DATED 8 SEPTEMBER 1997
(1) STRATAGEM GROUP PLC
(2) 4FRONT GROUP PLC
(3) 4FRONT SOFTWARE INTERNATIONAL INC
_______________________________
SHARE PURCHASE AGREEMENT
relating to Firstpoint Limited
________________________________
CONTENTS
CLAUSES PAGE NO
------- -------
1. DEFINITIONS AND INTERPRETATION........................................ 2
2. SALE OF SHARES........................................................ 6
3. CONSIDERATION......................................................... 6
4. COMPLETION............................................................ 7
5. PENSIONS.............................................................. 11
6. UNDERTAKINGS BY THE VENDOR............................................ 11
7. PURCHASER'S WARRANTIES AND UNDERTAKINGS............................... 13
8. INDEMNITIES........................................................... 14
9. LITIGATION............................................................ 16
10. WARRANTIES............................................................ 16
11. PURCHASER'S GUARANTEE................................................. 18
12. ANNOUNCEMENTS......................................................... 20
13. COSTS................................................................. 20
14. NOTICES............................................................... 20
15. FURTHER ASSURANCE..................................................... 22
16. TIME OF THE ESSENCE................................................... 22
17. WHOLE AGREEMENT AND VARIATION......................................... 22
18. WAIVER................................................................ 22
19. EFFECT OF COMPLETION.................................................. 23
20. GOVERNING LAW AND JURISDICTION........................................ 23
21. ASSIGNMENT............................................................ 23
SCHEDULE 1...................................................................24
The Company
SCHEDULE 2...................................................................25
The Properties
SCHEDULE 3...................................................................31
(i)
The Warranties
SCHEDULE 4...................................................................64
The Tax Covenant
SCHEDULE 5 ............................................................... 79
Pensions
SCHEDULE 6...................................................................84
Limitations on Liability
(ii)
THIS AGREEMENT is made on 8 September 1997
BETWEEN:
(1) STRATAGEM GROUP PLC (registered in England under number 172737) whose
registered office is at 00 Xxxxxx Xxxx, Xxxxxx XX0X 0XX (the "Vendor");
(2) 4FRONT GROUP PLC (registered in England under number 2278419) whose
registered office is at 00x Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX (the
"Purchaser");
(3) 4FRONT SOFTWARE INTERNATIONAL INC a company incorporated under the laws
of the State of Delaware under number 00-0000000 and whose principal
office is at 0000 Xxxxxxxxx Xxxxx Xxxxxxxxx, 000 Xxxxxxxxx, Xxxxxxxx
00000, Xxxxxx Xxxxxx of America (the "Purchaser's Guarantor").
WHEREAS:
(A) Firstpoint Limited (brief details of which are specified in Schedule 1)
is a private limited company incorporated in England under the Companies
Xxx 0000 under number 1307801 and has an authorised and issued share
capital of L15,000 divided into 15,000 ordinary shares of L1 each all of
which are fully paid. The Vendor is the registered holder and beneficial
owner of all of such shares.
(B) The Vendor has agreed to sell all the said shares to the Purchaser on the
terms set out in this Agreement.
(C) The Purchaser's Guarantor is the owner of the whole of the issued share
capital of the Purchaser and has agreed, in consideration of the Vendor
entering into this Agreement, to guarantee the Purchaser's obligations
under Clause 3.2 of this Agreement.
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context requires otherwise:
"ACCOUNTING DATE" means 31 August 1996;
1
"ASSOCIATE" has the meaning given to it by section 435 of the Insolvency Xxx
0000;
"AUDITED ACCOUNTS" means the audited balance sheet of the Company as at the
Accounting Date and the audited profit and loss account of the Company for the
financial year ended on the Accounting Date together with the directors' and
auditors' reports thereon and the notes thereto;
"BUSINESS DAY" means a day which is not a Saturday or Sunday or a public holiday
in England and Wales;
"CAA" means the Capital Xxxxxxxxxx Xxx 0000;
"COMPANIES ACT" means the Companies Xxx 0000;
"COMPANY" means Firstpoint Limited brief details of which are set out in
Schedule 1;
"COMPANY GUARANTEE" means the guarantee by the Company of the obligations of the
Vendor and other members of the Vendor's Group to National Westminster Bank PLC;
"COMPLETION" means completion of the sale and purchase of the Shares in
accordance with Clause 4;
"COMPLETION DATE" means the date on which Completion takes place pursuant to
Clause 4;
"CONSIDERATION" means the total consideration for the Shares referred to in
Clause 3;
"DIRECTORS" means the directors of the Company as listed in Schedule 1;
"DISCLOSURE LETTER" means the letter of the same date as this Agreement written
by the Vendor to the Purchaser disclosing matters as exceptions from the
Warranties;
"ENCUMBRANCE" includes any right or interest of any person (including, without
limitation, any right to acquire, option or right of pre-emption) or any
mortgage, charge, pledge, lien, assignment, hypothecation, security interest,
title retention, floating charge or any other security agreement or arrangement;
2
"ENVIRONMENTAL LAWS" means all laws and regulations concerning pollution and the
environment including, without limitation, the Control of Pollution Xxx 0000,
the Public Health Acts, the Environmental Protection Xxx 0000, the Environment
Xxx 0000 and similar legislation;
"INTER-COMPANY DEBT" means the total of the amounts (including interest) due by
the Company to the Vendor and/or any subsidiaries or Associates of the Vendor,
which shall not at Completion exceed L900,000;
"FA" followed by the number of a calendar year means the Finance Act of that
year;
"L" means pounds sterling;
"PROPERTIES" means the properties owned and/or occupied by the Company brief
particulars of which are set out in Schedule 2;
"PURCHASER'S SOLICITORS" means Xxxxxxxxx Xxxxxx & Xxxxx of 000 Xxxxxx Xxxxxx,
Xxxxxx XX0X 0XX;
"RELEVANT CLAIM" means a claim by the Purchaser in respect of any of the
Warranties or under the Tax Covenant;
"XXXXXXX XXXX LITIGATION" means the proceedings before the High Court of Justice
and the Reading Industrial Tribunal, which are ongoing at the date of this
Agreement, relating to various claims against the Company by Xxxxxxx Xxxx, a
former employee of the Company, and any proceedings, appeals, claims, demands or
actions related thereto;
"SHARES" means all of the issued and allotted shares in the Company at the date
hereof and at Completion;
"TAX" or "TAXATION" has the meaning given to it in Clause 1 of the Tax Covenant;
"TAX AUTHORITY" has the meaning given to it in Clause 1 of the Tax Covenant;
"TAX COVENANT" means a deed in the form set out in Schedule 4 to be entered into
on Completion between the Vendor and the Purchaser;
3
"TAX WARRANTIES" means the Warranties set out in paragraph 22 of Schedule 3;
"TMA" means the Taxes Management Xxx 0000;
"VAT" means the tax as constituted by the VATA and any other tax imposed in
addition or in substitution for it at the rate from time to time imposed;
"VATA" means the Value Added Tax Xxx 0000;
"VENDOR'S GROUP" means the Vendor and its subsidiaries from time to time;
"VENDOR'S SOLICITORS" means Xxxxxxx Xxxxx of Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxxx,
Xxxxxx XX0X 0XX;
"WARRANTIES" means the representations, warranties and undertakings set out in
Clauses 10.1 and 10.2 and Schedule 3;
"1988 ACT" means the Income and Corporation Xxxxx Xxx 0000;
"1992 ACT" means the Taxation of Chargeable Gains Xxx 0000;
"1997 AUDIT" means the audit of the accounts of the Company for the year ended
31 August 1997.
1.2 In this Agreement, unless the context requires otherwise:
(a) references to Clauses, Recitals and Schedules are references to
clauses and recitals of and schedules to this Agreement;
(b) the Recitals and Schedules form part of and are incorporated in
this Agreement;
(c) headings are included for ease of reference only and shall not
affect the interpretation of this Agreement;
(d) references to the singular shall include the plural and vice versa
and references to any gender shall include references to the other
genders;
(e) the expression "PERSON" shall mean any natural person,
partnership, joint venture, corporation (wherever incorporated),
trust, firm, association, government, governmental (or
supra-governmental) agency, authority or
4
department, or any other entity, whether acting in an individual,
fiduciary or other capacity;
(f) any reference to a time of day is to London time;
(g) any reference to a party shall mean any party to this Agreement;
(h) any reference to the parties shall include their respective
successors in title, permitted assigns and personal
representatives;
(i) any reference to a document as being "IN THE AGREED FORM" means
that document in a form agreed between the Vendor and the
Purchaser such agreement to be signified by the signature or
initialling of a draft for the purposes of identification by or on
behalf of each of the Vendor and the Purchaser;
(j) where any statement is qualified by the expression "SO FAR AS THE
VENDOR IS AWARE" or any similar expression that statement shall be
deemed to include an additional statement that it has been made
after due and careful enquiry of such persons as may be
appropriate in the circumstances;
(k) any reference to any statute or statutory provision shall include
that statute or statutory provision as from time to time amended,
modified, replaced or re-enacted (whether before or after the date
of this Agreement) and any order, regulation, instrument, bye-law
or other subordinate legislation made under it but no such
amendment, modification, replacement or re-enactment made after
the date hereof shall operate to increase the liability of any
party;
(l) the expressions "SUBSIDIARY", "HOLDING COMPANY", "FINANCIAL YEAR"
and "ACCOUNTING STANDARDS" shall have the meanings ascribed to
them respectively by the Companies Act.
2. SALE OF SHARES
2.1 The Vendor shall sell the Shares with full title guarantee and the
Purchaser shall purchase the Shares with effect from 12.00 midnight on Friday 29
August 1997 free from all Encumbrances and together with all rights attaching to
them (including the right to receive all dividends and distributions declared,
paid or made after the Accounting Date whether or not in respect of profits made
after that date).
2.2 The Purchaser shall not be obliged to complete the acquisition of any of
the Shares unless the acquisition of all the Shares is completed simultaneously.
5
2.3 The Vendor shall procure the waiver prior to Completion of all (if any)
rights of pre-emption under the articles of association of the Company or
otherwise in respect of the transfer of the Shares to the Purchaser.
3. CONSIDERATION
3.1 The Consideration payable by the Purchaser for the Shares shall be
L2,950,000 of which L1,600,000 shall be payable in cash on Completion and the
balance shall be payable in accordance with Clause 3.2.
3.2 Subject to Clause 3.3, the Purchaser shall pay the balance of the
Consideration to the Vendor by bankers draft or bank transfer in six equal
quarterly instalments of L225,000 commencing on 30 November 1997 and payable
thereafter on 28 February 1998, 31 May 1998, 31 August 1998, 30 November 1998
and 28 February 1999.
3.3 The Purchaser shall be entitled to withhold from any monies otherwise
payable by it under Clause 3.2 an amount equal to any sum which the Purchaser
may claim is lawfully due to it:
(a) under or by reason of any breach of the Warranties or any other
provision of this Agreement; or
(b) under the terms of the Tax Covenant,
and any amount so withheld shall be paid by the Purchaser into an interest
bearing deposit account at Lloyds Bank PLC in the joint names of the Vendor's
Solicitors and the Purchaser's Solicitors. The amount of the claim which the
Purchaser shall ultimately agree with the Vendor or which a final court of
competent jurisdiction shall hold to be lawfully due to the Purchaser shall
forthwith be released to the Purchaser's Solicitors together with accrued
interest thereon and the balance (if any) together with accrued interest thereon
shall be released to the Vendor's Solicitors. The Purchaser shall not be
concerned to see to the application of any monies paid to the Vendor's
Solicitors on behalf of the Vendor under Clause 3.2 or this Clause 3.3 and
payment to the Vendor's Solicitors shall constitute an absolute discharge to the
Purchaser in respect of such monies.
3.4 If the Purchaser is in arrears with any payment due to be made under
Clause 3.2 (except as permitted by Clause 3.3) and the Vendor becomes liable to
make any payment to the Purchaser under this Agreement whilst the Purchaser is
in arrears, the Vendor shall be entitled to pay the amount due (up to the amount
of the payment(s) in respect of which the Purchaser
6
is in arrears) into an interest bearing deposit account at Lloyds Bank PLC in
the joint names of the Vendor's Solicitors and the Purchaser's Solicitors, such
amount to be paid to the Purchaser on its making good the arrears or to be
returned to the Vendor on the Vendor obtaining an order from a final court of
competent jurisdiction for the payment of the amount in arrears to the Vendor.
4. COMPLETION
4.1 Completion shall take place at the offices of the Purchaser's Solicitors
immediately following the signing of this Agreement or at such other place or
time as the Vendor and the Purchaser may agree.
4.2 At Completion the Vendor shall procure:
(a) the delivery to the Purchaser of duly completed and executed
transfers of the Shares by the registered holders of the Shares in
favour of the Purchaser or its nominees together with valid share
certificates representing the Shares and all (if any) other
documents required to give good title to the Shares;
(b) the delivery to the Purchaser of powers of attorney in the agreed
form duly executed by the registered holders of the Shares;
(c) the delivery to the Purchaser of the Tax Covenant duly executed by
the Vendor;
(d) the delivery to the Purchaser of the following, each duly executed
and in form and substance satisfactory to the Purchaser:-
(i) a deed of release given in relation to the Company
Guarantee;
(ii) a deed of release by each person holding or being entitled
to any Encumbrance over the Shares or any of the assets of
the Company;
(iii) a deed of waiver by the Vendor waiving any claim it or any
of its subsidiaries or Associates may have against the
Company;
(iv) deeds of waiver by each co-guarantor of the Company in
respect of the Company Guarantee;
(e) the delivery to the Purchaser of the statutory books (duly written
up to date) and the certificate(s) of incorporation of the
Company;
(f) the delivery to the Purchaser of all current cheque books and
deposit books relating to all bank accounts of the Company;
(g) the delivery to the Purchaser of all documents of title relating
to the Properties;
(h) the delivery to the Purchaser of copies of the minutes of the
meetings of the boards of directors of the Vendor in the agreed
form, authorising (in each case)
7
the entry into of the transaction the subject of this Agreement,
approving this Agreement and any other agreements or documents to
be executed pursuant to or in connection with it and appointing
the relevant signatory to sign this Agreement and such other
agreements and documents on their behalf certified by the company
secretary of the Vendor together with (in each case) confirmation,
in the agreed form, from the company secretary that the authority
conferred remains valid at Completion;
(i) the passing of effective resolutions of the Directors resolving to
register the transfers of the Shares subject only to stamping of
the share transfers;
(j) (at the cost of the Vendor) the convening and holding of all such
meetings, the passing of all such resolutions, the execution and
delivery of all such documents and the taking of all other action
to the extent reasonably necessary in order to complete the
transfer of title to the Shares to the Purchaser free from all
Encumbrances and to enable the Purchaser to exercise and receive
all rights and benefits attaching to or arising from the Shares;
(k) with effect from Completion, the appointment as directors and
secretary of the Company of such person or persons as the
Purchaser shall have nominated and the resignation of each of the
Directors (except Xxxxx Xxxxxxx Xxxxxx Xxxx, Xxxxxx Xxxxx Xxxxxxxx
and Xxxx Xxxxx) and the secretary of the Company by delivery of a
letter under seal from each such Director and the secretary
resigning from his offices and from any employment he may have
with the Company with effect from Completion and acknowledging
that he has no claim against the Company either actual or
contingent in respect of any cause matter or thing (statutory or
otherwise);
(l) the resignation of the auditors of the Company (without
compensation for loss of office or any other claim save for proper
professional fees for services rendered in respect of their duties
as auditors prior to the completion of the 1997 Audit) with effect
from completion of the 1997 Audit and the delivery of a statement
by them that there are no circumstances connected with their
ceasing to hold office which they consider should be brought to
the attention of the members or creditors of the Company;
(m) revocation of all existing authorities to the bankers of the
Company relating to bank accounts and the grant of authority to
such persons as the Purchaser may nominate to operate the same;
8
(n) that all books, records and files of the Company are in its
possession or under its control and where any such are not at the
Properties that the Purchaser is given details of their
whereabouts and any necessary authority to collect them;
(o) the delivery to the Purchaser of duly completed and executed
transfers of all shares in the capital of Firstpoint Services
Limited not registered in the name of the Company, the statutory
books and common seal (if any) of Firstpoint Services Limited and
certificates for all of the issued shares in Firstpoint Services
Limited.
