Conformed Copy
DATED 12th February, 1998
THE GENERAL ELECTRIC COMPANY, P.L.C.
(the Covenantor)
and
MITEL TELECOM LIMITED
(the Purchaser)
-------------------------
DEED OF TAX COVENANT
-------------------------
▇▇▇▇▇▇▇▇▇ and May
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
(GJA/WNCW)
CONTENTS
Page
----
1. INTERPRETATION 1
2. COVENANT 8
3. LIMITS ON CLAUSE 2 9
4. EXCLUSIONS 11
5. MITIGATION 11
6. PAYMENT FOR GROUP RELIEF 12
7. OVER-PROVISIONS, RELIEFS, ETC 13
8. RECOVERY FROM OTHER PERSONS 14
9. CLAIMS PROCEDURE 14
10. TAX RETURNS 15
11. DUE DATE OF PAYMENT 16
12. DEDUCTIONS FROM PAYMENTS, ETC 17
13. SURRENDER OF GROUP RELIEF 18
14. COUNTER COVENANT 19
15. DEEMED END OF ACCOUNTING PERIOD 21
16. ▇▇▇ ▇▇
▇▇. REMEDIES AND WAIVERS 21
18. ASSIGNMENT 22
19. FURTHER ASSURANCE 23
20. NOTICES 23
21. COUNTERPARTS 24
22. TIME OF ESSENCE 24
23. INVALIDITY 24
24. GOVERNING LAW 24
25. JURISDICTION 24
THIS DEED OF TAX COVENANT is made on the 12th day of February, 1998
BETWEEN: -
(1) THE GENERAL ELECTRIC COMPANY, p.l.c.(registered in England No. 67307),
having its registered office at ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ (the
"Covenantor"); and
(2) MITEL TELECOM LIMITED (registered in England No. 1309629), having its
registered office at ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇(▇▇▇ "Purchaser").
NOW THIS DEED WITNESSES as follows:-
1. INTERPRETATION
In this deed of covenant:-
(i) the following expressions shall have the following meanings:-
"Accounts" means, in relation to each Group
Company, its audited balance sheet and
profit and loss account drawn up as at
the Accounts Date;
"Accounts Date" means 31st March, 1997;
"Agreement" means the agreement for the sale and
purchase of the Shares (as therein
defined) made between the Covenantor and
the Purchaser;
"Business Day" means a day (other than a Saturday or a
Sunday) on which banks are open for
business in London;
"Claim" means the issue of any notice, Tax
Assessment, letter or other document by
or on behalf of any Tax Authority or the
taking of any other action by or on
behalf of any Tax Authority from which
notice, letter, document or action it
appears either that a Tax Liability is
to be or has been imposed on a Group
Company or, in the context of clause 14
(Counter Covenant), that a liability or
increased liability to Tax is to be or
has been imposed on the Covenantor
and/or any of its subsidiaries;
"Completion" means completion of the sale and
purchase of the Shares under the
Agreement;
2
"Covenantor's Group" means The General Electric Company,
p.l.c. and all its subsidiaries or
subsidiary undertakings from time to
time other than the Group Companies;
"Distribution" has the meaning given in paragraph
(iii)(c);
"Event" includes (without limitation):-
(a) any transaction, act or omission
(whether or not a Group Company is a
party to it);
(b) the actual or deemed earning,
receipt or accrual for any Tax
purpose of any Income, Profits or
Gains;
(c) the incurring for any Tax purpose of
any loss or expenditure;
(d) the declaration, payment or making
of any Distribution;
(e) the sale and purchase of the Shares
pursuant to the Agreement; and
(f) Completion;
"Group" has the meaning given to it in the
Agreement;
"Group Company" has the meaning given to it in the
Agreement;
"Group Relief" means any loss, allowance or other
amount eligible for surrender by way of
group relief in accordance with the
provisions contained in sections 402 to
413 ICTA and any advance corporation tax
eligible for surrender in accordance
with section 240 ICTA;
"ICTA" means the Income and Corporation Taxes
▇▇▇ ▇▇▇▇;
"Income, Profits or Gains" has the meaning given in paragraph
(iii)(a);
"▇▇▇▇▇▇▇ ▇▇" has the meaning given to it in the
Agreement;
3
"Plessey" means Plessey Semiconductors Limited,
registered in England No. 705031 and
having its registered office at ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇;
"Proceedings" means any proceeding, suit or action
arising out of or in connection with
this deed;
"Purchaser's Tax Relief" means any Relief arising after
Completion and any Relief which was
treated as an asset of a Group Company
in preparing the Accounts (including any
Relief which has been taken into account
in computing any provision for deferred
Tax which appears in the Accounts or
which would have appeared in the
Accounts but for the assumed
availability of such Relief);
"Relief" means any relief, allowance or credit in
respect of any Tax, any deduction in
computing Income, Profits or Gains for
the purposes of any Tax and any right to
repayment of Tax;
"Severance Date" has the meaning given to it in clause 16
(VAT);
"Shares" has the meaning given to it in the
Agreement;
"Tax" means: -
(a) within the United Kingdom, all forms
of tax, duty, rate, levy, related
charge or other imposition or
withholding whatever and by whatever
authority imposed and includes
(without limitation) income tax
(including income tax required to be
deducted or withheld from or
accounted for in respect of any
payment), corporation tax, advance
corporation tax, capital gains tax,
capital transfer tax, inheritance
tax, petroleum revenue tax, value
added tax, customs duties, excise
duties, lottery duty, air passenger
duty, insurance premium tax, rates
(including the uniform business
rate), stamp duty reserve tax,
national insurance and other similar
contributions, any liability arising
under section 419, section 601 or
section 703
4
of ICTA and any other taxes, duties,
rates, levies, charges, imposts or
withholdings corresponding to,
similar to, replaced by or replacing
any of them, together with any
interest, penalty or fine in
connection with any Tax; and
(b) outside the United Kingdom, all
forms of tax, levy, duty, impost,
deduction, withholding or related
charge of any nature whatsoever,
including (without limitation) taxes
on gross or net Income, Profits or
Gains and taxes on receipts, sales,
use, capital, business, property,
consumption, transfer, occupation,
franchise, value added and personal
property, together with all
penalties, charges and interest
relating to any of them,
regardless (in either case) of whether
any such taxes, levies, duties, rates,
imposts, charges, withholdings,
penalties, fines and interest are
chargeable directly or primarily against
or attributable directly or primarily to
a Group Company or any other person and
of whether any amount in respect of any
of them is recoverable from any other
person as mentioned in clause 8
(Recovery from Other Persons);
"Tax Assessment" means any assessment, demand or other
similar formal notice of a Tax Liability
issued by or on behalf of any Tax
Authority by virtue of which a Group
