EXHIBIT 2
DATED
13 JANUARY 2006
AMENDED SHARE PURCHASE AGREEMENT
between
FUTUREMEDIA PLC
and
THE SHAREHOLDERS OF LEXON INC
0 XXXXXXXX XXXXXX
XXXXXX X0X 0XX
TEL: 000 0000 0000
FAX: 000 0000 0000
CONTENTS
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CLAUSE
1. Interpretation...........................................5
2. Conditions..............................................10
3. Sale and purchase, waiver of pre-emption rights and US
Securities Law Matters..................................10
4. Purchase price..........................................13
5. Completion..............................................15
6. Warranties..............................................16
7. Limitations on claims...................................17
8. Retention...............................................20
9. Vericomp................................................20
10. Tax covenant............................................21
11. Restrictions on Sellers.................................21
12. Confidentiality and announcements.......................22
13. Further assurance.......................................23
14. Assignment..............................................23
15. Whole agreement.........................................24
16. Variation and waiver....................................24
17. Costs...................................................24
18. Notice..................................................25
19. Interest on late payment................................26
20. Severance...............................................26
21. Agreement survives completion...........................26
22. Third party rights......................................27
23. Successors..............................................27
24. Counterparts............................................27
25. Language................................................27
26. Governing law and jurisdiction..........................27
SCHEDULE
SCHEDULE 1 - PARTICULARS OF SELLERS AND APPORTIONMENT OF PURCHASE PRICE......28
SCHEDULE 2 - PARTICULARS OF THE COMPANY AND SUBSIDIARIES.....................29
Part 1. Company..............................................................31
Part 2. The Subsidiaries.....................................................30
SCHEDULE 3 - COMPLETION......................................................32
Part 1. What the Sellers shall deliver to the Buyer at Completion 32
SCHEDULE 4 - WARRANTIES.......................................34
Part 1. General warranties....................................34
1. Power to sell the company...............................34
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2. Shares in the company and subsidiaries..................34
3. Constitutional and corporate documents..................35
4. Information.............................................36
5. Compliance with laws....................................36
6. Licences and consents...................................36
7. Insurance...............................................36
8. Power of attorney.......................................36
9. Disputes and investigations.............................37
10. Defective products and services.........................37
11. Customers and suppliers.................................38
12. Competition.............................................38
13. Contracts...............................................39
14. Transactions with sellers...............................40
15. Finance and guarantees..................................40
16. Insolvency..............................................42
17. Assets..................................................43
18. Condition of plant and equipment and stock in trade.....43
19. Environmental...........................................44
20. Intellectual property...................................45
21. Information technology..................................47
22. Data protection.........................................49
23. Employment..............................................50
24. Property................................................54
25. Accounts................................................56
26. Financial and other records.............................57
27. Changes since accounts date.............................58
28. Effect of sale on sale shares...........................58
29. Retirement benefits.....................................59
Part 2. Tax warranties........................................60
1. General.................................................60
2. Chargeable gains........................................61
3. Capital allowances......................................61
4. Distributions...........................................62
5. Loan relationships......................................62
6. Close companies.........................................62
7. Group relief............................................62
8. Groups of companies.....................................63
9. Intangible assets.......................................63
10. Company residence and overseas interests................64
11. Anti-avoidance..........................................64
12. Inheritance tax.........................................65
13. VAT.....................................................65
14. Stamp duty and stamp duty land tax......................66
SCHEDULE 5 - TAX COVENANT.....................................68
1. Interpretation..........................................68
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2. Covenant................................................71
3. Payment date and interest...............................72
4. Exclusions..............................................73
5. Recovery from third parties.............................74
6. Corporation tax returns.................................74
7. Conduct of tax claims...................................75
8. Grossing up.............................................77
9. Costs and expenses......................................77
SCHEDULE 6....................................................78
Registered intellectual property rights.......................78
SCHEDULE 7 - UNUSED...........................................79
SCHEDULE 8 - PARTICULARS OF PROPERTIES........................80
Leasehold properties..........................................80
SCHEDULE 9 - COMPLETION ACCOUNTS..............................81
Part 1. General...............................................81
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THIS AGREEMENT is dated 13 January 2006
PARTIES
(1) The several persons whose names and addresses are set out in Schedule 1
(SELLERS).
(2) FUTUREMEDIA PLC incorporated and registered in England and Wales with
company number 01616681 whose registered office is at Xxxx Xxxxx, Xxxx
Xxxxxx, Xxxxxxxx, Xxxx Xxxxxx, XX0 0XX (BUYER).
BACKGROUND
(A) The Company has an issued share capital of 1,010 ordinary shares (US$ 1.00
nominal value each).
(B) Further particulars of the Company at the date of this agreement are set
out in Schedule 2 (Particulars of the company and subsidiaries).
(C) The Sellers are the legal and beneficial owners of, or are otherwise able
to procure the transfer of, the legal and beneficial title to the number
of Sale Shares set out opposite their respective names in Schedule 1
(Particulars of sellers and apportionment of purchase price) comprising in
aggregate the whole of the issued share capital of the Company.
(D) The Sellers have agreed to sell and the Buyer has agreed to buy the Sale
Shares subject to the terms and conditions of this agreement.
AGREED TERMS
1. INTERPRETATION
1.1 The definitions and rules of interpretation in this clause apply in this
agreement.
ACCOUNTS: the audited financial statements of EBC as at and to the
Accounts Date including the notes thereon and the auditor's and Directors'
reports (copies of which are attached to the Disclosure Letter).
ACCOUNTS DATE: 31 December 2004.
ACTS: the Companies Acts and the BVI Act and "Act" shall mean the relevant
act in the context.
ADSS: the Buyer's American Depositary Shares as traded on the date hereof
on the NASDAQ-CM under the symbol FMDAY. Each ADS represents the right to
receive one Buyer Share. ADSs are evidenced by American Depositary
Receipts ("ADRS"). ADSs evidenced by ADRs are issued by the Bank of New
York as Depositary (the "DEPOSITARY") of the Company's ADR facility in
accordance with the terms of a deposit agreement between the Company and
the Depositary.
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BUSINESS: the business of the Target Group, namely developing bespoke
e-learning resources and related services, including blended learning
projects incorporating learning design solutions.
BUSINESS DAY: a day (other than a Saturday, Sunday or public holiday) when
banks in London are open for business.
BUYER SHARES: ordinary shares in the capital of the Buyer (1 and 1/9p
nominal value each).
BUYER'S SOLICITORS: Xxxxx Xxxxxxx Xxxxxxx Israels LLP, 0 Xxxxxxxx Xxxxxx,
Xxxxxx, X0X 0XX.
BVI ACT: the International Business Companies Act, Cap. 291, as amended.
CAA 2001: the Capital Allowances Xxx 0000.
CLAIM AND SUBSTANTIATED CLAIM: have the meanings set out respectively in
clause 7 (Limitations on claims).
COMPANY: LEXON INC, a company incorporated and registered in the British
Virgin Islands with company number 21081 whose registered office is at
Akara Buildings, 24 Xx Xxxxxx St, Road Town, Tortola, British Virgin
Islands, further details of which are set out in Schedule 2 (Particulars
of the Company and subsidiaries).
COMPANIES ACTS: the Companies Xxx 0000 and the Companies Xxx 0000.
COMPLETION: completion of the sale and purchase of the Sale Shares in
accordance with this agreement.
COMPLETION ACCOUNTS: has the meaning set out in paragraph 1 of Part 1 of
Schedule 9 (Completion accounts).
COMPLETION DATE: the date of this agreement.
COMPLETION NET ASSETS: has the meaning given in paragraph 1 of Schedule 9
(Completion Accounts).
CONDITIONS: has the meaning given in clause 2.1.
CONNECTED: in relation to a person, has the meaning contained in section
839 of the ICTA 1988.
CONTROL: in relation to a body corporate, the power of a person to secure
that the affairs of the body corporate are conducted in accordance with
the wishes of that person:
(a) by means of the holding of shares, or the possession of voting
power, in or in relation to that or any other body corporate; or
(b) by virtue of any powers conferred by the constitutional or corporate
documents, or any other document, regulating that or any other body
corporate,
and a CHANGE OF CONTROL occurs if a person who controls any body corporate
ceases to do so or if another person acquires control of it.
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DEEDS OF COVENANT: the deeds of covenant in the agreed form to be entered
into by each of Xx Xxxx Xxxxx and Xx Xxxxx Xxxxx on Completion. DEPOSIT:
the sum of (pound)100,000 to be paid on the date of this agreement by the
Buyer to the Sellers' Solicitors on the terms of the Undertaking in
relation to the Deposit.
DIRECTOR: each person who is a director or shadow director of the Company,
the names of whom are set out in Schedule 2 (Particulars of the company).
DISCLOSED: fairly disclosed in the Disclosure Letter and/or the
Supplemental Disclosure Letter.
DISCLOSURE LETTER: the letter from the Sellers to the Buyer with the same
date as this agreement and described as the disclosure letter, including
the bundle of documents attached to it (the "DISCLOSURE BUNDLE").
DUE AMOUNT: the amount (if any) due to the Buyer in respect of a
Substantiated Claim as agreed by the Seller and the Buyer in writing or as
determined by a court of competent jurisdiction from which no right of
appeal lies.
EBC: Executive Business Channel Limited registered in England and Wales
with registered number 02862053 (details of which are set out in Part 2 of
Schedule 2)
EMPLOYMENT AGREEMENT: the employment agreement in the agreed form to be
entered into between EBC and Xxxxxx Xxxxxx on Completion.
ENCUMBRANCE: any interest or equity of any person (including any right to
acquire, option or right of pre-emption) or any mortgage, charge, pledge,
lien, assignment, hypothecation, security, interest, title, retention or
any other security agreement or arrangement.
ESCROW AGENTS: The Buyer's Solicitor and the Sellers' Solicitors.
ESCROW BANK: NatWest Bank plc.
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.
EVENT: has the meaning given in Schedule 5 (Tax covenant).
FINANCING: has the meaning given in clause 2.1(a).
GROUP: in relation to a company (wherever incorporated) that company, any
company of which it is a Subsidiary (its holding company) and any other
Subsidiaries of any such holding company; and each company in a group is a
member of the group.
Unless the context otherwise requires, the application of the definition
of Group to any company at any time will apply to the company as it is at
that time.
ICTA 1988: the Income and Corporation Taxes Xxx 0000.
IHTA 1984: the Inheritance Tax Xxx 0000.
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INTELLECTUAL PROPERTY RIGHTS: has the meaning given in paragraph 20.1 of
Part 1 of Schedule 4 (Warranties).
JS CONSULTING AGREEMENT: the consultancy agreement in the agreed form to
be entered into between the Buyer and Xxxxxxxx Xxxxxxxx on COMPLETION.
LEASE: the lease pursuant to which the Target Group occupies the Property
further particulars of which are set out in Schedule 8.
MATERIAL ADVERSE CHANGE: has the meaning given in clause 2.4.
MANAGEMENT ACCOUNTS: the unaudited balance sheet and the unaudited profit
and loss account of EBC for the period of 11 months ended 30 November 2005
(a copy of which is attached to the Disclosure Letter).
PROPERTY: Xxxx X Xxxxx Xxxx Xxxx, Xxxxxxxxx Xxxx, Xxxxxx Xx. Xxxxxx Xxxxxx
XX00 0XX.
PURCHASE PRICE: the purchase price for the Sale Shares to be paid by the
Buyer to the Sellers in accordance with clause 4 (Purchase price).
RELEASE DATE: the date 12 months from Completion.
RETENTION: the sum of (pound)250,000 to be paid by the Buyer on Completion
into the Retention Account. RETENTION ACCOUNT: the joint interest bearing
bank account to be established in accordance with the Escrow Letter.
SALE SHARES: 1,010 ordinary shares in the capital of the Company (US$1.00
nominal value each), all of which have been issued and are fully paid.
SELLERS' REPRESENTATIVE: Xxxxxxxx Xxxxxxxx of Xxxxx Xxxxx, Xxxxxxxxx,
Xxxxxxxxxxxxxxxx XX00 0XX.
SELLERS' SOLICITORS: Kingsley Napley, Knights Quarter, 00 Xx. Xxxx'x Xxxx,
Xxxxxx, XX0X 0XX.
SUBSIDIARY: in relation to a company wherever incorporated (a holding
company) means a "subsidiary" as defined in section 736 of the Companies
Xxx 0000 and any other company which is a subsidiary (as so defined) of a
company which is itself a subsidiary of such holding company.
Unless the context otherwise requires, the application of the definition
of Subsidiary to any company at any time will apply to the company as it
is at that time, and references to "Subsidiary" or "Subsidiaries" are
references to a Subsidiary or Subsidiaries of the Company.
SUPPLEMENTAL DISCLOSURE LETTER: any letter in the agreed form addressed
from the Sellers to the Buyer supplemental to the Disclosure Letter dated
the Completion Date.
TARGET GROUP: the Company and its Subsidiaries, including EBC.
TAX OR TAXATION: has the meaning given in Schedule 5 (Tax covenant).
TAX COVENANT: the tax covenant as set out in Schedule 5 (Tax covenant).
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TAX CLAIM: has the meaning given in Schedule 5 (Tax covenant).
TAX WARRANTIES: the Warranties in Part 2 of Schedule 4 (Warranties).
TAXATION AUTHORITY: has the meaning given in Schedule 5 (Tax covenant).
TAXATION STATUTE: has the meaning given in Schedule 5 (Tax covenant).
TCGA 1992: the Taxation of Chargeable Gains Xxx 0000.
TMA 1970: the Taxes Management Xxx 0000.
TRANSACTION: the transaction contemplated by this agreement or any part of
that transaction.
UNDERTAKING: an undertaking given by the Sellers' Solicitors to the
Buyer's Solicitors on the date of this agreement.
VATA 1994: the Value Added Tax Xxx 0000.
WARRANTIES: the warranties in clause 6 (Warranties) and Schedule 4
(Warranties).
1.2 Clause and schedule headings do not affect the interpretation of this
agreement.
1.3 A PERSON includes a corporate or unincorporated body.
1.4 Words in the singular include the plural and in the plural include the
singular.
1.5 A reference to one gender includes a reference to the other gender.
1.6 A reference to a statute or statutory provision is a reference to it as it
is in force for the time being taking account of any amendment, extension,
or re-enactment and includes any subordinate legislation for the time
being in force made under it.
1.7 WRITING or WRITTEN includes faxes but not e-mail.
1.8 Documents in AGREED FORM are documents in the form agreed by the parties
or on their behalf and initialled by them or on their behalf for
identification.
1.9 A reference in this agreement to OTHER DOCUMENTS REFERRED TO IN THIS
AGREEMENT or similar expression is a reference to the following documents:
(a) the Disclosure Letter; and
t 6 12 (b) the Company's board minutes.
1.10 References to clauses and schedules are to the clauses and schedules of
this agreement; references to paragraphs are to paragraphs of the relevant
schedule.
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1.11 Reference to this agreement include this agreement as amended or varied in
accordance with its terms.
2. CONDITIONS
2.1 Completion of this agreement is subject to the following conditions:
(a) the Buyer raising finance in the amount of (pound)3,650,000 (the
"Financing");
(b) approval of the Financing and the transactions contemplated by this
agreement by the Buyer's shareholders at a general meeting called
for that purpose; and
(c) there having been no Material Adverse Change since the date of this
agreement.
2.2 If each of the Conditions is not satisfied or waived by 6pm on 28 April
2006, this agreement shall cease to have effect immediately after that
date and the Sellers' Solicitors shall immediately release the Deposit to
the Sellers (and the Buyer shall be deemed to have granted authority to
the Sellers' Solicitors to do so); provided, however, that in the event
that the Condition at clause 2.1(c) shall not have been so satisfied or
waived, then the Sellers' Solicitors shall immediately release the Deposit
to the Buyer (and the Sellers shall be deemed to have granted authority to
the Sellers' Solicitors to do so).
2.3 In the event that each of the Conditions is satisfied or waived, the
Deposit shall be released by the Sellers' Solicitors to the Sellers on
Completion (and the Buyer shall be deemed to have granted authority to the
Sellers' Solicitors to do so) and shall be treated as part of the Cash
Element payable by the Buyer to the Sellers pursuant to clause 4.1(a) of
the agreement.
2.4 For purposes hereof, "Material Adverse Change" means any change, event,
circumstance or effect (whether or not such change, event, circumstance or
effect is caused by or arises in connection with a breach of a
representation, warranty, covenant or agreement of the Sellers or any
member of the Target Group in this Agreement, including without limitation
the Warranties), that is materially adverse to the Business, assets
(including intangible assets, if applicable), capitalisation, financial
condition, liabilities, operations or results of operations of the
Business.
3. SALE AND PURCHASE, WAIVER OF PRE-EMPTION RIGHTS AND US SECURITIES LAW
MATTERS
3.1 On the terms of this agreement and subject to the Conditions, the Sellers
shall sell and the Buyer shall buy, with effect from Completion, the Sale
Shares with
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full title guarantee, free from all Encumbrances and together with all
rights that attach (or may in the future attach) to them including, in
particular, the right to receive all dividends and distributions declared,
made or paid on or after the date of this agreement.
3.2 Each of the Sellers severally waives any right of pre-emption or other
restriction on transfer in respect of the Sale Shares or any of them
conferred on him under the articles of association of the Company or
otherwise and shall procure the irrevocable waiver of any such right or
restriction conferred on any other person who is not a party to this
agreement.