4.3 Immediately following fulfilment of all the matters referred to in
Clause 4.2 the Purchaser shall:
(a) procure that that part of the Consideration payable in cash on
Completion is paid by bankers draft to the Vendor's Solicitors
(who are hereby irrevocably authorised to receive that
consideration) on behalf of the Vendor;
(b) deliver to the Vendor's Solicitors a counterpart of the Tax
Covenant duly executed by the Purchaser;
(c) if requested, and at the Vendor's cost, deliver to the Vendor's
Solicitors a legal opinion in a form reasonably satisfactory to
the Vendor as to the validity and enforceability of the guarantee
contained within Clause 11 of this Agreement and if such opinion
is that such guarantee is not valid and enforceable such
amendments shall be made to the guarantee as render it valid and
enforceable; and
(d) as agent for the Company, repay the Inter-Company Debt by bankers
draft to the Vendor's Solicitors (who are hereby irrevocably
authorised to receive that payment) on behalf of the Vendor and
its subsidiaries and Associates.
The delivery of a bankers draft to the Vendor's Solicitors shall be a full and
sufficient discharge to the Purchaser for the monies payable on Completion and
the Purchaser shall not be concerned to see to the application of any payment by
the Purchaser under this Clause 4.3.
4.4 If all the provisions of Clause 4.2 are not complied with in full on
Completion the Purchaser may:
(a) defer Completion to a date not more than 28 days after the date
specified in Clause 4.1 in which event the provisions of this
Clause 4.4 shall apply to Completion as so deferred; or
9
(b) proceed to Completion so far as practicable without prejudice to
its rights under this Agreement or otherwise and so that any
provision of Clause 4.2 which may not have been complied with at
Completion shall at the sole discretion of the Purchaser be held
over to such future date or dates as the Purchaser may in its sole
discretion determine; or
(c) terminate this Agreement (save for Clauses 12, 13, 14 and 20,
which shall remain in full force and effect) provided that such
termination shall not affect the rights and obligations of the
parties which have accrued prior to termination and shall not
limit or exclude any other rights or remedies of the Purchaser in
respect of any failure by the Vendor to comply with the
requirements of Clause 4.2 on the due date.
4.5 The Vendor shall use all reasonable endeavours to procure compliance with
the provisions of Clause 4.2 on any date set for Completion in accordance with
this Agreement.
4.6 The Vendor undertakes to and covenants with the Purchaser (for itself and
as trustee for the Company) that if, after Completion, it is discovered that the
Company had on or before Completion given or undertaken any guarantees,
indemnities or similar securities in respect of the obligations or liabilities
of any person other than the Company and such guarantees, indemnities or similar
securities were not finally and unconditionally released on or before
Completion, the Vendor will fully indemnify the Purchaser and the Company and
keep each of them fully indemnified on demand against all claims, demands,
actions, proceedings, damages, losses, costs, expenses or liabilities suffered
or incurred by the Purchaser or the Company under or in connection with such
guarantees, indemnities or similar obligations.
5. PENSIONS
The provisions of Schedule 5 shall have effect in relation to pensions.
6. UNDERTAKINGS BY THE VENDOR
6.1 The Vendor undertakes to the Purchaser that it will not and will procure
that none of its subsidiaries or Associates will:
(a) for a period of two years from the Completion Date be directly or
indirectly engaged, concerned or interested in any business or
company carrying on in the United Kingdom a business competing
with the business of the Company as carried on at the Completion
Date except that the Vendor and its subsidiaries
10
and Associates may be beneficially interested in up to three per
cent of the securities of any class in any company carrying on
such a business if such securities are listed on a recognised
Stock Exchange and the Vendor and its subsidiaries and Associates
together neither hold nor are beneficially interested in more than
a total of three per cent of all the securities of that class in
that company;
(b) at any time after Completion hold himself or itself out as being
connected with the Company;
(c) at any time after Completion carry on any business or be directly
or indirectly interested in or concerned with any person carrying
on any business in the United Kingdom or elsewhere under the name
"Firstpoint" or any name likely to be confused with it;
(d) at any time after Completion make use of or disclose or divulge to
any third party any information of a secret or confidential nature
relating to the business or affairs of the Company;
(e) for a period of two years after the Completion Date for himself or
itself or for or through any other person employ or seek to entice
away from the employment of the Company any person who was at any
time during the twelve months before Completion employed by the
Company except with the prior written approval of the Purchaser;
and
(f) for a period of two years after the Completion Date for himself or
itself or for or through any other person canvass or solicit any
person who was at any time during the twelve months prior to
Completion a customer of the Company in order to supply them in
the United Kingdom with the same or substantially the same goods
or services as those supplied to them by the Company.
6.2 Each of the undertakings in Clause 6.1 is a separate and severable
undertaking.
6.3 The parties to this Agreement agree that the restrictions set out in
Clause 6.1 are reasonable in the circumstances and necessary for the protection
of the legitimate interests of the Purchaser and the goodwill of the Company.
If however any part of Clause 6.1 is found to be invalid or unenforceable for
any reason then the remainder of Clause 6.1 shall continue in full force and
effect.
11
6.4 Where this Agreement or any other agreement or arrangement of which it
forms part is subject to registration pursuant to the Restrictive Trade
Practices Xxx 0000, no restriction (as referred to in that Act) contained in
this Agreement (or any other agreement or arrangement of which it forms part)
shall be enforced by the parties or otherwise come into effect until the day
after the day on which particulars of this Agreement (or any other agreement or
arrangement of which it forms part) are furnished by the Purchaser's Solicitors
to the Director General of Fair Trading in accordance with that Act.
7. PURCHASER'S WARRANTIES AND UNDERTAKINGS
7.1 The Purchaser warrants to the Vendor that:
(a) the Purchaser has full power and authority to enter into and
perform this Agreement and the Tax Covenant and the provisions of
this Agreement and the Tax Covenant, when executed, will
constitute valid and binding obligations on the Purchaser;
(b) the execution and delivery of, and the performance by the
Purchaser of its obligations under, this Agreement and the Tax
Covenant will neither:
(i) result in a breach of any provision of its Memorandum or
Articles of Association; nor
(ii) result in a breach of any order, judgment or decree of any
court or governmental agency to which the Purchaser is a
party or by which the Purchaser is bound;
(c) save as provided in this Agreement all consents, permissions,
approvals and agreements of third parties which are necessary or
desirable for the Purchaser to obtain in order to enter into and
perform this Agreement in accordance with its terms have been
unconditionally obtained in writing and have been disclosed in
writing to the Vendor.
7.2 The Purchaser undertakes to the Vendor that it shall, and shall procure
that its holding companies and subsidiaries shall, preserve for a period of at
least seven years from Completion all books, records and documents of or
relating to the Company existing at Completion. The Purchaser shall permit and
allow and shall procure that its holding companies and subsidiaries shall permit
and allow, upon reasonable notice (and in any event within 7 days of written
notice being given) and during normal business hours, the employees, agents and
professional advisers of the Vendor access to such books, records and documents
and the right to inspect the same and make copies thereof.
12
7.3 The Purchaser undertakes that it shall permit and allow and shall procure
that its holding companies and subsidiaries shall permit and allow, upon
reasonable notice and during normal business hours, the representatives and
employees of the auditors of the Company access to such books, records and
documents and the right to inspect and make copies of the same to the extent
reasonably necessary for the purposes of completing the 1997 Audit.
7.4 The Purchaser undertakes that it shall permit and allow and shall procure
that its holding companies and subsidiaries shall permit and allow, upon
reasonable notice and during normal business hours, the legal or other
representatives and employees of the Vendor access to such books, records and
documents and the right to inspect and make copies of the same and to contact or
interview such persons and receive any such further assistance or support from
the Company and the Purchaser as the Vendor deems necessary for the purposes of
conducting and pursuing the Xxxxxxx Xxxx Litigation. However, the Purchaser
will be under no obligation to disclose any books, records, documents or other
information created after the Completion Date. The Vendor will indemnify the
Purchaser, the Company and any of its holding companies and subsidiaries in
respect of all losses, costs or expenses incurred by the same as a result of the
assistance provided pursuant to this Clause 7.4.
8. INDEMNITIES
8.1 The Vendor shall be responsible for and shall keep the Purchaser and the
Company fully indemnified on demand against all claims, demands, actions,
proceedings, damages, losses, costs, expenses and liabilities suffered or
incurred in connection with:-
(a) the lease of the premises at Xxxx 0, Xxxxxxxxxx Xxxxxxxx Xxxx,
Xxxxxxxxx Lane, Almondsbury, Bristol, Avon or the termination of
such lease, including without limitation any liability in respect
of the obligations of repair and maintenance on the part of the
tenant contained in that lease, except to the extent already
provided for in the management accounts of the Company for the
period to 31 July 1997 (copies of which are attached to the
Disclosure Letter);
(b) any increased rent under the lease of the premises at 000 Xxxx
Xxxx, Xxxxxx, Xxxxxxxxx payable in respect of the period from 25
December 1995 to the Completion Date arising as a result of the
rent review under that lease due to be effected on 25 December
1995;
(c) the group reorganisation effected in 29 August 1997 whereby the
ownership of the Company was transferred from Concord PLC to the
Vendor.
13
8.2 If any of the IBM Contracts is terminated prior to the expiry of its
current term following any notice given by IBM within thirty-five days of the
Completion Date of its intention to terminate such contract for any reason
except any default on the part of the Company after Completion, the Vendor will
pay to the Purchaser an amount equal to the loss of profit on such terminated
contract in respect of the period from such termination to the date of expiry of
the current term. For this purpose:
(a) "IBM Contracts" means each of the contracts between the Company
and IBM United Kingdom Limited and its subsidiaries and Associates
(together in this Clause, "IBM") as set out in the Disclosure
Letter;
(b) the Company's profit on each such contract shall be deemed to be
25% of the value of the amounts charged or anticipated to be
charged by the Company (net of VAT) in the relevant period; and
(c) each such contract shall be deemed to have a current term of
twelve months from Completion or, if it has a current term which
is less than twelve months, that lesser period.
8.3 For the purposes of this Clause 8 the Purchaser is acting for itself and
as agent for the Company.
8.4 If any payment due to the Purchaser under this Clause 8 is not paid on
the due date then it shall bear interest at the rate of 2.5% per annum above the
base rate from time to time of National Westminster Bank PLC, accruing from day
to day both before and after any demand or judgment and being compounded
quarterly on the usual quarter days, from the due date until the date of actual
payment.
8.5 The liability of the Vendor under this Clause 8 shall be subject to the
limitation set out in paragraph 1 of Schedule 6.
9. LITIGATION
9.1 The Vendor and the Purchaser agree that, subject to the performance by
the Vendor of its obligations under this Clause, the conduct and pursuit of the
Xxxxxxx Xxxx Litigation shall, after Completion, continue to be undertaken by
the Vendor on behalf of the Company until full and final conclusion of such
litigation. The Vendor shall be entitled to conduct and pursue the Xxxxxxx Xxxx
Litigation at its absolute discretion, using all reasonable endeavours to secure
as beneficial an outcome as is reasonably possible in the circumstances for the
Company having
14
due regard to the goodwill and reputation of the Company. The Vendor shall be
responsible for and shall on demand indemnify the Purchaser and the Company and
keep each of them fully indemnified against any damages, awards, costs
(including, but not limited to, legal costs), interest, losses, expenses or
liabilities suffered or incurred by or made against either of them in respect of
the Xxxxxxx Xxxx Litigation.
9.2 The Vendor shall keep the Purchaser fully informed of all material
developments regarding the Xxxxxxx Xxxx Litigation and in the event of a
settlement of the Xxxxxxx Xxxx Litigation the Vendor undertakes to use its
reasonable endeavours to procure a confidentiality undertaking from the
plaintiff in form and substance reasonably satisfactory to the Purchaser
regarding the terms of such settlement and the matters at issue in the
litigation.
10. WARRANTIES
10.1 The Vendor represents, warrants and undertakes to the Purchaser in the
terms set out in Schedule 3 and acknowledge that the Purchaser is entering into
this Agreement upon the basis of and in reliance on each of the Warranties.
10.2 Each of the Warranties shall be construed as separate and independent
from the other Warranties and shall not be limited by reference to any other
Warranty.
10.3 The Warranties are given subject to the matters fairly disclosed in the
Disclosure Letter but no other information relating to the Company of which the
Purchaser has knowledge (actual or constructive) shall prejudice any claim made
by the Purchaser under the Warranties or operate to reduce any amount
recoverable and references in this Agreement to matters disclosed to the
Purchaser shall be construed exclusively as references to matters disclosed in
the Disclosure Letter. Nothing in the Disclosure Letter shall exclude or limit
the liability of the Vendor under the Tax Covenant or any provision of this
Agreement other than the Warranties.
10.4 Any obligation which the Purchaser may have to mitigate any loss arising
out of any breach of the Warranties or any other provision of this Agreement
shall not extend to allowing the Company to become insolvent.
10.5 The Purchaser shall be entitled to make claims under either or both of
the Warranties and the Tax Covenant in respect of the same matter provided that
it may not recover more than once in respect of the same matter.
15
10.6 The Vendor agrees with the Purchaser (for itself and as trustee for the
Company) to waive any rights it may have in respect of any misrepresentation,
inaccuracy or omission in or from any information or advice supplied or given by
the Company or its officers, agents and employees for the purpose of or in
connection with the giving of the Warranties and the preparation of the
Disclosure Letter.
10.7 Without prejudice to the rights of the Purchaser to claim damages for any
breach of the Warranties on any other basis and without limiting the amounts
which may be so claimed (except that any amount paid under this Clause 10.7 in
respect of a breach of Warranty will, where appropriate, be taken into account
in the calculation of any further damages payable to the Purchaser in respect of
the same breach) (but subject to Schedule 6) in the event that any of the
Warranties is breached the Purchaser shall be entitled to require the Vendor to
pay to the Purchaser in respect of such breach an amount equal to:-
(a) the amount by which the value to the Company of any asset
(including one warranted to exist or to belong to the Company but
not in fact existing or belonging to the Company) as at Completion
is less than it would have been if the Warranties had not been
breached; and/or
(b) any liability of the Company which would not have existed, or the
amount by which any liability of the Company as at Completion is
greater than it would have been, if the Warranties had not been
breached.
10.8 The Purchaser hereby acknowledges that it does not enter into this
Agreement in reliance on any warranties, representations, covenants or
undertakings howsoever or to whomsoever made except in so far as such are
embodied in the warranties, representations, covenants and undertakings on the
part of the Vendor contained in this Agreement and the Tax Covenant.
10.9 The liability of the Vendor for breach of the Warranties shall be limited
in the manner set out in Schedule 6 provided that no such limitation shall have
effect in any case of fraud or deliberate non-disclosure by the Vendor.
11. PURCHASER'S GUARANTEE
11.1 In consideration of the Vendor entering into this Agreement, the
Purchaser's Guarantor unconditionally and irrevocably guarantees to the
Purchaser that the Purchaser will pay all monies and discharge all present and
future obligations and liabilities of the Purchaser under
16
or in connection with Clause 3.2 of this Agreement (referred to in this Clause
11 as the "Purchaser's Obligations") and undertakes that, if the Purchaser fails
to do so, the Purchaser's Guarantor (or such other person as it shall direct)
will perform and discharge the Purchaser's Obligations forthwith on demand by
the Vendor and indemnify the Vendor against all reasonable costs, losses,
damages, expenses, claims and liabilities suffered or incurred by the Vendor as
a result of or arising out of any failure by the Purchaser promptly to discharge
any of the Purchaser's Obligations.