Company or, in the context of clause 14
(Counter Covenant), the Covenantor or
any of its subsidiaries, either is
liable to make a payment of Tax or will,
with the passing of time, become so
liable (in the absence of any successful
application to postpone any such
payment);
"Tax Authority" means any taxing or other authority
(whether within or outside the United
Kingdom) competent to impose any Tax
Liability;
"Tax Liability" has the meaning given in paragraph
(ii)(a);
5
"Transfer Pricing Adjustment" means any allocation, reallocation,
apportionment, distribution or
redistribution of price, gross or net
income, costs, expenses, deductions,
credits or allowances or the
redetermination or recharacterisation of
any feature of any transaction by a Tax
Authority in respect of a transaction
between a Group Company and any other
Group Company or any member of the
Covenantor's Group in order to reflect
the terms, conditions and arrangements
which would have prevailed or been made
if the parties to the transaction had
been independent persons dealing at
arm's length;
"VAT" means the tax imposed by the Sixth
Council Directive of the European
Communities;
"VATA" means the Value Added Tax ▇▇▇ ▇▇▇▇;
"VAT Group" means any group of companies for the
purposes of section 43 VATA of which a
Group Company is or has been a member on
or before Completion; and
"Working Hours" means 9.30 a.m. to 5.30 p.m. on a
Business Day;
(ii) (a) references to any "Tax Liability" of a Group Company shall mean
any such liability, inability or charge as is mentioned in clause
2(i) to clause 2(iv) and also:
(A) any other liability of a Group Company to make a payment in
respect of Tax (whether or not that company is primarily so
liable and whether or not that company has any right of
recovery from any other person);
(B) the failure to obtain the benefit of any repayment of Tax
which has been taken into account or otherwise assumed to be
available in the preparation of the Accounts;
(C) the utilisation of a Purchaser's Tax Relief in circumstances
where, but for such utilisation, any such liability to Tax
as is mentioned in (A) above would have arisen in respect of
which the Purchaser would have been able to make a claim
under this deed;
(D) the loss of a Purchaser's Tax Relief (other than a Relief
arising after Completion); and
6
(E) any liability to repay the whole or any part of any payment
received or receivable by a Group Company in respect of a
surrender of Group Relief made before Completion;
and references to an "'A' Tax Liability", a "'B' Tax Liability"
(and so on) shall be construed accordingly; and
(b) in any case falling within sub-paragraph (a) of this paragraph,
the amount that is to be treated for the purposes of this deed as
a Tax Liability of the relevant Group Company shall be determined
as follows:-
(1) in respect of an 'A' Tax Liability, the amount of the
relevant payment which a Group Company is liable to make;
(2) in respect of a 'B' Tax Liability, the amount of the
relevant repayment the benefit of which is not obtained;
(3) in respect of a 'C' Tax Liability, the amount by which a Tax
Liability is reduced by means of the relevant utilisation of
a Purchaser's Tax Relief;
(4) in respect of a 'D' Tax Liability, the amount of Tax payable
(if any) which would not have been payable had there been no
loss of the relevant Purchaser's Tax Relief; and
(5) in respect of an 'E' Tax Liability, the amount of the
repayment which a Group Company is liable to make;
(iii) references to:-
(a) "Income, Profits or Gains" shall include development value and
any other standard or measure for the purposes of any Tax and
shall also include any income, profits or gains which are deemed
to be earned, accrued or received for the purposes of any Tax;
(b) Income, Profits or Gains (as defined in sub-paragraph (a) of this
paragraph) as being earned, accrued or received on or before a
particular date or in respect of a particular period shall mean
Income, Profits or Gains which are regarded as having been, or
are deemed to have been, earned, accrued or received on or before
that date or in respect of that period for the purposes of any
Tax;
(c) any "Distribution" shall include anything which is, or is deemed
to be, a dividend or distribution for the purposes of any Tax and
shall also include any other Event which gives rise to an
obligation to account for
7
advance corporation tax or amounts corresponding to or similar to
advance corporation tax;
(d) any Distribution as occurring on or before a particular date
shall include any Distribution which has fallen due to be made on
or before that date for the purposes of any Tax; and
(e) any "subsidiary of the Covenantor" shall mean any company of
which the Covenantor has control for the purposes of section 416
ICTA; and
(iv) unless otherwise specified:-
(a) references to clauses, sub-clauses, paragraphs and sub-paragraphs
are to clauses, sub-clauses, paragraphs and sub-paragraphs of
this deed;
(b) a reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been, or may
from time to time be, amended, modified or re-enacted;
(c) references to a "person" shall be construed so as to include any
individual, firm, company, government, state or agency of a state
or any joint venture, association or partnership (whether or not
having separate legal personality);
(d) references to a "company" shall be construed so as to include any
company, corporation or other body corporate, wherever and
however incorporated or established;
(e) the expression "body corporate" shall have the meaning given in
the Companies ▇▇▇ ▇▇▇▇;
(f) references to writing shall include any modes of reproducing
words in a legible and non-transitory form;
(g) references to times of the day are to London (United Kingdom)
time;
(h) headings to clauses and the schedule are for convenience only and
do not affect the interpretation of this deed;
(i) references to any English legal term for any action, remedy,
method of judicial proceeding, legal document, legal status,
court, official, or any legal concept or thing shall in respect
of any jurisdiction other than England be deemed to include what
most nearly approximates in that jurisdiction to the English
legal term; and
(j) (1) the rule known as the ejusdem generis rule shall not apply
and accordingly general words introduced by the word "other"
shall
8
not be given a restrictive meaning by reason of the fact
that they are preceded by words indicating a particular
class of acts, matters or things; and
(2) general words shall not be given a restrictive meaning by
reason of the fact that they are followed by particular
examples intended to be embraced by the general words.
