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EXHIBIT 10.4
DATED February 25, 1998
INSIGNIA FINANCIAL GROUP, INC.
- and -
XXXXXX XXXXXXX AND OTHERS
----------------------------------------
DEED OF WARRANTY AND INDEMNITY
collateral to offers for the
whole of the issued share
capital of Xxxxxxx Xxxxx Group Limited
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ASHURST XXXXXX XXXXX
Xxxxxxxxx Xxxxx
0 Xxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Tel: 0000-000 0000
Fax: 0000-000 0000
PVB/X00000000
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CONTENTS
CLAUSE PAGE
1. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. YOUR WATCH INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. NAME INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. SURMIA INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. PENSIONS INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7. GROSS UP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8. EARN OUT PROTECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 14
9. MANAGEMENT OF THE GROUP POST COMPLETION . . . . . . . . . . . . . . . 18
10. COVENANTORS' REPRESENTATIVE . . . . . . . . . . . . . . . . . . . . . 19
11. ANNOUNCEMENTS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12. COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13. EFFECT OF COMPLETION . . . . . . . . . . . . . . . . . . . . . . . . . 21
14. WAIVER, AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
17. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
18. GOVERNING LAW AND JURISDICTION . . . . . . . . . . . . . . . . . . . . 23
19. INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
20. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SCHEDULE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SCHEDULE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Warranty and Indemnity Defences . . . . . . . . . . . . . . . . . . . . . . . 65
SCHEDULE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Taxation Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SCHEDULE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
The Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SCHEDULE 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Part A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Part B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
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THIS DEED is made on
1998
BETWEEN:-
(1) INSIGNIA FINANCIAL GROUP, INC. whose registered office is at One
Insignia Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 (the
"OFFEROR"); and
(2) The Shareholders (other than the B Ordinary Shareholders) and the
holders of Options who accept the Offers contained in the Offer
Document (the "COVENANTORS").
(together the "PARTIES")
RECITALS
(A) Xxxxxxx Xxxxx Group Limited ("REGL") is a private company
incorporated in England under the Companies Acts under number
3350437.
(B) The Covenantors are at the date hereof the registered holders
and/or beneficial owners of all of the Covenantors' Shares.
(C) The Offeror has made an offer to acquire all of the Ordinary
Shares, B Ordinary Shares, C Ordinary Shares and Convertible Shares
of the Company issued and to be issued subject to, and on the terms
set out in, the Offer Document. The Offeror has also made the
Cancellation Alternative Offer to participants holding outstanding
options under the REGL Wider Share Ownership Scheme for shares in
the Company.
(D) The Covenantors have warranted to the Offeror in the terms of the
Warranties to the intent that the Offeror should rely on such
Warranties in making the Offers.
(E) Irrevocable undertakings have been given to the Offeror by certain
Covenantors and other Shareholders to accept the Offers with the
intention of inducing the Offeror to make the Offer.
(F) The obligations contained in this Deed are part of the Offers and
the signing and returning of the form of acceptance in accordance
with the Offer Document includes the giving of a power of attorney
for the purpose of signing this Deed on a Covenantor's behalf as
confirmation of the obligations set out herein.
THE PARTIES AGREE AS FOLLOWS:-
1. INTERPRETATION
1.1 The following provisions shall have effect for the interpretation of
this Deed, in addition to the definitions included within the text of
this Deed.
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1.2 The following words and expressions and abbreviations shall, unless
the context otherwise requires, have the following meanings:-
"ACCOUNTS" means the consolidated financial statements of the Company,
comprising the consolidated balance sheet, profit and loss account and
cash flow statement of the Group, together with the notes thereon as
at and for the six month period ended on the Accounts Date;
"ACCOUNTS DATE" means 31 October 1997;
"AMOUNT OF THE RELEVANT CLAIM" means the amount Finally Determined or
agreed by the Offeror and the Covenantors' Representative;
"APPROPRIATE PROPORTION" has the meaning set out in paragraph 1(d) of
Schedule 2;
"ASSOCIATED COMPANY" has the meaning set out in Sections 416 et seq.
T.A.;
"BASE AMOUNT" has the meaning ascribed to it in Appendix III of the
Offer Document (as amended from time to time by agreement between the
Offeror and the Covenantors' Representative);
"BUDGET" means the financial budget of the Company for the year ending
31 December 1998, to be approved by the Offeror;
"BUSINESS" means the businesses presently carried on by the Group
being those of real estate property advisers and related activities,
and any businesses acquired by the Group and not rejected under Clause
8.1(p);
"BUSINESS DAY" means a day on which clearing banks in both London and
New York are open for normal banking business;
"BUSINESS PLAN" means the qualitative analysis of the Budget for the
forthcoming financial year, as approved in writing by the Offeror;
"B ORDINARY SHARES" means the B class of ordinary shares of the
Company created by a shareholders' resolution passed on 20
February1998 and designated "B Ordinary Shares";
"B ORDINARY SHAREHOLDERS" means the holders of B Ordinary Shares;
"C ORDINARY SHARES" means the C class of ordinary shares of the
Company created by a shareholders' resolution passed on 20 February
1998 and designated "C Ordinary Shares";
"CAA" means the Capital Xxxxxxxxxx Xxx 0000;
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"CANCELLATION ALTERNATIVE" means the cancellation alternative offered
to participants holding Options under the REGL Wider Share Ownership
Scheme whereby, conditional on the Offers becoming unconditional, the
holders of Options will receive cash and Deferred Loan Notes in
exchange for cancellation of the Options held;
"COMMON STOCK" means Class 'A' common stock of $0.01 par value each in
the capital of the Offeror;
"COMPANY" means the company described in Recital (A) and, for the
purposes of the Indemnities and Schedule 1 includes the Xxxxxxx Xxxxx
Partnership prior to the transfer of the business and assets of the
business to the Company on 1 May 1997, and the Subsidiaries, all of
them and each of them as the context admits;
"COMPANIES ACTS" as defined in Section 744 of the Companies Xxx 0000,
together with the Companies Xxx 0000;
"COMPLETION" means the opening of business on the business day after
the Offers become or are declared unconditional in all respects;
"COMPLETION ACCOUNTS" means the unaudited consolidated financial
statements of the Company comprising the consolidated balance sheet,
profit and loss account and cash flow statement of the Group, together
with the notes thereon as at the end of the period ended on the
Completion Accounts Date and compiled in accordance with Schedule 5;
"COMPLETION ACCOUNTS DATE" means the last day of that month which is
closest to the date of Completion;
"CONNECTED PERSON" means a person shall be deemed to be connected with
another if that person is connected with another within the meaning of
Section 839 T.A.;
"CONSIDERATION" means the total consideration to be paid by the Offeror
pursuant to the Offer Document;
"CONVERTIBLE SHARES" means convertible shares in the capital of the
Company as specified in the Document of Company Details;
"COVENANTORS' REPRESENTATIVE" means the person appointed pursuant to
Clause 10;
"COVENANTORS' SHARES" means the Shares of which the Covenantors are
the registered holders and/or beneficial owners;
"COVENANTORS' SOLICITORS" means Messrs Gouldens, 00 Xxxxx Xxxxxx,
Xxxxxx XX0X OJJ;
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"DEFERRED LOAN NOTES" means the loan notes to be issued by the Offeror
pursuant to the terms set out in the Offer Document;
"DISCLOSURE LETTER" means a letter as of the date the Offers are made
pursuant to the Offer Document together with the agreed bundle
addressed by the Covenantors' Solicitors on behalf of the Covenantors
to the Offeror's Solicitors on behalf of the Offeror limiting the
scope of the Warranties;
"DISTRIBUTION" means a distribution as defined by Sections 209 to 211
(inclusive), T.A. and Section 418 T.A.;
"DOCUMENT OF COMPANY DETAILS" means the agreed document containing the
details of the Company and Subsidiaries including specific information
in respect of the Shares, Convertible Shares, Options, B Ordinary
Shares and C Ordinary Shares.
"EARN OUT" means that part of the Consideration potentially achievable
by the Covenantors in the form of Deferred Loan Notes;
"ENCUMBRANCE" means any mortgage, charge (whether fixed or floating),
pledge, lien, security interest or other third party right or interest
(legal or equitable) over or in respect of the relevant asset,
security or right;
"ERA" has the meaning defined in Warranty D.1 of Schedule 1;
"ESCROW AGENT" means the agent appointed by the Offeror in accordance
with the terms of the Escrow Mandate for the purpose of administering
the Escrow Fund;
"ESCROW MANDATE" means the Escrow Mandate in the agreed form entered
into by the Offeror and The Royal Bank of Scotland or such other
financial institution as shall be reasonably acceptable to the
Covenantors' Representative, as escrow agent, and certain shareholders
of the Company;
"ESCROW FUND" means the fund operated pursuant to the Escrow Mandate;
"FINAL DETERMINATION" and "FINALLY DETERMINED" means a final decision
of a court or tribunal of competent jurisdiction from which there is
no appeal or the right to appeal has not been made within the
applicable time limit exclusive of any extension of time granted at
the discretion of the Court;
"GROUP" means the Company and the Subsidiaries;
"HOLDING COMPANY" has the meaning set out in Section 736 Companies Xxx
0000;
"THE INDEMNITIES" means the indemnities set out in Clauses 3, 4, 5 and
6 of this Deed;
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"I.T.A." means the Inheritance Tax Xxx 0000;
"INTELLECTUAL PROPERTY" means the following in any part of the world
which, or the subject matter of which are used in the Business as
conducted at the date hereof:-
(i) patents, trade or service marks (whether registered or not),
registered designs, business names and applications and rights
to apply for registrations of any of the same;
(ii) copyrights, typographical rights, unregistered design rights,
rights in databases and all rights in the nature of the same;
(iii) know-how, inventions and confidential information; and
(iv) all intellectual property rights of a similar nature in any
jurisdiction howsoever called;
"MANAGEMENT" means Messrs Huntley, Froggatt, Xxxxxxxxx, Xxxxxx and
Xxxxx and, if any of them leaves employment with the Group, such
individual in employment with the Group as the others choose to
replace the person leaving;
"MARKET PRICE" as of any date means the average of the closing price of
the Common Stock over the five business days prior to such date;
"NET ASSET VALUE" means the amount determined on the basis set forth on
the consolidated balance sheet of the Group included in the Accounts
less work-in-progress and intangible assets, provided, however, that
any net assets or liabilities included on such balance sheet
attributable to the Transaction Loyalty Bonus, the REGL 1997 Unapproved
Share Option Scheme or any amounts comprising the Offers and other
consideration payable to the holders of B Ordinary Shares, in each case
net of any tax benefit therefrom, shall not be reflected in the
calculation of Net Asset Value, nor shall any capital provided to the
Group by the Offeror be included in such Net Asset Value.
"NON-ALTERNATIVE STOCK" means the Common Stock save for the Common
Stock issued as part of the Common Share Alternative (as that term is
defined in the Offer Document);
"OFFERS" means the offers made subject to and on the terms of the Offer
Document;
"OFFER DOCUMENT" means the document which contains the Offers made by
the Offeror for, inter alia, the Shares;
"OFFEROR'S GROUP" means the Offeror and its subsidiaries and subsidiary
undertakings from time to time;
"OFFEROR GROUP'S BUSINESS" means the business of the Offeror's Group
after Completion;
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"OFFEROR'S SOLICITORS" means Ashurst Xxxxxx Xxxxx of Xxxxxxxxx Xxxxx, 0
Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX;
"OPTIONS" means the outstanding options to subscribe for Shares;
"ORDINARY SHARES" means the class of ordinary shares of the Company;
"PARTNERSHIP ACCOUNTS" means the audited financial accounts of the
Xxxxxxx Xxxxx partnership prepared for the financial year ended 30
April 1997;
"PENSION FUND INDEMNITY" means the indemnity set out in Clause 6;
"PRINCIPAL AMOUNT OF DEFERRED LOAN NOTES TO BE ISSUED" shall have the
meaning ascribed to it in the Offer Document;
"PROPERTIES" means the properties described in Schedule 4;
"PENSION SCHEMES" has the meaning defined in Warranty F.1 of Schedule
1;
"RELEVANT BENEFITS" has the meaning defined in Warranty F.1. of
Schedule 1;
"REGL MODIFIED PRE-TAX PROFIT" has the meaning ascribed to it in
Appendix III of the Offer Document (as amended from time to time by
agreement between the Offeror and the Covenantors' Representative);
"REGL WIDER SHARE OWNERSHIP SCHEME" means the REGL Wider Share
Ownership Scheme;
"SCHEDULE OF LIABILITIES" means the schedule of liabilities and
provisions agreed between the Offeror and the Board of the Company and
which is set out in Schedule 5, Part B;
"SCHEMES" has the meaning set out in Warranty D.2 of Schedule 1;
"SHAREHOLDERS" means the holders of the Shares;
"SHARES" means the whole of the issued and to be issued share capital
of the Company as specified in the Document of Company Details;
"SUBSIDIARY" has the meaning set out in Section 736 of the Companies
Xxx 0000;
"SUBSIDIARY" means a subsidiary undertaking of the Company;
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"SUBSIDIARY UNDERTAKING" has the meaning set out in Section 258
Companies Act 1985 as amended by the Companies Xxx 0000;
"T.A." means the Income and Corporation Taxes Xxx 0000;
"TAX RETURN" means any return, report or similar statement required to
be filed by or with respect to any Tax, (including any attached
schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax;
"T.C.G.A." means the Taxation of Chargeable Gains Xxx 0000 and any
reference thereto shall include any enactment repealed or modified
thereby;
"TAX" OR "TAXATION" means:-
(a) any supranational, national, federal, state, local or other
tax, custom duty, impost, levy, governmental fee or other like
assessment or charge of any kind whatsoever, whether domestic or
foreign, and any fine, penalty or interest connected therewith,
including (without prejudice to the foregoing) corporation tax,
advance corporation tax, national insurance and social security
contribution, capital gains tax, inheritance tax, petroleum
revenue tax, value added tax, turnover tax, customs excise and
import duties, stamp duty, stamp duty reserve tax, property tax,
excise tax, franchise tax, payroll tax, withholding tax,
transfer tax, net worth tax or registration tax, or
environmental tax and any other payment whatsoever which the
Company is or may be or become bound to make to any person by
reason of any taxation statutes but excluding rates and water
rates; and
(b) any liability of the Company for the payment of amounts with
respect to payments of a type described in clause (a) as a
result of being a member of an affiliated, consolidated,
combined or unitary group, or as a result of any obligation of
the Company under any Tax sharing arrangement or Tax indemnity
arrangement or any secondary liability of the Company arising as
a result of the failure by the Covenantors or any person
connected with any of them to discharge or pay any liability for
tax;
"TAXATION STATUTES" means all statutes, decrees, orders and
regulations, whether domestic or foreign, providing for or imposing
any Tax;
"TAXATION AUTHORITY" means any local, municipal, governmental, state,
federal or fiscal revenue, customs or excise authority, body or
official anywhere in the world having powers or authority in relation
to Tax;
"TAXATION INDEMNITY" means the indemnities set out in Schedule 3;
"V.A.T.A." means the Value Added Tax Xxx 0000;
"VAT LEGISLATION" has the meaning defined in Warranty I.42 of Schedule
1;
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"WARRANTIES" means the warranties set out in Schedule 1.
1.3 References to "F.A." followed by a stated year mean the
Finance Act of that year.
1.4 References to income being earned accrued or received before a
particular date shall include deemed income treated as earned accrued
or received prior thereto.
1.5 References to the parties hereto include their respective permitted
assignees and/or the respective successors in title to substantially
the whole of their respective undertakings and, in the case of
individuals, to their respective estates and personal representatives.
1.6 References to persons shall include bodies corporate and
unincorporated, associations, partnerships and individuals. Words
denoting the singular shall include the plural and words denoting any
gender shall include all genders.
1.7 References to statutes or statutory provisions include references to
any orders or regulations made thereunder and references to any
statute, provision, order or regulation include references to that
statute, provision, order or regulation as amended, modified,
re-enacted or replaced from time to time whether before or after the
date hereof (subject as otherwise expressly provided herein) and to
any previous statute, statutory provision, order or regulation
amended, modified, re-enacted or replaced by such statute, provision,
order or regulation.
1.8 Headings to clauses, sub-clauses and paragraphs and descriptive notes
in brackets relating to provisions of taxation statutes are for
information only and shall not form part of the operative provisions
of this Deed and shall be ignored in construing the same.
1.9 References to Recitals, Clauses, Schedules are to recitals to, clauses
of and schedules to this Deed. The Recitals and Schedules form part
of the operative provisions of this Deed and references to this Deed
shall, unless the context otherwise requires, include references to
the Recitals and the Schedules.
1.10 Each of the Warranties in Schedule 1 expressed to be given "to the
best of the knowledge and belief of the Covenantors" or "so far as the
Covenantors are aware" or otherwise qualified by reference to the
knowledge of the Covenantors shall be deemed to be given by reference
to the knowledge of the Management, the Management having made all
reasonable enquiries to establish the truth and accuracy of each
statement.
1.11 The obligations and liabilities of the Covenantors under this Deed are
given on a several basis.
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2. WARRANTIES
2.1 The Covenantors warrant to the Offeror in the terms of the Warranties
and so that the remedies of the Offeror in respect of any breach of
any of the Warranties shall continue to subsist notwithstanding
completion of the acquisition of the Shares.
2.2 Any information supplied by or on behalf of the Group to the
Covenantors or their agents or accountants, solicitors or other
advisers in connection with the Warranties, the Disclosure Letter or
otherwise in relation to the business and affairs of the Company or
the Subsidiaries shall not constitute a representation or warranty or
guarantee as to the accuracy thereof by the Group or any of the
Subsidiaries and the Covenantors hereby waive any and all claims which
they might otherwise have against the Group or any of their respective
agents or employees in respect thereof.
2.3 The provisions of Schedule 2 shall be operative provisions of this
Deed and deemed incorporated in the body hereof.
2.4 Each of the Warranties shall be construed as a separate warranty and
(save as expressly provided to the contrary in this Deed (including
Schedule 2) or the Disclosure Letter) shall not be limited by the
terms of any of the other Warranties or by any other term of this
Deed.
2.5 The Covenantors shall be under no liability under the Warranties in
relation to any matter forming the subject matter of a claim
thereunder to the extent that the same or circumstances giving rise
thereto are fairly disclosed in the Disclosure Letter, the Schedule of
Liabilities or in the Accounts or expressly provided for or stated to
be exceptions under the terms of this Deed. No letter, document or
other communication shall be deemed to constitute a disclosure for the
purposes of the Warranties unless the same is included or referred to
in the Disclosure Letter.
2.6 No information relating to the Company or the Subsidiaries of which
the Offeror has knowledge (actual or constructive), subject to Clause
2.5 above, and no investigation by or on behalf of the Offeror shall
prejudice any claim by the Offeror under the Warranties or Indemnities
or otherwise under this Deed or operate to reduce any amount
recoverable thereunder.
2.7 The Covenantors acknowledge that the Offeror has made the Offers in
reliance upon the Warranties, the Indemnities and the Taxation
Indemnity, contained in this Deed; however the Offeror acknowledges
that it shall have no right of rescission after Completion for breach
of any of the Warranties and the Offeror's only remedy will be in
damages.
2.8 Each of the Covenantors shall give to the Offeror and its
representatives (insofar as they are reasonably able so to do) both
before and after Completion all such information and documentation
relating to the Company and its Subsidiaries as he/it has in his/its
possession or control and as the Offeror shall reasonably require to
enable it to satisfy itself as to the accuracy and observance of the
Warranties.
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2.9 In the event the Offeror makes a relevant claim under the Warranties
and if such claim has been Finally Determined or agreed by the Offeror
and the Covenantors' Representative there shall be added to the Amount
of the Relevant Claim all reasonable third party costs of making,
investigating, pursuing and enforcing that claim against the
Covenantors.
3. YOUR WATCH INDEMNITY
3.1 Subject to Clause 3.2 and Schedule 2 (and, for the avoidance of doubt,
notwithstanding any information provided pursuant to the Disclosure
Letter) each Covenantor covenants severally with the Offeror that he
will pay, as the Offeror may direct to the Company or relevant
Subsidiary as the case may be, his appropriate proportion of an amount
or amounts (on a pound for pound basis) equal to:
(a) the amount or amounts of any payments made by the Offeror,
Company or any Subsidiary to third parties as a result of any
dispute with or claim made by a third party (not being the
Offeror or any member of the Offeror's Group) in relation to the
Company or the Subsidiaries arising out of or in respect of any
event, act or omission occurring on or prior to the date of
Completion;
(b) the amount or amounts of any and all third party costs and
expenses reasonably incurred or payable by the Offeror, the
Company or any Subsidiary in connection with investigating,
assessing, contesting or in settlement of any dispute or claim
referred to in paragraph (a) above or in connection with all
proceedings in relation thereto or steps taken to avoid or
mitigate the same.