3.3 The Buyer is not obliged to complete the purchase of any of the Sale
Shares unless the purchase of all the Sale Shares is completed
simultaneously.
3.4 In connection with the issuance of Buyer Shares as contemplated by this
agreement, each Seller hereby represents and warrants to the Buyer as
follows:
(a) Such Seller (i) has adequate means of providing for its current
needs and possible contingencies, and it has no need for liquidity
of any investment in the Buyer Shares; (ii) has such knowledge and
experience in financial matters that the undersigned is capable of
evaluating the relative risks and merits of an investment in the
Buyer Shares; and (iii) understands that an investment in the Buyer
Shares is highly speculative and is able financially to bear the
risk of losing its entire investment.
(b) The address set forth in schedule 1 of this agreement is such
Seller's true and correct business address, and he/it has no present
intention of changing its business location or residence (as
applicable) to any other jurisdiction. Each Seller shall notify the
Buyer of any change of address that occurs between the date of this
Agreement and any future issuance of Buyer Shares pursuant hereto.
(c) Such Seller, and its representatives, if any, have received and
reviewed copies of the following documents:
(i) the Buyer's Annual Report on Form 20-F for the fiscal year
ended 30 April 2005; and
(ii) the Buyer's press releases distributed since 30 April 2005.
(d) Such Seller acknowledges that he/it has reviewed the information
referred to in sub-clause 3.4(c) above, and further acknowledges
that he/it has had the opportunity to ask representatives of the
Buyer questions about the Buyer's business and financial condition
and that it has obtained such information as it has requested to the
extent it has deemed necessary to permit it to fully evaluate the
merits and risks of an investment in the Buyer Shares. Further, the
undersigned has consulted with such other of its investment and/or
11
accounting and/or legal and/or tax advisors as it has deemed
necessary and appropriate in making a decision to accept Buyer
Shares as part of the transactions contemplated by this agreement.
(e) If such Seller is a corporation, partnership, trust, or other
entity, (i) it is authorised and qualified to become a shareholder
of, and authorised to make its investment in, the Buyer Shares, (ii)
it has not been formed for the purpose of making an investment in
the Buyer Shares, and (iii) the person signing this agreement on
behalf of such Seller has been duly authorised by such entity to do
so.
(f) Such Seller is not relying on the Buyer or any representation
contained herein or in the documents referred to herein with respect
to the tax and economic effect of its investment in the Buyer
Shares.
(g) Such Seller understands that the Buyer Shares to be issued pursuant
to this agreement have not been and are not expected to be
registered under the United States Securities Act of 1933, as
amended (the "ACT"). Such Buyer Shares are being offered and sold in
an "offshore transaction" outside the United States in accordance
with Rule 903 of Regulation S ("REGULATION S"), promulgated under
the Act. The transferability of the Buyer Shares is restricted as
provided herein.
(h) At the date of this agreement, such Seller and all beneficial owners
or subscribers for the Buyer Shares hereunder will be outside of the
United States of America or any other jurisdiction where such offer
would be prohibited. Such Seller further represents that he/it and
all such beneficial owners has not (and will not in the future)
receive any offering documents, with respect to the Buyer Shares, in
the United States of America or any other jurisdiction where such
receipt of same would be prohibited.
(i) The Buyer Shares which such Seller is entitled to receive hereunder
are being acquired solely for his/its own account or for the account
of beneficial owners that such Seller represents, and are not being
purchased with a view to or for distribution. Such Seller has no
present plans to enter into any such contract, undertaking,
agreement or arrangement. In order to induce the Buyer to issue the
Buyer Shares as provided herein to such Seller, it is agreed that
the Buyer will have no obligation to recognise the ownership,
beneficial or otherwise, of such Buyer Shares by anyone but such
Seller and the beneficial owners that the undersigned represents.
(j) Such Seller understands that the Buyer Shares to be issued hereunder
may be not transferred, sold, assigned, hypothecated or otherwise
disposed of, except: (a)(i) pursuant to a registration statement,
filed with and declared effective by the SEC, (ii) in an offshore
transaction in compliance with Regulation S or (iii) pursuant to
another available exemption from the registration requirements under
the Act upon the
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delivery of an opinion of counsel, certification and/or other
information satisfactory to the Buyer and (b) in compliance with all
other applicable laws.
(k) Such Seller agrees that, in order to ensure compliance with
applicable securities laws, the certificates or ADRs evidencing any
Buyer Shares issued pursuant to this agreement will be held in
escrow by the Buyer for a period of 40 days following the date on
which such Buyer Shares are issued (the "RESTRICTED PERIOD"). Such
Seller agrees not to sell, grant options over, transfer, charge,
pledge, hypothecate or otherwise dispose of the Buyer shares which
may be issued to him/it hereunder during the Restricted Period. Such
seller further agrees not to engage in any hedging transactions or
short sales with respect to such Buyer Shares during the Restricted
Period.
(l) The foregoing representations and warranties in this clause 3.4 are
true and accurate as of the date of delivery of this agreement, and
shall survive delivery of such Buyer Shares in each case. If in any
respect such representations and warranties shall not be true and
accurate prior to any proposed issuance of Buyer Shares to such
Seller hereunder, such Seller shall give prompt written notice of
such fact to the Buyer, specifying which representations and
warranties are not true and accurate and the reasons therefor.
3.5 The Buyer will hold in escrow, as described herein, either certificates or
ADRs evidencing the Shares without any restrictive legends affixed thereon
(except to the extent that any such restrictive legends may be required by
The Bank of New York or any successor depositary of the Buyer's ADR
facility). The certificates or ADRs will be issued in the name of each
Seller and will be held in escrow by the Buyer during the Restricted
Period. Upon the expiration of the Restricted Period, the Buyer will
deliver the certificates representing the Shares or the ADRs to each
Seller.
4. PURCHASE PRICE 4.1 The Purchase Price is:
(a) (pound)3,750,000 payable in cash (the "CASH ELEMENT") at Completion
in accordance with Clause 4 (taking into account the Deposit); and
(b) a number of Buyer Shares equal to the quotient of (a) (pound)700,000
divided by (b) the average closing price of the Company's ADSs on
the NASDAQ-CM for the 20 trading days immediately prior to the
Completion Date (converted to British pounds based on the prevailing
exchange rate at such time) (the "SHARE ELEMENT"), to be issued at
Completion to the Sellers in the proportions set out opposite the
Sellers' names in Schedule 1 credited as fully paid and ranking pari
passu with the existing ordinary shares in the issued share capital
of
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the Buyer including the right to receive all dividends and other
distributions declared, made or paid after the date of allotment.
4.2 The Purchase Price shall be deemed to be reduced by the amount of any
payment made to the Buyer:
(a) for a breach of any Warranty; or
(b) under the Tax Covenant.
4.3 If the Completion Net Assets at Completion as determined in accordance
with Schedule 9:
(a) are less than (pound)250,000, the Sellers undertake to pay to the
Buyer on demand within seven Business Days of agreement of the
Completion Accounts in accordance with Schedule 9 an amount equal to
the amount by which the Completion Net Assets are less than
(pound)250,000 at Completion; and
(b) are greater than (pound)250,000, the Buyer undertakes to pay to the
Sellers on demand within seven Business Days of agreement of the
Completion Accounts in accordance with Schedule 9 an amount equal to
the amount by which the Completion Net Assets are greater than
(pound)250,000,
and the Cash Element of the Purchase Price shall be deemed to be adjusted
accordingly.
4.4 Any payment due pursuant to clause 4.3 of this agreement shall be made
together, in each case, with all interest on the amount so payable at a
rate of one per cent below the base rate from time to time of the Royal
Bank of Scotland plc from the Completion date to the date of payment (both
dates inclusive).
4.5 Any payment or repayment to be made under clauses 4.3 and 4.4 shall be
made:
(a) if to the Sellers, in the same manner as payments made under clause
5.10(a)(Completion); and
(b) if to the Buyer, by wire transfer to an account notified by the
Buyer to the Sellers following determination of the Completion
Accounts.
4.6 The Buyer shall procure, as soon as reasonably practicable following an
allotment of Buyer Shares to the Sellers pursuant to this agreement, the
admission of ADSs representing such Buyer Shares to trading on NASDAQ-CM.
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5. COMPLETION
5.1 Completion shall take place on the Completion Date at the offices of
Buyer's Solicitors.
5.2 Completion Date means:
(a) the Business Day after the Conditions have been satisfied; or
(b) any other date agreed in writing by the Seller's Representative and
the Buyer.
5.3 From the date of this agreement until Completion the Sellers undertake to
provide all assistance (at the Buyer's expense) reasonably requested by
the Buyer in connection with satisfying the Conditions in clause 2.1(a)
and (b).
5.4 The Sellers undertake to the Buyer that the Business shall be conducted in
the ordinary course of business from the date of this agreement until
Completion.
5.5 The Target Group may do anything falling outside the ordinary course of
business if the Buyer has given prior written consent.
5.6 The Sellers shall use their reasonable endeavours to maintain the trade
and trade connections of the Target Group from the date of this agreement
until the Completion Date.
5.7 The Sellers shall give to the Buyer as soon as possible full details of
any material change in the business, financial position or assets of the
Target Group from the date of this agreement until the Completion Date.
5.8 The Sellers shall not:
(a) induce, or attempt to induce, any of the employees of the Target
Group, whether directly or indirectly, to terminate their employment
before the Completion Date; or
(b) incur any liabilities to the Target Group, other than trading
liabilities incurred in the normal course of business.
5.9 The Buyer acknowledges and agrees that it shall have no right to rescind
this agreement at any time prior to the Completion Date.
5.10 At Completion the Sellers shall:
(a) deliver or cause to be delivered the documents and evidence set out
in Part 1 of Schedule 3;
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(b) procure that a board meeting of the Company is held at which the
matters identified in Part 2 of Schedule 3 are carried out.
5.11 At Completion the Buyer shall:
(a) pay the Cash Element of the Purchase Price less the Retention by
wire transfer to Sellers' Solicitors (who are irrevocably authorised
to receive the same) ;
(b) pay the Retention by electronic transfer for same day value into the
Retention Account;
(c) procure the issue of the Buyer Shares comprising the Share Element;
and
(d) deliver to the Seller a certified copy of the resolution by the
board of directors of the Buyer authorising the Transaction and the
execution and delivery of this agreement, and any other documents
referred to in this agreement as being required to be delivered by
the Buyer.
Payment made in accordance with this clause shall constitute a valid
discharge of the Buyer's obligations under clause 4.1.
5.12 As soon as possible after Completion, the Sellers shall send to the Buyer
(at the Buyers registered office for the time being) all records,
correspondence, documents, files, memoranda and other papers relating to
the Company and the Subsidiaries not required to be delivered at
Completion and which are not kept at the Property.
6. WARRANTIES
6.1 The Buyer is entering into this agreement on the basis of, and in reliance
on, the Warranties.
6.2 The Sellers, severally and not jointly, warrant to the Buyer that each
Warranty is true, accurate and not misleading on the date of this
agreement except as Disclosed.
6.3 Each of the Warranties is separate and, unless otherwise specifically
provided, is not limited by reference to any other Warranty or any other
provision in this agreement.
6.4 The Warranties are deemed to be repeated on each day up to and including
the Completion Date and any reference made to the date of this agreement
(whether express or implied) in relation to any Warranty shall be
construed, in relation to any such repetition, as a reference to each such
day.
16
6.5 The Warranties are deemed to be repeated in respect of each of the
Subsidiaries as if the word Company in Schedule 4 was defined to mean the
relevant Subsidiary.
6.6 Any Warranty which is qualified as being made "so far as the Sellers are
aware" or any similar expression has been so qualified after careful
enquiries by the Sellers.
7. LIMITATIONS ON CLAIMS
7.1 The definitions and rules of interpretation in this clause apply in this
agreement.
CLAIM: a claim for breach of any of the Warranties.
SUBSTANTIATED CLAIM: a Claim in respect of which liability is admitted by
the party against whom such Claim is brought, or which has been
adjudicated on by a Court of competent jurisdiction and no right of appeal
lies in respect of such adjudication, or the parties are debarred by
passage of time or otherwise from making an appeal.
A Claim is CONNECTED with another Claim or Substantiated Claim if they all
arise out of the occurrence of the same event or relate to the same
subject matter.
7.2 This clause limits the liability of the Sellers in relation to any
Claim.
7.3 The maximum aggregate liability of each of the Sellers in respect of all
Claims and any claim under the Tax Covenant shall not exceed each Seller's
pro rata portion of (pound)4,450,000 in accordance with the percentage in
column 3 of Schedule 1.
7.4 The Sellers are not liable for a Claim to the extent that the Claim:
(a) relates to matters Disclosed;
(b) relates to any matter specifically and fully provided for in the
Accounts or in the Completion Accounts;
(c) would not have arisen but for something voluntarily done or
intentionally omitted to be done by the Buyer, the Company or their
agents after Completion otherwise than in the ordinary course of the
business of the Company as carried on at Completion;
(d) arises as a result of the passing of or any change in law or
regulation after the date of this agreement (whether retrospectively
or not) or occurs or arises or, such Claim having arisen, is
increased as a result of any change in any accounting or taxation
policy of the Company after the date of this agreement;
17
(e) arises as a result of any failure or omission by the Company to make
any claim, election, surrender or disclaimer, or give any notice, or
consent or do any other thing, in connection with the provisions of
any enactment or regulation relating to Taxation after Completion,
the anticipated making, giving or going of which was Disclosed by
the Sellers and was taken into account in computing the provision
for Taxation in the Accounts;
(f) arises from an act, event omission, transaction or arrangement prior
to Completion occurring at the written request of the Buyer; or
(g) is actually recovered by the Buyer under the terms of any insurance
policy of the Buyer or the Company (net of any additional costs
incurred by the Company and/or the Buyer as a result of any
consequential increase in premiums).
7.5 The Sellers are not liable for a Claim unless the Buyer has given the
Sellers written notice of the Claim (giving reasonable information
regarding the nature and an estimate of the value of such Claim):
(a) in the case of a claim made under the Tax Warranties or the Tax
Covenant, within the period of seven years beginning with the
Completion Date; and
(b) in the case of a non-Tax Warranty claim by 31 July 2007,
(in each case such date being referred to as the "Expiry Date").
7.6 Any Claim made before the Expiry Date in accordance with clause 7.5 shall,
if it has not been previously satisfied, settled or withdrawn, be deemed
to have been withdrawn and shall become fully barred and unenforceable
(and the Sellers' liability in respect of such Claim shall absolutely
terminate) on the expiry of the period of 6 months after notice of such
Claim was given to the Sellers (or any of them) in accordance with clause
7.5, unless proceedings in respect thereof shall have been commenced
against the Sellers (and for this purpose proceedings shall not be deemed
to have been commenced unless they shall have been issued and validly
served upon the Sellers).
7.7 The Sellers shall not be liable in respect of a Claim or group of Claims
based on substantially the same facts or circumstances unless the amount
that would otherwise be recoverable from the Sellers, but for this clause
7.7, in respect of the Claim exceeds (pound)2,000.
7.8 The Sellers shall not be liable in respect of any Claim unless and until
the aggregate amount that would otherwise be recoverable from the Sellers,
but for this clause 7.8, in respect of all Claims (after giving due effect
to clause 7.7) in relation to each Claim exceeds (pound)20,000, in which
event the Sellers shall be liable for the full amount of the Claim and not
merely the excess over (pound)20,000.
18
7.9 Except where it may be prejudicial to the business interests of the
Company or the Buyer, the Buyer shall at all reasonable times make
available to the Sellers (at the Sellers' cost) all information and
documents relating to the Claim. If requested by the Seller, the Buyer
shall give the Sellers and their professional advisers access on
reasonable notice to the personnel of the Buyer and/or the Company (as the
case may be) and to any relevant premises, chattels, accounts, documents
and records within the power, possession or control of the Buyer and/or
the Company to enable the Sellers and their professional advisers to
interview such personnel, and to examine such Claim, premises, chattels,
accounts, documents and records and to take copies or photographs of the
same at their own expense.
7.10 Where the Buyer or the Company is entitled to recover any sum from another
person or firm or company in respect of any matter giving rise to a Claim
under this Agreement, the Buyer shall or shall procure that the Company
shall take all reasonable steps to enforce such recovery. The Buyer shall
not be required to take such steps where it is of the reasonable view that
any such action is prejudicial to the business interests of the Company or
the Buyer.
7.11 The sole remedy against the Buyer in respect of any Claim shall be an
action for damages. Save in the event of fraudulent misrepresentation, no
right of rescission shall be available after Completion to the Buyer by
reason of any breach of the Warranties or the Tax Covenant.
7.12 The Buyer shall reimburse to the Sellers an amount equal to any sum paid
in respect of any Claim which is subsequently recovered by or paid to the
Buyer or any member of the Buyer's Group or the Company by any third party
less any reasonable costs incurred by the Buyer in connection with such
Claim.
7.13 The amount or amounts of any successful Claim or Claims against the
Sellers under or in respect of claims under the Tax Covenant (after
deducting any reimbursement made pursuant to this schedule) shall be
deemed to constitute a reduction in the Consideration.
7.14 Nothing herein shall in any way diminish the Buyer's or the Company's
common law duty to mitigate its loss in relation to any Claim.