11.2 The liability of the Purchaser's Guarantor under this Clause 11 shall be
that of a sole principal obligor and not merely a surety and shall not be
limited, discharged or otherwise affected by any time, indulgence, waiver or
concession granted by the Vendor to the Purchaser, by the invalidity in or
unenforceability or frustration of this Agreement, by any lack of capacity or
lack or misuse of authority on the part of the Purchaser or its officers, by the
liquidation, administration or dissolution of the Purchaser or the disclaimer of
this Agreement by any liquidator, by any variation or termination of this
Agreement or the Tax Covenant or by any other fact or circumstance which might
(but for this Clause 11.2) limit, discharge or otherwise affect the liability of
the Purchaser's Guarantor.
11.3 The Purchaser's Guarantor irrevocably waives any right it may have to
require that the Vendor claims or brings proceedings, or enforces any other
right or security, against the Purchaser or any other person before claiming
from the Purchaser's Guarantor under this Clause 11.
11.4 This guarantee is a continuing guarantee and shall remain in full force
and effect so long as any of the Purchaser's Obligations has yet to be fully
discharged.
11.5 Until all of the Purchaser's Obligations have been fully discharged the
Purchaser's Guarantor shall not after a demand has been made by the Vendor
pursuant to this Clause 11 save in such manner and on such terms as the Vendor
may require:-
(a) exercise as against the Purchaser, in respect of any amount
previously paid by the Purchaser's Guarantor under this Clause 11,
any right of subrogation or any other right or remedy which the
Purchaser's Guarantor may have in respect of the same; or
(b) receive, claim or have the benefit of any payment, distribution or
security from the Purchaser or exercise any other right or remedy
(including, but not limited
17
to, any right of set-off) which the Purchaser's Guarantor may have
in respect of the same; or
(c) prove in any liquidation of the Purchaser in competition with the
Vendor for any sums owing to the Purchaser's Guarantor by the
Purchaser on any account whatever.
11.6 This guarantee shall be in addition to and shall not in any way merge
with or prejudice or be prejudiced by any collateral or other security now or in
the future held by the Vendor.
11.7 The Vendor may make one or more demands pursuant to this guarantee.
12. ANNOUNCEMENTS
12.1 Subject to Clause 12.2 no public statement or announcement shall be made
by any party before or after Completion in relation to any of the transactions
provided for in this Agreement without the prior written consent of the other
parties, which consent shall not be unreasonably withheld or delayed.
12.2 The Purchaser and the Vendor shall be entitled to make any announcement
regarding this Agreement and/or Completion in order to comply with the
requirements of any stock exchange or regulatory authority in the United Kingdom
or the USA provided that any such announcement shall to the extent permitted by
such requirements only be released after consultation with the other party and
after taking into account the reasonable requirements of the other party as to
the timing and contents of such announcement.
13. COSTS
Save as otherwise provided in this Agreement, the parties shall pay their own
costs in connection with the negotiation and preparation of this Agreement and
any other document to be delivered on Completion.
14. NOTICES
14.1 Any notice or other communication to be given under or in relation to
this Agreement shall be in writing and may be given by leaving it at or sending
it by facsimile transmission or prepaid registered first class post to the
address or facsimile number and marked for the attention of the person (if any),
in each case, set out in Clause 14.2 (or as otherwise notified
18
from time to time by notice given in accordance with this Clause). Any notice
so given shall be deemed to have been received:
(a) in the case of delivery by hand, at the time of delivery;
(b) in the case of facsimile transmission, at the time of despatch;
and
(c) in the case of post, 48 hours from the time of posting,
provided that if a notice is, or would, but for this proviso, be deemed to be,
received on a day that is not a Business Day, it shall instead be deemed to be
received at 10.00 a.m. on the Business Day next following that day; and if a
notice is, or would, but for this proviso, be deemed to be, received after
5.00 p.m. on a Business Day it shall be deemed to be received at 10.00 am on the
Business Day next following that day.
14.2 The addresses and facsimile numbers of the parties for the purposes of
Clause 14.1 are as follows:
Vendor:
------
Address: 0 Xxxxx Xxxxxx Xxxxx
Xxxxxx XX0X 0XX
Fax: 0171 638 6971
For the attention of: Xxx X X xx Xxxxxxx
Purchaser:
---------
Address: 00x Xxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Fax: 0171 269 5801
For the attention of: The Company Secretary
Purchaser's Guarantor:
---------------------
Address: 00x Xxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Fax: 0171 269 5801
For the attention of: The Company Secretary
14.3 In proving service it shall be sufficient to prove that:
19
(a) the envelope containing the notice was properly addressed and
delivered to the appropriate address; or
(b) the facsimile transmission was made and confirmed by a
transmission report; or
(c) the envelope containing the notice was posted as a first class
prepaid registered letter,
as the case may be.
15. FURTHER ASSURANCE
The parties shall do or procure to be done all such further acts and things, and
execute or procure the execution of all such other documents, as may from time
to time be reasonably required, whether on or after Completion, for the purpose
of giving effect to all of the provisions of this Agreement.
16. TIME OF THE ESSENCE
Time shall be of the essence as regards any date or period mentioned in any
clause of this Agreement save only to the extent that any date or period may be
altered by mutual agreement between the Vendor and the Purchaser whereupon time
shall be of the essence as regards such date or period as so altered.
17. WHOLE AGREEMENT AND VARIATION
This Agreement (together with any documents referred to in it) constitutes the
whole agreement between the parties and no modification, variation or amendment
of this Agreement shall be effective unless such modification, variation or
amendment is in writing and has been signed by or on behalf of all the parties
hereto. This Agreement supersedes and wholly replaces the heads of agreement
between the Purchaser and the Vendor dated 8 August 1997.
18. WAIVER
18.1 No waiver of any breach or default under this Agreement or any of its
terms shall be effective unless such waiver is in writing and has been signed by
the party against which it is asserted.
18.2 No delay or failure by any party in exercising any right, power or remedy
under this Agreement or otherwise shall constitute a waiver of the right, power
or remedy and no single or partial exercise of any right, power or remedy under
this Agreement or otherwise shall
20
prevent any further exercise of the right, power or remedy or the exercise of
any other right, power or remedy.
18.3 The rights, powers and remedies of the parties under this Agreement are
cumulative and not exclusive of any rights, powers or remedies provided by law.
19. EFFECT OF COMPLETION
All warranties and other obligations in this Agreement, so far as capable of
having effect after Completion, shall remain in full force and effect
notwithstanding Completion.
20. GOVERNING LAW AND JURISDICTION
20.1 This Agreement shall be governed by and construed in accordance with
English law. Each of the parties submits to the exclusive jurisdiction of the
courts of England.
20.2 Each party irrevocably waives any right that it may have to object to an
action being brought in those Courts, to claim that the action has been brought
in an inconvenient forum, or to claim that those Courts do not have
jurisdiction.
20.3 Each party agrees that without preventing any other mode of service, any
document in an action (including, but not limited to, any writ of summons or
other originating process or any third or other party notice) may be served on
any party by being delivered to or left for that party at its address for
service of notices under Clause 14 and each party undertakes to maintain such an
address at all times in the United Kingdom and to notify the other party in
advance of any change from time to time of the details of such address in
accordance with the manner prescribed for service of notices under Clause 14.
21. ASSIGNMENT
21.1 Except as provided in Clause 21.2, none of the parties shall, without the
prior written consent of the others, be entitled to assign the benefit of, or
any right or interest in or under or arising from, this Agreement in whole or in
part.
21.2 The benefit of, or any right or interest in or under or arising from,
this Agreement may be assigned in whole or in part by the Purchaser before or
after Completion to any subsidiary of the Purchaser.
21
In WITNESS whereof the parties have executed and delivered this Agreement as a
deed the day and year first before written.
22
SCHEDULE 1
THE COMPANY
NAME: : FIRSTPOINT LIMITED
AUTHORISED SHARE CAPITAL : 15,000 ordinary shares of L1 each
MEMBERS : Stratagem Group PLC (15,000 ordinary shares
of L1 each)
DIRECTORS : Xxxxxxx Xxxxxx Xxxxxxxx
Xxxxx Xxxxxxx Xxxxxx Xxxx
Xxxxxxx Xxxxxx Xxxxx xx Xxxxxxx
Xxxxxx Xxxxx Xxxxxxxx
SECRETARY : Xxxxx Xxxxx Xxxxxxxx
REGISTERED OFFICE : 0 Xxxxxxx Xxxxxxx, Xxxxxx, Xxxxxxxxx XX0 0XX
COMPANY NUMBER : 1307801
DATE OF INCORPORATION : 7 April 1977
ACCOUNTING REFERENCE DATE : 31 August
23
SCHEDULE 2
THE PROPERTIES
LEASEHOLD PROPERTIES
1. Description : Xxxx 0, Xxxxxx Xxxxx, Castings Road,
Xxxxxxxxxxx Xxxxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx XX0 0XX
2. Title number : -
3. Date of lease : 23.03.1993
as amended by Minute of Extension of Lease
dated 16.05.93
4. Term : 3 years from 1 August 1997
5. Current rent and next review : L10,000 per annum
No rent review
6. Permitted use :
7. Landlord : The Colonial Mutual Life Assurance Society
Limited
24
LEASEHOLD PROPERTIES
1. Description : 000 Xxxx Xxxx, Xxxxxx, Xxxxxxxxx
2. Title number : BK239395 - as per Lease back sheet
stamped by Gloucester District Land
Registry
BK162355 - as per Lease
3. Date of lease : 19.12.1985 - as per Land Certificate
4. Term : 25 years from 25 December 1985
5. Current rent and next review : L285,000 per annum from 25 December 1990
Review every fifth anniversary of the Lease
date
Next review: 25.12.1995
6. Permitted use : 29 DECEMBER 1989 VARIATION
Local Planning Authority gave permission for
change of use to B1 - Business Definition,
Part B - Schedule. Town & Country Planning
(Use Classes) Order 1987
7. Landlord : Xxxxx & Xxxx Development Ltd as per Lease
Tag Investment & Property Company Limited as
per rent review 8 October 1991
25
LEASEHOLD PROPERTIES
1. Description : Xxxx 00, Xxxxxxxxx Xxxxxxxxxx Xxxxxx,
Xxxxxxxxx, Norfolk
2. Title number : -
3. Date of lease : 19.08.1988
4. Term : 12 years from and including 19.12.1987
5. Current rent and next review : L5,100 per annum
No approach has been received from the
Landlord regarding the Rent Review as at 19
December 1996
Next review: 18.12.1999
6. Permitted use : Workshop stores and offices for light industrial
purposes with ancillary car parking within Class
B1 of the Use Classes Order 1987
7. Landlord : Xxxxx Xxxxxxx Xxxxxx and Xxxxx Xxxxxxx
26
LEASEHOLD PROPERTIES
1. Description : Xxxx 00, Xxxxxxxx Xxxxxxxxxx Xxxxxx,
Xxxx, Xxxxxxxx, XX0 0XX
2. Title number : -
3. Date of lease : 03.12.1992
4. Term : 6 years from 28.10.1992
5. Current rent and next review : L15,250 per annum
Rent Review every 3 years from
28.10.1992
6. Permitted use : Purposes within Use Classes 4, 5 and 11
of the Town & Country Planning (Use
Classes) Scotland Order 1989 and in
particular for the servicing of computer
equipment and for no other use without
the Landlord's written consent
7. Landlord : The Grampian Regional Council
27
LEASEHOLD PROPERTIES
1. Description : Industrial Xxxx 0, Xxxxxxxxxx Xxxxxxxx
Xxxx, Xxxxxxxxx Lane, Almondsbury,
Bristol, Avon
2. Title number : -
3. Date of lease : 21.12.1992
4. Term : 5 years from 24 June 1992
5. Current rent and next review : L19,000 per annum (not subject to
review)
6. Permitted use : Any use within Classes B1 and B8
referred to in the Schedule to the Town
& Country Planning (Use Classes) Order
1987
7. Landlord : The Official Custodian for Charities and
the Trustees of the Bristol Municipal
Charities
28
LEASEHOLD PROPERTIES
1. Description : Underlease, Xxxx 00, Xxxxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxx Xxxx,
Xxxxxxxxxxx, Xxxxxxx
0. Title number : -
3. Date of lease : 30.09.1996
4. Term : 10 years beginning on 29 September
1996
5. Current rent and next review : L40,000 per annum subject to review
Rent commencement date: 28.03.1997
Review: 29.09.1999
6. Permitted use : Any use within Classes B1 and B8 as
referred to in the Schedule to the Town
& Country Planning (Use Classes) Order
1987 as originally enacted as set out in
the Head Lease dated 30 May 1990
7. Landlord : Alexandra Workwear Plc
29
SCHEDULE 3
THE WARRANTIES
1. ACCURACY OF INFORMATION SUPPLIED
1.1 The facts relating to the Company and the Properties set out in
Schedules 1 and 2 and Recital (A) are true, complete and accurate in all
respects.
1.2 A true, complete and up to date copy of the memorandum and articles of
association of the Company has been supplied to the Purchaser and contains all
resolutions required to be embodied therein or annexed thereto.
1.3 All of the information disclosed in the Disclosure Letter or in the
documents attached to the Disclosure Letter is true and accurate and not
misleading.
2. CAPACITY
2.1 The Vendor has the power to enter into and perform this Agreement and the
Tax Covenant and this Agreement constitutes and the Tax Covenant when executed
will constitute legal, valid and binding obligations of the Vendor in accordance
with their respective terms.
2.2 The Vendor has the right, power and authority to sell and transfer the
Shares to the Purchaser on the terms of this Agreement without requiring the
consent or authority of any other person.
3. THE ACCOUNTS
3.1 All accounts, books, ledgers and financial and accounting records of
whatsoever kind of the Company:
(a) are in its possession;
(b) have been properly fully and accurately maintained and are written
up to date;
(c) do not contain or reflect any material inaccuracies or
discrepancies;
(d) properly state its transactions and the financial and contractual
position of the Company and its assets and liabilities; and
(e) generally accord with generally accepted accounting principles,
practices and standards properly maintainable by companies of
comparable size or those conducting business of a similar
character.
30
3.2 The Audited Accounts:
(a) comply with the Companies Act and all applicable statutory
requirements;
(b) were prepared on a recognised accounting basis consistent with
that of the statutory accounts of the Company for the previous
three accounting periods;
(c) were prepared and audited in accordance with generally accepted
accounting principles and proper auditing practices and comply
with all applicable accounting standards;
(d) give a true and fair view of the state of affairs of the Company
at the date thereof and of the activities and profits of the
Company for the period thereof;
(e) properly set out the nature of the assets and the liabilities of
the Company and the amounts thereof;
(f) accord with the books of account of the Company; and
(g) except as disclosed therein, are not affected by any unusual,
extraordinary, exceptional or non-recurring items.
3.3 In the Audited Accounts full disclosure of or full provision or reserve
is made (in accordance with the accounting policies under which such accounts
were prepared) for:
(a) all liabilities of the Company, whether actual or contingent or
unquantified or disputed at the date thereof;
(b) bad and doubtful debts owed to the Company;
(c) all Taxation (whether actual or contingent) payable by or liable
to be assessed on or for which the Company is accountable; and
(d) all contingent liabilities and capital commitments (whether
contracted for or not).
3.4 In the Audited Accounts all interest and all expenditure (whether actual
or deferred) attributable to:
(a) maintenance, repairs, insurance, management, rent, rates and other
outgoings;
(b) Taxation;
(c) marketing and development; and
(d) other ordinary or recurrent expenditure,
has been treated as an operating expense written off against income.
31
3.5 Since the Accounting Date no event has occurred which if then known would
have led to a material change in the amount attributed to any item in the
Audited Accounts at that date or would have resulted in the making of additional
reserves or provision.
3.6 The value of the net tangible assets (after deducting all liabilities and
provisions for liabilities) of the Company at 31 August 1997 as shown in its
statutory accounts for the financial year ended on that date (prior to any
adjustments made at the instance of the Purchaser to reflect its future aims for
the Company) determined in accordance with the same accounting policies as were
applied in the Audited Accounts (but on the basis that (i) each of the fixed
assets of the Company is valued at a figure no greater than the value attributed
to it in the Audited Accounts or in the case of any fixed assets acquired by the
Company after the Accounting Date at a figure no greater than cost and (ii) no
value shall be attributed to any debts owed to the Company by the Vendor or any
of its Associates which are not paid or repaid in full on Completion) will not
be less than L200,000.
