1
Exhibit 2.01
DATED 1998
------------------------------------------
ANGLIAN WATER SERVICES LIMITED(1)
and
ANGLIAN WATER, INC.(2)
and
ANGLIAN WATER INTERNATIONAL LIMITED(3)
and
WATERLINK (UK) LIMITED(4)
and
WATERLINK INC(5)
----------------------------------------------
AGREEMENT FOR THE SALE AND PURCHASE OF
THE ENTIRE ISSUED SHARE CAPITAL OF
AQUAFINE ENGINEERING SERVICES LIMITED
AND PURAC ENGINEERING, INC.
----------------------------------------------
XXXXXXXX XXXXXX XXXXXXXXXXX
Chichester House
000/000 Xxxx Xxxxxxx
Xxxxxx XXXX 0XX
Ref: NCC/TRA/ANG.18-1
2
CONTENTS
CLAUSE
1. Interpretation
2. Sale and purchase
3. Completion
4. Warranties
5. Limitations on the Sellers' liability
6. Confidential Information
7. Indemnity and Undertakings
8. Capacity and Authority of the Parties
9. Further undertakings by the Sellers
10. Pensions
11. Guarantees
12. Announcements
13. Competition
14. Costs
15. General
16. Assignment
17. Notices
18. Governing law and jurisdiction
19. Counterparts
SCHEDULE
1 . Information about AES and PEI
2. Items for delivery by the Sellers at Completion
3. Warranties in respect of AES and PEI
4. Guaranteed Contracts
5. Pension arrangements
6. Registered Intellectual Property Rights
7. Tax Indemnity
8. PEI contracts excluded from warranty
2
3
AGREED FORM DOCUMENTS
1. Letter of Credit for $750,000
2. Property Agreement
3. Assignment of debts
4. Asset Transfer and Novation Agreement
3
4
THIS AGREEMENT is made on 1998
BETWEEN:
(1) ANGLIAN WATER SERVICES LIMITED, a company incorporated in England and
Wales (registered no. 2366656), whose registered office is at Xxxxxxx
Xxxxx, Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxxxxxx, XX00 0XX, Xxxxxxx (the
"AES SELLER");
(2) ANGLIAN WATER, INC, a company incorporated in the state of Delaware,
USA, whose principal office is at 00000 Xxx Xxxxx Xxxx, Xxx Xxxxx, XX
00000, XXX (the "PEI SELLER")
(3) ANGLIAN WATER INTERNATIONAL LIMITED, a company incorporated in England
and Wales (registered no. 2729389), whose registered office is at
Xxxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxxxxxx, XX00 0XX,
Xxxxxxx (the "SELLER GUARANTOR");
(4) WATERLINK (UK) LIMITED, a company incorporated in England and Wales
(registered no. 3181974), whose registered office is at 00 Xxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxx, XX0 0XX (the "AES BUYER"); and
(5) WATERLINK, INC, a company incorporated in the state of Delaware, USA,
whose principal office is at 0000 Xxxxxxx Xxxxxx, XX Xxxxxx, Xxxx
00000-0000, XXX (the "PEI BUYER").
THE PARTIES AGREE as follows:
4
5
1. INTERPRETATION
1.1 In this Agreement:
"Accounts" means AES's individual accounts (as that term is used in
Section 226 of the Act) for the financial year ended on the Last
Accounting Date, the auditors' report on those accounts and the
directors' report for that year;
"Act" means the Companies Xxx 0000;
"AES" means Aquafine Engineering Services Limited, a company
incorporated in England and Wales (registered number 2387229), whose
registered office is at Xxxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxxxxxx,
Xxxxxxxxxxxxxx, XX00 0XX, Xxxxxxx;
"Business Day" means a day other than Saturday or Sunday or public
holiday in England and Wales;
"Buyers" means the AES Buyer and the PEI Buyer and any reference to the
relevant Buyer shall be to either the AES Buyer or the PEI Buyer as the
context implies;
"Buyers' Group Company" means the AES Buyer or the PEI Buyer, a
subsidiary or holding company for the time being of the AES Buyer or
the PEI Buyer or a subsidiary for the time being of a holding company
of the AES Buyer or the PEI Buyer and includes, for the avoidance of
doubt, following Completion AES and PEI;
"Buyers' Attorneys" means Benesch, Friedlander, Xxxxxx & Aronoff LLP,
0000 XX Xxxxxxx Xxxxxxxx, 000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxx, XXX;
"Completion" means completion of the sale and purchase of the Shares
and the PEI Shares in accordance with this Agreement;
"Confidential Information" means all information not publicly known
used in or otherwise relating to AES's or PEI's business, customers or
financial affairs;
"Disclosure Letter" means the letter from the AES Seller given on its
own behalf and on behalf of the PEI Seller to the AES Buyer and the PEI
Buyer in relation to the Warranties having the same date as this
Agreement together with any documents annexed thereto;
"Encumbrance" means a mortgage, charge, pledge, lien, option,
restriction, right of first refusal, right of pre-emption, third-party
right or interest, other encumbrance or security interest of any kind,
or another type of preferential arrangement (including, without
limitation, a title transfer and retention arrangement) having similar
effect;
5
6
"INTELLECTUAL PROPERTY" means:
(a) patents, trade marks, service marks, registered designs,
applications for any of those rights, trade and business
names, unregistered trade marks and service marks, copyrights,
know-how, rights in designs and inventions;
(b) rights under licences, consents, orders, statutes or otherwise
in relation to a right in paragraph (a); and
(c) rights of the same or similar effect or nature as or to those
in paragraphs (a) and (b),
in each case in any jurisdiction;
"INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property used, or
required to be used, by AES in, or in connection with, its business;
"LAST ACCOUNTING DATE" means 31 March 1997;
"MANAGEMENT ACCOUNTS" means ABS's unaudited profit and loss account for
the period starting on the day after the Last Accounting Date and
ending on, and AES's unaudited balance sheet as at, 31 December 1997
and AES's unaudited monthly financial summary for the period from that
date until 28 February 1998;
"PEI" means Purac Engineering, Inc., a corporation incorporated under
the laws of the state of Delaware, USA, having its principal office at
0000 Xxx Xxxxxx Xxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000;
"PEI ACCOUNTS" means the unaudited balance sheet and profit and loss
account of PEI as at 31 December and 31 March 1997 and for the nine and
twelve month periods then ended, together with the supporting
information included in the Sellers' group statutory accounts pack and
the unaudited monthly financial summary of PEI as at and for the 11
months ended 28 February 1998;
"PEI SHARES" means 210 shares of capital stock, without par value, of
PEI, comprising all the outstanding capital stock of PEI;
"PERMIT" means a permit, licence, consent, approval, certificate and
other authorisation, and a filing of a notification, report or
assessment, necessary in any jurisdiction for the operation of AES's
business, its ownership, possession, occupation or use of an asset Save
for any Environmental Licence (as defined in paragraph 9 of Schedule
3);
6
7
"Property" means the property comprising the freehold and leasehold
land at Xxxx Xxxx, Xxx, Xxxxxxxxxxxxxx owned by the AES Seller and
currently occupied by AES, details of which are set out in the Property
Agreement;
"Property Agreement" means the agreement between the AES Seller and the
AES Buyer dated the same date as this Agreement in respect of the sale
and purchase of the Property;
"Relevant Claim" means a claim by the AES Buyer or the PEI Buyer
involving or relating to a breach of a Warranty or under the Tax
Indemnity;
"Relevant Environmental Claim" means any Relevant Claim for breach of a
Warranty contained in paragraph 9 of Schedule 3;
"Relevant Non-Tax Claim" means any Relevant Claim other than a Relevant
Tax Claim;
"Relevant Non-Tax and Non-Environmental Claim" means any Relevant Claim
other than a Relevant Tax Claim or a Relevant Environmental Claim;
"Relevant Tax Claim" means any Relevant Claim for breach of a Tax
Warranty or under the Tax Indemnity;
"Pension Schemes" means means (i) the Anglian Water Miffor Image
Pension Scheme as the same was established by an interim trust deed
dated 31st August 1989 and made between Anglian Water Plc (1) and T
Bolongaro, X X Xxxxx, X X Xxxxxxxxx, A K D Fox, P J P Xxxxxxx, D R H
Price and The Xxxxxxxx X X Xxxxxx (2) and is currently governed by a
Definitive Trust Deed and Rules dated 5th April 1994 and made between
Anglian Water Plc (1) Anglian Water Services Limited, Anglian Water
(Engineering and Business Systems) Limited and Anglian Water
(Commercial Developments) Limited (2) and T Bolongaro, X X Xxxxx, X X
Xxxxxxxxx, A K D Fox, P J P Xxxxxxx, D R H Price and The Xxxxxxxx X X
Xxxxxx (3); and (ii) the Anglian Water Pension Scheme as the same was
established by an interim trust deed dated 27th September 1988 and made
between Anglian Water Plc (1) and X X Xxxxxx, P J P Xxxxxxx, D R H
Price, T Bolongaro, S Xxxxxxx and X X Xxxxxx (2) and is currently
governed by a Definitive Trust Deed and Rules dated loth May 1991 and
made between Anglian Water Plc (1) Anglian Water Services Limited,
Anglian Water (Engineering and Business Systems) Limited and Anglian
Water (Commercial Developments) Limited (2) and X X Xxxxxx, P J P
Xxxxxxx, D R H Price, T Bolongaro, S Xxxxxxx and X X Xxxxxx (3) or
either of them as the context requires;
"Sellers" means the AES Seller and the PEI Seller and any reference to
the relevant Seller shall be to either the AES Seller or the PEI Seller
as the context implies;
7
8
"Sellers' Group Company" means the AES Seller or the PEI Seller, a
subsidiary or holding company for the time being of the AES Seller or
the PEI Seller or a subsidiary for the time being of a holding company
of the AES Seller or the PEI Seller;
"Sellers' Solicitors" means Xxxxxxxx Xxxxxx Xxxxxxxxxxx of Chichester
House, 000/000 Xxxx Xxxxxxx, Xxxxxx, XXXX 0XX;
"Shares" means 2,300,002 fully-paid ordinary shares of il each of AES
comprising the whole of the issued share capital of AES;
"Sum Recovered" means an amount equal to the total of the amount
recovered from the other person less all reasonable costs incurred by a
Buyers' Group Company in recovering the amount from the person.
"Tax" and "Taxation" mean any form of taxation, levy, duty, charge,
contribution or impost of whatever nature (including any relation fine,
penalty, surcharge or interest) imposed by a Tax Authority;
"Tax Authority" and "Taxation Authority" mean any local, municipal,
governmental, state, federal or other fiscal, revenue, customs or
excise authority, body or official anywhere in the world including,
without limitation, the Inland Revenue and HM Customs and Excise;
"Taxes Act" means Income and Corporation Taxes Xxx 0000;
"Tax Indemnity" means the indemnity contained in Schedule 7;
"Tax Warranty" means any of the warranties contained in paragraph 6 of
Schedule 3 Part 1 or paragraph 6 of Schedule 3 Part 2;
"TCGA" means the Taxation of Chargeable Gains Xxx 0000;
"VATA" means, in the United Kingdom, the Value Added Tax Xxx 0000 and,
in a jurisdiction outside the United Kingdom, any equivalent
legislation;
"Warranty" means a warranty contained in Schedule 3 and "Warranties"
means all those warranties.
1.2 In this Agreement, a reference to:
1.2.1 a "subsidiary undertaking" or "parent undertaking" is to be
construed in accordance with Section 258 of the Act and a
"subsidiary" or "holding company" is to be construed in
accordance with Section 736 of the Act;
8
9
1.2.2 a document in the "agreed form" is a reference to a document
in a form approved and for the purposes of identification
signed by or on behalf of each party;
1.2.3 a statutory provision includes a reference to the statutory
provision as modified or reenacted or both from time to time
before the date of this Agreement and any subordinate
legislation made under the statutory provision before the date
of this Agreement;
1.2.4 a person includes a reference to a body corporate, association
or partnership;
1.2.5 a person includes a reference to that person's legal personal
representatives and successors; and
1.2.6 a clause, paragraph or Schedule, unless the context otherwise
requires, is a reference to a clause or paragraph of or
Schedule to this Agreement.
1.3 The headings in this Agreement do not affect its interpretation.
1.4 A reference in clause 5 and Schedule 3 to a person's knowledge,
information, belief or awareness is deemed to include knowledge,
information, belief or awareness which the person would have if the
person had made all usual and reasonable enquiries.
2. SALE AND PURCHASE
2.1 The AES Seller with full title guarantee agrees to sell and the AES
Buyer agrees to buy the Shares and the PEI Seller with full title
guarantee agrees to sell and the PEI Buyer agrees to buy the PEI Shares
and each right attaching to the Shares and the PEI Shares at or after
the date of this Agreement, free of any Encumbrance.
2.2 The total purchase price of the Shares is(pound)3,575,000. The total
purchase price of the PEI Shares is(pound)48,000.
3. COMPLETION
3.1 Completion of the matters specified in this Agreement is conditional in
all respects upon the completion of the Property Agreement, in so far
as it relates to the freehold property.
3.2 The AES Seller and the AES Buyer shall use their respective reasonable
endeavours to ensure that the condition contained in clause 3.1 is
satisfied.
3.3 Completion shall take place at the office of the Sellers' Solicitors on
the date of this Agreement.
3.4 At Completion the Sellers shall give to the Buyers each item specified
in Schedule 2.
9
10
3.5 The Seller shall ensure that at Completion AES's directors hold a
meeting of the board of directors of AES at which the directors:
3.5.1 vote in favour of the registration of the Buyer or its
nominee(s) as member(s) of AES in respect of the Shares
(subject to the production of properly stamped transfers);
3.5.2 change AES's registered office to a place nominated by the
Buyer;
3.5.3 change AES's accounting reference date to 30 September;
3.5.4 appoint persons nominated by the Buyer as directors, secretary
and auditors of AES with effect from the end of the meeting;
3.5.5 resolve to enter into the asset transfer and novation
agreement in the agreed form; and
3.5.6 revoke each existing mandate given by AES for the operation of
its bank accounts and pass the resolutions contained in new
mandate(s) giving authority to persons nominated by the AES
Buyer.
3.6 At Completion:
3.6.1 the AES Buyer shall pay (pound)3,575,000 to the AES Seller or
as the AES Seller directs in writing by transfer of funds and
the PEI Buyer shall pay (pound)48,000 to the PEI Seller or as
the PEI Seller directs in writing by transfer of funds;
3.6.2 the AES Buyer shall give the AES Seller the Property Agreement
in the agreed form executed by the AES Buyer and arrange for
payment to be made in accordance with the terms of that
contract to the AES Seller or as the AES Seller directs in
writing by transfer of funds;
3.6.3 the PEI Buyer shall procure the repayment by PEI to Anglian
Water International Holdings Limited of (pound)552,000 in full
settlement of the outstanding sum owed of $925,000 together
with all accrued and unpaid interest thereon; and
3.6.4 AES shall enter into the asset transfer and novation agreement
in the agreed form.
3.7 Without prejudice to their rights and obligations hereunder, the
parties acknowledge that the business, profits and losses of AES and
PEI have been operated for the account of AES Buyer and PEI Buyer,
respectively, from and after the opening of business on March 15, 1998.
10
11
4. WARRANTIES
4.1 The Sellers warrant to the Buyers that each Warranty is true at the
date of this Agreement and acknowledge that the Buyers are entering
into this Agreement in reliance on the Warranties.
4.2 The Buyers acknowledge that they have not relied on, or been induced to
enter this Agreement by, any representation, warranty or undertaking
other than those expressly set out in this Agreement. The Buyers are
not entitled to make a claim against the Sellers in respect of any
representation, warranty or undertaking arising out of, or in
connection with, this Agreement unless the representation, warranty or
undertaking is expressly set out in this Agreement.
4.3 The Warranties are qualified by reference to any matter or thing which
is fairly disclosed in the Disclosure Letter.
4.4 The Buyers warrant to the Sellers that they have not at the date of
this Agreement formulated an intention to make a Relevant Claim against
the Sellers and based upon enquiry of Xx Xxxx X Xxxxxxx that they do
not have actual knowledge of any breaches of the Warranties arising
from the relationship between AES or PEI (as the case may be) and a
Sellers' Group Company.
4.5 Each Warranty is to be construed independently and (except where this
Agreement provides otherwise) is not limited by another provision of
this Agreement or another Warranty.
4.6 If there is a breach of a Warranty and:
4.6.1 the value of an asset of AES or PEI is or becomes less than
the value would have been had the breach not occurred; or
4.6.2 AES or PEI is subject to or incurs a liability which it would
not have been subject to or would not have incurred had the
breach not occurred, the relevant Buyer shall be entitled to
claim, without prejudiced to its right to seek redress or
recover damages on any basis from time to time available to
it, an amount equal to either:
4.6.3 the reduction in the value of the asset or, as the case may
be, the increase in the liability; or
4.6.4 the reduction caused in the value of the Shares or the PEI
Shares (as the case may be) and for the avoidance of doubt
there shall be no right for the Buyer to recover an amount in
any circumstances calculated on the basis of a multiple of
such reduction;
each on demand from the Seller.
11
12
5. LIMITATIONS ON THE SELLERS' LIABILITY
5.1 Neither of the Sellers are liable in respect of a Relevant Non-Tax
Claim unless the amount that would otherwise be recoverable from the
relevant Seller (but for this clause 5. 1) in respect of that Relevant
Non-Tax Claim exceeds (pound)1,000.
5.2 Neither of the Sellers are liable in respect of a Relevant Non-Tax and
Non-Environmental Claim unless and until the amount that would
otherwise be recoverable from the Sellers (but for this clause 5.2) in
respect of that Relevant Non-Tax and Non-Environmental Claim, when
aggregated with any other amount or amounts recoverable in respect of
other Relevant Non-Tax and Non-Environmental Claims (excluding any
amounts in respect of a Relevant Non-Tax Claim for which the Sellers
have no liability because of clause 5.1), exceeds(pound)250,000 and in
the event that the aggregated amounts exceed(pound)250,000 the Sellers
are only liable for the excess.