2. COVENANT
Subject to the provisions of this deed, the Covenantor hereby covenants with the
Purchaser to pay to the Purchaser (so far as possible by way of repayment of the
consideration paid under the Agreement for the Shares) an amount calculated in
accordance with clause 1(ii)(b) in respect of any Tax Liability of a Group
Company (including a Tax Liability resulting from a Transfer Pricing Adjustment)
which has arisen or may arise in consequence of or in connection with any Event
which occurred or is deemed to occur on or before Completion, whether or not
that Tax Liability has been discharged on or before Completion save to the
extent that such discharge is taken into account in the Accounts, and also an
amount equal to any of the following:
(i) (for the avoidance of doubt) any liability or increased liability to
Tax of a Group Company which is chargeable directly or primarily
against or attributable directly or primarily to any company, not
being a Group Company, that may be treated for the purposes of any Tax
as being, or as having at any time been, either a member of the same
group of companies as the Covenantor or otherwise associated with the
Covenantor (a "Relevant Company"), and which arises as a result of the
failure of any Relevant Company to discharge that liability or
increased liability; or
(ii) any liability of a Group Company to account for VAT on supplies made
by another member of the VAT Group (not being a Group Company) before
the Severance Date, and any inability of a Group Company to claim any
credit or deduction for any amounts in respect of VAT incurred on
supplies made to that Group Company in the period (if any) between
Completion and the Severance Date to which that Group Company would
have been entitled had it not continued to be a member of the VAT
Group in that period;
(iii) any liability of Plessey or ▇▇▇▇▇▇▇ ▇▇ to account for VAT in respect
of supplies made between them in the period between the Accounts Date
and Completion, including any related interest, fine or penalty but
taking into account any corresponding benefit accruing to the
recipient of the supply;
(iv) any stamp duty which is charged on any document to which a Group
Company has become a party before Completion and by virtue of which
any Group Company has any right material to the business of that Group
Company, in circumstances where:-
9
(a) the production of that document is required by the Inland
Revenue; or
(b) that document must be produced before a registrar or other person
performing the functions of a registrar in order to establish the
title of a Group Company to any asset; or
(c) that document is to be given in evidence in civil proceedings in
the United Kingdom,
together with any interest, fine or penalty relating to any stamp duty
so charged; or
(v) any out-of-pocket legal and accounting costs and expenses reasonably
and properly incurred by the Purchaser and/or a Group Company in
connection either with any such Tax Liability, other liability,
inability or charge to stamp duty as is mentioned in this clause or
with any Claim therefor, or in taking or defending any action under
this deed or pursuant to clause 5 (Mitigation) or clause 6 (Payment
for Group Relief).
3. LIMITS ON CLAUSE 2
The covenant given in clause 2 (Covenant) shall not cover any Tax Liability of
any Group Company:-
(i) to the extent that provision or reserve in respect of that Tax
Liability was made in the Accounts; or
(ii) to the extent that that Tax Liability (not being such a liability,
inability or charge as is mentioned in clause 2(i) to clause 2(iv) nor
a Tax Liability resulting from a Transfer Pricing Adjustment) would
not have arisen but for an Event occurring in the ordinary course of
business of the relevant Group Company in the period between the
Accounts Date and Completion; or
(iii) to the extent that that Tax Liability arises or is increased as a
result only of any increase in rates of Tax or any change in law or
practice or any withdrawal of any extra-statutory concession by a Tax
Authority or any change in accountancy practice or principles
generally accepted in the relevant jurisdiction, being an increase,
withdrawal or change made, in any such case, after Completion with
retrospective effect; or
(iv) to the extent that that Tax Liability would not have arisen but for a
voluntary transaction, action or omission carried out or effected by a
Group Company at any time after Completion, other than any such
transaction, action or omission:-
(a) carried out or effected under a legally binding commitment
created on or before Completion; or
10
(b) carried out or effected in the ordinary course of the trade
carried on by the relevant Group Company as at Completion; or
(c) involving the proper disclosure to a Tax Authority of any matter
which the Purchaser reasonably considers to be relevant to the
calculation of a liability to Tax; or
(v) to the extent that that Tax Liability would not have arisen or would
have been reduced but for a failure or omission on the part of the
Purchaser and/or a Group Company after Completion to make any election
or claim any Relief, the making or claiming of which was taken into
account in computing the provision or reserve for Tax in the Accounts;
or
(vi) to the extent that that Tax Liability arises by reason of a voluntary
disclaimer by a Group Company after Completion of the whole or part of
any allowance (not being a Purchaser's Tax Relief) to which it is
entitled under Part II of the Capital Allowances Act 1990 or by reason
of the revocation by a Group Company after Completion of any claim for
Relief (not being a Purchaser's Tax Relief) made (whether
provisionally or otherwise) by it prior to Completion; or
(vii) to the extent that that Tax Liability arises as a result of any
changes after Completion in the bases, methods or policies of
accounting of the Purchaser or a Group Company, save where (in the
case of the bases, methods or policies of accounting of a Group
Company) such changes are required to conform those bases, methods or
policies with generally accepted bases, methods or policies as they
apply in the relevant jurisdiction at Completion or where such changes
are otherwise required to correct an improper basis, method or policy;
or
(viii) to the extent that that Tax Liability has been made good by insurers
or otherwise compensated for without cost to the Purchaser and/or a
Group Company; or
(ix) to the extent that any Income, Profits or Gains to which that Tax
Liability is attributable were actually earned and received by a Group
Company but were not (in either such case) reflected in the Accounts;
or
(x) to the extent that that Tax Liability arises or is increased as a
consequence of any failure by the Purchaser or a Group Company to
comply with any of their respective obligations under clauses 5
(Mitigation), 9 (Claims Procedure), 10 (Tax Returns), 13 (Surrender of
Group Relief) or 14 (Counter Covenant); or
(xi) to the extent that that Tax Liability would not have arisen but for a
cessation of, or any change in the nature or conduct of, any trade
carried on by a Group Company, being a cessation or change occurring
on or after Completion or a gradual change which began before
Completion.