3.2 Any claim relating to Tax shall be dealt with under the terms of the
Taxation Indemnity and not under this Clause 3.
4. NAME INDEMNITY
4.1 Subject to Schedule 2, notwithstanding any information provided
pursuant to the Disclosure Letter, each Covenantor shall indemnify and
keep indemnified the Offeror and/or the Company and/or each
Subsidiary, and/or its or their officers, servants and/or agents (the
"INDEMNIFIED PARTIES") against his appropriate proportion of any and
all liability, loss, damages, costs, legal costs, professional and
other expenses of any nature whatsoever (including without limitation
any indirect or consequential loss whatsoever) ("LIABILITIES")
incurred or suffered by the Indemnified Parties arising out of any
contractual or tortious proceedings brought by or against the
Indemnified Parties which claim actual or alleged infringement of
statutory or common law rights in the XXXXXXX XXXXX name and xxxx in
the UK ("PROCEEDINGS") where it follows from a Final Determination of
a court or tribunal of competent jurisdiction that the Company does
not have the exclusive right to use the XXXXXXX XXXXX name and xxxx in
relation to the Business in the United Kingdom. Unless and until any
such Final Determination the Covenantors shall have no liability to
the Indemnified Parties under this Clause other than the liability to
pay costs under Clause 4.2(e) below. For the avoidance of doubt, the
Covenantors
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shall have no liability under this Clause 4 or otherwise to compensate
or indemnify any of the Indemnified Parties in relation to any
Liabilities suffered or incurred by any of the Indemnified Parties if
and to the extent that they arise as a result of the Company and/or
any Subsidiary not having the exclusive right to use the XXXXXXX XXXXX
name and xxxx (a) in the United Kingdom in relation to any business
other than the Business; and/or (b) outside of the United Kingdom.
4.2 In relation to Clause 4.1 above, in the event that Proceedings are
threatened or commenced:-
(a) the Offeror shall as soon as reasonably practicable give the
Covenantors' Representative reasonable details of the
Proceedings and shall at all times promptly give to the
Covenantors' Representative and professional advisers appointed
by the Covenantors' Representative all material information and
copies of documents in its or the Company's possession or under
its or the Company's control relevant to the Proceedings as may
be reasonably requested by the Covenantors' Representative from
time to time;
(b) the Offeror shall consult with the Covenantors' Representative
in relation to all material aspects of the Proceedings and
afford the Covenantors' Representative every opportunity to
comment in relation to the Proceedings which the Offeror will
take reasonable consideration of in the handling of the
Proceedings;
(c) the Offeror will not and shall procure that no other of the
Indemnified Parties shall make an admission, agreement,
settlement or compromise or other action in relation to the
Proceedings without the prior written consent of the
Covenantors' Representative (not to be unreasonably withheld);
(d) the Offeror and/or the Company and/or each Subsidiary shall
use all commercially reasonable endeavours to mitigate the
amount of any liability (whether actual or contingent) on the
part of the Covenantors under this Clause 4; and
(e) if, following a final decision at first instance by a court or
tribunal of competent jurisdiction (which, for the avoidance of
doubt, shall not include a decision made pursuant to any interim
motions or applications), it follows that the Company does not
have the exclusive right to use the XXXXXXX XXXXX name and xxxx
in relation to the Business in the United Kingdom (an "ADVERSE
FINDING"), the Covenantors' Representative shall have the right
to require those of the Indemnified Parties which are parties to
the Proceedings to appeal such Adverse Finding (in the absence
of an appeal by the Indemnified Parties) until such time as
there has been a Final Determination Provided That the
Covenantors shall bear the legal costs out of the Escrow Fund of
all appeals made against any such Adverse Finding which the
Indemnified Parties are required to make by the Covenantors. If
it subsequently follows from a Final Determination that the
Company has the exclusive right to use the XXXXXXX XXXXX name
and xxxx in relation to the Business in the United Kingdom then
to the extent that the Covenantors do not recover the full
amount of the costs incurred by them in relation
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14
to all such appeals, the Offeror shall forthwith reimburse the
amount of any shortfall to the Covenantors.
4.3 The benefit of this indemnity may be assigned to any purchaser of all
or substantially all of the business of the Company, whether by sale
of shares or assets.
4.4 For the purpose of this Clause 4, a "Final Determination" shall mean a
final decision of a court or tribunal of competent jurisdiction from
which there is no appeal or from which the Covenantors have notified
the Offeror that they do not wish the final decisions to be appealed.
5. SURMIA INDEMNITY
Subject to Schedule 2 (and, for the avoidance of doubt,
notwithstanding any information provided pursuant to the Disclosure
Letter) each Covenantor covenants severally with the Offeror that he
will pay to the Offeror (or as the Offeror may direct, to the Company
or relevant Subsidiary as the case may be) his appropriate proportion
of an amount or amounts (on a pound for pound basis) equal to the
amount or amounts of sums demanded from the Company or any Subsidiary
by or on behalf of the Surveyors Mutual Insurance Association Limited
(or its successors or assigns) (together "SURMIA") and/or of any other
liability of the Company or any Subsidiary and/or of any payment made
by the Company or any Subsidiary to or in respect of SURMIA, including
for the avoidance of doubt liabilities or payments pursuant to
indemnities given by the Company or any Subsidiary in relation to
SURMIA, to the extent that the aggregate of such demands, liabilities
and payments exceeds L.207,866 as provided for in the Accounts plus
L.17,530 disclosed in Part B of Schedule 5. For the avoidance of
doubt, under this Clause 5, the Offeror, the Company or any Subsidiary
as the case may be, shall be entitled to be indemnified upon the
making of any demand by or on behalf of SURMIA or upon the
notification of any other liability, and without the Company or any
Subsidiary as the case may be having first made payment thereof, nor,
in the absence of manifest error, shall the Offeror, the Company or
any Subsidiary be required to challenge or otherwise question the
demand or the amount of any other liability or payment in order to be
entitled to indemnity in respect thereof.
6. PENSIONS INDEMNITY
6.1 The Offeror shall procure that an actuarial valuation ("THE 1999
VALUATION") of the Xxxxxxx Xxxxx Retirement Fund ("XXX XXXX") is
carried out as at 1 May 1999 ("THE 1999 VALUATION DATE") no later than
30 June 1999 using the same assumptions as are set out in the draft
valuation report of the Fund dated 4 December 1997 ("THE VALUATION
REPORT") and on the further assumptions that:-
(a) the Company and its Subsidiaries have continued to pay
contributions to the Fund to the 1999 Valuation Date at the
rate recommended in the Valuation Report;
(b) benefits have not been improved from those applying at the
date of Completion;
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15
(c) basic salaries have increased at the lower of the rate assumed
in the Valuation Report and the actual rate of increase since
the date of Completion;
(d) the Final Salary Section of the fund continues to remain
closed to new entrants, provided it is legal and proper to do
so.
6.2 In the event that the 1999 Valuation reveals that the value of the
assets of the Fund does not exceed the value of the benefits which are
payable from the Fund in respect of service to 1 May 1999 (such
shortfall being referred to herein as "THE 1999 DEFICIT") the Offeror
shall be entitled to procure that a further actuarial valuation of the
Fund is carried out as at the date of Completion using the same
assumptions as are set out in the Valuation Report ("THE COMPLETION
VALUATION") no later than 31 August 1999.
6.3 In the event that the Completion Valuation reveals that the value of
the assets of the Fund does not exceed the value of the benefits which
are payable from the Fund in respect of service to the date of
Completion (such shortfall being referred to herein as the "COMPLETION
DEFICIT") and subject to Schedule 2 (and for the avoidance of doubt
notwithstanding any information provided pursuant to the Disclosure
Letter) each Covenantor covenants severally with the Offeror that he
will pay as the Offeror may direct to the Company or the relevant
Subsidiary, as the case may be, his appropriate proportion of an
amount equal to the lower of the Completion Deficit and the 1999
Deficit ("THE SHORTFALL").
6.4 The Offeror shall procure that the Company and/or the relevant
Subsidiary shall forthwith upon receipt of the Shortfall pay an
equivalent amount to the Fund subject to Inland Revenue approval not
being prejudiced.
6.5 In the event that any liability of the Company and/or the relevant
Subsidiary to corporation tax is reduced as a result of any
contribution to the Fund (by the Company and/or the relevant
Subsidiary to the Fund as envisaged in Clause 6.4 derived from payment
made under Clause 6.3) the Offeror shall procure that the Company
and/or the relevant Subsidiary shall repay to each of the Covenantors
his appropriate proportion of an amount equal to the corporation tax
saving thereby arising to the Company and such repayment shall be made
on the day or days on which the corporation tax thereby saved would
otherwise have been due and payable.
7. GROSS UP
7.1 Where the Covenantors are obliged to indemnify the Offeror, the
Company or any Subsidiary (the "INDEMNIFIED PARTY") under this Deed:
(a) any amount due shall be paid free and clear of all deductions
or withholdings unless such deductions or withholdings are
required by law in which case the Covenantors shall pay to the
Indemnified Party such additional amount as shall be required
to ensure that the amount received by the Indemnified Party
will, after such deduction or withholding,
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16
be sufficient to indemnify the Indemnified Party against the matter or
circumstance in question;
(b) if any Tax Authority brings the sum paid by way of indemnity
into charge to Tax (or would bring such sum into charge to Tax
but for any Relief as defined in the Tax Covenant), then the
Covenantors shall pay to the Indemnified Party such additional
amount as shall be required to ensure that the total amount
paid, less the tax chargeable (or which would be so chargeable
but for the Relief) is sufficient to indemnify and hold harmless
the Indemnified Party; and
(c) if following the payment of an additional amount under either
Clauses 7.1(a) or (b) above, the Indemnified Party subsequently
obtains a saving, reduction, credit or payment in respect of Tax
(other than a reduction in taxation which would have given rise
to a claim or been taken into account in a claim for damages
under the Warranties or under the Tax Indemnity) in consequence
of which the net after tax amount received by the Indemnified
Party is greater than the amount required to indemnify and hold
harmless the Indemnified Party against the matter indemnified,
the Indemnified Party shall pay to the Covenantors'
Representative such sum as shall leave the Indemnified Party
fully indemnified within seven days of the receipt of the
repayment or reduction of tax as the case may be.
7.2 Clause 7.1 shall not apply if the Offeror assigns the benefit of this
Deed or any rights deriving from this Deed.
8. EARN OUT PROTECTIONS
8.1 In recognition of the Covenantors' interest in achieving the maximum
amount payable in respect of the Deferred Loan Notes, the Offeror
hereby undertakes to the Covenantors that following Completion and
until the earlier of 31 December 2002 and the date on which no further
Deferred Loan Notes may be issued, save with the prior written consent
of the Covenantors' Representative (which may only be withheld to the
extent legitimate to protect the interests of the Covenantors
achieving the maximum amount payable in respect of the Deferred Loan
Notes) or as provided in Clauses 8.2 to 8.4 inclusive below:-
(a) it will not deliberately and knowingly do any act or thing or
procure the Company or any member of the Group to do any act or
thing not properly done for the purpose of the Offeror Group's
business the effect of which distorts unfairly the financial
results of the Company so as to reduce the amount of Deferred
Loan Notes to be issued as part of the Earn Out;
(b) it will not require or permit the declaration, making or
payment by the Company or any member of the Group of any
dividend or similar distribution in respect of the Company's
share capital save to the extent of net income of the Company
calculated for this purpose
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17
without deduction for any amounts (net of any associated tax
benefit) incurred by the Offeror or REGL from amounts
contributed by the Offeror after the Completion Date;
(c) it will not require or permit the payment of management
charges to the Offeror's Group by the Company or any member of
the Group save:-
(i) with respect to services requested by the Company,
with any such charges subject to the consent of the
Covenantors' Representative, such consent not to be
unreasonably withheld; or
(ii) corporate allocations for travel expenses, accounting
services and similar items actually incurred, not to
exceed L.100,000 per year;
(d) it will not deliberately and knowingly do any act or thing or
procure the Company or any member of the Group to do any act or
thing which results in the provision of additional capital to
the Company and/or any Subsidiaries such that there is a
material increase in the Base Amount provided that the Business
is being managed prudently and in accordance with the Budget and
Business Plan;
(e) conducting a business operation to cease carrying on its
business in whole or in part except to the extent that the
Company and/or any member of the Group:-
(i) fails to satisfy the requirements specified in the
Budget or the Business Plan; or
(ii) without prejudice to Clause 8.1(a) above, it is
considered by the Offeror (acting reasonably) to be
necessary to effect an acquisition, disposal,
reorganisation or similar restructuring of assets or
shares provided that the financial results of the
Business after completion of such a restructuring or
acquisition are separately identifiable for the
purpose of the Earn Out;
(f) it will not solicit or endeavour to entice away, offer
employment to or offer to conclude any contract for services
with any of the employees of the Group except with the consent
of the Covenantors' Representative save for Xxxxxx Xxxxxxx;
(g) it will not knowingly interfere with or do anything the sole
or main purpose of which is to impair or adversely affect the
relationship of the Company or any member of the Group with any
of its or their customers and clients;
(h) it will not require the Company or any member of the Group to
give any guarantee or indemnity for the obligations of any third
party save to the extent that the Offeror considers (acting
reasonably) it necessary for the Company and/or any of the
Subsidiaries to provide collateral guarantees in respect of:-
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18
(i) the financing facilities available to the Offeror's
Group; or
(ii) liabilities relating to acquisitions completed after
Completion by the Group;
(i) it will maintain the Company and any member of the Group as
separate operating companies save to the extent that those
companies may be merged, amalgamated, reorganised or structured
within the Group in a more tax efficient way for the Group as a
whole provided that the financial results of the Business after
completion of any such restructuring are separately identifiable
for the purposes of determining the Earn Out;
(j) it will (insofar as he is permitted to act as such by law and
except where the Company or any member of the Group has
dismissed or is entitled to dismiss him summarily from his
employment) allow each member of the Management to have access
to all matters relating to the Business (except where the
information is held by the Offeror in which case a written
request for the information must be made, and such request
cannot be unreasonably withheld) and (insofar as consistent with
his fiduciary duties as a director) to pursue and maintain
trading policies (so long as consistent with the trading
policies of the Offeror and the Group over the year prior to the
date hereof and not to conflict with the interest of the
Business) to enable the Company to maximise the amount of the
Deferred Loan Notes issuable pursuant to the Offer Document
subject to overall control by the board of the Company in
respect of financial and policy matters relating to the
Offeror's Group (including the Group) such overall control not
to be unreasonably exercised to the material detriment of the
Covenantors in respect of the realisation of the maximum amount
possible in respect of the Deferred Loan Notes;
(k) it will not pass any resolution for the winding up,
dissolution or reconstruction of the Company or any member of
the Group except to the extent that the Company and/or any
member of the Group:-
(i) fails to satisfy the requirements specified in the
Budget or the Business Plan; or
(ii) without prejudice to Clause 8.1(a) above, is
considered by the Offeror (acting reasonably) to be
necessary to effect an acquisition of business assets
or shares provided that the financial results of the
Business after such acquisition is completed are
separately identifiable for the purpose of
determining the Earn Out;
(l) it will not take steps designed to prevent the Company or any
member of the Group from carrying on its business in the
ordinary course, substantially as presently carried on, and
(without prejudice to the generality of the foregoing) it will
not in any way to the detriment of the Company or any member of
the Group compel the Company or any member of the Group to trade
or deal with any particular person, firm or company whether for
goods or services except in relation to the selection of a
financial institution for commercial lending or investing or in
respect of appointing auditors, barristers,
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19
solicitors, accountants, investment bankers, insurers, actuaries
and other professional advisors provided that the Company or any
member of the Group shall only be required to meet appropriate
fees, charges or costs to the extent reasonable in the
circumstances including where such costs are incurred on an
Offeror's Group wide basis the due proportion of such costs
where such circumstances shall include the standing and
reputation of the professional advisers appointed;
(m) it will use its reasonable endeavours to procure that no
member of the Offeror's Group knowingly and deliberately diverts
away from the Group any business opportunities that first become
available to the Company or any of the Subsidiaries;
(n) it will not change the Company's corporate name or cause it to
cease using any trade name or start using any new trade name
(other than to reflect the fact that it is a member of the
Offeror's Group or in the event the Company does not have the
exclusive right to the XXXXXXX XXXXX name and xxxx in relation
to the Business in the United Kingdom);
(o) in the event of a sale or other disposition of a majority of
the Shares or all or substantially all of the undertaking or
material assets of the Group the Offeror shall procure the
purchaser to assume the Offeror's obligations under this Deed
and the Offer Document in respect of the Earn Out; and
(p) in the event that the Offeror procures the Company or any
Subsidiary to merge with another company or to acquire the whole
or part of any undertaking or any shares in the capital of
another company and the Board of the Company has not unanimously
approved such merger or acquisition then the Covenantor's
Representative may in the period of one month after the merger
or acquisition determine not to include the new undertaking or
company as part of the Business or the Group for the purpose of
calculating the REGL Modified Pre-tax Profit provided that any
such decision shall be treated consistently over time for the
purpose of determining REGL Modified Pre-tax Profit. In such
event, the Offeror shall indemnify the Group for any guarantee
provided by any member of the Group in connection with such
merger or acquisition.
8.2 Nothing in Clause 8.1 save for sub-Clauses (a), (i), (k) or (l) above
shall prevent the Offeror's Group from carrying on any business
presently carried on by it nor from acquiring any other company or
business whether of a similar nature or otherwise.
8.3 Nothing in Clause 8.1 shall prevent the Offeror or any other member of
the Offeror's Group or the Company from performing its other
obligations or enjoying or enforcing its rights under this Deed
including the Taxation Indemnity or any other agreement entered into
pursuant hereto.
8.4 Nothing in Clause 8.1 shall prevent the Offeror from changing the
auditors appointed for the Company or any members of the Group at any
time in the future.
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20
8.5 In recognition of the Offeror's interest in acquiring a business that
is operated on the basis of maximising the net present value of
profits over time each of the Covenantors hereby undertakes to the
Offeror that in his capacity as officer, manager or employee of any
member of the Group ( if he is such) he shall procure as far as
reasonably practicable that following Completion and until the earlier
of 31 December 2002 and the date on which no further Deferred Loan
Notes may be issued:-
(a) he will not deliberately and knowingly do any act or thing or
procure the Company or any member of the Group to do any act or
thing the object of which is to distort unfairly the financial
results of the Company so as to increase the amount of Deferred
Loan Notes that are to be issued;
(b) that transactions entered into by the Company are structured
to maximise the net present value of the Company even though the
structure used may result in a corresponding decrease in REGL
Modified Pre-tax Profit;
(c) that the Business is being managed prudently and in accordance
with the Business Plan and Budget;
(d) that investment capital will not be committed or guarantees
undertaken or other liabilities assumed outside the ordinary
course of business without the written approval of the
Offeror; and
(e) to the extent that any rights, interests or obligations are
assigned under this Deed the Covenantors agree to meet their
obligations under this Clause 8.5.
9. MANAGEMENT OF THE GROUP POST COMPLETION
9.1 The Offeror hereby undertakes with the Covenantors that for the period
from Completion until the earlier of 31 December 2002 and the date on
which no further Deferred Loan Notes may be issued it will regulate
the affairs of the Group in accordance with this Clause 9
notwithstanding anything to the contrary in the articles of
association of the Company or any Group Company.
9.2 Notwithstanding anything contained in the articles of association of
the Company the board of directors of the Company will comprise 9
directors provided that the Offeror shall be able to replace any
directors appointed to the board at any time and further provided that
those members of the board of the Company appointed pursuant to Clause
9.2(c) below shall have served on the board for a period of at least
12 months:-
(a) five of whom will be appointed by the Offeror;
(b) four of whom, each being employees of the Company or its
Subsidiaries, will be appointed by the five directors
appointed pursuant to Clause 9.2(a) above; and
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21
(c) the initial directors shall be Messrs Huntley, Froggatt,
Ellingham, Hubbard, Strong, Webster, Siegel, Aston and the
Finance Director.
9.3 (a) The Offeror shall nominate Xx. X. Xxxxxxx as a member of the
board of the Offeror as part of the slate of nominees to be
presented to shareholders at the Offeror's next annual meeting
of shareholders.
