasonably satisfactory to the Purchaser a deed executed by all the
parties to a Shareholders Agreement dated 16 February 2005 terminating such agreement;
	 
	 	(p)	 	a certified copy of the agreement pursuant to which the Canadian Disposal has
been completed;
	 
	 	(q)	 	all such other documents (including any necessary waivers of pre-emption
rights or other consents) as may be required to enable the Purchaser to be registered
as the holder of the Shares;
	 
	 	(r)	 	in terms reasonably satisfactory to the Purchaser an acknowledgement from the
Seller to the effect that there is no intra-group indebtedness from any Company to the
Canadian Subsidiaries (other than in respect of

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	 	 	 	intra-group trading activities in the ordinary and usual course of business) owing
at Completion; and
	 
	 	(s)	 	releases as referred to in clause 9.2;
	 
	 	(t)	 	one part of the Put and Call Option if necessary.

	2.	 	The Sellers shall deliver or cause to be delivered to the Purchaser as agent for the
Companies:

	 	(a)	 	all the Statutory and Minute Books of the Company and each of the
Subsidiaries and their respective Common Seals Certificates of Incorporation and
Certificates of Incorporation on Change of Name (if any);
	 
	 	(b)	 	certificates in respect of all issued shares in the capital of each of the
Subsidiaries and transfers of all shares in any Subsidiary not registered in the name
of the Company or another Subsidiary in favour of such persons as the Purchaser shall
direct;
	 
	 	(c)	 	A counterpart of the MediaLink Licence duly executed by the Company;

	3.	(a)	 	Immediately prior to Completion the Sellers shall take such steps before Completion so
that the Companies will comply with section 155(2) Companies Act 1985 and shall, subject to
receipt of a copy of the auditors report prepared by the Purchasers’ Accountants to be
provided pursuant to section 156(4) of the Companies Act 1985:

	 	(i)	 	Pass special resolutions by way of unanimous vote of all the
shareholders in respect of 100% of the issued shares of each of the Companies
approving the giving of financial assistance in the agreed form under and in
accordance with section 151 to 156 of the Companies Act 1985 and in connection
with the acquisition of the Shares; and
	 
	 	(ii)	 	Make such or procure by way of unanimous vote of all the
shareholders in respect of 100% of the issued shares the making of such
alterations to the Memorandum and Articles of Association of each of the
Companies (where necessary) as the Purchaser may reasonably require to permit
the giving of financial assistance. Provided that none of the Sellers will be
expected to provide a Statutory Declaration in the form required by section
155(6) of the Companies Act 1985.

	4.	 	The Sellers shall procure that all indebtedness due from any of the Sellers or any person
connected with them to any of the Companies (full particulars of which are contained in the
Disclosure Letter) shall be satisfied in full without payment of interest.
	 
	5.	 	The Sellers shall cause a meeting of the Board of each of the Companies to be held at which
the appropriate Board shall:

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	 	(a)	 	appoint such persons as the Purchaser may nominate as Directors and Secretary
of the relevant Company;
	 
	 	(b)	 	accept the letters of resignation referred to at paragraph [h];
	 
	 	(c)	 	(in the case of the Company’s Board) vote in favour of the registration of
the Purchaser and/or its nominee(s) as members of the Company and, in the case of the
Subsidiaries, the share transfers referred to in paragraph 2(c), subject only to the
production of duly stamped and completed transfers in favour of the Purchaser and/or
its nominee(s) in respect of the Shares;
	 
	 	(d)	 	appoint the Purchasers’auditors as auditors;
	 
	 	(e)	 	alter the accounting reference date of [each of ] the Compan[y/ies] to 31
December and resolve that the current accounting reference period of each of the
Companies be shortened or extended as required by the Purchaser;
	 
	 	(f)	 	revoke all existing authorities to banks and new authorities shall be given
to such banks and on such terms as the Purchaser may direct;

change the situation of the registered office and (subject to the Companies Acts) as the Purchaser
may direct; and

	6.	 	The Sellers shall deliver to the Purchaser, certified as correct by the Secretary of the
relevant company, the minutes of each such board meeting.

Part 2 — Purchaser’s Completion Obligations

	1.	 	The matters to be undertaken by the Purchaser for the purposes of Clause 5.4 are as follows:

	 	(a)	 	make payment to the Company of the sums referred to in clause 3.3.2;
	 
	 	(b)	 	pay to such account of the Sellers’ Solicitors as they shall advise in
writing not less than three business days prior to Completion in immediately available
funds by electronic transfer under the CHAPS system the amounts due under clauses
3.1.1;
	 
	 	(c)	 	release the Deposit to the Sellers pursuant to the provision of Schedule 13.
	 
	 	(d)	 	pay to such joint account of the Sellers’ solicitors and the Purchasers’
solicitors in immediately available funds the amount due under clause 3.1.3;
	 
	 	(e)	 	the Purchaser will as part of the whitewash process in connection with the
Canadian Disposal and the Medialink Licence and in particular, without limitation it
shall procure that the following shall be provided or occur:

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	 	(i)	 	Statutory Declaration in the form required by section
155(6)(a) of the Companies Act 1985 as amended (“the Act”) made by all the
directors of the Principal Company.
	 
	 	(ii)	 	Statutory report as required by s156(4) of the Act from the
Principal Company’s auditors.

	 	(f)	 	Provide a receipt to Carl Rushton for the monies payable by him to the
Principal Company upon exercise of his options for 40,000 Shares;
	 
	 	(g)	 	Provide a receipt to the Sellers for the amounts owing to the Principal
Company by the Sellers pursuant to the Canadian Disposal.
	 
	 	(h)	 	Enter into the Deed of Adherence if the Purchasing Subsidiary shall become
the Purchaser pursuant to clause 21.1.
	 
	 	(i)	 	Procure the payment by the Company of £100,000 to Tim Parker as a bonus.
	 
	 	(j)	 	Enter into one part of the Put and Call Option if necessary.

Part 3 – PGIC Completion Obligations

PGIC will enter into the Deed of Guarantee if the Purchasing Subsidiary shall become the Purchaser
pursuant to clause 21.1.

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Schedule 8

Limitations on Liabilities under the Warranties etc

Part
A — General

In this schedule “Claim” means any claim made or which would (if it were not for the application of
the provisions of this schedule) be capable of being made against the Sellers (or any of them) for
breach of the Warranties (excepting Warranties A.1 and A.5), having in respect of any Claim first
taken into account the provisions of paragraph 7 of this Schedule.

	1.	 	The aggregate liability of the Sellers in respect of all Claims and any claim under the Tax
Covenant is limited to USD27,000,000. Any Tax Liability arising from claims under clause 2(g)
or 2(h) of the Tax Covenant shall not be subject to this provision nor shall it be included in
any calculation or aggregation for the purposes of this paragraph.
	 
	2.	 	The liability of any individual Seller in respect of all Claims is limited to his Proportion
of the Consideration.
	 
	3.	 	In relation to any Claim, each Seller shall be liable only for his Proportion of the value of
that Claim.
	 
	4.	 	The Sellers will be under no liability to make payment in respect of any Claim unless the
aggregate cumulative liability of the Sellers in respect of all and any such Claims (not being
a Claim falling within paragraph 5 of this Schedule) together with any Tax Liability arising
under the Tax Covenant exceeds five hundred thousand U.S. Dollars in which event the Sellers
shall (subject to the other provisions of this schedule) be liable for the full amount of such
Claim and not only for the amount of the excess over five hundred thousand U.S. Dollars.
	 
	5.	 	The Sellers shall be under no liability in respect of any Claim where the amount for which
the Sellers would be liable under such Claim is less than twenty five thousand U.S. Dollars.
	 
	6.	 	For the purposes of paragraph 5, where a number or series of Claims relates or derives from
one event, circumstance, act or omission, each such Claim shall not be disregarded for failure
to meet the minimum amount of Claim under paragraph 5 but such individual Claims when
aggregated shall be treated as one Claim in respect of the event, circumstance, act or
omission in question.
	 
	7.	 	The Sellers will be under no liability to make any payment in respect of any Claim unless:

	 	7.1	 	written particulars of the Claim (giving reasonable details of the specific
matter in respect of which such Claim is made) are given to the Sellers; and
	 
	 	7.2	 	such particulars are given:

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	 	7.2.1	 	in the case of any Claim under the Taxation Warranties,
before the seventh anniversary of this Agreement;
	 
	 	7.2.2	 	in the case of any Claim under any other Warranties, within
a period of two years from the date of this Agreement,

and any Claim shall (unless previously satisfied, settled or withdrawn) be deeded
to be withdrawn unless proceedings in respect of the Claims so notified are
commenced and served within 9 months of the date of notification.

	8.	 	The Sellers shall not be liable for any Claim to the extent that it would not have arisen but
for any act, event, omission or default of the Purchaser or the Companies occurring after
Completion.
	 
	9.	 	The Purchaser shall not be entitled to make any Claim to the extent that any Claim arises as
a result of any liability to Taxation arising or being increased as a result of any change in
the basis or method of calculation or of an increase in the rate of any Taxation after
Completion.
	 
	10.	 	Where in relation to any matter which has been the subject of any Claim against the Sellers,
(and the Sellers have paid the Purchaser the amount agreed or determined in respect of such
Claim), the Purchaser or any of the Companies recovers any sum through insurance and which
relates to the loss suffered in relation to the claim in question the Purchaser or the Company
in question shall as soon as reasonably practicable notify the Sellers in writing and as soon
as reasonably practicable shall repay to the Sellers any sums paid by the Sellers in respect
of such Claim up to an amount not exceeding the sum recovered from the insurance less any
costs reasonably and properly incurred by the Purchaser in connection therewith.
	 
	11.	 	If the Purchaser or any of the Companies receives notice or shall become aware of any claim,
action or demand of a third party it reasonably considers will constitute or give rise to a
Claim the Purchaser shall:

	 	11.1.	 	as soon as practicable notify in writing the Sellers giving reasonable
relevant details of any such fact matter or event then known to it so far as
practicable and upon a reasonable request from the Sellers and at the Sellers’ cost,
copies of all relevant documentation;
	 
	 	11.2.	 	thereafter upon the Sellers reasonable request keep the Sellers informed in
writing of all significant developments and communications relating thereto;
	 
	 	11.3.	 	not make any admission of liability, agreement or compromise with any
person, body or authority in relation to the potential Claim without prior
consultation with of the Sellers;
	 
	 	11.4.	 	the Purchaser shall take or procure that the Companies take such action as
the Sellers may reasonably request (provided that it is indemnified to its reasonable
satisfaction by the Sellers against any losses, costs,

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	 	 	 	interest, damages and expenses which may be incurred by the Purchaser and the
relevant Companies in taking such action and provided that the Sellers shall give
the Purchaser such reasonable assistance as it reasonable requires) to avoid
dispute resist compromise defend pursue or prosecute any Claim threat right demand
or mitigate any event or fact or prevent the occurrence of any fact matter or
circumstance which has or may give rise to any Claim or affect the amount of any
Claim against the Sellers hereunder.