11
4. EXCLUSIONS
(A) Save in relation to a Tax Liability arising from the fraud or wilful
misconduct of the Covenantor or a Group Company prior to Completion, the
Covenantor shall not be liable under this deed in respect of any Tax
Liability unless the Tax Liability in question shall have arisen within
seven years from Completion and the Purchaser shall by notice in writing to
the Covenantor have given such details of the Claim, the matter giving rise
to that Tax Liability and the amount claimed in respect thereof as are
available to it or to a Group Company.
(B) The provisions of sub-paragraph 3.1 of Schedule 4 to the Agreement shall,
to the extent that they refer to this deed, apply to this deed as if set
out herein.
5. MITIGATION
The Purchaser shall, at the direction in writing of the Covenantor, procure that
each Group Company take all such reasonable and lawful steps as the Covenantor
may specifically require by notice in writing following Completion to:-
(i) use in the manner hereinafter mentioned all such Reliefs other than
Purchaser's Tax Reliefs arising as a consequence of or by reference to
any Event occurring (or deemed to occur) on or before Completion or in
respect of a period ended on or before Completion as are available to
each Group Company to reduce or eliminate any Tax Liability in respect
of which the Purchaser would have been able to make a claim against
the Covenantor under this deed (such Reliefs including, without
limitation, Reliefs made available to a company by means of a
surrender from another company), the said use being to effect the
reduction or elimination of any such Tax Liability to the extent
specified by the Covenantor and permitted by law, and to provide to
the Covenantor, at the Covenantor's expense, a certificate from the
auditors (for the time being) of each relevant Group Company
confirming that all such Reliefs have been so used;
(ii) make all such claims and elections specified by the Covenantor in
respect of any accounting period of the relevant Group Company ending
on or before or deemed to end on or before Completion as have the
effect of reducing or eliminating any such Tax Liability as is
mentioned in paragraph (i), provided that no such claim or election
shall require that Group Company to use any Purchaser's Tax Relief;
and
(iii) allow the Covenantor to reduce or eliminate any Tax Liability by
surrendering or procuring the surrender by any company not being a
Group Company of Group Relief to any Group Company to the extent
permitted by law but without any payment being made in consideration
for such surrender.
12
6. PAYMENT FOR GROUP RELIEF
(A) Subject to the following provisions of this clause 6, the Purchaser shall
procure that (to the extent permitted by law) Plessey shall, in respect of
any accounting period ended on or before Completion, make, give or enter
into such claims, elections, notices or consents (whether unconditional or
conditional, whether or not forming part of any other return or tax
document and whether provisional or final, and including amendments to or
withdrawals of earlier claims, elections, notices or consents) as the
Covenantor shall direct in writing in connection with the surrender of any
Group Relief by any member of the Covenantor's Group (the "Relevant
Member") to Plessey. Except where Group Relief is surrendered to Plessey by
the Relevant Member in order to reduce or eliminate a Tax Liability in
respect of which the Purchaser would otherwise have been able to make a
claim against the Covenantor under this deed, payment shall be made in
respect of any such surrender as provided in the following provisions of
this clause 6.
(B) If, in respect of any accounting period ended on or before Completion:-
(i) Plessey has paid Tax and a surrender effected pursuant to sub-clause
(A) above has the effect of causing a repayment of some or all of that
Tax; or
(ii) provision for Tax is made in the Accounts and a surrender effected
pursuant to sub-clause (A) has the effect of discharging all or part
of the liability represented by that provision,
the Purchaser shall procure that a payment for Group Relief shall be made
in respect of any such surrender by Plessey to the Relevant Member to the
extent, if any, provided for by sub-clause (C) and at the time provided for
by sub-clause (D).
(C) The amount of any such payment as is referred to in sub-clause (B) shall be
equal to:-
(i) in a case where paragraph (B)(i) applies, the amount of Tax so repaid
(together with any repayment supplement or interest relating thereto);
and
(ii) in a case where paragraph (B)(ii) applies, the amount of Tax saved as
a result of the relevant surrender, up to a maximum of the amount in
respect of which provision is made in the Accounts.
(D) Any payment under sub-clause (B) shall be made:-
(i) in a case where paragraph (B)(i) applies, on the date two Business
Days after the date on which such repayment is received or would be
received but for being offset by some other liability to Tax; and
(ii) in a case where paragraph (B)(ii) applies, on the later of the date on
which such Tax would have become due and payable and two Business Days
after
13
the date on which notice is given by the Covenantor to the Purchaser
of such surrender.
(E) If a payment is made under sub-clause (B) and the surrender to which it
relates is subsequently determined to have been excessive, invalid or to
any extent ineffective, then the Covenantor shall procure that the payment
so made (or so much of it as relates to such part of the surrender found to
be excessive, invalid or ineffective) shall be refunded as soon as
practicable thereafter, together with interest from the date of payment
until the date of the refund at the rate of 2 per cent. above the base rate
from time to time of National Westminster Bank plc.
7. OVER-PROVISIONS, RELIEFS, ETC.
(A) If the auditors for the time being of the relevant Group Company shall
certify (at the request and expense of the Covenantor) that any provision
for Tax in the Accounts (excluding any provision for deferred Tax and, for
the avoidance of doubt, not including any provision for anything other than
Tax) has proved to be an over-provision, then the amount of such
over-provision shall be dealt with in accordance with sub-clause (C).
(B) If the auditors for the time being of the relevant Group Company shall
certify (at the request and expense of the Covenantor) that any Tax
Liability which has resulted in a payment having been made by the
Covenantor under this deed gives rise to a Relief for that Group Company
which would not otherwise have arisen, then the amount of that Relief shall
be dealt with in accordance with sub-clause (C); provided that if the
Relief in question is a deduction from or offset against Income, Profits or
Gains, the amount to be so dealt with shall be a sum equal to the amount of
Tax that is saved through the use of that Relief.