7.15 Any payment by the Sellers under this agreement to the Buyer shall reduce
by that amount any Claims by the Buyer under the Tax Covenant (and vice
versa) and the Buyer shall at all times procure that there is no
duplication of any claim relating to the same subject matter whether under
this agreement or under the Tax Covenant or otherwise.
19
7.16 Nothing in this clause 6 applies to a Claim that arises or is delayed as a
result of dishonesty, fraud, wilful misconduct or wilful concealment by
the Sellers, their agents or advisers.
8. RETENTION
8.1 No amount shall be released out of the Retention Account otherwise than in
accordance with this clause 8.
8.2 As soon as practicable following the agreement or determination of any
Substantiated Claim in respect of which there is a Due Amount, the Buyer
and the Sellers' Representative shall, unless such Due Amount has been
paid to the Buyer, instruct the Escrow Agents to pay to the Buyer out of
the Retention Account the lesser of the Due Amount and the amount standing
to the credit of the Retention Account (together with any interest which
has accrued on the amount so paid but less any applicable bank charges)
the lesser of the amount due under the indemnity and the amount standing
to the credit of the Retention Account (together with any interest which
has accrued on the amount so paid but less any applicable bank charges).
8.3 The balance of the amount (if any) standing to the credit of the Retention
Account at the Release Date (including any accrued interest but less any
applicable bank charges) shall on the Release Date or as soon as
reasonably practicable thereafter be released to the Seller's Solicitors
and the Buyer and the Sellers' Representative shall instruct the Escrow
Agents accordingly.
8.4 Any interest that may accrue on the credit balance on the Retention
Account shall be credited to the Retention Account and any payment of
principal out of the Retention Account shall include a payment of the
interest earned on such principal sum by the Retention Account.
8.5 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.
9. VERICOMP
The Buyer undertakes to allow Vericomp Limited, a company registered in
England and Wales with registered number 03237823 ("Vericomp"), until 31
March 2007, the right to use one desk in the Property and use of the
Company's telcommunications and IT infrastructure and call centre services
sufficient to run two pc's and two phones in the Property (the "Services")
as are consistent with the Services enjoyed by Vericomp immediately prior
to Completion and, as soon as practicable following Completion, shall
enter into a written
20
agreement on reasonable terms with Vericomp to provide the same provided
that no charge will be payable.
10. TAX COVENANT
The provisions of Schedule 5 (Tax covenant) apply in this agreement.
11. RESTRICTIONS ON SELLERS
11.1 Each of the Sellers severally covenants with the Buyer that he shall not:
(a) at any time during the period of three years beginning with the
Completion Date, in the United Kingdom, carry on or be employed,
engaged or interested in any business which would be in competition
with any part of the Business as the Business was carried on at the
Completion Date (a "Restricted Activity") save that nothing in this
clause 11.1(a) shall prevent any of the Sellers from holding for
investment purposes only not more than three per cent of any class
of the issued share or loan capital of any company quoted on a
recognised investment exchange (as defined in the Financial Services
and Markets Act 2000); or
(b) at any time during the period of three years beginning with the
Completion Date, in the context of any Restricted Activity deal with
any person who is at the Completion Date, or who has been at any
time during the period of 12 months immediately preceding that date,
a client or customer of the Target Group; or
(c) at any time during the period of three years beginning with the
Completion Date in the context of any Restricted Activity, canvass,
solicit or otherwise seek the custom of any person who is at the
Completion Date, or who has been at any time during the period of 12
months immediately preceding that date, a client or customer of the
Target Group; or
(d) at any time during the period of three years beginning with the
Completion Date:
(i) offer employment to, enter into a contract for the services
of, or attempt to entice away from the Target Group, any
individual who is at the time of the offer or attempt, and was
at the Completion Date, employed or directly or indirectly
engaged in an executive or managerial position with the Target
Group; or
(ii) procure or facilitate the making of any such offer or attempt
by any other person; or
(e) at any time after Completion, use in the course of any business:
21
(i) the words EBC or EXECUTIVE BUSINESS CHANNEL; or
(ii) any trade or service xxxx, business or domain name, design or
logo which, at Completion, was or had been used by the Target
Group; or
(iii) anything which is, in the reasonable opinion of the Buyer,
capable of confusion with such words, xxxx, name, design or
logo; or
(f) at any time during a period of three years beginning with the
Completion Date in the context of any Restricted Activity, solicit
or entice away from the Target Group any supplier to the Target
Group who had supplied goods and/or services to the Target Group at
any time during the 12 months immediately preceding the Completion
Date, if that solicitation or enticement causes or would cause such
supplier to cease supplying, or materially reduce its supply of,
those goods and/or services to the Target Group.
11.2 The covenants in this clause 11 are intended for the benefit of the Buyer
and the Target Group and apply to actions carried out by the Sellers in
any capacity and whether directly or indirectly, on the Sellers' own
behalf, on behalf of any other person or jointly with any other person.
11.3 Each of the covenants in this clause 11 is a separate undertaking by each
Seller in relation to himself and his interests and shall be enforceable
by the Buyer and the Target Group separately and independently of its
right to enforce any one or more of the other covenants contained in this
clause 11. Each of the covenants in this clause 11 is considered fair and
reasonable by the parties, but if any restriction is found to be
unenforceable, but would be valid if any part of it were deleted or the
period or area of application reduced, the restriction shall apply with
such modifications as may be necessary to make it valid and enforceable.
11.4 The consideration for the undertakings contained in this clause 11 is
included in the Purchase Price.
12. CONFIDENTIALITY AND ANNOUNCEMENTS
12.1 Each of the parties severally undertakes to the other parties to keep
confidential the terms of this agreement and all information which they
have acquired or will acquire about such other party or such other party's
Group where applicable, and to use the information only for the purposes
contemplated by this agreement.
12.2 The Buyer does not have to keep confidential or restrict its use of
information about the Company after Completion.
22
12.3 A party does not have to keep confidential or to restrict its use of:
(a) information that is or becomes public knowledge other than as a
direct or indirect result of a breach of this agreement; or
(b) information that it receives from a source not connected with the
party to whom the duty of confidence is owed that it acquires free
from any obligation of confidence to any other person.
12.4 Each party shall supply any other party with any information about itself,
its Group or this agreement as such other party may reasonably require for
the purposes of satisfying the requirements of a law, regulatory body or
securities exchange to which such other party is subject, provided that
any such information shall be disclosed only to the extent required by
applicable law or regulatory requirements and (unless such consultation is
prohibited by the applicable law or regulatory requirements) only after
consultation with the Sellers or the Buyer (as the case may be).
12.5 No announcement about the transactions contemplated by this agreement or
any matter connected with them and no disclosure of the terms of this or
related agreements shall be made by either of the parties unless it is for
the purposes of the satisfaction of a legal requirement or regulatory
requirement without the prior written consent of the Buyer in the case of
announcements by the Sellers or the Sellers in the case of announcements
made by the Buyer. Where an announcement is required by any applicable law
or regulatory requirement, it shall, unless such consultation is
prohibited by regulatory requirements, be made only after consultation
with the Sellers or the Buyer (as the case may be). Notwithstanding
anything stated in this clause 12.5, the Buyer may at any time make
disclosure (by way of press release or otherwise) if such disclosure is
required under applicable law, regulatory authority or securities exchange
listing requirements. Further, the parties will issue a mutually-agreed
press release regarding the transaction after execution of this agreement.
13. FURTHER ASSURANCE
Each party shall promptly execute and deliver all such documents, and do
all such things, as the other party may from time to time reasonably
require for the purpose of giving full effect to the provisions of this
agreement.
14. ASSIGNMENT
14.1 Except as provided otherwise in this agreement, no party may assign, or
grant any Encumbrance or security interest over, any of its rights under
this agreement or any document referred to in it.
23
14.2 The Buyer may assign its rights under this agreement (or any document
referred to in this agreement) to a member of its Group or, with the prior
written consent of the Sellers, to any person to whom it transfers the
Sale Shares.
15. WHOLE AGREEMENT
15.1 This agreement, and any documents referred to in it, constitute the whole
agreement between the parties and supersede any arrangements,
understanding or previous agreement between them relating to the subject
matter they cover.
15.2 Nothing in this clause 15 operates to limit or exclude any liability for
fraud.
16. VARIATION AND WAIVER
16.1 Any variation of this agreement shall be in writing and signed by or on
behalf of the parties.
16.2 Any waiver of any right under this agreement is only effective if it is in
writing and it applies only to the party to whom the waiver is addressed
and to the circumstances for which it is given.
16.3 A party that waives a right in relation to one party, or takes or fails to
take any action against that party, does not affect its rights in relation
to any other party.
16.4 No failure to exercise or delay in exercising any right or remedy provided
under this agreement or by law constitutes a waiver of such right or
remedy or shall prevent any future exercise in whole or in part thereof.
16.5 No single or partial exercise of any right or remedy under this agreement
shall preclude or restrict the further exercise of any such right or
remedy.
16.6 Unless specifically provided otherwise, rights arising under this
agreement are cumulative and do not exclude rights provided by law.
17. COSTS
17.1 Unless otherwise provided, all costs in connection with the negotiation,
preparation, execution and performance of this agreement, and any
documents referred to in it, shall be borne by the party that incurred the
costs.
24
17.2 For the avoidance of doubt, all costs borne by the Sellers in connection
with the transaction contemplated by this agreement shall be for the
account of the Sellers and not of the Target Group.
18. NOTICE
18.1 A notice given under this agreement:
(a) shall be in writing in the English language (or be accompanied by a
properly prepared translation into English);
(b) shall be sent for the attention of the person, and to the address or
fax number, specified in this clause 18 (or such other address, fax
number or person as each party may notify to the others in
accordance with the provisions of this clause 18); and
(c) shall be:
(i) delivered personally; or
(ii) sent by fax; or
(iii) sent by pre-paid first-class post or recorded delivery; or
(iv) (if the notice is to be served by post outside the country
from which it is sent) sent by airmail.
18.2 Any notice to be given to or by all of the Sellers under this agreement is
deemed to have been properly given if it is given to or by the Sellers'
representative named in clause 18.3 Any notice required to be given to or
by some only of the Sellers shall be given to or by the Sellers concerned
(and in the case of a notice to the Sellers) at their address or fax
number as set out in Schedule 1.
18.3 The addresses for service of notice are:
(a) Sellers' Representative
(i) address: Xxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxxxxxxxx XX00 0XX
(ii) for the attention of: Xxxxxxxx Xxxxxxxx
(b) Futuremedia PLC
(i) address: Xxxx Xxxxx, Xxxx Xxxxxx, Xxxxxxxx, Xxxx Xxxxxx, XX0
0XX
(ii) for the attention of: the Chief Executive Officer
(iii) fax number: x00 (0)0000 000 000
18.4 A notice is deemed to have been received:
(a) if delivered personally, at the time of delivery; or
25
(b) in the case of fax, at the time of transmission; or
(c) in the case of pre-paid first class post or recorded delivery 2
Business Days from the date of posting; or
(d) in the case of airmail, 4 Business Days from the date of posting; or
(e) if deemed receipt under the previous paragraphs of this clause 18.4
is not within business hours (meaning 9.00 am to 5.30 pm Monday to
Friday on a day that is not a public holiday in the place of
receipt), when business next starts in the place of receipt.
18.5 To prove service, it is sufficient to prove that the notice was
transmitted by fax to the fax number of the party or, in the case of post,
that the envelope containing the notice was properly addressed and posted.
19. INTEREST ON LATE PAYMENT
19.1 Where a sum is required to be paid under this agreement but is not paid
before or on the date the parties agreed, the party due to pay the sum
shall also pay an amount equal to interest on that sum for the period
beginning with that date and ending with the date the sum is paid (and the
period shall continue after as well as before judgment).
19.2 The rate of interest shall be 4% per annum above the base lending rate for
the time being of the Royal Bank of Scotland plc. Interest shall accrue on
a daily basis and be compounded quarterly.
19.3 This clause 19 is without prejudice to any claim for interest under the
law.
20. SEVERANCE
20.1 If any provision of this agreement (or part of a provision) is found by
any court or administrative body of competent jurisdiction to be invalid,
unenforceable or illegal, the other provisions shall remain in force.
20.2 If any invalid, unenforceable or illegal provision would be valid,
enforceable or legal if some part of it were deleted, the provision shall
apply with whatever modification is necessary to give effect to the
commercial intention of the parties.
21. AGREEMENT SURVIVES COMPLETION
This agreement (other than obligations that have already been fully
performed) remains in full force after Completion.
26
22. THIRD PARTY RIGHTS
22.1 This agreement and the documents referred to in it are made for the
benefit of the parties and their successors and permitted assigns and are
not intended to benefit, or be enforceable by, anyone else.
23. SUCCESSORS
The rights and obligations of the Sellers and the Buyer under this
agreement shall continue for the benefit of, and shall be binding on,
their respective successors and assigns.
24. COUNTERPARTS
This agreement may be executed in any number of counterparts, each of
which is an original and which together have the same effect as if each
party had signed the same document.
25. LANGUAGE
If this agreement is translated into any language other than English, the
English language text shall prevail.
26. GOVERNING LAW AND JURISDICTION
26.1 This agreement and any disputes or claims arising out of or in connection
with its subject matter are governed by and construed in accordance with
the law of England.
26.2 The parties irrevocably agree that the courts of England have exclusive
jurisdiction to settle any dispute or claim that arises out of or in
connection with this agreement.
This agreement has been executed as a deed on the date stated at the beginning
of it.
27
SCHEDULE 1
PARTICULARS OF SELLERS AND APPORTIONMENT OF PURCHASE PRICE
--------------------------------------------------------------------------------
SELLER'S NAME, NUMBER OF PROPORTION OF CASH SHARE
ADDRESS AND FAX SALE SHARES PURCHASE PRICE ELEMENT ELEMENT
NUMBER % % %
--------------------------------------------------------------------------------
Balchan 391 38.71 38.71 38.71
Secretaries
Limited
--------------------------------------------------------------------------------
Xxxxxxxx Xxxxxxxx 379 37.53 37.53 37.53
The Xxxxx Xxxxx
Xxxxxxxxx
Xxxxxxxxxxxxxxxx
XX00 0XX
--------------------------------------------------------------------------------
Xxxxxx Xxxxxx 100 9.90 9.90 9.90
0 Xxxxxxxxx Xxxx
Xxxxxxxx
Xxxxxx Xxxxxx
XX0 0XX
--------------------------------------------------------------------------------
Xxxxx Xxxxx 50 4.95 4.95 4.95
0 Xxxxxxx Xxxxx
Xxxxxx Xxxxx Xxxx
Xxxxxx Xxxxxx
XX0 0XX
--------------------------------------------------------------------------------
Xxxxxxxxxxx 50 4.95 4.95 4.95
Xxxxxx
00 Xxxxxxxx Xxxx
Xxxxxxxxxx
Xxxxxxxxxxxx
XX00 0XX
--------------------------------------------------------------------------------
Trustees of the 40 3.96 3.96 3.96
Xxxx Xxxxxx
Pension Scheme
--------------------------------------------------------------------------------
28
SCHEDULE 2
PARTICULARS OF THE COMPANY AND SUBSIDIARIES
PART 1. THE COMPANY
--------------------------------------------------------------------------------
NAME: LEXON INC
--------------------------------------------------------------------------------
REGISTRATION NUMBER: 21081
--------------------------------------------------------------------------------
REGISTERED OFFICE: Xxxx Xxxxxxxx X.X Xxx 0000, Xxxx Xxxx,
Xxxxxxx, Xxxxxxx Xxxxxx Xxxxxxx
--------------------------------------------------------------------------------
AUTHORISED SHARE CAPITAL 50,000 shares
--------------------------------------------------------------------------------
ISSUED SHARE CAPITAL $1,010
AMOUNT:
--------------------------------------------------------------------------------
REGISTERED SHAREHOLDERS (AND Balchan Secretaries Limited on
NUMBER OF SALE SHARES HELD): behalf of Xxxxx Xxxxx (391)
Xxxxxxxx Xxxxxxxx (379)
Xxxxxx Xxxxxx (100)
Xxxxx Xxxxx (50)
Xxxxxxxxxxx Xxxxxx (5)
Trustees of the Xxxx Xxxxxx Pension
Scheme on behalf of Xxxx Xxxxx (40)
--------------------------------------------------------------------------------
DIRECTORS: Balchan Secretaries Limited
Xxxxxxxx Xxxxxxxx
--------------------------------------------------------------------------------
SECRETARY: Balchan Secretaries Limited
--------------------------------------------------------------------------------
AUDITOR None
--------------------------------------------------------------------------------
REGISTERED CHARGES None
--------------------------------------------------------------------------------
29
SCHEDULE 2 PARTICULARS OF THE COMPANY AND SUBSIDIARIES
PART 2. THE SUBSIDIARIES
--------------------------------------------------------------------------------
NAME: EXECUTIVE BUSINESS CHANNEL
LIMITED
--------------------------------------------------------------------------------
REGISTRATION NUMBER: 02862053
--------------------------------------------------------------------------------
REGISTERED OFFICE: Xxxxxxxxx Xxxx
Xxxxxx
Xxxxxx Xxxxxx
XX00 0XX
--------------------------------------------------------------------------------
AUTHORISED SHARE CAPITAL 10,000 ordinary shares of (pound)1
each
--------------------------------------------------------------------------------
ISSUED SHARE CAPITAL
AMOUNT: (pound)10,000
--------------------------------------------------------------------------------
REGISTERED SHAREHOLDERS (AND NUMBER Betternote Ltd (9,990
OF SALE SHARES HELD): ordinary shares)
Lexon Inc (100 ordinary
shares)
--------------------------------------------------------------------------------
DIRECTORS: Xxxxx Xxxx Xxxxx
Xxxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx Xxxxxxx Xxxxxx
--------------------------------------------------------------------------------
SECRETARY: Xxxxxx Xxxxxxxxx Xxxxxx
--------------------------------------------------------------------------------
AUDITOR Xxxx Xxxxxxx
--------------------------------------------------------------------------------
REGISTERED CHARGES None
--------------------------------------------------------------------------------
30
--------------------------------------------------------------------------------
NAME: BETTERNOTE LIMITED
--------------------------------------------------------------------------------
REGISTRATION NUMBER: 03439039
--------------------------------------------------------------------------------
REGISTERED OFFICE: Xxxxxxxxx Xxxx
Xxxxxx
Xxxxxx Xxxxxx
XX00 0XX
--------------------------------------------------------------------------------
AUTHORISED SHARE CAPITAL 1,000 ordinary shares of (pound)1
each
--------------------------------------------------------------------------------
ISSUED SHARE CAPITAL
AMOUNT: (pound)2
--------------------------------------------------------------------------------
REGISTERED SHAREHOLDERS (AND NUMBER Lexon Inc (2 ordinary shares)
OF SALE SHARES HELD):
--------------------------------------------------------------------------------
DIRECTORS: Xxxxx Xxxx Xxxxx
Xxxxxxxx Xxxxxxxx
--------------------------------------------------------------------------------
SECRETARY: Xxxxxxxx Satchel
--------------------------------------------------------------------------------
AUDITOR Xxxx Xxxxxxx
--------------------------------------------------------------------------------
REGISTERED CHARGES None
--------------------------------------------------------------------------------
31
SCHEDULE 3
COMPLETION
PART 1. WHAT THE SELLERS SHALL DELIVER TO THE BUYER AT COMPLETION
1. At Completion, the Sellers shall deliver or cause to be delivered to the
Buyer the following documents and evidence:
(a) transfers of the Sale Shares executed by the registered holders in
favour of the Buyer;
(b) the share certificates for the Sale Shares in the names of the
registered holders or an indemnity in the agreed form for any lost
certificates;
(c) the waivers, consents and other documents required to enable the
Buyer to be registered as the holder of the Sale Shares;
(d) the original of any power of attorney under which any document to be
delivered to the Buyer under this paragraph 1 has been executed;
(e) in relation to each company in the Target Group, the statutory
registers and minute books (written up to the time of Completion),
the common seal, the current memorandum and articles of association
of the Company, certificate of incorporation and any certificates of
incorporation on change of name;
(f) the written resignation, executed as a deed and in the agreed form,
of the directors and secretary of each company in the Target Group
from their offices and employment with such company:
(g) the written resignation of the auditors of each company in the
Target Group accompanied bya statement that there are no
circumstances connected with the auditors' resignation which should
be brought to the notice of the members or creditors of each company
in the Target Group.