5.3 Neither of the Sellers are liable in respect of a Relevant
Environmental Claim unless and until the amount that would otherwise be
recoverable from the Sellers (but for this clause 5.3) in respect of
that Relevant Environmental Claim, when aggregated with any other
amount or amounts recoverable in respect of other Relevant
Environmental Claims (excluding any amounts in respect of a Relevant
Non-Tax Claim for which the Sellers have no liability because of clause
5.1), exceeds(pound)250,000 and in the event that the aggregated
amounts exceed(pound)250,000 the Sellers are only liable for the
excess.
5.4 The Sellers' total liability in respect of all Relevant Non-Tax Claims
is limited to (pound)750,000 in aggregate save that their total
liability in respect of all Relevant Environmental Claims shall be an
additional (pound)750,000 in aggregate.
5.5 Neither of the Sellers are liable in respect of a Relevant Claim unless
the relevant Buyer has given the relevant Seller written notice of the
Relevant Claim (stating in reasonable detail the nature of the Relevant
Claim and, if practicable, the amount claimed):
5.5.1 on or before the seventh anniversary of Completion in respect
of a Relevant Tax Claim;
5.5.2 on or before the second anniversary of Completion in respect
of a Relevant Environmental Claim;
5.5.3 on or before the first anniversary of Completion in respect of
another Relevant Claim; and
5.5.4 Notwithstanding the foregoing, there shall be no limitation as
to when a Relevant Claim may be brought with respect to the
warranty contained in paragraph 2 of
12
13
Schedule 3 Part 1 or paragraph 2 of Schedule 3 Part 2 and for
the avoidance of doubt the limitations set out in this
Agreement shall not apply to the Sellers covenants to sell
with full title guarantee.
5.6 A Relevant Non-Tax Claim notified in accordance with clause 5.5 and not
satisfied, settled or withdrawn is unenforceable against the relevant
Seller on the expiry of the period of twelve months starting on the day
of notification of the Relevant Claim, unless proceedings in respect of
the Relevant Claim have been issued and served on the relevant Seller.
5.7 Neither of the Sellers are liable in respect of a Relevant Non-Tax
Claim:
5.7.1 to the extent that the matter giving rise to the Relevant
Non-Tax Claim would not have arisen but for the passing of, or
a change in, after the date of this Agreement a law, rule,
regulation, interpretation of the law or administrative
practice of a government, governmental department, agency or
regulatory body or an increase in the Tax rates or an
imposition of Tax, in each case not actually or prospectively
in force at the date of this Agreement;
5.7.2 to the extent that the matter giving rise to a Relevant
Non-Tax Claim relates to an amount for which AES or PEI (as
the case may be) has a right of recovery against, or an
indemnity from, a person other than a Sellers' Group Company,
whether under a provision of applicable law, insurance policy
or otherwise howsoever provided that if the relevant Buyer has
reasonable commercial grounds for wishing not to pursue such
right of recovery or indemnity the relevant Seller shall
nevertheless be liable in respect of such Relevant Non-Tax
Claim upon the assignment to the relevant Seller for no
consideration of the benefit of such right of recovery or
indemnity;
5.7.3 if a Buyers' Group Company fails to act in accordance with
clause 5.11 in connection with the matter giving rise to the
Relevant Non-Tax Claim unless and to the extent that in the
absence of the failure the relevant Buyer would still have had
a Relevant Non-Tax Claim;
5.8 For the avoidance of doubt, limitations on the Sellers' liability in
respect of Relevant Tax Claims are also contained in the Tax Indemnity:
5.8.1 references to the AES Seller and the AES Buyer in the Tax
Indemnity shall be taken to be references to the PEI Seller
and the PEI Buyer and references to the Company to be
references to PEI where appropriate in relation to claims
under the Tax Warranties in respect of PEI; and
5.8.2 where the provisions of this clause 5 in respect of Relevant
Tax Claims and the Tax Indemnity conflict; the Tax Indemnity
shall prevail.
13
14
5.9 The Buyers are not entitled to recover more than once in respect of any
one matter giving rise to a Relevant Claim.
5.10 If in respect of any one matter a Relevant Claim may be made under the
Warranties and under the Tax Indemnity:
5.10.1 the Relevant Claim under the Tax Indemnity may not be made
before the Relevant Claim is made under the Warranties; and
5.10.2 to the extent that the Buyers recover under the Warranties
they shall not be entitled to recover under the Tax Indemnity.
5.11 If a Buyers' Group Company becomes aware of a matter which might give
rise to a Relevant Non-Tax Claim which is not likely to exceed
(pound)200,000 in excess of the Sellers' total liability as provided
for in clause 5.4:
5.11.1 the relevant Buyer shall as soon as reasonably practicable
give written notice to the relevant Seller of the matter and
shall consult with the relevant Seller with respect to the
matter but the failure to do so shall not impair such Buyer's
rights unless such failure is actually materially prejudicial
to such Seller;
5.11.2 the relevant Buyer shall, and shall ensure that each Buyers'
Group Company will, provide to the relevant Seller and its
advisers reasonable access to premises and personnel and to
relevant assets, documents and records within each Buyers'
Group Company's power or control for the purposes of
investigating the matter and enabling the relevant Seller to
take the action referred to in clause 5.11.4(a);
5.11.3 the relevant Seller (at its cost) may take copies the
documents or records, and photograph the premises or assets,
referred to in clause 5.11.2, which copy documents, records,
and photographs shall be treated by such Seller as
confidential;
5.11.4 the relevant Buyer shall and shall ensure that each Buyers'
Group Company will:
(a) take any action and institute any proceedings, and
give any information and assistance, as the relevant
Seller may reasonably request to:
(i) dispute, resist, appeal, compromise, defend,
remedy or mitigate the matter provided that
the relevant Buyer shall not be obliged to
take any such action or institute such
proceedings or to settle or procure the
settlement of any matter which will have a
future material adverse effect on AES or PEI
without consent, such consent not to be
unreasonably withheld and in the event that
the action or proceedings requested to be
taken by the relevant Seller are not against
a Buyers'
14
15
Group Company the right to withhold such
consent shall be determined upon the
reasonable judgement of the relevant Buyer;
or
(ii) enforce against a person (other than
a Sellers' Group Company) a Buyers'
Group Company's rights in relation
to the matter; and
(b) in connection with proceedings related to
the matter (other than against a Sellers'
Group Company) use advisers nominated by the
relevant Seller and, if such Seller
requests, allow such Seller the exclusive
conduct of the proceedings, and in each case
on the basis that notwithstanding the
provisions contained in clause 5.4 the
relevant Seller shall fully indemnify each
Buyers' Group Company for all reasonable
losses, damages and costs incurred as a
result of a request or nomination by such
Seller;
5.11.5 the relevant Buyer shall not, and shall ensure that no Buyers'
Group Company will, admit liability in respect of, or
compromise or settle, the matter without the prior written
consent of the relevant Seller (not to be unreasonably
withheld or delayed).
5.12 The Sellers are not liable in respect of a relevant claim to the extent
that the working capital (ie the current assets less the current
liabilities as shown in the unaudited balance sheet as at 31 December
1997 for AES or PEI as the case may as shown in the Management Accounts
or the PEI Accounts) is overstated.
5.13 If one of the Sellers pays to a Buyers' Group Company an amount in
respect of a Relevant Non-Tax Claim and a Buyers' Group Company
subsequently recovers from another person an amount which is referable
to the matter giving rise to the Relevant Non-Tax Claim:
5.13.1 if the amount paid by such Seller in respect of the Relevant
Non-Tax Claim is more than the Sum Recovered, the relevant
Buyer shall immediately pay to such Seller the Sum Recovered;
and
5.13.2 if the amount paid by such Seller in respect of the Relevant
Claim is less than or equal to the Sum Recovered, the relevant
Buyer shall 'immediately pay to such Seller an amount equal to
the amount paid by such Seller.
5.14 Nothing in clause 5 or in the Tax Indemnity restricts or limits the
Buyer's general obligation at law to mitigate any loss or damage which
it may incur in consequence of a matter giving rise to a Relevant Claim
and notwithstanding the provisions of clause 4.6 the Buyers will be
deemed to be under a duty to mitigate any loss which they may seek to
claim constitutes a breach of Warranty.
15
16
6. CONFIDENTIAL INFORMATION
6.1 With effect from Completion the Sellers shall:
6.1.1 not use or disclose to a person Confidential Information it
has or acquires; and
6.1.2 make every reasonable effort to prevent the use or disclosure
of Confidential Information by persons over which it has
influence.
6.2 Clause 6.1 does not apply to:
6.2.1 disclosure of Confidential Information to a director, officer
or employee of the Buyer, AES or PEI whose function requires
him to have the Confidential Information;
6.2.2 use or disclosure of Confidential Information required to be
used or disclosed by law or the London Stock Exchange Limited;
6.2.3 disclosure of Confidential Information to an adviser for the
purpose of advising the Sellers but only on terms that clause
6.1 applies to use or disclosure by the adviser; or
6.2.4 Confidential Information which becomes publicly known except
by the Sellers' breach of clause 6.l.
7. INDEMNITY AND UNDERTAKINGS
7.1 The Sellers undertake that they will and will procure that each
Sellers' Group Company will continue to support all existing bank
guarantees and guarantees given directly by any Sellers' Group Company
relating to the performance of those contracts as set out in Schedule 4
to which AES or PEI is a party until such guarantees have expired.
Notwithstanding the foregoing the PEI Buyer undertakes to provide or
procure the provision of a $60,000 letter of credit to the landlord of
the premises occupied by PEI within 2 months of Completion in order to
release the relevant Sellers' Group Company from its obligations with
respect thereto.
7.2 The AES Buyer shall indemnify and keep the AES Seller fully and
effectively indemnified on demand against any and all losses, claims,
damages, costs, charges, expenses, liabilities, demands, proceedings
and actions which the AES Seller or any Sellers' Group Company may
sustain or incur or which may be brought or established by any person
arising out of or in relation to or by reason of the actions provided
for in clause 7.1. Save that notwithstanding the indemnity set out in
this clause 7.2 the AES Buyer shall nevertheless be entitled to the
benefit of any Relevant Claim available to it.
16
17
7.3 The AES Seller shall be entitled to draw on the letter of credit for
$750,000 (in the agreed form) drawn on Bank of America as a result of
any claim that it has by virtue of the indemnity set out at clause 7.2.
The aforementioned letter of credit may be reduced in value by the AES
Buyer on a dollar for dollar basis (using the dollar/sterling exchange
rate which would be reasonably available to the AES Seller for the
purchase of dollars at the time of the reduction) to the extent that
the guarantees set out in Schedule 4 and the guarantees and bonds set
out in schedule 3.4(f) of the share purchase agreement between inter
alia Waterlink (Sweden) AB and Anglian Water Holding GmbH concerning
the acquisition of shares in inter alia Nordic Water Products AB dated
4 March 1997 have in aggregate reduced in value to below $750,000.
Before exercising their right to draw on the aforementioned letter of
credit, the AES Seller undertakes to notify the AES Buyer of its
intention to draw on such letter of credit. On request by the AES
Seller, the AES Buyer undertakes to provide the AES Seller with
information on the status of the relevant contracts and the guarantees
given in respect of those contracts by the AES Seller or by a Sellers'
Group Company and to assist the AES Seller in the recovery of the
guarantees upon their expiry.
7.4 The AES Buyer undertakes to use all reasonable efforts not to and to
ensure that each Buyers' Group Company ceases to use or make any
references to the trade xxxx or corporate name Anglian Water in their
operations as soon as possible and in no event as from six months after
Completion. During this six month period, AES is entitled to continue
to use the name Anglian Water in any literature or brochure existing at
Completion. The AES Buyer hereby waives any rights whatsoever to the
name "Anglian Water" or any derivatives thereof.
7.5 The PEI Buyer undertakes to use all reasonable efforts not to and to
ensure that each Buyers' Group Company ceases to use or make any
references to the corporate name Purac in their operations within
twelve months after Completion. The PEI Buyer hereby waives any rights
whatsoever to the name "Purac" or any derivatives thereof.
7.6 The AES Buyer undertakes to the AES Seller to ensure that the employees
of AES at Completion shall be paid the bonuses that they are entitled
to under the profit related pay scheme operated by AES immediately
prior to Completion for the financial year ended 31 March 1998 and that
none of such employees suffer any financial loss as a result of an
increase in their personal tax liability upon the receipt of such bonus
arising from the cessation of their right to participate in such scheme
Provided that the liability of the AES Buyer in respect of its
obligation to ensure that such employees do not suffer any increased
personal tax liability shall not exceed(pound)8,000.
7.7 Immediately following Completion the AES Buyer undertakes to the AES
Seller for the benefit of Anglian Water plc to pay (pound)6,801.38 to
Anglian Water plc in consideration for which Anglian Water plc will
enter into an assignment of debts (in the agreed form) in relation to
amounts owed by employees of AES to Anglian Water plc which were loaned
for the purchase of computer equipment.
17
18
7.8 The AES Seller shall indemnify and keep AES fully and effectively
indemnified on demand against any and all losses, claims, damages,
costs, charges, expenses, liabilities, demands, proceedings and actions
which AES may sustain or incur or which may be brought or established
by any person arising out of or in relation to or by reason of any
claim for redundancy, termination or other severance payments and/or
any allegation of a failure to consult pursuant to the Transfer of
Undertakings (Protection of Employment) Regulations 1981 made by each
of A Dunsire, M Mutch, J Bennet, X Xxxxxxx, J Xxxxxxxx, N Xxxxxx, W
Xxxxxx, L Xxxxx, P Xxxxxxxx, M Xxxx, J Xxxxx, R Baring, P Xxxxxx, X
Xxxxxxxx, G Xxxxxx and K Xxxxxx who have previously been employed in
the provision of services by AES under the sewerage maintenance
contract to the AES Seller which was novated from AES to Alpheus
Environmental Services Limited and to which company the said employees
have agreed to be transferred prior to Completion.
7.9 The AES Seller shall indemnify and keep AES fully and effectively
indemnified on demand against any and all losses, claims, damages,
costs, charges, expenses, liabilities, demands, proceedings and actions
which AES may sustain or incur or which may be brought or established
by R Cornwall who has previously been employed in the provision of
services for AES arising out of or in relation to or by reason of any
claim he may have against AES for unfair dismissal, wrongful dismissal
or redundancy.
7.10 The PEI Seller shall pay all costs and expenses, including, without
limitation, payments in respect of any severance arrangement, (but not
for the avoidance of doubt any ex gratia payments or contractual
payments in excess of those provided for under the contract of
employment existing at the date of Completion) arising from the
termination of Xxxx Xxxxxxxx'x employment by PEI, and shall indemnify
and keep the PEI Buyer (and PEI after Completion) fully and effectively
indemnified on demand against any and all losses, claims, damages,
costs, charges, liabilities, demands, proceedings and actions which the
PEI Buyer or PEI (after Completion) may sustain or incur by reason of
said termination of employment Provided that the said termination shall
occur within 6 months of the date of this Agreement.
7.11 The PEI Buyer shall pay all costs and expenses, including, without
limitation, payments in respect of any severance arrangement, arising
from the termination of Xxxx Xxxxxxxx'x employment more than 6 months
after the date of this Agreement or from the termination of Xxx
Xxxxxxx'x or Xxxx Xxxxxx'x employment by PEI at any time, and shall
indemnify and keep the PEI Seller and each Sellers' Group Company fully
and effectively indemnified on demand against any and all losses,
claims, damages, costs, charges, liabilities, demands, proceedings and
actions which the PEI Seller or any Sellers' Group Company may sustain
or incur by reason of said terminations of employment.
7.12 The indemnity in terms of Schedule 7 shall apply in relation to Tax.
7.13 The AES Seller undertakes to procure that the payroll facilities for
the payment of the employees of AES is made available to the AES Buyer
for April and May 1998 at the same
18
19
charge that AES has paid prior to Completion and the AES Buyer
undertakes to reimburse in full on demand the amount which is paid to
such employees (including for the avoidance of doubt an apportionment
of sums that have already been paid to such employees in respect of the
period commencing on Completion) together with the relevant charge.
8. CAPACITY AND AUTHORITY OF THE PARTIES
8.1 Each of the parties to this Agreement undertakes that it the right,
power and authority and has taken all action necessary to execute and
deliver, and to exercise its rights and perform its obligations under,
this Agreement and each document to be executed at or before
Completion.
8.2 Each of the parties to this Agreement undertakes that its obligations
under this Agreement and each document to be executed at or before
Completion are, or when the relevant document is executed will be,
enforceable in accordance with their terms.
9. FURTHER UNDERTAKINGS BY THE SELLERS
9.1 For 2 years starting on the date of this Agreement:
9.1.1 the AES Seller shall not compete directly or indirectly with
AES within the UK in respect of AES' current activities of:
(a) the manufacture, sale, supply, distribution,
installation and service of the existing product
range as at Completion or enhancement of such
existing products; or
(b) the sale, supply, distribution and installation of
NWP Lamellas or Dynasand filters;
except where the AES Seller undertakes contracts for design
and construction of Water, Wastewater, Sludge and other
Treatment plants incorporating these or similar products. For
the avoidance of doubt the restrictions set out in this clause
9.1.1 do not restrict the AES Seller from continuing its
current activities, nor the continued development and
exploitation of products where AES has non exclusive territory
licences with any Sellers' Group Company;
9.1.2 The PEI Seller shall not compete directly or indirectly with
PEI within the USA in respect of PEI's current activities of
direct sale, supply, distribution, installation and service of
Flofilters, GEWE Lamellas and hydraulic scrapers except where
the AES Seller undertakes the design construction of Water,
Wastewater, Sludge and other Treatment plants incorporating
these or similar products. For the avoidance of doubt the
restrictions set out in this clause 9.1.2 do not restrict the
PEI Seller from
19
20
extending its current activities in the Design and Construct
markets to include the USA, the continued exploitation of
Kaldnes where PEI will have a non exclusive licence, or other
products and processes that the PEI Seller is developing such
as the Lamella - DAF process currently being trialed in the
USA.
9.2 For 3 years starting on the date of this Agreement the Sellers shall
not directly or indirectly:
9.2.1 engage, employ or solicit an employee of AES or PEI; or
9.2.2 do or say anything which is harmful to the reputation of AES
or PEI which may lead a person to cease to deal with AES or
PEI on substantially equivalent terms to those previously
offered or at all.