(C) Where it is provided under sub-clause (A) or (B) that any amount (the
"Relevant Amount") is to be dealt with in accordance with this sub-clause:-
(i) the Relevant Amount shall first be set off against any payment then
due from the Covenantor under this deed or in respect of the
warranties relating to Tax which appear in Schedule 3 to the Agreement
(the "Tax Warranties"); and
(ii) to the extent there is an excess, a refund shall be made to the
Covenantor of any previous payment or payments made by the Covenantor
under this deed or in respect of the Tax Warranties (and not
previously refunded under this clause) up to the amount of such
excess; and
(iii) to the extent that the excess referred to in paragraph (ii) of this
sub-clause is not exhausted under that paragraph, the remainder of
that excess shall be carried forward and set off against any future
payments which become due from the Covenantor under this deed or in
respect of the Tax Warranties.
14
(D) Where any such certification as is mentioned in sub-clause (A) or (B) has
been made, the Covenantor, the Purchaser or the relevant Group Company may
(at the expense of the person making the request) request the auditors for
the time being of that Group Company to review such certification in the
light of all relevant circumstances, including any facts which have become
known only since such certification, and to certify whether such
certification remains correct or whether, in the light of those
circumstances, the amount that was the subject of such certification should
be amended.
(E) If the auditors certify under sub-clause (D) that an amount previously
certified should be amended, that amended amount shall be substituted for
the purposes of sub-clause (C) as the Relevant Amount in respect of the
certification in question in place of the amount originally certified, and
such adjusting payment (if any) as may be required by virtue of the
above-mentioned substitution shall be made as soon as practicable by the
Covenantor or (as the case may be) to the Covenantor.
8. RECOVERY FROM OTHER PERSONS
If, in the event of any payment becoming due from the Covenantor under clause 2
(Covenant), a Group Company either is immediately entitled at the due date for
the making of that payment to recover from any person (including any Tax
Authority) any sum in respect of the Tax Liability that has resulted in that
payment becoming due from the Covenantor, or at some subsequent date becomes
entitled to make such a recovery, then the Purchaser shall procure that the
Group Company entitled to make that recovery shall promptly notify the
Covenantor of its entitlement and shall, if so required in writing by the
Covenantor and at the Covenantor's sole expense, take appropriate steps to
enforce that recovery (keeping the Covenantor fully and promptly informed of the
progress of any action taken); and if the Covenantor has made a payment under
clause 2 (Covenant) in respect of the Tax Liability in question, the Purchaser
shall account to the Covenantor for whichever is the lesser of:-
(i) any sum so recovered by the relevant Group Company in respect of that
Tax Liability (including any interest or repayment supplement paid by
the Tax Authority or other person on or in respect thereof less any
Tax chargeable on that Group Company in respect of that interest); and
(ii) the amount paid by the Covenantor under clause 2 (Covenant) in respect
of that Tax Liability.
9. CLAIMS PROCEDURE
(A) Upon the Purchaser or a Group Company becoming aware of a Claim relevant
for the purposes of clause 2 of this deed, the Purchaser shall as soon as
reasonably practicable give written notice of that Claim to the Covenantor
or, as the case may be, shall procure that the relevant Group Company give
written notice of that Claim to the Covenantor as soon as reasonably
practicable, and the Purchaser shall further procure that the relevant
Group Company (if the Covenantor shall indemnify the
15
Purchaser and/or the Group Company in question to their reasonable
satisfaction against all losses, costs, damages and expenses, including
interest on overdue Tax, which may be incurred thereby) take such action
and give such information and assistance in connection with the affairs of
the relevant Group Company as the Covenantor may reasonably and promptly by
written notice request to avoid, resist, appeal or compromise the Claim and
in particular, to the extent that a Claim relates to a Transfer Pricing
Adjustment, that the relevant Group Company send to the Covenantor a draft
of any letter or other document which it is proposed be sent or made
available to a Tax Authority and that before the letter or other document
is so sent or made available it is amended in accordance with any
reasonable request of the Covenantor made by notice in writing to the
Purchaser within 21 days of the date on which the said draft is sent to the
Covenantor;
PROVIDED THAT the Purchaser shall not be obliged to procure that a Group
Company appeal against any Tax Assessment if, the Covenantor having been
given written notice of the receipt of that Tax Assessment in accordance
with the preceding provisions of this sub-clause, that Group Company has
not within 21 days thereafter received specific instructions in writing
from the Covenantor, in accordance with the preceding provisions of this
sub-clause, to make that appeal and the Purchaser shall not be obliged to
procure that a Group Company contest any Tax Assessment before any court or
other appellate body (excluding the authority or body demanding the Tax in
question) unless the Covenantor furnishes the Purchaser with the written
opinion of tax counsel of not less than ten years' standing to the effect
that an appeal against the Tax Assessment in question is on a balance of
probabilities likely to be won or is (comparing the amount of Tax demanded
with the cost of making the appeal) otherwise reasonable.
(B) The actions which the Covenantor may reasonably request under sub-clause
(A) shall include (without limitation) the relevant Group Company applying
to postpone (so far as legally possible) the payment of any Tax and/or
allowing the Covenantor to take on or take over at its own expense the
conduct of all or any proceedings of whatsoever nature arising in
connection with the Claim in question, and, if the Covenantor takes on or
takes over the conduct of proceedings, the Purchaser shall provide and
shall procure that the relevant Group Company provide such information and
assistance as the Covenantor may reasonably require in connection with the
preparation for and conduct of those proceedings.
10. TAX RETURNS
(A) The Covenantor or its duly authorised agent shall prepare the Tax returns
of each Group Company and any related documentation required by a Tax
Authority for all accounting periods ended on or prior to the Accounts
Date, to the extent that the same shall not have been prepared before
Completion, and the Covenantor shall ensure that a copy of the Tax returns
and any such other documentation is received by the Purchaser not less than
ten Business Days before the date by which the Tax returns or documentation
are to be received by the relevant Tax Authority.