(h) a certified copy of the minutes of the board meetings held pursuant
to Part 2 of this Schedule 3;
(i) in relation to each company in the Target Group:
(i) statements from each bank at which each company in the Target
Group has an account, giving the balance of each account at
the close of business on the second Business Day preceding the
Completion Date (the "Reconciliation Date") and a bank
reconciliation statement showing all movements on each of the
bank accounts from the close of business on the Reconciliation
Date to Completion;
32
(ii) all cheque books in current use and written confirmation that
no cheques have been written since those statements were
prepared;
(j) details of their cash book balances; andall charges, mortgages,
debentures and guarantees to which the Company is a party (in
particular from the Royal Bank of Scotland plc) and, in relation to
each such instrument and any covenants connected with it:
(i) a sealed discharge or release in the agreed form; and
(ii) if applicable, a sworn and completed Form 403a (declaration
that part of the property or undertaking charged has been
released from the charge);
(k) JS consulting agreement;
(l) Employment Agreement; and
(m) Deeds of Covenant.
PART 2: MATTERS FOR THE BOARD MEETINGS AT COMPLETION
1. The Sellers shall cause a board meeting of each company in the Target
Group to be held at Completion at which the matters set out in this Part 2
of this Schedule 3 shall take place:
(a) In respect of the Company, a resolution to register the transfer of
the Sale Shares shall be passed at such board meeting of the
Company, subject to the transfers being stamped at the cost of the
Buyer.
(b) All directors, secretaries and auditors of each company in the
Target Group shall resign from their offices and employment with
such company with effect from the end of the relevant board meeting:
(c) The persons the Buyer nominates shall be appointed as directors and
secretary of each company in the Target Group (but not exceeding any
maximum number of directors contained in the relevant company's
articles of association). The appointments shall take effect at the
end of the board meeting.
(d) BDO shall be appointed as the auditors of each company in the Target
Group with effect from the end of the relevant board meeting.
(e) All the existing instructions and authorities to bankers shall be
revoked and replaced with new instructions and authorities to those
banks in the form the Buyer requires.
33
SCHEDULE 4
WARRANTIES
PART 1. GENERAL WARRANTIES
1. POWER TO SELL THE COMPANY
1.1 The Sellers have all requisite power and authority to enter into and
perform this agreement in accordance with its terms and the other
documents referred to in it.
1.2 This agreement and the other documents referred to in it constitute (or
shall constitute when executed) valid, legal and binding obligations on
the Sellers in the terms of the agreement and such other documents.
1.3 Compliance with the terms of this agreement and the documents referred to
in it shall not breach or constitute a default under any of the following:
(a) any agreement or instrument to which any of the Sellers is a party
or by which any of them is bound; or
(b) any order, judgment, decree or other restriction applicable to any
of the Sellers.
2. SHARES IN THE COMPANY AND SUBSIDIARIES
2.1 The Sale Shares constitute the whole of the allotted and issued share
capital of the Company and are fully paid.
2.2 The Sellers are the legal and beneficial owners of the Sale Shares.
2.3 The Sale Shares are free from all Encumbrances.
2.4 No right has been granted to any person to require the Company to issue
any share capital and no Encumbrance has been created in favour of any
person affecting any unissued shares or debentures or other unissued
securities of the Company.
2.5 No commitment has been given to create an Encumbrance affecting the Sale
Shares (or any unissued shares or debentures or other unissued securities
of the Company) or for any of them to issue any share capital and no
person has claimed any rights in connection with any of those things.
34
2.6 The Company:
(a) does not hold or beneficially own, or has not agreed to acquire, any
securities of any corporation; or
(b) is not or has not agreed to become a member of any partnership or
other unincorporated association, joint venture or consortium (other
than recognised trade associations); or
(c) has not, outside its country of incorporation, any branch or
permanent establishment; or
(d) has not allotted or issued any securities that are convertible into
shares.
2.7 The Company has not at any time:
(a) purchased, redeemed or repaid any of its own share capital; or
(b) given any financial assistance in connection with any acquisition of
its share capital or the share capital of its holding company (as
that expression is defined in section 736 of the Companies Acts) as
it would fall within sections 151 to 158 (inclusive) of the
Companies Acts.
2.8 All dividends or distributions declared, made or paid by the Company have
been declared, made or paid in accordance with its memorandum, articles of
association, the applicable provisions of the Acts and any agreements or
arrangements made with any third party regulating the payment of dividends
and distributions.
3. CONSTITUTIONAL AND CORPORATE DOCUMENTS
3.1 The copies of the memorandum and articles of association or other
constitutional and corporate documents of the Company are true, accurate
and complete in all respects and copies of all the resolutions and
agreements required to be annexed to or incorporated in those documents by
the law applicable are annexed or incorporated.
3.2 All statutory books and registers of the Company have been properly kept
and no notice or allegation that any of them is incorrect or should be
rectified has been received.
3.3 All returns, particulars, resolutions and other documents which the
Company is required by law to file with or deliver to any authority in any
jurisdiction (including, in particular, the Registrar of Companies in
England and Wales) have been correctly made up and filed or, as the case
may be, delivered.
35
4. INFORMATION
4.1 The particulars relating to the Company in this agreement are accurate and
not misleading.
5. COMPLIANCE WITH LAWS
The Company has at all times conducted its business in accordance with all
applicable laws and regulations.
6. LICENCES AND CONSENTS
There are no licences, authorisations or consents required by the Company
to carry on its business in the way it is carried on at Completion.
7. INSURANCE
7.1 The insurance policies maintained by or on behalf of the Company provide
full indemnity cover against all losses and liabilities including business
interruption and other risks that are normally insured against by a person
carrying on the same type of business as the Company.
7.2 The particulars of those policies set out in the Disclosure Letter are
accurate and not misleading.
7.3 There are no material outstanding claims under, or in respect of the
validity of, any of those policies, there are no circumstances likely to
give rise to any claim under any of those policies.
7.4 All the insurance policies are in full force and effect, are not void or
voidable, nothing has been done or not done by the Company which could
make any of them void or voidable and Completion will not terminate, or
entitle any insurer to terminate, any such policy.
8. POWER OF ATTORNEY
8.1 There are no powers of attorney in force given by the Company.
8.2 No person, as agent or otherwise, is entitled or authorised to bind or
commit the Company to any obligation not in the ordinary course of the
Company's business.
36
8.3 The Disclosure Letter sets out details of all persons who have authority
to bind the Company in the ordinary course of business.
9. DISPUTES AND INVESTIGATIONS
9.1 Neither the Company nor any person for whom the Company is vicariously
liable:
(a) is engaged in any litigation, administrative, mediation or
arbitration proceedings or other proceedings or hearings before any
statutory or governmental body, department, board or agency (except
for debt collection in the normal course of business); or
(b) as far as the Sellers are aware, is the subject of any
investigation, inquiry or enforcement proceedings by any
governmental, administrative or regulatory body.
9.2 No director of the Company has, to the extent that it relates to the
business of the Company, received notice of any of the matters mentioned
in paragraph 9.1 of this Schedule 4.
9.3 No notice of such proceedings, investigation or inquiry as are mentioned
in paragraph 9.1 or paragraph 9.2 of this Schedule 4 have been received
and, so far as the Sellers are aware, there are no circumstances likely to
give rise to any such proceedings.
9.4 The Company is not affected by any existing or pending judgments or
rulings and have not given any undertakings arising from legal proceedings
to a court, governmental agency, regulator or third party.
10. DEFECTIVE PRODUCTS AND SERVICES
10.1 The Company has not sold any products which were, at the time they were
sold, faulty, out of date or defective or did not comply with:
(a) warranties or representations expressly made or implied by or on
behalf of the Company; or
(b) all laws, regulations, standards and requirements applicable to the
products.
10.2 No notices have been received by the Company in which it is claimed that
any products sold by the Company or any distributor are defective, not
appropriate for their intended use or have caused bodily injury or
material damage to any person or property when applied or used as
intended.
37
10.3 No notices have been received by the Company and there are no outstanding
liabilities or claims against the Company in respect of any services or
items supplied by the Company for which the Company is liable and no
dispute exists between the Company and any of their respective customers
or clients.
11. CUSTOMERS AND SUPPLIERS
11.1 In the 12 months ending with the date of this agreement and otherwise than
in the ordinary course of the business of the Company as a result of the
completion of a specific project, the business of the Company has not been
affected in an adverse manner as a result of any one or more of the
following things happening to the Company:
(a) the loss of any of its customers or suppliers; or
(b) a reduction in trade with its customers or in the extent to which it
is supplied by any of its suppliers; or
(c) a change in the terms on which it trades with or is supplied by any
of its customers or suppliers.
11.2 So far as the Sellers are aware, no one or more of the things mentioned in
paragraph 11.1 of this Schedule 4 is likely to happen to the extent that
the business of the Company will be materially affected in an adverse
manner.
12. COMPETITION
12.1 The definition in this paragraph applies in this agreement.
COMPETITION LAW: the national and directly effective legislation of any
jurisdiction which governs the conduct of companies or individuals in
relation to restrictive or other anti-competitive agreements or practices
(including, but not limited to, cartels, pricing, resale pricing, market
sharing, bid rigging, terms of trading, purchase or supply and joint
ventures), dominant or monopoly market positions (whether held
individually or collectively) and the control of acquisitions or mergers.
12.2 The Company is not engaged in any agreement, arrangement, practice or
conduct which amounts to an infringement of the Competition Law of any
jurisdiction in which the Company conducts business and no Director is
engaged in any activity which would be an offence or infringement under
any such Competition Law.
12.3 The Company has received no notice of any investigation, inquiry or
proceedings by any relevant government body, agency or authority in
connection with any actual or alleged infringement of the Competition Law
of any jurisdiction in which the Company conducts business.
38
12.4 As far as the Sellers are aware, no such investigation, inquiry or
proceedings as mentioned in paragraph 12.3 of this Schedule 4 have been
threatened or are pending and there are no circumstances likely to give
rise to any such investigation, inquiry or proceedings.
12.5 The Company is not affected by any existing or pending decisions,
judgments, orders or rulings of any relevant government body, agency or
authority responsible for enforcing the Competition Law of any
jurisdiction and the Company has not given any undertakings or commitments
to such bodies which affect the conduct of the Business.
12.6 The Company is in receipt of any payment, guarantee, financial assistance
or other aid from the government or any state body which was not, but
should have been, notified to the European Commission under Article 88 of
the EC Treaty for decision declaring such aid to be compatible with the
common market.
13. CONTRACTS
13.1 The definition in this paragraph applies in this agreement.
MATERIAL CONTRACT: an agreement or arrangement to which the Company is
a party or is bound by and which is of material importance to the
business, profits or assets of the Company.
13.2 Except for the agreements and arrangements Disclosed, the Company is not a
party to or subject to any agreement or arrangement which:
(a) is a Material Contract; or
(b) is of an unusual or exceptional nature; or
(c) is not in the ordinary and usual course of business of the Company;
or
(d) may be terminated as a result of any change of control of the
Company; or
(e) restricts the freedom of the Company to carry on the whole or any
part of its business in any part of the world in such manner as it
thinks fit; or
(f) involves agency or distributorship; or
(g) involves partnership, joint venture, consortium, joint development,
shareholders or similar arrangements; or
(h) is incapable of complete performance in accordance with its terms
within six months after the date on which it was entered into; or
(i) cannot be readily fulfilled or performed by the Company on time and
without undue or unusual expenditure of money and effort; or
39
(j) requires the Company to pay any commission, finders' fee, royalty or
the like; or
(k) is for the supply of goods and/or services by or to the on terms
under which retrospective or future discounts, price reductions or
other financial incentives are given; or
(l) is not on arm's length terms.
13.3 Each Material Contract is in full force and effect and binding on the
parties to it. The Company has not defaulted under or breached a Material
Contract and:
(a) as far as the Sellers are aware, no other party to a Material
Contract has defaulted under or breached such a contract; and
(b) no such default or breach by the Company or as far as the Sellers
are aware, any other party is likely or has been threatened.
13.4 No notice of termination of a Material Contract has been received or
served by the Company and as far as the Sellers are aware, there are no
grounds for determination, rescission, avoidance, repudiation or a
material change in the terms of any such contract.
14. TRANSACTIONS WITH SELLERS
14.1 There is no outstanding indebtedness or other liability (actual or
contingent) and no outstanding contract, commitment or arrangement between
the Company and any of the following:
(a) any of the Sellers or any person Connected with any of the Sellers;
or
(b) any director of a member of the Company or any person Connected with
such a member or director.
14.2 None of the Sellers, nor any person Connected with any of the Sellers, is
entitled to a claim of any nature against the Company or has assigned to
any person the benefit of a claim against the Company to which the Sellers
or a person Connected with the Sellers would otherwise be entitled.
15. FINANCE AND GUARANTEES
15.1 The Company does not have any borrowings or outstanding loan capital and
no guarantee, mortgage, charge, pledge, lien, assignment or other security
agreement or arrangement has been given by or entered into by the Company
or any third party in respect of borrowings or other obligations of the
Company.
40
15.2 The Company has not lent any money that has not been repaid, and there are
no debts owing to the Company other than debts that have arisen in the
normal course of business.
15.3 The Company has not:
(a) factored any of its debts or discounted any of its debts or engaged
in financing of a type which would not need to be shown or reflected
in the Accounts; or
(b) waived any right of set-off it may have against any third party.
15.4 All debts (less any provision for bad and doubtful debts) owing to the
Company reflected in the Accounts or the Management Accounts and all debts
subsequently recorded in the books of the Company have either prior to the
date of this agreement been realised or will, within three months after
the date of this agreement, realise in cash their full amount as included
in those Accounts or Management Accounts or books and none of those debts
nor any part of them has been outstanding for more than one month from its
due date for payment.
15.5 No indebtedness of the Company is due and payable and no security over any
of the assets of the Company is now enforceable, whether by virtue of the
stated maturity date of the indebtedness having been reached or otherwise.
The Company has not received any notice whose terms have not been fully
complied with and/or carried out from any creditor requiring any payment
to be made and/or intimating the enforcement of any security which it may
hold over the assets of the Company.