9.3 Each restriction in clauses 9.1 and 9.2 constitutes an entirely
independent restriction on the relevant Seller.
9.4 The Sellers shall ensure that each Sellers' Group Company complies with
clauses 9.1 and 9.2 subject to the exceptions set out in those clauses
which are deemed to apply to each Sellers' Group Company.
9.5 The Sellers hereby acknowledge that damages would be an inadequate
remedy for a breach of clauses 9.1 and 9.2 and agree that the Buyers
should be entitled to an injunction for a threatened or actual breach.
9.6 On receiving the Buyer's reasonable request the Sellers shall (at their
cost):
9.6.1 do and execute, or arrange for the doing and executing of,
each act, document and thing necessary to implement this
Agreement; and
9.6.2 give to the Buyers all information in its possession or to
which they have access relating to the business of AES or PEI
and allow the Buyers to copy any document containing that
information.
9.7 Notwithstanding the provisions of clause 9.1.1 the restrictions
contained within that clause shall not prevent prohibit the holding of
not more than 5% of the total issued shares or securities in a company
which are quoted on any recognised investment exchange (as defined by
section 201 of the Financial Services Act 1986).
10. PENSIONS
The AES Seller and the AES Buyer shall implement the pension
arrangements in Schedule 5.
20
21
11. GUARANTEES
11.1 In consideration of the PEI Buyer entering into this Agreement the
Seller Guarantor guarantees to the PEI Buyer the due and punctual
performance by the PEI Seller of all its obligations under this
Agreement.
11.2 In consideration of the Sellers entering into this Agreement, the PEI
Buyer guarantees to the Sellers the due and punctual performance by the
AES Buyer of all its obligations under this Agreement.
11.3 The liability of the PEI Buyer and the Seller Guarantor respectively
hereunder shall not be affected, impaired or discharged by reason of
any act, omission, matter or thing which but for this provision might
operate to release or otherwise exonerate them from their obligations
under this Agreement including without limitation any time or other
indulgence granted by the Buyers to the Sellers or vice versa.
12. ANNOUNCEMENTS
12.1 Subject to clause 12.2, neither party may, before or after Completion,
make or send a public announcement, communication or circular
concerning the transactions referred to in this Agreement unless it has
first obtained the other party's written consent, which may not be
unreasonably withheld or delayed.
12.2 Clause 12.1 does not apply to a public announcement, communication or
circular:
12.2.1 required by law or a regulation of a stock exchange, if the
party required to make or send it has, if practicable, first
consulted and taken into account the reasonable requirements
of the other party; or
12.2.2 made or sent by the Buyers after Completion to a customer,
client or supplier of AES or PEI informing it of the Buyers'
purchase of the Shares and the PEI Shares.
13. COMPETITION
No provision of this Agreement, or of an agreement or arrangement of
which it forms part, by virtue of which this Agreement, or an agreement
or arrangement of which it forms part, is subject to registration under
the Restrictive Trade Practices Acts 1976 and 1977, takes effect until
the day after the date on which particulars have been furnished to the
Director General of Fair Trading in accordance with those Acts.
21
22
14. COSTS
Except where this Agreement provides otherwise, each party shall pay
its own costs relating to the negotiation, preparation, execution and
performance by it of this Agreement and of each document referred to in
it.
15. GENERAL
15.1 A variation of this Agreement is valid only if it is in writing and
signed by or on behalf of each party.
15.2 The failure to exercise or delay in exercising a right or remedy
provided by this Agreement or by law does not constitute a waiver of
the right or remedy or a waiver of other rights or remedies. No single
or partial exercise of a right or remedy provided by this Agreement or
by law prevents further exercise of the right or remedy or the exercise
of another right or remedy.
15.3 The Buyer's rights and remedies contained in this Agreement are
cumulative and not exclusive of rights or remedies provided by law.
15.4 Except to the extent that they have been performed and except where
this Agreement provides otherwise, the Warranties, indemnities and
obligations contained in this Agreement remain in force after
Completion.
16. ASSIGNMENT
A party may not assign or transfer or purport to assign or transfer a
right or obligation under this Agreement except that the benefit of a
Warranty may be assigned or transferred in whole or in part and without
restriction between the Buyers and the lender of any Buyers' Group
Company subject to any defence available to the Sellers hereunder,
which assignment shall be in a form and substance reasonably
satisfactory to the Sellers.
17. NOTICES
17.1 A notice or other communication under or in connection with this
Agreement shall be in writing and shall be delivered personally or sent
by first class post pre-paid recorded delivery (or air mail if
overseas) or by fax to the party due to receive the notice or
communication, at its address set out in this Agreement or another
address specified by that party by written notice to the others. The
parties to this Agreement shall use their reasonable endeavours to
ensure that any notice to the Sellers shall be copied to the Seller
Guarantor and any notice to the AES Buyer shall be copied to the PEI
Buyer.
22
23
17.2 In the absence of evidence of earlier receipt, a notice or other
communication is deemed given:
17.2.1 if delivered personally, when left at the address referred to
in clause 17.1;
17.2.2 if sent by mail except air mail, two days after posting it;
17.2.3 if sent by air mail, six days after posting it; and
17.2.4 if sent by fax, on completion of its transmission.
18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement is governed by English law.
18.2 The courts of England have exclusive jurisdiction to hear and decide
any suit, action or proceedings, and to settle any disputes, which may
arise out of or in connection with this Agreement (respectively,
"Proceedings" and "Disputes") and, for these purposes, each party
irrevocably submits to the jurisdiction of the courts of England.
18.3 Each party irrevocably waives any objection which it might at any time
have to the courts of England being nominated as the forum to hear and
decide any Proceedings and to settle any Disputes and agrees not to
claim that the courts of England are not a convenient or appropriate
forum.
18.4 Process by which any Proceedings are begun in England may be served on
the Buyers' Attorneys or their agents at the following address in the
United Kingdom, Messrs Edge & Xxxxxxx of Rutland House, 000 Xxxxxx
Xxxxxx, Xxxxxxxxxx, X0 0XX, by being delivered in accordance with
clause 17. Nothing contained in clause 18.4 affects the right to serve
process in another manner permitted by law.
19. COUNTERPARTS
This Agreement may be executed in any number of counterparts each of
which when executed and delivered is an original, but all the
counterparts together constitute the same document.
23
24
SCHEDULE 1
PART 1 - INFORMATION ABOUT AES
1. Registered number: 2387229
2. Date of incorporation: 22 May 1989
3. Place of incorporation: England and Wales
4. Address of registered office: Xxxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxxxxxx,
Xxxxxxxxxxxxxx, XX00 0XX
5. Type of company: Private Limited
6. Authorised share capital: (pound)2,500,000 divided into 2,500,000 Ordinary
Shares of (pound)1 each
7. Issued share capital: (pound)2,300,002 divided into 2,300,002 Ordinary
Shares of (pound)1 each
8. Directors: Xxxxxxx Xxxx Xxxxxxxx of Treetops, 00 Xxxxxx
Xxx, Xxxxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxxxx
and Xxxxxx Xxxxxx of 00 Xxxx Xxx, Xxxx
Xxxxxx, Xxxxxxxxxxxxxxxx, XX0 0XX
9. Secretary: Xxxxxxxxxx Xxxxxxxxx Xxx of Little Dormers, 0
Xxxxxx Xxxx, Xxxxxxx, Xxxxx, XX00 0XX
10. Accounting reference date: 31 March
11. Auditors: Price Waterhouse of Cornwall Court, 00
Xxxxxxxx Xxxxxx, Xxxxxxxxxx X0 0XX
12. Tax residence: UK
13. VAT registration no.: 514060002 (group registration)
24
25
14. Bank accounts: Barclays Bank plc of 0 Xxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxxxxxxxx XX00 0XX
Account No: 00000000
Sort Code: 20-43-63
15. Charges: None
25
26
PART 2 - INFORMATION ABOUT PEI
1. Date of incorporation: 11 July 1984
2. Place of incorporation: Delaware
3. Place of principal office: 0000 Xxx Xxxxxx Xxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, XX 00000
4. Type of company: Corporation
5. Authorised share capital: 300 shares, without par value
6. Issued share capital: 210 shares
7. Directors: Xxxx Xxxxxxxx
Xxxx Xxxxx
Xxxxx Xxxxxxxx
Xxxx Xxxxx
8. Secretary: Xxxx Xxxxxx
9. Fiscal year: 31 March
10. Auditors: Price Waterhouse
11. Tax residence: United States
12. Charges: None
26
27
SCHEDULE 2
ITEMS FOR DELIVERY BY THE SELLERS AT COMPLETION
1. Executed transfer(s) in respect of the Shares and the PEI Shares to the
AES Buyer and the PEI Buyer or their nominee(s) and the share
certificate(s) for the Shares and the PEI Shares.
2. The common seals (if any) of AES and PEI and each register, minute
book and other book required to be kept by AES under the Act or by PEI
under applicable law made up to the date of Completion, each
certificate of incorporation and certificate of incorporation on change
of name for AES and a copy of the certificate of incorporation of PEI
and all amendments thereto, certified as of a recent date by the
Secretary of State of the State of Delaware.
3. The Property Agreement in the agreed form executed by the AES Seller.
4. A copy of a letter to AES from their auditors resigning their office
with effect from Completion containing the statement referred to in
Section 394 of the Act, the original of the letter having been
deposited at the registered office of the relevant company.
5. A letter executed as a deed in the form required by the Buyers from
each present director and secretary of AES and from each present office
and director of PEI (other than any such individuals whom the Buyers
request to remain in office) in each case resigning their respective
office (with effect from the end of the meeting held pursuant to clause
3.5) and acknowledging that the writer has no claim against AES for
compensation for loss of office or otherwise.
6. The Management Accounts.
7. Written confirmation from the AES Seller that debts and accounts
between AES and PEI on the one hand and any Sellers' Group Company on
the other hand have been fully paid.
8. Written confirmation from each of the AES Seller and AW Licensing
Limited that the change of control clause at clause 11.2 of each
respective licence agreement referred to at items 1 and 2 of Schedule 6
will not apply in respect of the sale of the Shares under the terms of
this Agreement.
27
28
SCHEDULE 3
PART 1 - WARRANTIES IN RESPECT OF AES
1. INFORMATION
The information set out in this Agreement is accurate and not
misleading.
2. SHARES
2.1 The AES Seller is the only legal and beneficial owner of the Shares.
2.2 The Shares comprise the whole of AES's allotted and issued share
capital, have been properly allotted and issued and are fully paid or
credited as fully paid.
2.3 There is no Encumbrance, and there is no agreement, arrangement or
obligation to create or give an Encumbrance, in relation to any of the
Shares or unissued shares in the capital of AES.
3. SUBSIDIARY UNDERTAKINGS
AES does not have and has never had a subsidiary undertaking. AES has
no interest in, and has not agreed to acquire an interest in a
corporate body or other undertaking.
4. ACCOUNTS
4.1 GENERAL
4.1.1 The Accounts have been prepared and audited on a proper and
consistent basis in accordance with the law and applicable
standards, principles and practices generally accepted in the
United Kingdom.
4.1.2 No change in accounting policies has been made in preparing
the accounts of AES for each of the three financial years of
AES ended on the Last Accounting Date, except as stated in the
audited balance sheets and profit and loss accounts for those
years.
4.1.3 The Accounts show a true and fair view of the assets,
liabilities and state of affairs of AES as at the Last
Accounting Date and of the profits and losses of AES for the
financial year ended on the Last Accounting Date.
28
29
4.2 DEBTS AND LIABILITIES
The Accounts fully disclose and provide adequately for all bad and
doubtful debts, existing at the Last Accounting Date as are required to
be disclosed or provided for in accordance with applicable standards,
principles and practices accepted in the United Kingdom.
4.3 EXTRAORDINARY AND EXCEPTIONAL ITEMS
The results shown by the audited profit and loss account of AES for
each of the three financial years of AES ended on the Last Accounting
Date have not (except as disclosed in those accounts) been affected by
any extraordinary, exceptional or nonrecurring item or by any other
matter making the profit or loss for a period covered by any of those
accounts unusually high or low.
4.4 MANAGEMENT ACCOUNTS
The Management Accounts:
4.4.1 have been prepared in consistency with the reporting
principles applied by the management of AES;
4.4.2 fairly present in all material respects, AES's financial
position, results of its operations and changes in its
financial position at and for the periods specified therein;
and
4.4.3 are consistent with and have been extended from the books and
records of AES.
4.5 ACCOUNTING RECORDS
AES's accounting records are up-to-date, in its possession or under its
control and fully and accurately completed in accordance with the law
and applicable standards, principles and practices generally accepted
in the United Kingdom.
5. CHANGES SINCE THE LAST ACCOUNTING DATE
5.1 GENERAL
Since the Last Accounting Date:
5.1.1 AES's business has been conducted in the usual way and AES has
been maintained as a going concern;
5.1.2 there has been no adverse change in the financial or trading
position or prospects of AES.
29
30
5.2 SPECIFIC
Since the Last Accounting Date:
5.2.1 AES has not, other than in the usual course of its business:
(a) acquired or disposed of, or agreed to acquire or
dispose of, a material asset; or
(b) assumed or incurred, or agreed to assume or incur, a
liability, obligation or expense (actual or
contingent);
5.2.2 AES has not factored, sold or agreed to sell a debt other than
in the usual course of its business;
5.2.3 AES has not made, or agreed to make, capital expenditure
exceeding in total (pound)50,000 (or its equivalent at the
time) or incurred, or agreed to incur, a commitment or
commitments involving capital expenditure exceeding in total
(pound)50,000 (or its equivalent at the time);
5.2.4 AES's business has not been materially and adversely affected
by the termination, or a change in the terms, of an important
agreement or by the loss of a customer or supplier or by an
abnormal factor not affecting similar businesses and the AES
Seller is not aware of a matter which might have a material
and adverse effect on AES's business;
5.2.5 AES has not declared, paid or made a dividend or distribution
(including, without limitation, a distribution within the
meaning of the Taxes Act) except as provided in the Accounts;
5.2.6 AES has not created, allotted, issued, acquired, repaid or
redeemed share or loan capital, or made an agreement or
arrangement or undertaken an obligation to do any of those
things.
6. TAX
6.1 The Accounts make full provision for all Taxation for which
AES was then or thereafter became or may hereafter become
liable or accountable in respect of or by reference to any
income, profit, receipt, gain transaction, agreement,
distribution or event which was earned, accrued, received,
realised, entered into, paid, made or accrued on or before the
Last Accounting Date and proper provision was made therein for
deferred liablities to Taxation in accordance with generally
accepted accounting principles and AES has promptly paid or
fully provided in its books of
30
31
account for all Taxation for which it has or may hereafter
become liable or accountable in the period from the Last
Accounting Date to the date hereof.
6.2 Save as provided for in the Accounts there is no liability for Taxation
which would arise on AES ceasing to trade or on its ceasing to use or
occupy any asset for the purposes of its trade or on its disposing of
any asset at its book value as shown in the Accounts or which might
arise in the event of any other person failing to pay any Tax charged,
assessed or payable by him (including any liability which might arise
as a combined result of two or more such events) but excluding any
liability which would arise solely as a result of the realisation of
trading stock or work in progress by AES in the ordinary course of its
business and no material changes have occurred since the Last
Accounting Date which might result in any such liability.
6.3 AES is not aware of any circumstance which will or may, whether by
lapse of time or the issue of any notice of assessment or otherwise,
give rise to any dispute with any Tax Authority in relation to its
liability or accountability for Taxation, any claim made by it, any
relief, deduction, or allowance afforded to it, or in relation to the
status or character of AES (whether as to its status as an unquoted
trading private company or as a member of any group) under or for the
purpose of any provision of any legislation relating to Taxation.
6.4 Since the Last Accounting Date no further liability or contingent
liability for Taxation on AES has arisen or is likely to or will arise
otherwise than as a result of transactions (not including
distributions) entered into by AES in the ordinary course of trading
after the Last Accounting Date.
6.5 AES is not liable and has not since the Last Accounting Date been
liable to pay any interest, penalty, fine or sum of a similar nature in
respect of Taxation.
6.6 AES has duly complied with all requirements imposed on it by any
legislation relating to Taxation and in particular has properly kept
all records and documents so required to be kept, has properly and
punctually made all returns and provided full and complete information
to the Inland Revenue, Customs and Excise and any other body concerned
as so required, has paid all Taxation charged, assessed, levied or
payable in accordance with applicable legislation as and when it became
due and has deducted Tax from all payments where the law requires such
deduction and accounted to the Inland Revenue or other fiscal body for
the Tax so deducted.
7. ASSETS
7.1 TITLE AND CONDITION
7.1.1 Each asset included in the Accounts or acquired by AES since
the Last Accounting Date (other than stock disposed of in the
usual course of business) is:
31
32
(a) legally and beneficially owned by AES free from any
Encumbrance;
(b) where capable of possession, in the possession or
under the control of AES; and
(c) situated in the United Kingdom.
7.1.2 AES owns each asset necessary for the continued operation of
its business with the exception of the Property.
7.1.3 So far as the AES Seller is aware without having made any
enquiry other than the commissioning of the report contained
in the Disclosure Letter. AES does not own databases, software
or hardware, the performance of which will be adversely
affected by dates after the commencement of the year 2000.
7.2 HIRE PURCHASE AND LEASED ASSETS
AES is not a party to, or is liable under, a lease or hire, hire
purchase, credit sale or conditional sale agreement.
7.3 NET ASSETS
At Completion AES has net assets of (pound)2,300,000 calculated on a
basis consistent with the Accounts and in accordance with the law and
applicable standards, principles and practices general accepted in the
United Kingdom Save that all income which would not normally accrue
until the end of March 1998 shall be deemed to have accrued
proportionately during the month on a daily basis and Provided that the
provisions existing as at 28 February 1998 remaining unchanged.
7.4 INTELLECTUAL PROPERTY
7.4.1 Each of the Intellectual Property Rights is legally and
beneficially owned by AES alone, free from any licence,
Encumbrance, restriction on use or disclosure obligation.
7.4.2 Schedule 6 contains details of the registered Intellectual
Property Rights and details of the licences entered into by
AES with respect to the Intellectual Property Rights
(including, without limitation, applications for registration)
in respect of which AES is the registered owner or applicant
for registration.