(b) The Offeror shall appoint two members of the board of the
Company, who are also employees of the Company, to the Senior
Executive Management Committee of the Offeror.
(c) The Offeror shall procure that personnel from its Investment
Banking Division are made available to the Company at cost or
on other terms agreed in writing between the parties at the
time of each given assignment to assist in the implementation
of the objectives set out in the Business Plan prepared for
three consecutive years.
9.4 (a) As and when prescribed by the Offeror with respect to its
major business units, the Company shall prepare and submit a
budget dealing with operating performance, capital expenditure
and cash flow. The Offeror's chief financial officer and
other designees will review these budgets during the
prescribed time and submit the final form of budget to the
Offeror's Board of Directors.
(b) Upon the approval of the Offeror's Board, in its sole
discretion, the Budget shall constitute authority to take all
actions implicit in the Budget, except for those matters, such
as major capital expenditures, acquisitions, guarantees,
borrowings, investments and other similar obligations, which
require further specific approvals.
(c) The Company shall use all reasonable endeavours to operate its
business in accordance with the agreed Budgets and the
Business Plan prepared for three consecutive years in the form
approved in writing by the Offeror.
9.5 The board of the Company will appoint a remuneration committee to
advise on the allocation of discretionary bonuses and options under
any stock incentive plans.
9.6 The Offeror shall use its reasonable endeavours (and where practicable
shall procure) that any business of surveying for the time being
carried on by the Company or any member of the Group shall at all
times be conducted in accordance with the document entitled "Rules of
Conduct" for the time being of The Royal Institution of Chartered
Surveyors.
10. COVENANTORS' REPRESENTATIVE
10.1 Each of the Covenantors hereby appoints the Chief Executive for the
time being (the first such Covenantors' Representative being Xxxx
Xxxxxxxx) of the Company (provided that person is a Covenantor) as the
Covenantors' Representative and authorises and empowers such
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Covenantors' Representative as such Covenantor's true and lawful agent
and attorney to act in the name, place and stead of such Covenantor
with respect to the Offers as such Offers may from time to time be
amended, extended, varied or revised and with respect to the transfer
of the Covenantors' Shares to the Offeror pursuant thereto and to do
or refrain from doing all such acts and things as such Covenantors'
Representative shall deem necessary or appropriate in order to accept
and to give effect to the terms of the Offers and this Deed and the
transactions contemplated thereby, including, without limitation, the
power:-
(a) to act for such Covenantor with regard to all warranty and
indemnification matters referred to in this Deed including,
without limitation, the power to acknowledge responsibility
for any claim and the power to compromise or settle any claim
on behalf of such Covenantor including meeting his appropriate
proportion of costs incurred in investigating, assessing,
contesting, litigating or settling such claims out of the
Escrow Fund;
(b) to receive all demands, notices and other communications
directed to Covenantors and to do or refrain from doing any
further acts or deeds on behalf of such Covenantors which such
Covenantors' Representative deems necessary or appropriate;
(c) to acknowledge, vary, waive or agree any changes to the terms
of the Earn-Out protections set out in Clause 8 hereof in
relation to the Deferred Loan Notes on behalf of the
Covenantors where the Covenantors' Representative deems it
necessary, appropriate or expedient; and
(d) to vary, waive or agree any changes to the method of
calculating and to agree on behalf of such Covenantors the
calculations of REGL Modified Pre-Tax Profit, Base Amount and
Principal amount of Deferred Loan Notes to be issued
including, without limitation, in order to address any issues
that may arise from the acquisition or merger of a company by
or with any member of the Group.
10.2 The appointment of the Covenantors' Representative shall be
irrevocable until the later of 20 February 2004 and the date when all
relevant claims made by the Offeror prior to 20 February 2004 shall
have been resolved, settled, withdrawn or deemed to have been
withdrawn, at which date such appointment shall automatically
terminate, and the Offeror and any other person may conclusively and
absolutely rely, without enquiry, upon any action of the Covenantors'
Representative in accordance with this provision as an act of all of
the Covenantors in all matters referred to in the Offer Document and
this Deed. Each Covenantor hereby ratifies and confirms all and any
acts which the Covenantors' Representative shall do or cause to be
done in his capacity as Covenantors' Representative. The Covenantors'
Representative shall act for all Covenantors on all of the matters set
out in the Offer Document and in this Deed in the manner such
Covenantors' Representative believes to be in the best interests of
such Covenantors and consistent with their obligations under the
Offers and this Deed but the Covenantors' Representative shall not be
responsible to any Covenantor for any loss or damage any Covenantor
may suffer by reason of the performance by the Covenantors'
Representative of his
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23
duties in accordance with this provision except for loss or damage
arising from wilful violation of law or negligence in the performance
of his duties.
10.3 In the event of the death, incapacity or resignation of the
Covenantors' Representative, or the Covenantors' Representative
ceasing to be the Chief Executive of the Company and the new Chief
Executive not being a Covenantor, the Covenantors shall agree upon a
successor within the 30 day period immediately following the date of
notification of the death, incapacity or resignation of the
Covenantors' Representative or his ceasing to be the Chief Executive
of the Company and the new Chief Executive not being a Covenantor and
such successor shall either be a Covenantor or any other person
acceptable to the Offeror who shall agree in writing to accept such
appointment in accordance with this provision. The appointment of a
successor Covenantors' Representative pursuant to this provision shall
promptly be notified in writing to the Offeror.
10.4 For the avoidance of doubt, any Covenantors' Representative appointed
pursuant to this Clause 10 shall not be vested with any authority or
power which is in conflict with the authority or power granted to any
attorney appointed by the Covenantors under any irrevocable
undertakings given by them in connection with or as part of the Offers
and to the extent that any conflict exists the attorney appointed by
the Covenantors pursuant to such irrevocable undertakings shall take
precedence.
11. ANNOUNCEMENTS, ETC
The terms of this Deed shall not be disclosed by any party hereto
other than to their respective legal financial and other advisers
without the prior consent of the other parties (not to be unreasonably
withheld or delayed) unless disclosure is required by any US or UK law
or the rules of the New York or London Stock Exchanges.
12. COSTS
Save as expressly otherwise provided in this Deed or in the Offer
Document each of the parties hereto shall bear its own legal,
accountancy and other costs, charges and expenses connected with the
negotiation, preparation and implementation of this Deed and the
Offers and any other document or action incidental to or referred to
in this Deed.
13. EFFECT OF COMPLETION
The terms of this Deed shall insofar as not performed before the
acquisition of the Shares by the Offeror and subject as specifically
otherwise provided in this Deed continue in force after and
notwithstanding the acquisition of the Shares by the Offeror.
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14. WAIVER, AMENDMENT
14.1 No waiver of any term, provision or condition of this Deed shall be
effective unless such waiver is evidenced in writing and signed by the
waiving party.
14.2 No omission or delay on the part of any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or of any
other right, power or privilege. The rights and remedies herein
provided are cumulative with and not exclusive of any rights or
remedies provided by law.
14.3 No variation to this Deed shall be effective unless made in writing
and signed by the Covenantors' Representative on behalf of the
Covenantors and by the Offeror.
15. FURTHER ASSURANCES
At any time hereafter the Covenantors shall at their own expense
execute all such documents and do such acts and things as the Offeror
may reasonably require for the purpose of vesting in the Offeror the
full legal and beneficial title to the Covenantors' Shares and giving
to the Offeror the full benefit of this Deed.
16. NOTICES
16.1 Save as specifically otherwise provided in this Deed any notice,
demand or other communication to be served under this Deed may be
served upon any party hereto only by posting by first class post or
airmail if sent from outside the UK or delivering the same or sending
the same by facsimile transmission to the Offeror at the address of
the Offeror's Solicitors or to any of the Covenantors to the
Covenantors' Representative marked for the attention of the
Covenantors' Representative or facsimile number given below or at such
other name and address or number in England and/or Wales as the
Offeror or (as the case may be) all of the Covenantors may from time
to time notify in writing to the other parties hereto:-
The Covenantors' - fax number - 0000 000 0000
Representative marked for the attention of Xxxx
Xxxxxxxx
The Offeror - fax number 0000 000 0000 marked for
the attention of Xxxxxx Broke copy to
Xxxx X. Lines, General Counsel of
Insignia Financial Group, Inc. fax
number 001 864 239 1096
16.2 The Covenantors hereby irrevocably agree that service of any notice,
demand or other communication upon the person named above shall be
deemed due service upon each of them at the time of deemed service
upon him. The Covenantors hereby irrevocably agree that the
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25
Offeror may rely upon any notice, demand or other communication given
by the Covenantors' Representative or the Covenantors' Solicitors and
purporting to be given on behalf of all the Covenantors as having been
given with the express authorisation of each of the Covenantors and
that each of the Covenantors will be bound thereby.
16.3 A notice or demand served by first class post shall be deemed duly
served 72 hours after posting by airmail from outside the UK and a
notice or demand sent by facsimile transmission shall be deemed to
have been served at the time of transmission and in proving service of
the same it will be sufficient to prove, in the case of a letter, that
such letter was properly stamped or franked first class, addressed and
placed in the post and, in the case of a facsimile transmission, that
such facsimile was duly transmitted to a current facsimile number of
the addressee at the address referred to in this Clause 16 or in
Clause 18.
17. COUNTERPARTS
This Deed may be executed in any number of counterparts and by the
several parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
18. GOVERNING LAW AND JURISDICTION
18.1 This Deed and the Offer Document shall be governed by and construed in
accordance with English law.
18.2 The parties hereto agree that service of any writ, notice or other
document for the purpose of any proceedings shall be duly served upon
it if delivered or sent by registered post, in the case of the
Covenantors to the address specified in Clause 16 (marked for the
attention of the Covenantors' Representative) or such other name and
address in England and/or Wales as is notified pursuant to Clause 16
and in the case of the Offeror to the address specified in Clause 16
(marked for the attention of Xxxxxx X. Broke).
19. INVALIDITY
If at any time any one or more of the provisions hereof is or becomes
invalid, illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining provisions
hereof shall not be in any way affected or impaired thereby.
20. ASSIGNMENT
20.1 It is hereby agreed and declared that the benefit of this Deed may be
assigned by the Offeror (i) to any company of which it is a subsidiary
(as defined by Section 736 Companies Act 1985) or to any other company
which is a subsidiary of it or its holding company as thus defined;
and (ii) to any person who acquires a majority of the Shares or all or
substantially all of the undertaking
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or material assets of the Group and who agrees to assume the Offeror's
obligations under this Deed and the Offer Document in respect of the
Earn Out.
20.2 Save as aforesaid this Deed and all rights and benefits hereunder are
personal to the parties hereto and may not be assigned at law or in
equity without the prior written consent of the other parties hereto.
SIGNED on behalf of each of the Covenantors by way of confirmation.
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SCHEDULE 1
WARRANTIES
A. Constitution
B. Accounts
C. Business
D. Directors and Employees
E. Properties
F. Pensions
G. The Group and its Bankers
H. Accuracy of Information
I. Tax
J. Environmental Matters
K. Title and Capacity
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A. CONSTITUTION
MEMORANDUM AND ARTICLES
A.1. The Memorandum and Articles of Association of the Company in the form
of the copies supplied to the Offeror are complete and accurate and
have embodied therein or annexed thereto copies of all resolutions and
agreements as are referred to in Section 380 of the Companies Xxx 0000,
and all amendments thereto (if any) were duly and properly made.
REGISTER OF MEMBERS
A.2. The Register of Members of the Company contains true and accurate
records of the members from time to time of the Company and the Company
has not been subject to any application under the Companies Xxx 0000
for rectification of such Register.
RETURNS
A.3. All such resolutions returns and other documents required by the
Companies Xxx 0000 to be delivered to the Registrar of Companies have
been duly delivered and are true and accurate.
POWERS OF ATTORNEY
A.4. To the best of the knowledge and belief of the Covenantors, the Company
has not executed any power of attorney or conferred on any person other
than its directors officers and employees any authority to enter into
any transaction on behalf of or to bind the Company in any way.
SUBSIDIARIES
A.5. The Company does not have any subsidiary undertakings other than those
listed in the Document of Company Details nor does the Company own any
shares or stock in the capital of nor have any beneficial interest in
any other company, corporate enterprise, partnership or business
organisation nor does the Company control or take part in the
management of any other company or business organisation. Each of the
Subsidiaries is a wholly owned subsidiary of the Company, save as
otherwise indicated in the document in agreed form headed "Details of
the Company and the Subsidiaries".
OPTIONS OVER SHARES
A.6. There is no agreement or commitment outstanding which calls for the
allotment, issue or transfer of, or accords to any person the right to
call for the allotment or issue of, any shares, debentures or
securities in or of the Company or any of the Subsidiaries other than
the Options and the Convertible Shares.
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INSOLVENCY
A.7. No Company or Subsidiary is insolvent or unable to pay its debts as
they fall due or subject to receivership, administration, litigation or
winding-up and no order has been made or resolution passed, petition
presented or meeting held for the winding-up of any of them and no
analogous proceedings in any other jurisdiction have been commenced.
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B. ACCOUNTS
ACCOUNTS WARRANTY
B.1. The Accounts which are not audited have been prepared by the Company
with due care and attention in accordance with generally accepted
accounting principles and practices in the United Kingdom and
accordingly adequately reflect in all material respects all the assets
and liabilities and the state of affairs, financial position and
results of the Company as at and up to the Accounts Date and without
prejudice to the generality of the foregoing, the Accounts:-
(a) make adequate provision or reserve for depreciation, bad or
doubtful debts and other actual liabilities in accordance with
the accounting policies of the relevant company;
(b) either make adequate provision or reserve for or make fair
disclosure of postponed or deferred liabilities in the
financial statements in accordance with the accounting policies
of the relevant company;
(c) do not overvalue assets or understate liabilities; and
(d) have not (save as disclosed in the Accounts) been affected by
any extraordinary, exceptional or non- recurring item or by any
other fact or circumstance rendering the profits or losses for
the relevant period unusually high or low.
PARTNERSHIP ACCOUNTS
B.2. The Partnership Accounts have been prepared in accordance with
generally accepted accounting principles and practices in the United
Kingdom and are true and accurate in all material respects so far as
they are stated to be facts and not estimates and accordingly give a
true and fair view of all the assets and liabilities (whether present
or future, actual or contingent) and of the state of affairs, financial
position and results of the Partnership as at and up to 30 April 1997.
NET ASSET WARRANTY
B.3. The Net Asset Value, calculated in accordance with Schedule 5, shall
not be less than L.3,938,000 as at the Completion Accounts Date.
UNDISCLOSED LIABILITIES
B.4. To the best of the knowledge and belief of the Covenantors there are no
liabilities or obligations of any nature (absolute, accrued,
contingent, otherwise or known) which were not fully disclosed or
reserved in the balance sheet prepared as at the Accounts Date, except
the liabilities specified in the Disclosure Letter and those
liabilities arising since the Accounts Date which were incurred in the
ordinary course of business.
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BOOK DEBTS
B.5. Except to the extent to which provision or reserve has been made in the
Accounts, 90% of book debts owed to the Company included in the
Accounts will be duly paid in full not later than 30 April 1998 and
none of the book debts owed to the Company has been the subject of any
factoring by the Company. For this purpose book debts shall not include
prepayments by the Company.
FIXED ASSETS
B.6. The value of all of the fixed assets of the Company as shown in the
Accounts is at cost thereof less depreciation deducted from time to
time in a consistent manner and there has been no revaluation of such
fixed assets since their acquisition.
OFF BALANCE SHEET FINANCING
B.7. Neither the Company nor any associated company has engaged in any
financing (including without prejudice to the generality of the
foregoing the incurring of any borrowing or any indebtedness in the
nature of borrowing including without limitation liabilities in the
nature of acceptances or acceptance credits) of a type which would not
be required to be shown or reflected in the Accounts.
ACCOUNTING REFERENCE DATE
B.8. The Company has notified to the Registrar of Companies 30 April as
being its accounting reference date pursuant to the Companies Xxx 0000
and has not at any time notified the Registrar of Companies of any
other date.
BOOKS OF ACCOUNT
B.9. The Company has properly kept and maintained all necessary books of
account (accurately reflecting in accordance with generally accepted
accounting principles and practices in the United Kingdom and, in the
case of certain Subsidiaries, in their respective countries in which or
in a state, province or part of which they were incorporated, all
transactions effected by the Company or to which it is or has been a
party), minute books, records, Register of Members and other statutory
books. All deeds and documents (properly stamped where stamping is
necessary for enforcement thereof) belonging to the Company or which
ought to be in the possession of the Company and the common seal of the
Company are in the possession of the Company.
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C. BUSINESS
BUSINESS SINCE THE ACCOUNTS DATE
C.1. Since the Accounts Date there has been no material adverse change in
the overall financial or trading position or performance of the Company
taking account of seasonal fluctuations in the financial performance of
the Business, and the Business has been conducted on a normal basis and
the Company has not disposed of any of its assets otherwise than in the
normal course of business or declared or paid any dividend on any of
its shares or effected any distribution of its assets or made any loan
or other payment other than in the normal course of business, and
without prejudice to the generality thereof, the Company has not since
the Accounts Date done or agreed or committed to do any of the
following:-
(a) accelerated collection of any sum payable to the Company to a
date prior to the date such collection would have occurred in
the ordinary course of business and consistent with past
practice;
(b) delayed payment of any sum payable by the Company beyond its
due date or to a date after the date such payment would have
been made in the ordinary course of business and consistent
with past practice; and
(c) created, incurred, guaranteed or assumed any indebtedness or
borrowed money or entered into any financial lease.
ACQUISITION AND DISPOSAL OF ASSETS
C.2. The Company has not since the Accounts Date acquired or agreed to
acquire any material asset for a consideration which is higher than the
market value at the time of acquisition and has not disposed of or
agreed to dispose of any material asset for a consideration which is
lower than the market value or the value thereof as shown in the books
of the Company at the time of disposal.
CHARGES AND TITLE TO ASSETS
C.3. (a) Save for Intellectual Property the Company has not created or
agreed to create or suffered to arise or exist any Encumbrance
(other than arising in the ordinary course of business) over any
part of its undertaking or assets and the Company has and will
at Completion own all the assets included in the Accounts and
all other assets (tangible or intangible) used for the purpose
of the Company's business at the date hereof and to all assets
acquired since the Accounts Date and prior to Completion.
(b) The Company owns or leases all vehicles, plant, machinery and
equipment required for the proper and efficient conduct of the
business of the Company.
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(c) Save for Intellectual Property no person other than the
Company has any right, title or interest (present or future) in
any material asset belonging to or used by the Company.
LEASING ETC. AGREEMENTS
C.4. Accurate details of any hiring or leasing agreement, hire purchase
agreement, credit or conditional sale agreement, agreement for payment
on deferred terms or any other similar agreement with an annual
commitment in excess of L.5,000 per agreement to which the Company is a
party and where the aggregate annual payments by the Company exceed
L.5,000 are scheduled in the Disclosure Letter.
ONEROUS OBLIGATIONS
C.5. The Company is not a party to any contract, transaction, arrangement
or liability which:-
(a) is of an unusual or abnormal nature, or outside the ordinary
and proper course of business and is for an amount during the
term of the contract of more than L.50,000;
(b) is for a fixed term of more than six months and is for an
amount during the term of the contract of more than L.50,000;
(c) is of a material long-term nature (that is unlikely to have
been fully performed, in accordance with its terms, more than
six months after the date on which it was entered into or
undertaken) and is for an amount during the term of the contract
of more than L.50,000;
(d) is incapable of termination in accordance with its terms, by
the Company, on 60 days' notice or less and is for an amount
during the term of the contract of more than L.50,000;
(e) is of a material loss-making nature (that is, known to be
likely to result in a loss to the Company) on completion of
performance and is for an amount during the term of the contract
of more than L.15,000;
(f) cannot readily be fulfilled or performed by the Company on
time without undue, or unusual, expenditure of money, effort or
personnel and is for an amount during the term of the contract
of more than L.50,000;
(g) involves payment by the Company by reference to fluctuations
in the index of retail prices, or any other index or in the rate
of exchange for any currency and is for an amount during the
term of the contract of more than L.50,000;
(h) involves an aggregate outstanding expenditure by the Company
of more than L.50,000; or
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(i) restricts its freedom to engage in any activity or business or
confines its activity or business to a particular place.