15.6 The Company has not given or entered into any guarantee, mortgage, charge,
pledge, lien, assignment or other security agreement or arrangement or is
responsible for the indebtedness, or for the default in the performance of
any obligation, of any other person.
15.7 The Company is not subject to any arrangement for receipt or repayment of
any grant, subsidy or financial assistance from any government department
or other body.
15.8 Particulars of all bank accounts of the Company have been Disclosed and
the Company has no other bank accounts. The bank statements and
reconciliation statements which are to be produced on Completion will be
accurate and since the date of such, there have been no payments out of
those accounts other than routine payments in the ordinary course of
business.
15.9 Having regard to the existing banking and other facilities available to
it, the Company has sufficient working capital for the purposes of:
41
(a) continuing to carry on its business in its present form and at its
present level of turnover for the next 12 months; and
(b) executing, carrying out and fulfilling in accordance with their
respective terms all orders, projects and contractual obligations
which have been placed with or undertaken by the Company.
15.10 A change of control of the Company will not result in:
(a) the termination of or material effect on any financial agreement or
arrangement to which the Company, is a party or subject; or
(b) any indebtedness of the Company becoming due, or capable of being
declared due and payable, prior to its stated maturity.
16. INSOLVENCY 16.1 The Company:
(a) Is not insolvent or unable to pay its debts within the meaning of
the Insolvency Act 1986 or any other insolvency legislation
applicable to the company concerned; and
(b) has not stopped paying its debts as they fall due.
16.2 No step has been taken to initiate any process by or under which:
(a) the ability of the creditors of the Company to take any action to
enforce their debts is suspended, restricted or prevented; or
(b) some or all of the creditors of the Company accept, by agreement or
in pursuance of a court order, an amount less than the sums owing to
them in satisfaction of those sums with a view to preventing the
dissolution of the Company; or
(c) a person is appointed to manage the affairs, business and assets of
the Company, on behalf of the Company's creditors; or
(d) the holder of a charge over the Company's assets is appointed to
control the business and assets of the Company.
16.3 In relation to the Company:
(a) no administrator has been appointed;
(b) no documents have been filed with the court for the appointment of
an administrator; and
(c) no notice of an intention to appoint an administrator has been given
by the Company, its directors or by a qualifying floating charge
holder (as defined in paragraph 14 of Schedule B1 to the Insolvency
Act 1986).
42
16.4 No process has been initiated which could lead to the Company being
dissolved and its assets being distributed among the Company's creditors,
shareholders or other contributors.
16.5 No distress, execution or other process has been levied on an asset of the
Company.
17. ASSETS
17.1 EBC is the full legal and beneficial owner of, and has good and marketable
title to, all the assets included in the Accounts, and any assets acquired
since the Accounts Date and all other assets used by EBC.
17.2 None of the assets shown in the Accounts or acquired by EBC since the
Accounts Date or used by EBC is the subject of any lease, lease hire
agreement, hire purchase agreement or agreement for payment on deferred
terms or is the subject of any licence or factoring arrangement.
17.3 EBC is in possession and control of all the assets included in the
Accounts or acquired since the Accounts Date and all other assets used by
EBC, except for those Disclosed as being in the possession of a third
party in the normal course of business.
17.4 None of the assets, undertaking or goodwill of EBC is subject to an
Encumbrance, or to any agreement or commitment to create an Encumbrance,
and no person has claimed to be entitled to create such an Encumbrance.
17.5 The assets of the Company comprise all the assets necessary for the
continuation of EBC's business in the manner in which such business has
been carried on as at the Accounts Date and as at Completion.
18. CONDITION OF PLANT AND EQUIPMENT AND STOCK IN TRADE
18.1 The plant, machinery, equipment and vehicles used in connection with the
Business:
(a) are in good working order and have been regularly and properly
maintained;
(b) are capable and will continue to be capable of doing the work for
which they were designed; and
(c) are not surplus to the current or proposed requirements of the
Company.
43
18.2 The stock-in-trade of the Company is in good condition and is capable of
being sold by the Company in the ordinary course of its business in
accordance with its current price list without discount, rebate or
allowance to a buyer.
18.3 The stock-in-trade of the Company is not excessive and is adequate in
relation to the current trading requirements of the Company and none of
the stock is out of date, obsolete, slow moving, unusable or unmarketable
or includes returned goods.
18.4 The stock-in-trade of the Company complies fully and will, on sale by the
Company in the ordinary and usual course of its business, comply fully
with all applicable laws, regulations, standards and specifications agreed
with customers.
19. ENVIRONMENTAL
19.1 The definitions in this paragraph apply in this agreement.
HAZARDOUS SUBSTANCES: any natural or artificial substance (whether
solid, liquid or gas and whether alone or in combination with any other
substance or radiation), capable of causing harm to any human or other
living organism or the Environment.
ENVIRONMENT: air, water and land, all living organisms and natural or
man-made structures.
ENVIRONMENTAL LAW: any law in so far as it relates to Environmental
Matters.
ENVIRONMENTAL MATTERS: the protection of human health, the protection
and condition of the Environment, the condition of the workplace, the
generation, transportation, storage, treatment, emission, deposit and
disposal of any Hazardous Substance or Waste.
WASTE: all waste, including any unwanted or surplus substance
irrespective of whether it is capable of being recycled or recovered or
has any value.
19.2 The Company has at all times complied with all Environmental Laws.
19.3 No notices relating to Environmental Law have been received by the
Company, or any employees, directors or officers of the Company by any
competent authority or any other person.
19.4 The Company has not and, as far as the Sellers are aware, is not likely to
have any actual or potential liability under any Environmental Law by
reason of it having owned, occupied or used any land or buildings.
44
19.5 All environmental reports, audits, assessments, reviews or investigations
(including any testing, sampling or monitoring results) in the possession
or control of the Company or the Sellers relating to the Property have
been disclosed.
19.6 The Company has not given or received any warranties or indemnities in
respect of, has any insurance in respect of, or has otherwise attempted to
apportion, any liabilities, duties or obligations that arise under
Environmental Law.
19.7 The Company does not manufacture and sell, resell under its own brand, or
import or export electrical or electronic equipment containing lead,
mercury, cadmium, hexavalent chromium, polybrominated biphenyls or
polybrominated diphenyl ethers in or into an EU member state except in
applications listed in the Annex to Directive 2002/95/EC on the
restriction of the use of certain hazardous substances in electrical and
electronic equipment.
20. INTELLECTUAL PROPERTY
20.1 The definition in this paragraph applies in this agreement.
INTELLECTUAL PROPERTY RIGHTS: all patents, rights to inventions, utility
models, copyright, trade marks, service marks, trade, business and domain
names, rights in trade dress or get-up, rights in goodwill or to xxx for
passing off, unfair competition rights, rights in designs, rights in
computer software, database rights, topography rights, moral rights,
rights in confidential information (including know-how and trade secrets),
domain names, and any other intellectual property rights, in each case
whether registered or unregistered and including all applications for and
renewals or extensions of such rights, and all similar or equivalent
rights or forms of protection in any part of the world.
20.2 Complete and accurate particulars are set out in Schedule 6 of all
registered Intellectual Property Rights (including applications for such
rights) owned, used or held for use by the Company and the Company is the
sole legal and beneficial owner of such, free from all Encumbrances.
20.3 All licences and agreements pursuant to which the Company:
(i) uses or exploits Intellectual Property Rights owned by any third
party;
or
(ii) has licensed or agreed to license Intellectual Property Rights to,
or otherwise permitted the use of any Intellectual Property Rights
by, any third party have been Disclosed and:
(a) are valid and binding.
45
(b) as far as the Sellers are aware, have not been the subject of any
breach or default by any party or of any event which, with the
giving of notice or lapse of time, would constitute a default;
(c) are not the subject of any claim, dispute or proceeding, pending or
threatened; and
(d) have, where required, been duly recorded or registered.
20.4 Other than as Disclosed, the Company does not require any Intellectual
Property Rights in order to carry on its activities.
20.5 The Intellectual Property Rights set out in Schedule 6 are valid,
subsisting and enforceable and as far as the Sellers are aware, nothing
has been done or not been done as a result of which any of them has ceased
or might cease to be valid, subsisting or enforceable. In particular:
(a) all application and renewal fees and other steps required for the
maintenance or protection of such rights have been paid on time or
taken;
(b) all confidential information (including know-how and trade secrets)
owned or used by the Company has been kept confidential and has not
been disclosed to third parties (other than parties who have signed
written confidentiality undertakings in respect of such information,
details of which are set out in the Disclosure Letter);
(c) as far as the Sellers are aware, no xxxx, trade name or domain name
identical or similar to any such rights has been registered, or is
being used by any person in the same or a similar business to that
of the Company, in any country in which the Company has registered
or is using that xxxx, trade name or domain name; and
(d) as far as the Sellers are aware, there are and have been no claims,
challenges disputes or proceedings, pending or threatened, in
relation to the ownership, validity or use of such rights.
20.6 Nothing is due to be done within 30 days of Completion the omission of
which would jeopardise the maintenance or prosecution of any of the
registered Intellectual Property Rights listed in Schedule 6.
20.7 So far as the Sellers are aware, there has been and is no current or
anticipated infringement by any third party of any Intellectual Property
Rights owned by, or licensed by or to, the Company.
20.8 The Company has received no notice that the activities of the Company:
(a) infringe the Intellectual Property Rights of any third party; or
46
(b) constitute any breach of confidence, passing off or actionable act
of unfair competition; or
(c) give rise to any obligation to pay any royalty, fee, compensation or
any other sum whatsoever.
21. INFORMATION TECHNOLOGY
21.1 The definitions in this paragraph apply in this agreement.
IT SYSTEM: all computer hardware (including network and telecommunications
equipment) and software (including associated preparatory materials, user
manuals and other related documentation) owned, used, leased or licensed
by or to the Company.
IT CONTRACTS: all arrangements and agreements under which any third party
(including without limitation any source code deposit agents) provides any
element of, or services relating to, the IT System, including leasing,
hire purchase, licensing, maintenance and services agreements.
21.2 Complete and accurate particulars of the IT System and all IT Contracts
have been Disclosed.
21.3 Save to the extent provided in the IT Contracts, the Company is the owner
of the IT System free from Encumbrances. The Company has obtained all
necessary rights from third parties to enable it to make exclusive and
unrestricted use of the IT System.
21.4 As far as the Sellers are aware, the IT Contracts are valid and binding
and no act or omission has occurred which would, if necessary with the
giving of notice or lapse of time, constitute a breach of any such
contract.
21.5 As are as the Sellers are aware, there are and have been no claims,
disputes or proceedings arising or threatened under any IT Contracts.
21.6 None of the IT Contracts is liable to be terminated or otherwise
materially affected by a change of control of the Company, and, as far as
the Sellers are aware, IT Contracts will be renewed on the same or
substantially the same terms when they expire.
21.7 The Company has possession or control of the source code of all software
in the IT System, or have the right to gain access to such code under the
terms of source code deposit agreements with the owners of the rights in
the relevant software and reputable deposit agents (particulars of which
are set out in Part 2 of Schedule 7).
47
21.8 The elements of the IT System:
(a) are functioning properly and in accordance with all applicable
specifications;
(b) are not defective in any respect and have not been materially
defective or materially failed to function during the last three
years;
(c) as far as the Sellers are aware, do not contain any software virus
and have not within the last 12 months been infected by any software
virus or accessed by any unauthorised person;
(d) have sufficient capacity and performance to meet the current and
foreseeable business requirements of the Company;
(e) include sufficient user information to enable reasonably skilled
personnel in the field to use and operate the IT System without the
need for further assistance;
(f) have been satisfactorily and regularly maintained and the IT System
has the benefit of appropriate maintenance and support agreements as
Disclosed.
21.9 The Company has implemented appropriate procedures, (including in relation
to off-site working where applicable) for ensuring the security of the IT
System and the confidentiality and integrity of all data stored in it.
21.10 The Company has in place a disaster recovery plan which is fully
documented and would enable the business of the Company to continue if
there were significant damage to or destruction of some or all of the IT
System. A copy of the plan is attached to the Disclosure Letter.
21.11 The performance and functionality of the IT System (and any other
equipment and systems owned or used by the Company which depend on
date-programmed control devices) has not been affected and will be
unaffected by any changes in dates (past, present or future). In
particular:
(a) no value for a current date has caused or will cause any
interruption in operation;
(b) date-based functionality has behaved and will behave consistently
for all dates;
(c) in all interfaces and data storage, the century in any date is and
will be specified either explicitly or by unambiguous algorithms or
inferencing rules; and
(d) all leap years will be recognised as such.
21.12 The IT System is capable of:
48
(a) performing its functions in multiple currencies, including the euro;
(b) satisfying all applicable legal requirements relating to the euro,
including the conversion and rounding rules in EC Regulation
1103/97;
(c) displaying and printing the generally accepted symbols for the euro
and any other currency; and
(d) processing the generally accepted codes for the euro and any other
currency.
22. DATA PROTECTION
22.1 The Company has notified registrable particulars under the Data Protection
Xxx 0000 of all personal data held by them and:
(a) has renewed such notifications and have notified any changes
occurring in between such notifications as required by that Act;
(b) has paid all fees payable in respect of such notifications;
(c) the contents of such notifications (copies of which are attached to
the Disclosure Letter) are complete and accurate; and
(d) there has been no unauthorised disclosure of personal data outside
the terms of such notifications.
22.2 No personal data have been transferred outside the European Economic Area.
22.3 The Company has:
(a) complied in all respects with the Data Protection Xxx 0000 and the
Data Protection Xxx 0000;
(b) satisfied any requests for access to personal data subject to
paragraph 22.3(a) of this Schedule 4;
(c) established the procedures necessary to ensure continued compliance
with such legislation; and
(d) complied with the requirements of the seventh principle of the Data
Protection Xxx 0000 in respect of any processing of data carried out
by a data processor on behalf of the Company, including by entering
into a written contract with the data processor confirming that the
data processor will only act on the instructions of the Company, and
requiring the data processor to comply with obligations relating to
security measures equivalent to those imposed on the Company by the
seventh principle as mentioned above.
22.4 The Company has not received any:
49
(a) notice or complaint under the Data Protection Xxx 0000 alleging
non-compliance with the Act (including any information or
enforcement notice, or any transfer prohibition notice); or
(b) claim for compensation for loss or unauthorised disclosure of data;
or
(c) notification of an application for rectification or erasure of
personal data,
and as far as the Sellers are aware, there are no circumstances which may
give rise to the giving of any such notice or the making of any such
notification.
22.5 The Company is not relying on the transitional exemptions for manual data
under Schedule 8 of the Data Protection Xxx 0000.
22.6 The Company has complied with their obligations under the Privacy and
Electronic Communications (EC Directive) Regulations 2003 in respect of
the use of electronic communications (including e-mail, text messaging,
fax machines, automated calling systems and non-automated telephone calls)
for direct marketing purposes.
23. EMPLOYMENT
23.1 The definitions in this paragraph apply in this agreement.
EMPLOYMENT LEGISLATION: legislation applying in England and Wales
affecting contractual and other relations between employers and their
employees or workers, including but not limited to any legislation and any
amendment, extension or re-enactment of such legislation and any claim
arising under European treaty provisions or directives enforceable against
the Company by any Employee or Worker.
EMPLOYEE: any person employed by the Company under a contract of
employment.
WORKER: any person who personally performs work for the Company but who
is not in business on their own account or in a client/customer
relationship.
23.2 The name of each person who is a Director is set out in Schedule 2.
23.3 The Disclosure Letter includes details of all Employees and Workers of the
Company, the particulars of each Employee and Worker and the principal
terms of their contract including:
(a) the Company which employs or engages them;
50
(b) their remuneration (including any benefits and privileges provided
or which the Company is bound to provide to them or their
dependants, whether now or in the future);
(c) the commencement date of each contract and, if an Employee, the date
on which their continuous service began;
(d) the length of notice necessary to terminate each contract, or if a
fixed term, the expiry date of the fixed term and details of any
previous renewals;
(e) the type of contract (whether full or part-time or other);
(f) date of birth;
(g) the country in which the Employee or Worker works or performs
services and/or is paid, if the Employee or Worker works or is paid
outside England and Wales; and
(h) the law governing the contract, if the Employee or Worker works or
is paid outside England and Wales.
23.4 The Disclosure Letter includes details of all persons who are not Workers
and who are providing services to the Company under an agreement which is
not a contract of employment with the Company (including, in particular,
where the individual acts as a consultant or is on secondment from a
company) and the particulars of the terms on which the individual provides
services, including:
(a) the company which engages them;
(b) the remuneration of each individual (including any benefits and
privileges provided or which the Company is bound to provide); and
(c) the length of notice necessary to terminate each agreement or, if at
fixed term, the expiry date of the fixed term and details of any
previous renewals;
(d) the country in which the individual provides services, if the
individual provides services wholly or mainly outside England and
Wales; and
(e) the law governing the agreement, if the individual provides services
wholly or mainly outside England and Wales.
23.5 The Disclosure Letter includes details of all Employees and Workers of the
Company who are on secondment, maternity, paternity, adoption or other
leave or absent due to ill-health or for any other reason.
23.6 No notice to terminate the contract of employment of any Employee or
Worker of the Company (whether given by the relevant employer or by the
Employee or Worker) is pending, outstanding or threatened by the Company
and no dispute under any Employment Legislation or otherwise is
outstanding between:
51
(a) the Company and any of its current or former Employees relating to
their employment, its termination and any reference given by the
Company regarding them; or
(b) the Company and any of its current or former Workers relating to
their contract, its termination and any reference given by the
Company regarding them.