7.4.3 Renewal fees payable in respect of the registered Intellectual
Property Rights have been paid. Each other action to maintain
and protect the registered Intellectual Property Rights has
been taken.
32
33
7.4.4 AES has not granted and is not obliged to grant a licence,
assignment or other right in respect of any of the
Intellectual Property Rights.
7.4.5 So far as the AES Seller is aware, there is, and has been, no
infringement of any of the Intellectual Property Rights.
7.4.6 The Intellectual Property Rights comprise all the Intellectual
Property necessary for AES to operate its business as it has
been operated before the date of this Agreement.
7.4.7 AES is not a party to a confidentiality, non-compete or other
agreement which restricts the use or disclosure of information
or its ability to conduct its business.
7.4.8 AES does not use, or operate its business under, a name other
than its corporate name.
7.4.9 The Intellectual Property Rights owned by AES are subsisting
and are not subject to any claims for total or partial
revocation or removal, entitlement or compensation under
sections 40-43 of The Patents Xxx 0000 and there are no
circumstances which may give rise to such a claim.
7.4.10 So far as the AES Seller is aware the processes and methods
employed, the services provided, the businesses conducted and
the products manufactured, used or dealt in by AES within the
last 6 years do not infringe and have not during that period
infringed the rights of any other person in any Intellectual
Property.
7.4.11 If required to do so under the Data Protection Xxx 0000, AES
has duly registered as a data user and has complied with the
data protection principles as set out in the Data Protection
Xxx 0000.
7.4.12 So far as the AES Seller is aware AES is not in breach of any
material term of any licence set out in schedule 6.
7.5 DEBTORS
7.5.1 No debt shown in the Accounts or AES's accounting records (a
schedule of which are contained in the Disclosure Letter) is
overdue by more than 30 days or is the subject of an
arrangement not made in the usual course of AES's business.
7.5.2 AES has not released a debt shown in the Accounts or its
accounting records so that the debtor has paid or will pay
less than the debt's book value. None of those debts has been
deferred, subordinated or written off or become irrecoverable
to any extent. The AES Seller has no reason to believe that
any of those debts will fail to realise its book value in the
usual course of collection.
33
34
7.5.3 The Disclosure Letter contains an aged debtors list Of AES's
debtors as of a date not more than three (3) days prior to
Completion.
7.6 BANK BALANCES
The Disclosure Letter contains copies of bank statements which have
been reconciled to show the net cash position of AES as at the date to
which they Ore drawn up, which is no more than 3 days prior to
Completion.
8. INSURANCE
8.1 The Disclosure Letter contains a list of each current insurance policy
which is currently in force in respect of which AES has an interest.
8.2 Details of all insurance claims that have been made on behalf of AES in
the preceding 5 years are set out in the Disclosure Letter.
9. ENVIRONMENTAL MATTERS
9.1 In this paragraph 9:
9.1.1 "Environmental Law" means any statute, rule, regulation,
statutory instrument, treaty, directive, direction, decision,
by-law, code of practice, circular, guidance note, order,
notice, demand, injunction, rule of common law or statutory or
common law duty of care of (in each case) any governmental
authority or agency or any regulatory or other body (whether
in the United Kingdom or overseas, including the United
States) in relation to Environmental Matters, but only to the
extent that breach of the same creates legally enforceable
rights and responsibilities including but not limited to, the
Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") 42 U.S.C. 9601 et seq., as amended.
9.1.2 "Environmental Licence" means any licence, registration,
permit, authorisation, approval or consent relating to
Environmental Matters which under Environmental Law may be
necessary in connection with the current use of the Property
or Premises and/or any process or activity currently carried
on at the Property or Premises or otherwise in connection with
the business of AES or PEI (as the case may be), and
"Environmental Licences" shall be construed accordingly.
9.1.3 "Environmental Matters" means any matter affecting the
environment including (but not limited to) each of the
following:
34
35
(a) the release, emission, entry or introduction of any
Relevant Substance into the air including (but not
limited to) the air within buildings and other
natural or man-made structures above or below ground;
(b) the release of any Relevant Substance into water
including (but not limited to) water as defined in
Section 1 (11) (a)(ii) and (iii) of the Environmental
Protection Xxx 0000, or into ground waters as defined
in Section 1 (12) of the Environmental Protection Xxx
0000, sewer or the sea;
(c) the release, deposit, storage or disposal of any
Relevant Substance in or on or about the land or
soil;
(d) the generation, treatment, importation, exportation,
transportation, handling, processing, manufacture or
collection of any Relevant Substance; and
(e) nuisance, litter, noise and the abstraction of water.
9.1.4 "Premises" means the premises occupied by PEI at Suite 500,
4550 New Xxxxxx Xxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000,
9.1.5 "Relevant Substance" means any energy, force or substance
(including any substance resulting from the interaction of
substances present in the environment following the release
into the environment of another substance or substances) which
causes or is capable of causing pollution of the environment
or harm to man or any other living organisms supported by the
environment and any waste as described or listed in or
pursuant to any Environmental Law.
9.2 The activities of AES or PEI (as the case may be) are and have at all
times been carried on in compliance with relevant Environmental Law.
9.3 AES or PEI (as the case may be) has obtained all Environmental
Licences, none of which are of limited duration or subject to onerous
conditions. All fees payable in relation to any Environmental Licence
have been paid and there has been no default in the observance of any
Environmental Licence by AES or PEI (as the case may be), its
directors, officers, employees or agents. No steps have been taken for
the revocation, cancellation, withdrawal, variation or surrender of any
Environmental Licence and no material circumstances exist which could
give rise to any revocation, cancellation, withdrawal, amendment,
variation or restriction upon transfer of any Environmental Licence or
which would prevent compliance with any of the terms of it or which
might prevent any Environmental Licence being extended, renewed or
granted. No further applications for an Environmental Licence are
pending.
9.4 AES or PEI (as the case may be) has not received nor had notice of any
claim, notice, requirement or complaint from any person, regulatory
body, governmental authority, court or other competent organisation in
respect of Environmental Matters which:
35
36
9.4.1 might prevent the continued use of any part of any of the
Premises in the manner and for the purpose for which it is now
being used;
9.4.2 requires any remedial work or so far as PEI is concerned
cleaning to the Property or Premises or the clearance,
removal, or so far as PEI is concerned containment from the
Property or Premises of any Relevant Substance; or
9.4.3 alleges any breach of Environmental Law;
and as far as the AES Seller or the PEI Seller (as the case may be) is
aware there is no act, omission or circumstance which would or might
give rise to an entitlement or obligation to give such notice or
communication.
9.5 Neither AES or PEI (as the case may be) nor so far as the AES Seller or
the PEI Seller (as the case may be) is aware any present occupier or
user of the Property or Premises has engaged in or permitted nor so far
as the AES Seller or the PEI Seller (as the case may be) is aware has
any previous owner, occupier or user of the Property or Premises
engaged in or permitted any operations or activities on the Property or
Premises involving the use, storage, handling, release, treatment,
manufacture, processing, deposit, transportation or disposal of any
Relevant Substance.
9.6 No discharge, release, leaching, disposal, emission or escape of any
Relevant Substance has occurred or is occurring in the conduct of the
Business or in the conduct by AES or PEI (as the case may be) of any
former business or in connection with or in relation to any former
premises or former assets of AES or PEI (as the case may be) while such
former premises or assets were in the ownership or under the control of
AES or PEI (as the case may be).
9.7 There is no underground storage tank present at the Property or
Premises.
9.8 The Property or Premises is not is not nor has it been contaminated
with any Relevant Substance and none of the former premises was
contaminated with any Relevant Substance during the period of use,
ownership, occupation or control of such former premises by AES or PEI
(as the case may be). As far as the AES Seller or the PEI Seller (as
the case may be) is aware, no premises in the vicinity of the Property
or Premises have been used as a landfill nor has there been any
release, discharge or disposal of any Relevant Substance by any third
party in the vicinity of the Property or Premises.
9.9 No process or activity has been carried on at the Property or Premises
which has caused or will cause pollution of the environment or harm to
human health (in each case within the meaning of the Environmental
Protection Act 1990 (or so far as PEI is concerned other Environmental
Law)) or will result in a legally enforceable obligation on AES or PEI
(as the case may be) in respect of such pollution or harm to human
health.
36
37
9.10 None of the Premises is or has been affected by any surface or
subterranean working of mines and minerals.
9.11 AES or PEI (as the case may be) currently satisfies the conditions
attaching to authorisations required under Section 6 of the
Environmental Protection Xxx 0000. The AES Seller or the PEI Seller
(as the case may be) is not aware of any changes likely to occur in the
foreseeable future to such conditions.
9.12 No works (or so far as PEI only is concerned) response or removal
actions have been carried out at the Property or Premises under any
Environmental Law by any statutory authority in respect of which such
authority is entitled to recover its costs.
9.13 There are attached to the Disclosure Letter copies of all Environmental
Licences, together with all amendments to or variations of any
Environmental Licence, now subsisting in relation to the Property or
Premises.
10. AGREEMENTS
10.1 VALIDITY OF AGREEMENTS
So far as the AES Seller is aware no party with whom AES has entered
into an agreement or arrangement is in material breach of the agreement
or arrangement.
10.2 MATERIAL AGREEMENTS
10.2.1 AES is not a party to and is not liable under an onerous or
unusual agreement, arrangement or obligation.
10.2.2 AES is not a party to and is not liable under:
(a) an agreement, arrangement or obligation by which AES
is a member of a joint venture, consortium,
partnership of association (other than a bona fide
trade association);
(b) a distributorship, agency or management agreement or
arrangement;
(c) an agreement which may be terminated or is breached
as a result of the transfer of the Shares; or
(d) an agreement, arrangement or obligation under which
AES may be required to pay a royalty or commission.
10.3 The Disclosure Letter contains a schedule of:
37
38
10.3.1 all agreements for the supply of products or services by AES
in respect of which AES is still awaiting payment of the
primary consideration where such consideration will exceed
(pound)75,000 or where such agreement is backed by a
performance bond or guarantee given on behalf of AES and so
far as the AES Seller is aware AES is not in default of any
such agreement; and
10.3.2 all agreements for the supply of products or services to AES
which were entered into within the preceding twelve months and
Which amount to in excess of ten percent of AES's total spend
on supply of products and services to it within such period.
10.3.3 all agreements or contracts for the supply of products or
services by AES which contain liquidated damage or similar
provisions in excess of 10% of the total contract price.
10.3.4 all other agreements or contracts which, to the AES Seller's
knowledge, are material to the business of AES other than any
agreement or contract that (i) may be cancelled by AES on
thirty day's notice or less without incurring a liability or
obligation on the part of AES for such cancellation, or (ii)
involves or is reasonably expected to involve the payment of
consideration having an aggregate value of less than
(pound)25,000.
10.4 CONDITIONS AND WARRANTIES IN RESPECT OF GOODS OR SERVICES
10.4.1 Except for a condition or warranty implied by law or contained
in its standard terms of business or otherwise given in the
usual course of business, AES has not given a condition or
warranty, or made a representation, in respect of goods or
services supplied or agreed to be supplied by it, or accepted
an obligation that could give rise to a liability after the
goods or services have been supplied by it.
10.4.2 There have been no claims of customers or others based on an
alleged or admitted defect of material, workmanship or design
or otherwise in or in respect of any of AES's products which:
(a) have resulted in the requirement to make payment or
accept a discount in the aggregate in excess of
(pound)100,000 per annum; or
(b) are presently pending or, to the knowledge of the AES
Seller, threatened other than claims in the aggregate
not in excess of (pound)100,000 save for the
rectification work which is currently in progress on
the Eastbourne Lamella contract with Biwater Europe
which is fully provided for in the Management
Accounts and for the avoidance of doubt knowledge of
potential claims under the Eastbourne Lamella
contract with Biwater Europe shall not effect the AES
Buyer's right to claim under the Warranties (other
than this Warranty)
38
39
nor constitute actual knowledge of any breach of
warranty for the purposes of clause 4.4 of this
Agreement.
11. TERMS OF TRADE AND BUSINESS
11.1 CREDITORS
No debt owing by AES has been outstanding for more than four weeks
since the due date.
11.2 SUPPLIERS AND CUSTOMERS
11.2.1 During the year ending on the date of this Agreement no
customer (representing more than ten percent of AES's turnover
in the preceding 12 months) or supplier (representing more
than ten percent of the value of the total supplies acquired
by AES during the preceding 12 months) of AES has:
(a) stopped, or indicated an intention to stop, trading
with or supplying AES;
(b) reduced, or indicated an intention to reduce,
substantially its trading with or supplies to AES; or
(c) changed, or indicated an intention to change,
substantially the terms on which it is prepared to
trade with or supply AES (other than normal price and
quota changes).
11.2.2 So far as the AES Seller is aware, the attitude of customers,
suppliers and employees with regard to AES will not be
prejudicially affected by the execution or performance of this
Agreement or a document to be executed at or before
Completion.
12. EMPLOYEES
12.1 GENERAL
12.1.1 AES is not a party to a consultancy contract.
12.1.2 The Disclosure Letter contains copies of the contract of each
director, other officer and employee of AES entitled to a
basic wage at an annual rate, of more than (pound)25,000 per
annum.
12.1.3 AES is not obliged to increase, nor has it made provision to
increase, the total annual remuneration payable to its
directors, other officers and employees by more than five
percent since the Last Accounting Date. The last pay review
took effect on 1 April 1997.
39
40
12.1.4 AES owes no amount to a present or former director, other
officer or employee of AES (or his dependent) other than for
accrued remuneration or reimbursement of business expenses.
12.1.5 There is no agreement or arrangement between AES and an
employee or former employee with respect to his employments
his ceasing to be employed or his retirement which is not
included in the written terms of his employment or previous
employment. AES has not provided, or agreed to provide, a
gratuitous payment or benefit to a director, officer or
employee or to any of their dependents.
12.2 TRADE UNIONS
12.2.1 AES has no agreement or arrangement with and does not
recognise a trade union, works council, staff association or
other body representing any of its employees.
12.2.2 AES is not involved in, and no matter exists which might give
rise to, a dispute with a trade union, works council, staff
association or other body representing any of its employees.
13. LIABILITIES
13.1 INDEBTEDNESS
Except as disclosed in the Accounts or in the Disclosure Letter, AES
does not have outstanding and has not agreed to create or incur loan
capital, borrowing or indebtedness in the nature of borrowing,
including, without limitation, a bank overdraft, a liability under an
acceptance (other than a normal trade xxxx) and an acceptance credit.
13.2 GUARANTEES AND INDEMNITIES
13.2.1 AES is not a party to and is not liable (including, without
limitation, contingently) under a guarantee, indemnity or
other agreement to secure or incur a financial or other
obligation with respect to another person's obligation.
13.2.2 No part of the loan capital, borrowing or indebtedness in the
nature of borrowing of AES is dependent on the guarantee or
indemnity of, or security provided by, another person.
13.3 EVENTS OF DEFAULT
There is no event has occurred or been alleged which constitutes an
event of default, or otherwise gives rise to an obligation to repay,
under an agreement relating to borrowing or indebtedness in the nature
of borrowing.
40
41
13.4 GRANTS
AES is not liable to repay an investment or other grant or subsidy made
to it by a body.
14. PERMITS
14.1 COMPLIANCE WITH PERMITS
AES has obtained and complied with the terms and conditions of each
Permit (details of which are contained in the Disclosure Letter).
14.2 STATUS OF PERMITS
14.2.1 Each Permit is in force and there is no indication that any
Permit might be revoked, suspended, cancelled, varied or not
renewed. No Permit and no condition to which any Permit is
subject is personal to the AES Seller.
14.2.2 Each action required for the renewal or extension of each
Permit has been taken.
15. INSOLVENCY, WINDING UP, ETC.
15.1 WINDING UP AND ADMINISTRATION
No order has been made, petition presented or resolution passed for the
winding up of AES or for the appointment of a provisional liquidator to
AES or for an administration order in respect of AES.
15.2 RECEIVERSHIP
No receiver or receiver and manager has been appointed of the whole or
part of AES's business or assets.
15.3 VOLUNTARY ARRANGEMENTS
No voluntary arrangement has been proposed under section 1 of the
Insolvency Xxx 0000 in respect of AES. No compromise or arrangement has
been proposed, agreed to or sanctioned under section 425 of the Act in
respect of AES.
15.4 INSOLVENCY
AES is not insolvent or unable to pay its debts within the meaning of
section 123 of the Insolvency Xxx 0000.
41
42
15.5 PAYMENT OF DEBTS
AES has not stopped paying its debts as they fall due.
15.6 DISTRESS ETC.
No distress, execution or other process has been levied on an asset of
AES.
15.7 UNSATISFIED JUDGMENTS
There is no unsatisfied judgment, undertaking or court order
outstanding against AES.
15.8 STRIKING OUT
No action is being taken by the registrar of companies to strike AES
off the register under section 652 of the Act.
16. COMPETITION
16.1 INVESTIGATIONS
AES has not received a communication or request for information
relating to any aspect of AES's business from or by the Director
General of Fair Trading, Monopolies and Mergers Commission, Secretary
of State for Trade and Industry, Commission of the European
Communities, EFTA Surveillance Authority or a competition or
governmental authority of another jurisdiction. No agreement,
arrangement or conduct (by omission or otherwise) of AES has been the
subject of an investigation, report or decision by any of those persons
or bodies,
17. PENSIONS AND OTHER BENEFITS
In these Pension Warranties, defined terms not appearing in clause 1
(interpretation) of this Agreement shall be interpreted in accordance
with defined terms appearing in paragraph 1 (interpretation) of
Schedule 5 (pension arrangements) to this Agreement.
17.1 AES neither operates nor is a participant in any pension arrangements
other than the Pension Schemes. It has no legal or moral obligation to
provide "relevant benefits" within the meaning of section 612(l) of the
Taxes Act other than under the Pension Schemes. Further, AES does not
operate or participate in or have any legal or moral obligation to
contribute to any permanent health insurance, private health provision,
accident benefit or any other ancillary schemes.
42
43
17.2 Each of the Pension Schemes is an exempt approved scheme within section
592(l) of the Taxes Act. The AES Seller is not aware of any matter
which could result in the withdrawal of that approval.