	12.	 	The amount of any successful Claim against the Sellers shall constitute or be deemed to
constitute a reduction in the Consideration.
	 
	13.	 	In assessing the liability of the Sellers the amount of liability under any Claim shall be
reduced or extinguished as the case may be to the extent that:-

	 	14.1	 	applicable Tax Losses can be used to offset the loss giving rise to the
Claim;
	 
	 	14.2	 	any credits relief benefits or accruals received or obtained by the Purchaser
or the Company by reason of or arising out of the fact matter events or circumstances
giving rise to the Claim;
	 
	 	14.3	 	such liability arises as a result only of any change made in any law,
legislation (including subordinated legislation), administrative practice or
interpretation after the date hereof (whether by the introduction of any new law or
otherwise howsoever) or the withdrawal or amendment of any extra statutory concession
after such date; and
	 
	 	14.4	 	such liability arises only as a result of a change of accounting policies or
the accounting reference date of the Companies.
	 
	 	14.5	 	Taxation for which the Companies are accountable is extinguished or reduced
or any relief increased as a result of the Claim giving rise to the liability.

	15.	 	The Sellers shall not be liable under this Agreement in respect of any Claim based on a
liability which is contingent only unless and until such contingent liability becomes an
actual liability and is due and payable in which case the time limits set out in paragraph 7.2
shall only apply once such contingent liability becomes an actual liability.
	 
	16.	 	Payment of any Claim shall to the extent of such payment satisfy and preclude any other Claim
which is capable of being made in respect of the same loss arising from the same subject
matter.
	 
	17.	 	Nothing herein shall in any way diminish the Purchaser’s or the Companies’ common law duty to
mitigate their loss.

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	18.	 	Any breach of this Agreement by the Sellers shall give rise only to an action in damages by
the Purchaser and shall not entitle the Purchaser to rescind this Agreement, save in respect
of fraud, or fraudulent misrepresentation.
	 
	19.	 	The Warranties shall be given as at the date hereof and shall not be deemed to be repeated at
Completion. In addition there shall be no duty on the Sellers to notify the Purchaser of any
matter that occurs between the date hereof and Completion that would have resulted in a breach
of the Warranties if they were to be repeated at Completion.
	 
	20.	 	In the event of the Sellers being liable to the Purchaser in respect of an obligation of the
Companies to pay Taxation and where the payment will be repaid or some other liability to
Taxation reduced in consequence (in whole or in part) of the payment the liability of the
Sellers shall be reduced and any amount paid to the Purchaser in respect of the liability
shall be refunded forthwith when and to the extent that the Companies are entitled to a
repayment or reduction in liability and the Purchaser shall procure that the Companies make
all necessary Claims and do all such things to obtain the repayment or reduction as soon as
they are entitled to do so save that the Purchaser and the companies shall not be obliged to
take any action pursuant to this paragraph 20 whatsoever that the Purchaser reasonably
believes acting in good faith having taken account of the reasonable requests of the Sellers
will or is reasonably likely to have a material adverse effect on the future liability to Tax
of the Purchaser or the Companies.
	 
	21.	 	Where the Sellers are liable in respect of any breach of the Warranties relating to the debts
or to liabilities in respect of which the Purchaser or the Companies have a right of Claim or
reimbursement (in whole or in part) against any person (including the debtor) the Purchaser
shall forthwith notify the Sellers in writing and upon the request of the Sellers assign or
procure to be assigned to them for no consideration the benefit of the debt, Claim or
reimbursement provided always that the Purchaser shall (provided that it is indemnified to its
reasonable satisfaction by the Sellers against any losses, costs, interest, damages and
expenses which be incurred by the Purchaser) ensure that such assignment is valid and without
prejudice to the generality of the foregoing does not constitute financial assistance within
the meaning of s151 of the 1985 Act.
	 
	22.	 	Save in respect of its rights in relation to the Retention provisions in Schedule 10, the
Purchaser shall not be entitled to exercise any rights of set-off withholding or deduction in
respect of any claims for breach, non-observance or non-performance of this Agreement
(including without prejudice to the generality of the foregoing any Claim in respect of a
breach of the Warranties) against any payments to be made to the Sellers pursuant to the terms
of this Agreement..

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Part B

Purchaser’s Confirmation/Warranties

	1.	 	The Purchaser confirms that, in entering into this Agreement it agrees that (except as
expressly set out or referred to in the Disclosure Letter) no information, advice or
assurances it or anyone on its behalf may have received from the Sellers their advisors or
anyone else on their behalf in relation to the Companies or otherwise in relation to this
Agreement or its negotiation may be legally relied upon in any manner.
	 
	2.	 	The Purchaser warrants to and undertakes with the Sellers and each of them that at the date
of this Agreement:

	 	2.1	 	it has the requisite power and authority to enter into and perform this
Agreement and all matters ancillary hereto;
	 
	 	2.2	 	the execution delivery of and the performance by the Purchaser of its
obligations under this Agreement and documents ancillary hereto will not:

	 	2.2.1	 	result in the breach of any provision of its memorandum or
articles of association bye-laws or other constitutional documents;
	 
	 	2.2.2	 	result in the breach of or constitute a default under any
agreement, arrangement or instrument of which the Purchaser is a party or by
which the Purchaser is bound; and
	 
	 	2.2.3	 	result in a breach of any applicable order, judgment or
decree of any court or governmental authority;
	 
	 	2.2.4	 	the Purchaser has not already formulated and does not
presently contemplate making a claim against the Sellers in respect of any
breach of this Agreement and without prejudice to the generality of the
foregoing in particular the Warranties and/or the Tax Covenant; and
	 
	 	2.2.5	 	the person(s) executing this Agreement and all documents
ancillary thereto on behalf of the Purchaser is duly authorised to do so on
behalf of the Purchaser under the terms of this Agreement and the documents
ancillary hereto binding the Purchaser.
	 
	 	2.2.6	 	The Purchaser is not aware of a matter that it is aware
would constitute a breach of the Warranties.

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Schedule 9

Indemnities

	1.	 	In this Schedule where the context admits:
	 
	 	 	“Indemnified Matters” for the purpose of Clause 7 means:-

	 	(a)	 	the Canadian Disposal;
	 
	 	(b)	 	the Media Link Licence;
	 
	 	(c)	 	any loan from any Company to the Canadian Subsidiaries;
	 
	 	(d)	 	any loan or any other agreement or arrangement between any Company and David
Lobb, including without limitation the David Lobb Option and any amount payable
thereunder;
	 
	 	(e)	 	the incorporation of 6349609 Canada Inc and its subsequent acquisition of any
part of the share capital of 4028546 Inc (together the “Canadian Subsidiaries”)
entered into on or around or subsequent to 28 February 2005;
	 
	 	(f)	 	any and all contracts, arrangements, obligations, debts, liabilities,
guarantees or indemnities that any Company may be a party to or subject to in respect
of the Canadian Subsidiaries or the business carried on (previously or in the future)
by the Canadian Subsidiaries.

	2.	 	For the avoidance of doubt, the provisions of Clause 6 and Schedule 8 shall not apply to
Clause 7 and this Schedule.
	 
	3.	 	When events have taken place or circumstances have arisen (“an Event”) in which the Purchaser
or any of the Companies may be able to make a claim (“a Clause 7 Claim”) against the Sellers
under the indemnity at Clause 7, then the Purchaser shall inform the Sellers of the Event in
reasonable detail including the nature of the Event;
	 
	4.	 	If the Sellers at any time pay to the Purchaser an amount pursuant to Clause 7 and the
Purchaser subsequently recovers from a third party any sum in respect of the loss suffered in
relation to the matter giving rise to such Claim, the Purchaser shall repay to the Sellers as
soon as practicable so much of the amount paid to the Purchaser by the Sellers as does not
exceed the sum recovered from such Third Party (less all reasonable costs, charges and
expenses incurred by the Purchaser in recovering that sum from such Third Party).
	 
	5.	 	The Purchaser shall inform the Sellers in writing of any claim by any third party (Third
Party Claim) which may result in a Clause 7 Claim (Indemnity Claim) as soon as reasonably
practicable from the day on which such Third Party Claim comes to the notice of the Purchaser
or one of the Companies.
	 
	6.	 	Subject to the Purchaser being indemnified to its satisfaction in accordance with paragraph 8
below:

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	 	(a)	 	The Purchaser shall, and shall procure that the Companies shall, take such
action and give such information and assistance as the Sellers may reasonably request
in writing to avoid, dispute, resist, mitigate, compromise or defend any Third Party
Claim and to appeal against any judgment given in respect thereof including (without
limitation) applying to postpone so far as legally possible the payment of any
Taxation; and
	 
	 	(b)	 	On the written request of the Sellers, the sole conduct of any legal
proceedings of whatsoever nature arising out of any Third Party Claim (Proceedings)
shall be delegated to the Sellers. For this purpose, the Purchaser shall give or
procure to be given to the Sellers all such assistance as the Sellers may reasonably
require and shall appoint such solicitors and other professional advisers as the
Sellers may nominate (provided that the Purchaser shall have the right to approve or
reject the choice of solicitors or counsel) to act of behalf of the Purchaser or the
Company or any of its Subsidiaries in accordance with the Sellers’ instructions (and
provided also that the Purchaser may, in the event of a conflict of interest, require
the Sellers to select alternative counsel or solicitors).

	7.	 	Where Proceedings are delegated to the Sellers in accordance with paragraph 5 above:

	 	(a)	 	The Sellers shall keep the Purchaser fully and promptly informed of the
Proceedings, shall consult the Purchaser on any matter which is or is likely to be
material in relation to any Proceedings; and
	 
	 	(b)	 	The Sellers shall not make any settlement or compromise of the Third Party
Claim which is the subject of Proceedings, or agree to any matter in the conduct of
such 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.

	8.	 	Where the Sellers take over the conduct of any Proceedings pursuant to the provisions of
paragraph 5 above the Sellers shall indemnify the Purchaser to its reasonable satisfaction in
respect of all costs, charges and expenses reasonably and properly incurred by the Purchaser
as a consequence of any actions taken at the request of the Sellers pursuant to paragraph 3
above.

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Schedule 10

RETENTION

	1	 	INTERPRETATION

In this Schedule, the following expressions shall have the following meanings:

Bank Instruction Letter : the letter, in agreed form, from the Escrow Agents to the Escrow
Bank.

Due Amount : the amount (if any) due to the Purchaser on a Relevant Claim being Settled,
as defined below.

Escrow Agents : the Purchaser’s Solicitors and the Sellers’ Solicitors.

Escrow Bank : [NAME AND ADDRESS OF BANK].

Escrow Letter : the letter, in the agreed form, to be signed by the parties instructing
and authorising the Escrow Agents to establish and operate the Retention Account.

Estimated Liability : the amount claimed by the Purchaser in respect of a Relevant Claim
notified in writing by the Purchaser to the Sellers, and including sufficient detail (to the extent
only that such detail is then available) to enable the Sellers to make a reasonable assessment of
the nature of the Relevant Claim and its likely quantum.