3.7 The value of the net tangible assets of the Company (determined on the
same basis as in paragraph 3.6 above) will not be less at Completion than at 31
August 1997.
3.8 The unaudited management accounts of the Company for the period from the
Accounting Date to 31 July 1997 (copies of which are attached to the Disclosure
Letter) were properly prepared on the same basis as and employing the same
accounting policies as were employed in the Audited Accounts and properly
disclose the state of affairs of the Company as at the date to which they were
made up and its activities and profits for the period ended on that date.
3.9 Proper provision or reserve is made in the Audited Accounts and in the
Company's management accounts for all damaged, defective, obsolete and slow
moving stock and the value attributed to stock and work in progress in such
accounts is the lower of cost and net realisable value.
4. EMPLOYEES
In this section 4 the expression "employee" shall include any director,
secretary or other officer of the Company.
32
4.1 The documents attached to the Disclosure Letter contain full and accurate
details of the name, age, length of service and terms and conditions of
employment (including any arrangements or expectation, whether or not having the
force of law, as to future variations in such terms and conditions) including,
without limitation, rates of remuneration, benefits in kind, bonuses and
commissions, notice periods, pensions, health insurance and life assurance of
each employee of the Company.
4.2 The documents attached to the Disclosure Letter contain copies of the
standard terms of employment of the employees of the Company, all contracts of
employment with employees who are not employed solely on those standard terms
and all handbooks, manuals, benefit plans, disciplinary and grievance
procedures, personnel policies, codes of conduct and collective agreements
applicable to employees of the Company.
4.3 Since the Accounting Date there has been no change made in the rate of
remuneration, benefits or other terms of employment of any of the senior
employees of the Company. For the purpose of this Schedule, a "senior employee"
is an employee entitled to three months or more notice to terminate his or her
employment.
4.4 There is no employment contract between the Company and any of its
employees which cannot be terminated by three months' notice or less without
giving rise to a claim for damages or compensation (other than a statutory
redundancy payment or statutory compensation for unfair dismissal).
4.5 None of the current senior employees of the Company has given or received
notice terminating his employment.
4.6 None of the employees of the Company will be entitled to give notice
terminating his employment as a result of the provisions of this Agreement and,
so far as the Vendor is aware, none of the senior employees of the Company
intends to resign or is likely to resign as a result of entry into of this
Agreement or the transactions contemplated by this Agreement.
4.7 No amount is owed by the Company to any employee or former employee of
the Company (or his dependants) other than for accrued remuneration or
reimbursement of business expenses and no amount is owed to the Company by any
such person.
33
4.8 The Company has maintained records which are up-to-date and accurate in
all material respects records regarding the employment of each of its employees
and former employees.
4.9 Since the Accounting Date, the Company has not:
(a) incurred a liability (actual or contingent) for breach or
termination of an employment contract or for failure to comply
with an order for the reinstatement or re-engagement of an
employee; or
(b) made or agreed to make a payment or provided or agreed to provide
a benefit to an employee or former employee of the Company or to
any of his or her dependants in connection with the termination of
his or her employment beyond the minimum required by law.
4.10 Save in respect of the Xxxxxxx Xxxx Litigation (a brief summary of which
is given within the Disclosure Letter) there is no dispute between the Company
and any employee or former employee of the Company, any employee representative,
trade union, staff association or works council representative and, so far as
the Vendor is aware, there are no circumstances likely to give rise to any such
dispute.
4.11 There is no agreement or arrangement between the Company and any trade
union, staff association or works council.
4.12 The Company, in relation to each of its employees and former employees,
has complied with:
(a) all obligations imposed on it under contract, at common law, by
statute and under codes of conduct and practice including, without
limitation, any obligation under any health and safety
legislation;
(b) all customs and practices for the time being dealing with
relations between the Company and employees of the Company or the
terms of employment of the employees of the Company; and
(c) all relevant recommendations, orders, declarations and awards made
under any relevant statute, regulation or code of conduct and
practice.
4.13 There is no person employed or previously employed by the Company who has
a right to return to work (including for reasons connected with maternity leave
or absence by reason
34
of illness or incapacity) or a right to be reinstated or re-engaged by the
Company or to any compensation in lieu of any such right.
4.14 The Company does not have and is not proposing to introduce a share
incentive, share option, profit sharing, bonus or other incentive scheme for any
of its employees or former employees.
4.15 There is and has been no training scheme, arrangement or proposal in
relation to the Company in respect of which a levy may become payable by the
Company.
5. COMPANY FORMALITIES
5.1 Compliance has been made with all legal requirements in connection with
the formation of the Company and all issues and grants of shares, debentures,
notes, mortgages, charges and other securities of the Company.
5.2 The Company has on a proper and timely basis filed all documents and made
all returns required to be filed or made under legal requirements affecting the
Company.
5.3 The Company has properly and accurately maintained all statutory books
which it is required by law to maintain and these are written up to date.
5.4 No notice or allegation has been received that any of the statutory books
or registers of the Company is incorrect or should be rectified.
5.5 The Company has not since the Accounting Date passed any resolution by
its members (or any class of its members) or agreed to do so or convened or been
called upon to convene any general meeting which has not yet taken place.
5.6 Since the Accounting Date, no dividend or other distribution has been or
is treated as having been or is required or agreed to be declared, paid or made
by the Company.
6. SHARE CAPITAL
6.1 The Shares are fully paid and will, at Completion, comprise the whole of
the issued and allotted share capital of the Company.
35
6.2 Other than this Agreement, there are no options or other agreements or
arrangements (whether or not unconditional) which provide for or entitle any
person to call for the allotment or transfer of any shares or other securities
in the Company or the conversion of any loan or security into shares.
6.3 The Company has not since the Accounting Date sub-divided or consolidated
or varied any rights of any shares in the Company or agreed to do so.
6.4 There is not now, and there is no agreement to create, any Encumbrance
over any of the shares in the Company.
6.5 No one is entitled to receive from the Company or any other person a
finder's fee, brokerage or other commission in connection with the sale and
purchase of the Shares under this Agreement.
7. DIRECTORS
7.1 The only directors of the Company are listed in Schedule 1.
7.2 There are no shadow directors of the Company.
8. COMPLIANCE WITH LEGISLATION
8.1 The Company has conducted its business in all respects in accordance with
all applicable laws and regulations in each country in which it conducts or has
conducted business and no officer or employee of the Company has committed any
breach of such laws and regulations for which the Company may be liable.
8.2 No investigation or enquiry by, or on behalf of, a governmental,
regulatory, industry or other body in respect of the affairs of the Company has
taken place within the last six years which has led to any liability on the part
of the Company, no such investigation or enquiry is pending and the Vendor is
not aware of any circumstances which might lead to any such investigation or
enquiry.
9. LITIGATION
9.1 Apart from routine debt collection not involving amounts in excess of
L5,000 in any one case and save in respect of the Xxxxxxx Xxxx Litigation (a
brief summary of which is given
36
within the Disclosure Letter) the Company is not directly or through any person
for whom it may be liable engaged in any legal action, proceeding or arbitration
whether as plaintiff, defendant or otherwise and is not being prosecuted for any
criminal offence and there are no circumstances known to the Vendor which might
reasonably be expected to result in the Company becoming involved in any legal
action, proceeding or arbitration and no cause of action is alleged or likely to
be alleged against the Company.
9.2 The Company is not a party to any undertaking or assurance given to any
court or government agency which is still in force.
10. PROPERTIES
10.1 The Company is in physical possession and exclusive occupation of the
whole of each of the Properties and the Vendor is not aware of any right of
occupation or enjoyment which has been acquired or is in the course of being
acquired by any third party.
10.2 The Company has a good and marketable title to the Properties.
10.3 The Company has in its possession all the title deeds and documents
necessary to prove title to the Properties all of which have been properly
stamped and, where necessary, duly registered.
10.4 Except as specifically stated in Schedule 2, the Properties are not
subject to any Encumbrances and there are no agreements to give or create any
Encumbrances over any of the Properties.
10.5 The Company has not received notice of any alleged breach of any
covenants, restrictions and agreements (including any covenants under any
leases, underleases, licences or other agreements or any consents or approvals
obtained thereunder) affecting the Properties.
10.6 The Vendor is not aware of any current circumstances which (with or
without taking other action) would entitle any third party to exercise any right
to terminate the Company's use or occupation of the Properties.
37
10.7 The Properties are not subject to any outgoings other than business
rates, water rates, rent, insurance rent and service charges as reserved by the
relevant lease and all outgoings have been paid when due and none is disputed.
10.8 There are no disputes affecting the Properties or their use and the
Vendor is not aware of any circumstances that might give rise to any such
dispute.
10.9 The Company does not use or occupy any property in connection with its
business other than the Properties.
10.10 The use of the Properties is the permitted use for the purposes of
applicable planning requirements.
10.11 The Company has complied with all applicable statutory and other
requirements relating to the Properties including requirements relating to
planning, development, fire safety and health and safety at work.
10.12 The buildings and other structures on the Properties are in good and
substantial repair and fit for the purpose for which they are used and so far as
the Vendor is aware there are no latent defects in the buildings and structures.
10.13 So far as the Vendor is aware no deleterious building materials or
methods of construction not in accordance with currently accepted good building
practices have been used in the construction, alteration or repair of the
Properties.
10.14 In respect of each of the Properties:
(a) such Property is held under the terms of the lease brief details
of which are given in Schedule 2 and no collateral agreements,
assurances or concessions have been made by any party to the
lease;
(b) the Company has paid the rent, service charge and any other
payment due under the lease in full and duly observed and
performed the covenants on the part of the tenant and the
conditions contained in the lease;
(c) all licences, consents and approvals required from the landlord
have been obtained and the covenants on the part of the tenant
contained in the licences, consents and approvals have been duly
performed and observed.
38
10.15 The Company has no existing or contingent liabilities in respect of any
properties (other than the Properties) whether previously occupied by it or in
which it owned or held any interest, including, without limitation, premises
assigned or otherwise disposed of or in respect of which it guaranteed the
liabilities of a third party.
11. ENVIRONMENT
11.1 So far as the Vendor is aware the Company has complied in all material
respects with all Environmental Laws, and all regulations, codes of practice and
other similar controls and advice made or issued thereunder or in connection
therewith both in respect of its business as carried on from time to time and in
respect of the Properties.
11.2 So far as the Vendor is aware, the Company has not incurred any liability
as a result of any breach of any Environmental Laws which is attributable to its
business or the ownership or use of any of its assets nor, so far as the Vendor
is aware, are there any facts or circumstances in existence likely to give rise
to such liability.
12. ASSETS
12.1 The fixtures, fittings, plant and equipment (including computers and
ancillary equipment) and motor vehicles owned by the Company or used in its
business are:
(a) summarised in the schedules attached to the Disclosure Letter;
(b) in good repair and condition, subject to normal wear and tear,
have been properly maintained and are not in need of replacement;
(c) in its absolute ownership, possession and control free from any
Encumbrances,
and the same will be left at the Properties or in the possession of the Company
on Completion.
12.2 Except for current assets disposed of by the Company in the ordinary
course of its business, the Company is the owner of and has good and marketable
title to all assets included in the Audited Accounts and all the assets which
have been acquired by the Company since the Accounting Date and no such asset,
nor any of the undertaking, goodwill or uncalled capital of the Company, is
subject to any Encumbrance or any agreement or commitment to create any
Encumbrance (except for stock or assets covered by retention of title claims in
the ordinary course of business).
39
12.3 The assets owned or used by the Company comprise all the assets
reasonably required to enable the Company to carry on its business in the manner
in which it has been carried on in the period immediately prior to the date of
this Agreement.
12.4 There are maintenance contracts with independent specialist contractors
in respect of all of such assets of the Company for which it is normal or
prudent to have maintenance contracts.
12.5 The stocks of raw materials, packaging materials and finished goods held
by the Company are not excessive and are adequate in relation to current trading
requirements.
12.6 No stock has been sold on a sale or return basis.
12.7 No employee, officer or shareholder of the Company and none of the Vendor
or any subsidiary or Associate of the Vendor is or was interested directly or
indirectly in any assets owned by the Company or which have been acquired or
disposed of by or leased to or by or are proposed to be acquired or disposed of
or leased to or by the Company.
13. INSURANCE
13.1 A summary of the material contents of all policies of insurance which the
Company has is set out in the Disclosure Letter.
13.2 All such insurance is currently in full force and effect and nothing has
been done or omitted to be done and there are no circumstances which would make
any policy of insurance void or voidable or lead to an increase in the premiums.
13.3 There are no claims under such insurance at present outstanding or
requiring to be made nor so far as the Vendor is aware any circumstances likely
to give rise to such a claim.
14. TRADE SECRETS, KNOW-HOW AND OTHER INDUSTRIAL PROPERTY
14.1 No disclosure has been made to any person other than the Purchaser, its
agents or advisers of any of the know-how or the financial or trade secrets or
other confidential information of the Company save in the ordinary and proper
course of business of the Company and upon the Company having secured the
confidential nature of any such disclosure where appropriate.
40
14.2 Except for licences for the use of computer software disclosed in the
Disclosure Letter the Company is not a party to any agreements or other
arrangements for the acquisition, use or licensing of know-how, patents, trade
marks, copyrights, registered designs or the like and no such intellectual
property rights are used or required to be used by the Company in the ordinary
course of its business.
14.3 The business of the Company as presently carried on does not, and is not
likely to, infringe the intellectual property rights of another person.
14.4 The Company is the legal and beneficial owner of or is entitled to use
without payment or restriction (as to time or otherwise) the computer hardware
and software currently used by it in its business.
15. OTHER INTERESTS
15.1 The Company is not a member of any partnership, joint venture, consortium
or other unincorporated association (other than recognised trade associations)
nor has it agreed to become a member of any such association.
15.2 The Company is not the holder or beneficial owner of, nor has it agreed
to acquire, shares or loan capital of any other body corporate.
16. TRANSACTIONS REDUCING ASSET VALUE
Since the Accounting Date:
(a) no obligations to the Company have been written off or written
down or assigned to a third party at less than full value or have
proved to any extent irrecoverable or are now regarded as
irrecoverable; and
(b) there has not been nor is there any release or agreement for the
release of any person under any liability to the Company.
17. LIABILITIES
17.1 Neither the Vendor nor the Company has done anything whereby the
continuance of any overdrafts, loans or other financial facilities outstanding
or available to the Company might be affected or prejudiced.
41
17.2 The Company has no borrowings or indebtedness in the nature of borrowing
(including debt securities) not disclosed in the Disclosure Letter.
17.3 The Company has not factored or agreed to factor its debts.
17.4 The Company has not since the Accounting Date done or agreed to do any of
the following acts or things, other than in accordance with this Agreement,
namely:
(a) repay or discharge in whole or in part any mortgages, charges,
debentures or other securities or (excluding fluctuations in
overdrawn current accounts with bankers) any loans or overdrafts
or other indebtedness;
(b) increase the facility for the amount borrowed or raised by the
Company; or
(c) exceed any applicable overdraft limits.
17.5 The total amount borrowed by the Company has not exceeded any limitation
on borrowings contained in its articles of association or other constitutional
documents or in any instrument to which it is a party or applying to it.
17.6 Since the Accounting Date no xxxx of exchange or promissory note has been
drawn, made, accepted or endorsed by the Company except in the ordinary course
of business of the Company and as recorded in the books of the Company.
17.7 Since the Accounting Date the Company has not received notice (whether
formal or informal) from a lender of money requiring repayment or intimating the
enforcement of security which it holds over assets of the Company and there are
no circumstances which may give rise to the same.
17.8 No guarantee, indemnity, bond or security has been given, nor agreed to
be given, by or for the benefit of the Company.