16
(B) The Purchaser shall procure that the Group Companies shall cause the
returns mentioned in sub-clause (A) to be authorised, signed and submitted
to the appropriate authority without amendment or with such amendments as
the Covenantor shall agree and shall give the Covenantor or its agent all
such assistance as may be required to agree those returns with the
appropriate authorities;
PROVIDED THAT the Purchaser shall not be obliged to procure that a Group
Company take any such action as is mentioned in this sub-clause in relation
to any Tax return that is not true and accurate in all material respects.
(C) The Covenantor or its duly authorised agent shall prepare all documentation
and deal with all matters (including correspondence) relating to the Tax
returns of each Group Company for all accounting periods ended on or prior
to the Accounts Date and the Purchaser shall procure that each Group
Company shall afford such access to its books, accounts and records as is
necessary and reasonable to enable the Covenantor or its duly authorised
agent to prepare those returns and conduct matters relating thereto in
accordance with the Covenantor's rights under this clause.
(D) The Purchaser shall procure that the Covenantor is sent a draft of the Tax
returns of each Group Company for the accounting period beginning before
and ending on or after Completion at least one month before its intended
submission to a Tax Authority and that its final form contains such
alterations as the Covenantor may require in respect of any matter which
might give rise to a Transfer Pricing Adjustment and also, in the case of
Plessey, in respect of any matter which to a material extent affects or
might affect the amount of Group Relief available for surrender under
clause 13 (Surrender of Group Relief).
(E) Nothing done by any Group Company pursuant to this clause shall in any
respect restrict or reduce any rights the Purchaser may have to make a
claim against the Covenantor under this deed in respect of any such Tax
Liability as is mentioned in clause 2 (Covenant).
11. DUE DATE OF PAYMENT
(A) Where the Covenantor becomes liable to make any payment under clause 2
(Covenant) in respect of a charge to stamp duty, the due date for the
making of that payment shall be the date which is three days after the
Covenantor has been sent a copy of the document, duly stamped, which has
given rise to that liability and in addition to any amount so payable the
Covenantor shall add to that amount six days' interest, calculated on a
daily basis at the base rate from time to time of Midland Bank plc.
(B) In any other case where the Covenantor becomes liable to make any payment
under clause 2 (Covenant), the due date for the making of that payment
shall be the date falling seven days after the date when the Covenantor has
been served notice by the Purchaser that the Covenantor has a liability for
a determinable amount under clause 2 (Covenant) or, if later:-
17
(i) in the case of an 'A' Tax Liability, the date three days before the
last date on which the relevant Group Company would have had to pay
the Tax that has given rise to the Covenantor's liability under this
deed in order to avoid incurring a liability to interest or a charge
or penalty in respect of that Tax Liability;
(ii) in the case of a 'B' Tax Liability, the date on which the relevant
repayment would have been made;
(iii) in the case of a 'C' Tax Liability, the date on which the amount of
Tax in question would have been payable but for the relevant
utilisation of a Purchaser's Tax Relief;
(iv) in the case of a 'D' Tax Liability, the date three days before the
date on which the Tax in question becomes payable as a result of the
loss of the relevant Purchaser's Tax Relief;
(v) in the case of an 'E' Tax Liability, the date three days before the
date on which the relevant repayment is to be made,
provided that, in the case of a 'B' Tax Liability, a 'C' Tax Liability, a
'D' Tax Liability or an 'E' Tax Liability, the Purchaser must when serving
notice also notify the Covenantor that the auditors for the time being of
the relevant Group Company have certified that the Covenantor has that
liability for a determinable amount.
(C) If any payment required to be made by the Covenantor under this deed is not
made by the due date for the making thereof, then, except to the extent
that the Covenantor's liability under clause 2 (Covenant) compensates the
Purchaser for the late payment by virtue of its extending to interest and
penalties, that payment shall carry interest from that due date until the
date when the payment is actually made at the rate of 2 per cent. above the
base rate from time to time of Midland Bank plc, calculated on a daily
basis.
12. DEDUCTIONS FROM PAYMENTS, ETC.
(A) All sums payable by the Covenantor to the Purchaser under this deed
(including for the avoidance of doubt all related or consequential costs
and expenses) shall be paid free and clear of all deductions or
withholdings whatsoever, save only as may be required by law.
(B) If any deductions or withholdings are required by law to be made from any
of the sums payable as mentioned in sub-clause (A), the Covenantor shall be
obliged to pay to the Purchaser such sum as will, after the deduction or
withholding has been made, leave the Purchaser with the same amount as it
would have been entitled to receive in the absence of any such requirement
to make a deduction or withholding.
18
(C) If any sum payable by the Covenantor to the Purchaser under this deed
(other than interest under clause 11 (Due Date of Payment)) shall be
subject to a Tax Liability in the hands of the Purchaser, the Covenantor
shall be under the same obligation to make an increased payment in relation
to that Tax Liability as if the liability were a deduction or withholding
required by law.
13. SURRENDER OF GROUP RELIEF
(A) The Purchaser shall procure that Plessey shall surrender to the Covenantor
or to such subsidiary or subsidiaries of the Covenantor as the Covenantor
may specify all such Group Relief as the Covenantor may at its sole
discretion direct in writing in respect of any accounting period of Plessey
ended on or before Completion.
(B) The Purchaser hereby undertakes that it shall, and shall procure that
Plessey will, use all reasonable endeavours to procure that full effect is
given to the surrenders to be made under sub-clause (A) and that such
surrenders are allowed in full by the Inland Revenue and (without prejudice
to the generality of the foregoing) the Purchaser shall procure that
Plessey shall sign and submit to the Inland Revenue all such notices of
consent to surrender (including provisional or protective notices of
consent in cases where any relevant Tax computation has not yet been
agreed) and all such other documents and returns as may be necessary to
secure that full effect is given to this clause.
(C) In consideration of each of the surrenders to be made under sub-clause (A),
the Covenantor shall pay to Plessey in respect of the surrender in question
or, as the case may be, shall procure that the relevant subsidiary or
subsidiaries of the Covenantor shall pay to Plessey a sum equal to the
amount of corporation tax from which the company that is the claimant
company in respect of such surrender has been relieved by virtue of that
surrender being validly and effectively made; PROVIDED THAT the provisions
of this sub-clause shall not have effect if and to the extent that payment
in respect of any such surrender has been made on the basis specified in
the foregoing provisions of this sub-clause on or before the date of this
deed.