23.7 No questionnaire has been served on the Company by an Employee or Worker
under any Employment Legislation which remains unanswered in full or in
part.
23.8 Every Employee or Worker of the Company who requires a work permit to work
in the United Kingdom has a current work permit or other permission and
all necessary permission to remain in the United Kingdom.
23.9 No offer of employment or engagement has been made by the Company that has
not yet been accepted, or which has been accepted but where the employment
or engagement has not yet started.
23.10 The acquisition of the Sale Shares by the Buyer and compliance with the
terms of this agreement will not enable any Directors, officers or
Employees of the Company to terminate their employment or receive any
payment or other benefit.
23.11 All contracts between the Company, and its Employees and Workers are
terminable at any time on three months' notice or less without
compensation (other than for unfair dismissal or a statutory redundancy
payment) or any liability on the part of the Company other than wages,
commission or pension.
23.12 All contracts between the Company and their Directors, Employees or
Workers comply with any relevant requirements of section 319 of the
Companies Xxx 0000.
23.13 The Company is not a party to, bound by or proposing to introduce in
respect of any of its Directors or Employees any redundancy payment scheme
in addition to statutory redundancy pay, and there is no agreed procedure
for redundancy selection.
23.14 The Company is not a party to, bound by or proposing to introduce in
respect of any of its Directors, Employees or Workers any share option,
profit sharing, bonus, commission or any other scheme relating to the
profit or sales of the Company.
52
23.15 The Company has not incurred any actual or contingent liability in
connection with any termination of employment of its Employees (including
redundancy payments) or for failure to comply with any order for the
reinstatement or re-engagement of any Employee.
23.16 The Company has not incurred any liability for failure to provide
information or to consult with Employees under any Employment Legislation.
23.17 The Company has not made or agreed to make a payment or provided or agreed
to provide a benefit to a present or former Director or officer, Employee
or Worker or to their dependants in connection with the actual or proposed
termination or suspension of employment or variation of an employment
contract.
23.18 The Company is not involved in any material industrial or trade dispute or
negotiation regarding a claim with any trade union, group or organisation
of employees or their representatives representing Employees or Workers
and as far as the Sellers are aware, there is nothing likely to give rise
to such a dispute or claim.
23.19 No subject access requests made to the Company pursuant to the Data
Protection Xxx 0000 by Employees or Workers are outstanding and the
Company and the Subsidiaries have complied with the provisions of the Data
Protection Xxx 0000 in respect of all personal data held or processed by
them relating to their Employees, Workers, and former Employees and
Workers.
23.20 The Company has not in the last 12 months altered and they shall not alter
(whether to take effect prior to, on or after the Completion Date) any of
the terms of employment or engagement of any of the Employees or Workers
(without the prior written consent of the Buyer).
23.21 The Company has not or will not transfer any Employee or Worker from
working for the Company, induce any Employee or Worker to resign their
employment or agree to transfer any Employee or Worker from the Company
(without the prior written consent of the Buyer).
23.22 There are no sums owing to or from any Employee or Worker other than
reimbursement of expenses, wages for the current salary period and holiday
pay for the current holiday year.
23.23 The Company has not offered, promised or agreed to any future variation in
the contract of any Employee or Worker
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23.24 The Disclosure Letter includes true, complete and accurate:
(a) copies of all contracts, handbooks, policies and other documents
which apply to the Employees and Workers;
(b) copies of all agreements or arrangements with any trade union,
employee representative or body of employees or their
representatives (whether binding or not) and details of any such
unwritten agreements or arrangements which may affect any Employee
or Worker.
23.25 In respect of each Employee and Worker, the Company has:
(a) performed all obligations and duties they are required to perform
(and settled all outstanding claims), whether or not legally binding
and whether arising under contract, statute, at common law or in
equity or under any treaties including the EC Treaty or laws of the
European Community or otherwise;
(b) complied with the terms of any relevant agreement or arrangement
with any trade union, employee representative or body of employees
or their representatives (whether binding or not);
(c) maintained adequate, suitable and up to date records.
23.26 Part 7 of the Income Tax (Earnings and Xxxxxxxx) Xxx 0000 does not apply
to any shares in the Company.
24. PROPERTY
24.1 The Company does not own any freehold property and has no interest in,
rights of ownership, right of use, option, right of first refusal or
contractual obligation to purchase, or any other legal or equitable right,
estate or interest in, or affecting, any land or buildings except pursuant
to the Lease.
24.2 The Company has no actual or contingent liability in respect of any other
property formerly owned or occupied by the Company.
24.3 The Company has not given any guarantee or indemnity for any liability
relating to the Property or any property formerly owned or occupied by the
Company.
24.4 EBC is in actual occupation of the Property on an exclusive basis, and no
right of occupation or enjoyment has been acquired or is in the course of
being acquired by any third party, and the Company has not granted, or
agreed not to grant, any right of occupation or enjoyment in respect of
the Property to any third party.
54
24.5 The Sellers have in their possession and control and have Disclosed a copy
of the Lease and there are no rent reviews under the Lease pending, in
progress or outstanding.
24.6 As far as the Sellers are aware, the Property is free from any mortgages,
debentures, charges, rent-charges or liens securing the repayment of
monies or other obligations.
24.7 As far as the Sellers are aware, the Property is not affected by any
options, rights of pre-emption, or any contracts to create any of these
matters or to dispose of any interest in the Property.
24.8 As far as the Sellers are aware, the Property is not effected by any
covenants, reservations, conditions, exceptions, stipulations, easements,
profits a prendre, wayleaves, licences, franchises, grants, restrictions,
overriding interests, rights of common or other rights vested in third
parties or any contracts to create any of these matters.
24.9 In relation to the Lease the Company and, as far as the Sellers are aware,
the landlord has observed and performed in all material respects all
covenants, restrictions, stipulations and other encumbrances and there has
not been (expressly or impliedly) any waiver of or acquiescence to any
breach of them.
24.10 In relation to the Lease, all principal rent and additional rent and all
other sums payable by the Company (LEASE SUMS) have been paid as and when
they became due and no Lease Sums have been:
(a) set off or withheld; or
(b) commuted, waived or paid in advance of the due date for payment.
24.11 No collateral assurances, undertakings or concessions have been made by
any party to any Lease.
24.12 The Property is not subject to the payment of any outgoings other than
non-domestic local business rates and water and sewerage charges,principal
rent, insurance premiums and service charges and all outgoings have been
paid when due and none is disputed.
24.13 The Property is actively used by the Company in connection with the
Business.
24.14 As far as the Sellers are aware, the current use of the Property is the
permitted use for the purposes of the planning legislation.
55
24.15 The Property either:
(a) has a current fire certificate, and no alterations or improvements
have been made, or are proposed, to the Property which would affect
the validity of the fire certificate; or
(b) does not require a fire certificate.
24.16 The Property is in a good state of repair and condition and fit for the
current use.
24.17 There are no development works, redevelopment works or fitting-out works
outstanding in respect of any of the Property.
24.18 As far as the Sellers are aware, the Property has not suffered from any of
the following:
(a) flooding;
(b) subsidence;
(c) heave;
(d) landslip;
(e) mining activities;
(f) structural defects;
(g) defects in the drains and services from time to time serving the
Properties; or
(h) dry rot, wet rot, rising damp and any infestation.
24.19 There exists no dispute between the Company, and the owner or occupier of
any other premises adjacent to or neighbouring the Property and the
Company does not expect nor is aware of any circumstances that may give
rise to any such dispute after the date of this agreement.
25. ACCOUNTS
25.1 The Accounts have been prepared in accordance with the Companies Acts and
with accounting standards, policies, principles and practices generally
accepted in the UK and in accordance with the law of that jurisdiction.
25.2 The Accounts have been audited by an auditor or firm of accountants
qualified to act as auditors in the UK and the auditors' report(s)
required to be annexed to the Accounts is unqualified.
25.3 The Accounts:
56
(a) make proper and adequate provision or reserve for all bad and
doubtful debts, obsolete or slow-moving stocks and for depreciation
on fixed assets;
(b) do not overstate the value of current or fixed assets; and
(c) do not understate any liabilities (whether actual or contingent).
25.4 The Accounts show a true and fair view of the commitments and financial
position and affairs of EBC as at the Accounts Date and of the profit and
loss of EBC for the financial year ended on that date.
25.5 The Accounts contain either provision adequate to cover, or full
particulars in notes of, all Taxation (including deferred Taxation) and
other liabilities (whether quantified, contingent, disputed or otherwise)
of EBC as at the Accounts Date.
25.6 The Accounts are not affected by any unusual or non-recurring items or any
other factor that would make the financial position and results shown by
the Accounts unusual or misleading in any respect.
25.7 The Accounts have been filed and laid before EBC in general meeting in
accordance with the requirements of the Companies Acts.
25.8 The Accounts have been prepared on a basis consistent with the audited
accounts of EBC for the two prior accounting periods without any change in
accounting policies used.
25.9 The Management Accounts have been prepared on a basis consistent with that
employed in preparing the Accounts and fairly represent the assets and
liabilities and the profits and losses of EBC as at and to the date for
which they have been prepared.
26. FINANCIAL AND OTHER RECORDS 26.1 All financial and other records of the
Company:
(a) have been properly prepared and maintained;
(b) constitute an accurate record of all matters required by law to
appear in them;
(c) do not contain any material inaccuracies or discrepancies; and
(d) are in the possession of the Company.
57
26.2 No notice has been received or allegation made that any of those records
are incorrect or should be rectified.
26.3 All statutory records, including accounting records, required to be kept
or filed by the Company have been properly kept or filed and comply with
the requirements of the Companies Acts.
26.4 All deeds and documents belonging to the Company are in the possession of
the Company.
27. CHANGES SINCE ACCOUNTS DATE
Since the Accounts Date:
(a) the Company has conducted its business in the normal course and as a
going concern;
(b) there has been no material adverse change in the turnover, financial
position or prospects of the Company;
(c) the Company has not issued or agreed to issue any share or loan
capital;
(d) no dividend or other distribution of profits or assets has been, or
agreed to be, declared, made or paid by the Company;
(e) the Company has not borrowed or raised any money or taken any form
of financial security and no capital expenditure has been incurred
on any individual item by the Company in excess of (pound)2,000 and
the Company has not acquired, invested or disposed of (or agreed to
acquire, invest or dispose of) any individual item by the Company in
excess of (pound)2,000;
(f) no shareholder resolutions of the Company have been passed other
than as routine business at the annual general meeting;
(g) there has been no abnormal increase or reduction of stock in trade;
(h) none of the stock in trade reflected in the Accounts has realised an
amount less than the value placed in it in the Accounts; and
(i) the Company has not offered price reductions or discounts,
incentives, or allowances on sales of stock in trade, or sold stock
in trade at less than cost price.
28. EFFECT OF SALE ON SALE SHARES
As far as the Sellers are aware, neither the acquisition of the Sale
Shares by the Buyer nor compliance with the terms of this agreement will:
58
(a) cause the Company to lose the benefit of any right or privilege it
presently enjoys; or
(b) relieve any person of any obligation to the Company (whether
contractual or otherwise), or enable any person to determine any
such obligation or any right or benefit enjoyed by the Company, or
to exercise any right in respect of the Company; or
(c) give rise to, or cause to become exercisable, any right of
pre-emption over the Sale Shares; or
(d) entitle any person to receive from the Company any finder<180>s fee,
brokerage or other commission in connection with the purchase of the
Sale Shares by the Buyer; or
(e) result in any customer or supplier being entitled to cease dealing
with the Company or to reduce substantially its existing level of
business or to change the terms on which it deals with the Company;
or
(f) result in any officer or senior Employee leaving the Company; or
(g) result in a breach of contract, law, regulation, order, judgment,
injunction, undertaking, decree or other like imposition; or
(h) result in the loss or impairment of or any default under any
licence, authorisation or consent required by the Company for the
purposes of its business; or
(i) result in the creation, imposition, crystallisation or enforcement
of any Encumbrance on any of the assets of the Company; or
(j) 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 date or in any financial facility of the
Company being withdrawn; or
(k) entitle any person to acquire, or affect the entitlement of any
person to acquire shares in the Company.
29. RETIREMENT BENEFITS
29.1 The Company is not party to any agreement or arrangement for the provision
of pensions, allowances, lump sums or other like benefits on retirement.
29.2 The Company has complied with the obligations imposed by the Welfare
Reform and Pensions Xxx 0000 regarding facilitating access to a
stakeholder pension arrangement.
29.3 There are no claims or actions in progress or pending, nor as far as the
Sellers are aware, any reason for such claims and actions in respect of
any entitlement to retirement benefits.
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PART 2. TAX WARRANTIES
1. GENERAL
1.1 All notices, returns (including any land transaction returns), reports,
accounts, computations, statements, assessments and registrations and any
other necessary information submitted by the Company to any Taxation
Authority for the purposes of Taxation have been made on a proper basis,
were punctually submitted, were accurate and complete when supplied and
remain accurate and complete in all material respects and none of the
above is, or, as far as the Sellers are aware, is likely to be, the
subject of any material dispute with any Taxation Authority.
1.2 All Taxation (whether of the United Kingdom or elsewhere) for which the
Company is or has been liable or is liable to account for has been duly
paid (insofar as such Taxation ought to have been paid).
1.3 The Company has not made any payments representing instalments of
corporation tax pursuant to the Corporation Tax (Instalment Payments)
Regulations 1998 in respect of any current or preceding accounting periods
and is not under any obligation to do so.
1.4 The Company has not paid within the past seven years ending on the date of
this agreement or, as far as the Sellers are aware, will become liable to
pay, any penalty, fine, surcharge or interest charged by virtue of the
provisions of the TMA 1970 or any other Taxation Statute.
1.5 The Company has not within the past 12 months been subject to any visit,
audit, investigation, discovery or access order by any Taxation Authority
and, as far as the Sellers are aware, there are no circumstances existing
which make it likely that a visit, audit, investigation, discovery or
access order will be made in the next 12 months.
1.6 The amount of Taxation chargeable on the Company during any accounting
period ending on or within the seven years before Completion has not, to
any material extent, depended on any concession, agreements or other
formal or informal arrangement with any Taxation Authority.
1.7 All transactions in respect of which any clearance or consent was required
from any Tax Authority have been entered into by the Company after such
consent or clearance has 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.
60
1.8 The Company has duly submitted all claims, disclaimers and elections the
making of which has been assumed for the purposes of the Accounts and, ,
as far as the Sellers are aware, none of such claims, disclaimers or
elections are likely to be disputed or withdrawn.
1.9 The Disclosure Letter contains full particulars of all matters relating to
Taxation in respect of which the Company is or at Completion will be
entitled to:
(a) make any claim (including a supplementary claim), disclaimer or
election for relief under any Taxation Statute or provision; and/or
(b) appeal against any assessment or determination relating to Taxation;
and/or
(c) apply for a postponement of Taxation.
1.10 The Company is not or, as far as the Sellers are aware, will not become
liable to make to any person (including any Taxation Authority) any
payment in respect of any liability to Taxation of any other person where
that other person fails to discharge liability to Taxation to which he is
or may be primarily liable.
1.11 The Company has sufficient records to determine the tax consequence which
would arise on any disposal or realisation of any asset owned at the
Accounts Date or acquired since that date but prior to Completion.
2. CHARGEABLE GAINS
The book value shown or adopted for the purposes of the Accounts as the
value of each of the assets of the Company on the disposal of which a
chargeable gain or allowable loss could arise does not exceed the amount
which on a disposal of such asset at the date of this agreement would be
deductible under section 38 of TCGA 1992.
3. CAPITAL ALLOWANCES
3.1 No balancing charge under the CAA 2001 (or any other legislation relating
to capital allowances) would be made on the Company on the disposal of any
pool of assets (that is, all those assets whose expenditure would be taken
into account in computing whether a balancing charge would arise on a
disposal of any other of those 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.
61
3.2 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 CAA 2001 (or any other legislation relating to
capital allowances).
4. DISTRIBUTIONS
4.1 No distribution or deemed distribution within the meaning of sections 209,
210 or 211 of ICTA 1988 has been made (or will be deemed to have been
made) by the Company except dividends shown in their audited accounts and
the Company is not bound to make any such distribution.
4.2 No rents, interest, annual payments or other sums of an income nature paid
or payable by the Company or which the Company is under an existing
obligation to pay in the future are or may be wholly or partially
disallowable as deductions, management expenses or charges in computing
profits for the purposes of corporation tax.
4.3 The Company has not within the period of seven years preceding Completion
been engaged in, nor been a party to, any of the transactions set out in
sections 213 to 218 (inclusive) of ICTA 1988, nor has it made or received
a chargeable payment as defined in section 218(1) of ICTA 1988.
5. LOAN RELATIONSHIPS
All interests, discounts and 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 Xxx 0000 at
the time and to the extent that such debits are recognised in the
statutory accounts of the Company in the six years ending on the Accounts
Date.
6. CLOSE COMPANIES
The Company has at any time during the last six years ending at the
Accounts Date been a close company within the meaning of sections 414 and
415 of ICTA 1988.