Release Date : means any of the dates falling a multiple of 182 days after the date of
Completion provided that where a Release Date would otherwise not fall on a business day, the next
following business day shall be substituted for it.

Relevant Claim : a clause 7 Claim as defined in Schedule 7, a Claim as defined in Schedule
8, or a claim under the Tax Covenant.

Retention Account : the joint interest-bearing bank account to be established in
accordance with the Escrow Letter.

	2	 	RETENTION
	 
	2.1	 	No amount shall be released out of the Retention Account otherwise than in accordance with
this clause 2.
	 
	2.2	 	Subject as set out below, on each Release Date there shall be released to the Sellers’
Solicitors (who shall be responsible for ensuring that such sum is apportioned between the
Sellers in the proportions set out opposite their names in Schedule 2) a sum equal to the
balance standing to the credit of the Retention Account which exceeds, on each Release Date
the sum set out in the table below:-

	 	 	 	 	 
	Date	 	Amount to remain in Retention Account	 
	First Release Date
	 	$	1,500,000	 
	Second Release Date
	 	$	1,000,000	 
	Third Release Date
	 	£	500,000	 
	Fourth Release Date
	 	Nil

PROVIDED ALWAYS THAT if any Relevant Claims have been notified to the Sellers by that Release Date
then

	 	2.2.1	 	no sum shall be paid out of the Retention Account which would reduce the
balance thereon below the aggregate of the Estimated Liabilities and unpaid Due
Amounts of all those Relevant Claims

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	 	2.2.2	 	one half of the value of the Estimated Liabilities and all of the unpaid Due
Amounts for those Relevant Claims shall be deducted from any amount otherwise to be
paid out to the Sellers Solicitors, PROVIDED ALWAYS that :-

	 	2.2.2.1	 	the aggregate deductions made for any one Relevant Claim shall not exceed
the Estimated Liability or unpaid Due Amount of that Relevant Claim, and
	 
	 	2.2.2.2	 	save as set out in 2.2.1 above, the amount to be paid out to the Sellers on
each Release Date shall not be less than $250,000.

	2.3	 	Amounts determined in accordance with Clause 2.2 above to be deducted from amounts to be paid
out to the Sellers Solicitors shall be retained in the Retention Account.
	 
	2.4	 	Any interest which may accrue on the credit balance on the Retention Account shall be
credited to the Retention Account and upon any payment of principal out of the Retention
Account the interest accrued thereon shall also be paid to the payee.
	 
	2.5	 	The liability to taxation on any interest on any amount in the Retention Account shall be
borne by the party ultimately entitled to that amount.
	 
	2.6	 	Subject always to paragraph 2.2 of this Schedule 10, if at any time an amount representing an
Estimated Liability or an unpaid Due Amount has been retained in the Retention Account which
would otherwise have been released on a Release Date, and the Estimated Liability is reduced
or a Due Amount is determined in respect of the Relevant Claim which is less than the
Estimated Amount or the amount unpaid of a Due Amount is reduced then an amount of the
Retention Account equal to the difference or reduction shall forthwith be released to the
Sellers’ Solicitors (who shall be responsible for ensuring that such sum is apportioned
between the Sellers in the proportions set out opposite their names in Schedule 2).
	 
	2.7	 	If at any time, a Relevant Claim is Settled and there is a Due Amount, the parties shall,
unless such Due Amount has been paid to the Purchaser, as soon as practicable following such
settlement, instruct the Escrow Agents to pay to the Purchaser out of the Retention Account
the lesser of the Due Amount and the amount standing to the credit of the Retention Account.
	 
	2.8	 	If the Sellers consider that the Estimated Liability in respect of the Relevant Claim which
has not been Settled is greater than that which is likely to be agreed between the parties or
awarded by the appropriate forum for determination of the Relevant Claim, the Sellers may
refer the matter to the determination of a barrister of not less than ten years call with
experience in the relevant area of law to be agreed between the parties or in default of
agreement, to be nominated by the Chairman of the Bar Council in England and Wales upon the
application of either party . The barrister so appointed (the “Independent Barrister”) shall
act on the following basis:

	 	2.8.1	 	the Independent Barrister shall act as an expert and not as an arbitrator;
	 
	 	2.8.2	 	the Independent Barrister shall be requested to determine the likely
monetary value of any award to the Purchaser (if any) by the appropriate forum of the
Relevant Claim;
	 
	 	2.8.3	 	the Sellers and the Purchaser shall each provide the Independent Barrister
with all information which he reasonably requires and the

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	 	 	 	Independent Barrister shall be entitled to base his opinion on such information
and/or on any other matter which he considers fit in his exclusive discretion;
	 
	 	2.8.4	 	the determination of the Independent Barrister shall (in the absence of
manifest error) be conclusive; and
	 
	 	2.8.5	 	the Independent Barrister’s costs shall be borne equally by the Sellers and
the Purchaser.

	 	 	and the amount of the Estimated Liability determined by the Independent Barrister shall be
replace that used previously.
	 
	2.9	 	A Relevant Claim shall be deemed to be Settled for the purposes of this clause 2 if:

	 	(a)	 	the Sellers and the Purchaser so agree in writing; or
	 
	 	(b)	 	the Relevant Claim has been determined by a court of competent jurisdiction
or other forum from which there is no right of appeal, or from whose judgment the
Purchaser or the Sellers (as the case may be) are debarred by passage of time or
otherwise from making an appeal.

	2.10	 	The part of the Consideration paid into the Retention Account shall not be regarded as
imposing any limit on the amount of any claims under this agreement or under any of the
documents executed pursuant to this agreement.
	 
	2.11	 	For the avoidance of doubt, if a Due Amount is not satisfied in full from the Retention
Account, the Relevant Claim (to the extent not so satisfied) shall remain fully enforceable
against the Sellers.
	 
	2.12	 	Nothing in this clause 2 shall prejudice, limit or otherwise affect any right, including to
make any Claim, or remedy the Purchaser may have from time to time against the Sellers either
under this agreement or under any of the documents executed pursuant to this agreement.
	 
	3.	 	INSTRUCTIONS

The parties agree and undertake that they will promptly give at all appropriate times and
reflecting fully the above provisions of this Schedule instructions to the Sellers Solicitors and
the Purchasers Solicitors pursuant to the Escrow Letter only in accordance with the provisions of
this Schedule 10 and the Escrow Letter and in a timely manner as contemplated by this Agreement.

	4.	 	COMPLETION

At Completion, the Purchaser shall pay $2,000,000 to the Escrow Bank to be held in accordance with
the Bank Instruction Letter, and the Sellers and the Purchaser shall sign the Escrow Letter and
procure that the Escrow Agents sign and deliver the Bank Instruction Letter to the Escrow Bank.

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Schedule 11

Protective Covenants

Part
1 — Definitions

	1.	 	In this Schedule the following definitions shall apply, unless the context otherwise
requires:
	 
	 	 	“Business” means the business or businesses of the Companies namely the provision of
software to the gaming industry as carried on at the Completion Date;
	 
	 	 	“Business Day” means a day other than a Saturday or Sunday or public holiday in England and
Wales;
	 
	 	 	“Company” includes any of the Companies and any of their respective successors in the
Business;
	 
	 	 	“Company Intellectual Property Rights” means all Intellectual Property Rights used, or
required to be used, by the Companies in, or in connection with, its business;
	 
	 	 	“Completion” means completion of the sale and purchase of the Shares in accordance with
this Agreement;
	 
	 	 	“Confidential Information” means all information not publicly known, used in or otherwise
relating to the Companies’ business, customers or financial or other affairs, including,
without limitation, information relating to:

	 	(a)	 	the marketing of goods or services including, without limitation, customer
names and lists and other details of customers, sales targets, sales statistics,
market share statistics, prices, market research reports and surveys and advertising
or other promotional materials; or
	 
	 	(b)	 	future projects, business development or planning, commercial relationships
and negotiations;

	 	 	“Covenantors” means the Sellers;
	 
	 	 	“Customer” means any person who has been or is at any time a buyer of goods or services
from any of the Companies;
	 
	 	 	“Intellectual Property Rights” has the meaning given in Schedule 1 of this Agreement;
	 
	 	 	“Key Personnel” means any person who is at Completion employed or engaged in the
Business in an executive or senior managerial capacity;
	 
	 	 	“Permitted Goods or Services” means the provision of the iView Software and ancillary
matters in respect of gaming and non gaming applications and the

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	 	 	provision of the MediaLink Software and ancillary matters, supplied in respect of
non-gaming applications only;
	 
	 	 	“Prospective Customer” means any Customer who has been engaged in negotiations in the
period of two years prior to Completion with the Company with a view to becoming a Customer
of the Company and which negotiations have not been terminated;
	 
	 	 	“Relevant Area” means United Kingdom and those countries in which the Companies conducted
business in the 12 month period preceding the date of this Agreement;
	 
	 	 	“Relevant Customer” means any person, firm or company who at any time during the two years
prior to Completion was a Customer of the Company at any time during the said period;
	 
	 	 	“Relevant Period” means the period of two years from Completion;
	 
	 	 	“Relevant Goods or Services” means any goods or services competitive with those supplied by
the Company at the date of Completion save for those [in respect of the Permitted Goods or
Services;
	 
	 	 	“Relevant Supplier” means any person, firm or company who at the date of Completion was a
supplier of any goods or services (other than utilities, banking services and goods or
services supplied for administrative purposes) to the Company; and
	 
	 	 	“Relevant Words” means EndX, Mikohn, Progressive Gaming, TableLink.