(D) Any sum payable under sub-clause (C) shall be paid on the date on which any
corporation tax chargeable on the taxable profits of the company that is
the claimant company in respect of the surrender in question for the
accounting period of its to which that surrender relates becomes due and
payable (or would have become due and payable had the claimant company
incurred any liability to corporation tax in respect of that accounting
period).
(E) If any sum is paid in accordance with sub-clause (C), the Purchaser shall
within three Business Days pay to the Covenantor an equivalent amount by
way of addition to the consideration payable under the Agreement.
19
14. COUNTER COVENANT
(A) The Purchaser hereby covenants with the Covenantor to pay to the Covenantor
an amount equal to any of the following:-
(i) any liability or increased liability to Tax of the Covenantor or any
of its subsidiaries which arises as a result of or by reference to any
reduction or disallowance of Group Relief that would otherwise have
been available to the Covenantor or its relevant subsidiary or
subsidiaries where and to the extent that such reduction or
disallowance occurs as a result of or by reference to:-
(a) any total or partial withdrawal effected by a Group Company after
Completion, of its own accord or at the Purchaser's behest, of
any surrender of Group Relief that was submitted by that Group
Company to the Inland Revenue on or before Completion in respect
of any accounting period ended on or before Completion; or
(b) any total or partial disclaimer made by a Group Company after
Completion, of its own accord or at the Purchaser's behest, of
any capital allowances available to that Group Company in respect
of any accounting period ended on or before Completion
save where any such withdrawal or disclaimer is made at the express
written request of the Covenantor;
(ii) any liability or increased liability to Tax of the Covenantor or any
of its subsidiaries:-
(a) which is caused by the failure of a Group Company to discharge a
liability to Tax (a "Group Company Liability") which arises in
respect of an accounting period beginning before Completion; or
(b) which is otherwise properly attributable to a Group Company (also
a "Group Company Liability")
other than (in either case) a Group Company Liability in respect of
which the Purchaser could make a claim under clause 2 (Covenant); and
(iii) any reasonable out-of-pocket legal and accounting costs and expenses
reasonably and properly incurred by the Covenantor or any of its
subsidiaries in connection with any such liability or increased
liability to Tax (or Claim therefor) or in taking any action under
this clause.
(B) (i) Upon the Covenantor becoming aware of a Claim relevant for the
purposes of sub-clause (A), the Covenantor shall forthwith give
written notice of that Claim to the Purchaser, and the Covenantor
shall or, as the case may be, shall procure that the relevant
subsidiary will (if the Purchaser shall indemnify the
20
Covenantor and/or the relevant subsidiary to the Covenantor's
reasonable satisfaction against all losses, costs, damages and
expenses, including interest on overdue Tax, which may be incurred
thereby) take such action and give such information and assistance in
connection with the affairs of the Covenantor and/or the relevant
subsidiary as the Purchaser may reasonably and promptly by written
notice request to avoid, resist, appeal or compromise the Claim;
PROVIDED THAT the Covenantor shall not be obliged to appeal against
any Tax Assessment or to procure that any subsidiary appeals against
any Tax Assessment if, the Purchaser having been given written notice
of the receipt of that Tax Assessment in accordance with the preceding
provisions of this sub-clause, the Covenantor or the relevant
subsidiary has not within 21 days thereafter received instructions in
writing from the Purchaser, in accordance with the preceding
provisions of this sub-clause, to make that appeal.
(ii) The actions which the Purchaser may reasonably request under paragraph
(i) of this sub-clause shall include (without limitation) the
Covenantor and/or the relevant subsidiary applying to postpone (so far
as legally possible) the payment of any Tax and/or allowing the
Purchaser to take on or take over at its own expense the conduct of
all or any proceedings of whatsoever nature arising in connection with
the Claim in question, and, if the Purchaser takes on or takes over
the conduct of proceedings, the Covenantor shall provide and/or shall
procure that the relevant subsidiary shall provide such information
and assistance as the Purchaser may reasonably require in connection
with the preparation for and conduct of those proceedings.
(C) (i) Where the Purchaser becomes liable to make any payment under
sub-clause (A), the due date for the making of that payment shall be
the date that is the last date on which the Covenantor or, as the case
may be, the relevant subsidiary, would have had to have paid to the
appropriate Tax Authority the Tax that has given rise to the
Purchaser's liability under sub-clause (A) in order to avoid incurring
a liability to interest or a charge or penalty in respect of that
amount of Tax.
(ii) If any payment required to be made by the Purchaser under sub-clause
(A) is not made by the due date for the making thereof, then, except
to the extent that the Purchaser's liability under sub-clause (A)
compensates the Covenantor for the late payment by virtue of its
extending to interest and penalties, that payment shall carry interest
from that due date until the date when the payment is actually made at
the rate of 2 per cent. above the base rate from time to time of
National Westminster Bank plc.
(D) (i) All sums payable by the Purchaser to the Covenantor under this clause
shall be paid free and clear of all deductions or withholdings
whatsoever, save only as may be required by law.
21
(ii) If any deductions or withholdings are required by law to be made from
any of the sums payable as mentioned in paragraph (i) of this
sub-clause, the Purchaser shall be obliged to pay to the Covenantor
such sum as will, after the deduction or withholding has been made,
leave the Covenantor with the same amount as it would have been
entitled to receive in the absence of any such requirement to make a
deduction or withholding.
(iii) If any sum payable by the Purchaser to the Covenantor under this
clause (other than interest under sub-clause (C)) shall be subject to
a liability to Tax in the hands of the Covenantor, the Purchaser shall
be under the same obligation to make an increased payment in relation
to that liability to Tax as if the liability were a deduction or
withholding required by law.
15. DEEMED END OF ACCOUNTING PERIOD
For the purposes of any part of this deed other than clause 10 (Tax Returns),
the accounting period of each Group Company which began on 1st April, 1997 shall
be deemed to have ended at Completion.