SUPPLY CONTRACTS
C.6. All agreements or arrangements for the supply of products or goods to
or by the Company which involve or are likely to involve the supply of
goods the aggregate sale value of which will represent in excess of 5%
of the turnover for the preceding financial year of the Company have
been disclosed to the Offeror in writing. The Company has not been
notified of nor are the Covenantors aware of any breach of any of its
obligations under any contract, transaction or arrangement to which it
is a party or by which it is bound.
CONTRACTS WITH CONNECTED PERSONS
C.7. Save in respect of employment contracts and contracts relating to
employee benefits subsequent to Completion the Company will not have
any contractual or other arrangements of any sort with any of the
Covenantors or any body corporate or person connected or associated
with any of the Covenantors or holders of Shares or options over or to
subscribe for shares in the Company.
EVENTS OF DEFAULT
C.8. (a) To the best of the knowledge and belief of the Covenantors no
event has occurred or is subsisting which constitutes or results
in or would with the giving of notice and/or lapse of time
constitute or result in a default or the acceleration of any
obligation under any agreement or arrangement to which the
Company is a party or by which it or any of its properties,
revenues or assets are bound.
(b) The Company is not a party to any material agreement or
material arrangement which is capable of termination by any
other person on a change in the management control or
shareholding of the Company or by reason of the acquisition of
the Shares under the Offers.
(c) The Covenantors have no actual knowledge that after Completion
(whether by reason of an existing agreement or arrangement or
otherwise or as a result of the proposed acquisition of the
Company by the Offeror):-
(i) a material customer of the Company will cease, or
be entitled to cease, to deal with the Company or
is likely substantially to reduce its existing
level of business with the Company;
(ii) the Company is likely to lose the benefit of any
material right or privilege which it enjoys;
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35
(iii) any officer or senior employee of the Company or
director of the Company will leave other than as
referred to in or contemplated by this Deed or by
the Offers.
GUARANTEES ETC.
C.9. The Company has not given any indemnity, warranty or bond or incurred
any other similar obligation or created any security for or in respect
of liabilities, actual or contingent, of any other person nor has the
Company given any guarantee for an amount in excess of L.10,000 or
entered into any confidentiality agreement.
SRO INDEMNITIES
C.10 So far as the Covenantors are aware, no claim has been made and no
circumstances have arisen which are likely to give rise to a claim for
indemnification under the rules of the self regulating organisations by
an employee or former employee of the Company or any member of the
Group.
OPTIONS OVER SHARES ETC.
C.11. Since the Accounts Date no share or loan capital has been created or
issued or agreed to be created or issued and there are not any options
or other agreements outstanding which call or give any person the right
to call (whether or not subject to conditions) for the issue of any
share or loan capital of the Company and none of the Covenantors is
under any obligation of any kind whatsoever whether actual or
contingent to sell, charge or otherwise dispose of any of the Shares or
any interest therein to any other person other than the Offeror.
LITIGATION
C.12. The Company is not engaged in any litigation, arbitration,
prosecution or other legal proceedings (whether as plaintiff, defendant
or third party) and to the best of the knowledge and belief of the
Covenantors there are no such proceedings pending or threatened or any
proceedings in respect of which the Company is or would if the
proceedings were adversely determined be liable to indemnify any other
person concerned therein.
CUSTOMER DISPUTES
C.13. The Company is not engaged in any dispute, claim or negotiation with
any Customer which is or could be material to the Business or the value
of any of its assets.
BUSINESS NAME
C.14. The Company does not carry on, and has not in the past three years
carried on, any business under any name other than its corporate name.
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INTRA XXXXX
C.15. The Company has the power to carry on its business as now conducted
and the business of the Company has at all times been carried on intra
xxxxx.
INTELLECTUAL PROPERTY
C.16.1. General
Save for Intellectual Property licensed to the Company, the
Intellectual Property which is material to the successful
operation of the Business as presently operated is
beneficially owned by the Company and so far as the
Covenantors are aware the Intellectual Property constitutes
all rights necessary to carry on the business of the Company
as presently operated and will not be adversely affected by
the acquisition herein contemplated.
C.16.2. Registered Rights
Details of all registered Intellectual Property and of all
applications for registration of Intellectual Property are set
out in the Disclosure Letter with the name in which the
registrations are registered, the country of registration, the
xxxx, the number, the class and any associations, as
appropriate. All renewal fees have been paid in respect of
the registered Intellectual Property.
C.16.3 Licences-out
Details of all licences-out granted or liable to be granted in
relation to the Intellectual Property and which are still in
force which are material to the successful operation of the
Business as presently operated are set out in the Disclosure
Letter with details of the date, parties, term, royalty,
relevant Intellectual Property, exclusivity, territory and any
unusual restrictions or provisions.
C.16.4 Licences-in
Details of all licences-in granted or liable to be granted in
relation to the third party Intellectual Property used by the
Group other than software used in its business and which are
still in force are set out in the Disclosure Letter with
details of the date, parties, term, royalty, relevant third
party intellectual property, exclusivity, territory and any
unusual restrictions or provisions.
C.16.5 Breaches
So far as the Covenantors are aware there is no breach nor do
the Covenantors know of any fact or matter which would or may
create a breach of any licence referred to in Warranties
C.16.3 or C.16.4.
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C.16.6 Infringement by the Company
So far as the Covenantors are aware, the Intellectual Property
owned by the Company does not infringe any intellectual
property rights of any nature of any third party.
C.16.7 Infringement by third parties
So far as the Covenantors are aware, no third party is
infringing the Intellectual Property owned by the Company.
C.16.8 Confidential Information
The Company has obtained confidentiality agreements wherever
necessary for the protection of know-how forming part of the
Intellectual Property.
C.16.9 Data Protection and Software
(a) The Company has complied with the Data Protection
Xxx 0000 in all material respects.
(b) In the 12 months prior to the date hereof, the
Company has not suffered and the Covenantors do not
know that any other person has suffered any
failures or bugs in or breakdowns of any computer
hardware or software used in connection with the
business of the Company which have caused any
substantial disruption or interruption in or to its
use and the Covenantors do not know nor are they
aware of any fact or matter which may so disrupt or
interrupt or affect the use of such equipment
following the acquisition by the Offeror of the
Shares pursuant to this Deed on the same basis as
it is presently used.
(c) The Company either solely owns or is validly
licensed to use the software used in its Business
and has all rights necessary to develop, modify and
maintain such software and no action will be
necessary to enable it to continue to use, develop,
modify and maintain such software to the same
extent and in the same manner as it had been used
prior to the date hereof.
(d) All computer systems, excluding software, used in
the business of the Company is owned and operated
by and are under control of the Company and are not
wholly or partly dependent on any facilities which
are not under the ownership, operation or control
of the Company. No action will be necessary to
enable such systems to be continued to be used in
the business of the Company to the same extent and
the same manner as they have been used prior to the
date hereof.
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(e) Steps which the Management believes to be adequate
have been taken to back-up electronically stored
information and software material to be used or
likely to be used in the Business and the
Management has made what it believes to be adequate
disaster recovery provisions and security
arrangements in relation to all computer systems
and software used in the business of the Company.
PROPERTY IN OTHER COMPANIES
C.17. The Company is not liable to offer for sale transfer or otherwise
dispose of or purchase or otherwise acquire any assets, including
shares with an aggregate value of more than L.50,000 held by it in
other bodies corporate under their Articles of Association or any
agreement or arrangement or to take or suffer any action by reason of a
change in the management control or shareholding of the Company or by
reason of the acquisition of the Shares under the Offer.
INSURANCE
C.18. (a) The Company has produced to the Offeror all insurance policies
in effect in relation to its business and assets and such
policies are in full force and effect and so far as the
Covenantors are aware are not voidable.
(b) The Management considers that the Company is now, and has at
all material times been, adequately covered against accident,
damage, injury, third party loss, loss of profits, claims and
other risks normally covered by insurance and has at all times
effected such insurances as are required by law.
(c) So far as the Covenantors are aware there are no circumstances
which could reasonably be expected to lead to any cover under
such insurance being avoided by the insurers or the premiums
being increased and there is no claim outstanding under any
such policy nor are the Covenantors aware of any circumstances
likely to give rise to a claim.
FAIR TRADING AND COMPLIANCE WITH OTHER LEGISLATION
C.19. (a) To the best of the knowledge and belief of the Covenantors
neither the Company, nor any of its officers, agents or
employees (during the course of their duties in relation to the
Company) have committed, or omitted to do, any act or thing the
commission or omission of which is in contravention of any Act,
order, regulation or the like in the United Kingdom or
elsewhere which is punishable by fine or other penalty or which
may impose any other liabilities on the Company or affect the
validity or enforceability of any agreement or arrangement to
which it is a party.
(b) Without prejudice to the generality of the foregoing, so far as
the Covenantors are aware the Company has not done or omitted
to do any act or thing in contravention of the provisions of
the Restrictive Trade Practices Acts 1976 and 1977, the Fair
Trading Xxx 0000, the Competition Xxx 0000, Articles 85 and 86
of the Treaty of Rome, the Resale
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Prices Xxx 0000, the Trade Descriptions Xxx 0000, the Consumer
Credit Xxx 0000, the Consumer Protection Xxx 0000, the
Companies Acts, the Financial Services Xxx 0000, the Banking
Xxx 0000 and the Food Safety Act 1990 and so far as the
Covenantors are aware all statutory, municipal and other like
requirements (including orders and regulations affecting
businesses carried on in member states of the European Economic
Community) applicable to the business of the Company have been
complied with.
LICENCES
C.20. So far as the Covenantors are aware the Company has all licences,
permissions, permits, consents and authorisations required for the
carrying on of its Business and is not in breach of the terms or
conditions of such licences, permissions, permits, consents and
authorisations and the Covenantors have not received notice of any
pending or threatened proceedings which might affect such licences,
permissions, permits, consents and authorisations and the Covenantors
are not aware of any other reason why any of them should be suspended,
threatened or revoked or be invalid.
GRANTS
C.21. The Company has not applied for nor received any financial assistance
from any supranational, national or local agency, body or authority.
FINANCIAL ASSISTANCE
C.22 The Company has not been a party to any transactions which could
constitute unlawful financial assistance by the Company for the
acquisition of its own shares contrary to the law relating thereto as
prevailing at the time of any such transaction.
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D. DIRECTORS AND EMPLOYEES
D DIRECTORS AND EMPLOYEES
D.1 PARTICULARS OF OFFICERS
The particulars of all employees annexed to the Disclosure Letter show
the names, job title, date of commencement of employment, date of
birth and period of continuous employment (calculated in accordance
with chapter 1 of part XIV of the Employment Rights Xxx 0000 "ERA"))
of every employee of the Company.
D.2 REMUNERATION AND BENEFITS
The particulars of all employees annexed to the Disclosure Letter show
all remuneration and other benefits:-
(a) actually provided; and
(b) which the Company is bound to provide (whether now or in the
future)
to each officer and employee of the Company and are true and complete
and include particulars of and details of participation in all profit
sharing, incentive, bonus, commission, share option, medical,
permanent health insurance, directors' and officers' insurance,
travel, car, redundancy and other benefit schemes, arrangements and
understandings (the "SCHEMES") operated for all or any employees or
former employees of the Company or their dependants whether legally
binding on the Company or not.
D.3 TERMS AND CONDITIONS
(a) The Disclosure Letter contains copies of all the standard
terms and conditions, staff handbooks and policies which apply
to employees of the Company and identifies which terms and
conditions apply to which employees.
(b) There are no terms and conditions in any contract with any
director, officer or employee of the Company pursuant to which
such person will be entitled to receive any payment or benefit
or such person's rights will change as a direct consequence of
the transaction contemplated by this Deed.
(c) There are no service agreements or contracts of employment
between the Company and any of its directors, officers or
employees containing any provision in addition to the matters
required to be contained therein under section 1 of the ERA.
(d) All employees of the Company have received a written
statement of particulars of their employment as required by
section 1 of the ERA.
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D.4 OPERATION OF THE SCHEMES
(a) The Schemes have at all times been operated in all material
respects in accordance with their governing rules or terms and
all applicable laws and all documents which are required to be
filed with any regulatory authority have been so filed and all
tax clearances and approvals necessary to obtain favourable tax
treatment for the Company and/or the participants in the Schemes
have been obtained and not withdrawn and no act or omission has
occurred which has or could prejudice any such tax clearance
and/or approval.
(b) No director, officer, employee or any dependant thereof or
any other participant in any Scheme in the last two years has
made any claim against the Company in respect of any Scheme and
the Covenantors are not aware of any event having occurred which
could reasonably be expected to give rise to any such claim.
D.5 NOTICE PERIODS
The terms of employment or engagement of all employees, agents,
consultants and professional advisers of the Company are such that
their employment or engagement may be terminated by not more than four
weeks' notice given at any time without liability for any payment
including by way of compensation or damages (except for unfair
dismissal or a statutory redundancy payment).
D.6 CHANGES SINCE THE ACCOUNTS DATE
Since the Accounts Date the Company has not made, announced or
proposed any changes to the emoluments or benefits of or any bonus to
any of its directors, officers or employees and the Company is under
no obligation to make any such changes with or without retrospective
operation.
D.7 LOANS
There are no amounts owing or agreed to be loaned or advanced by the
Company to any directors, officers and employees of the Company (other
than amounts representing season ticket loans, remuneration accrued
due for the current pay period, accrued holiday pay for the current
holiday year or for reimbursement of expenses).
D.8 NOTICE OF TERMINATION AND LEAVE OF ABSENCE
(a) Save as contemplated by the Offers no director, officer or
employee of the Company has given or received notice to
terminate his employment.
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(b) There are no directors, officers or employees of the Company
who are on secondment or absent on grounds of disability or
other leave of absence (other than normal holidays or absence of
no more than one week due to illness).
D.9 PAYMENT UP TO COMPLETION
All salaries and wages and other benefits of all employees of the
Company have, to the extent due, been paid or discharged in full.
D.10 INDUSTRIAL RELATIONS
(a) No directors, officers or employees of the Company are members
of a trade union, staff association or any other body
representing workers and no such union, association or body is
recognised by the Company for the purposes of collective
bargaining.
(b) The Disclosure Letter contains copies of and full details of
all rights and liabilities relating or pursuant to any
collective agreements (whether with a trade union, staff
association or any other body representing workers and whether
legally binding or not) concerning the Company.
(c) Within the three years preceding the date hereof the Company
has not been engaged or involved in any trade dispute (as
defined in section 218 of the Trade Union and Labour Relations
(Consolidation) Act 1992) with any employee, trade union, staff
association or any other body representing workers and no event
has occurred which could or might give rise to any such dispute
and no industrial action involving employees of the Company,
official or unofficial, is now occurring or threatened nor has
any industrial relations or employment matter been referred
either by the Company or its employees or by any trade union
staff association or any other body representing workers to
Advisory, Conciliation and Arbitration Service for advice,
conciliation or arbitration.
D.11 CLAIMS BY EMPLOYEES
No past or present director, officer or employee of the Company or any
predecessor in business has any claim or right of action against the
Company including any claim:-
(a) in respect of any accident or injury which is not fully
covered by insurance; or
(b) for breach of any contract of services or for services; or
(c) for loss of office or arising out of or connected with the
termination of his office or employment
and no event or inaction has occurred which could or might give rise
to any such claim.
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D.12 ENQUIRIES AND DISCRIMINATION
(a) So far as the Covenantors are aware there are no enquiries or
investigations existing, pending or threatened affecting the
Company in relation to any directors, officers or employees by
the Equal Opportunities Commission, the Commission for Racial
Equality or the Health and Safety Executive or any other bodies
with similar functions or powers in relation to workers.
(b) So far as the Covenantors are aware there are no terms or
conditions under which any director, officer or employee of the
Company is employed, nor has anything occurred or not occurred
prior to Completion that may give rise to any claim for sex
discrimination, race discrimination, disability discrimination
or equal pay either under domestic United Kingdom or European
Law whether by such director, officer or employee or a
prospective director, officer or employee or otherwise.
D.13 COMPLIANCE WITH LAWS
(a) The Company has complied in all material respects with all
relevant provisions of the Treaty of Rome, EC Directives,
statutes, regulations, codes of conduct, collective agreements,
terms and conditions of employment, orders, declarations and
awards relevant to the Company's directors, officers and
employees or the relations between the Company and any trade
union, staff association or any other body representing workers.
(b) There are no training schemes, arrangements or proposals,
whether past or present, in respect of which a levy may
henceforth become payable by the Company under the Industrial
Training Xxx 0000.
D.14 TRANSFER REGULATIONS
The Company has not entered into any agreement and no event has
occurred which may involve the Company in the future acquiring any
undertaking or part of one such that the Transfer Regulations may
apply thereto.
D.15 DUTY TO INFORM AND CONSULT
The Company has complied in all material respects with its obligations
to inform and consult with trade unions and other representatives of
workers and to send notices to the Secretary of State pursuant to
sections 188 to 194 of the TULR(C)A and regulations 10 and 11 of the
Transfer of Undertakings (Protection of Employment) Regulations 1981.
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D.16 RECORDS
The Company has maintained adequate and suitable records regarding the
service of its directors, officers and employees and such records
comply with the requirements of the Data Protection Xxx 0000.
D.17. BUSINESS IS CONDUCTED BY EMPLOYEES
The Company has not entered into any agreement or arrangement for the
management or operation of its business or any part thereof other than
with its employees.
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E. PROPERTIES
E.1. ALL PROPERTY
The Properties comprise all the freehold and leasehold land and
premises owned used or occupied by the Company and there are no other
rights vested in or liabilities of the Company or any agreements
whereby the Company has entered into obligations and/or has any
financial entitlement relating to any land other than the Properties at
the date hereof.
E.2. DISCLOSURES AND REPLIES
All disclosures and replies to enquiries and requisitions relating to
the Properties made or given by or on behalf of the Covenantors or the
Company to the Offeror or its Solicitors are now and will at Completion
be complete and correct in all material respects.
E.3. NO OTHER LIABILITIES
The Company has no actual or contingent obligations or liabilities (in
any capacity including as principal contracting party or guarantor) in
relation to any lease, licence or other interest in, or agreement
relating to, land apart from the Properties.
E.4. GOOD AND MARKETABLE TITLE
The Company has a good title to the Properties which title is freehold
or leasehold as indicated in Schedule 4 and, unless disclosed in
Schedule 4, the Company is solely legally and beneficially entitled to
the Properties for an unencumbered estate in possession.
E.5. TITLE DEEDS AND DOCUMENTS
The Company has under its control all title deeds and documents
necessary to prove its title to the Properties and the same are
original documents or properly examined abstracts; where any of the
Properties is leasehold the title documents include all necessary
consents for the grant and assignment of the lease, satisfactory
details of all reversioners' titles, memoranda of rent increases where
appropriate and all reversioners' consents required under the lease;
where any of the Properties is subject to leases, underleases,
agreements or licences the title documents include all necessary
consents in connection therewith and evidence of registration of the
grant of the same where appropriate.
E.6. ADEQUACY OF EXISTING BENEFICIAL RIGHTS
To the best of the Covenantors' knowledge each of the Properties has
the benefit of all rights necessary for the continued present use and
enjoyment of the same such rights not being capable of withdrawal by
any person nor liable to be made subject to any charge therefor.
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E.7. OTHER MATTERS ADVERSELY AFFECTING THE PROPERTIES
So far as the Company is aware, there are no agreements, covenants,
restrictions, exceptions, reservations, conditions, rights, privileges
or stipulations affecting the Properties which are of an onerous or
unusual nature.
E.8. NO DEFAULT
The Company has not received any notice of any breach of any
covenants, restrictions, exceptions, reservations, conditions,
agreements, statutory and common law requirements, by-laws, orders,
building regulations and other stipulations and regulations affecting
the Properties and the uses of the Properties including the terms of
any lease, underlease or tenancy agreement under which any part of any
of the Properties is held and (without prejudice to the generality of
the foregoing) all outgoings have been paid to date and (in the case
of leasehold property) all rents and service charges have been paid to
date and no notice of any alleged breach of any of the terms of any
such lease or tenancy agreement as aforesaid has been served on the
Company.
E.9. LEASEHOLD PROPERTIES
(a) Each of the Properties which is leasehold is held under the
lease brief details of which are set out in Schedule 4 and no
licences or collateral arrangements or concessions have been
entered into or granted each such lease being a head lease and
containing no unusual or onerous covenants or provisions nor
any rights of determination on the part of the landlord and
there are no rent reviews which are or will at the date of
Completion be in the course of being determined;
(b) The proposed acquisition of the Company by the Offeror will
not result in the termination or cessation of any rights or
interests in the Properties pursuant to any lease, licence or
collateral arrangement in relation to the Properties.