Part 2 — Business, Solicitation and Dealing

	2.	 	Each of the Covenantors hereby undertakes to the Purchaser (for itself and as trustee for
each of the Companies and for the holders for the time being of the Shares) that without the
written consent of the Purchaser,(but save to the extent that the activities below are carried
out pursuant to written contracts of employment or written consultancy agreements with any
Company):

	 	(a)	 	he shall not directly or indirectly at any time within the Relevant Period
engage or be concerned or interested in any business within the Relevant Area which
competes with, or is likely at any time during the Relevant Period to compete with,
the Business;
	 
	 	(b)	 	he shall not directly or indirectly at any time within the Relevant Period:

	 	(i)	 	solicit the custom of; or
	 
	 	(ii)	 	knowingly facilitate the solicitation of; or
	 
	 	(iii)	 	deal with

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any Relevant Customer in respect of any Relevant Goods or Services whether or not
such person would commit a breach of contract by reason of transferring business;
or

	 	(iv)	 	solicit the custom; or
	 
	 	(v)	 	knowingly facilitate the solicitation of; or
	 
	 	(vi)	 	deal with

any Prospective Customer in respect of any Relevant Goods or Services; or

	 	(vii)	 	interfere; or
	 
	 	(viii)	 	endeavour to interfere

with the continuance of supplies to the Company (or the terms relating to those
supplies) by any Relevant Supplier whether or not such person would commit a breach
of contract by reason of transferring business;

	 	(c)	 	he shall not directly or indirectly at any time during the Relevant Period:

	 	(i)	 	entice away from the Company; or
	 
	 	(ii)	 	endeavour to entice away from the Company

	 	 	 	any Key Personnel (other than Key Personnel who respond to a general public
advertisement placed by it in the ordinary course of business or who have solicited
employment with it only at his or her own initiative) whether or not such person
would commit a breach of contract by reason of leaving service or office;
	 
	 	(d)	 	they shall not directly or indirectly at any time during the Relevant Period
employ, engage, endeavour to employ or endeavour to engage any Key Personnel;

at any time after the date of this Agreement, directly or indirectly use or attempt to use in the
course of any business on its own account or in conjunction with or on behalf of any person, firm
or company, the Relevant Words, any colourable imitation of them, or any valid trade or service
mark, trade name, design or logo (whether or not registered) or any other Company Intellectual
Property Rights used in the business of the Companies or any other name, logo, trade or service
mark or design which is or might be confusingly similar thereto and it will at all times procure
that any company controlled by it will not carry on such business under any such title or name;

	3.	 	Nick Boyes-Hunter by way of additional covenant to secure the benefit of this Agreement to
the Purchaser undertakes to the Purchaser that he shall not without the prior written consent
of the Purchaser do or engage in any of the matters listed in paragraph 2 above for an
additional period of one year.

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	4.	 	For the purposes of this Schedule, a Covenantor is concerned or interested in a business if:

	 	(a)	 	he carries it on as principal or agent either alone or jointly; or
	 
	 	(b)	 	he is a partner, director, employee, secondee, consultant or agent in, of or
to any person who carries on the business; or
	 
	 	(c)	 	he has any direct or indirect financial interest (as shareholder or
otherwise) in any person who carries on the business; or
	 
	 	(d)	 	he is a partner, director, or employee, secondee, consultant or agent in, of
or to any person who has a direct or indirect financial interest (as shareholder or
otherwise) in any person who carries on the business, disregarding any financial
interest of a person in securities which are listed on the London Stock Exchange or
traded on the Alternative Investment Market, if that person, the remaining Sellers and
any person connected with him or them are interested in securities which amount to
less than three per cent of the issued securities of that class and which, in all
circumstances, carry less than three per cent of the voting rights (if any) attaching
to the issued securities of that class.

	5.	 	Nothing in paragraph 2 shall prevent the Covenantors from:

	 	(a)	 	participating as a shareholder in and/or employee or consultant to the
Purchaser;
	 
	 	(b)	 	owning not more than three per cent of any class of the issued share capital
of a company which is dealt in on a recognised investment exchange (as defined for the
purposes of the Financial Services and Markets Act 2000); or
	 
	 	(c)	 	exploiting, commercially or otherwise, the Permitted Goods or Services;
	 
	 	(d)	 	owning the Canadian Subsidiary.

	6.	 	It is agreed between the parties that, whilst the restrictions set out in this Schedule are
considered fair and reasonable, if it should be found that any of the restrictions be void as
going beyond what is fair and reasonable in all circumstances and if by deleting part of the
wording or substituting a shorter period of time or different geographical limit or a more
restricted range of activities for any of the periods of time, geographical limits or ranges
of activities set out in this clause it would not be void then there shall be substituted such
next less extensive period and/or limit and/or activity or such deletions shall be made render
this clause valid and enforceable.
	 
	7.	 	Each of the restrictions in each paragraph or sub-clause above shall be enforceable by the
Purchaser independently of each of the others and its validity shall not be affected if any of
the others is invalid; if any of those restrictions is void but would be valid if some part of
the restrictions were deleted the restriction in question shall apply with such modification
as may be necessary to make it valid.

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Schedule 12

Addresses for Notices

The addresses and facsimile details of the parties for the purposes of Clause 20 are as follows:

	1.	 	The Sellers:
	 
	 	 	The Sellers’ SolicitorsFacsimile number: +44 (0) 161 957 8899
	 
	 	 	For the attention of: Martin Caller or William Pinnock
	 
	2.	 	The Purchaser:
	 
	 	 	Mikohn Gaming Corporation
	 
	 	 	Facsimile number: 001 702 263 1663
	 
	 	 	For the attention of: Michael A Sicuro
	 
	 	 	With a copy to:
	 
	 	 	Bird & Bird
	 
	 	 	Facsimile number: +44 (0) 207 415 6111
	 
	 	 	For the attention of: Matt Dennis or Roger Butterworth
	 
	 	 	And
	 
	 	 	With a copy to:
	 
	 	 	Facsimile number: 001 858 550 6420
	 
	 	 	For the attention of: Steve Przesmicki

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Schedule 13

Deposit Account / Return of Deposit

	A.	 	The Deposit shall be sent to the client account of the Sellers’ Solicitors
who shall provide an undertaking to the parties in the agreed terms.
	 
	B.	 	The Deposit will be held in an interest bearing account. Interest arising on
the deposit shall be paid out in proportion to the persons to whom the principal of
the Deposit is paid out
	 
	C.	 	If the Purchaser rescinds the Agreement in accordance with Clause 5.5(d), the
parties will as soon as reasonably practicable sign payment instruction letter A, and
send the same to the Sellers’ solicitors, and the Deposit will be sent in full
($2,000,000) to the Purchaser.
	 
	D.	 	If the Condition is not satisfied or waived in accordance with Clause 4 the
parties will sign as soon as is reasonably practicable payment instruction Letter B,
and send the same to the Sellers’ solicitors, and the Deposit will be sent as to
$1,000,000 to Purchaser, and $1,000,000 shall be paid to the Company, which amount
will be treated as a loan made by the Purchaser to the Company and shall be the
subject of the PGIC Loan.
	 
	 	 	The coming into force of the PGIC Loan will be conditional and contingent upon the
failure of the Condition and non-waiver of that Condition including for the
avoidance of doubt the termination of this Agreement pursuant to clause 4.6.
	 
	E.	 	If:

	 	•	 	Completion occurs in accordance with Clause 5 and Schedule 7, or otherwise;
or
	 
	 	•	 	the Agreement lapses or otherwise fails to complete other than as result of
the matters described at paragraphs C or D above,

then :-

	 	–	 	the parties will sign as soon as reasonably practicable
instruction Letter C and the Deposit will be sent to the Sellers for their
benefit absolutely
	 
	 	–	 	and the provisions of the PGIC Loan will lapse.

The terms of the PGIC Loan are that it shall be a loan from PGIC to the Company unsecured
and interest free and shall be due for repayment as to $250,000 on 15th
September 2006, and $750,000 on 31st May 2007.

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Schedule 14

Tax Covenant

	1.	 	Interpretation
	 
	1.1	 	In this Schedule unless the context otherwise requires:
	 
	 	 	“Company” means any or all of the Company and the Subsidiaries;
	 
	 	 	“Event” includes (without limitation), the Company ceasing to be associated with any other
person for any Tax purpose, the death or the winding up or dissolution of any person, and
any transaction (including the execution and completion of all provisions of this
Agreement), event, act or omission whatsoever, and any reference to an event occurring on
or before a particular date will include events which, for Tax purposes, are deemed to
have, or are treated or regarded as having, occurred on or before that date;
	 
	 	 	“Group Relief” means:

	 	(i)	 	Relief the subject of a surrender or claim pursuant to
Chapter IV of Part X of the Taxes Act 1988; or
	 
	 	(ii)	 	any Tax refund the subject of a surrender or claim pursuant
to section 102 of the Finance Act 1989;

“Overprovision” means the amount by which any provision in the Accounts relating to tax is
overstated, applying the accounting policies, principles and practices adopted in relation
to the preparation of the Accounts (and ignoring the effect of any change in law made or
action taken by the Purchaser or the Company after Completion, or any Relief arising after
Completion);

“Purchaser’s Tax Group” means the Purchaser and any other company or companies which either
are, become after Completion, or have within the seven years ending at Completion been,
treated as members of the same group as, or otherwise connected or associated in any way
with, the Purchaser for any Tax purpose;

“Relief” includes any loss, allowance, credit, deduction, exemption or set-off in respect
of any Tax or relevant to the computation of any income, profits or gains for the purposes
of any Tax, or any right to repayment of or saving of Tax;

“Saving” means the reduction or elimination of any liability of the Company to make an
actual payment of Corporation Tax in respect of which the Seller would not have been liable
under paragraph 2, by the use of any Relief arising wholly as a result of a Tax Liability
in respect of which the Seller has made a payment under paragraph 2 of this Tax Covenant.

“Seller” means any and all of the Sellers;

“Tax” or ‘Taxation’ means all forms of taxation and statutory, governmental, state,
federal, provincial, local, government or municipal charges, duties,

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imposts, contributions, levies, withholdings or liabilities wherever chargeable and whether
of the UK or any other jurisdiction, and any penalty, fine, surcharge, interest, charges or
costs relating thereto;

‘Tax Authority’ means any person entitled to enforce or collect Tax;

“Tax Claim” means the issue of any notice, demand, assessment, letter or other document by
or on behalf of any Tax Authority or the taking of any other action by or on behalf of any
Tax Authority (including the imposition of any withholding) from which notice, demand,
assessment, letter, document or action it appears that a Tax Liability may be imposed or
will be imposed on the Company, the Purchaser or any member of the Purchaser’s Tax Group;

“Tax Liability” means:

	 	(b)	 	a liability of the Company to make a payment of Tax (an “A Liability”);
	 
	 	(c)	 	the application of all or part of any Relief in computing either profits
earned, accrued or received on or before Completion or Tax arising in respect of any
Event on or before Completion where the Relief arises in respect of any Event
occurring or period commencing after Completion and where but for such application
the Company would have been liable to make a payment of Tax in respect of which the
Purchaser would have been able to make a claim under this Deed (a “B Liability”), in
which case the amount of the Tax Liability shall be the amount of Tax saved by the
Company as a result of that application;
	 
	 	(d)	 	the loss of all or part of a right to repayment of Tax which has been treated
as an asset of the Company in the Accounts (a “C Liability”), in which case the amount
of the Tax Liability shall be the amount of the loss of the right to repayment and any
related repayment supplement; and
	 
	 	(e)	 	the loss of all or part of any Relief in computing profits or Tax, which
Relief has been taken into account in computing (and so reducing) any provision or
asset relating to Tax which appears in the Accounts in circumstances where the Relief
would (were it not for that loss) have been available in full to the Company (a “D
Liability”), in which case the amount of the Tax Liability shall be the amount of Tax
which would (on the basis of tax rates current at the date of such loss) have been
saved by the Company but for such loss, assuming for this purpose that the Company was
in a position to use the Relief,

	 	 	PROVIDED THAT payment will be made whether or not the Purchaser or the Company is or may be
entitled to claim reimbursement of the Tax Liability from any person; and
	 
	1.2	 	references to “gross receipts, income, profits or gains” earned, accrued or received will
include any gross receipts, income, profits or gains which for Tax purposes is deemed to have
been or treated or regarded as earned, accrued or received;