7. GROUP RELIEF
Except as provided in the Accounts, the Company is not or will not be
obliged to make or be entitled to receive any payment for group relief as
defined in section 402(6) of ICTA 1988 in respect of any period ending on
or before the
62
Accounts Date, or any payment for the surrender of the benefit of an
amount of advance corporation tax or any repayment of such a payment.
8. GROUPS OF COMPANIES
8.1 The Company has not entered or agreed to enter into an election pursuant
to section 171A of TCGA 1992 or paragraph 66 of Schedule 29 to the Finance
Xxx 0000.
8.2 The execution or completion of this agreement or any other event since the
Accounts Date will not result in any chargeable asset being deemed to have
been disposed of and re-acquired by the Company for Taxation purposes
pursuant to section 179 of TCGA 1992, paragraphs 58 or 60 of Schedule 29
to the Finance Xxx 0000 or as a result of any other Event (as defined in
the Tax Covenant) since the Accounts Date.
8.3 The Company has never been party to any arrangements pursuant to section
36 of the Finance Xxx 0000 (group payment arrangements).
8.4 The Company has not been, and is not, required by Schedule 28AA of ICTA
1988 to compute its profits or losses as if an arm's length provision had
been made instead of any actual provision.
9. INTANGIBLE ASSETS
For the purposes of this paragraph 9, references to INTANGIBLE FIXED
ASSETS mean intangible fixed assets and goodwill within the meaning of
Schedule 29 to the Finance Xxx 0000 to which the provisions of that
Schedule apply and references to an INTANGIBLE FIXED ASSET shall be
construed accordingly.
9.1 The Disclosure Letter sets out the amount of expenditure on each of the
intangible fixed assets 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. As far as the Sellers are aware, no
circumstances have arisen since the Accounts Date by reason of which that
basis might change.
9.2 No claims or elections have been made by the Company under Part 7 of, or
paragraph 86 of Schedule 29 to, the Finance Xxx 0000 in respect of any
intangible fixed asset of the Company.
9.3 Since the Accounts Date:
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(a) the Company does not own an asset which has ceased to be a
chargeable intangible asset in the circumstances described in
paragraph 108 of Schedule 29 to the Finance Xxx 0000;
(b) the Company has not realised or acquired an intangible fixed asset
for the purposes of Schedule 29 to the Finance Xxx 0000; and
(c) as far as the Sellers are aware, no circumstances have arisen which
have required, or will require, a credit to be brought into account
by the Company on a revaluation of an intangible fixed asset.
10. EBC RESIDENCE AND OVERSEAS INTERESTS
10.1 EBC has within the past seven years been resident in the United Kingdom
for corporation tax purposes and has not at any time in the past seven
years been treated for the purposes of any double taxation arrangements
having effect by virtue of section 249 of the Finance Xxx 0000, section
788 of ICTA 1988 or for any other tax purpose as resident in any other
jurisdiction.
10.2 EBC has not without the prior written consent of HM Treasury caused,
permitted or entered into any of the transactions specified in section 765
of ICTA 1988 (migration of companies).
10.3 EBC does not hold shares in a company which is not resident in the United
Kingdom and which would be a close company if it were resident in the
United Kingdom in circumstances such that a chargeable gain accruing to
the company not resident in the United Kingdom could be apportioned to the
Company pursuant to section 13 of TCGA 1992.
10.4 EBC has not held in the past seven years any interest in a controlled
foreign company within section 747 of ICTA 1988, and neither of them has
any material interest in an offshore fund as defined in section 759 of
ICTA 1988.
10.5 EBC has no permanent establishment outside the UK.
11. ANTI-AVOIDANCE
11.1 All transactions or arrangements made by the Company have been made on
fully arm's length terms and there are no circumstances in which section
770A of, or Schedule 28AA to, ICTA 1988 or any other rule or provision
could apply causing any Taxation Authority to make an adjustment to the
terms on which such transaction or arrangement is treated as being made
for Taxation purposes.
11.2 The Company has not at any time been a party to or otherwise involved in a
transaction or series of transactions in relation to which advisers
considered that
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there was a risk that the Company could be liable to taxation as a result
of the principles in X.X Xxxxxx Limited v IRC (54 TC 101) or Xxxxxxx v
Xxxxxx (55 TC 324), as developed in subsequent cases.
12. INHERITANCE TAX
12.1 The Company has not made any transfer of value within sections 94 and 202
of the IHTA 1984, nor has it received any value such that liability might
arise under section 199 of the IHTA 1984, nor has it been a party to
associated operations in relation to a transfer of value as defined by
section 268 of the IHTA 1984.
12.2 There is no unsatisfied liability to inheritance tax attached to or
attributable to the Sale Shares or any asset of the Company and none of
them are subject to any Inland Revenue charge as mentioned in section 237
and 238 of the IHTA 1984.
12.3 No asset owned by the Company, nor the Sale Shares are liable to be
subject to any sale, mortgage or charge by virtue of section 212(1) of the
IHTA 1984.
13. VAT
13.1 The Company is a taxable person and is duly registered for the purposes of
VAT with quarterly prescribed accounting periods, such registration not
being pursuant to paragraph 2 of Schedule 1 to the VATA 1994 or subject to
any conditions imposed by or agreed with HM Revenue & Customs and the
Company is not (nor, as far as the Sellers are aware, are there any
circumstances by virtue of which it may become) under a duty to make
monthly payments on account under the Value Added Tax (Payments on
Account) Order 1993.
13.2 The Company has complied with all statutory provisions, rules,
regulations, orders and directions in respect of VAT.
13.3 All supplies made by the Company are taxable supplies and the Company has
not been or will not be denied full credit for all input tax by reason of
the operation of sections 25 and 26 of the VATA 1994 and regulations made
thereunder or for any other reasons and no VAT paid or payable by the
Company is not input tax as defined in section 24 of the VATA 1994 and
regulations made thereunder.
13.4 The Company is not or has not been for VAT purposes a member of any group
of companies and no act or transaction has been effected in consequence
whereof the Company is or may be held liable for any VAT arising from
supplies made by another company and no direction has been given nor will
be
65
given by HM Revenue & Customs under Schedule 9A to the VATA 1994 as a
result of which the Company would be treated for the purposes of VAT as a
member of a group.
13.5 For the purposes of paragraph 3(7) of Schedule 10 to the VATA 1994, the
Company or any relevant associates of such companies (within the meaning
of paragraph 3(7) of Schedule 10 to the VATA 1994) has exercised the
election to waive exemption from VAT (pursuant to paragraph 2 of Schedule
10 to the VATA 1994) only in respect of those Properties listed (as having
been the subject of such an election) in the Disclosure Letter and:
(a) all things necessary for the election to have effect have been done
and in particular any notification and information required by
paragraph 3(6) of Schedule 10 to the VATA 1994 has been given and
any permission required by paragraph 3(9) of Schedule 10 to the VATA
1994 has been properly obtained; and
(b) no election has or, as far as the Sellers are aware, will be
disapplied or rendered ineffective by virtue of the application of
the provisions of paragraph 2(3AA) of Schedule 10 to the VATA 1994.
13.6 The Company does not own or has not at any time within the period of ten
years preceding the date hereof owned any assets which are capital items
subject to the capital goods scheme under Part XV of the VAT Regulations
1995.
13.7 The Company has not made any claim for bad debt relief under section 36 of
the VATA 1994 and there are no existing circumstances by virtue of which
any refund of VAT obtained or claimed may be required to be repaid or
there could be a claw back of input VAT from the Company under section
36(4) of the VATA 1994.
14. STAMP DUTY AND STAMP DUTY LAND TAX
14.1 Any document that may be necessary or desirable in proving the title of
the Company to any asset which is owned by the Company Subsidiary at
Completion or any document which the Company may wish to enforce or
produce in evidence is duly stamped for stamp duty purposes.
14.2 Neither entering into this agreement nor Completion will result in the
withdrawal of any stamp duty or stamp duty land tax relief granted on or
before Completion which will affect the Company.
14.3 The Disclosure Letter sets out full and accurate details of any chargeable
interest (as defined under section 48, Finance Act 2003) acquired or held
by the Company before Completion in respect of which an additional land
transaction
66
return will be required to be filed with a Taxation Authority and/or a
payment of stamp duty land tax made on or after Completion.
67
SCHEDULE 5:
TAX COVENANT
1. INTERPRETATION
1.1 The definitions and rules of interpretation in this paragraph apply in
this Tax Covenant.
BUYER'S RELIEF: means:
(a) any Accounts Relief (as defined in paragraph (a) of the definition
of Liability for Taxation) or Repayment Relief (as defined in
paragraph (b) of the definition of Liability for Taxation); and
(b) any Post-Completion Relief of the Company (as defined in paragraph
(c) of the definition of Liability for Taxation).
BUYER'S TAX GROUP: the Buyer and any other company or companies which
either are or 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 Buyer for any Tax
purpose.
EVENT: includes (without limitation) the expiry of a period of time, the
Company becoming or ceasing to be associated with any other person for any
Tax purpose or ceasing to be or becoming resident in any country 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 shall include Events
which, for Tax purposes, are deemed to have, or are treated or regarded as
having, occurred on or before that date.
LIABILITY FOR TAXATION: any liability of the Company to make a payment of
or in respect of Tax, whether or not the Company has or may have any right
of reimbursement against any other person or persons and also includes:
(a) the Loss of any Relief (ACCOUNTS RELIEF) where such Relief has been
taken into account in computing and so reducing or eliminating any
provision for deferred Tax which appears in the Accounts (or which,
but for such Relief, would have appeared in the Accounts) or where
such Relief was treated as an asset of the Company in the Accounts
or was taken into account in computing any deferred Tax asset which
appears in the Accounts (LOSS OF AN ACCOUNTS RELIEF), in which case
the amount of the Liability for Taxation shall be the amount of Tax
which would (on the basis of Tax rates current at the date of such
Loss) have been saved but for such Loss, assuming for this purpose
68
that the Company had sufficient profits or was otherwise in a
position to use the Relief;
(b) the Loss of any right to repayment of Tax (including any repayment
supplement) (REPAYMENT RELIEF) which was treated as an asset in the
Accounts (LOSS OF A REPAYMENT RELIEF), in which case the amount of
the Liability for Taxation shall be the amount of the Loss of the
right to repayment and any related repayment supplement;
(c) the set off or use against income, profits or gains earned, accrued
or received or against any Tax chargeable in respect of an Event
occurring on or before the Accounts Date of any Relief
(POST-COMPLETION RELIEF) or right to repayment of Tax (including any
repayment supplement) which is not available before Completion, but
arises after Completion in circumstances where, but for such set off
or use, the Company would have had a liability to make a payment of
or in respect of Tax for which the Buyer would have been able to
make a claim against the Sellers under this Tax Covenant (LOSS OF A
POST-COMPLETION Relief), in which case the amount of the Liability
for Taxation shall be the amount of Tax saved by the Company as a
result of such set off or use; and
(d) any liability of the Company to make a payment pursuant to an
indemnity, guarantee or covenant entered into before Completion
under which the Company has agreed to meet or pay a sum equivalent
to or by reference to another person's Tax liability, in which case
the Liability for Taxation shall be equal to the amount of the
liability.
LOSS: any reduction, modification, loss, counteraction, nullification,
utilisation, disallowance or claw-back for whatever reason.
RELIEF: includes any loss, relief, allowance, credit, exemption or set
off in respect of Tax or any deduction in computing income, profits or
gains for the purposes of Tax and any right to a repayment of Tax.
TAX: all forms of taxation and statutory, governmental, state, federal,
provincial, local, government or municipal charges, duties, 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, and TAXATION shall
have the same meaning.
TAX CLAIM: any assessment (including self-assessment), notice, demand,
letter or other document issued or action taken by or on behalf of any
Taxation Authority from which it appears that the Buyer or the Company may
be subject to a Liability for Taxation or other liability in respect of
which the Sellers are or may be liable under this Tax Covenant.
TAXATION AUTHORITY: HM Revenue & Customs, the Department of Social
Security and any other governmental or other authority whatsoever
competent to impose any Tax, whether in the United Kingdom or elsewhere.
69
TAXATION STATUTE: any directive, statute, enactment, law or regulation
wheresoever enacted or issued, coming into force or entered into providing
for or imposing any Tax and including orders, regulations, instruments,
bye-laws or other subordinate legislation made under the relevant statute
or statutory provision and any directive, statute, enactment, law, order,
regulation or provision which amends, extends, consolidates or replaces
the same or which has been amended, extended, consolidated or replaced by
the same.
1.2 References to GROSS RECEIPTS, INCOME, PROFITS or GAINS earned, accrued or
received shall include any gross receipts, income, profits or gains deemed
pursuant to the relevant Taxation Statute to have been or treated or
regarded as earned, accrued or received.
1.3 References to a REPAYMENT OF TAX shall include any repayment supplement or
interest in respect of it.
1.4 Any reference to something occurring 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
liability of the Company to Tax that is the primary liability of, or
properly attributable to, or due from another person (other than a
member of the Buyer's Tax Group), or is the liability of the Company
only because some other person, other than a member of the Buyer's
Tax Group, has failed to pay it or is the liability of the Company
because it has elected to be regarded as taxable or liable or to be
regarded as having made a disposal; or
(b) 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; or
(c) 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 the Company becoming or ceasing to be or
being treated as ceasing to be a member of a Group or as becoming or
ceasing to be associated or connected with any other company for any
Tax purposes; or
(d) anything which relates to a transaction or arrangement which
includes, or a series of transactions or arrangements which include,
any step or steps having no commercial or business purpose apart
from the reduction, avoidance or deferral of a Liability for
Taxation; or
(e) anything which gives rise to a Liability for Taxation on deemed (as
opposed to actual) profits or to the extent that it gives rise to a
70
Liability for Taxation on an amount of profits greater than the
difference between the sale proceeds of an asset and the amount
attributable to that asset in the Accounts or, in the case of an
asset acquired since the Accounts Date, the cost of that asset; or
(f) anything which involves, or leads directly or indirectly to, a
change of residence of the Company for Tax purposes.
1.5 Unless the contrary intention appears, words and expressions defined in
this agreement have the same meaning in this Tax Covenant and any
provisions in this agreement concerning matters of construction or
interpretation also apply in this Tax Covenant.
2. COVENANT
2.1 Subject to the provisions of clause 4, the Sellers covenant with the Buyer
that, subject to the provisions of this Tax Covenant, the Sellers shall be
severally liable to pay to the Buyer by way of repayment of the Purchase
Price for the Sale Shares, to the extent possible but not so as to limit
the amount payable where not wholly possible, an amount equal to any:
(a) Liability for Taxation 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) Liability for Taxation which arises solely as a result of the
relationship for Tax purposes of the Company with any person other
than a member of the Buyer's Tax Group on or before Completion;
(c) any Liability for Taxation falling within paragraph (a) to paragraph
(d) of the definition of Liability for Taxation;
(d) any Liability for Taxation which is a liability for inheritance tax
which:
(i) arises as a result of a transfer of value occurring or being
deemed to occur on or before Completion (whether or not in
conjunction with the death of any person whensoever
occurring); or
(ii) has given rise at Completion to a charge on any of the Sale
Shares or assets of the Company; or
(iii) gives rise after Completion to a charge on any of the Sale
Shares in or assets of the Company as a result of the death of
any person within seven years of a transfer of value which
occurred before Completion; and
(e) costs and expenses referred to in paragraph 9.
71
3. PAYMENT DATE AND INTEREST
3.1 Where the Sellers are liable to make any payment under paragraph 2
(including any payment pursuant to paragraph 2.1(e)), the due date for the
making of that payment (DUE DATE) shall be the earlier of the date falling
seven days after the Buyer has served a notice on the Sellers demanding
that payment and in a case:
(a) that involves an actual payment of Tax by the Company (including any
payment pursuant to paragraph 2.1(e)), the date on which the Tax in
question would have had to have been paid to the relevant Taxation
Authority in order to prevent a liability to interest or a fine,
surcharge or penalty from arising in respect of the Liability for
Taxation in question; or
(b) that falls within paragraph (a) of the definition of Liability for
Taxation, the last date on which the Tax is or would have been
required to be paid to the relevant Taxation Authority in respect of
the period in which the Loss of the Relief occurs (assuming for this
purpose that the Company had sufficient profits or was otherwise in
a position to use the Relief); or
(c) that falls within paragraph (b) of the definition of Liability for
Taxation, the date on which the repayment was due from the relevant
Taxation Authority; or
(d) that falls within paragraph (c) of the definition of Liability for
Taxation, the date on which the Tax saved by the Company is or would
have been required to be paid to the relevant Taxation Authority; or
(e) that falls within paragraph (d) of the definition of Liability for
Taxation not later than the fifth day before the day on which the
Company or the relevant Subsidiary is due to make the payment or
repayment.
3.2 Any dispute as to the amount specified in any notice served on the Sellers
under paragraph 3.1(b) to paragraph 3.1(e) remaining unresolved for more
than 10 Business Days from the date of service of a notice pursuant to
clause 3.1 shall be determined by an independent accountant appointed by
agreement between the parties or, failing such agreement within a further
5 Business Days, appointed at the instance of either party by the
President for the time being of the Institute of Chartered Accountants in
England and Wales. Such independent expert shall decide the disputed
matter as expert and not as arbitrator and shall issue to the parties his
written decision which shall be final and binding upon the parties hereto
(except in the case of manifest error or fraud). The costs of such
independent accountant shall be borne by the parties as such expert shall
direct.