E.10. USE
The existing use of each of the Properties is only that specified in
Schedule 4 and is the lawful permitted use whether under the current
Town and Country Planning legislation and in the case of leasehold
property under the terms of the lease or tenancy agreement under which
such property is held or otherwise and are not temporary uses and all
necessary consents to such existing uses have been obtained.
E.11. NO COMPULSORY ACQUISITION OR ENFORCEMENT PROCEEDINGS
There are no outstanding enforcement or other notices or proceedings
issued in respect of any of the Properties and so far as the Company
is aware there is no resolution or proposal for compulsory acquisition
by the local or any other authority nor any outstanding order, notice
or
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other requirement of any such authority that affects such existing use
as aforesaid or involves expenditure in complying with it nor any
other circumstances known which may result in any such order or notice
being made or served or which may otherwise affect the Properties.
E.12. FULL DISCLOSURE
Accurate details of all leases have been disclosed in writing to the
Offeror or the Offeror's Solicitors prior to the date hereof.
E.13. ACCURACY OF INFORMATION
All the information produced to or given in writing to the Offeror or
the Offeror's Solicitors in respect of or relating to the Properties
(including replies to enquiries and requisitions) in the course of
negotiations leading up to the execution of this Deed is true and
accurate and the Covenantors are not aware of any fact, matter or
thing which has not been disclosed to the Offeror or the Offeror's
Solicitors which makes any such information untrue or misleading at
the date of this Deed.
E.14. NO DISPUTES
The Company has not received notice that the Properties are affected
by any outstanding disputes, notices or complaints which affect the
use of the Properties for the purposes for which they are now used or
proposed to be used or that there are matters or Encumbrances
affecting the Properties and which would prevent or impede the Company
from operating and carrying on the businesses currently carried on at
the Properties.
E.15. FIRE PRECAUTIONS XXX 0000
The Company has not received notice that it has not complied with its
obligations under the Fire Precautions Xxx 0000 and that it has
applied for and obtained fire certificates thereunder in respect of
all premises owned or occupied by the Company to the extent required
by such Act.
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F. PENSIONS
F.1. PENSION ARRANGEMENTS DISCLOSED
Save in respect of the Xxxxxxx Xxxxx Retirement Fund, the Xxxxxxx
Xxxxx Executive Retirement Trust and the Xxxxxxx Xxxxx Structured
Finance Limited Retirement Scheme (the "PENSION SCHEMES") the Company
is under no obligation or commitment, nor is it a party to any custom
or practice, to pay, provide or contribute towards any "RELEVANT
BENEFITS" within the meaning of Section 612 of the TA (ignoring the
exception therein) and has not at any time participated in or
contributed towards any scheme or arrangement which has as its purpose
or one of its purposes the provision of any such benefits (other than
schemes which have been fully wound up).
F.2. EX GRATIA PENSIONS ETC.
The Company has not made or proposed, and will not before Completion
make or propose, any voluntary or ex gratia payments to any person in
respect of any relevant benefit (as defined in paragraph F.1 above).
F.3 UNDERTAKINGS AND ASSURANCES
No undertaking or assurance (whether legally binding or not) has been
given by the Company to any person as to the continuance,
introduction, increase or improvement of any such benefit or scheme or
arrangement as is referred to in paragraph F.1 above since 1 May 1996.
F.4. DISCLOSURE OF DOCUMENTS
All material details of the Pension Schemes have been supplied to the
Offeror or its legal advisers including (without limitation to the
foregoing) in relation to the Xxxxxxx Xxxxx Retirement Fund
(the "RETIREMENT FUND") complete up-to-date and accurate copies of the
following:-
(a) all trust deeds, rules and other documents which have at any
time governed the Retirement Fund (including any which have
now been superseded or consolidated);
(b) any announcements to members of the Retirement Fund which are
not yet the subject of formal amendment to the documentation;
(c) the current explanatory booklets and other explanatory
literature issued to persons who are (or are entitled to
become) members of the Retirement Fund;
(d) the name and address of the actuary to the Retirement Fund and
the actuary's reports on the last actuarial valuation of the
Retirement Fund, together with any subsequent actuarial advice
or recommendations given in relation to the Retirement Fund;
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(e) the audited accounts of the Retirement Fund (including the
auditors' report) for the last two scheme years and any draft
scheme accounts for the current scheme year;
(f) a statement of the basis on which the participating companies
and the members of the Retirement Fund contribute thereto, and
make payments in respect of the expenses of administration,
management and trusteeship thereof and the rate and amount of
such contributions and payments made in the three years prior
to the date of this Deed;
(g) details of any discretionary benefits provided under, and
discretionary arrangements relating to, the Retirement Fund,
including any discretionary increases of deferred pensions or
pensions in payment;
(h) the approval letter issued by the Pension Schemes Office of
the Inland Revenue in respect of the Retirement Fund and any
undertakings and indemnities given to the Inland Revenue in
relation to the Retirement Fund other than undertakings in the
normal form requested by the Inland Revenue from pension
schemes generally.
All written information which has been made available to the Offeror
on or before the date of this Deed in relation to the Pension Schemes
and which is annexured to the Disclosure Letter is true and accurate
in all material respects.
F.5 PAYMENT OF CONTRIBUTIONS
All contributions and premiums which are payable by the participating
companies under the Pension Schemes and all contributions due from
members of the Pension Schemes have been duly paid when due and the
participating companies have fulfilled all their obligations under the
Pension Schemes to pay all relevant contributions and premiums.
F.6 EXEMPT APPROVAL
The Retirement Fund and the Xxxxxxx Xxxxx Structured Finance Limited
Retirement Scheme are, and have been with effect from the date of
their commencement, (within the meaning of Section 592(1) of the TA)
exempt approved schemes and so far as the Covenantors are aware there
is no reason why such approval might be withdrawn or cease to apply.
F.7 CONTRACTING OUT
No employee of the Company is in contracted-out employment as defined
in the Xxxxxxx Xxxxxxx Xxx 0000.
F.8 INSURANCE OF DEATH BENEFITS
All lump sum death benefits which may be payable under the Pension
Schemes (other than a refund of members' contributions with interest
where appropriate) are fully insured with an
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insurance company of good repute authorised to carry on long-term
insurance business under the Insurance Companies Xxx 0000. All
policies and contracts under which such benefits are insured are
enforceable and there is no ground on which the insurance company
concerned might avoid liability under any such policy or contract.
Each member and beneficiary has been covered for such insurance by
such insurance company at its normal rates and on its normal terms for
persons in good health.
F.9. LEGAL COMPLIANCE
So far as the Covenantors are aware the Pension Schemes have at all
times been administered in all material respects in accordance with
the trusts' powers and provisions of their governing documentation and
have been administered in accordance with and comply with all
applicable legislation and the general requirements of trust law.
F.10 NO CLAIMS OR LITIGATION
No notice of any claim has been made or threatened against the
trustees or administrator of the Pension Schemes or any company
participating therein or against any person whom the Company is or may
be liable to indemnify or compensate (including any complaint to the
Pensions Ombudsman) in respect of any act, event, omission or other
matter arising out of or in connection with the Pension Schemes (other
than routine claims for benefits) and so far as the Covenantors are
aware there are no circumstances which may give rise to any such
claim.
F.11 DISCRETIONARY BENEFITS
No power or discretion has been exercised to augment or improve any
benefit under the Pension Schemes, nor any promise or announcement
made to do so.
F.12 ACCESS TO MEMBERSHIP
Every person who is entitled to membership of the Pension Schemes has
been invited to join as of the date on which he became so entitled.
F.13 PAYMENTS TO COMPANIES
No payment has been or is proposed to be made from the Pension Schemes
to any participating company.
F.14 CONTRIBUTIONS TO PERSONAL PENSIONS
The Company has no contractual liability to make any contributions to
any personal pension scheme or any retirement annuity contract of any
employee or director or to make any payment of remuneration
specifically referable to contributions payable by any employee or
director under such scheme or contract.
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F.15 FEES AND EXPENSES PAID
All actuarial, consultancy, legal and other fees, charges or expenses
which have fallen due in respect of the Pension Schemes, and whether
payable by participating companies or by the trustees thereof, have
been paid.
F.16 NO TAX LIABILITY
All taxation of any nature, whether of the United Kingdom or
elsewhere, for which the trustees or administrators of the Pension
Schemes are liable or liable to account and which has fallen due has
been duly paid.
F.17 RECORDS PROPERLY MAINTAINED
The records of the Pension Schemes, including without prejudice to the
generality of the foregoing all books of account and trustees'
minutes, have been adequately maintained and all such records are in
the possession of or under the control of the trustees of the Pension
Schemes.
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G. THE GROUP AND ITS BANKERS
BORROWINGS
G.1. The total amount borrowed by the Company from its bankers does not
exceed its facilities and the total amount borrowed by the Company from
whatsoever source does not exceed any limitation on its borrowing
contained in its Articles of Association, or in any debenture or loan
stock deed or other instrument.
CONTINUANCE OF FACILITIES
G.2. Accurate details of all bank or deposit accounts (whether in credit or
overdrawn), overdraft, loans or other financial facilities outstanding
or available to the Company including the signatures of each bank or
deposit account, overdraft, loan or facility have been supplied to the
Offeror and none of the Covenantors nor the Company has done anything
whereby the continuance of any such facilities in full force and effect
might be affected or prejudiced. In relation to the bank or deposit
accounts there have been no payments out of any such accounts except
for payments in the ordinary course of the Company's business.
EVENTS OF DEFAULT - INDEBTEDNESS
G.3. No circumstances have arisen or, to the best of the knowledge,
information and belief of the Covenantors, are about to arise in
consequence of the acquisition of the Company or by reason of any
default by the Company or any of its Subsidiaries such that any person
is, or would with the giving of notice and/or lapse of time and/or the
satisfaction of any other condition become entitled to require payment
before its stated maturity of, or security for, any indebtedness in
respect of borrowed money of the Company and, to the best of the
knowledge, information and belief of the Covenantors, no person to whom
any indebtedness for borrowed money of the Company which is payable on
demand is owed presently proposes to demand payment of, or security
for, the same, and there is no reason to suppose that any overdraft
facility of the Company will be, or is likely to be, withdrawn.
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H. ACCURACY OF INFORMATION
H.1 All information contained in the document in agreed form headed
"Details of the Company and the Subsidiaries", Schedule 4 to this Deed
and the information contained in the Offer Document in relation to the
Company, its officers and any person connected (within the meaning
given in Section 839 T.A.) with any of them is true and correct in all
material respects and does not omit any information which would be
necessary to make the information contained therein not misleading in
any material respect.
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I. TAXATION
INFORMATION AND RETURNS
RETURNS
I.1. The Company has made all returns and supplied all information and given
all notices to the Inland Revenue or other Taxation Authority as
reasonably requested or required by law and, so far as the Covenantors
are aware, these have been made within any requisite period. All such
returns and information and notices are correct and accurate in all
material respects and are not the subject of any dispute so far as the
Covenantors are aware and to the best of the knowledge, information and
belief of the Covenantors there are no facts or circumstances likely to
give rise to or be the subject of any such dispute and all tax returns
for the Company for all periods ending on or before the Accounts Date
have been agreed by the Inland Revenue or other Taxation Authority.
CLEARANCES
I.2. No action has been taken by the Company in respect of which any consent
or clearance from the Inland Revenue or other Taxation Authority was
legally required save in circumstances where such consent or clearance
was validly obtained, and where any conditions attaching thereto were
and are (so far as necessary), at the date of the Offer, met.
CLAIMS AND ELECTIONS
I.3. The Company has not made and is not subject to any claim or election
under any or all of the following:-
(a) Sections 279(1) to (6) T.C.G.A. (foreign assets: delayed
remittances);
(b) Section 35 T.C.G.A. (capital gains: rebasing to 31 March 1982);
(c) Section 24 T.C.G.A. (assets of negligible value or lost or
destroyed);
(d) Section 175 T.C.G.A. and Sections 152 and 153 T.C.G.A.
(roll-over relief);
(e) Section 242 T.A. (surplus franked investment income);
(f) Section 247 T.A. (group income);
(g) Sections 584 585 or 723 T.A. (foreign income etc.: delayed
remittances);
(h) Sections 75 to 77 F.A. 1986 (stamp duty on reconstructions
etc.).
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I.4. The Disclosure Letter contains details of all outstanding entitlements
to make claims, elections, appeals and postponement applications in
respect of each company other than REGL and in respect of Section 35
T.C.G.A., no period has expired being a period in which such an
election in respect of the Company could have been made without the
election being made.
PAYMENT OF TAX BY INSTALLMENTS
I.5. The Company has made no election or arrangement for the payment of Tax
by instalments under Sections 280 and 48 T.C.G.A.
PROVISION FOR AND PAYMENT OF TAX
GENERAL
I.6. The Accounts make proper provision or reserve in respect of any period
ended on or before the Accounts Date for all Tax assessed or liable to
be assessed on the Company or for which it is accountable at the
Accounts Date whether or not the Company has or may have any right of
reimbursement against any other person and proper provision has been
made and shown in the Accounts for deferred taxation in accordance with
generally accepted accounting principles.
PAYMENT OF TAX
I.7. The Company has duly paid all Tax to the extent that the same ought to
have been paid and is not liable nor has it within three years prior to
the date hereof been liable to pay any penalty or interest in
connection therewith.
PAY AS YOU EARN
I.8. The Company has properly operated the P.A.Y.E. system, or any
equivalent system outside the United Kingdom, deducting Tax as required
by law from all payments to or treated as made to or benefits provided
for employees, ex-employees or independent contractors of the Company
(including any such payments within Section 134 T.A.) and duly
accounted to the Inland Revenue for Tax so deducted and has complied
with all its reporting obligations to the Inland Revenue in connection
with any such payments made or benefits provided, and no P.A.Y.E. audit
in respect of the Company has been made by the Inland Revenue nor has
the Company been notified that any such audit will be made.
GIVE AS YOU EARN
I.9. Details of any payroll deduction scheme pursuant to Section 202 T.A.
operated by the Company are set out in the Disclosure Letter and any
such scheme has been operated in accordance with that section and
regulations made thereunder.
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SECONDARY LIABILITY
I.10. So far as the Covenantors are aware, no transaction or event has
occurred in consequence of which the Company is or may be held liable
for any Tax or deprived of relief or allowances otherwise available to
it or may otherwise be held liable for or to indemnify any person in
respect of any Tax for which some other company or person was primarily
liable (whether by reason of any such other company being or having
been a member of the same group of companies or otherwise).
CORPORATION TAX
TRADING ASSETS
I.11. In the event that any asset shown in the Accounts as a fixed asset is
disposed of immediately following the Offers the proceeds derived from
such asset will not be treated as a trading receipt for tax purposes.
I.12. INTENTIONALLY LEFT BLANK
TRANSFER PRICING
I.13. The Company has not entered into any transactions to which Section 770
T.A. would apply and no notice or enquiry pursuant to Section 770 T.A.
has been made in connection with any of such transactions.
APPROPRIATIONS
I.14. Since the Accounts Date the Company has not appropriated any of its
assets to or from trading stock.
I.15. INTEREST RATE CONTRACTS ETC.
The Company is not at the date hereof and has not since the Accounts
Date been a party to any contract which is a qualifying contract for
the purposes of Section 147 of the 1994 or a contract which may become
a qualifying contract.
I.16 EXCHANGE GAINS AND LOSSES
The Company is not at the date hereof and has not since the Accounts
Date been:-
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(a) the holder of a qualifying asset;
(b) subject to a qualifying liability; or
(c) party to a currency contract
for the purposes of chapter II of the FA 1993.
I.17 CREDITOR RELATIONSHIPS
The Company is and has since the Accounts Date been taxed on an
authorised accruals basis of accounting in relation to all loan
relationships which are creditor relationships as defined in Section
103 of the FA 1996 and in relation thereto:-
(a) the accruals on which the Company is taxable are computed only
by reference to interest;
(b) if any such debt were to be repaid at its face value the
Company would not suffer any charge to Tax in excess of Tax on
interest accrued; and
(c) there is no connection between the Company and the debtor as
mentioned in Section 87 of the FA 1996.
I.18 DEBTOR RELATIONSHIPS
(a) So far as the Covenantors are aware the Company will obtain Tax
relief (in respect of the period between the Accounts Date and
the date hereof) on an authorised accruals basis of accounting
in relation to all loan relationships which are debtor
relationships as mentioned in Section 103 of the FA 1996 which
are now or have at any time during the period between the
Accounts Date and the date hereof been outstanding and in
relation to each such relationship:-
(i) the deduction given in computing the taxable profits
of the Company in consequence of that relationship
will not be less than the interest accruing for the
period concerned;
(ii) the Company would suffer no adverse Tax consequences
were such debts to be repaid at face value save that
the Tax deduction for interest accrued would cease.
(b) The Company has not since the Accounts Date held or been the
debtor under any relevant discounted security as mentioned in
Schedule 13 of the FA 1996.
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PENSION FUND SURPLUS
I.19. Since the Accounts Date the Company has not received any payment to
which Schedule 22 T.A. applies.
CAPITAL ASSETS
CAPITAL ALLOWANCES
I.20. (a) No balancing charge in respect of any capital allowances (as
defined in Section 832(1) T.A.) claimed or given would be made
on any member of the Group on the disposal of any pool of assets
(that is to say all those assets expenditure relating to which
would be taken into account in computing whether a balancing
charge would arise on a disposal of any other of those assets)
if the disposals were to be made on the date hereof and for a
consideration equal to the amount of the book value thereof as
shown or included in the Accounts for each of the assets.
(b) So far as the Covenantors are aware, all necessary conditions
for all capital allowances claimed by the Company were at all
material times satisfied and remain satisfied and the Company
has not since the Accounts Date become liable for any balancing
charge.
FINANCE LEASES
I.21. (a) The Company is not the lessee under any leases of plant or
machinery save for the leases specified in the Disclosure Letter
(the "Leases").
(b) The machinery or plant subject to the Leases has in the period
which is the requisite period in respect of any expenditure
thereon by an owner or lessor for the purposes of Section 39(1)
CAA been used and only been used for a qualifying purpose as
defined by the section.
(c) The Covenantors, after making due and reasonable enquiry, are
not aware of any revenue investigation, revenue enquiry or
other circumstance which indicates that any person who is or
was a lessor or owner of equipment subject to any of the Leases
will or may be denied the first year allowances and writing
down allowances by reference to which the initial rental under
that Lease was calculated.
DISTRIBUTIONS
REPAYMENTS OF SHARE CAPITAL
I.22. (a) The Company has not at any time after 6 April 1965 repaid or
agreed to repay or redeemed or agreed to redeem or purchased or
agreed to purchase (or made any
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contingent purchase contract within the meaning of Section 165
of the Companies Act 1985) in respect of any of its issued
share capital or any class thereof. Further the Company has
not after 6 April 1965 capitalised or agreed to capitalise in
the form of shares debentures or other securities or in paying
up amounts unpaid on any shares debentures or other securities
any profits or reserves of any class or description or passed
or agreed to be passed any resolution to do so.
(b) The Company has not made (and will not be deemed to have made)
any distribution within the meaning of Sections 209 and 210
T.A. in the last six years except dividends properly authorised
and shown in its Accounts nor is the Company bound to make any
such distribution.
PAYMENTS TO BE TREATED AS DISTRIBUTIONS
I.23. The Company has not issued any securities (within the meaning of
Section 254(1) T.A.) which remain in issue where the interest payable
thereon falls to be treated as a distribution.
CHARGEABLE GAINS
SALES AT BOOK VALUE
I.24. No chargeable gain would arise if any assets of the Company (other than
trading stock) were to be realised for a consideration equal to the
amount of the book value thereof as shown or included in the Accounts.
VALUATION OF ASSETS
I.25. (a) The Company has not since the Accounts Date made any disposal
of part of an asset part of which is still owned by the Company
at the date hereof which has required or may or will require
any computation under Section 42 T.C.G.A. (part disposals of
assets).
(b) The Company has not since the Accounts Date disposed of or
acquired any asset so that Section 17 T.C.G.A. might apply to
restrict the consideration deemed to be given on such disposal
or acquisition.
DEPRECIATORY TRANSACTIONS
I.26. No loss which may hereafter arise on a disposal by the Company of
shares in or securities of any company will or is likely to be reduced
by virtue of the application of Section 176 T.C.G.A. (transactions in a
group) or Section 177 T.C.G.A. (dividend stripping).