17.9 The Company has no contracts or commitments for capital expenditure.
18. DEBTORS
18.1 No part of the amounts included in debtors in the Audited Accounts, or
subsequently recorded in the books of the Company as owing by a debtor, is
overdue by more than three
42
months, has been released on terms that the debtor pays less than the full book
value of his debt, has been written off or has proved to be, or is regarded as,
wholly or partly irrecoverable.
18.2 So far as the Vendor is aware the amounts due from debtors as at
Completion will be recoverable in full, in the normal course of business and, in
any event, not later than three months after Completion and none of those debts
is subject to a counterclaim or set-off, except to the extent of a provision or
reserve in the Audited Accounts or in the management accounts of the Company for
the period to 31 July 1997.
19. LICENCES AND CONSENTS
The Company has and had at all material times all necessary licences, permits,
authorities, permissions and consents (public and private) to enable it to own,
use or deal with its assets and carry on its business as now carried on and the
same are in full force and effect and will not be terminable as a result of the
sale of the Shares to the Purchaser and the Vendor is not aware of breach of any
of them or of any reason why any of them should be suspended, cancelled, or
revoked.
20. CONDUCT OF BUSINESS OF THE COMPANY
20.1 Except in the ordinary course of business the Company has not given any
guarantees, warranties or undertakings in respect of goods or services
previously supplied by it under which the Company may still have any liability
to repair or replace such goods or provide further services.
20.2 There is no matter disputed in any material respect with any government
or statutory department, authority, body or agency and there is no fact known or
which might reasonably be expected to be known to the Vendor which might be the
cause of any such dispute.
20.3 The Company is not a party to any agreement or arrangement which:
(a) is outside the normal course of business;
(b) is not terminable in accordance with its terms on 60 days' notice
or less;
(c) is subject to abnormal or onerous conditions relative to the norms
in the industry in which the Company operates;
(d) is loss making to an extent of L5,000 or more per annum on the
basis used by the Vendor in the preparation of document I.10
attached to the Disclosure Letter (contract profitability);
43
(e) involves payments which may fluctuate by reference to the index of
retail prices on any other index or the rate of exchange for a
currency; or
(f) is not entirely of an arms' length nature.
20.4 The Vendor is not aware, and have no grounds for believing, that after
Completion (whether by reason of an existing agreement or arrangement or as a
result of the acquisition of the Company by the Purchaser):
(a) a supplier of the Company will cease, or be entitled to cease,
supplying it or may substantially reduce its level of supplies;
(b) a customer of the Company will cease, or be entitled to cease, to
deal with it or may substantially reduce its level of business; or
(c) the Company will lose a right or benefit which it enjoys.
20.5 Neither this Agreement nor Completion will:
(a) breach or constitute a default under an agreement or arrangement
to which the Company is a party or a provision of its memorandum
or articles of association or any other restriction affecting the
Company;
(b) relieve any person from an obligation to the Company (whether
contractual or otherwise) or enable any person to terminate any
agreement with the Company or to determine a right or benefit
enjoyed by the Company; or
(c) result in indebtedness of the Company becoming, or capable of
being declared, due and payable prior to its stated maturity.
20.6 The Company has not defaulted under any of the provisions of any
agreement or arrangement to which it is a party and has not done or suffered to
be done anything whereby nor omitted to do or suffered to be omitted anything as
a result of which omission any such agreement or arrangement may be terminated
or rescinded by any other party.
20.7 No party to an agreement or arrangement with the Company is in default,
being a default which would be material in the context of the Company's
financial position, and there are no circumstances likely to give rise to any
such default.
20.8 The Company is not and has not been directly or indirectly concerned in
or a party to any agreement, arrangement, transaction or practice or pursued any
course of conduct or done or omitted to do any act or thing which is
registerable, unenforceable or void, or renders the
44
Company or any of its employees liable to administrative, civil or criminal
proceedings under any anti-trust, competition, fair trading, trade regulation or
similar legislation in any jurisdiction in which its business has been carried
on.
20.9 There are no agreements in force restricting the freedom of the Company
to supply and take goods and services and conduct its business by such means and
from and to such persons as it may from time to time think fit.
20.10 There are and in the past six years have been no agreements or
understandings (whether legally enforceable or not) between the Company and any
person who is or was a shareholder, director or employee of or the beneficial
owner of any interest (direct or indirect) in the Company or any Associate of
any such person relating to the management of the business of the Company or the
appointment or removal of Directors or the ownership or transfer of ownership or
supply, manufacture, letting, licensing, purchase or use of goods, services,
copyrights, designs, patents, trade marks or names or other facilities to or by
the Company or otherwise howsoever relating to the Company and its affairs.
20.11 Other than in relation to the customer contracts with IBM, Energis
Communications Limited, Thorn Transit Systems International, Xxxxx & Root
Limited, Reuters Health Care Limited (formerly known as VAMP Health Limited),
copies of which are attached to the Disclosure Letter the Company does not
obtain or make more than 5 per cent of the aggregate amount of its purchases and
not more than 5 per cent of the aggregate amount of its sales from or to any one
supplier or customer (treating any person and all his Associates as one supplier
or customer for this purpose).
20.12 No material customer or supplier of or to the Company has during the
twelve months preceding the date of this Agreement ceased or indicated an
intention to cease (or reduce the value of) trading with the Company or is
likely to do so.
20.13 There are no disputes between the Company and any of its customers or
suppliers nor are there any circumstances known to the Vendor likely to give
rise to any such disputes.
20.14 Since the Accounting Date:
(a) the business of the Company has been carried on in a normal course
and without any interruption or alteration;
45
(b) save in the ordinary course of trading, the Company has not
entered into any transaction nor incurred any liability;
(c) save in the ordinary course of business, the Company has not
acquired or disposed of any assets or agreed to do so;
(d) the Company has effectually carried out current contracts and
obligations and has paid its creditors in a timely fashion.
20.15 Since 31 July 1997 there has been no material change in the financial
position or prospects of the Company.
20.16 No person is authorised by the Company to bind the Company other than the
Directors of the Company and there are no alternate directors of the Company.
20.17 No powers of attorney or authorities (express or implied) by which a
person may enter into a contract or incur an obligation on behalf of the Company
are subsisting.
20.18 The Company is not a party to any agency, distributorship or franchise
agreements or any agreements relating to the payment of commission to or by the
Company.
20.19 The Company has the power and is duly qualified to carry on business in
all jurisdictions in which it carries on business.
20.20 The Company is not insolvent or unable to pay its debts.
20.21 No receiver, administrative receiver, trustee or other officer has been
appointed of the whole or any part of the assets or undertaking of the Company.
20.22 No petition has been presented, no order has been made and no resolution
has been passed for the winding-up, administration, bankruptcy or dissolution of
the Company.
20.23 No distress, execution or other process has been levied and remains
undischarged in respect of the Company.
20.24 There is no outstanding judgment or court order against the Company.
46
20.25 The Company does not owe any money or have any other liability to the
Directors or the Vendor or any of its subsidiaries or Associates nor does any
such person owe any money to the Company.
20.26 The Company has not applied for or received any grant or financial
assistance or similar payment from any supranational, national or local
authority or governmental agency.
20.27 The Company has not done or omitted to do any act or thing which could
result in, and nor will the entry into or completion of this Agreement result
in, all or any part of any grant or financial assistance made to the Company by
any supranational, national or local authority or governmental agency becoming
repayable or being forfeited or withheld.
20.28 No leasing, hire, hire-purchase or deferred payment or conditional sale
or conditional purchase agreements have been entered into or agreed to be
entered into by the Company under which there is or may be any continuing
liability on the part of the Company.
20.29 The Company does not receive any services from the Vendor or any of its
Associates (whether paid for or not).
21. BANK ACCOUNTS
21.1 A statement of each of the bank accounts of the Company and of the credit
or debit balances on such accounts as at close of business on the Business Day
preceding the date of this Agreement is attached to the Disclosure Letter.
21.2 The bank accounts of the Company are operated separately from the bank
accounts of any other person and there is no right of set-off against monies in
the Company's bank accounts for the liabilities of any other person.
22. TAXATION
Tax Events since the Accounting Date
22.1 Since the Accounting Date:-
(a) the Company has not engaged in any transaction in respect of which
there may be substituted for the purposes of any Tax a different
consideration for the actual consideration given or received by
it;
47
(b) no dividend or distribution has been declared, made or paid by the
Company and no payment has been made which could be deemed to be a
distribution within the meaning of the 1988 Act; and
(c) no disposal or deemed disposal which might give rise to a
liability for corporation tax on chargeable gains has been made by
the Company.
RESIDENCE FOR TAXATION PURPOSES
22.2 The Company was incorporated in the United Kingdom and for the purposes
of United Kingdom Taxation:-
(a) is and has always been resident in the United Kingdom;
(b) has not at any time been resident in any other territory and has
never paid or become liable to pay Tax on income, profits or gains
to any Tax Authority outside the United Kingdom or become liable
to the foreign equivalent of VAT in any other jurisdiction or
traded or invested outside the United Kingdom through a permanent
establishment, branch or agency.
ADMINISTRATION AND COMPLIANCE
22.3 All returns, computations, registrations and payments which should have
been made or filed by the Company on or before the date hereof for any Taxation
purpose (including Pay and File) have in all material respects been made or
filed promptly and are up to date correct and on a proper basis and as far as
the Vendor is aware none of them is or is likely to be the subject of any
dispute or appeal and no estimated returns have been submitted nor are there any
liabilities or potential liabilities to Tax the date for payment for which has
been postponed under section 55 TMA.
22.4 The Company has in its possession and under its control all records and
documentation which it is obliged to hold, preserve and retain under any
Taxation Statute and the Company has sufficient records relating to past events
(including any elections made) to calculate accurately in all material respects
the liability to Taxation of the Company or its entitlement to any relief which
would arise on the disposal or realisation at Completion of all assets owned by
the Company at the Accounting Date or acquired by it since that date but before
Completion.
22.5 In respect of Pay As You Earn ("PAYE"):-
(a) the Company has properly operated the PAYE system, deducting Tax
as required by law from all payments made or treated as made by it
to its
48
employees or former employees (including payments within section
134 of the 0000 Xxx) and properly accounting to the Inland Revenue
for all amounts for which it is required to account and has
complied with all its reporting obligations to the Inland Revenue
in connection with any such payments made or benefits provided;
and
(b) the Inland Revenue has not within the twelve months prior to the
date hereof conducted a PAYE audit on the Company and has not
notified the Company that any such audit will or might take place.
22.6 The Company has complied with all its obligations relating to national
insurance and social security contributions and has made and accounted to the
appropriate Tax Authorities for all deductions required or authorised to be made
thereunder including (without limitation) under the Social Security Xxxxxxxx Xxx
0000, Social Security Contributions and Benefits Xxx 0000, the Social Security
Administration Act 1992 and all other legislation whatsoever pertaining to
social security and national insurance contributions.
22.7 All payments made by the Company to any person which ought to have been
made under deduction of Tax have been so made and the Company has (when required
to do so) provided certificates of deduction to such persons and properly
accounted to the relevant Tax Authority in full for all amounts so deducted.
22.8 The Company is not and has never been the subject of an investigation
audit or visit by any Tax Authority; neither the Vendor nor the Company has at
the date hereof been notified that any such investigation audit or visit is
planned in the next twelve months and so far as the Vendor is aware there are no
facts which are likely to cause any such investigation audit or visit to be
instituted.
22.9 The Company is not and should not become liable to pay or make
reimbursement or indemnity in respect of or corresponding to Taxation in
consequence of the failure by any other person to discharge that Taxation or
amount within any specified period or otherwise, and in particular (without
limitation) the Company is not and will not become liable under sections 190
(tax on one member of group recoverable from another member) or 191 of the 1992
Act (non-payment of tax by non-resident companies) where such Taxation or amount
relates to a profit, income or gain, transaction, event, omission or
circumstance arising or deemed to arise in whole or in part prior to Completion.
49
APPROPRIATIONS
22.10 Since the Accounting Date the Company has not except in the ordinary
course of business appropriated any assets to or from trading stock.
CLAIMS, ELECTIONS AND RELIEFS
22.11 The Disclosure Letter gives full details (with express reference to this
sub-paragraph) of all matters relating to Taxation in respect of which the
Company (either alone or jointly with any other person) has, or at Completion
will have, an outstanding entitlement:-
(a) to make any appeal (including a further appeal) against an
assessment to or a determination affecting Taxation;
(b) to apply for the postponement or payment by instalments of
Taxation; or
(c) to disclaim or require the postponement or reduction of any
allowance.
22.12 The Company has duly submitted all claims and disclaimers the making of
which have been assumed for the purposes of the Audited Accounts within the
requisite periods and all such claims and disclaimers have been accepted as
valid by the relevant Tax Authority.
DEDUCTIBILITY OF PAYMENTS
22.13 Since the Accounting Date, the Company has not paid or incurred and is
not under any obligation to pay or incur in the future expenditure of an income
nature which will be wholly or partially disallowable for corporation tax
purposes in computing the profits of a trade as a deduction, charge on income,
expense of management or otherwise except for expenditure on the acquisition of
any asset held otherwise than as stock-in-trade or expenditure on entertaining
customers and suppliers, the hiring of expensive motor cars within section 35(2)
CAA or the payment of Taxation details of all of which are set out in the
Disclosure Letter.
DISTRIBUTIONS
22.14 During the Vendor's period of ownership of the Company, the Company has
not repaid, or agreed to repay or redeemed or agreed to redeem or purchased or
agreed to purchase any shares of any class in its issued share capital or
capitalised or agreed to capitalise in the form of redeemable shares or
debentures any profits or reserves of any class or description to which section
210(1) of the 1988 Act applies or otherwise issued or agreed to issue any share
capital other than for the receipt of new consideration (within the meaning of
Part VI of the 0000 Xxx) or passed or agreed to pass any resolution to do so.
50
22.15 During the Vendor's period of ownership of the Company no distribution
within the meaning of sections 209, 210 and 211 of the 1988 Act has been made
(or could be deemed to have been made) by the Company except cash dividends
shown in its audited accounts and the Company is not bound to make any such
distribution in the future.
22.16 The Company neither owns nor has issued any qualifying corporate bonds
within the meaning of section 117 of the 1992 Act.
22.17 The Company:-
(a) has no assets or liabilities to which Chapter II, Part II FA 1993
could apply; and
(b) is not and never has been a party to any interest rate contract or
option or currency contract or option which is or may become a
qualifying contract as described in Chapter II, Part IV FA 1994.
LOAN RELATIONSHIPS
22.18 The Company is not a party to any loan relationships as defined in
section 81 FA 1996.
CARRY FORWARD OF LOSSES
22.19 In the computations of the Company submitted to the Inland Revenue for
the accounting period ended 31 August 1996 (the "Relevant Computations"),
trading losses of not less than L2,500,000 were claimed as being available for
carry forward by the Company pursuant to section 393(1) of the 1988 Act; the
Relevant Computations were prepared on a proper basis and no part of any such
amount or amounts of the losses claimed is attributable to unused stock relief
nor has anything been done, and no event or series of events has occurred or
will as a result of any contract, agreement or arrangement entered into before
Completion occur nor is the Vendor aware of any matter or thing which might
cause or contribute to the disallowance for the Company of the carry forward of
losses or excess charges on income which would otherwise have been available to
the Company under the provisions of any Taxation Statute provided always that
this paragraph 22.19 shall be deemed not to have been breached if the said
Losses are not so available to carry forward solely as a result of any act or
omission of the Purchaser, the Company or any of their Associates on or after
Completion.
22.20 Within the period of three years ending on the date of this Agreement
there has been no major change in the nature or conduct of the trade or business
carried on by the Company
51
within the meaning of section 768 (change in ownership of company: disallowance
of trading losses) nor has there been a change in ownership of the Company
within section 769 (change on company ownership: corporation tax) of the 1988
Act.
CAPITAL LOSSES
22.21 The Company has no capital losses available to carry forward at the date
hereof.