109

 

	1.3	 	references to a “repayment of Tax” shall include any repayment supplement or interest in
respect of it;
	 
	1.4	 	any reference to an Event occurring on or before Completion shall include a series or
combination of Events, the first of which occurred on or before Completion and was not in the
ordinary course of business of the Company and the second or successive of which occurring
after Completion were in the ordinary course of business of the Company ;
	 
	1.5	 	any stamp duty (which for these purposes shall include stamp duty land tax and any interest,
fines, penalties relating to such stamp duty or stamp duty land tax) which would have to be
paid by the Company after Completion on any instrument or, in the case of an instrument which
is outside the United Kingdom, any stamp duty which would have to be paid by the Company after
Completion on the instrument if it were brought into the United Kingdom, in either case which
confers any right or title on the Company to any asset owned at Completion by the Company or
in the enforcement or production of which the Company is interested shall be deemed to be a
Tax Liability of the relevant Company which arose at the date of execution of the instrument
(being a date which occurred before Completion) whether or not such instrument was or is
submitted for stamping;
	 
	1.6	 	persons shall be treated as “connected” for the purposes of this Schedule if they are
connected within the meaning of section 839 of the Taxes Act 1988; and
	 
	1.7	 	any reference to something occurring (including a Tax Liability arising) in “the ordinary
course of business” shall, without prejudice to the generality thereof, be deemed not to
include:

	 	(a)	 	anything which involves, or leads directly or indirectly to any Tax Liability
that is the primary liability of, or properly attributable to or due from, another
person (other than a member of the Purchaser’s Tax Group) or is the liability of the
Company only because some other person, other than a member of the Purchaser’s Tax
Group, has failed to pay it;
	 
	 	(b)	 	any Event to which Part XVII of the Taxes Act 1988 (tax avoidance) applies;
	 
	 	(c)	 	anything which relates to or involves the acquisition or disposal of an asset
or the supply of services (including the lending of money, or the hiring or licensing
of tangible or intangible property) in a transaction which is not entered into on
arm’s length terms;
	 
	 	(d)	 	anything which relates to or involves the making of a distribution for Tax
purposes, the creation, cancellation or re-organisation of share or loan capital, the
creation, cancellation or repayment of any intra-group debt or any company becoming or
ceasing or being treated as becoming or ceasing to be a member of a group of companies
or as becoming or ceasing to be associated with any other company for any Tax
purposes;

110

 

	 	(e)	 	anything which relates to a transaction or arrangement which includes, or a
series of transactions or arrangements which includes, any step or steps having no
commercial or business purpose apart from the reduction, avoidance or deferral of a
Tax Liability; or
	 
	 	(f)	 	anything which involves, or leads directly or indirectly to, a change of
residence of the Company for Taxation purposes.

	2.	 	Covenant

The Seller covenants with the Purchaser that, subject to the following provisions of this Tax
Covenant, the Seller will pay to the Purchaser, so far as possible by way of repayment of the
purchase price for the Shares, an amount equal to:

	 	(a)	 	any Tax Liability resulting from or by reference to any Event occurring on or
before Completion or in respect of any gross receipts, income, profits or gains
earned, accrued or received by the Company on or before Completion;
	 
	 	(b)	 	any Tax Liability which arises solely as a result of the relationship for Tax
purposes of the Company with any person other than a member of the Purchaser’s Tax
Group whensoever arising;
	 
	 	(c)	 	any Tax Liability by reference to another person’s Tax liability relating to
any Tax indemnity, sharing or allocation agreement under which the Company was
obliged, or to which it was a party, on or prior to Completion;
	 
	 	(d)	 	any liability of the Company arising from an obligation to pay for Group
Relief or to repay the whole or any part of any payment received for Group Relief
(other than from another Group Company) pursuant to an arrangement entered into by the
Company on or before Completion;
	 
	 	(e)	 	the loss of the right to receive any payment for Group Relief to the extent
that such right to payment is provided for as an asset in the Accounts;
	 
	 	(f)	 	any Tax Liability payable by the Purchaser which arises as a result of its
receiving any payment under this Tax Covenant;
	 
	 	(g)	 	any Tax Liability arising in connection with the Canadian Disposal;
	 
	 	(h)	 	any Tax Liability arising in connection with the MediaLink Licence; and
	 
	 	(i)	 	any reasonable costs and expenses properly incurred and payable by the
Purchaser in connection with a Tax Liability for which the Seller is liable under
paragraph 2(a)-(h).

	3.	 	Exclusions
	 
	3.1	 	The covenant contained in paragraph 2 above will not cover any Tax Liability to the extent
that:

111

 

	 	(a)	 	Provision or reserve in respect of that Tax Liability has been made or its payment
or discharge has been reflected in the Accounts; or
	 
	 	(b)	 	it arises or is increased as a result only of any change in law announced and
coming into force after Completion with retrospective effect (whether relating to
rates of Tax or otherwise) or the withdrawal of any extra-statutory concession
previously made by a Tax Authority; or
	 
	 	(c)	 	the Purchaser is compensated for any such matter as a result of a claim under
another provision of this Agreement; or
	 
	 	(d)	 	it would not have arisen but for a voluntary act or transaction carried out
by the Purchaser or the Company after Completion SAVE THAT this exclusion shall not
apply where the act or transaction:

	 	(i)	 	is in the ordinary course of the relevant company’s normal
business as conducted up to the date of Completion;
	 
	 	(ii)	 	is required by any legislation or the practice of any Tax or
other authority, whether coming into force or applying before, on or after
Completion;
	 
	 	(iii)	 	could not reasonably have been avoided;
	 
	 	(iv)	 	is the presentation for stamping of any document which was
executed prior to Completion;
	 
	 	(v)	 	is one which the Company is legally committed to do under a
commitment that existed on or before Completion;
	 
	 	(vi)	 	is carried out with the written consent of Seller or its
authorised representative; or
	 
	 	(vii)	 	the Purchaser was neither aware nor ought reasonably to have
been aware would give rise to the Tax Liability in question.

	 	(e)	 	it arises or is increased as a result of transactions entered into by the
Company in the ordinary course of business between the Accounts Date and Completion;
	 
	 	(f)	 	it would not have arisen but for a change after Completion in the accounting
bases upon which the Company values its assets (other than a change made in order to
comply with generally accepted accounting principles);
	 
	 	(g)	 	it arises or is increased as a result of the Company ceasing to be entitled
to the small companies’ rate of corporation tax;
	 
	 	(h)	 	it arises or increased as a consequence of the failure of the Purchaser to
comply with or procure the compliance of the Company with its obligations under
paragraphs 6 (Recovery from Third Parties), 7 (Conduct of Tax Claims) and 10
(Purchaser’s covenant);

112

 

	 	(i)	 	it is in respect of stamp duty or stamp duty reserve tax payable on the
transfer or agreement to transfer the Shares pursuant to the Agreement;
	 
	 	(j)	 	the Tax Liability has been made good or otherwise compensated for at no
expense to the Company or the Purchaser;
	 
	 	(k)	 	the Tax Liability of the Seller under this Tax Covenant, when aggregated with
any Claims within the meaning given to it in Schedule 8, exceeds USD 27,000,000.
	 
	 	(l)	 	the Tax Liability of any claim under this Tax Covenant would be less than USD
25,000;
	 
	 	(m)	 	the aggregate cumulative Tax Liability of all claims under this Tax Covenant
(not being a claim falling within paragraph (l) above) when aggregated with any Claim
within the meaning given to it in Schedule 8 would be less than USD 500,000;
	 
	 	(n)	 	any income, profits or gains to which the Tax Liability is attributable were
earned or received by or accrued to the Company on or before the Accounts Date but
were not reflected in the Accounts;
	 
	 	(o)	 	the liability in question arises or is increased as a result of the failure
by the Company 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, giving or doing
of which was permitted by law and which is taken in account in computing and so
reducing any provision which appears in the Accounts (or eliminating any provision
which would otherwise have appeared in the Accounts), or in computing any right to
repayment of Tax which appears in the Accounts, or the withdrawal or amendment by the
Company after Completion of any such claim, election, surrender, disclaimer, notice or
consent made by the Company prior to Completion.

	3.2	 	The provisions of paragraph 3.1 and 3.5 of this Tax Covenant shall not apply to any claims:

	 	(a)	 	in respect of any Tax Liability falling within paragraph 2(g) and (h) of this
Tax Covenant; or
	 
	 	(b)	 	arising out of fraud or dishonest conduct on the part of the Seller (and in
such case the Covenantors waive any rights they may otherwise have under the
Limitations Act 1980).

	3.3	 	The liability of any individual Seller under any claim brought under this Tax Covenant is
limited to his Proportion of the Consideration.
	 
	3.4	 	In relation to any claim brought under this Tax Covenant, each Seller shall be liable only
for his Proportion of the value of that claim.
	 
	3.5	 	No claim shall be brought by the Purchaser under this Tax Covenant unless written particulars
of such claim specifying (in reasonable detail) the matter

113

 

which gives rise to the claim have been given to the Seller before the seventh anniversary
of this Agreement.

	4.	 	Payment date and interest

	4.1	 	Where the Seller is liable to make any payment under paragraph 2, the due date for the making
of that payment (“Due Date”) will be the later of the date falling 10 Business Days after the
Purchaser has served a notice on the Seller demanding that payment and 3 Business Days before
the date on which the Tax in question would have to be paid to the relevant Tax Authority in
order to prevent a liability to interest or a fine, surcharge or penalty from arising in
respect of the Tax Liability in question or, where a claim relates to the application by the
Purchaser of any Relief, the Due Date referred to in this paragraph is that which would have
applied to the Tax saved by the application of that Relief, or in the case of a right to
repayment, the date on which such repayment would otherwise have been made to the Company; or
in the case of a loss of any Relief, the date on which the Tax that would have been saved but
for such loss becomes due and payable to the Tax Authority.
	 
	4.2	 	If any sums required to be paid by the Seller under this Tax Covenant are not paid on the Due
Date, then, except to the extent that the Seller’s liability under paragraph 2 compensates the
Purchaser for the late payment by virtue of it extending to interest, such sums will bear
interest (which will accrue from day to day after as well as before any judgment for the same)
at the rate of 2% per annum over the base rate from time to time of Lloyds TSB Bank plc or, in
the absence thereof, at such similar rate as the Purchaser will select from the day following
the Due Date up to and including the day of actual payment of such sums, such interest to be
compounded quarterly.
	 
	4.3	 	Any dispute as to the amount specified in any notice served on the Seller under paragraph 4.1
above will be determined by the auditors of the Company for the time being, acting as experts
and not as arbitrators (the costs of that determination being shared equally by the Seller and
the Purchaser).
	 
	5.	 	Withholdings/gross-up
	 
	5.1	 	All sums payable under this Schedule shall be free and clear of all deductions or
withholdings unless a deduction or withholding is required by law in which event the payer
shall pay such additional amount as shall be required to ensure that the net amount received
by the payee shall equal the full amount that would have been received by it had the payment
not been subject to such deduction or withholding.
	 