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SHARES AND SECURITIES
I.27. The Company has not acquired or sold any shares or securities or
changed the rights attaching to any shares or securities since the
Accounts Date.
TRANSFERS BY WAY OF GIFT
I.28. The Company has not since the Accounts Date made any such transfer of
an asset at an undervalue as is mentioned in Section 125 T.C.G.A. or
received any assets by way of gift as mentioned in Section 282 T.C.G.A.
ANTI AVOIDANCE PROVISIONS
TAX SCHEMES
I.29. The Company has not entered into nor been a party to nor otherwise
involved in any scheme or arrangement containing one or more steps or
stages having no commercial purpose and designed wholly or partly for
the purpose of avoiding or deferring Tax.
TRANSACTIONS IN SECURITIES
I.30. The Company has not since the Accounts Date:-
(a) become liable for Tax; or
(b) received and will not receive or be the subject of or be
adversely affected by any Claim for Tax (arising as a result of
events occurring after the Accounts Date);
arising under or imposed by or resulting from the operation of Sections
703-709 T.A..
TRANSACTIONS IN LAND
I.31. The Company has not since the Accounts Date:-
(a) become liable for Tax; or
(b) received and will not receive or be the subject of or be
adversely affected by any Claim for Tax (arising as a result of
events occurring after the Accounts Date);
arising under or imposed by or resulting from the operation of Sections
776-778 T.A..
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SALE AND LEASE BACK OF LAND
I.32. In the last six years, the Company has not entered into any transaction
as is mentioned in Sections 34-37 or Section 780 T.A.
TRANSACTIONS BETWEEN DEALING AND ASSOCIATED COMPANY
I.33. The Company has not in the last six years entered into any transaction
mentioned in Section 774 T.A.
FOREIGN ELEMENT
TREASURY CONSENTS
I.34. The Company has not without the prior consent of the Treasury entered
into any of the transactions specified in Section 765(1)(c) or (d) T.A.
nor did the Company prior to 15 March 1988 without such consent enter
into any of the transactions specified in Section 765(1)(a) or (b) T.A.
JURISDICTION
I.35. The Company is not liable to tax in any jurisdiction other than the
country in which it was incorporated.
TRANSFERS TO NON-RESIDENT COMPANY
I.36. The Company has not since the Accounts Date made any such transfer as
is mentioned in Section 140 T.C.G.A.
AGENCY FOR NON RESIDENTS
I.37. The Company is not assessable and has not been assessed to Tax by
virtue of Section 78 T.M.A.
INHERITANCE TAX
INHERITANCE TAX CHARGE
I.38 There is no unsatisfied liability to inheritance tax attached or
attributable to the Shares or any asset of the Company and in
consequence no person has the power to raise the amount of such Tax by
sale or mortgage of or by a terminable charge on any of the Shares or
assets of the Company as mentioned in Section 212 of the I.T.A. and
none of the Shares or assets of the Company are subject to an Inland
Revenue charge within Section 237 of the I.T.A..
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GROUPS OF COMPANIES
GROUP RELIEF
I.39. The Disclosure Letter contains particulars of all arrangements relating
to group relief under Sections 402-413 T.A. to which the Company is or
has been a party and:-
(a) all claims by the Company for group relief were valid when made
and have been or will be allowed by way of relief from
corporation tax;
(b) the Company has not made nor is liable to make any payment for
group relief otherwise than in consideration for the surrender
of group relief allowable to the Company by way of relief from
corporation tax;
(c) the Company has received all payments due to it under any
arrangement or agreement for surrender of group relief by it;
(d) no such payment exceeds or could exceed the amount permitted by
Section 402(6) T.A..
ADVANCE CORPORATION TAX
I.40. The Disclosure Letter contains particulars of all arrangements for the
surrender under Section 240 T.A. of any amount of advance corporation
tax and in respect of receipts and surrenders disclosed:-
(a) the Company has not paid nor is liable to pay for the benefit
of any advance corporation tax which is or may become incapable
of set off against the Company's liability to corporation tax;
(b) the Company has received all payments due to it for all
surrenders of advance corporation tax made by it; and
(c) no such payment exceeds or could exceed the amount permitted by
Section 240(8) T.A..
COMPANIES FORM A GROUP
I.41. The Companies form a group for the purposes of Section 170 T.C.G.A. and
there are no other companies which are members of that group.
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VALUE ADDED TAX
VALUE ADDED TAX
I.42. (a) The Company is a registered taxable person for the purpose of
the VAT legislation and has not at any time been treated as a
member of a group of companies for such purpose and has not
made any application to be so treated and no circumstances
exist whereby the Company would or might become liable for
value added tax as an agent or otherwise by virtue of Section
47 V.A.T.A. or any equivalent section of the VAT legislation.
(b) The Company has (so far as the Covenantors are aware) complied
in all respects with all material requirements and provisions
of V.A.T.A. or any equivalent legislation outside the UK and
all regulations and orders made thereunder (the "VAT
LEGISLATION") and has made and maintained and will pending the
date of the Offers make and maintain accurate and up-to-date
records invoices accounts and other documents required by or
necessary for the purposes of the VAT legislation.
STAMP DUTY
STAMP DUTY AND CAPITAL DUTY
I.43. All documents necessary to prove the Company's title to its assets have
been duly stamped and since the Accounts Date the Company has not been
a party to any transaction whereby the Company was or is or could
become liable to stamp duty reserve tax.
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J. ENVIRONMENTAL MATTERS
For the purposes of this Section J:
"Disposal" means any disposal by any means, including dumping, incineration,
spraying, pumping, injecting, depositing or burying;
"Environmental Laws" means all EU, national, municipal or local statutes,
regulations, bye-laws, published guidelines, published policies or rules, and
Orders of any Governmental Authority and the common law (in force as at or
prior to the date of this Deed), relating in whole or in part to the
environment and includes those laws (all as in force as at or prior to the date
of this Deed) relating to the storage, generation, use, handling, manufacture,
processing, transportation, import, export, treatment, Release or Disposal of
any Hazardous Substance and any laws (in force as at or prior to the date of
this Deed) relating to asbestos or asbestos containing materials in the
environment, in the workplace or in any building located on any of the
Properties;
"Environmental Notice" shall mean any citation, directive, order, claim,
litigation, investigation, proceeding, judgment, letter or other communication,
written or oral, actual or threatened, from any person, including any
Governmental Authority;
"Environmental Permits" includes all permits, certificates, approvals,
consents, authorisations, registrations, and licences issued, granted,
conferred, created or required by any Governmental Authority pursuant to any
Environmental Laws;
"Governmental Authority" means any domestic or foreign government whether
federal, provincial, state or municipal and any governmental agency,
governmental or regulatory authority, governmental tribunal or governmental
commission of any kind whatever;
"Hazardous Substance" means any pollutant, contaminant, waste, hazardous
substance, hazardous material, toxic substance, dangerous substance or
dangerous good as defined, judicially interpreted or identified in any
Environmental Law, including any that may impair the quality of any waters;
"Order" means any order (draft or otherwise), judgment, injunction, decree,
award or writ of any court, tribunal, arbitrator, Governmental Authority or
other person;
"Process" means any industrial or other process or activity carried on at the
Properties;
"Release" includes releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, migrating, escaping, leaching, disposing,
dumping, depositing, spraying, burying, abandoning, incinerating, seeping or
placing, or any similar action defined in any Environmental Law; and
"Remedial Order" means any Order issued, filed or imposed pursuant to any
Environmental Law and includes, without limitation, any Order requiring any
remediation or clean-up of any Hazardous Substance, or requiring that any
Release, Disposal or other activity be reduced, modified or eliminated.
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J.1 To the best of the Covenantors' knowledge, information and belief the
Company possesses all Environmental Permits necessary or desirable to
operate its businesses. All operations of the Company are now and
always have been in compliance in all respects with and without breach
of all applicable Environmental Laws and all Environmental Permits.
J.2 The Company is not the subject of any Remedial Order, nor to the
knowledge of the Covenantors, has any investigation, evaluation or
other proceeding been commenced to determine whether any such Remedial
Order is necessary.
J.3 To the best of the Covenantors' knowledge, information and belief,
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(a) the Company has not been charged with or convicted of an
offence for non compliance with or breach of any Environmental
Law nor has the Company been fined or otherwise sentenced for
non-compliance with or breach of any Environmental Law nor has
the Company settled any prosecution short of conviction for
non-compliance with or breach of any Environmental Law;
(b) the Company has not received any notice of judgment or
commencement of proceedings of any nature, or experienced any
search and seizure, nor is the Company under investigation
related to, any breach or alleged breach of or non-compliance
with any Environmental Law;
(c) the Company has not caused or permitted the Release or
Disposal of any Hazardous Substance on, from, under or to the
Properties or of any Release or Disposal from a facility owned
or operated by any other person, including previous owners,
for which the Company may have liability;
(d) all Hazardous Substances generated, handled, stored, treated,
processed, transported or disposed of by or on behalf of the
Company have been generated, handled, stored, treated,
processed, transported or disposed of in compliance with all
applicable Environmental Laws and Environmental Permits; and
(e) the Company has not received any Environmental Notice or other
Order that the Company is, or is potentially, responsible for
any clean-up, remediation or corrective action under any
Environmental Laws and the Covenantors have no knowledge of
any facts which could give rise to any such Environmental
Notice or other Order.
J.4 In relation to the Company, its businesses, the Properties and the
Process, the Covenantors have provided to the Offeror complete,
accurate and up to date copies of all insurance appraisals,
applications for relevant licences, consents, permits and
authorisations, all filings and submissions made in relation thereto,
all environmental audit reports and associated documentation, and
health and safety reports and in each case correspondence relevant
thereto in all cases since 31 December 1992.
J.5 There are no actions, claims, or proceedings (whether actual or so far
as the Covenantors are aware potential) relating to liability in
respect of environmental matters nor, to the best of the knowledge,
information and belief of the Covenantors, is there any other, so far
as the Covenantors are aware, reason to believe that the Company has or
is likely to have liability in relation to environmental matters.
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K. TITLE AND CAPACITY
Each of the Covenantors has good title to and the necessary power and authority
to enter into, to deliver and to perform his or its obligations made in this
Deed and in the document containing his irrevocable undertaking to accept the
Offers and any other documents executed or to be executed in connection
herewith or with the Offers and to sell all his Shares and he or it will at
Completion be free to transfer those Shares free from all Encumbrances and
together with all rights now or hereafter attaching thereto on the terms of
this Deed and the other documents executed or to be executed in connection
herewith and the entry into, delivery and performance of each of such
obligations will not conflict with or be prevented by the terms of any other
document or obligation binding on a Covenantor.
SCHEDULE 2
WARRANTY AND INDEMNITY DEFENCES
1. GENERAL
In this Deed and in particular this Schedule, where the context so
admits:-
(a) references to the Warranties are references to the warranties,
undertakings and covenants on the part of the Covenantors given
or contained in Schedule 1 and Clause 2 of this Deed and, for
the purposes of the limitations provided herein, all other (if
any) warranties given by the Covenantors or any of them pursuant
to or in connection with this Deed;
(b) the expression "relevant claim" means a claim in respect of
any of the Warranties and/or any claim against the Covenantors
under the Indemnities and/or the Taxation Indemnity as the case
may be;
(c) references to a claimant are references to any person entitled
to claim under the Warranties and/or the Indemnities and/or the
Taxation Indemnity;
(d) the expression "appropriate proportion" in relation to any of
the Covenantors means, to the maximum extent possible, that
proportion of his shares shown on the register of members as at
the date of the Offer Document together with any shares allotted
on the exercise of options granted under the REGL Wider Share
Ownership Scheme (plus options in respect of which he has
accepted the Cancellation Alternative) bears to the total issued
share capital of the Company less the shareholding of B Ordinary
Shareholders (plus the total number of options granted under the
REGL Wider Share Ownership Scheme); and
(e) In the event of the Offeror successfully bringing a relevant
claim against the Covenantors:-
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(i) the Offeror shall not be entitled to have recourse to the
personal assets of a Covenantor (other than the Common Stock and
Deferred Loan Notes and proceeds thereof held or to be held in
the Escrow Fund) under this Deed; and
(ii) any limitations imposed on the Offeror in this Deed in
relation to the Warranties, Indemnities and the Taxation
Indemnity, including the limitations specified in Clause 1(e)(i)
above, shall cease to apply to the extent there has been a
fraudulent misrepresentation by a Covenantor.
2. TIME LIMITS FOR CLAIMS
No relevant claim may be made unless written notice of a claim under
the Warranties or Indemnities shall have been given by the Offeror to
the Covenantors before:-
(a) 31 August 1999 in the case of a claim under the Warranties and
the Pension Fund Indemnity other than those relating to
Taxation; or
(b) 20 February 2003 in the case of a claim under the Indemnities
other than the Pension Fund Indemnity;
(c) 20 February 2004 in the case of a claim under the Warranties
relating to Taxation,
and any relevant claim which is validly made under paragraphs
(a) and (b) above within the required period shall (unless
previously settled or withdrawn) be deemed to have been waived
or withdrawn in the event that legal proceedings in respect
thereof are not issued and served on the Covenantors'
Representative within nine months of written notice of the
relevant claim first being given. Time shall be of the essence
for the purposes of the foregoing. For the avoidance of doubt,
the written notice required pursuant to paragraph 12 below shall
not constitute written notice of a relevant claim unless such
notice is clearly expressed to be notice of a relevant claim as
opposed to notice of potential liability under the Warranties or
Indemnities. Claims under the Warranties relating to Taxation
shall mutatis mutandis be governed by Clause 5 of the Taxation
Indemnity.
3. MINIMUM AMOUNT
No relevant claim may be made and no Covenantor shall be liable in
respect of any of the Warranties or under the Indemnities or the
Taxation Indemnity unless:-
(a) the amount of the liability actually payable by the
Covenantors under any individual claim or series of related
claims exceeds L.5,000; and
(b) the amount of the liability actually payable under such claim
and under all relevant claims (each being in excess of
L.5,000) exceeds L.150,000 in aggregate.
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4. THRESHOLD FOR CLAIMS
In the event that the aggregate relevant claims (each in excess of
L.5,000):-
(a) exceed L.150,000 but are not more than L.300,000, the Offeror
shall not make a relevant claim against the Covenantors but the
REGL Modified Pre-tax Profit shall be decreased in the year the
aggregate relevant claims exceed L.150,000 by the amount that
such aggregate relevant claims exceed that threshold, and in
each year thereafter in which relevant claims are made, by the
amount of such claims in such years provided that REGL Modified
Pre-tax Profit is only affected once in respect of the actual
amount paid; and
(b) exceed L.300,000, the Offeror shall be entitled to recover
L.150,000 plus the total amount of the aggregate relevant
claims in excess of L.300,000 from and only from the Escrow
Fund.
5. ESCROW ARRANGEMENTS
5.1 Deposit to Escrow
As security for any and all relevant claims made, each Covenantor
agrees that:
(a) on Completion the Non-Alternative Stock issued as part of the
Consideration ("ESCROW SHARES") shall not be delivered to him
but shall be deposited with the Escrow Agent;
(b) on each occasion on which any Deferred Loan Notes that would
otherwise have been issued by the Offeror to the Covenantors
("ESCROW NOTES") such Escrow Notes shall not be delivered to
the Covenantors but shall be deposited with the Escrow Agent
directly by the Offeror; and
(c) any dividend or distribution paid on the Escrow Shares shall
be paid to and deposited with the Escrow Agent provided that
to the extent that any such dividend or distribution gives
rise to a tax liability on his Escrow Shares in the UK, 40 per
cent. of the taxable amount of such dividend shall be
distributed to the Covenantor.
5.2 Release from Escrow
Subject to the retention of the Escrow Shares and the Escrow Notes
("ESCROW SECURITY") by the Escrow Agent in accordance with paragraph
5.3 below, the Offeror and the Covenantors' Representative shall
instruct the Escrow Agent to release from the Escrow Fund:-
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================================================================================
(a) to each Covenantor who was not a C Ordinary Shareholder one
third of his Escrow Shares on 20 February 1999 and each
succeeding 20 February, each such date being a Release Date,
until all such shares have been released from the Escrow Fund;
(b) to each Covenantor who was a C Ordinary Shareholder all his
Escrow Shares on 20 February 1999, being a Release Date; and
(c) to each Covenantor on 20 February 2000 and each succeeding 20
February, each such date being a Release Date, Escrow Notes
deposited in the Escrow Fund in respect of the second
preceding year until all such Escrow Notes have been released
from the Escrow Fund.
5.3 Relevant Claims
If by the Release Date it shall not have been Finally Determined
whether or not the Covenantors are liable in whole or part in respect
of a relevant claim and the Covenantors' Representative shall not have
expressly agreed in writing that the Covenantors are so liable, the
Offeror and the Covenantors' Representative shall jointly instruct the
Escrow Agent to retain in the Escrow Fund (and withhold from the
Escrow Security which would otherwise be released on such Release
Date) such amount of each Covenantor's Escrow Security (firstly from
Escrow Shares and secondly from Escrow Notes) representing his
appropriate proportion of such amount as the Offeror and the
Covenantors' Representative reasonably believe to be the value of such
claim (the "RETAINED ESCROW SECURITY") and, in the absence of
agreement, as determined by an independent chartered accountant
selected by the parties, where such Retained Escrow Security shall be
retained until it shall be Finally Determined whether or not the
Covenantors are liable in whole or in part in respect thereof or the
Covenantors' Representative shall agree that the Covenantors are so
liable or until the provisions of paragraph 5.4 apply (as
appropriate).
5.4 Disbursement of Escrow Security
The Offeror and the Covenantors' Representative shall jointly instruct
the Escrow Agent to release the Retained Escrow Security as follows in
the respective circumstances:
(a) if it is Finally Determined or agreed by the Offeror and the
Covenantors' Representative that the Covenantors are liable in
whole or in part in respect of a relevant claim, such amount
of each Covenantor's Retained Escrow Security with an Agreed
Value on the date of such Final Determination or agreement
equal to such Covenantor's appropriate proportion of the value
of such relevant claim (including interest and VAT thereon) in
each case as Finally Determined or agreed by the Covenantors'
Representative and the Offeror ("VALUE OF CLAIM") shall be
transferred by the Escrow Agent as authorised agent for the
Covenantor to the Offeror and the remainder of such
Covenantor's Retained Escrow Security shall be transferred by
the Escrow Agent as authorised agent for the Covenantor to
such Covenantor;
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(b) if it is Finally Determined or agreed by the Offeror and the
Covenantors' Representative that the Covenantors are not
liable in whole or in part in respect of a relevant claim,
each Covenantor's Retained Escrow Security shall be
distributed to such Covenantor;
(c) in the event the Agreed Value of each Covenantor's Retained
Escrow Security on the date of Final Determination or
agreement referred to in paragraph 5.4(a) above is less than
his appropriate proportion of the Value of Claim, an amount of
such Covenantor's other Escrow Security representing the
difference between his appropriate proportion of the Value of
Claim and the Agreed Value of the Retained Escrow Security
shall be transferred by the Escrow Agent as authorised agent
for the Covenantor from the Escrow Fund to the Offeror;
(d) in the event each Covenantor's Escrow Security transferred
under paragraphs 5.4(a) and (b) above is insufficient to meet
such Covenantor's appropriate proportion of the value of the
relevant claim the shortfall shall be carried forward and any
further Escrow Security from time to time deposited to the
Escrow Fund in respect of such Covenantor shall be transferred
by the Escrow Agent as authorised agent for the Covenantors in
accordance with paragraph 5.4(c) above until the shortfall of
his appropriate proportion of the relevant claim has been met
in full; and
(e) as to each Covenantor's Retained Escrow Security or other
Escrow Security, any distribution or transfer shall firstly be
taken from the Escrow Shares and secondly from the Escrow
Notes.
5.5 Valuation of Escrow Security
Escrow Security shall be valued for the purposes of paragraph 5.4 (the
"AGREED VALUE") as at any date as follows:-
(a) Escrow Shares shall have an Agreed Value equal to their Market
Price on such date; and
(b) Escrow Notes shall have an Agreed Value equal to their face
value.
(c) any distribution of dividends held in the Escrow Security or
cash shall be valued at the cash amount together with accrued
interest.
5.6 Covenantors' Representative's Access to Escrow Fund
(a) The Covenantors' Representative shall be entitled to recover
from the Escrow Fund (as they are incurred) the amount or
amounts of any and all third party costs and expenses incurred
or payable on behalf of the Covenantors by the Covenantors'
Representative in connection with investigating, assessing,
contesting or in settlement of any disputes or relevant claims
in connection with all proceedings in relation thereto or
steps taken to avoid or mitigate the same whether in relation
to a relevant claim made by the Offeror
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against the Covenantors or in pursuing a claim in accordance
with paragraph 12 against third parties.