16. VAT
The Covenantor shall procure that an application is made to H.M. Customs &
Excise pursuant to section 43(5) VATA for the exclusion of each Group Company
from the VAT Group (if any) of which that Group Company is currently a member
and for that exclusion to take effect at the earliest date on or after
Completion as is permitted by law (the "Severance Date").
17. REMEDIES AND WAIVERS
(A) No delay or omission on the part of any party to this deed in exercising
any right, power or remedy provided by law or under this deed or any other
documents referred to in it shall:-
(i) impair such right, power or remedy; or
(ii) operate as a waiver thereof.
(B) The single or partial exercise of any right, power or remedy provided by
law or under this deed shall not preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
(C) The rights, powers and remedies provided in this deed are cumulative and
not exclusive of any rights, powers and remedies provided by law.
22
18. ASSIGNMENT
(A) This deed and the benefits and obligations under it and any part of it
shall not be assignable except that the Purchaser may, upon giving written
notice to the Covenantor, assign the benefit (but not the burden) of this
deed to a member of the Purchaser's Group provided that
(i) any such assignee remains a member of the Purchaser's Group; and
(ii) before such assignee ceases to be a member of the Purchaser's Group,
the Purchaser will procure that the benefit of this deed is assigned
to the Purchaser or (upon giving further written notice to the
Covenantor) to another company within the Purchaser's Group (any such
further assignment to be subject to the same conditions as above); and
(iii) if the liability of the Covenantor shall be increased by reason of
such assignment, the assignee shall be entitled to claim against the
Covenantor only such amount as would equal the liability of the
Covenantor had no assignment taken place.
(B) This deed and the benefits and obligations under it and any part of it
shall not be assignable by the Covenantor except that the Covenantor may,
upon giving written notice to the Purchaser, assign the benefit (but not
the burden) of this deed to a member of the Covenantor's Group provided
that
(i) any such assignee remains a member of the Covenantor's Group; and
(ii) before such assignee ceases to be a member of the Covenantor's Group,
the Covenantor will procure that the benefit of this deed is assigned
to the Covenantor or (upon giving further written notice to the
Purchaser) to another company within the Covenantor's Group (any such
further assignment to be subject to the same conditions as above); and
(iii) if the liability of the Purchaser shall be increased by reason of
such assignment the assignee shall be entitled to claim against the
Covenantor only such amount as would equal the liability of the
Covenantor had no assignment taken place.
(C) Clause 2 (Covenant) shall cease to have effect for all purposes in relation
to any Group Company upon that Group Company ceasing to be owned by a
member of the Purchaser's Group.
(D) For the purposes of this clause "Purchaser's Group" means the Purchaser and
all its subsidiaries or subsidiary undertakings from time to time.
23
19. FURTHER ASSURANCE
Each of the parties shall from time to time, on being required to do so by any
other party to this deed now or at any time in the future, execute or procure
the execution of all such documents in a form satisfactory to the party
concerned and except as provided elsewhere in, and subject to the terms of the
Agreement, each of the parties shall at its own expense do or, so far as it is
able, procure to be done, all such acts as the parties may, in each such case,
reasonably consider necessary for giving full effect to this deed and securing
to them the full benefit of the rights, powers and remedies conferred upon them
in this deed.
20. NOTICES
(A) Any notice or other communication given or made under or in connection with
the matters contemplated by this deed shall, unless expressly stated
otherwise, be in writing, other than writing on the screen of a visual
display unit or other similar device which shall not be treated as writing
for the purposes of this clause.
(B) Any such notice or other communication shall be addressed as provided in
sub-clause (C) and sent by personal delivery or by first class post
PROVIDED THAT if, in accordance with the above provisions, any such notice
or other communication is given or made outside Working Hours, such notice
or other communication shall be deemed to be given or made at the start of
Working Hours on the next Business Day.
(C) The relevant addressee and address of each party for the purposes of this
deed, subject to sub-clause (D), are:-
Name of party Addressee Address
------------- --------- -------
The Covenantor Company Secretary ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
but from 1st March 1998,
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
The Purchaser Company Secretary ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
(D) A party may notify the other party to this deed of a change to its name,
relevant addressee or address for the purposes of sub-clause (C) PROVIDED
THAT such notification shall only be effective on:-
(i) the date specified in the notification as the date on which the change
is to take place; or
24
(ii) if no date is specified or the date specified is less than five clear
Business Days after the date on which notice is given, the date
falling five clear Business Days after notice of any such change has
been given.
21. COUNTERPARTS
(A) This deed may be executed in any number of counterparts, and by the parties
on separate counterparts, but shall not be effective until each party has
executed at least one counterpart.
(B) Each counterpart shall constitute an original of this deed, but all the
counterparts shall together constitute but one and the same instrument.
22. TIME OF ESSENCE
Save as otherwise expressly provided, time is of the essence of each provision
of this deed.
23. INVALIDITY
If at any time any provision of this deed is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, that shall not
affect or impair:-
(A) the legality, validity or enforceability in that jurisdiction of any other
provision of this deed; or
(B) the legality, validity or enforceability under the law of any other
jurisdiction of that or any other provision of this deed.
24. GOVERNING LAW
This deed shall be governed by and construed in accordance with English law.
25. JURISDICTION
Each party to this deed irrevocably agrees that any Proceedings against it may
be brought in the courts of England. Nothing contained in this clause shall
limit either party's rights to take Proceedings against the other in any other
court of competent jurisdiction, nor shall the taking of Proceedings in one or
more jurisdictions preclude the taking of Proceedings in any other jurisdiction,
whether concurrently or not, to the extent permitted by the law of such other
jurisdiction.
IN WITNESS WHEREOF this document has been executed and delivered as a deed the
day and year first before written.
Signed as a deed by )
THE GENERAL ELECTRIC ) /s/ ▇▇▇▇ ▇▇▇▇
COMPANY, p.l.c. acting by ) ......................................
) Director
)
and ) /s/ ▇. ▇▇▇▇▇▇
......................................
Director/Secretary
Signed as a deed by )
MITEL TELECOM LIMITED ) /s/ ▇. ▇▇▇▇▇▇▇
acting by ) ......................................
) Director
)
and ) /s/ ▇. ▇▇▇▇▇
......................................
Director/Secretary