17.3 Each of the Pension Schemes is a contracted-out scheme for the purposes
of Part III of the Xxxxxxx Xxxxxxx Xxx 0000. The AES Seller is not
aware Of any matter which could result in its contracted-out status
being withdrawn.
17.4 All contributions payable by AES and all contributions due from members
to the Pension Schemes have been made at the rate stipulated by the
Actuary to the Pension Schemes in the most recent actuarial
investigation of each of the Pension Schemes.
17.5 AES has so far as the AES Seller is aware fulfilled all its obligations
under the Pension Schemes.
17.6 True copies of the Trust Deeds and Rules and ancillary deeds of each of
the Pension Schemes have been delivered to the Buyer together with true
copies of all relevant explanatory booklets, announcements and other
communications to employees relating to the Pension Schemes.
17.7 Each of the Pension Schemes is governed solely by these deeds and
documents which have been properly and validly brought into effect. AES
has so far as the AES Seller is aware no obligation to either of the
Pension Schemes in respect of any present or former employees or
directors other than under these deeds and documents.
17.8 True copies of the last actuarial report on each of the Pension Schemes
the relevant extracts from AES's latest statutory accounts in respect
of the application of SSAP 24 and the latest accounts of each of the
Pension Schemes and the cost of providing any ancillary benefits
described in warranty 1 have been delivered to the AES Buyer.
17.9 There is no investigation in progress or pending either by the
Occupational Pensions Regulatory Authority ("OPRA") into either of the
Pension Schemes and/or the benefits provided under it or by the
Pensions Ombudsman concerning any employee of AES.
17.10 No claim has been made against AES the respective trustees or
administrator of the Pension Schemes or against any other person whom
AES is or may be liable to compensate or indemnify in respect of any
act, omission or other matter concerning the Pension Schemes.
17.11 The Company has never participated in an occupational pension scheme
which has been closed to new members.
17.12 All actuarial, consultancy, legal and other fees charges or expenses in
respect of the Pension Schemes payable by AES have been paid.
43
44
17.13 So far as the AES Seller is aware there are no retrospective
contributions due from AES to the Pension Schemes.
18. LITIGATION AND COMPLIANCE WITH LAW
18.1 LITIGATION
18.1.1 Neither AES nor so far as the AES Seller is aware a person for
whose acts or defaults AES may be vicariously liable is
involved, or has during the two years ending on the date of
this Agreement been involved, in a civil, criminal,
arbitration, administrative or other proceeding in any
jurisdiction. No civil, criminal, arbitration, administrative
or other proceeding in any jurisdiction is pending or, so far
as the AES Seller is aware, threatened by or against AES or a
person for whose acts or defaults AES may be vicariously
liable.
18.1.2 So far as the AES Seller is aware, no matter exists which
might give rise to a civil, criminal, arbitration,
administrative or other proceeding in any jurisdiction
including an industrial tribunal involving AES or a person for
whose acts or defaults AES may be vicariously liable.
18.1.3 There is no outstanding judgment, order, decree, arbitral
award or decision of a court, tribunal, arbitrator or
governmental agency in any jurisdiction against AES or a
person for whose acts Or defaults AES may be vicariously
liable.
18.2 COMPLIANCE WITH LAW
AES has conducted its business and the goods and services supplied by
AES have been supplied in all material respects in accordance with all
applicable legal and administrative requirements in any jurisdiction.
19. INSIDER AGREEMENTS
There is, and during the three years ending on the date of this
Agreement there has been, no agreement or arrangement (legally
enforceable or not) to which AES is or was a party and in which the AES
Seller, another Group Company, a director or former director of AES or
a person connection with any of them is or was interested in any way.
For this purpose, "connected" has the meaning given by section 839 of
the Taxes Act, except that in construing section 839 "control" has the
meaning given by section 840 or section 416 of the Taxes Act so that
there is control whenever either section 840 or 416 requires.
20. CONSTITUTION, REGISTERS AND RETURN
20.1 CONSTITUTION
44
45
AES is operating and has always operated its business in all respects
in accordance with its memorandum and articles of association at the
relevant time.
20.2 REGISTERS ETC.
Each register, minute book and other books and records which the Act
requires AES to keep is in the possession of or control of AES, has
been properly kept and in all material respects contains a complete and
accurate record of the matters which it is required by the Act to
record. No notice has been received or allegation made that a register
or books and records is incorrect or should be rectified.
20.3 RETURNS ETC.
All return, particulars, resolutions and other documents required to be
delivered by AES to the registrar of companies or another governmental
of other authority or agency have been properly prepared and delivered.
20.4 POWERS OF ATTORNEY AND AUTHORITIES
AES has given no power of attorney or other authority by which a person
may enter into an agreement, arrangement or obligation on the Group
Company's behalf (other than an authority for a director, other officer
or employee to enter into an agreement in the usual course of his
duties).
21. BROKERAGE OR COMMISSIONS
No person is entitled to receive from AES a finder's fee, brokerage or
commission in connection with this Agreement or anything contained in
it.
45
46
PART 2 - WARRANTIES IN RESPECT OF PEI
All warranties contained in Part 1 of this Schedule 3 shall apply to PEI as if:
1. all references to AES were references to PEI;
2. all references to the AES Seller were to the PEI Seller;
3. all references to the Shares were to the PEI Shares;
4. all references to the Accounts or to the Management Accounts were to
the PEI Accounts; and
5. all references to the Last Accounting Date were to December 31, 1997;
6. subject to the following exceptions and the matters disclosed in the
portion of the Disclosure Letter pertaining to PEI.
(Numbered paragraph references below are to Part 1 of this Schedule 3)
6.1 Paragraph 2.2 shall read as follows with respect to PEI:
"The PEI shares have been duly issued, are full-paid and
non-assessable, and constitute the only outstanding shares of capital
stock of PEI. There are no warrants, options or other rights to
purchase, or securities convertible into, shares of capital stock of
PEI."
6.2 Paragraphs 4.1 through to 4.3 and 4.5 shall be inapplicable (there
being no audited financial statements for PEI). The following shall be
added to paragraph 4.4 with respect to the PEI Accounts:
"No material change in accounting policies has been made in preparing
the PEI Accounts or the comparable accounts for the two fiscal years
ended 31 March 1996. The PEI Accounts fully disclose and provide
adequately for bad and doubtful accounts receivable in accordance with
accounting reporting standards of Anglian Water plc. The results of
operations of PEI reflected in the PEI Accounts have not (except as
disclosed in such accounts) been affected by an extraordinary,
exceptional or non-recurring item or by any other matter including the
profit or loss for a period covered by the PEI Accounts unusually high
or low."
6.3 In paragraph 5.2.3 the currency reference shall be $75,000.
46
47
6.4 Paragraph 6 shall read as follows with respect to PEI:
"TAX
6.1 Except as set forth in the Disclosure Letter, PEI and any
affiliated, consolidated, combined or unitary group of which
PEI is a member for federal, state, local or foreign Tax
purposes (a "Tax Group") has duly and timely filed or caused
to be filed (or, in the case of the most recently ended
taxable year with respect to each applicable Tax, requests for
an extension have been filed for) all federal and state, local
and foreign Tax returns, reports, estimates and information
and other statements and returns of any nature whatsoever
(collectively, "Tax Returns") required to be filed by or on
behalf of PEI or any Tax Group, pursuant to any applicable
federal, state, local or foreign tax laws for all years and
periods for which such Tax Returns have become due. All such
Tax Returns are true, accurate and complete in all respects,
and all amounts shown as owing on such Tax Returns, or with
respect or periods to which such Tax Returns relate, have been
paid in full.
6.2 For purposes of this Part 2 of Schedule 3, "Tax" (and with
correlative meaning, "Taxes" and "Taxing") shall mean:
6.2.1 any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem,
value added, transfer, franchise, profits, license,
withholding on amounts paid to or by PEI, payroll,
employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit
taxes, custom duties or Other taxes, governmental
fees or other like assessments or charges of any kind
whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed
by any governmental authority responsible for the
imposition of any such taxes (within or without the
United States); and
6.2.2 liability of PEI for the payment of any amounts of
the type described in 6.2.1 as a result of being a
member of a Tax Group pursuant to Treasury Regulation
1.1502-6 or any comparable state, local or foreign
statute or regulation, as a transferee or successor,
by contract or otherwise.
6.3 PEI and any Tax Group have paid all Taxes, or where payment is
not yet due, have established, consistent with past practice
and in accordance with the AES Seller's customary accounting
practices, an adequate reserve on its books and records for
the payment of all Taxes with respect to any taxable period
(or portion thereof) ending on or before 31 March 1997 (or
otherwise relating or attributable to periods up to and
including 31 March 1997). As to all Tax periods, or portions
thereof, which began after 31 March 1997 and end prior to, or
include, the date of Completion for which no Tax Returns or
Tax payments are yet due (including extensions), the liability
of
47
48
PEI for Taxes with respect to such periods or portions
thereof, does not exceed the amount properly accruable for
such liability as a result of operations and transactions in
the ordinary course of business of PEI through the date of
Completion in accordance with the past practice and custom of
PEI.
6.4 For the taxable year ending 31 March 1997 and for all
subsequent periods up to and including Completion, PEI has
been an includible member of the "affiliated group" (within
the meaning of section 1504 of the Internal Revenue Code of
1986, as amended (the "Code")) of which the PEI Seller is the
parent; for such periods PEI was entitled to report its income
on consolidated federal income Tax Return$ filed on behalf of
such affiliated group and, for such periods, all federal
income Tax Returns required to be filed by PEI have been (or
will be) duly and timely filed on behalf of PEI on a
consolidated basis. For all periods prior to the taxable year
ending 31 March 1997 all federal income Tax Returns required
to be filed by PEI were duly and timely filed on a separate
company basis, and for all periods all other Tax Returns of
PEI have been filed on a separate company, non-combined, non-
consolidated and non-unitary basis.
6.5 Except as set forth in the Disclosure Letter, none of the PEI
Seller, PEI or any of their affiliates (including any Tax
Group) has:
6.5.1 applied for or received a tax ruling (other than a
determination with respect to a qualified employee
benefit plan);
6.5.2 entered into any closing agreement under section 7121
of the Code (or any similar provision of state, local
or foreign law);
6.5.3 agreed to make any adjustment to its income or
deductions pursuant to section 481(a) of the Code (or
similar provision of state, local or foreign law); or
6.5.4 granted a power of attorney to any person regarding
any tax matter of PEI;
6.6 Except as set forth in the Disclosure Letter:
6.6.1 none of PEI or any Tax Group is delinquent in the
payment of any Taxes;
6.6.2 no extensions of time have been granted to the
Company or any Tax Group to file any Tax Return
required by applicable law to be filed by or on
behalf of PEI prior to or on Completion, which have
expired, or will expire, on or before Completion
without such Tax Return having been filed;
48
49
6.6.3 no deficiency or adjustment for any Taxes has been
proposed, asserted or assessed against PEI or any Tax
Group and no federal, state, local or foreign audits
or other administrative proceedings or court
proceeding$ are pending with regard to any such
Taxes; and
6.6.4 no waiver or consent extending any statute of
limitations for the assessment or collection of any
Taxes, which waiver or consent remains in effect, has
been executed by or on behalf of PEI or any Tax
Group, nor are any requests for such waivers or
consents pending.
6.7 Except as set forth in the Disclosure Letter, PEI is not a
party to any tax-sharing or allocation agreement (whether or
not in writing), nor is any amount due to or owed by PEI under
any tax-sharing or allocation agreement. Any Tax-sharing or
allocation agreement to which PEI is a party shall terminate
with respect to PEI as of Completion."
6.8 PEI has complied in all material respects with all applicable
laws, rules and regulations relating to the payment and
withholding of Taxes and has, within the time and the manner
prescribed by law, withheld and paid over to the proper
governmental authorities, all amounts required to be so
withheld and paid over under applicable laws.
6.9 PEI has not filed any consent of the type described under
Section 341(f) of the Code, nor is it subject to any
accumulated earnings penalties. PEI has not made any payments,
is not obligated to make any payments, and is not a party to
any agreement that under certain circumstances could oblige it
to make any payments that would not be deductible under
section 280G of the Code.
6.10 PEI has not been a real property holding company within the
meaning of section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code.
6.11 Tax Indemnity:
6.11.1 the PEI Seller and the Seller Guarantor agree to, and
shall, indemnify the PEI Buyer, PEI and their
respective affiliates and hold each of them harmless
from and against any and all costs, expenses, losses,
Taxes and damages incurred or suffered by any of them
(including, without limitation, reasonable attorneys
fees and expenses) resulting from or attributable to:
(a) the breach of any one or more of the
representations or warranties set forth in
6.1 to 6.10 above of this paragraph 6;
49
50
(b) any claims, demands, suits, investigations,
proceedings or actions by any third party
containing or relating to allegations that,
if true, would constitute a breach of any of
the representations or warranties of PEI
Seller set forth in 6.1 to 6.10 above of
this paragraph 6;
(c) any liability of PEI for Taxes with respect
to any taxable period ending on or before 31
March 1997, except to the extent such Taxes
are reflected in the PEI Accounts as of that
date;
(d) any liability of PEI for Taxes relating to
consolidated, combined or unitary Tax
Returns which include PEI for periods (or
portions thereof) ending on or before, or
including, the date of Completion for which
PEI could have liability pursuant to
Treasury Regulation section 1.1502-6 or any
comparable state, local or foreign statute
or regulation, as a transferee or successor,
by contract or otherwise; and
(e) any liability for Taxes for any Tax period
(or portion thereof) which begins after 31
March 1997, and ends prior to, or includes,
the date of Completion for which no Tax
Returns or payments are yet due (including
extensions) to the extent such liability
exceeds the amount properly accruable for
such liability as a result of operations and
transactions in the ordinary course of
business of PEI through the date of
Completion in accordance with the past
practice and custom of PEI. In no event
shall PEI or the PEI Buyer have any claim or
right of recovery under this paragraph 6
unless and until the aggregate claim or
claims of PEI and the PEI Buyer shall exceed
$50,000, and then only to the extent of such
excess;
6.11.2 for the purposes of paragraph 6.11.1 above, any
interest, penalty or additional charge included in
Taxes shall be deemed to be Tax for the period in
which the item on which the interest , penalty or
additional charge is based, and not a Tax for the
periods during which the item) accrues;
6.11.3 In respect of third party claims:
(a) if any third party shall notify PEI or PEI
Buyer (the "INDEMNIFIED PARTY") with respect
to any matter (a "THIRD PARTY CLAIM") which
may give rise to a claim for indemnification
against the PEI Seller or the Seller
Guarantor (the "Indemnifying Party") under
this paragraph 6.11.3(a) of this Schedule 3,
then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in
writing; provided, however, that no delay on
the part of the Indemnified Party shall
relieve the Indemnifying Party from any
obligation hereunder unless
50
51
(and then solely to the extent) the
Indemnifying Party thereby is prejudiced;
(b) any Indemnifying Party will have the right
to defend the Indemnified Party against the
Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified
Party so long as (i) the Indemnifying Party
has given notice of the Third Party Claim
that the Indemnifying Party will indemnify
the Indemnified Party from and against the
entirety of any adverse consequences the
Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature
of, or caused by the Third Party Claim, and
(ii) the Indemnifying Party conducts the
defence of the Third Party Claim actively
and diligently;
(c) so long as the Indemnifying Party is
conducting the defence of the Third Party
Claim in accordance with 6.11.3(b) above,
(i) the Indemnified Party may retain
separate co-counsel at its sole cost and
expense and participate in the defence of
the Third Party Claim, and (ii) the
Indemnifying Party will not consent to the
entry of any judgment or enter into any
settlement with respect to the Third Party
Claim if such judgment or settlement is
likely to establish a precedential custom or
practice materially adverse to the
continuing business aspects of the
Indemnified Party or otherwise have a
material adverse effect on the Indemnified
Party for periods beginning on or after, or
including, the date of Completion without
the prior written consent of the Indemnified
Party;
(d) in the event of any of the conditions in
6.11.3(b) above is or becomes unsatisfied,
(i) the Indemnified Party may defend
against, and consent to the entry of any
judgment or enter into any settlement with
respect to, the Third Party Claim in any
manner it reasonably may deem appropriate
(and the Indemnified Party need not consult
with ' or obtain any consent from, any
Indemnified Party in connection therewith),
(ii) the Indemnifying Party will reimburse
the Indemnified Party promptly and
periodically for the costs of defending
against the Third Party Claim (including
reasonable attorney's fees and expenses),
and (iii) the Indemnifying Party will remain
responsible for any adverse consequences the
Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature
of, or caused by the Third Party Claim to
the fullest extent provided in this section.
6.11.4 the PEI Seller and the PEI Buyer shall:
51
52
(a) each give the other prompt written notice of
the receipt of any claim by any taxing
authority that, if successful, may result in
an indemnity payment pursuant to this
sub-paragraph 6.11; and
(b) each transmit to the other a written
description reasonably detailing the nature
of the claim, a copy of all papers served
with respect to such claim and the basis of
its claim for indemnification under this
sub-paragraph 6.11;
6.11.5 the indemnity provided for in this sub-paragraph 6.11
shall be independent of any other indemnity provision
hereof and, anything in this Agreement to the
contrary notwithstanding, shall survive until the
expiration of the applicable statutes of limitation
(including extensions thereof) for the Taxes referred
to herein and any Taxes subject to indemnification
under this section shall not be subject to any
maximum limit. Anything in this Agreement to the
contrary notwithstanding, the PEI Seller shall have
no liability under this subparagraph 6.11 or
otherwise for Taxes imposed on PEI (or any other
entity which, after Completion, is an affiliate
thereof) for any taxable year or taxable period
commencing after Completion.