(b) The Covenantors' costs of indemnifying the Offeror, the
Company and/or any Subsidiaries under paragraph 13 shall be
met at the option of the Covenantors' Representative out of
the Escrow Fund.
(c) The Offeror shall be obliged to join with the Covenantors'
Representative to jointly instruct the Escrow Agent to release
such amount of Escrow Security as is necessary to meet the
third party costs and expenses referred to in paragraph 5.6(a)
and (b) above.
5.7 Lapse of Claims
Notwithstanding any other provision of this paragraph the Offeror
shall not be entitled to continue to withhold its consent to release
of Escrow Security in respect of a relevant claim unless legal
proceedings in respect of such relevant claim shall have been
commenced on or before the expiry of nine months from the date on
which the relevant claim is notified in accordance with paragraph 12.
In default of legal proceedings both issued and served having been
commenced by such date the Offeror's rights to have recourse to the
Escrow Security in respect of such relevant claim shall automatically
lapse.
5.8 Permitted Actions
Nothing in this schedule shall in respect of the Escrow Securities
prevent the Covenantors from:-
(a) accepting or agreeing to accept or disposing of Shares or any
interest therein pursuant to acceptance of a general offer
made for all the issued share capital of the Offeror (other
than any such issued share capital held by the Offeror and/or
any subsidiary thereof and/or persons acting in concert with
the Offeror); or
(b) disposing of any shares in the Offeror or any interest thereon
where the disposal is pursuant to a statutory merger; or
(c) receiving interest due under the Escrow Notes,
provided that the share certificates in respect of any shares and/or
cash receivable by the Covenantors in consideration of an offer or
statutory merger shall be deposited in the Escrow Fund to be held on
the same terms as the Escrow Securities and
For the purposes of this clause a person shall be deemed to dispose of
a share or any interest therein if in any circumstances whatever he
ceases to be the beneficial owner thereof free from all liens,
charges, encumbrances or third party rights of any description or
enters into an agreement or arrangement whereby he will or may cease
to be such an owner thereof.
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6. APPROPRIATE PROPORTION
The liability of each of the Covenantors in respect of any relevant
claim shall not exceed his appropriate proportion of such claim.
7. REDUCTION OF CONSIDERATION
The amount of any successful relevant claim shall be deemed to
constitute a reduction in the Consideration payable hereunder.
8. RESTRICTIONS ON CLAIMS
No relevant claim may be made and none of the Covenantors shall be
liable under or in respect of the Warranties and/or under the
Indemnities:-
(a) if it would not have arisen but for some act, omission,
transaction or arrangement carried out after Completion
(otherwise than in the ordinary course of business or pursuant
to a legally binding commitment binding on the Company or any
Subsidiary in force on Completion) and which the Offeror was
or should reasonably have been aware would give rise to the
claim in question by or on behalf of all or any of the
Offeror, the Company any Subsidiary or any holding company
from time to time of any of them or any Subsidiary from time
to time thereof and their respective successors in title;
(b) if the fact, event or circumstance giving rise to the breach
or claim or otherwise relevant thereto is disclosed in the
Offer Document and this Deed (including the Schedules and any
Appendices thereto) or in any document in agreed terms or, in
relation to any breach of Warranty only, the Disclosure
Letter;
(c) to the extent that provision or allowance is made in the
Completion Accounts and Schedule of Liabilities in respect of
the matter to which the liability relates or that payment or
discharge thereof is or has been taken into account therein;
and
(d) to the extent of any insurance recovered by the claimant in
respect of the claim being brought. The Offeror shall procure
that the Company and the Subsidiaries maintain Professional
Indemnity insurance cover with substantially similar coverage
as the insurance in place during the 1997 financial year
provided such insurance cover is commercially available with
equivalent scope and breadth (including coverage of prior acts
and omissions up until Completion) and amount as had been in
place at Completion, provided that the Offeror shall not be
obliged to procure such insurance at a cost of more than 125%
of the cost for the financial year commencing 1 May 1997.
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9. CONTINGENT LIABILITIES
If in respect of a relevant claim under the Warranties or Indemnities
the liability of the Offeror or the Company or any Subsidiary is
contingent then the Covenantors shall not be liable in respect thereof
unless and until such time as the contingent liability ceases to be
contingent and becomes actual and no liability under a successful
relevant claim in respect of the payment of monies shall become due to
be satisfied unless and until the relevant monies become legally due
and payable.
10. DUTY TO MITIGATE
Nothing herein or in this Deed or otherwise shall be deemed to relieve
the Offeror or the Company or any Subsidiary from any common law duty
to mitigate any loss or damage incurred by it or them in consequence
of any matter giving rise to a relevant claim under the Warranties or
Indemnities and in any event the Offeror undertakes that it will
procure that following Completion insofar as relevant to the
Warranties or the Indemnities or other obligations of the Covenantors
under the Warranties or Indemnities:-
(a) the Company and each Subsidiary shall take all commercially
reasonable steps to perform its obligations owing to and
enforce its rights against third parties including (without
limitation) promptly to collect all debts the payment of which
or any part of which is warranted hereunder; and
(b) the Company and each Subsidiary shall duly and properly
perform its obligations set out in or contemplated by this
paragraph 10.
11. RECOVER ONLY ONCE
No person shall be entitled to recover any sum in respect of any
relevant claim or otherwise obtain reimbursement or restitution more
than once in respect of any one breach of the Warranties or claim
under the Indemnities or under the Taxation Indemnity or the subject
matter thereof so that for this purpose recovery by one shall be
deemed to be recovery by all other persons so entitled.
12. CONDUCT OF CLAIMS
If any relevant claim is made or any matter comes to the notice of the
Offeror or the Company or any Subsidiary or other possible claimant
for which or as a result of which the Covenantors may be liable under
the Warranties or the Indemnities the Offeror or the Company or
Subsidiary or claimant shall, as appropriate, within 28 days after the
matter first comes to its notice give written notice thereof to the
Covenantors' Representative provided that any failure to give the
requisite notice during that period shall not prejudice the ability of
the Offeror or the Company or any Subsidiary or other possible
claimant to make a claim and:-
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(a) none of them shall make any admission of liability, agreement,
settlement or compromise or otherwise take any action in
relation thereto without the prior written consent of the
Covenantors' Representative and shall at all times promptly
give the Covenantors' Representative and their professional
advisers all information and documents in its or the Company's
or Subsidiary's control as reasonably requested from time to
time;
(b) save as provided in paragraph 12(c), each of them will at all
times permit the Covenantors' Representative, as appropriate,
to take such action on their/its behalf to avoid, resist,
appeal, compromise, defend, mitigate or otherwise deal with
the claim or the liability the subject thereof or pursue any
rights of the Company or any Subsidiary in respect thereof;
(c) paragraph 12(b) will not apply to any relevant claim which
exceeds the maximum liability of the Covenantors (as set out
in paragraph 5 of this Schedule 2) or to any relevant claim
(other than purely monetary disputes or claims) which could
reasonably be expected to have a material adverse effect on
the operation of the Business or the goodwill or reputation of
the Business. In respect of any such relevant claims to which
this paragraph 12(c) applies, the Offeror, the Company or any
Subsidiary will consult with the Covenantors' Representative
and take account of all reasonable representations and views
in order to avoid, dispute, resist, appeal, compromise or
defend any such relevant claim.
Provided that to the extent that there is a conflict between the
provisions of this paragraph and Clause 4, Clause 4 shall prevail.
13. APPROPRIATE STEPS TO ENFORCE RECOVERY
Where the Offeror or the Company or any Subsidiary is entitled
(whether by right of indemnity, reimbursement or any other means) to
recover from some other person (not being the Offeror or the Company
or any Subsidiary but including, without limitation, any Taxation
authority) any sum or benefit in respect of any matter the subject of
a relevant claim under the Warranties or Indemnities the Offeror or
the Company or Subsidiary so entitled shall (subject to being
indemnified by the Covenantors to its or their reasonable satisfaction
against all costs and expenses which it or they may reasonably incur
thereby) take all appropriate steps to enforce such recovery or at the
option of the Covenantors it shall assign (for no consideration) to
them or such of them as they may nominate in writing all of its and
their rights of recovery aforesaid and the full benefit thereof and
(to the extent they have previously made payments in respect of the
relevant claim) account to them (or those of them as shall have made
payments in respect of the relevant claim in the proportions in which
such payments were made) for any amounts they recover, in accordance
with paragraph 14 below.
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14. SUBSEQUENT RECOVERY
In the event that payment is made by the Covenantors or any of them in
respect of a relevant claim under the Warranties or Indemnities and
the Offeror or the Company or any Subsidiary or any agent on its or
their behalf or any of them subsequently recovers from the third party
a sum or benefit which is referable to the subject matter of such
claim, the Offeror and the Company and the relevant Subsidiary shall
be jointly and severally liable forthwith after the receipt of such
sum or benefit to reimburse to the Covenantors the net amount received
(after deducting any costs and expenses reasonably incurred by the
recipient(s) in recovering such sum or benefit from the third party)
but not in any event exceeding the amount originally paid in respect
of the relevant claim. For these purposes:-
(a) a sum or benefit shall also be deemed to have been received if
received by way of credit set-off or other deduction or if
received in kind;
(b) a reduction in liability to Taxation arising as a direct
result of any payment made in respect of the relevant claim
shall be deemed to be a sum or benefit received aforesaid;
(c) the recipient shall be deemed to receive a credit refund or
repayment for Taxation purposes when and if it would have
received the same but for a liability to any Taxation not
covered by the Taxation Deed;
(d) any repayment supplement for Taxation purposes or interest
(less tax) paid or received or attributable to the sum or
benefit recovered shall also be accounted for to the
Covenantors to the extent referable to the period after the
relevant claim was satisfied.
15. RELEVANT REPRESENTATIONS
Save in respect of fraudulent misrepresentation none of the
Covenantors shall be liable in respect of any representations,
warranties, covenants, agreements, undertakings or other obligations
express, implied, statutory or otherwise which are made or assumed or
deemed to have been made or assumed by them or any of them in relation
to or connection with the subject matter hereof which are not
contained and expressly given or assumed by them in this Deed or any
document in agreed form to be entered into pursuant hereto and the
Offeror hereby confirms that it has not entered into this Deed or
intends to make the Offers in reliance on any such representation,
warranty, covenant, agreement, undertaking or other obligation.
16. CONTINUING OBLIGATIONS
The provisions of this Schedule shall remain in force and be fully
applicable in all circumstances and in particular shall not be
discharged by any breach of the Warranties or claim under the
Indemnities or breach of the provisions of the Taxation Indemnity
whatever its nature or consequence.
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17. MATERIAL TO BUSINESS
When any Warranty or any provision of this Deed or the Taxation
Indemnity is qualified or phrased by reference to materiality, such
reference shall be construed as a reference to materiality in the
context of the Business or its value as a whole, and where any
Warranty contains a reference to a material adverse change or effect,
such reference shall be construed as being a reference to a change or
effect which is material in the context of the Business or its value
taken as a whole.
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SCHEDULE 3
TAXATION INDEMNITY
1. INTERPRETATION
1.1 The following words, expressions and abbreviations used in this
Schedule shall, unless the context otherwise requires, have the
following meanings:-
"COMPLETION ACCOUNTS" means the unaudited consolidated financial
statements of the Company comprising the consolidated balance sheet,
profit and loss account and cash flow statement of the Group, together
with the notes thereon as at and for the period ended on the
Completion Accounts Date;
"CLAIM FOR TAX" means any of the following:-
(a) any liability to make a payment of or in respect of Tax;
(b) any claim, assessment, demand, notice or other document issued
or action taken by or on behalf of any person authority or
body whatsoever and of whatever country which claims payment
of Tax or any submission, return or correspondence from which
it appears that there may be a liability to Tax or Claim for
Tax within (c) below; or
(c) any non-availability or loss of or reduction of any Relief
(including in particular a right to repayment) to the extent
that such Relief has been shown as an asset in the Completion
Accounts or the availability of which has been taken into
account in computing, and so reducing or extinguishing, any
provision for deferred tax which appears in the Completion
Accounts (or which, but for such Relief, would have appeared
in the Completion Accounts);
"THE COMPANY" means REGL and the Subsidiaries and each of them;
"INCOME PROFITS OR GAINS" includes any measure by reference to which
Tax is computed;
"OFFEROR'S RELIEF" means any Relief to the extent that the same has
been treated as an asset in the Completion Accounts or the
availability of which has been taken into account in computing, and so
reducing or extinguishing any provision for deferred taxation which
appears in the Completion Accounts (or which would, but for such
Relief, have appeared in the Completion Accounts) or such Relief
arises in respect of periods after the Completion Accounts Date;
"RELEVANT EVENT" means every event, act, omission, default,
occurrence, circumstance, transaction, dealing or arrangement of any
kind whatsoever done or omitted to be done by the Covenantors or the
Company or which in any way concerns or affects the Company whether or
not done or omitted to be done by the Company or the Covenantors;
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"RELIEF" means any allowance, credit, exemption, deduction or relief
(including without prejudice to the generality of the foregoing loss
relief) from, in computing, against or in respect of Tax or any right
to the repayment of Tax;
"TAXATION STATUTES" means all statutes, decrees, orders and
regulations, whether domestic or foreign providing for or imposing any
Tax;
"TAX" has the meaning ascribed to it in the Deed;
"TAXATION AUTHORITY" means any local, municipal, governmental, state,
federal or fiscal revenue, customs or excise authority, body or
official anywhere in the world having powers or authority in relation
to Tax;
"UTILISATION OF AN OFFEROR'S RELIEF" means the utilisation or set off
of an Offeror's Relief available to the Company.
2. INDEMNITY
2.1 Subject as specifically provided herein, each Covenantor hereby
covenants severally with the Offeror to pay from time to time to the
Offeror or, as the Offeror may direct, to the Company or the relevant
Subsidiary (as the case may be), his appropriate proportion of an
amount equal to:-
(a) any Claim for Tax where the Claim for Tax in question arises
in respect or as a result or consequence of or in connection
with or by reference to:-
(i) one or more Relevant Events occurring or entered into
on or before the Completion Accounts Date; or
(ii) any income profits or gains earned, accrued or
received on or before the Completion Accounts Date;
or
(iii) the combined effect of two or more Relevant Events of
which at least one shall have occurred on or before
the Completion Accounts Date but only in
circumstances where such Claim for Tax would not have
been suffered by the Company but for the failure of
any person (other than a company falling within the
definition of the Company for the purposes of this
Deed) to discharge or pay any liability for Tax.
(b) any reasonable third party costs and expenses properly
incurred or payable in connection with any Claim for Tax the
subject of a successful claim under Clause 2.1(a) or (c),
including all legal proceedings relating thereto and the
settlement of any Claim for Tax or rebuttal of any contention
or in connection with any legal proceedings and reasonable
steps taken to avoid any Claim for Tax or contention whether
actual, threatened or anticipated including, for the avoidance
of doubt, all reasonable third party costs or
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expenses properly incurred in any legal proceedings taken by
the Offeror against the Covenantors under this Schedule;
(c) the amount of each and every Utilisation of an Offeror's
Relief which avoids or reduces a Claim for Tax which would
otherwise have been the subject of clause 2.1(a) hereof in
which case the Covenantors' liability under this Clause shall
be equal to the amount which the Covenantors would have paid
under Clause 2.1(a) had the Offeror's Relief utilised not been
available.
2.2 The covenant contained in Clause 2.1(a) shall not apply:-
(a) to any Claim for Tax to the extent that any Tax giving rise to
the same has been paid prior to the Completion Accounts Date
or to the extent that provision or reserve for the liability
to which the same relates has been made in the Completion
Accounts and for the purposes of this Clause 2.2(a) no
provision or reserve shall be prevented from being full and
sufficient if the same proves to be inadequate by reason only
of an increase in rates of Tax announced after the Completion
Accounts Date;
(b) to any Claim for Tax to the extent that the same shall have
arisen in consequence of any act or transaction, and which was
carried out without the prior written agreement of the
Covenantors by the Offeror or the Company after Completion
otherwise than in the ordinary course of business of the
Company or pursuant to a legally binding obligation created
prior to the date of this Deed; or
(c) to any Claim for Tax to the extent that the same is increased
as a result of any failure by the Offeror or the Company to
comply with its obligations under Clause 5.
(d) to any Claim for Tax to the extent that such liability to
Taxation arises or is increased by virtue of any change after
Completion in the basis upon which the accounts of the Company
are prepared and/or in the policies or practice adopted in the
preparation of such accounts other than a change required by
law or to comply with generally accepted accounting principles
where the existing basis, policies or practice did not so
comply; or
(e) to the extent that the Claim for Tax would not have arisen but
for the failure or omission by the Company after Completion to
make any claim, election, surrender or disclaimer or give any
notice or consent under any taxation statutes, the making or
giving of which was taken into account in computing any
provision or reserve for Tax in the Completion Accounts; or
(f) to the extent that the Claim for Tax would not have arisen but
for any claim, election, surrender or disclaimer made or
notice or consent given after Completion by the Offeror or the
Company or any subsidiary of them under any taxation statutes
other than a claim, election, surrender disclaimer, notice or
consent the making or giving of which was
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taken into account in computing any provision or reserve for
tax in the Completion Accounts; or
(g) to the extent that notice of the Claim for Tax, in accordance
with Clause 5 hereof shall not have been given to the
Covenantors on or prior to 20 February 2004; or
(h) to the extent only that any amount otherwise subject to the
covenant contained in Clause 2.1 has been recovered under the
Warranties contained in this Deed; or
(i) to the extent that the Claim for Tax is excluded by paragraph
3 of Schedule 2 to this Deed;
(j) to the extent that the Claim for Tax would not have arisen but
for any change in law or published administrative practice of
any Taxation Authority, in either case after Completion with
retrospective effect to periods prior to Completion.
(k) if and to the extent that the Offeror or the Company have
recovered an amount in respect of such claim from a person or
persons other than the Covenantors or any other Company;
(l) to the extent that such claim would not have arisen but for
any winding-up or cessation after Completion of any trade or
business carried on by the Company or the Offeror or any major
change in the nature or conduct of any Company's trade after
Completion;
(m) to the extent that any Reliefs (including, for the avoidance
of doubt, any such saving, reduction or payment in respect of
Tax as is referred to in Clause 2.4(b) or 4.3(b) which has not
previously been so used or in respect of which a payment has
not already been made by the Offeror to the Covenantors) other
than an Offeror's Relief, are available for offset against the
liability giving rise to the claim;
(n) to the extent the damage, liability or loss suffered or
incurred by the Company has been made good or otherwise
compensated for without cost to the Offeror or any Company.
2.3 The provisions of Clauses 1(b), (c), (d) and (e) (3 (Minimum Amount),
4 (Threshold for Claims), 5 (Escrow Arrangements), 6 (Appropriate
Proportion), 9 (Contingent Liabilities) 11 (Recover Only Once), 16
(Continuing Obligations) and 17 (Material to Business) of Schedule 2
shall mutatis mutandis apply to this Schedule as if set out herein in
full.
2.4 Subject to Clause 2.5 below, all sums payable by the Covenantors under
this Schedule shall be paid free and clear of all deductions or
withholdings (including Tax), unless the deduction or withholding is
required by law, in which event or in the event that the Offeror shall
incur any liability for Tax chargeable or assessable in respect of any
payment pursuant to this Schedule, the Covenantors shall pay such
additional amounts as shall be required to ensure that the net amount
received and retained by the recipient of such sums (after Tax) will
equal the full
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amount which would have been received and retained by it had no such
deduction or withholding been made and/or no such liability to tax
been incurred and:-
(a) in applying this Clause 2.4 no account shall be taken of the
extent to which any liability for Tax may be mitigated or
offset by any Relief available to the Offeror so that where
such Relief is available the additional amount payable
hereunder shall be the amount which would have been payable in
the absence of such availability; and
(b) if following the payment of an additional amount under this
Clause 2.4 the Offeror or the Company subsequently obtains a
saving, reduction or payment in respect of the Tax giving rise
to such additional amount (other than a reduction in Tax which
would have given rise to a claim under this Schedule or been
taken into account in a claim for damages under the
Warranties) the Offeror shall pay to the Covenantors a sum
equal to the amount of such repayment or saving (in both cases
to the extent only of the said additional amount) such payment
to be made within 14 days of the receipt of the repayment or
the reduction of Tax due and payable as the case may be.