72
3.3 If any sums required to be paid by the Sellers under this Tax Covenant are
not paid on the Due Date then, except to the extent that the Sellers
liability under paragraph 2 compensates the Buyer for the late payment by
virtue of it extending to interest and penalties, such sums shall bear
interest (which shall 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 Bank of Scotland or (in the absence thereof) at such
similar rate as the Buyer selects 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. EXCLUSIONS
4.1 The covenant contained in paragraph 2 shall not cover any Liability for
Taxation to the extent that:
(a) a provision or reserve in respect thereof is made in the Accounts;
or
(b) it arises or is increased as a result only of any change in the law
of Tax announced and coming into force after Completion (whether
relating to rates of Tax or otherwise) or the withdrawal of any
extra-statutory concession previously made by a Taxation Authority
(whether or not the change purports to be effective retrospectively
in whole or in part); or
(c) the Buyer is compensated for any such matter under any other
provision of this agreement;
(d) to the extent that the Liability for Taxation would not have arisen
but for any voluntary act of the Buyer or the Company after
Completion which the Buyer or the Company ought reasonably to have
known would give rise to such Liability for Taxation but excluding
any act:
(i) carried out pursuant to a legally binding obligation of the
Company incurred prior to Completion; or
(ii) pursuant to an obligation imposed by any law, regulation or
requirement having the force of law; or
(iii) taking place with the written approval of the Sellers or in
accordance with the terms of the Agreement or this Covenant
(including, without limitation, the provisions of paragraph 7
below) or any document executed pursuant to the Agreement;
(e) occurring in the ordinary course of trade of any company in the
Group; or
73
(f) which arises or is increased as a consequence of the failure of the
Buyer to comply with or procure the compliance of the Company with
their respective obligations under this Tax Covenant.
4.2 The Sellers are not liable for a claim under this Tax Covenant unless the
Buyer has given the Sellers written notice of the claim (giving reasonable
information regarding the nature and an estimate of the value of such
claim) within the period of seven years beginning with the Completion
Date.
5. RECOVERY FROM THIRD PARTIES
5.1 Where the Sellers have paid an amount in full discharge of a liability
under paragraph 2 in respect of any Liability for Taxation and the Buyer
or the Company is or becomes entitled to recover from some other person
(not being the Buyer, the Company or any other company within the Buyer's
Tax Group), any amount in respect of such Liability for Taxation, the
Buyer shall or shall procure that the Company shall:
(a) notify the Sellers of its entitlement as soon as reasonably
practicable; and
(b) if required by the Sellers and, subject to the Buyer, the Company
being secured and indemnified by the Sellers against any Tax that
may be suffered on receipt of that amount and any costs and expenses
incurred in recovering that amount, take or procure that the Company
takes all reasonable steps to enforce that recovery against the
person in question (keeping the Sellers fully informed of the
progress of any action taken), provided that the Buyer shall not be
required to take any action pursuant to this paragraph 5.1 which, in
the Buyer's reasonable opinion, is likely to harm its or the
Company's commercial relationship (potential or actual) with that or
any other person.
5.2 If the Buyer or the Company recovers any amount referred to in paragraph
5.1, the Buyer shall account to the Sellers 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 amount has already been made good by the
Sellers under paragraph 5.1(b)); and
(b) the amount paid by the Sellers under paragraph 2 in respect of the
Liability for Taxation in question.
6. CORRESPONDING BENEFIT
74
6.1 If the auditors for the time being of the Company shall certify (at the
request and expense of the Sellers) that any Liability for Taxation which
has resulted in a payment having been made or becoming due from the
Sellers under this Tax Covenant would give rise to a Relief for the
Company which would not otherwise have arisen, then as and when the
liability of the Company to make an actual payment of or in respect of
taxation is reduced by reason of that Relief (and in this respect the
Company may in its absolute discretion choose to utilise any other Reliefs
that are or become available to the Company in priority to the Relief
which would not have arisen but for the Liability for Taxation which has
resulted in the payment having been made or becoming due from the Sellers)
or, in the case of a repayment, as and when the repayment is received, the
amount by which the liability is reduced or the amount of the repayment
shall be dealt with in accordance with sub-clause 6.2.
6.2 Where it is provided in sub-clause 6.1 that any amount (the "Relevant
Amount") is to be dealt with in accordance with this sub-clause:
(a) the Relevant Amount shall first be set off against any payment then
due from the Sellers under this Tax Covenant; and
(b) to the extent that there is any excess, a refund shall be made to
the Sellers of any previous payment or payments made by the Sellers
under this Tax Covenant and not previously refunded under this
sub-clause up to the amount of such excess; and
(c) to the extent that the excess referred to in paragraph 6.2(b) is not
exhausted under that paragraph, the remainder of that excess shall
be carried forward for set off against any future payment or
payments which becomes due from the Sellers under this Tax Covenant.
6.3 Where any such certification as is mentioned in sub-clause 6.1 has been
made, the Sellers or the Buyer may (at their/its own expense) request the
auditors for the time being of the Company to review such certification in
the light of all relevant circumstances, including any facts which have
become known only since such certification, and to certify whether such
certification remains correct or whether, in the light of those
circumstances, the amount that was subject to such certification should be
amended.
6.4 If the auditors certify under sub-clause 6.3 that an amount previously
certified should be amended, that amended amount shall be substituted for
the purposes of sub-clause 6.2 as the Relevant Amount in respect of the
certification in question in place of the amount originally certified and
such adjusting payment (if any) as may be required by virtue of the
above-mentioned substitution shall be made as soon as practicable by the
Sellers or (as the case may be) to the Sellers.
7. CONDUCT OF TAX CLAIMS
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7.1 If the Buyer or the Company becomes aware of a Tax Claim, the Buyer shall
give or procure that notice in writing is given to the Sellers as soon as
is reasonably practicable, provided that if any of the Sellers receive any
Tax Claim for whatever reason, they shall notify the Buyer in writing as
soon as is reasonably practicable and the Buyer shall be deemed, on
receipt of such notification, to have given the Sellers notice of such Tax
Claim in accordance with the provisions of this paragraph 7, provided
always that the giving of such notice shall not be a condition precedent
to the Sellers' liability under this Tax Covenant.
7.2 Provided the Sellers indemnify and secure the Buyer and the Company to the
Buyer's reasonable satisfaction against all liabilities, costs, damages or
expenses which may be incurred thereby including any additional Liability
for Taxation, the Buyer shall take and shall procure that the Company
shall take such action as the Sellers may reasonably request by notice in
writing given to the Buyer, the Company to avoid, dispute, defend, resist,
appeal or compromise any Tax Claim (such a Tax Claim where action is so
requested being hereinafter referred to as a DISPUTE), provided that
neither the Buyer nor the Company shall be obliged to appeal or procure an
appeal against any assessment to Tax raised on any of them if, the Sellers
having been given written notice of the receipt of such assessment, the
Buyer or the Company have not within 28 days of the date of the notice
received instructions in writing from the Sellers to do so.
7.3 If:
(a) the Sellers do not request the Buyer or the Company to take any
action under paragraph 7.2 or fail to indemnify and secure the Buyer
or the Company to the Buyer's reasonable satisfaction within a
period of time (commencing with the date of the notice given to the
Sellers) 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 28
days; or
(b) any of the Sellers (or the Company before Completion) has been
involved in a case involving fraudulent conduct or wilful default in
respect of the Liability for Taxation which is the subject matter of
the Dispute; or
(c) the Dispute involves an appeal against a determination by the
General or Special Commissioners of the VAT and Duties Tribunal,
unless the Sellers have obtained the opinion of Tax counsel of at
least 5 years<180> standing that there is a reasonable prospect that
the appeal will succeed,
the Buyer or the Company shall have the conduct of the Dispute absolutely
(without prejudice to its rights under this Tax Covenant) and shall be
free to pay or settle the Tax Claim on such terms as the Buyer or the
Company may in its absolute discretion considers fit.
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8. GROSSING UP
8.1 All sums payable by the Sellers to the Buyer under this Tax Covenant shall
be paid free and clear of all deductions or withholdings whatsoever unless
the deduction or withholding is required by law. If any deductions or
withholdings are required by law to be made from any of the sums payable
under this Tax Covenant, the Sellers shall pay to the Buyer such sum as
will, after the deduction or withholding has been made, leave the Buyer
with the same amount as it would have been entitled to receive in the
absence of any such requirement to make a deduction or withholding.
8.2 If the Buyer incurs a taxation liability which results from, or is
calculated by reference to, any sum paid under this Tax Covenant, the
amount so payable shall be increased by such amount as will ensure that,
after payment of the taxation liability, the Buyer is left with a net sum
equal to the sum it would have received had no such taxation liability
arisen.
8.3 If the Buyer would, but for the availability of a Buyer's Relief, incur a
taxation liability falling within paragraph 8.2, it shall be deemed for
the purposes of that paragraph to have incurred and paid that liability.
9. COSTS AND EXPENSES
The covenant contained in paragraph 2 of this Tax Covenant shall extend to
all costs and expenses incurred by the Buyer or the Company in connection
with any matter included under paragraph 2 of this Tax Covenant and the
enforcement of rights under this Tax Covenant.
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SCHEDULE 6
REGISTERED INTELLECTUAL PROPERTY RIGHTS
Domain names:
xxx.xxx.xx.xx (due for renewal on 27 October 2006)
xxx.xxxxxxxxxxx.xx.xx
xxx.XXXXXX.xxx
xxx.xxxxxxxxxxxxx.xx.xx
xxx.xxxxxxxxxxxxxxxxxx.xx.xx
xxx.xxxxxxxxxxxxxxxxxx.xxx.xx
78
SCHEDULE 7
NOT USED
79
SCHEDULE 8 - PARTICULARS OF PROPERTIES
LEASEHOLD PROPERTIES
--------------------------------------------------------------------------------
DESCRIPTION OF THE Unit D Mount Mill Farm, Stratford
PROPERTY Road, Xxxxxx Xx. Xxxxxx Keynes MK19 6DG
--------------------------------------------------------------------------------
DESCRIPTION OF LEASE Lease between Mr J K J Xxxxxx and Executive
(LEASE, UNDERLEASE, Business Channel dated 28 April 2003
LICENCE, DATE AND
PARTIES)
--------------------------------------------------------------------------------
OWNER J K J Xxxxxx
--------------------------------------------------------------------------------
REGISTERED/UNREGISTERED Registered (No. 2862053)
(AND TITLE NUMBER)
CONTRACTUAL DATE OF 31 March 2008
TERMINATION OF LEASE
--------------------------------------------------------------------------------
OCCUPIER Executive Business Channel As Offices within Class
CURRENT USE B1 of the Tow and Country Planning (Use Classes)
order 1987
--------------------------------------------------------------------------------
IS THERE AN No.
INVESTMENT LEASE?
--------------------------------------------------------------------------------
TENANT UNDER AN N/A
INVESTMENT LEASE
--------------------------------------------------------------------------------
CONTRACTUAL DATE OF N/A
TERMINATION OF
INVESTMENT LEASE.
--------------------------------------------------------------------------------
80
SCHEDULE 9
COMPLETION ACCOUNTS
PART 1 GENERAL
1. DEFINITIONS
The definitions in this paragraph apply in this agreement.
ACCOUNTING POLICIES: the accounting principles, practices, policies and
procedures set out in Part 2 of this Schedule
BUYER'S ACCOUNTANTS: BDO, 0 Xxxxx Xxxxxx, Xxxxxx, X0X 0XX .
COMPLETION ACCOUNTS: the consolidated balance sheet and profit and loss
account of the Target Group, including the notes thereon as at the
Completion Date and stating the amount of the Completion Net Assets
prepared in accordance with and subject to the provisions of this
Schedule.
COMPLETION NET ASSETS: means fixed assets plus current assets less all
liabilities of the Target Group.
DRAFT COMPLETION ACCOUNTS: a draft of the Completion Accounts prepared in
accordance with the requirements of this Schedule.
EXPERT: a person appointed in accordance with paragraph 3 of Part 1 of
this Schedule to resolve any dispute arising in the preparation of the
Completion Accounts.
GROUP: the Company and its Subsidiaries
SELLERS' ACCOUNTANTS: Xxxx Xxxxxxx, 00 Xxx Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX
XX GAAP: generally accepted accounting principles applied in the United
Kingdom, incorporating Statements of Standard Accounting Practice,
Financial Reporting Standards and Urgent Issues Task Force Abstracts
issued by the Accounting Standards Board Limited, in each case as in force
at the date of this agreement.
2. PREPARATION OF COMPLETION ACCOUNTS
2.1 The Sellers shall procure that the Sellers' Accountants prepare the Draft
Completion Accounts as soon as reasonably practical after the Completion
Date.
81
2.2 The Buyer shall and shall procure that the Buyer's Accountants shall give
such assistance and access to information as the Sellers' Accountants may
reasonably require to enable them to prepare the Draft Completion Accounts
within the period referred to in paragraph 2.1.
2.3 The Sellers shall deliver a copy of the Draft Completion Accounts to the
Buyer's Accountants no later than 30 days after the Completion Date.
2.4 The Buyer shall ensure that, within seven days starting on the day after
delivery of the Draft Completion Accounts to the Buyer's Accountants, the
Buyer's Accountants submit to the Seller and the Sellers' Accountants a
report stating whether or not they agree with the Completion Accounts (and
in the case of disagreement, the area of dispute).
2.5 If the Buyer's Accountants agree the Draft Completion Accounts, the
parties shall ensure that the Sellers' Accountants and the Buyer's
Accountants certify the Draft Completion Accounts as being the Completion
Accounts within 5 days of the Sellers' Accountants receiving the report of
the Buyer's Accountants, and the Completion Accounts shall then become
final and binding on the parties for the purpose of this agreement.
2.6 If the Buyer's Accountants disagree with the Draft Completion Accounts,
the parties shall endeavour to agree any matter in dispute. If the matter
in dispute is resolved by agreement between the parties, the Buyer's
Accountants and the Sellers' Accountants shall certify the Draft
Completion Accountants (subject to any amendment agreed between the
parties) as being the Completion Accounts and they shall become final and
binding on the parties for the purpose of this agreement.
2.7 If the parties are unable to resolve any disagreement within seven days of
the delivery of the report of the Buyer's Accountants to the Sellers'
Accountants, the disagreement shall be referred to an Expert.
2.8 Save as provided in paragraph 3, the Buyer and the Sellers shall bear and
pay their own costs incurred in connection with the preparation and
agreement of the Draft Completion Accounts and Completion Accounts.
3. EXPERT
3.1 An Expert is a person appointed in accordance with this paragraph 3 to
resolve a dispute arising in relation to the Completion Accounts.
3.2 The parties shall agree on the appointment of an independent Expert.
3.3 If the parties are unable to agree on an Expert within seven days of their
party serving details of a suggested expert on the other, either party may
request the chairman of the Institute of Chartered Accountants in England
& Wales to appoint an Expert.
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3.4 The Expert shall prepare a written decision and give notice (including a
copy) of the decision to the parties within a maximum of two months of the
matter being referred to him.
3.5 All matters under this paragraph 3 shall be conducted, and the Expert's
decision shall be written, in the English language.
3.6 The parties are entitled to make submissions to the Expert and shall
provide (or procure that others provide) the Expert with such assistance
and documents as the Expert reasonably requires for the purpose of
reaching a decision.
3.7 To the extent not provided for by this paragraph 3, the Expert may, in his
reasonable discretion, determine such other procedures to assist with the
conduct of the determination as he considers just or appropriate.
3.8 The Expert shall act as an expert and not as an arbitrator. The Expert
shall determine any dispute, which may include any issue involving the
interpretation of any provision of this agreement, his jurisdiction to
determine the matters and issues referred to him or his terms of
reference. The Expert's written decision on the matters referred to him
shall be final and binding in the absence of manifest error or fraud.
3.9 Each party shall bear its own costs in relation to the Expert. The
Expert's fees and any costs properly incurred by him in arriving at his
determination (including any fees and costs of any advisers appointed by
the Expert) shall be borne by the parties or in such other proportions as
the Expert directs.
4. BASIS OF COMPUTATION
4.1 The Completion Accounts shall be prepared:
(a) in accordance with the accounting principles, practices, policies
and procedures applied in the Accounts; and
(b) subject to (a), in accordance with UK GAAP.
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Executed as a Deed )
By FUTUREMEDIA PLC )
Acting by )
Director
Director/Secretary
Executed as a Deed )
By BALCHAN SECRETARIES LIMITED)
acting by )
Director
Director/Secretary
Executed as a Deed )
By XXXXXXXX XXXXXXXX )
in the presence of: )
Witness signature:
Witness name:
Witness address:
Witness occupation:
Executed as a Deed )
By XXXXXX XXXXXX )
in the presence of: )
Witness signature:
Witness name:
Witness address:
Witness occupation:
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Executed as a Deed )
By XXXXX XXXXX )
in the presence of: )
Witness signature:
Witness name:
Witness address:
Witness occupation:
Executed as a Deed )
By XXXXX XXXXXX )
in the presence of: )
Witness signature:
Witness name:
Witness address:
Witness occupation:
Executed as a Deed )
By TRUSTEES OF THE XXXX XXXXXX)
PENSION SCHEME )
in the presence of: )
Witness signature:
Witness name:
Witness address:
Witness occupation:
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