GROUP AND CONSORTIUM TAXATION
22.22 (a) The Company is a member of the Vendor's Group for the purposes of
section 170 of the 1992 Act and sections 402-412 (inclusive) of
the 1988 Act and there is nothing in either section 410 or section
413 of the 1988 Act which precludes or would have precluded the
Company from being regarded as a member of the Vendor's Group for
any accounting period ending on or before the date of this
Agreement.
(b) The Disclosure Letter contains particulars of all arrangements and
agreements relating to group relief (under sections 402-413 of the
0000 Xxx) and the surrender of advance corporation tax to the
Company under section 240 of the 1988 Act to which the Company is
or has been a party within the six years ended on the Accounting
Date and the Company has not since the Accounting Date surrendered
or agreed to surrender any amount by way of group relief pursuant
to sections 402 to 413 of the 1988 Act (inclusive).
(c) The Company has not made and is not liable to make any payment for
group relief or the surrender of advance corporation tax,
otherwise than in consideration for the surrender of group relief,
or advance corporation tax allowable to the Company by way of
relief from corporation tax and no such payment exceeds or could
exceed the amount permitted by section 402(6) or (as appropriate)
section 240(8) of the 1988 Act.
(d) The Company has received all payments due to it under any
arrangement or agreement for the surrender by it of group relief.
(e) The Company has not made or received a payment for group relief
which may be liable to be refunded in whole or in part.
(f) All claims and surrenders for group relief made by the Company
were when made and are now valid and have been or will be allowed
by way of relief from corporation tax.
52
(g) If the Company became a member of the Vendor's Group after the
Accounting Date, the provisions of section 409(2) of the 1988 Act
(Group relief: apportionment) will not apply so as to permit the
apportionment of profits and losses to be made otherwise than on a
time basis according to the respective lengths of the component
accounting periods.
(h) Group income elections under section 247 of the 1988 Act to which
the Company has been party at any time have been duly in force in
respect of all dividends paid and interest payments made
thereunder and have been accepted by the Inland Revenue and the
Disclosure Letter contains full particulars of the election
currently in force and no assessment will be made on the Company
in respect of advance corporation tax which ought to have been
paid or income tax which ought to have been deducted.
(i) The Company is not and never has been a party to any agreement or
arrangement under section 102 FA 1989.
(j) The Company has at no time received and is not entitled to receive
any franked investment income.
(k) The Company has not at any time been a party to any such
reconstruction as is described in section 343 of the Taxes Act.
CLOSE COMPANIES
22.23 During the Vendor's period of ownership of the Company, it has not at any
time been a close company as defined in section 414 of the 1988 Act or a close
investment holding company as defined in section 13A of the 1988 Act.
CAPITAL ALLOWANCES
22.24 No balancing charge would be imposed on the Company under CAA (or any
other relevant Taxation Statute) on the disposal of any pool of capital assets
(being all those assets expenditure relating to which would be taken into
account in computing whether a balancing adjustment would arise on a disposal of
any of those assets) or of any asset not in such a pool, on the assumption that
such disposal is made for a consideration equal to the book value shown in or
adopted for the purpose of the Audited Accounts for each of the assets and
ignoring any reliefs or allowances available to the Company other than
qualifying expenditure.
22.25 The Company has not made any election under section 37 CAA nor could it
be taken to have made such an election under section 37(8)(c) thereof.
53
22.26 The Company does not currently own any assets which are long life assets
within the meaning of Chapter IVA CAA.
22.27 No event has occurred since the Accounting Date by reason of which any
balancing charge may fall to be made against or any disposal value may fall to
be brought into account by the Company under CAA (or other legislation relation
to capital allowances) or which may give rise to a recovery of excess relief
within section 47 CAA.
22.28 No election has been made or agreed to be made by the Company under
section 53 CAA (Expenditure incurred by equipment lessor) or section 55 CAA
(Expenditure incurred by incoming lessee: election to transfer right to
allowances) in relation to any fixtures.
FINANCE LEASES
22.29 The Company is not and has not been the lessee under any leases of plant
and machinery.
DEPRECIATORY TRANSACTIONS
22.30 So far as the Vendor is aware no loss which may accrue on the disposal by
the Company of any asset is liable to be reduced by reason of any depreciatory
transaction or deemed depreciatory transaction within sections 176 or 177 of the
1992 Act and no chargeable gain or allowable loss which might accrue on a
disposal by the Company of any asset is likely to be adjusted in accordance with
section 17 of the 1992 Act (Disposals and acquisition treated as made at market
value).
BASE VALUES AND ACQUISITION COSTS
22.31 If each of the capital assets (which for the avoidance of doubt exclude
stock and work-in-progress) of the Company was disposed of at Completion for a
consideration equal to the value attributed to that asset in the Audited
Accounts (or in the case of any asset acquired since the Accounting Date, equal
to the consideration given upon its acquisition), no liability to corporation
tax would arise.
CHARGEABLE GAINS
22.32 In determining the liability to corporation tax on chargeable gains in
respect of any asset which has been acquired or provided by the Company or which
the Company has agreed to
54
acquire or provide the sums allowable as a deduction will be determined solely
in accordance with the provisions of sections 35, 36, 53, 38 and Schedule 4 of
the 1992 Act.
22.33 The Company is not owed a debt (not being a debt on a security) upon the
disposal or satisfaction of which a liability to corporation tax on chargeable
gains will arise by reason of the provisions of section 251 of the 1992 Act.
22.34 The Company has not acquired any chargeable asset within the six year
period ending on the date hereof from another company which was at the time of
acquisition a member of the same group of companies as the Company within the
meaning of section 170 of the 1992 Act.
22.35 Since the Accounting Date, no debt owned by the Company has been realised
in whole or in part in circumstances giving rise to a liability to Taxation.
REPLACEMENT OF BUSINESS ASSETS
22.36 The Company has not made and is not entitled to make any claims under
section 175 of the 1992 Act (Replacement of business assets by members of a
group) or sections 23 (Capital sums: compensation and insurance money), 247
(Roll-over relief on compulsory acquisition), 152 (Roll-over relief),
153 (Assets only partly replaced) or 154 (New assets which are depreciating
assets) of the 1992 Act nor is the Vendor aware that any such claims have been
made by any other person which could affect the amount or value of the
consideration for the acquisition of any asset by the Company as taken into
account in calculating its liability to corporation tax on chargeable gains.
TRANSACTIONS NOT AT ARM'S LENGTH
22.37 The Company has not carried out or been engaged in any transaction or
arrangement to which the provisions of sections 770 and 773 of the 1988 Act
(Sale, etc, at undervalue or overvalue) have been or may be applied in respect
of which a direction has or could have been made under paragraphs 1 or 2 of
Schedule 4 to the VATA.
22.38 The Company has not disposed of or acquired any asset in such
circumstances that the provisions of section 17 of the 1992 Act (Disposals and
acquisitions treated as made at market value) could apply nor given or agreed to
give any consideration to which section 128(1)(2) of the 1992 Act could apply
and no allowable loss has accrued to the Company to which section 18 of the 1992
Act will apply.
55
TAX AVOIDANCE
22.39 The Company has not engaged in or been a party to any scheme or
arrangement designed wholly or partly for the purpose of avoiding, deferring or
reducing Taxation and no scheme or transaction of any nature has been carried
out by or proposed in relation to the Company which has given rise or could give
rise to a charge to Taxation.
22.40 The Company has not been a party to any preordained series of
transactions containing one or more steps which have no commercial purpose other
than avoiding deferring or saving tax or obtaining of a tax advantage.
CLEARANCES
22.41 All consents or clearances which should or could be obtained in respect
of any transaction to which the Company has been a party have been so obtained
and have been secured on the basis of full and accurate disclosure to the
relevant Tax Authority of all material facts and circumstances and all such
transactions for which such clearances have been obtained have been carried out
only in accordance with the terms of the clearance given and no such clearance
or consent might be withdrawn or nullified.
22.42 Copies of all applications for clearance made and all consents or
clearances obtained since the Accounting Date (together with all relevant
particulars) have been provided to the Purchaser.
22.43 No company over which the Company had control or which was a member of
the same group of companies as the Company ceased to be resident in the United
Kingdom otherwise than in compliance with section 130 FA 1988 (provisions for
securing payment by company of outstanding Tax) and so far as the Vendor is
aware there are no circumstances by reason of which any company could be liable
to any penalty under section 131 FA 1988.
VAT
22.44 The Company:-
(a) is a duly registered taxable person for the purposes of VAT and
has been at all times when it ought to have been so registered in
order to comply with VAT legislation and such registration is not
subject to any conditions imposed by or agreed with H.M. Customs &
Excise and the Company is not now nor has in the preceding six VAT
years been wholly or partly exempt to such extent as
56
might affect its ability to reclaim input tax being VAT on the
supply to it of goods and services;
(b) has not been served with a direction by the Commissioners of H.M.
Customs & Excise pursuant to the provisions of paragraph 2 of
Schedule 1 VATA;
(c) has promptly complied in all material respects with all statutory
requirements, orders, provisions, directions or conditions
relating to VAT including the submissions of accurate returns;
(d) is not in arrears with any payments, returns or notifications or
liable to any abnormal or non-routine payment, or any forfeiture
or penalty, or to the operation of any penal provision and has
not, during the period of 24 months preceding the date of this
Agreement, received a notice under section 64 of VATA;
(e) is not and has not applied for treatment as a member of a group
for the purposes of section 43 VATA and has not been so treated,
and no act or transaction has been effected in consequence whereof
the Company is or may be held liable for any VAT arising from
supplies made by any other company
(f) is not operating any special arrangement or scheme relating to VAT
and has not agreed any special method of accounting for VAT;
(g) has not paid VAT on any interest in or right over land or licence
to occupy land;
(h) has not (nor has any relevant associate, as defined in Schedule 10
paragraph 3(7) VATA) at any time elected to waive exemption from
VAT under Schedule 10 paragraph 2 VATA in respect of any land or
interest in land and the Vendor is not aware of any intention to
exercise such an election in respect of any land or interest in
land and in no case has the Company charged VAT on a supply on the
basis of a purported election to waive exemption which has not
been made or which did not have effect in relation to the supply;
(i) has not purchased or sold any assets in a transaction to which
section 49 VATA and Article 5 of the Value Added Tax (Special
Provisions) Order 1995 (SI 1995/1268) could apply or has applied
being the transfer of a business or part of a business as a going
concern;
(j) has no assets and has not within the period of ten years preceding
the date hereof owned any assets to which the Capital Goods Scheme
in Part XV of the Value Added Tax (General) Regulations 1995 (SI
1995/2518) applies;
57
(k) has paid all VAT import duties excise duties tariffs and other
taxes payable in respect of any assets (including trading stock)
imported, owned or used by the Company and has paid all VAT which
it has become liable to pay in respect of any deemed self supply
by it of any goods and services.
22.45 The Disclosure Letter contains full particulars of any claim for bad debt
relief made or which may be made by the Company under section 36 VATA (as
amended) and of any claim for a repayment of VAT or a payment of interest by
H.M. Customs & Excise which has been or should be made (and in this event the
time by which such claim should be made) by the Company under section 80 VATA
(recovery of overpaid VAT) or section 78 VATA (Interest in certain cases of
official error) and all notices which ought to have been given in respect of any
bad debt relief claimed in connection with the supply by the Company of goods or
services on or after 26 November 1996 have been given in full compliance with
the Value Added Tax Regulations 1995 (as amended).
22.46 The Company has not within the period of 12 months preceding the date of
this Agreement received a surcharge liability notice under section 59 VATA nor a
warning within section 76(2) of that Act.
22.47 During the Vendor's period of ownership of the Company, it has duly paid
all stamp duty loan capital duty and any bearer instrument duty for which it has
during that time been liable and interest and penalties payable in respect of
all documents required to be stamped and which are in the Company's possession
or by virtue of which the Company has any right and all stamp duty reserve tax
to which it is or may be liable under the provisions of Part IV FA 1986 and no
such document which is held by or on behalf of the Company outside the United
Kingdom (details of which have been disclosed) would attract stamp duty or stamp
duty reserve tax if brought in the United Kingdom and the Company is not liable
to any interest, fine or penalty and the Company is not entitled to claim
repayment of any stamp duty reserve tax by virtue of section 92 FA 1986
(repayment or cancellation of tax).
GENERAL
22.48 The execution or completion of this Agreement or any other event (other
than those undertaken in the normal course of trading) since the Accounting Date
will not result in any profit or gain being deemed to accrue to the Company for
Taxation purposes, whether pursuant
58
to sections 178 or 179 of the 1992 Act (Company ceasing to be a member of a
group) or otherwise.
23. GENERAL
For the purposes of establishing whether any matter is known to the Vendor, the
knowledge of the directors, secretary and senior employees of each of the
Company and the Vendor and its subsidiaries shall be imputed to the Vendor.
24. SUBSIDIARY
24.1 The Company is the legal and beneficial owner free from all Encumbrances
of the whole of the issued share capital of Firstpoint Services Limited (the
"Subsidiary").
24.2 The Subsidiary has no assets, no liabilities (whether actual or
contingent) and no employees.
24.3 No person has any right to subscribe for or otherwise acquire any shares
in the capital of the Subsidiary.
24.4 All accounts, returns and other documents required to be filed by or in
relation to the Subsidiary with any authority (including without limitation the
Registrar of Companies, the Inland Revenue and HM Customs & Excise) have been
duly and promptly filed and all such accounts, returns and other documents were
accurate and complete and made on a proper basis.
24.5 The Subsidiary is and has been since the Accounting Date dormant (within
the meaning of section 250(3) of the Companies Act).
59
SCHEDULE 4
THE TAX COVENANT
THIS DEED OF TAX COVENANT is made the day of September 1997
BETWEEN:-
(1) STRATAGEM GROUP PLC (registered in England under number 172737) whose
registered office is at 00 Xxxxxx Xxxx, Xxxxxx XX0X 0XX (the
"Covenantor"); and
(2) 4FRONT GROUP PLC (registered in England under number 2278419) whose
registered office is at 00x Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX (the
"Purchaser")
WHEREAS by an agreement dated September 1997 ("the Agreement") the
Purchaser agreed to purchase all of the issued shares in the capital of the
Company owned by the Covenantor and the Covenantor agreed on completion thereof
to enter into this Deed
NOW THIS DEED WITNESSES as follows:-
1. DEFINITIONS AND INTERPRETATION
Words and expressions used in this Deed shall have the meaning given to them in
the Agreement (unless specifically defined or varied herein) and in addition the
following definitions apply in this Deed :-
1.1 "ACTUAL LIABILITY TO TAXATION"
Any liability of the Company to make an actual payment of Taxation;
1.2 "THE AUDITORS"
The auditors for the time being of the Company;
1.3 "CLAIM"
Includes any assessment, notice, letter, demand or other document issued
or action taken by or on behalf of any Tax Authority whatsoever and of whatever
country (whether issued or taken before or after the date hereof and whether
satisfied or not at the date hereof) from which it appears that a Liability to
Taxation has been or may be imposed or an increased or further payment of
Taxation is or may be required to be made or that a right to repayment of
Taxation
60
may be lost, cancelled or reduced in each case whether or not the Company or the
Purchaser has or may have any right of reimbursement against any other person
and whether or not the same is directly or primarily payable by or attributable
to the Company or the Purchaser;
1.4 "THE COMPANY"
Firstpoint Limited (registered in England under number 1307801) whose
registered office is at 0 Xxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxx XX0 0XX;
1.5 "EVENT"
Includes any transaction, payment or receipt and any other act or
omission (including Completion of the Agreement) whether or not the Company is a
party thereto and references to an Event occurring on or before the date hereof
shall include an Event deemed to occur or treated as occurring on or before the
date hereof and the combined result of two or more events the first of which
only shall have taken place on or before Completion but only to the extent that
the first event or events are outside the ordinary course of business of the
Company and the second or successive events are effected inside the ordinary
course of the business of the Company as carried out at the Completion Date;
1.6 "LIABILITY TO TAXATION"
1.6.1 Any Actual Liability to Taxation (and, for the purposes of Clause
2, the amount of such a Liability to Taxation shall be the amount
of the actual payment of Taxation which the Company is liable to
make); or
1.6.2 The set-off of any Post-Completion Relief against any Actual
Liability to Taxation in respect of which the Covenantor would,
but for such set-off, have been liable under Clause 2, or against
any income, profits or gains of the Company earned, accrued or
received on or before Completion or in respect of a period ended
on or before Completion in circumstances where, but for such
set-off, the Company would have suffered an Actual Liability to
Taxation in respect of which the Covenantor would have been liable
under Clause 2 (and, for the purposes of Clause 2, the amount of
such a Liability to Taxation shall be the amount of the
Post-Completion Relief set off against an Actual Liability to
Taxation or the amount of Taxation saved as a result of the
set-off of the Post-Completion Relief against income, profits or
gains, as the case may be);
61
1.7 "POST-COMPLETION RELIEF"
Any Relief which arises wholly as a result of any Event occurring after
Completion;
1.8 "RELIEF"
Any relief, allowance, exemption, set-off, deduction or credit available
from, against or in relation to Taxation or in the computation of income,
profits or gains for any Taxation purpose;
1.9 "TAX" OR "TAXATION"
Means all forms of taxation, duties, imports and levies and includes
(without limitation):-
1.9.1 income tax (including income tax required to be deducted or
withheld from or accounted for in respect of any payment),
corporation tax, advance corporation tax, profits tax;
1.9.2 capital gains tax;
1.9.3 any liability under Section 601(2) of the 1988 Act;
1.9.4 customs and other import duties, excise duty, purchase tax and
value added tax;
1.9.5 stamp duty and stamp duty reserve tax;
estate duty and inheritance tax;
1.9.6 National Insurance and Social Security contributions;
1.9.7 any other tax, levy, impost or duty being in the nature of
Taxation whether similar to the foregoing or not and whether
imposed now or in the past in the United Kingdom or elsewhere;
and
1.9.8 all charges, fines, penalties, surcharges and interest incidental
to any Claim for Taxation or to any return or information
required to be provided to any Tax Authority for Taxation
purposes.