2.5 Clause 2.4 shall not apply if the Offeror assigns the benefit of this
Deed to any other person.
3. TIMING
3.1 For the purposes of paragraph 9 of Schedule 2, a liability giving rise
to a claim under this Schedule shall be treated as being an actual tax
liability on the date falling five business days after the Offeror
makes written demand therefor or, if later:-
(a) insofar as the claim arises pursuant to Clause 2.1(a) two days
before the day on which a payment of Tax becomes due under or
in consequence of the Claim for Tax in question or two days
before the day on which any repayment (or increased repayment)
of Tax which but for such Claim for Tax would have been
available, would have been due;
(b) insofar as the claim arises pursuant to Clause 2.1(b), two
days before the day on which the costs and expenses fall due
for payment (subject to the Offeror giving the Covenantors
such evidence as they reasonably require for the purposes of
ascertaining that such costs and expenses have fallen due);
(c) insofar as the Claim for Tax arises pursuant to Clause 2.1(c),
two days before the day on which an actual payment of Tax
becomes due in consequence of the non-availability of the
Offeror's Relief which would have been available but for the
Utilisation of the Offeror's Relief.
3.2 For the purposes hereof where Tax is due or a repayment due is lost or
reduced or where, but for a Utilisation of an Offeror's Relief, Tax
would be due or costs and expenses fall due for payment, on more than
one occasion then paragraphs (a) to (c) of Clause 3.1 shall apply
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separately on each such occasion (but, for the avoidance of doubt,
shall not operate to extend or increase the liability of the
Covenantors under this Schedule for the Claim for Tax in question).
3.3 Where, but for the non-availability of an Offeror's Relief, the
Company could have surrendered the same to another company by way of
Group Relief, this Schedule and in particular Clause 3.1(a) shall
apply as if the Company could have saved such amount of Tax as the
recipient of the Group Relief could have saved as a consequence of
such Group Relief and at the same time.
3.4 If any sum due under Clause 2 is not paid by the Covenantors or due
under Clause 4.3 is not paid by the Offeror by the due date the same
shall carry interest (from such later date until the date of payment)
at the rate of two per cent over base rate for the time being of
National Westminster Bank PLC (or in the absence of such rate at such
rate quoted by a bank of similar standing as the Offeror shall select)
save that interest shall not start to run in respect of any payments
of Tax falling within sub-Clause 3.1(a) above until two days before
the day on which the Company makes the payment of Tax due.
3.5 For the avoidance of doubt, references to any payment being made by
the Covenantors for the purpose of this Schedule 3 shall be references
to the transfer of an Appropriate Amount of the Escrow Security in
accordance with paragraph 5 of Schedule 2.
4. RIGHT TO REIMBURSEMENTS AND CREDITS
4.1 Subject to Clause 4.3, in calculating amounts due from the Covenantors
under this Schedule no account shall be taken of any entitlement of
the Offeror or the Company to make any recovery in respect of that
amount or the circumstances giving rise to the same from some other
person or of any Relief or other benefit or saving which may become
available to the Offeror or the Company in consequence of the Claim
for Tax in question or the circumstances giving rise to the same.
4.2 If the Offeror or the Company is or becomes entitled to recover from
some other person (not being the Company but including, inter alios,
any Tax authority) any amount in respect of the Claim for Tax
resulting in a payment being or becoming due by the Covenantors to the
Offeror under this Schedule, then the Offeror shall promptly notify
the Covenantors of the said entitlement and, if so required by the
Covenantors and if the Covenantors shall undertake to pay all
reasonable costs and expenses properly incurred by the Offeror and the
Company, shall take all reasonable steps to enforce or procure that
the Company shall enforce that recovery (keeping the Covenantors fully
informed of progress) and shall apply the same in accordance with
Clause 4.3.
4.3 If the Offeror or the Company receives:-
(a) a recovery as mentioned in Clause 4.2; or
(b) a benefit or saving being either a reduction in Tax due and
payable or any increased repayment of Tax in either case as a
result of:-
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(i) credit being obtained for Tax giving rise to a claim
by the Offeror under the terms of this schedule
(other than a reduction in a liability to Tax which
would otherwise have itself given rise to a payment
hereunder or been taken into account in a claim for
damages under the Warranties); and
(ii) the utilisation of any Relief which has arisen in
connection with Tax paid by the Company which has
given rise to a payment by the Covenantors pursuant
to Clause 2 hereof (other than where such Relief is
utilised to offset or reduce a liability to Tax which
would itself have given rise to a payment hereunder
or been taken into account in a claim for damages
under the Warranties);
then the Offeror shall within 14 days pay to the Covenantors an
amount equal to so much of the benefit received or sum recovered
(less any Tax paid by the recipient in respect thereof and less
any costs and expenses incurred by the Offeror and the Company)
as does not exceed the amount which the Covenantors paid in
respect of the Claim for Tax in question (together with so much
of any interest or repayment supplement paid to the recipient of
the recovery or benefit in respect thereof as corresponds to the
proportion of the recovery or benefit accounted for under this
Clause 4.3, less any Tax thereon).
4.4 Where any recovery or benefit is accounted for under Clause 4.3:-
(a) the amount of the payment originally made by the Covenantors
under Clause 2 shall be treated as reduced for all purposes of
this Schedule (including any further application of this
Clause 4) and of this Deed; and
(b) the same shall not of itself prejudice the right of the
Offeror to make further recoveries under this Schedule whether
in respect of matters to which the original claim related or
otherwise.
5. RESISTANCE OF CLAIMS
5.1 If the Offeror or the Company becomes aware of any Claim for Tax
(which expression shall for the avoidance of doubt include any claim
which would give rise to a Claim for Tax but for a Utilisation of an
Offeror's Relief) which may result in the Offeror having a claim
against the Covenantors under this Schedule, the Offeror shall give
notice to the Covenantors in the manner provided by this Deed as soon
as is reasonably practicable and in any event, in the case of an
assessment, at least 14 days before the expiry of the time limit for
appealing the assessment provided that any failure to give such notice
shall not prejudice the ability of the Offeror to make a claim under
this Deed and:
(a) neither the Offeror nor the Company shall make any admission
of liability, agreement, settlement or compromise or otherwise
take any action in relation thereto without the
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prior written consent of the Covenantors' Representative and
shall at all times promptly give the Covenantors' Representative
and their professional advisers all information and documents in
the Offeror's or the Company's control as reasonably requested
from time to time;
(b) save as provided in paragraph 5.1(c), each of them will at all
times permit the Covenantors' Representative, as appropriate,
to take such action on their/its behalf to avoid, resist,
appeal, compromise, defend, mitigate or otherwise deal with
the claim or the liability the subject thereof or pursue any
rights of the Company in respect thereof;
(c) paragraph 5.1(c) will not apply to any Claim for Tax which
(when aggregated with any other relevant claims) exceeds the
maximum liability of the Covenantors (as set out in paragraph
5 of Schedule 2 of this Deed) or to any Claim for Tax which
could reasonably be expected to have a material adverse effect
on the operation of the Business or the goodwill or reputation
of the Business. In respect of any such Claim for Tax to
which this paragraph 5.1 applies, the Offeror or the Company
will consult with the Covenantors' Representative and take
account of all reasonable representations and views in order
to avoid, dispute, resist, appeal, compromise or defend any
such Claim for Tax.
5.2 If the Covenantors do not request the Offeror or the Company to take
any action or do not respond indicating that they are actively
considering the matter within 21 days of the notice referred to in
Clause 5.1 above, the Offeror on the Company shall be free to admit,
settle, pay or discharge the Claim for Tax on such terms and
conditions as it shall in its absolute discretion consider
appropriate.
5.3 Any claim under this Schedule shall (unless previously settled or
withdrawn) be deemed to have been waived or withdrawn in the event
that legal proceedings in respect thereof are not issued and served on
the Covenantors' Representative within nine months of the date of
notice given pursuant to Clause 5.1 above.
6. MISCELLANEOUS
6.1 Any payment by the Covenantors to the Offeror pursuant to Clause 2
hereof shall, so far as possible constitute a repayment of the
Consideration.
6.2 The provisions of Clause 10 (Notices) of this Deed shall apply to this
Schedule as if the same were incorporated herein.
6.3 The provisions of Clause 9 (Covenantor's Representative) and of Clause
13 (waiver, amendment), 16 (counterparts), 17 (governing law) and 19
(assignment) of this Deed shall apply to this Schedule as if the same
were incorporated herein.
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7. COVENANTORS TO PREPARE TAX RETURNS/MITIGATION
7.1 The Covenantors or their duly authorised agents shall be responsible
for, and have the conduct of preparing, submitting to and agreeing
with the relevant Taxation Authorities all taxation computations of
the Company relating to all accounting periods ending on or before
Completion subject to all such computations, documents and
correspondence relating thereto being submitted in draft form to the
Offeror or its duly authorised agents for comment and approval such
approval not to be unreasonably withheld or delayed. The Offeror or
its duly authorised agent shall comment within 21 business days of
such submission. If the Covenantors have not received any comments
within 21 business days, the Offeror and its duly authorised agents
shall be deemed to have approved such draft documents. If the Offeror
or its duly authorised agents have any comments or suggestions, the
Covenantors shall not unreasonably refuse to adopt such comment or
suggestion. The Covenantors and the Offeror shall each respectively
afford (or procure the affordance) to the other or their duly
authorised agents of information and assistance which may reasonably
be required to prepare, submit and agree all such outstanding taxation
computations PROVIDED THAT nothing herein shall oblige the Offeror or
the Company to submit any return unless it is satisfied that it is
true and accurate in all material respects.
7.2 The Offeror shall procure that the Company makes (or joins in making)
such claims and elections as shall have been taken into account in the
1997 Accounts and sign such documents as the Covenantors shall
reasonably require in relation to accounting periods for which the
Covenantors have responsibility pursuant to paragraph 7.1 above.
7.3 The Offeror shall procure that the Company takes such reasonable steps
as are necessary for the Company to use in the manner hereinafter
mentioned all Reliefs arising by reason of events occurring on or
before the date of Completion (other than Offeror's Reliefs) as are
available to the Company to reduce or eliminate any liability of the
Company to make an actual payment of Tax in respect of which the
Offeror would have been able to make a claim against the Covenantors
under this Schedule, the said use being to effect the reduction or
elimination of any such liability to make an actual payment of Tax to
the extent permitted by law PROVIDED THAT nothing in this Clause shall
oblige the Offeror the Company or any Subsidiary to take any action
which it reasonably believes would materially increase the Tax
liability of the Company for any accounting period ended after
Completion (and, for these purposes, the use of a Relief, other than
an Offeror's Relief, to reduce or eliminate any liability of the
Company to make an actual payment of Tax in respect of which the
Offeror would have been able to make a claim under this Schedule shall
not constitute a material increase of any Tax liability of the Company
for any accounting period ended after Completion).
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SCHEDULE 4
THE PROPERTIES
1. The following parts of the premises known as Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxxx Xxxxxx X0:-
(a) parts of the basement
(b) part of the First Floor
(c) part of Wing no. 1 on the third floor
(d) part of Wing no. 3 on the first floor
(e) part of Wing no. 3 on the third floor
(f) part of Wing no. 4 on the third floor
(g) part of Wing no. 5 on the third floor
(h) part of Wing no. 6 on the third floor
(i) part of Wing no. 7 on the third floor
(j) part of Wing no. 2 on the third floor
(k) part of Wing no. 7 on the third floor
(l) part of Wing no. 6 on the fourth floor
(m) sixteen car parking spaces
all as more particularly described in various leases (and in the case
of (m) a licence) between National Westminster Bank plc (1) (or in the
case of (c) where the first party is Instance Contracts Limited) and
Xxxxxxx and others trading as Xxxxxxx Xxxxx (2)
2. Premises on the fourth and fifth floors of 00 Xxxxxx Xxxxxx Xxxxxxxxxx
as more particularly described in the Lease dated 17 November 1989 made
between MIM Trustee Corporation Ltd (1) and Xxxxxxx Xxxxxx and Xxxxx
Xxxxx trading as Xxxxxxx Xxxxx (2)
3. Premises at 15, 16 and 00 Xxxxxxx Xxxx Xxxxxxxx as more particularly
described in a Lease dated 28 May 1992 made between Messrs Xxxx (1) and
Halifax Estate Agencies Limited (2)
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4. Premises on the ground floor of The Corn Exchange Fenwick Street
Liverpool as more particularly described in a Lease dated 25 August
1994 between AXA Equity & Law Life Assurance Society plc (1) and
Xxxxxxx Xxxxx Regional Ltd (2) and the Supplemental Lease dated 4 March
1996 between AXA Equity & Law Life Assurance Society plc (1) and
Xxxxxxx Xxxxx Regional Ltd (2)
5. Premises on the first floor of the Corn Exchange Fenwick Street
Liverpool as more particularly described in a Lease dated 22 April 1997
between AXA Equity & Law Life Assurance Society plc (1) and Xxxxxxx
Xxxxx Regional Ltd (2)
6. Storerooms B1 and B2 in the Corn Exchange Fenwick Street Liverpool as
more particularly described in a tenancy agreement dated 30 June 1995
between AXA Equity & Law Life Assurance Society plc (1) and Xxxxxxx
Xxxxx Regional Limited (2)
7. Third Floor Acquis House Greek Street Leeds as more particularly
described in a Lease dated 10 October 1988 between the Acquis Property
Company Ltd (1) and Xxxxx Xxxxxxx & Sons Ltd (2)
8. Fourth floor offices at 00/00 Xxxxxxx Xxx Xxxxxxxxxx as more
particularly described in a Lease dated 22 May 1989 between Piper Land
Development Ltd (1) and Xxxxxxxxxx Xxxx Ltd (2)
9. Seventh and eighth Floors office premises at Xxxxx Xxxxxx Xxxxx, 00 Xxx
Xxxxx Xxxxxx, Xxxxxx XX0 as more particularly described in a
sub-underlease dated 21st March 1997 between A.J.M. Xxxxxxx and Others
(practising in partnership as Xxxxxxx Xxxxx) (1) and Derby Investment
Holdings Limited (2)
Ninth and tenth Floors and Basement Store Room at Xxxxx Xxxxxx Xxxxx,
00 Xxx Xxxxx Xxxxxx, Xxxxxx XX0 as more particularly described in a
Reversionary Underlease dated 21st March, 1997 between Derby Investment
Holdings Limited (1) and A.J.M. Xxxxxxx and Others (2).
10. First floor offices at Apsley House Glasgow as more particularly
described in a Lease dated 27 January and 8 February 1994 between
County Properties Group Ltd (1) and Messrs Xxxxxxx Xxxxx (2)
11. First floor offices at Pacific House 00 Xxxxxxxxxx Xxxxxx Xxxxxxx as
more particularly described in a Lease dated 30 September and 1
November 1985 between Beta Properties Ltd (1) and Xxxxxxx Xxxxx
Goodends and others as partners of and trustees for Xxxxxxx Xxxxx (2)
12. Premises on the first floor of 00/00 Xxxxxx Xxxx, Xxxxxxxxxxxxxx as
more particularly described in a Lease dated 22 October 1990 between
West End & Metropolitan Estates Limited (1) and Halifax (NW) Limited
(2)
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13. Premises on the second and third floors of Xxxxx Xxxxxxxxx, 00 Xxxxx
Xxxxxx, Xxxxxxxxxx as more particularly described in a Lease dated 23
March 1992 between The Norwich Union Life Insurance Society (1) and
Halifax Estate Agencies Limited (2)
14. Premises on the third floor of the Xxxxxxxxx Xxxxxxxxx, 0-0 Xx Xxxxx'
Xxx, Xxxxxxxxx as more particularly described in a Lease dated 3 May
1989 between Sun Life Assurance Company of Canada (UK) Limited (1) and
Halifax (NW) Limited (2).
15. Basement Storeroom in Xxxxx Xxxxxx Xxxxx, 00 Xxx Xxxxx Xxxxxx, Xxxxxx
XX0 as more particularly described in a supplemental underlease dated
28 February 1980 between City and West End Properties Limited (1) and
Midland Bank Finance Corporation (2).
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SCHEDULE 5
PART A: COMPLETION ACCOUNTS
1. NET ASSET VALUE
1.1 For the purpose of determining the Net Asset Value the Offeror shall
cause the Company to prepare and deliver to each party, as soon as
practicable following Completion but in any event within 90 days after
the Completion Accounts Date, draft Completion Accounts. The
Completion Accounts shall be prepared in accordance with the Companies
Acts and in accordance with generally accepted accounting principles
and practices in the United Kingdom which are extant at the time of
preparation, including in particular (but without limitation) the
Statements of Standard Accounting Practice issued by the member bodies
of the Consultative Committee of Accounting Bodies (or any successor
or replacement organisation) which are extant at that time and,
subject thereto, adopting the same accounting policies and practices
consistently applied as those used in the preparation of the
Partnership Accounts and the Accounts.
1.2 Immediately following preparation of the draft Completion Accounts,
the Offeror shall review the draft Completion Accounts and determine
the Net Asset Value as soon as possible and in any event not later
than 30 days after the Offeror's receipt of the draft Completion
Accounts.
1.3 Immediately following the Offeror's determination of the Net Asset
Value, there shall be supplied to the Covenantors' Representative a
statement of the Net Asset Value determination. The Covenantors'
Representative shall have a period of 28 days (the "NAV AGREEMENT
PERIOD") in which to review and agree or dispute the Offeror's
determination of the Net Asset Value.
1.4 The Offeror's determination of the Net Asset Value shall in the
absence of the service of a notice within the NAV Agreement Period by
either party on the other disputing the amount so determined be deemed
to constitute the final and binding agreement between the Covenantors
and the Offeror as to the amount thereof.
1.5 In the event that the Net Asset Value has not been agreed by the
earlier of the termination of the NAV Agreement Period or by 30
September 1998, the determination of the Net Asset Value shall be
referred to an independent firm of chartered accountants agreed
between the Offeror and the Covenantors' Representative or, failing
agreement within 30 days of the expiry of the NAV Agreement Period,
determined by the President for the time being of the Institute of
Chartered Accountants in England and Wales. In appointing any such
independent firm of chartered accountants, the Offeror and the
Covenantors' Representative shall have the right to make
representations to such independent firm of chartered accountants as
to the determination of the Net Asset Value. Any independent firm of
chartered accountants appointed pursuant to this paragraph 1.5 shall
act as experts and not as arbitrators and their certificate shall (in
the absence of manifest error) be final and binding on the Offeror and
the Covenantors and the
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91
costs of any independent firm of chartered accountants appointed
pursuant to this paragraph 1.5 shall be borne between the parties as
it shall determine, or, in the absence of any such determination
equally between the parties.
1.6 The Covenantors' Representative shall procure that each Covenantor
shall, and the Offeror shall procure that the Company shall, promptly
provide each other, and their respective advisers with all information
(in their respective possession or control) relating to the operations
of the Group or the Company as the case may be, including access at
all reasonable times to all books and records, and all co-operation
and assistance as may be reasonably required to:-
(a) enable the production of the Completion Accounts; and
(b) enable the Offeror (or any independent firm of chartered
accountants appointed pursuant to this clause) to determine
the Net Asset Value.
1.7 The parties agree that from the date on which the Offers are made to
the Shareholders until the later of the Completion Accounts Date or
the date the Offers are declared unconditional the parties will use
all reasonable endeavours to operate the business in the ordinary and
usual course and will not deliberately and knowingly do any act or
thing or procure the Company or any member of the Group to do any act
or thing not properly done for the purpose of the Business the effect
of which distorts unfairly the Calculation of the Net Asset Value.
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92
PART B: SCHEDULE OF LIABILITIES AS AT 31/12/97 - NON NORMAL TRADING ITEMS
FY97 6m to 31/10 2m to Projected Total
L.000 L.000 31/12 from 1/1/98 L.000
L.000 to completion
L.000
Interest on late paid tax 28 28
Incorporation costs 4 4
Donaldsons deal costs 16 16
Insignia deal costs 0 562 562
Associated Insignia deal costs:
Actuarial fees (estimated) 20 20
Wragges' fees (estimated) 20 20
PI provision (Central House) 20 20
(Amresco) 16 16
(Britannia Hotels) 70 70
General PI provision 100 100
Surmia 208 17 225
Redundancies 0 30 30
Additional bad debt provision 256 256
(Schipol)
244 118 609 396 1,367
Deal costs:
Transaction bonuses/NIC 1,781 1,781
Legal costs 270 270
1,781 270 2,051
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