	5.2	 	If any sum payable by the Seller to the Purchaser under this Schedule is subject to Tax in
the hands of the Purchaser, the amount so payable shall be increased by such amount as will
ensure that, after payment of the liability to Tax, the Purchaser is left with a net sum equal
to the sum it would have received had no such liability to Tax arisen provided that if any
payment is initially made on the basis that the amount due is not taxable in the hands of the
Purchaser and its is subsequently determined that it is, or vise versa, such adjustments shall
be made between the Purchaser and the Seller as may be required.

114

 

	5.3	 	If the Purchaser would, but for the availability of a Purchaser’s Relief, incur a liability
to Tax falling within paragraph 5.2, it shall be deemed for the purposes of that paragraph to
have incurred and paid that liability.
	 
	6.	 	Recovery from third parties
	 
	6.1	 	Where the Purchaser or the Company is or becomes entitled to recover by virtue of a legal
right from some other person not being the Company or a member of the Purchaser’s Tax Group
any amount relating to a Tax Liability which has resulted in a payment being made by the
Seller under this Tax Covenant, the Purchaser will or will procure that the Company will:

	 	(a)	 	notify the Seller of its entitlement as soon as reasonably practicable; and
	 
	 	(b)	 	if required by the Seller and, subject to the Purchaser or the Company being
indemnified by the Seller to the Purchaser’s reasonable satisfaction against any Tax
that may be suffered on receipt of that amount and any reasonable costs and expenses
incurred in recovering that amount, take or procure that the Company takes all
reasonable steps to enforce that recovery provided that the Purchaser shall not be
required to take any action pursuant to this paragraph 6.1(b) which, in the
Purchaser’s reasonable opinion acting in good faith having taken account of the
reasonable requests of the Seller, is likely to have a material adverse effect on the
future liability to Tax of it or the Company.

	6.2	 	If the Purchaser or the Company recovers any amount referred to in paragraph 6.1, the
Purchaser will account to the Seller for the lesser of:

	 	(a)	 	any amount recovered (including any related interest or related repayment
supplement) less any Tax suffered in respect of that amount and any costs and expenses
incurred in recovering that amount (save to the extent that any such amount has
already been made good by the Seller under paragraph 2); and
	 
	 	(b)	 	the amount paid by the Seller under paragraph 2 of this Schedule in respect
of the Tax Liability in question.

	7.	 	Conduct of Tax Claims

	7.1	 	If the Purchaser or the Company becomes aware of a Tax Claim, the Purchaser will give notice
in writing, or procure that notice in writing is given, (setting out reasonable particulars of
the Claim), to the Seller as soon as is reasonably practicable (and in any event not less than
15 Business Days prior to the expiry of any time for appeal), provided that if the Seller
receives any Tax Claim for whatever reason, it shall notify the Purchaser in writing as soon
as is reasonably practicable and the Purchaser will be deemed on receipt of such notification
to have given the Seller notice of such Tax Claim in accordance with the provisions of this
paragraph 7. If the Purchaser fails to give the Seller prompt notice of a Tax Claim and such
failure precludes the Seller from contesting or instructing the Company or the Purchaser to
contest the Tax Claim in both the administrative and judicial forums, then the Seller shall
not have any obligation

115

 

to indemnify for such loss and the Seller shall not be liable under this Tax Covenant.

	7.2	 	Provided the Seller indemnifies the Purchaser or the Company to the Purchaser’s reasonable
satisfaction against all liabilities, costs, damages or expenses which may be incurred thereby
including any additional Tax Liability, the Purchaser will take and will procure that the
Company takes such action as the Seller may reasonably request by notice in writing given to
the Purchaser or the Company to avoid, dispute, defend, resist, appeal or compromise any Tax
Claim.
	 
	7.3	 	If any dispute arises between the Purchaser and the Seller as to whether any Tax Claim should
at any time be settled in full, or contested in whole or in part, such dispute shall be
referred for determination to a Queen’s Counsel, who has specialised in Tax matters for at
least ten years at the English Bar with relevant experience (“Counsel”), appointed by
agreement between the Purchaser and the Seller or (if they do not agree) upon the application
by either party to the President for the time being of The Law Society, whose determination
shall be final. Any Counsel so appointed shall be asked to advise whether, in his opinion,
(acting as an expert and not as an arbitrator), an appeal against the Tax Claim would, on the
balance of probabilities, be likely to succeed and shall be instructed, if the dispute relates
to a Tax Claim issued by a Tax Authority outside the United Kingdom, to obtain such advice
from professional advisers of the relevant jurisdiction as he thinks necessary in order to
arrive at his opinion, and also to determine how the costs of obtaining his opinion should be
allocated between the parties hereto. Any further dispute arising between the parties as to
whether any further appeal should be pursued following determination of an earlier appeal
(whether or not in favour of the Company) shall be resolved in a similar manner.
	 
	7.4	 	If:

	 	(a)	 	the Seller does not request the Purchaser or the Company to take any action
under paragraph 7.2 above within 15 Business Days of the date of notice of the claim
being given by the Purchaser or the Company; or
	 
	 	(b)	 	the Seller fails to indemnify the Purchaser or the Company to the Purchaser’s
reasonable satisfaction within a period of time (commencing with the date of the
notice given to the Seller) that is reasonable, having regard to the nature of the Tax
Claim and the existence of any time limit in relation to avoiding, disputing,
defending, resisting, appealing or compromising such Tax Claim, and which period shall
not in any Event exceed a period of 20 Business Days; or
	 
	 	(c)	 	the Tax Claim concerns fraud or dishonest conduct as alleged by any Tax
Authority; or
	 
	 	(d)	 	Counsel advises pursuant to paragraph 7.3 on the balance of probabilities
that an appeal against the relevant Tax Claim is not likely to succeed,

the Purchaser or the Company will have the conduct of the Dispute absolutely (without
prejudice to its rights under this Tax Covenant) and will be free to pay

116

 

or settle the Tax Claim on such terms as the Purchaser or the Company (acting reasonably)
may in its absolute discretion consider fit.

	7.5	 	If the Seller does request the Purchaser or the Company to take any action under paragraph
7.2 above within the time limits specified in paragraph 7.4(a) above, the Purchaser shall
procure that the Tax Claim is not settled or compromised without the Seller’s prior written
consent, such consent not to be unreasonably withheld or delayed.
	 
	7.6	 	The action which the Seller may request under paragraph 7.2 above shall include the Company
applying to postpone (so far as legally possible) the payment of any Tax.
	 
	8.	 	Savings
	 
	8.1	 	If (at the Seller’s request and expense) the auditors of the Company for the time being
determine that the Company has obtained a Saving, the Purchaser will as soon as reasonably
practicable thereafter repay to the Seller the lesser of:

	 	(a)	 	the amount of the Saving (as determined by the auditors) less any reasonable
costs incurred by the Company or the Purchaser; and
	 
	 	(b)	 	the amount paid by the Seller under paragraph 2 in respect of the Tax
Liability which gave rise to the Saving less any part of that amount previously
re-paid to the Seller under any provision of this Tax Covenant.

	9.	 	Overprovisions
	 
	9.1	 	If, on or before the 7th anniversary of Completion, the auditors for the time
being of the Company certify (at the request and expense of the Seller) that any provision for
Tax in the Accounts has proved to be an Overprovision;

	 	(a)	 	the amount of any Overprovision will first be set off against any payment
then due from the Seller under this Tax Covenant; and to the extent that there is an
excess, a refund will be made to the Seller of any previous payment or payments made
by the Seller under this Tax Covenant (and not previously refunded under this Tax
Covenant) up to the amount of such excess; and
	 
	 	(b)	 	to the extent that such excess as referred to in (a) above is not exhausted,
the remainder of that excess will be carried forward and set off against any future
payment or payments which become due from the Seller under this Tax Covenant.

	10.	 	Purchaser’s Covenant
	 
	10.1	 	The Purchaser shall pay to the Seller an amount equal to any Tax Liability relating to any of
the following Events occurring or deemed to occur after Completion;

117

 

	 	(a)	 	the Company or any member of the Purchaser’s Tax Group failing to pay any
amount of Tax to which it is liable to the extent that such Tax Liability arises in
circumstances where the Purchaser would not have been entitled to make a claim against
the Seller under paragraph 2 of the Tax Covenant had such Tax Liability been paid by
the Company or the relevant member of the Purchaser’s Tax Group.
	 
	 	(b)	 	the making by the Company or any member of the Purchaser’s Tax Group of any
payment or deemed payment which is treated as a chargeable payment for the purposes of
section 214 of the Taxes Act where the Company or the relevant member of the
Purchaser’s Tax Group was aware or ought reasonably to have been aware that such
payment would give rise to such Tax Liability;
	 
	 	(c)	 	the Company or any member of the Purchaser’s Tax Group ceasing to be resident
in the United Kingdom or such other country as that relevant company resides for
Taxation purposes.

	10.2	 	Any payment made by the Purchaser under paragraph 10.1 above shall be made 10 Business Days
before the last day on which the relevant payment of taxation is due to be made to the
relevant Taxation Authority without incurring any liability to interest or penalties.
	 
	10.3	 	The Purchaser shall pay to the Seller an amount equal to all costs and expenses reasonably
and properly incurred by the Seller in connection with such Tax Liability as described in
paragraph 10.1 above or any action taken under this paragraph.

118

 

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	SIGNED by NICHOLAS BOYES-HUNTER

	 	 	)	 	 	/s/ Nicholas Boyes-Hunter	 	 
	 

	 	 	 	 	 	 	 	 
	in the presence of: [unintelligible]

	 	 	)

)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SIGNED by CYRIL BOYES-HUNTER

	 	 	)	 	 	/s/ Cyril Boyes-Hunter	 	 
	 

	 	 	 	 	 	 	 	 
	in the presence of: [unintelligible]

	 	 	)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SIGNED by DAVID WATERS

	 	 	)	 	 	/s/ David Waters	 	 
	 

	 	 	 	 	 	 	 	 
	in the presence of: [unintelligible]

	 	 	)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SIGNED by STUART PAYNE

	 	 	)	 	 	/s/ Stuart Payne	 	 
	 

	 	 	 	 	 	 	 	 
	in the presence of: [unintelligible]

	 	 	)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SIGNED by GEORGE PAYNE

	 	 	)	 	 	/s/ George Payne	 	 
	 

	 	 	 	 	 	 	 	 
	in the presence of: [unintelligible]

	 	 	)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SIGNED by CARL RUSHTON

	 	 	)	 	 	/s/ Carl Rushton	 	 
	 

	 	 	 	 	 	 	 	 
	in the presence of: [unintelligible]

	 	 	)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SIGNED by Michael A. Sicuro the duly

	 	 	)	 	 	/s/ Michael A. Sicuro	 	 
	 

	 	 	 	 	 	 	 	 
	authorised representative of

	 	 	 	 	 	Executive Vice President, Chief	 	 
	MIKOHN GAMING CORPORATION

	 	 	 	 	 	Financial Officer, Secretary and	 	 
	 

	 	 	 	 	 	Treasurer	 	 
	in the presence of: [unintelligible]

	 	 	)	 	 	 	 	 

119exv10w1

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is effective as of September 12, 2005 (the
“Effective Date”), and is entered into by and between Gary I. Schneiderman (“Schneiderman”) and
Ashworth, Inc., a Delaware corporation (the “Company”).