1.10 "TAX AUTHORITY"
Any taxing or other authority competent to impose a Liability to
Taxation.
1.11 References to profits include (without limitation) any income, profit or
gain (including capital gains, distributions, receipts or payments). References
to profits made, earned, accrued or received shall include any profits deemed to
have been or treated as made, earned, accrued or received for the purposes of
any legislation.
62
1.12 Clause 1.2 of the Agreement shall apply equally to this Deed.
2. COVENANT
Subject as provided in this Deed the Covenantor covenants with the Purchaser to
pay to the Purchaser an amount equal to the amount of:-
2.1 Any Liability to Taxation resulting from or by reason of any profits
made, earned, accrued or received by the Company on or before the Completion
Date or resulting from or directly or indirectly by reason of any Event
occurring on or before the Completion Date;
2.2 Any Liability to Taxation or increased Liability to Taxation resulting
from the payment to the Company of L1.3 million by British Telecommunications
plc ("BT") in settlement of a dispute between the Company and BT regarding work
done by the Company;
2.3 Any Liability to Taxation or increased Liability to Taxation imposed on
the Company arising pursuant to payments made by the Company in settlement of
the Xxxxxxx Xxxx Litigation;
2.4 Any Liability to Taxation or increased Liability to Taxation of the
Company arising as a result of the payment of any amounts to employees,
directors, former employees and former directors (whether by way of compensation
for loss of office or otherwise) or agency workers whether by reason of the
non-deductibility in whole or part of such payments for corporation tax
purposes, the failure by the Company to operate Pay As You Earn and/or account
for national insurance contributions properly or at all or otherwise;
2.5 Any Liability to Taxation or increased Liability to Taxation arising from
the understatement of sales values included in VAT returns submitted to HM
Customs & Excise for prescribed accounting periods of the Company between 1
October 1996 and 30 June 1997;
2.6 Any Liability to Taxation of the Company which is the primary liability
of any member of the Vendor's Group (other than the Company);
2.7 All costs and expenses reasonably and properly incurred by the Company or
the Purchaser in connection with any Liability to Taxation mentioned in this
Clause 2 including in successfully taking or defending any action under this
Deed.
63
3. EXCLUSIONS
3.1 The covenants contained in Clause 2 of this Deed shall be subject to the
limitations set out in Schedule 6 to the Agreement and shall not cover any
Liability to Taxation or other liability:-
3.1.1 if and to the extent that specific provision, reserve or
allowance is made in the Audited Accounts in respect of the
matter giving rise to the Liability for Taxation; or
3.1.2 if and to the extent that such Claim or Liability to Taxation
arises or is increased as a result solely of any increase in
rates of Taxation made after Completion with retrospective effect
or of a change in the law or in the published practice of any Tax
Authority made after Completion with retrospective effect ; or
3.1.3 arising out of transactions in the ordinary course of business of
the Company since the Accounting Date; or
3.1.4 if and to the extent that recovery has been made by the Purchaser
under the Warranties in respect of the same Claim or Liability to
Taxation; or
3.1.5 if and to the extent that any Liability to Taxation of the
Company included in the Audited Accounts has been discharged or
satisfied below the amount attributed to it or included in
respect of it in the Audited Accounts to the extent only of the
difference between the provision in the Audited Accounts and the
actual sum required to discharge or satisfy the relevant
Liability to Taxation; or
3.1.6 to the extent that the Liability to Taxation would not have
arisen or would have been reduced or eliminated but for a failure
or omission on the part of the Company after Completion to make
any claim, election or give any notice or consent or do any other
thing the making or giving or doing of which was taken into
account in computing the provision or reserve for Taxation in the
Audited Accounts and which was disclosed to the Purchaser in the
Disclosure Letter;
3.1.7 to the extent that the Liability to Taxation would not have
arisen but for a voluntary disclaimer of capital allowances to
which the Company is entitled under Part II of the CAA or a
revision to a claim therefor where such revision or disclaimer is
caused or made by the Company after Completion the making of the
claim was taken into account in computing the provision
64
or reserve for Taxation in the Audited Accounts and which was
disclosed to the Purchaser in the Disclosure Letter;
3.1.8 to the extent that the income, profits or gains in respect of
which that Liability to Taxation arises were actually earned,
accrued or received by the Company but were not reflected in the
Audited Accounts;
3.1.9 to the extent that it would not have arisen but for a change in
the accounting reference date or any accounting principles or
practice of the Company adopted after Completion except to the
extent that such change is necessary because the accounting
principle or practice in question does not comply with standard
accounting practice at the date hereof;
3.1.10 to the extent that any Relief of the Company incurred in or in
respect of a period ended on or before Completion is available to
relieve or mitigate that Liability to Taxation other than trading
losses available for carry forward at the Accounting Date.
4. NOTIFICATION AND CONDUCT OF CLAIMS
4.1 If the Company or the Purchaser (as the case may be) shall become aware
of a Claim for Taxation relevant for the purposes of this Deed it shall as soon
as reasonably practicable (and in the case of an assessment to or an actual
demand for payment of Taxation, in any event within 21 days thereafter) give
written notice thereof to the Covenantor.
4.2 If the Covenantor shall indemnify and secure the Company and/or the
Purchaser (as the case may be) to its reasonable satisfaction against all
liabilities, costs, damages or expenses which may be incurred thereby including
any additional Claim for Taxation but (except in a case where the Taxation the
subject of the Claim must be paid before the action requested by the Covenantor
in respect thereof can be taken) excluding the amount of Taxation in dispute the
Purchaser shall take and shall procure that the Company shall take such action
and give such information and assistance in connection with its affairs as the
Covenantor may reasonably request in writing be given to the Company or the
Purchaser to avoid, dispute, defend, resist, appeal or compromise any Claim
(such a Claim where action is so requested being hereinafter referred to as a
"Dispute") including but not limited to applying to postpone (so far as legally
possible) the payment of any Taxation and/or allowing the Covenantor to
undertake at its own expense the conduct of all or any proceedings of whatsoever
nature arising in connection with the Claim in question PROVIDED THAT
65
4.2.1 neither the Company nor the Purchaser shall be obliged to appeal
against any Claim for Taxation if having given the Covenantor
written notice of the receipt of such Claim the Purchaser or the
Company has not within 14 Business Days thereafter received
instructions in writing from the Covenantor or its duly
authorised agents above to do so;
4.2.2 neither the Company nor the Purchaser shall in any event be
obliged to take any action under this Clause which would mean
contesting any Claim for Taxation beyond the High Court or any
equivalent court unless the Covenantor provides the Purchaser or
the Company with the written opinion of leading Tax Counsel that
an appeal against the Claim for Taxation in question is, in his
opinion, and taking account of all the circumstances, on the
balance of probabilities, likely to succeed; and
4.2.3 the Purchaser or the Company shall be entitled to admit,
compromise settle discharge or otherwise deal with any Claim for
Taxation on such terms as it may in its absolute discretion think
fit and without prejudicing any right or remedy under this Deed
where any Tax Authority alleges in writing that the Covenantor or
the Company has committed acts or omissions which are further
alleged in writing may constitute fraud, wilful default or
neglect and (having been given notice of such allegation
including all available details) the Covenantor fails to provide
to the Tax Authority in question a written explanation causing
the withdrawal of such allegation within 21 days of the
Covenantor having been notified of it.
4.3 Neither the Purchaser nor the Company shall be subject to any Claim by or
liability to the Covenantor on the grounds that the Purchaser or the Company (as
the case may be) has not complied with any of the foregoing provisions of this
Clause 4 or Clause 5 below if the Purchaser or the Company (as the case may be)
has bona fide acted in accordance with the written instructions of the
Covenantor.
5. CONDUCT OF DISPUTES
If the Covenantor undertakes the conduct of a Dispute under Clause 4.2 above
then:-
5.1 the Purchaser shall be kept fully informed of all relevant matters
pertaining to the Dispute;
66
5.2 the appointment of solicitors or other professional advisers shall be
subject to the prior written approval of the Purchaser (such approval not to be
unreasonably withheld or delayed);
5.3 all communications, written or otherwise, pertaining to the Dispute which
are likely to affect the amount of any future Taxation Liability of the Company
which are to be transmitted to any Tax Authority shall first be submitted to the
Purchaser for approval and shall only be finally transmitted if such approval is
given (such approval not to be unreasonably withheld or delayed); and
5.4 the Covenantor shall make no settlement or compromise of the Dispute or
agree any matter in the conduct of the Dispute which is likely to affect the
amount thereof or the future Tax liability of the Company or the Purchaser
without the prior written approval of the Purchaser not to be unreasonably
withheld or delayed.
6. OVER-PROVISIONS, CORRESPONDING BENEFITS AND REFUNDS
6.1 If:
6.1.1 the Auditors shall certify (at the request and expense of the
Covenantor) that any provision for Taxation in the Audited
Accounts (excluding any provision for deferred taxation) has
proved to be an over-provision; or
6.1.2 the Auditors shall certify (at the request and expense of the
Covenantor) that any Liability to Taxation which has resulted in
a payment having been made or becoming due from the Covenantor
under this Deed will give rise to a Relief for the Company which
would not otherwise have arisen and shall further certify the
value of that Relief (taking into account timing differences); or
6.1.3 the Company shall, pursuant to a determination made by HM
Inspector of Taxes become entitled to any repayment of
corporation tax over-paid by the Company in respect of any period
ending on or before Completion (but not where such repayment has
been treated as an asset in the Audited Accounts or Previous
Accounts);
then any such amounts shall be dealt with in accordance with sub-clause 6.2.
6.2 Where it is provided under sub-clause 6.1 that any amount (the "Relevant
Amount") is to be dealt with in accordance with this sub-clause 6.2:-
67
6.2.1 the Purchaser shall procure that full details thereof are given
to the Covenantor as soon as is reasonably practicable and in any
event within 14 days;
6.2.2 the Relevant Amount shall first be set off against any payment
then due from the Covenantor under this Deed; and
6.2.3 to the extent there is an excess, the Purchaser shall procure
that a refund shall be made to the Covenantor of any previous
payment or payments made by the Covenantor under this Deed and
not previously refunded under this sub-clause to the amount of
such excess; and
6.2.4 to the extent that the excess referred to in sub-clause 6.2.3 is
not exhausted under that sub-clause, the remainder to that excess
shall be carried forward and set off against any future payment
or repayments which become due from the Covenantor under this
Deed.
6.3 Where any such certification as mentioned in sub-clause 6.1 of this
clause has been made, the Covenantor or the Purchaser may (at the Covenantor's
expense) request the Auditors to review such certification in the light of all
relevant circumstances, including any facts which have become known only since
such certification, and to certify whether such certification remains correct or
whether, in the light of those circumstances, the amounts that was the subject
of such certification should be amended.
6.4 If the Auditors certify under sub-clause 6.3 of this clause that an
amount previously set aside should be amended, that amended amount shall be
substituted for the purposes of sub-clause 6.2 of this clause as the relevant
amount, and such adjusting payment (if any) as may be required by virtue of the
above-mentioned substitution shall be made as soon as practicable by the
Covenantor or (as the case may be) to the Covenantor.
7. RECOVERY FROM OTHER PERSONS
If, in the event of any payment becoming due from the Covenantor pursuant
to Clause 2, the Company recovers from some other person (including, without
limitation, any Tax Authority) any sum in respect of a Liability to Taxation
that has resulted in a payment having been made by the Covenantor or at some
subsequent date the Company becomes aware that it is entitled to make such a
recovery, then the Purchaser shall procure that the Company shall (in either of
those cases) as soon as reasonably practicable notify the Covenantor of its
entitlement and shall, if reasonably and promptly required by the Covenantor in
writing to do so and subject
68
first to being indemnified and secured to its reasonable satisfaction in respect
of all losses, costs, damages and expenses it may thereby incur, procure that
the Company shall take all reasonable steps to enforce that recovery (keeping
the Covenantor fully informed of the progress of any action taken) and shall
account to the Covenantor for whichever is the letter of:-
7.1 any sum so recovered (including any interest or repayment supplement paid
by the Tax Authority relating to the period after receipt of the payment in
question from the Covenantor or other person on or in respect thereof less than
Tax chargeable on the Company in respect of that interest) after deduction of
all costs and expenses reasonably and properly incurred by the Company in
enforcing such recovery; and
7.2 the amount paid by the Covenantor pursuant to Clause 2 in respect of the
Liability to Taxation in question.
8. PAYMENT DATE
Where the Covenantor is liable to the Purchaser pursuant to the covenants
contained in Clause 2 above the following provisions shall apply in determining
when a payment in respect of such Liability to Taxation shall be made:-
8.1 in a case which involves (and to the extent that it involves) an actual
payment of Taxation by the Company or the Purchaser which Taxation has not
already been paid and which is not yet due for payment the Covenantor shall pay
the amount due under this Deed in cleared funds on or before the later of:-
8.1.1 three Business Days prior to the date on which the Taxation in
question would have to be paid in order to prevent a liability to
interest or a fine, charge, penalty or surcharge from arising in
respect thereof or (if earlier) no later than three Business Days
prior to the date on which the Taxation in question must be paid
in order to entitle the Company or the Purchaser to make an
appeal against the assessment; and
8.1.2 five Business Days after the Purchaser has served notice in
writing on the Covenantor or his duly authorised agents demanding
such payment; and
69
8.2 in any other case the Covenantor shall pay the amount due under this Deed
in cleared funds within five Business Days of a receipt of a demand for such
payments from the Purchaser or the Company.
9. INTEREST ON LATE PAYMENT
If any payment due to be made by the Covenantor under this Deed is not made on
the due date for payment thereof as set out in Clause 8 above the same shall (in
addition to any interest or penalties included in such payment) carry interest
from the due date up to and including the date of actual payment at the rate of
two and a half per cent per annum above the base rate from time to time of
Barclays Bank Plc such interest to accrue from day to day both before and
after any judgment and to be compounded annually.
10. DEDUCTIONS FROM PAYMENTS
10.1 All sums payable by the Covenantor to the Purchaser under this Deed shall
be paid free and clear of any set-off, counterclaim, deduction or withholding
whatsoever save only as may be required by law and save in respect of amounts
due under Clause 9.