6.12 Certain Tax Information:
6.12.1 after Completion, the PEI Buyer and PEI Seller:
(a) shall provide, or cause to be provided, to
and by each other and each other's
respective subsidiaries, affiliates,
officers, employees and representatives,
such assistance as may reasonably be
requested by any of them in connection with
the preparation of any Tax Return, the
conduct of any audit or the defence of any
litigation or other proceeding with respect
to any Tax liability of PEI for any period
prior to, including or ending after
Completion; and
(b) shall retain, or shall cause to be retained,
for the appropriate period any records or
information which may be relevant to any
such return of audit. The assistance
provided for in this subparagraph 6.12 shall
include providing, or causing to be
provided, such information as might
reasonably be expected to be of use in
connection with any such return, audit,
litigation or proceeding, including, without
limitation, records, returns, schedules,
documents, work papers, opinions, letters,
memoranda or other relevant materials
relating thereto. All such materials and
information shall be held in confidence by
the recipient thereof and shall not be
disclosed by the recipient in any manner
whatsoever and shall not be used by the
52
53
recipient other than in connection with such
return, audit or litigation without the
written consent of the supplier of the
information, except as required by law. 'the
party requesting the assistance provided for
in this sub-paragraph 6.12 shall reimburse
the party whose assistance is requested for
reasonable out-of-pocket costs (including
compensation of employees who provide such
assistance outside of their regular working
hours) incurred by it in providing such
assistance and shall bear all costs or
expenses incurred in connection with the
provision of such assistance by any outside
representatives or consultants (other than
any such out-of-pocket or other costs or
expenses subject to any indemnification
hereunder). The term "audit" as used in this
sub-paragraph 6.12 shall include any
inquiry, examination or other conduct of any
taxing authority or any judicial or
administrative proceedings.
6.12.2 the PEI Seller shall prepare and timely file a
consolidated federal income Tax Return for the
taxable period commencing 1 April 1997 and ending on
Completion with respect to PEI and shall pay all
federal income Taxes due with respect to PEI for such
period. The PEI Buyer or PEI shall prepare and file
(or cause to be prepared and filed) all other Tax
Returns to be filed by PEI after Completion and shall
pay all Taxes due thereunder.
6.5 In paragraph 7.1.1(c), the reference to the United Kingdom shall be to
the United States. In paragraph 7.1.2 the words "with the exception of
the Property" shall be deleted.
6.6 Paragraph 7.3 shall be inapplicable.
6.7 Information required by paragraphs 7.5.3 and 7.6 shall be as of a date
not more than 10 days prior to Completion.
6.8 Paragraph 8.2 shall not require disclosure of any claims for less than
$25,000.
6.9 In paragraphs 10.3 and 10.4 the currency references shall be $125,000.
6.10 In paragraph 12.1.2 the currency reference shall be $40,000.
6.11 Paragraphs 15.3 and 15.4 shall be read as follows with respect to PEI:
"No voluntary or involuntary proceeding has been commenced by or
against PEI under any federal or state bankruptcy or insolvency law."
6.12 Paragraph 15.8 shall be inapplicable.
53
54
6.13 Paragraph 16.1 shall be inapplicable.
6.14 Paragraph 17 shall read as follows with respect to PEI:
"PENSIONS AND OTHER BENEFITS
17.1 Except for the plans, policies or arrangements listed in the
Disclosure Letter, which includes all plans, policies and
arrangements maintained by a Controlled Group member in the
past or present (hereinafter referred collectively to as the
"Plans" and individually as a "Plan"), no member of the
Controlled Group (as defined below), directly or indirectly,
maintains, sponsors or has any obligation or liability with
respect to any "employee benefit plan", as defined in section
3(3) of the Employment Retirement Income Security Act of 1974,
as amended ("ERISA"), any fringe benefit plan, any equity
compensation plan or arrangement, any plan, policy or
arrangement for the provision of executive compensation,
incentive benefits, bonuses or severance benefits, collective
bargaining agreement, cafeteria plan or split-dollar insurance
arrangement, or any other plan, policy or arrangement for the
provision of employee benefits. For the purposes of this
Paragraph 17, "Controlled Group" shall mean PEI, and any
person, entity or trade or business, whether or not
incorporated, which is required to be aggregated with PEI
under section 414(b), (c), (m) or (o) of the Code.
17.2 No Plan is subject to Title IV of ERISA, no Plan is a part of
a "multiple employer welfare arrangement" within the meaning
of section 3(40) of ERISA, and no Plan is a multi-employer
plan within the meaning of section 4001(a)(3) of ERISA or
section 414(f) of the Code or a multi-employer plan described
in clauses (i) and (ii) of section 3(37)(A) of ERISA.
17.3 With respect to each Plan identified in the Disclosure Letter
with respect to Warranty No. 17:
17.3.1 the Plan, each Controlled Group Member, each employee
of any Controlled Group Member and, to the best
knowledge o the PEI Seller, the other fiduciaries and
administrators of the Plan have at all times complied
in all respects with applicable requirements of law
(including, without limitation, the Code and ERISA)
that relate to the Plan and, with respect to the
Plan, there are no ongoing audits or investigations
by any governmental agency. There are no actions,
suits or claims (other than routine claims for
benefits) pending or threatened against the Plan, the
assets of the Plan, a Controlled Group Member, any
employee, officer or director of a Controlled Group
Member with respect to a Plan or, to the best
knowledge of the PEI Seller, against any other
trustee, fiduciary or administrator of the Plan;
54
55
17.3.2 if the Plan provides health, accident or medical
benefits:
(a) the Plan sponsor and administrator have
complied in all respects with the
requirements of Part 6 of Subtitle B of
Title I of ERISA and section 4980B of the
Code (herein collectively referred to as
"COBRA"); and
(b) the Plan does not provide for non-terminable
or non-alterable health, accident, medical
or life benefits for employees, former
employees, dependents, beneficiaries or
retirees, except as otherwise required by
COBRA, and then only to the extent the
person pays the "applicable premium" (as
defined- in Code section 4980B(f)(4)) for
such coverage, or otherwise pays the full
costs of such coverage;
17.3.3 full payment has been made of all amounts which a
Controlled Group Member is required, under applicable
law or under the Plan, to have paid as a contribution
or a benefit. The liability of each Controlled Group
Member with respect to each Plan has been fully
funded based on reasonable and proper actuarial
assumptions, has been fully insured, or has been
fully reserved for on its financial statements. No
changes have occurred or are expected to occur that
would cause an increase in the cost of providing
benefits under the Plan;
17.3.4 the consummation of the transactions contemplated by
the Agreement will not:
(a) entitled any current or former employee or
officer of the Corporation to severance pay,
unemployment compensation or any other
similar payment from PEI;
(b) except as contemplated under sub-paragraph
17.3.5 below, accelerate the time of payment
or vesting under the Plan;
(c) increase the amount of compensation due any
such employee or officer;
(d) directly or indirectly cause the Corporation
to transfer or set aside any assets to fund
or otherwise provide for the benefits under
the Plan for any current or former employee,
officer or director; or
(e) result in any non-exempt prohibited
transaction described in ERISA section 406
or Code section 4975; and
55
56
17.3.5 with respect to each Plan identified on the
Disclosure Letter that is an "employee pension
benefit plan", as defined in section 3(2) of ERISA
and is funded or required to be funded under ERISA or
is intended to be qualified under section 401(a) of
the Code:
(a) the Plan and any associated trust
operationally comply with the applicable
requirements of Code section 401(a);
(b) the Plan and any associated trust have been
amended to comply with all such requirements
as currently in effect, other than those
requirements for which a retroactive
amendment can be made within the "remedial
amendment period" available under Code
section 401(b) (as extended under Treasury
Regulations and other Treasury
pronouncements upon which taxpayers may
rely);
(c) the Plan and any associated trust have
received a favorable determination letter
from the Internal Revenue Service stating
that the Plan qualifies under Code section
401(a), that the associated trust qualifies
under Code section 501(a) and, if
applicable, that any cash or deferred
arrangement under the Plan qualifies under
Code section 401(k), unless the Plan was
first adopted at a time for which the
above-described "remedial amendment period"
has not yet expired, and
(d) no contribution made to the Plan is subject
to an excise tax under Code section 4972.
17.3.6 with respect to the Fluid Systems Corporation 401(k)
Plan (the "401(K) Plan"), the PEI Seller will either
(a) terminate and liquidate the 401(k) Plan or (b)
spin off that portion of the 401(k) Plan attributable
to individuals actively employed by PEI on the
Business Day that follows Completion, into a separate
plan entity (the "PEI 401(K) Plan"), and terminate
the PEI 401(k) Plan. The PEI Buyer agrees that
employees of PEI as of the Business Day that follows
Completion who have account balances under either the
401(k) Plan or the PEI 401(k) Plan will be permitted
to take direct ro over distributions to the WaterLink
Management, Inc., 401(k) Plan upon confirmation that
the United States Internal Revenue Services has
issued a favorable determination letter with respect
to the termination of the PEI 401(k) Plan and the
401(k) Plan. Further, the PEI Seller and the PEI
Buyer agree to co-operate with respect to the
foregoing transaction and each agree to provide any
information and assistance to the other that is
reasonably requested in connection with the foregoing
transactions.
56
57
6.15 Paragraph 19 shall read as follows with respect to PEI:
"PEI will not at Completion be a party to any arrangement or agreement
(whet er or not legally binding) with Anglian Water plc or any
subsidiary pursuant to which goods or services are provided or
received, with the extension of guarantees and letters of credit
provided for PEI's benefit."
6.16 Paragraph 20.1 through to 20.3 shall read as follows with respect to
PEI:
"PEI has operated its business in compliance with its certificate of
incorporation and by-laws in all material respects. The minutes books
of PEI contain accurate records of all formal actions taken by the
board of directors of PEI for the period during which the PEI Seller
has owned PEI. PEI's minute books for 1988 and prior years are
incomplete."
6.17 Neither PEI nor the PEI Buyer will be subject to any loss or damage
arising by reason of any breach or alleged breach of any provision of
any contract for the provision of goods or services by PEI prior to
Completion excluding, however, any such claim for any breach or alleged
breach of any contract listed in Schedule 8 hereto. PEI will provide,
without charge, management assistance that the PEI Seller may
reasonably request after Completion in resolving any claim for any such
breach or alleged breach.
6.18 To the best knowledge of the PEI Seller PEI is not at the date hereof
in material breach, nor has any breach been alleged, of any contract
listed in Schedule 8.
57
58
SCHEDULE 4
GUARANTEED CONTRACTS
------------------------------------------------------------------------------------------------------------------------------------
ARRANGEMENT DATE BANK BONDS $ PARENT EXPIRY DATE BENEFICIARY'S NAME CONTRACT
COMPANY
------------------------------------------------------------------------------------------------------------------------------------
19 January 1994 116,454.20 19 January 1997 Xxx Xxxxxxx Xxxxxxx & Partners Venezuela
26 June 1994 13,169.00 NRA - Xxxxxx Xxxxx Region Pillings
23 December 1994 25,936.00 31 December 1998 Ebara UK Ltd Ebara
4 July 1996 46,418.00 4 July 1997 Mid Kent Water Trosley WTW
21 November 1996 6,941.75 25 July 1998 Biwater International Ltd Vathia Xxxxx
26 June 1997 182,436.88 31 August 1998 Environment Agency Welmore Lake
21 December 1997 364,872.00 31 August 1998 Environment Agency Xxxxxxx Xxxx
00 November 1997 8,307.00 21 November 1998 Wabag Water Engineering Canterbury
26 September 1994 28,053.00 NRA - Xxxxxx Xxxxx Region Edmonsey Sluice
28 January 1998 4,523.30 20 March 2000 Ebara UK Ltd Kassabi Pumping Station
28 January 1998 18,452.10 20 March 2000 Ebara UK Ltd Baloza Pumping Station
2 February 1998 385,570.00 12 June 1999 Environment Agency Northampton Flood
Alleviation Scheme
------------------------------------------------------------------------------------------------------------------------------------
662,749.03 116,454.20 421,930.00
------------------------------------------
58
59
PEI GUARANTEES
-----------------------------------------------------------------------------------------------------------------------------
REF. BENEFICIARY FROM FACILITY CURRENCY AMOUNT EXPIRY DATE
-----------------------------------------------------------------------------------------------------------------------------
PLC 22 SHB 1 December 1993 Letter of Credit USD 60,000 8 September 1998
PLC 22 SHB 1 December 1993 Line of Credit USD 99,328 15 August 1998
PLC 84 Pizzagall 24 October 1994 Guarantees USD 4,967,000 On completion of contract
-----------------------------------------------------------------------------------------------------------------------------
59
60
SCHEDULE 5
PENSION ARRANGEMENTS
1. INTERPRETATION
1.1 In this Schedule the following words and expressions shall, unless the
context otherwise requires, have the following meanings:
"Actuary's Letter" means the letter from the Sellers' Actuary to the
Buyers' Actuary (in the agreed form annexed hereto) and as the same has
been agreed between the Sellers' Actuary and the Buyers' Actuary;
"the Adjusted Funding Requirement" means the amount calculated in
accordance with paragraph 4.2;
"Appropriately Adjusted" means adjusted during the specified period as
follows:-
(a) in respect of the period from the beginning of the specified
period to but excluding the day three days before the end of
the specified period in proportion to the change in the value
of the relevant sum or amount which would have occurred if at
the beginning of that period 90% thereof had been invested in
shares represented by the Financial Times Actuaries All Share
Total Return Index and 10% thereof had been invested in stocks
represented by the Financial Times - Actuaries British
Government Over 15 Year Index with gross interest reinvested
daily in the same stocks; and
(b) in respect of the period from and including the three days
before the end of the specified period to the end of the
specified period, by the addition of compound interest at the
base lending rate from time to time of Lloyds Bank plc
accruing daily;
"Approval" means approval by the Board of Inland revenue as an exempt
approved scheme for the purposes of Chapter I of Part XIV of the Taxes
Act;
"The Assumptions" means the actuarial methods and assumptions set out
in the Actuary's Letter as the same have been agreed between the
Sellers' Actuary and the Buyers' Actuary;
"The Buyers' Actuary" means Xxxxxxx Xxxxx, F.I.A. of Messrs Gissings of
Finsbury House, 00 Xxxxxxxx Xxxxxx, Xxxxxx XX0X 0XX or such other
actuary as may be appointed by the Buyer for the purposes of this
Schedule;
"The Buyers' Scheme" means the retirement benefits scheme or schemes to
be nominated by the Buyer in accordance with paragraph 3.2;
60
61
"the Completion Date" means the date on which Completion will take
place;
"the Consenting Members" means those Transferring Members whose consent
or request in writing (in a form submitted to and approved by the
trustees of the Sellers' Schemes in advance of its issue) to or for a
payment or transfer of assets from the Sellers' Schemes to the Buyers'
Scheme in respect of the benefits (including accrued rights to
guaranteed minimum pensions (within the meaning of the Pensions Act))
which have accrued to and in respect of them under the Sellers' Schemes
up to the Membership Transfer Date has been received by the trustees of
toe Sellers' Schemes not later than the date which is two months after
the Membership Transfer Date and is not withdrawn prior to the Payment
Date;
"the Funding Requirement" means the amount which is equal to the
aggregate value as at the Completion date of the benefits (including
all benefits secured by voluntary contributions made by Consenting
Members which are not money purchase benefits and excluding any
enhancement of pensionable service $ranted on ill-health retirement or
death in service and any lump sum benefit payable on death in service)
prospectively and contingently payable from the Seller's Scheme$ in
accordance with the provisions of the Sellers' Schemes in respect of
the Consenting Members at the Membership Transfer Date calculated by
reference to their pensionable service up to the Completion Date and a
projection from the Completion Date of their pensionable earnings at
the Completion Date and using the Assumptions (including the assumption
that their pensionable earnings shall increase during the period from
the Completion Date to their normal pension date under the Sellers'
Schemes or earlier assumed date of death, retirement or other cessation
of pensionable service);
"the Member Employees" means those employees of the Company who are
members of the Sellers' Schemes at the Completion Date;
"the Membership Transfer Date" means the date which is twelve months
after the Completion Date or such earlier date as may be agreed in
writing between the Seller and the Buyer;
"the Payment Date" means the date on which the trustees of the Sellers'
Schemes make the payment to the trustees of the Buyers' Scheme in
accordance with paragraph 5;
"the Pensions Act" means the Pensions Xxx 0000;
"the Sellers' Actuary" means M A Xxxx, FIA of Messrs Bacon & Xxxxxxx of
Xxxxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxx, Xxxxxx XX00 0XX or such other
actuary as may be appointed by the Seller for the purposes of this
Schedule;
"the Sellers' Schemes" means the Anglian Water Pension Scheme and the
Anglian Water Mirror Image Pension Scheme or either of these as the
context may require and any
61
62
retirement benefit scheme with or capable of obtaining Approval which
shall result from the amalgamation of the Sellers' Schemes;
"the Transferred Amount" means the aggregate amount which is paid or
transferred by the trustees of the Sellers' Schemes to the trustees of
the Buyers' Scheme but excluding so much (if any) thereof as shall be
certified by the trustees of the Sellers' Schemes as deriving from
voluntary contributions to which paragraph 6 relates;
"the Transferring Members" means those Member Employees who become
members of the Buyers' Scheme with effect from the Membership Transfer
Date and who immediately before becoming members of the Buyers' Schekne
are members of the Sellers' Schemes;
"the Transitional Period" means the period commencing on the day
immediately following the Completion Date and ending on the day
immediately preceding the Membership Transfer Date (both days
inclusive).
1.2 For the purposes of this Schedule "Buyer" shall mean "AES Buyer" and
"Seller" shall mean "AES Seller" and "Company" shall mean "AES".
1.3 References to paragraphs are to paragraphs of this Schedule.
1.4 Headings in this Schedule are for ease of reference only and $hall not
affect the interpretation of any provision.
2. TRANSITIONAL PERIOD
2.1 The Seller and the Buyer shall use their best endeavors to procure the
inclusion of the Buyer as a participating employer in the Sellers'
Schemes during the Transitional Period in respect of the Member
Employees subject to the Approval of the Sellers' Schemes not being
prejudiced thereby.