     1. Employment. As of the Effective Date, the Company hereby employs Schneiderman to
serve in the capacity of Executive Vice President of Sales and Marketing (“EVP-S&M”). The
Company’s Board of Directors (the “Board”) and/or the Company’s Chief Executive Officer (the “CEO”)
may provide such additional designations of title to Schneiderman as the Board and/or CEO, in its
discretion, may deem appropriate.

     Schneiderman agrees to perform the executive duties and functions customarily associated with
the offices of EVP-S&M and as specified from time to time by the Board and/or the CEO. Except for
legal holidays, vacations and absences due to temporary illness, Schneiderman shall devote his
time, attention and energies to the business of the Company on a full-time basis. Schneiderman
represents and warrants to the Company that he is under no restriction, limitation or other
prohibition to perform his duties as described herein.

     2. Employment Compensation And Benefits.

          a. Base Salary. Schneiderman’s initial base salary shall be at the annual rate
of three hundred thousand dollars ($300,000). This salary level shall be reviewed at least
annually by the Board’s Compensation Committee on the basis of Schneiderman’s performance
and the Company’s financial success and progress.

          b. Annual Bonus and Stock Options. Schneiderman will be entitled to receive an
option for a minimum of 20,000 shares for each of fiscal years 2005, 2006 and 2007 with the
options for fiscal year 2005 to be granted on September 12, 2005 and vesting on the first
anniversary of the date of grant. Option grants for fiscal years 2006 and 2007 will be
granted and will vest on the first anniversary of the date of grant. Schneiderman will also
be eligible to earn an annual bonus on a Earnings Before Taxes (“EBT) in accordance with the
executive bonus plan, and according to the following schedule:

	 	 	 	 	 
	 	 	Ashworth Bonus Plan
	 	 	Target is 50% of base
	% of Ashworth’s	 	salary
	Plan	 	Bonus % of Target
	150%
	 	 	165	%
	125%
	 	 	135	%
	110%
	 	 	115	%
	100%
	 	 	100	%
	95%
	 	 	75	%
	90%
	 	 	60	%
	85%
	 	 	50	%
	Less than 85%
	 	Discretionary

 1 of 8

 

Under this plan, for example, Schneiderman’s “Target” bonus at 100% of Plan will equal 50%
of his annual base salary, $150,000. The annual bonus will be paid following the close of
final accounting records for the previous fiscal year.

          c. Non-compete/Retention Payment. Schneiderman acknowledges that the Company
has offered upon certain conditions described herein to provide him with a
non-compete/retention payment in the form of guaranteed minimum annual payments.
Schneiderman understands and agrees that any portion of the payments described below that
exceeds the bonus payment to which he would otherwise be entitled pursuant to Paragraph 2(b)
of this Agreement shall be deemed vested and earned only upon the condition that
Schneiderman remain with the Company from the effective date of this Agreement through the
end of fiscal year 2006.

Schneiderman will receive three guaranteed minimum non-compete/retention payments as
follows. The first payment of $85,000 shall be made on September 12, 2005. The second
payment of $85,000 shall be made on November 24, 2005. The third payment, in the amount of
$40,000, shall be paid following the close of final accounting records for 2006. Each of
these payments will be applied against any cash bonus award earned during the relevant
fiscal year (as described in Paragraph 2(b)). Any portion of the payment amount that exceeds
the actual amount Schneiderman earned according to the cash bonus plan will be considered an
“advanced non-compete/retention payment”, and constitute the amount to be repaid by
Schneiderman if he leaves the Company prior to the end of the 2006 fiscal year. For
example, if the Company’s 2006 fiscal year performance for purposes of the executive cash
bonus plan is less than 85% of Plan, and Schneiderman’s discretionary bonus is determined to
be $30,000, Schneiderman’s advanced non-compete/retention payment would be $10,000.

If Schneiderman does not fulfill the conditions for receiving the non-compete/retention
payment by remaining with the Company through the end of fiscal year 2006, the Company will
not have received the benefit of its bargain with regard to the non-compete/retention
payment, in which case Schneiderman will not be entitled to the payment, and further,
Schneiderman will be indebted to the Company for the amount advanced to him by the Company.
Furthermore, in the event that Schneiderman fails to remain with the Company through the end
of fiscal year 2006, Schneiderman agrees to repay the Company the full amount advanced to
him by the Company by no later than 30 days after the date of his departure. Schneiderman
further understands that if he refuses or is unable to repay to the Company the advanced
funds, the Company may seek appropriate legal remedies to recoup the full amount of the
outstanding debt, or offset any advanced funds against other payments owed, including but
not limited to severance payments.

          d. Automobile Allowance. The Company shall pay Schneiderman an automobile
expense allowance of one thousand dollars ($1,000) per month to defray the cost of business
automobile expense.

          e. Vacation. Schneiderman shall be entitled to annual vacations in a manner
commensurate with his status as a key executive and in accordance with the Company’s
vacation policies in effect during the term of this Agreement.

          f. Expense Reimbursement. The Company shall reimburse Schneiderman for all
reasonable amounts actually expended by Schneiderman in the course of performing his duties
for the Company and in accordance with any Company-established guidelines
where Schneiderman tenders receipts or other documentation reasonably substantiating
the amounts as required by the Company.

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          g. Club Membership. On September 12, 2005, the Company will pay Schneiderman
up to $45,000 (grossed up for any applicable income taxes) to purchase a Club Membership at
a Club of Schneiderman’s choosing. Schneiderman will be entitled to make use of such
membership and the Company will pay the monthly dues of $630 beginning September 12, 2005
for the term of Schneiderman’s employment. Schneiderman agrees that at the end of his
employment, he will reimburse the membership cost (current market value at the time of sale
minus the club fee) to Ashworth.

          h. Other Benefits. Except as otherwise provided in this Agreement,
Schneiderman shall be entitled to receive all of the rights, benefits and privileges of an
executive officer of the Company under any retirement, pension, profit-sharing, group
medical insurance, group dental insurance, group-term life insurance, and disability
insurance, and other employee benefit plans which may be now in effect or hereafter adopted.

     3. Non-compete. Schneiderman agrees that during the term of this Agreement
Schneiderman will not, directly or indirectly, own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management, operation, or control
of any business which manufactures or sells golf-inspired sportswear which is substantially the
same as that of the Company and which is distributed in the same channels of distribution as the
then current channels of distribution of the Company, provided, however, that if Schneiderman’s
employment is terminated for reasons which provide for severance compensation, the non-compete term
shall be extended to the period for which he receives such severance compensation.

     4. Termination.

          a. At Will. The Company shall employ Schneiderman at will, and either
Schneiderman or the Company may terminate Schneiderman’s employment with the Company at any
time and for any reason, with or without cause.

          b. Severance Payment and Benefits. If Schneiderman’s employment is terminated
as a result of a Qualifying Termination, as defined below, and if Schneiderman delivers a
fully executed release and waiver of all claims against the Company in the form attached
hereto as Exhibit A, then, upon expiration of any applicable revocation period contained in
the Release Agreement, the Company shall pay or provide Schneiderman the following severance
payment and benefits:

               i. Schneiderman shall receive the equivalent of twelve(12) months of his
then-current base salary (the “Severance Payment”), which shall be payable in equal
monthly installments beginning on the first day of the first full month following
Schneiderman’s Qualifying Termination and continuing on the first day of each month
thereafter until fully paid. The Severance Payment is in lieu of any severance payment
benefits which otherwise may at that time be available under the Company’s applicable
policies; provided, however, that nothing in this Agreement is intended
to modify or supercede the “Agreement re: Change In Control” entered into between
Schneiderman and the Company as of September 12, 2005, and Schneiderman shall be
entitled to receive whatever additional severance pay
benefits, if any, for which he may qualify according to the terms of his Agreement
re: Change in Control with the Company.

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               ii. For the twelve-month period following the Qualifying Termination of his
employment, Schneiderman shall be entitled to continue to participate in the following
executive benefit programs which had been made available to him (including his family)
before the Qualifying Termination: group medical insurance, group dental insurance,
group-term life insurance, and disability insurance. The programs shall be continued in
the same way and at the same level as immediately prior to the Qualifying Termination.
Schneiderman’s participation in each of such executive benefit programs shall be earlier
terminated or reduced, as applicable, if and to the extent Schneiderman receives
benefits as a result of concurrent coverage through another program.

               iii. Schneiderman will also be entitled to receive an additional cash payment of
$50,000.

               iv. Schneiderman’s unvested stock options, as described in Paragraph 2(b) of this
Agreement, shall immediately become fully vested and exercisable. This provision only
applies to stock options Schneiderman has been granted pursuant to this Agreement, and
does not apply to options provided from any other source or Ashworth.

        c. Qualifying Termination. Schneiderman’s termination shall be considered a
“Qualifying Termination” unless:

               i. Schneiderman voluntarily terminates his employment with the Company and its
affiliated companies. Schneiderman, however, shall not be considered to have
voluntarily terminated his employment with the Company and its affiliated companies if
he elects to terminate his employment because his overall compensation plan is reduced
or adversely modified in any material respect or his authority or duties are materially
changed. For such purposes, Schneiderman’s authority or duties shall be considered to
have been “materially changed” if, without Schneiderman’s express and voluntary written
consent, there is any substantial diminution or adverse modification in his title,
status, overall position, or responsibilities.

               ii. The termination is on account of Schneiderman’s death or Disability. For such
purposes, “Disability” shall mean a physical or mental incapacity as a result of which
Schneiderman becomes unable to continue the performance of his responsibilities for the
Company and its affiliated companies for a period of three (3) months.

               iii. Schneiderman is involuntarily terminated for “Cause.” For this purpose,
“Cause” shall mean:

                    1. Schneiderman’s willful and deliberate refusal to comply with a lawful,
instruction of the CEO or Board of Directors, which refusal is not remedied by
Schneiderman within a reasonable period of time after his receipt of written notice
from the Company identifying the refusal, so long as the instruction is consistent
with the scope and responsibilities of Schneiderman’s position;

                    2. Schneiderman’s act or acts of personal dishonesty;

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                    3. Schneiderman’s conviction of a felony;

                    4. Schneiderman’s violation of the Company’s policies and/or code of conduct;

             5. Schneiderman’s violation of any confidentiality or non-competition agreement
with the Company or any Affiliate of the Company; or

                    6. The willful engaging by Schneiderman in misconduct which is injurious to the
Company.

          d. Return of Materials. In the event of any termination of Schneiderman’s
employment for any reason whatsoever, Schneiderman shall promptly deliver to the Company all
Company property, including, but not limited to, documents, data, and other information
pertaining to Confidential Information, as defined below. Schneiderman shall not take with
him any documents or other information, or any reproduction, summary or excerpt thereof,
electronic or otherwise, containing or pertaining to any Confidential Information.