10.2 If any such deduction or withholding as is referred to in Clause 9.1
above is required by law (other than in respect of amounts due under Clause 9)
the Covenantor shall be obliged to pay to the Purchaser such additional sum as
will after such deduction or withholding has been made leave the Purchaser with
the same amount as it would have been entitled to receive in the absence of such
deduction or withholding but taking into account any credit or benefit received
by the Purchaser in connection therewith.
10.3 If any sum payable by the Covenantor to the Purchaser under this Deed
(other than interest under Clause 9) shall be subject to Tax in the hands of the
recipient the same obligation to make an increased payment as is referred to in
Clause 9.2 shall apply in relation to such Tax liability as if it were a
deduction or withholding required by law.
11. TAX RETURNS
11.1 The Covenantor shall (at the Covenantor's cost and expense) have
responsibility for and conduct of the Taxation affairs of the Company for all
accounting periods ended on or before 31 August 1997 including (without
limitation) the preparation, submission, negotiation and agreement with the
relevant Tax Authorities of (i) any Taxation, return or computation and (ii)
70
any claims, elections, surrenders and consents in respect of any such accounting
periods to the extent the same shall not have been prepared, submitted and
agreed before Completion.
11.2 The Purchaser shall procure that the Company shall afford such access to
its books, accounts and records for the relevant accounting periods as is
necessary to enable the Covenantor to comply with Clause 11.1 PROVIDED THAT any
information given to the Covenantor or its duly authorised professional advisers
shall be kept confidential and shall not be divulged to any third party other
than a relevant Tax Authority.
11.3 The Purchaser shall procure that the Company promptly makes or gives such
claims, elections, surrenders and consents in relation to Taxation for all
accounting periods ending on or before 31 August 1997 as the Covenantor or its
duly authorised professional advisers request in writing and shall further
procure that any return, computation, claim, election, surrender or consent
shall be authorised, signed and submitted to the appropriate Tax Authority
within 28 days of receipt by the Purchaser.
11.4 The Covenantor or its duly authorised professional advisers shall keep
the Purchaser fully informed of its conduct of the Taxation affairs of the
Company pursuant to this Clause 11 and shall provide the Purchaser within 14
days of receipt by the Covenantor (or its duly authorised professional advisers)
with copies of all correspondence and other communications (written or
otherwise) pertaining thereto which are received from any Tax Authority.
Subject to Clause 11.3 all such communications which are to be transmitted to
any Tax Authority (including any computations or returns in respect of the
accounting period ended 31 August 1997) shall first be submitted to the
Purchaser for approval and shall only be finally submitted if such approval is
given (not to be unreasonably withheld or delayed) and the Purchaser or its duly
authorised professional advisers shall be afforded the opportunity of attending
any meetings with any relevant Tax Authority in connection with the matters
contemplated by this Clause 11.
11.5 The Purchaser or its duly authorised agents shall (at the Purchaser's
cost and expense) have responsibility for and conduct of the Taxation affairs of
the Company for the accounting period commencing 1 September 1997 and all
subsequent accounting periods.
12. ENFORCEABILITY
For the avoidance of doubt the indemnity contained in this Deed shall be
enforceable before as well as after any payment covered by such indemnity has
been made and if the indemnity
71
contained herein shall be found void or invalid for any reason but would be
valid if the application thereof to a particular claim, Event or form of
Taxation were limited or deleted the indemnity shall apply with such
modification as may be necessary to make it valid and effective.
13. NO WAIVER
The provisions of Clause 18 of the Agreement shall apply as if incorporated
herein.
14. NO ASSIGNMENT
The provisions of Clause 21 of the Agreement shall apply as if incorporated
herein.
15. COUNTERPARTS
This Deed may be entered into in any number of counterparts and by the parties
to it on separate counterparts, each of which when so executed and delivered
shall be an original but all the counterparts together shall constitute one and
the same Deed.
16. NOTICES
Any notice to be given under this Deed shall be given in accordance with the
provisions of Clause 14 of the Agreement.
17. GOVERNING LAW AND JURISDICTION
The provisions of Clause 20 of the Agreement shall apply as if incorporated
herein.
IN WITNESS whereof the parties hereto have executed and delivered this Deed the
day and year first above written.
72
SCHEDULE 5
PENSIONS
1. DEFINITIONS
For the purpose of this schedule, "Company's Scheme" means the Firstpoint
Limited Pension Scheme and "Employees" means the employees of the Company
as detailed in the Disclosure Letter and shall include any director,
secretary or other officer of the Company.
2. WARRANTIES
2.1 Except under the Company's Scheme, the Company has no agreement,
arrangement or understanding (whether contractual, under trust or
otherwise and whether or not legally enforceable) which exists for the
provision of relevant benefits (as defined in Section 612 of the Income
and Corporation Taxes Act 1988 but as if the exception contained in that
definition were included) in respect of any of the Employees or for any
relative or dependant of any of the Employees in connection with which
the Company is or may become liable to make any payment and apart from
the Company, no other company or employer participates in the Company's
Scheme.
2.2 There is no obligation to provide benefits under the Company's Scheme
other than as revealed in the documents and particulars annexed to the
Disclosure Letter.
2.3 The Company's Scheme is an exempt approved scheme for the purpose of
Chapter I of Part XIV Income and Corporation Taxes Act 1988 and the
Vendor is not aware of any matter which could lead to the withdrawal of
that approval.
2.4 No power to augment or alter benefits under the Company's Scheme has been
exercised in respect of which there is any outstanding liability on the
part of the Company and no Employee has been notified that such exercise
may be contemplated.
2.5 No Employees have been notified that the exercise of discretion under the
Company's Scheme to admit to membership of the Company's Scheme an
employee who would not otherwise be eligible for such admission may be
contemplated in the future.
73
2.6 The Disclosure Letter contains a list of the Employees who are active
members of the Company's Scheme as at 25 July 1997 with details of the
contributions currently payable under the Company's Scheme for and in
respect of them.
2.7 So far as the Vendor and the Company are aware the trustees of the
Company's Scheme and the Company's Scheme have complied in all respects
with Article 119 of the Treaty of Rome.
2.8 All benefits payable under the Company's Scheme on the death of a member
while in an employment to which the Company's Scheme relate are fully
insured under a policy effected with an insurance company and except to
the extent that they are payable monthly in arrears all insurance
premiums payable to date have been paid and neither the trustees of the
Company's Scheme nor any other person has done or omitted to do anything
which has or might render any such policies of insurance void or
voidable.
2.9 All amounts due to the Company's Scheme from the Company or its officer
or any employer or employees have been paid to Completion and were
properly assessed or calculated in accordance with the trust deed and
rules of the Company's Scheme and have been paid to the trustees in
accordance with the payments schedule (as required by, and defined in,
section 87 of the Pensions Act 1995). All fees, charges and expenses of
whatever nature (including all levies required to be paid under the
Pensions Act 1995) with respect to the Company's Scheme due to date have
been paid and no services have been rendered for which an account or
invoice has been delivered and not paid.
2.10 The Company's Scheme has been operated at all times in accordance with
the documents constituting the same (as lawfully amended from time to
time), the requirements of the Inland Revenue for exempt approved status
within the meaning of Section 592(1) of the Income and Corporation Taxes
Act 1988 and all applicable laws and, without limitation to the
foregoing, all decisions made by the trustees and administrators of the
Company's Scheme have been made in accordance with their powers and
duties as the trustees or administrators respectively.
2.11 No claim has been made or threatened against the Company or the trustees
or administrators of the Company's Scheme, or against any person whom the
Company
74
is or may be liable to indemnify or compensate, in connection with the
Company's Scheme (other than routine claims for benefits), there are no
circumstances which may give rise to any such claim and the Company has
not given any indemnity to any person in connection with the Company's
Scheme.
2.12 Apart from earnings related lump sum death in service benefits, the
Company's Scheme provides and has only ever provided only money purchase
benefits (as defined in the Occupational Pensions Scheme (Disclosure of
Information) Regulations 1996) for the beneficiaries of the Company's
Scheme and neither the Company nor the trustees of the Company's Scheme
have given any promise or assurance (oral or written) to any beneficiary
that his benefits will be calculated wholly or partly by reference to any
person's remuneration or equate (approximately or exactly) to any
particular amount and the Company has complied with all service
contracts, contracts of employment and other contracts or obligations in
connection with the Company's Scheme.
2.13 No event has occurred, or would on, or as a result of, Completion occur
which would, or could, result in, or entitle any person or body of
persons (without the consent of the Purchaser) to wind-up, terminate or
close the Company's Scheme in whole or in part.
2.14 The Company's Scheme shall not without the consent of the Purchaser (such
consent not to be unreasonably withheld or delayed) be amended or
discontinued before Completion unless legislation so requires.
2.15 The Company's Scheme is not contracted out of the State Earnings Related
Pension Scheme as defined in the Xxxxxxx Xxxxxxx Xxx 0000.
2.16 No undertaking or assurance has been given to any of the Employees or
former employees of the Company as to the continuance, introduction,
increase or improvement of any retirement or death benefits (whether or
not there is any legal obligation to do so).
2.17 The Company and the trustees of the Company's Scheme have at all material
times complied with the provisions of the Pensions Xxx 0000 and in
particular (but without prejudice to the generality of the foregoing):
75
(a) the Company and the trustees of the Company's Scheme have
complied with sections 16 to 21 of the Pensions Xxx 0000 (and
regulations made under those sections) relating to
member-nominated trustees and member-nominated directors:
(b) an internal dispute resolution procedure has been implemented and
details provided to all members and no disputes under the
internal dispute resolution procedure remain unresolved;
(c) all professional advisers to the trustees have been properly
appointed by the trustees;
(d) the Company operates and has at all material times operated a
separate bank account in relation to the Company's Scheme;
(e) the Company and the trustees of the Company's Scheme have
complied with the disclosure requirements contained in the
Occupational Pensions Scheme (Disclosure of Information)
Regulations 1996; and
(f) none of the professional advisers to the Company's Scheme have
had cause to report any wrong-doing or irregularities to OPRA,
there has been no correspondence with OPRA on any issues which
may give rise to sanctions being imposed, and no civil or
criminal penalties, fines or other sanctions have been imposed on
the trustees or the Company in relation to the Company's Scheme.
76
SCHEDULE 6
LIMITATIONS ON LIABILITY
Subject to and in accordance with Clause 10.9 and Clause 3 of the Tax Covenant:-
1. The aggregate liability of the Vendor in respect of all claims for breach
of the Warranties, under the Tax Covenant and under Clause 8 shall be
limited to L3,500,000 (exclusive of interest and costs).
2. The Vendor shall not have any liability in respect of any claim for
breach of the Warranties or under the Tax Covenant unless written notice
of that claim containing details thereof is given to the Vendor:
(a) in the case of claims for breach of the Tax Warranties or under
the Tax Covenant, within seven years of the Completion Date; or
(b) in the case of all other claims on or before 30 June 1999.
3. The Vendor shall not have any liability in respect of any claim for
breach of the Warranties (other than the Tax Warranties or the Warranties
in paragraphs 3.6 and 3.7 of Schedule 3) until the aggregate of all such
claims exceeds L40,000 when the Purchaser shall be entitled to claim for
the entire amount and not merely the excess over L40,000 provided that
the Vendor shall not be liable in respect of any individual claim (other
than under the Tax Warranties, in which case the amount shall be L500, or
the Warranties in paragraphs 3.6 and 3.7 of Schedule 3, in which case the
amount shall be zero) which does not exceed L5,000.
4. A relevant claim shall not be enforceable against the Vendor and shall be
deemed to have been withdrawn unless any legal proceedings in connection
with it are commenced within twelve months of first written notice of
such claim being served on the Vendor by the Purchaser.
5. The Vendor shall not be liable in respect of a relevant claim:-
(a) arising out of anything voluntarily done or omitted to be done
(other than pursuant to a legally binding obligation created on
or before the date hereof) after Completion by the Purchaser or
the Company otherwise than in the ordinary course of business of
the Company after Completion and which the Purchaser was aware at
the time would give rise to such a claim;
(b) to the extent that it arises as a result only of:-
(i) an increase in the rates, method of calculation or scope of
taxation after the Completion Date; or
77
(ii) any change in generally accepted accounting practice after
the Completion Date
in each case with retrospective effect;
(c) to the extent that:-
(i) the matter giving rise to the claim was provided for in the
Audited Accounts or specifically provided for in the
schedule to the management accounts of the Company for the
period ended 31 July 1997 (copies of which are attached to
the Disclosure Letter); or
(ii) (where the relevant claim is in respect of a breach of
Clause 10 but not where such claim is pursuant to the Tax
Covenant) the matter giving rise to the claim is fairly
disclosed in the Disclosure Letter.
6. Where the Purchaser or the Company is entitled to recover from some other
person any sum in respect of any matter or event which gives rise to a
relevant claim (other than a claim pursuant to the Tax Warranties or the
Tax Covenant to which the provisions of Clause 7 of the Tax Covenant
shall apply) the person so entitled shall use its reasonable endeavours
to recover that sum and any sum recovered will reduce the amount of the
relevant claim or, in the event of the recovery occurring after the
relevant claim has been satisfied by the Vendor, the amount recovered up
to a maximum equal to the amount actually paid by the Vendor shall be
repaid to the Vendor, after deduction of all reasonable costs (including,
but not limited to, legal costs) and expenses of the recovery.
7. The Purchaser shall (save where the relevant claim is in respect of a
breach of the Tax Warranties or pursuant to the Tax Covenant when the
provisions of Clauses 4 of the Tax Covenant shall apply):-
(a) promptly notify the Vendor in writing of any relevant claim and
of any claim or matter which gives or may give rise to a relevant
claim;
(b) following such notification, keep the Vendor advised of progress
in relation to such claim or matter;
(c) take such action at the Vendor's sole cost (and subject to the
Vendor indemnifying and securing the Purchaser and the Company to
the reasonable satisfaction of the Purchaser against any costs,
expenses or liabilities which may be incurred in connection
therewith) as the Vendor may reasonably require to avoid, resist,
contest or compromise any claim or matter which gives or may give
rise to a relevant claim; and
(d) not settle, make any admission of liability in respect of nor
compromise any claim or matter which gives or may give rise to a
relevant claim without the prior written consent of the Vendor
(such consent not to be unreasonably withheld or delayed)
78
provided that:
(i) the Purchaser shall not be bound to take any action under
sub-paragraph (b) above which might reasonably be expected to be
detrimental to its own interests or the interests of the Company;
and
(ii) failure by the Purchaser to comply with its obligations under
this paragraph shall not prejudice or affect the Purchaser's
rights against the Vendor under the Warranties or the Tax
Covenant except that it shall not be entitled to recover from the
Vendor any loss which arises as a result of its failure to
perform such obligations.
8. The Purchaser shall procure that the Company shall accept and comply with
paragraphs 6 and 7 of this Schedule 6, on the same terms as the Purchaser
itself, as if the Company were a party to and bound by this Agreement.
9. If the management accounts of the Company for the period ended 31 July
1997 (copies of which are attached to the Disclosure Letter) contain
provisions for specific liabilities which prove after Completion to have
been, in aggregate, greater than the liabilities against which such
provisions were established, the amount of such over-provision shall
first be applied to set off any specific liabilities which were not fully
provided for in such accounts and the balance (if any) may be set off by
the Vendor against any liability of the Vendor under the Warranties.
79
SIGNED AND DELIVERED AS A DEED )
by STRATAGEM GROUP PLC acting )
by two duly authorised officers ) ......................................
DIRECTOR
......................................
DIRECTOR/SECRETARY
SIGNED AND DELIVERED AS A DEED )
by 4FRONT GROUP PLC acting )
by two duly authorised officers ) ......................................
DIRECTOR
......................................
DIRECTOR/SECRETARY
SIGNED AND DELIVERED AS A DEED )
by 4FRONT SOFTWARE INTERNATIONAL )
INC acting by two duly authorised )
signatories ) ......................................
AUTHORISED SIGNATORY
......................................
AUTHORISED SIGNATORY
80