2.2 The Buyer undertakes that during the Transitional Period:-
2.2.1 it will pay to the trustees of the Sellers' Scheme the
contributions to be made to the Sellers' Scheme by and in
respect of the Member Employees at the following rates:-
by the Buyer - (i) in the case of Member Employees of the
Anglian Water Pension Scheme: 8.0% of Pensionable Pay for
members contributing 3% of Pensionable Pay; 12.3% of
Pensionable Pay for members contributing 5% of Pensionable Pay
and 12.4% for members contributing 6% of Pensionable Pay and
(ii) in the case of Member Employees of the Anglian Water
Mirror Image Pension Scheme: 15.2% of Pensionable Earnings for
members contributing 5% of Pensionable Earnings and
62
63
13.4% of Pensionable Earnings for members contributing 6% of
Pensionable Earnings;
by members - 6%, 5% or 3% of Pensionable Pay or Pensionable
Earnings as appropriate to the individual under the Rules of
the Sellers' Scheme;
and it will comply in all respects (other than in relation to
the payment of contributions) with the provisions of the
Sellers' Schemes and for the avoidance of doubt the terms
Pensionable Earnings and Pensionable Pay shall have the
meanings ascribed to them in the trust deed and rules
governing the Sellers' Schemes;
2.2.2 it will meet all and any costs that may fall either on the
Seller or the Principal Employer (as the same is defined in
the Sellers' Schemes) the Trustees of the Sellers' Schemes
consequent upon any Member Employee taking early retirement
(being retirement prior to the earliest age at which the
Member Employee is entitled to immediate unreduced benefits as
of right) between Completion Date and the end of the
Transitional Period such costs to be agreed between the
Buyers' Actuary and the Sellers' Actuary using assumptions
consistent with those in the Actuary's letter;
2.2.3 it will not exercise its discretion to allow or permit early
retirement on grounds of ill-health without the written
consent of the Seller such consent not to be unreasonably
withheld;
2.2.4 it will make all necessary arrangements with the Co-operation
of the Seller to obtain separate contracting-out certificates
(within the meaning of the Pensions Act) in respect of the
participation of the Buyer in the Sellers' Schemes in respect
of the Member Employees and to cancel those contracting-out
certificates with effect from the day immediately preceding
the Membership Transfer Date;
2.2.5 it will not do or omit to do any act or thing whereby the
Approval of the Sellers' Schemes or their status as a
contracted-out scheme would or might be prejudiced; and
2.2.6 it will not exercise any right, power or discretion conferred
on it by the Sellers' Schemes except on such terms (whether as
to payment or additional contributions or otherwise) as the
Seller may require.
2.3 The Buyer undertakes that if the Pensionable Pay or
Pensionable Earnings (as defined for the purposes of the
Sellers' Schemes) of any Member Employee who does not become a
Consenting Member is increased by more than 6.5% per annum
before the Membership Transfer Date the Buyer shall pay such
additional contribution to the Sellers' Schemes as the Seller
or the trustees of the Sellers' Schemes may reasonably
require.
63
64
2.4 The Buyer and the Seller will do all such things and execute
all such documents and generally use their reasonable
endeavors to procure the implementation of the agreement set
out in this Schedule.
3. THE BUYERS' SCHEME
3.1 The Buyer shall arrange for those Member Employees who are still in its
employment to be offered within nine months of the Completion Date
membership of the Buyers' Scheme with effect on and from the Membership
Transfer Date on terms which satisfy the requirements of paragraph 3.3
(such offer of membership to be in writing in a form disclosed at least
two weeks in advance of issue by the Buyer to the trustees of the
Sellers' Schemes who shall have an opportunity to comment upon the form
and whose reasonable comments shall be incorporated) and for those
Member Employees who accept such offer of membership and who are still
in its employment on the Membership Transfer Date to be admitted to
membership of the Buyers' Scheme with effect on and from the Membership
Transfer Date in accordance with the terms of the offer of membership.
3.2 The Buyer undertakes to nominate a retirement benefits scheme on or
before the Membership Transfer Date which shall:
3.2.1 be or be intended to be in receipt of Approval;
3.2.2 be or be intended to be a scheme providing salary related
benefits which is contracted-out for the purposes of Part III
of the Pensions Act on the basis of providing benefits which
equal or exceed those set out in Sections 12A and 12B of the
Pensions Act;
3.2.3 provide (inter alia) benefits on the basis described in
paragraph 3.3;
and the Buyer shall use its best endeavors to procure that the trustees
or managers of the Buyers' Scheme shall be able and willing to accept
the transfer to the Buyers' Scheme of the accrued rights of the
Consenting Members under the Sellers' Schemes.
3.3 The Buyer undertakes to the Seller to procure that the Buyers' Scheme
shall (subject to receipt by the trustees of the Buyers' Scheme of the
Adjusted Funding Requirement in full and Inland Revenue limits on
benefits not being exceeded) provide benefits for and in respect of
Consenting Members on a basis which for service before the Membership
Transfer Date is in the agreed opinion of the Sellers' Actuary and
Buyers' Actuary substantially the same as and no less favorable overall
than the basis of the benefits for such service to which the Consenting
Members would be entitled under the Sellers' Schemes at the Completion
Date on the basis of the Assumptions TOGETHER WITH the benefit of any
improvements or increases in Sellers' Schemes benefits made by the
Principal Employer (as the same is defined in the Sellers' Schemes)
and/or the Trustees of the Sellers' Schemes between the
64
65
Completion Date and the Membership Transfer Date. In comparing the
bases of benefits referred to in this paragraph an appropriate
adjustment shall be made if any benefits are retained in the Sellers'
Schemes in respect of any of the Consenting Members or if a state
scheme premium (within the meaning of the Pensions Act) is paid by the
trustees of the Sellers' Schemes in respect of a Consenting Member.
3.4 The Buyer undertakes to procure that the amount transferred to the
Buyers' Scheme under paragraph 5 and any amount payable under paragraph
7 will, so far as can reasonably be achieved without maintaining or
identifying such amounts as a separate fund and subject only to the
need to retain Approval of the Buyers' Scheme, be applied under the
Buyers' Scheme exclusively in the provision of benefits for and in
respect of the Consenting Members in respect of their pensionable
service completed prior to the Membership Transfer Date.
4. CALCULATION OF THE ADJUSTED FUNDING REQUIREMENT
4.1 As soon as practicable after the Membership Transfer Date the Seller
shall instruct the Sellers' Actuary to calculate the Funding
Requirement and when the Payment Date has been determined the Adjusted
Funding Requirement and the Buyer shall instruct the Buyers' Actuary to
consult with the Sellers' Actuary for the purpose of checking and
agreeing the method of calculation and the calculation by the Sellers'
Actuary of the Funding Requirement and the Adjusted Funding
Requirement.
4.2 The Adjusted Funding Requirement shall be the aggregate of:
4.2.1 the Funding Requirement Appropriately Adjusted in respect of
the period from the Completion Date to but excluding the
Payment Date;
PLUS
4.2.2 an amount equal to the contributions paid after the Completion
Date to the Sellers' Schemes by and in respect of the
Consenting Members (except voluntary contributions to which
paragraph 6 relates and a management charge of 0.5% of
Pensionable Pay or Pensionable Earnings) with each such
contribution being Appropriately Adjusted from the date of
receipt thereof by the trustees of the.
Sellers' Scheme to but excluding the Payment Date;
LESS
4.2.3 an amount equal to the notional cost of insuring during the
Transitional Period all benefits payable under the Sellers'
Scheme which relate to an enhancement of pensionable service
on ill-health retirement or death in service or a lump sum on
death in service which is attributable to Consenting Members
calculated as 2% of
65
66
Pensionable Pay or 4% of Pensionable Earnings (as appropriate)
of the Consenting Members. Appropriately Adjusted in respect
of the period from the date on which it is deemed to have been
incurred to but excluding the Payment Date;
LESS
4.2.4 an amount equal to the value as at the Membership Transfer
Date of any benefits in respect of the Consenting Members
liability for which is not transferred from the Sellers'
Schemes to the Buyers' Scheme. The value of each such benefit
shall be calculated by the Sellers' Actuary and agreed by the
Buyers' Actuary using the same assumptions (including the
assumption that earnings shall increase) as are used for the
calculation of the Funding Requirement and the value of each
such benefit shall be Appropriately Adjusted in respect of the
period from and including the Membership Transfer Date to but
excluding the Payment Date.
5. PAYMENT FROM THE SELLERS' SCHEMES
The Seller shall use its best endeavors to procure that subject to:
5.1.1 the trustees of the Sellers' Schemes being satisfied that the
requirements of paragraph 3 have been or will be satisfied;
5.1.2 if the trustees of the Sellers' Schemes are required to obtain
Inland Revenue consent before making a transfer of assets to
the Buyers' Scheme, such consent having been received by the
trustees of the Sellers' Schemes;
5.1.3 completion of a trustee transfer agreement in a form agreed in
advance by the trustees of the Buyers' Scheme and the trustees
of the Sellers' Schemes;
the trustees of the Sellers' Schemes shall within 14 days of agreeing
the Funding Requirement or its being agreed in accordance with
paragraph 8 and (so far as is practicable using a reasonable estimate
of the Payment Date) the Adjusted Funding Requirement offer to the
trustees of the Buyers' Scheme an amount equal to the Adjusted Funding
Requirement in the form of cash or if the Buyer agrees (i) noncash
assets offered and selected by the trustees of the Sellers' Schemes or
(ii) partly in cash and partly in the form of non-cash assets
(similarly selected) in full and final satisfaction of the interests of
the Consenting Members under the Sellers' Schemes (other than the
interests to which paragraph 6 applies).
6. ADDITIONAL VOLUNTARY CONTRIBUTIONS
Any voluntary contributions made under the Sellers' Schemes for the
purpose o securing additional retirement benefits on a money purchase
basis and the investments or monies representing such contributions and
any income derive therefrom shall be disregarded for the
66
67
purposes of calculating the Funding Requirement. The Seller will,
nevertheless, use its best endeavors to procure that on the Payment
Date the trustees of the Sellers' Schemes pay or transfer to the
trustees of the Buyers' Scheme (or procure the payment or transfer to
the trustees of the Buyers' Scheme) the amount of any voluntary
contributions of the Consenting Members under the Sellers' Schemes
together with accumulated bonuses or investment return thereon and the
Buyer shall use its best endeavors to procure that the trustees of the
Buyers' Scheme apply that amount in the provision of additional
benefits under the Buyers' Scheme for and in respect of the Consenting
Members who had so contributed. The trustees of the Sellers' Schemes
shall certify to the trustees of the Buyers' Scheme how much (if any)
of the assets transferred derive from the voluntary contributions paid
by the Consenting Members,
7. ADJUSTMENT PAYMENT
7.1 In the event of the Transferred Amount (together with any realisation
costs if the payment is made in cash) is less than the Adjusted Funding
Requirement calculated as at the Payment Date and all the requirements
set out in paragraph 5 have been met the Seller shall instruct the
Sellers' Actuary to certify to the Buyer the amount of the difference
(such amount being referred to in this sub-paragraph as "the
shortfall") and the Seller shall pay or procure to be paid to the Buyer
or as the Buyer may direct an amount equal to the shortfall
Appropriately Adjusted in respect of the period from and including the
Payment Date to but excluding the date of payment in accordance with
this sub-paragraph.
7.2 If the Buyer or Buyers' Group Company (which shall have the moaning
given to it in the Agreement) obtains for the accounting period in
which the shortfall is paid by the Seller under paragraph 7.1 or in any
of the four succeeding accounting periods a deduction for part (or the
whole) of the shortfall which result$ in a reduction in taxable profits
for the purposes of corporation tax either as an expense of the
applicable accounting period or as an expense of a subsequent
accounting period in respect of the shortfall made in one or more of
the preceding accounting periods or by virtue of a trading loss created
in whole or in part by the shortfall being carried forward against
future profits of the Buyers' trade resulting in a reduction in taxable
profits then the Buyer shall pay to the Seller an amount equal to the
amount by which the shortfall reduces the said taxable profits
multiplied by the marginal rate of tax applicable to the Buyer or the
applicable member of the Buyers' Group (as the case may be) for the
accounting period in which the deduction is Obtained or the loss
utilised (such payment shall be made by the Buyer forthwith upon the
later or (i) the date on which the tax would otherwise have been paid
if it had not been for the said reduction in taxable profits and (ii)
the amount of reduction being certified by the auditor of the Buyer or
the applicable member of the Buyers' Group, which certification the
Buyer shall procure is made at the earliest reasonable practicable
opportunity, each accounting period being dealt with separately).
67
68
For this purpose, a reduction in taxable profits includes not only a
reduction in the taxable profits of the company obtaining a reduction
in taxable profits but also a reduction in the taxable profits of any
member of any group or consortium to which any loss attributable to
such payment is surrendered by way of group relief or consortium relief
in accordance with the provisions of sections 402 to 413 of the Taxes
Act to a member of the Buyers' Group (but, for the avoidance of doubt,
this does not include the increasing of a net loss for corporation tax
purposes in an accounting period).
7.3 The Buyer shall use all reasonable endeavors to procure that such a
deduction as is described in paragraph 7.2 is obtained in the earliest
possible accounting period.
8. DISPUTES
Any dispute between the Seller and the Buyer or between the Sellers'
Actuary and the Buyers' Actuary covering the calculation of the Funding
Requirement or any element of the Adjusted Funding Requirement or any
of the matters to be agreed by them under the provisions of this
Schedule shall in the absence of agreement between them be referred to
an independent actuary, agreed between the Seller and the Buyer within
10 days of the issue of such a reference first being raised or failing
such agreement, appointed at the request of either the Seller or the
Buyer by the President for the time being of the Institute of Actuaries
who shall act as an expert and not as an arbitrator and whose decision
shall be final and binding on the parties and whose expenses shall be
borne equally by the Seller and the Buyer or otherwise as the expert in
his absolute discretion may determine.
68
69
SCHEDULE 6
REGISTERED INTELLECTUAL PROPERTY RIGHTS
PATENTS
British Patent No: 2242372 for Wedge Wire D Screen dated 25 March 1991.
LICENCES
1. Manufacture and supply of Black Box Sewage Treatment Unit for the
Domestic Sewage Market from the AES Seller dated 9 April 1997.
2. Manufacture and supply of Dekoda Deodorising Unit for the Domestic
Sewage Market from AW Licensing Limited dated 29 July 1997.
3. Step Screen etc. as provided for in the International Distributor
Agreement with Hydropress Wallander & Co AB dated 1 March 1997.
4. General Industrial Property Rights as provided for in the Distribution
Agreement with Picatech AG dated 20 June 1994.
5. Various trademarks (including "Waterlink") as provided for under the
International Distributorship Agreement with Nordic Water Products AB
and Xxxxxxx Products AB dated 5 December 1997.
69
70
SCHEDULE 7
TAX INDEMNITY
1. DEFINITIONS
1.1 In this Schedule the following words have the meanings set out below.
1.1.1 "Actual Liability To Taxation" means any liability of the
Company to make actual payment of (or of an amount in respect
of) Taxation.
1.1.2 "Claim" means:
(a) any letter, assessment, notice, demand or other
document issued or action taken by any Taxation
Authority; or
(b) any action that the Company has to take as a result
of any Taxation legislation or requirement of the
relevant Taxation Authority,
from which it appears that the Company is or may be or may become
liable to any Liability to Taxation.
1.1.3 "Effective Liability To Taxation" shall have the meaning given
in clause 2.4.
1.1.4 "Event" includes any actual event, act, transaction or
omission or any deemed event, act, transaction or omission or
combination or series of such actual or deemed events, acts,
transactions or omissions whether or not the Company is a
party to it. Including (without limitation) the declaration,
payment or making of any dividend or other distribution, and
completion of the sale of the Shares to the AES Buyer pursuant
to the Agreement.
1.1.5 "Liability To Taxation" means any Actual Liability to Taxation
and/or Effective Liability to Taxation and/or other payment
referred to in clause 3.
1.1.6 "Non-Availability" includes in relation to a Relief the
reduction, modification, loss, claw-back, counteraction,
disallowance or cancellation of that Relief or right to
repayment of Taxation or a failure to obtain a Relief or to
receive the benefit of a right to repayment o Taxation to
which the Company was or reasonably assumed it was entitled.
1.1.7 "Relief" means any loss, relief, allowance, exemption, credit,
set-off, charge or deduction or right to repayment of Taxation
in respect of any Taxation for the
70
71
purposes of computing income profits or gains for Taxation,
including (without limitation) losses within the meaning of
section 393 of the Taxes Act.
2. INTERPRETATION
2.1 Reference to income or profits or gains, earned, accrued or received
includes income or profits of gains deemed to have been, treated as or
regarded as earned, accrued, received or otherwise arising for the
purposes of any Taxation legislation.
2.2 Reference to a Claim for Taxation shall include any Claim whether made
before or after the date of this Agreement (which has not been
satisfied at that date).
2.3 There shall be excluded (without limitation) from the meaning of
"ordinary course of business" any Event which results in or involves
the following:
2.3.1 any Taxation arising under Part VIII of the Taxes Management
Xxx 0000 (charges on non-residents);
2.3.2 any Taxation arising under Part XVII of the Taxes Act (tax
avoidance);
2.3.3 any Taxation arising in respect of any distribution (as
defined in Part VI of the Taxes Act) or deemed distribution;
2.3.4 any Taxation arising in respect of the acquisition, disposal
or supply or deemed acquisition, disposal or supply of any
assets, goods, service or business facility of any kind
(including a loan of money or the letting, hiring or licensing
of any tangible or intangible property) for a consideration
deemed for Taxation purposes to be in excess of that (if any)
actually received or for a consideration deemed for Taxation
purposes to be less than that actually given;
2.3.5 any Taxation arising in respect of a transaction which may
result in the Company or the AES Buyer becoming liable to pay
or bear Taxation chargeable directly or primarily against or
attributable directly or primarily to another person, firm or
company other than any Taxation which the Company has deducted
pursuant to the provisions of section 203 of the Taxes Act;
2.3.6 any Taxation which the Company failed to deduct or which
arises as a result of a failure by the Company to deduct or
duly account for Taxation; and
2.3.7 any Taxation arising from the disposal or acquisition or
deemed disposal or acquisition of any asset other than trading
stock for a consideration or deemed consideration in excess of
(pound)10,000.