     5. Nondisclosure of Confidential Information. Schneiderman acknowledges that during
the term of his employment with the Company, he will have access to and become acquainted with
information of a confidential, proprietary or secret nature which is or may be either applicable
to, or related in any way to, the present or future business of the Company, the research and
development or investigation of the Company, or the business of any customer of the Company
(“Confidential Information”). For example, Confidential Information includes, but is not limited
to, devices, secret inventions, processes and compilations of information, records, specifications,
designs, plans, proposals, software, codes, marketing and sales programs, financial projections,
cost summaries, pricing formula, and all concepts or ideas, materials or information related to the
business, products or sales of the Company and its customers and vendors. Schneiderman shall not
disclose any of Confidential Information, directly or indirectly, or use them in any way, either
during the term of this Agreement or at any time thereafter, except as required in the course of
employment with the Company. Schneiderman also agrees to comply with the Company’s policies and
regulations, as established from time to time for the protection of its Confidential Information,
including, for example, executing the Company’s standard confidentiality agreements. This section
shall survive termination of this Agreement.

     6. Non-Solicitation. Schneiderman agrees that so long as he is employed by the
Company and for a period of two (2) years after termination of his employment for any reason, he
shall not (a) directly or indirectly solicit, induce or attempt to solicit or induce any Company
employee to discontinue his or her employment with the Company; (b) usurp any opportunity of the
Company of which Schneiderman became aware during his tenure at the Company or which is made
available to him on the basis of the belief that Schneiderman is still employed by the Company; or
(c) directly or indirectly solicit or induce or attempt to influence any person or business that is
an account, customer or client of the Company to restrict or cancel the business of any such
account, customer or client with the Company. This section shall survive termination of this
Agreement.

     7. Successors.

          a. This Agreement is personal to Schneiderman, and without the prior written consent of
the Company shall not be assignable by Schneiderman other than by will or
the laws of descent and distribution. This Agreement shall inure to the benefit of and
be enforceable by Schneiderman’s legal representatives.

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          b. The rights and obligations of the Company under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of the Company.

     8. Governing Law. This Agreement is made and entered into in the State of California,
and the internal laws of California shall govern its validity and interpretation in the performance
by the parties hereto of their respective duties and obligations hereunder.

     9. Modifications. This Agreement may be amended or modified only by an instrument in
writing executed by all of the parties hereto.

     10. Entire Agreement. Except as otherwise set forth herein, this Agreement, together
with the exhibits attached hereto, supersedes any and all prior written or oral agreements between
Schneiderman and the Company, and contains the entire understanding of the parties hereto with
respect to the terms and conditions of Schneiderman’s employment with the Company;
provided, however, that this Agreement is not intended to supercede the Agreement
re: Change in Control between Schneiderman and the Company, which they entered into as of September
12, 2005, or any agreements which Schneiderman may previously have entered into regarding the
protection of trade secrets and confidential information.

     11. Dispute Resolution. Schneiderman and the Company will utilize a system of binding
arbitration to resolve all disputes that may arise out of the employment context. Both the Company
and Schneiderman agree that any claim, dispute, and/or controversy that either Schneiderman may
have against the Company (or its owners, directors, officers, managers, employees, agents, and
parties affiliated with its employee benefit and health plans) or the Company may have against
Schneiderman, arising from, related to, or having any relationship or connection whatsoever with
Schneiderman’s seeking employment with, employment by, or other association with the Company, shall
be submitted to and determined exclusively by binding arbitration under the Federal Arbitration
Act, in conformity with the procedures of the California Arbitration Act (Cal. Code Civ. Proc. sec
1280 et seq., including section 1283.05 and all of the Act’s other mandatory and permissive rights
to discovery). Included within the scope of this Agreement are all disputes, whether based on
tort, contract, statute (including, but not limited to, any claims or discrimination and
harassment, whether they be based on the California Fair Employment and Housing Act, Title VII of
the Civil Rights Act of 1964, as amended, or any other state or federal law or regulation),
equitable law, or otherwise. However, nothing herein shall prevent Executive from filing and
pursuing proceedings before the California Department of Fair Employment and Housing, or the United
States Equal Employment Opportunity Commission (although if Schneiderman chooses to pursue a claim
following the exhaustion of such administrative remedies, that claim would be subject to the
provisions of this Agreement). In addition to any other requirements imposed by law, the
arbitrator selected shall be a retired California Superior Court Judge and shall be subject to
disqualification on the same grounds as would apply to a judge of such court. To the extent
applicable in civil actions in California courts, the following shall apply and be observed: all
rules of pleading (including the right of demurrer), all rules of evidence, and all rights to
resolution of the dispute by means of motions for summary judgment, judgment on the pleadings, and
judgment under Code of Civil Procedure Section 631.8. Resolution of the dispute shall be based
solely upon the law governing the claims and defenses pleaded, and the arbitrator may not invoke
any basis (including but not limited to, notions of “just cause”) other than such controlling law.
The arbitrator shall have the immunity of a judicial officer from civil liability when acting in
the capacity of an arbitrator, which immunity supplements any other existing immunity. Likewise,
all communications during or in

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connection with the arbitration proceedings are privileged in accordance with Cal. Civil Code
Section 47(b). As reasonably required to allow full use and benefit of this agreement’s
modification to the Act’s procedures, the arbitrator shall extend the times set by the Act for the
giving of notices and setting of hearings. Awards shall include the arbitrator’s written reasoned
opinion. Notwithstanding the foregoing, the parties acknowledge and agree that this provision
shall not preclude either party from requesting temporary and/or preliminary injunctive relief to
enforce Paragraphs 3, 5 or 6 of this Agreement until such time as an arbitrator can assume
jurisdiction and render a decision over any such claims or requests.

     12. Notices. Any notice or communications required or permitted to be given to the
parties hereto shall be delivered personally or be sent by United States registered or certified
mail, postage prepaid and return receipt requested, and addressed or delivered as follows, or at
such other addresses the party addressed may have substituted by notice pursuant to this Section:

	 	 	 
	Ashworth, Inc.

	 	Gary I. Schneiderman
	2765 Loker Avenue West

	 	20 Camberley
	Carlsbad, California 92010

	 	Laguna Niguel, CA 92677
	Attn: President
	 	 

     13. Captions. The captions of this Agreement are inserted for convenience and do not
constitute a part hereof.

     14. Severability. In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein and there shall be deemed substituted for such invalid, illegal or
unenforceable provision such other provision as will most nearly accomplish the intent of the
parties to the extent permitted by the applicable law. In case this Agreement, or any one or more
of the provisions hereof, shall be held to be invalid, illegal or unenforceable within any
governmental jurisdiction or subdivision thereof, this Agreement or any such provision thereof
shall not as a consequence thereof be deemed to be invalid, illegal or unenforceable in any other
governmental jurisdiction or subdivision thereof.

     15. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall together constitute one in the same
Agreement.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered effective as of the day and year first written above in Carlsbad, California.

	 	 	 	 	 
	 	 	ASHWORTH, INC.
	 
	 	 	 	 
	 

	 	By:	 	/s/
Randall L. Herrel, Sr. 
	 	 	 	 	 
	 

	 	 	 	Randall L. Herrel, Sr.
	 	 	Title: CEO and President

	 	 	 	 	 
	 	GARY I. SCHNEIDERMAN

 	 
	 	By:  	/s/
Gary I. Schneiderman	 
	 	 	Gary I. Schneiderman 	 
	 	 	 	 

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EXHIBIT A — RELEASE AGREEMENT

     I, Gary I. Schneiderman, hereby enter into this Release Agreement (this “Agreement”), pursuant
to Paragraph 4(b) of my Employment Agreement with Ashworth, Inc., a Delaware corporation (the
“Company”), in consideration for which the Company shall make the Severance Payment as described in
my Employment Agreement entered into effective as of September 12, 2005.

     1. The date of my Qualifying Termination is                                         , and I have received a final
paycheck for all wages due, including all accrued vacation, through that date. Other than the
Severance Payment as described in my Employment Agreement and whatever additional severance pay
benefits, if any, for which I may qualify according to the terms of my Agreement re: Change in
Control with the Company, the foregoing payments are the only amounts which I am entitled to
receive from the Company, and I hereby waive all other payments or claims for payments.

     2. As consideration for the Severance Payment as described in my Employment Agreement, I
hereby release the Company, its successors, affiliates, directors, employees and agents from any
and all claims or lawsuits (including but not limited to any and all claims or demands relating to
salary, wages, bonuses, commissions, stock, stock options, vacation pay, fringe benefits, expense
reimbursements, any and all tort claims, contract claims (express or implied), wrongful termination
claims, public policy claims, whistleblower claims, implied covenant of good faith and fair dealing
claims, retaliation claims, personal injury claims, emotional distress claims, invasion of privacy
claims, defamation claims, fraud claims, attorneys’ fees claims, all claims arising under any
federal, state or other governmental statue, law, regulation or ordinance including, but not
limited to, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities
Act, the Family and Medical Leave Act, the California Fair Employment & Housing Act, the California
Labor Code, the Age Discrimination in Employment Act of 1967 (“ADEA”), the Older Workers’ Benefit
Protection Act (“OWBPA”)) which I may have based either on my employment, my termination, or any
other event occurring prior to the date of this Agreement. This Release is intended to settle any
and all claims that I may have against the Company. Accordingly, I waive any and all rights
conferred under Section 1542 of the California Civil Code, which provides: “A general release does
not extend to claims which the creditor does not know or suspect to exist in his favor at the time
of executing the release which if known by him must have materially affected his settlement with
the debtor.”

     3. I acknowledge and understand my continuing obligation (a) to maintain the confidentiality
of the Company’s trade secrets, confidential and proprietary information and (b) not to solicit the
Company’s customers or employees, as set forth in Paragraphs 3, 5 and 6 of my Employment Agreement.
I also warrant and represent that I have returned all Company materials as required in Paragraph
4(d) of my Employment Agreement.

     4. I acknowledge that I fully understand my right to discuss this Agreement with an attorney,
and I have carefully read and fully understand this entire Agreement, and I am entering into this
Agreement voluntarily.

     5. I understand that I shall have twenty-one (21) days from the date of receipt of this
Agreement to consider this Agreement, I shall have seven (7) days following the signing of this
Agreement to revoke it in writing, and this Agreement shall not be effective or enforceable until
this revocation period has expired.

	 	 	 	 	 	 	 	 	 
	Dated:	 	 	 	 	 	GARY I. SCHNEIDERMAN
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Dated:	 	 	 	 	 	ASHWORTH, INC.
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 
	 	 	 	 	 	 	 	 	 

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