71
72
2.4 Any reference to an "Effective Liability to Taxation" shall be construed
as a reference to:
2.4.1 the set-off of any Relief against any Actual Liability to
Taxation or against any income, profit or gains in respect of
which the Covenantors would, but for such set-off, have been
liable under clause 3.1 and, for the purposes of clause 3.1,
the amount of such an Effective Liability to
Taxation arising as a result of such set-off will be an amount
equal to the amount of Taxation saved as a result of the
Set-off; or
2.4.2 the non-availability (in whole or in part) of any Relief taken
into account in computing any provision for current or
deferred Taxation in the Accounts and, for the purposes of
clause 3.1, the amount of such Effective Liability to Taxation
shall be:
(a) if the Relief was a deduction from or set-off against
Taxation or a right to repayment of Taxation, the
amount of that Relief; or
(b) in any other case, the amount of Taxation that would
have been saved but for such non-availability on the
assumption that the Relief was available and was
capable of being fully utilised and was so utilised
immediately prior to it becoming non-available.
2.5 Any reference to a "clause" shall be to a clause in this Schedule
unless stated otherwise.
3. COVENANTS
3.1 Subject as hereinafter provided the AES Seller hereby covenants to pay
to the AES Buyer an amount equal to:
3.1.1 any Actual Liability to Taxation resulting from or by
reference to:
(a) any income, profits or gains earned, accrued or
received on or before the date of this Agreement; or
(b) any Event which occurred on or before such date or
was deemed to occur on or before such date for the
purposes of Taxation whether alone or in conjunction
with other such Events; or
(c) the provisions of section 767A of the Taxes Act or
sections 179, 190 or 191 of the TCGA in relation to
corporation tax assessed on any company remaining
unpaid where the company in question is the AES
Seller or was under the control of the AES Seller; or
72
73
(d) any Event occurring after Completion in pursuance of
a legally binding obligation or arrangement in either
case whether or not conditional incurred or entered
into on or before Completion;
3.1.2 any Effective Liability to Taxation;
3.1.3 any payment made by the Company, whether to a Taxation
Authority or not, where such payment is made between the Last
Accounting Date and Completion in respect of an Actual
Liability to Taxation that would have been a liability of the
AES Seller under clause 3.1.1 but for such payment;
3.1.4 any reasonable costs and expenses properly incurred by the AES
Buyer and/or the Company in connection with any such Liability
to Taxation or in taking or defending any action under this
Schedule in respect of which the AES Buyer ultimately proves
successful;
3.1.5 any liability of the Company to pay or repay an amount in
respect of Taxation under any agreement, indemnity, guarantee,
covenant, mortgage or charge or other contractual obligation
entered into on or before Completion; and
3.1.6 any Liability to Taxation, and all reasonable costs and
expenses properly incurred by the AES Buyer and/or the Company
in connection with any such Liability to Taxation, which
arises as a direct consequence of:
(a) the interim dividend of (pound)2,300,000 declared and
paid by the Company on 20th March 1998;
(b) the issue and allotment of 2,300,000 Shares at par by
the Company to Anglian Water International Holdings
Limited on 23rd March 1998; and/or
(c) the transfer of the Shares from Anglian Water
International Holdings Limited to the AES Seller on
24th March 1998.
3.2 In respect of payments made pursuant to the covenants contained within
this Indemnity:
3.2.1 all sums payable by the AES Seller to the AES Buyer shall be
paid free and clear of all deductions, withholdings, set-off$
or counterclaims whatsoever save only as may be required by
law,
3.2.2 if any deductions or withholdings are required by law to be
made from any sums, the AES Seller shall be obliged to pay the
AES Buyer such further amount as will, after the deduction or
withholding has been made, leave the AES Buyer with the same
73
74
amount as it would have been entitled to receive in the
absence of such requirement to make a deduction or
withholding; and
3.2.3 if any sum payable by the AES Seller to the AES Buyer under
clause 3 (including clause 3.2.2 and this clause 3.2.3) shall
be subject to an Actual Liability to the Taxation in the hands
of the AES Buyer or would have been so subject but for the
availability of a Relief, the AES Seller shall pay to the AES
Buyer such further sum equal to such Actual Liability to
Taxation.
4. EXCLUSIONS
4.1 The covenants by the AES Seller in clause 3.1 shall not apply to any
Liability to Taxation:
4.1.1 to the extent that provision or reserve in respect of any
relevant Actual Liability to Taxation was taken into account
in computing any provision or reserve for current or deferred
Taxation in the Accounts;
4.1.2 for which the Company is or may become primarily liable as a
result of transactions entered into in the ordinary course of
its business after the Last Accounting Date and before the
date of this Agreement; or
4.1.3 in respect of which provision or reserve has been made in the
Accounts which is insufficient only by reason of any increase
in rates of Taxation made after the date of this Agreement.
4.2 The AES Seller shall not be liable in respect of any claim under this
Indemnity or under any of the Tax Warranties to the extent that the
claim arises or is increased as a consequence of:
4.2.1 the failure by the Company after Completion to make any claim,
election, surrender or disclaimer or to give any notice or
consent or to do any other thing the making, giving or doing
of which could have been performed by the Company and full
written details Of which have been given by the AES Seller to
the AES Buyer or the Company at least two months before the
date by which such thing has to be performed and which was
taken into account in computing any provision for current or
deferred Taxation which appears in the Accounts (or
eliminating any provision for current or deferred Taxation
which, but for such Relief, would have appeared in the
Accounts);
4.2.2 the withdrawal or amendment by the Company after Completion of
any claim for capital allowances made by the Company prior to
the last Accounting Date;
4.2.3 a voluntary disclaimer, claim or election made or notice or
consent given by the AES Buyer or the Company after Completion
which could reasonably have been avoided
74
75
(otherwise than at the request of the AES Seller under the
provisions of this Agreement and otherwise than pursuant to an
obligation, whether legally binding or not, incurred prior to
the date of this Agreement) and which the AES Buyer was or
ought reasonably to have been aware would give rise to a
Liability or Taxation;
4.2.4 a cessation of the trade carried on by the Company or a major
change in the nature or conduct of the trade carried on by the
Company in either case after Completion;
4.2.5 the failure by the Company or the AES Buyer to comply with any
of their respective obligations under clause 5 (Mitigation);
4.2.6 any changes in the law (whether relating to Taxation, rates of
Taxation or otherwise) or the withdrawal of any extra
statutory concession previously made by the Inland Revenue or
any other Taxation Authority or change in the generally
published interpretation or practice of any Tax Authority and
whether or not having retrospective effect;
4.2.7 the Company ceasing to be taxed at the small companies' rate
of corporation tax as a result of the purchase of the $hares
by the AES Buyer;
4.2.8 any change in the basis on which the Company prepares its
accounts other than a change designed to comply with generally
accepted accounting principles at the date hereof; or
4.2.9 a voluntary act or omission by the AES Buyer or the Company
after Completion which could reasonably have been avoided
outside the ordinary course of the Company's business as
carried out at the date of Completion (unless pursuant to an
obligation, whether legally binding or not, incurred prior to
the date of this Agreement, or taking place with the approval
of the AES Seller) and which the AES Buyer was or ought
reasonably to have been aware would give rise to a Liability
or Taxation.
4.3 For the avoidance of doubt, limitations on the AES Seller's liability
in respect of Tax Claims are also contained in clause 5 of the
Agreement and where the provisions of that clause and this Indemnity
conflict, this Indemnity shall prevail.
5. MITIGATION OF LIABILITY
5.1 Where:
5.1.1 it appears to the AES Seller that a Liability to Taxation may
arise or has arisen in respect of which the AES Seller is or
will or may become liable to pay an amount to the AES Buyer
under this Agreement; and
75
76
5.1.2 the AES Seller has available amounts eligible for surrender by
way of group relief, or advance corporation tax the benefit of
which may be surrendered, or any other available reliefs any
of which, if surrendered to the Company, would reduce or
eliminate such Liability to Taxation or prevent such claim
from arising in whole or in part;
then, at the request and expense of the AES Seller, the Purchaser shall
(or shall procure that the Company shall) make all such claims for
group relief and give all other such claims, elections and consents as
the AES Seller may reasonably require, and do all such other things as
may be necessary for the Company or the AES Buyer to give effect to
such claims, surrenders, consents and elections.
5.2 Where the AES Seller has paid an amount to the AES Buyer under this
Indemnity or for breach of any Tax Warranty in respect of a liability
of the Company to account for advance corporation tax which is
subsequently (whether in whole or in part) set off against the
Company's liability to corporation tax for any account period under
section 239 of the Taxes Xxx 0000 the AES Buyer shall repay to the AES
Seller the whole or a proportional part as the case may be of the
amount previously paid by the AES Seller to the AES Buyer, such
repayment to be made:
5.2.1 where the Company receives a repayment of corporation tax on
the fifth Business Day after the date on which the Company
receives such repayment; and
5.2.2 where the Company satisfies a liability to pay corporation
tax, on the date of which such corporation tax would otherwise
have been required to be paid.
6. OVER-PROVISIONS
6.1 The AES Seller shall be entitled to require the AES Buyer to request
the auditors for the time being of the Company to determine (as experts
and not as arbitrators and at the expense of the AES Seller) whether
any provision for Taxation in the Accounts (excluding any provision for
deferred Taxation) has proved to be an over-provision and if the
auditors so determine the amount of such over-provision shall be dealt
with in accordance with clause 6.2.
6.2 Where it is provided under clause 6.1 that any amount is to be dealt
with in accordance with this clause:
6.2.1 the amount shall first be set off against any payment due from
the AES Seller under this Agreement; and
76
77
6.2.2 to the extent that there is any excess which is not exhausted
under clause 6.2.1 the remainder of that excess shall be
carried forward and set off against any future payment which
becomes due from the AES Seller under this Agreement.
7. CONDUCT OF NEGOTIATION AND PROCEEDINGS
7.1 If the AES Buyer or the Company becomes aware of a Claim relevant for
the purposes of this Schedule it shall as soon as reasonably
practicable and in any case within 10 Business Days give written notice
of it to the AES Seller.
7.2 The AES Buyer and the Company shall be at liberty to take any
reasonable action to avoid, resist, appeal, compromise or defend the
Claim provided that the AES Buyer:
7.2.1 keeps the AES Seller fully informed of all matters relating to
the Claim and delivers to the AES Seller copies of all
material correspondence relating to the Claim;
7.2.2 obtains the AES Seller's prior written approval (not to be
unreasonably withheld or delayed) to:
(a) the appointment of solicitors or other professional
advisers; and
(b) the content and sending to a Tax Authority of each
communication (written or otherwise) relating to the
Claim; and
7.2.3 obtains the AES Seller's prior written approval (not to be
unreasonably withheld or delayed) to:
(a) the settlement or compromise of the Claim; and
(b) the agreement of any matter which is likely to affect
the amount of the Claim or the future liability of
the AES Seller or any subsidiary or holding company
of the AES Seller in respect of Tax.
7.3 If the AES Seller notifies the AES Buyer that it does not approve any
matter referred to in clauses 7.2.2 and 7.2.3 above and agreement in
respect of such matter has not been reached with the AES Buyer within
10 Business Days of such notification, the AES Seller shall (subject to
clause 7.4 below) be at liberty to take over the conduct of all
negotiations and proceedings in relation to the relevant Claim and the
AES Buyer and the Company shall take such action in connection
therewith as the AES Seller may reasonably request, provided that the
AES Seller shall indemnify the AES Buyer and the Company against any
reasonable loses, costs, liabilities, damages and expenses which may be
incurred and provided that neither the AES Buyer nor the Company shall
be required to take any action which it reasonably considers will be
materially prejudicial to it.
77
78
7.4 If the AES Seller takes over the conduct of negotiations and
proceedings in relation to any Claim under clause 7.3 above, then the
AES Seller shall:
7.4.1 keep the AES Buyer fully informed of all matters relating to
the Claim and deliver to the AES Buyer copies of all material
correspondence relating to the Claim;
7.4.2 obtain the AES Buyer's prior written approval (not to be
unreasonably withheld or delayed) to:
(a) the appointment of solicitors or other professional
advisers; and
(b) the content and sending to a Tax Authority of each
communication (written or otherwise) relating to the
Claim; and
7.4.3 obtain the AES Buyer's prior written approval (not to be
unreasonably withheld or delayed) to:
(a) the settlement or compromise of the Claim; and
(b) the agreement of any matter which is likely to affect
the amount of the Claim or the future liability of
the Company or the AES Buyer or any subsidiary or
holding company of either of them in respect of Tax.
7.5 If the AES Buyer notifies the AES Seller that it does not approve any
matter referred to in clauses 7.4.2 and 7.4.3 above and agreement in
respect of such matter has not been reached with the AES Seller within
10 Business Days of such notification, the AES Buyer shall be at
liberty to take over again the conduct of all negotiations and
proceedings in relation to the relevant Claim and the provisions of
clauses 7.2 and 7.3 above shall apply to this further conduct.
8. TAX RETURNS
The AES Buyer or its duly authorised agents shall prepare the tax
returns and the computations of the Company for all accounting periods
ending on or before Completion. The AES Buyer shall deliver all tax
returns, computations and accompanying statutory accounts to the AES
Seller for comment before submitting them to any Tax Authority. The tax
returns, computations, claims and consents (so far as not already
authorised signed and submitted) shall be authorised signed and
submitted to the appropriate authority with such amendments as the AES
Seller or its duly authorised agents shall reasonably request as long
as the AES Buyer is not required to make any amendment which it
reasonably considers will be materially prejudicial to it or the
Company or any Subsidiary or Holding Company of either of them. The AES
Buyer or its authorised agents shall prepare all documentation and
78
79
deal with all matters (including correspondence) subject to clause 7,
relating to the said returns, computations, claims, consents and
surrenders PROVIDED that all of such documentation and correspondence
is approved by the AES Seller or its authorised agents prior to
submission to the Taxation Authority (such approval not to be
unreasonably withheld or delayed). If the AES Buyer or its agents
become aware of any matter raised by the Inland Revenue or other
relevant authority in relation to the tax returns and computations of
the Company for the accounting periods ending on or prior to Completion
the AES Buyer shall procure that written notice of the matter in
question be promptly given to the AES Seller.
9. DATE FOR PAYMENT
9.1 The AES Seller shall make payments to the AES Buyer under this Schedule
or under the Tax Warranties not later than on the following dates:
9.1.1 insofar as a Claim represents Taxation to be borne by the
Company but which has not yet become due, the AES Seller shall
take the payment in respect of that Claim (or so much thereof
as represents that Taxation) 5 Business Days before that
Taxation becomes due;
9.1.2 insofar as a Claim consists of the loss of a right to
repayment of Taxation, the AES Seller shall make the payment
in respect of that Claim (or so much thereof as represents
that loss) on the date on which that repayment would otherwise
have become due; and
9.1.3 in any other case, the AES Seller shall make the payment 5
Business Days after the date on which a notice containing a
written demand for the amount of the payment required to be
made is delivered to the AES Seller;
and for this purpose references to a date on which Taxation becomes due
include a reference to the date on which it would have become due were
it not for the availability of some Relief or right to repayment of
Taxation. Any payment which becomes due on a day which is not a
Business Day shall be paid on the next following Business Day. No
payment shall be treated as made until cleared funds in respect thereof
are available to the AES Buyer.
9.2 If any payment required to be made by the AES Seller under
this deed is not made by the due date for payment thereof,
then that payment shall carry interest from the due date of
payment until actual payment at the rate of 2 percent above
the Base Rate from time to time of Barclays Bank plc.
10. RECOVERY
10.1 Save where recovery is pursuant to clause 10.2 below if the AES Seller
has made a payment to the AES Buyer under this Indemnity or for breach
of any Tax Warranty and the Company
79
80
recovers from any third party (including any 'taxation Authority) any
sum (including any interest or repayment supplement) in respect of the
matter to which the payment made by the AES Seller relates the AES
Buyer shall procure that the Company accounts to the AES Seller for
such sum less any reasonable costs fees or expenses reasonably incurred
by the Company or the AES Buyer in recovering such sum up to the amount
of the payment previously made by the AES Seller to the AES Buyer in
respect of the matter in question under this Indemnity or for breach of
the Tax Warranty such payment to be made by the Company five Business
Days after the Company actually recovers the sum.
10.2 Subject to clause 10.1, if:
10.2.1 the Company or the AES Buyer is entitled to recover from
another person a sum in respect of a matter to which clause 3
or any Tax Warranty relates; and
10.2.2 the AES Seller has first agreed (to the AES Buyer's reasonable
satisfaction) to indemnify the AES Buyer and the Company
against all costs which the AES Buyer or the Company may incur
in connection with the taking of the following action,
then, subject to clause 10.3 and at the AES Seller's request, the A@S
Buyer shall, and shall ensure that the Company will, take any action
reasonably requested by the AES Seller to enforce recovery against the
other person.
10.3 The AES Buyer need not take any action which the AES Buyer or the
Company reasonably considers to be prejudicial to its commercial
interests.
10.4 The AES Buyer shall account to the AES Seller for the lesser of:
10.4.1 the sum recovered (including any interest paid by the, other
person), net of any Tax on the sum and that interest and less
any reasonable costs, fees or expenses reasonably incurred by
the Company or the AES Buyer in recovering such sum; and
10.4.2 the amount paid by the AES Seller under clause 3 or for breach
of any Tax Warranty in respect of that matter.
80
81
SCHEDULE 8
PEI CONTRACTS EXCLUDED FROM WARRANTY
PEI Current Contracts
NUMBER LOCATION
9351 Colorado Springs, CO
9456-1 Rockford, IL
9457 Norfolk, VA
9457A Norfolk, VA
9570 Xxxxxx, Xxxxxxx
0000 City of St Louis
9673 Mahopac, NY
9676 Spartanburg, SC
9677 Xxxxxxx, XX
0000 Corazal, PR
9679 Xxxxxxxx, XX
0000 Detroit Pilot Plant
9781 Philadelphia Pilot Plants
9782 EXXON Chemicals Corp.
9783 Coca, EL
9784 Xxxxx, Xxxxxxx
9785 WPT - New Orleans, LA
9786 Xxxxxxxx, XX
0000 Brooklyn College
9788 Shandaggen Farms
9889 Valley Pride
81
82
EXECUTED by the parties:
SIGNED by )
for and on behalf of ANGLIAN WATER )
SERVICES LIMITED )
SIGNED by )
for and on behalf of ANGLIAN WATER )
INC )
SIGNED by )
for and on behalf of ANGLIAN WATER )
INTERNATIONAL LIMITED )
SIGNED by )
for and on behalf of WATERLINK UK )
LIMITED )
SIGNED by )
for and on behalf of WATERLINK INC )
)
82
83
83
