Dated 2 September 1998
------------------
(1) XXXXXXX XXXXXXX XXXXXXXX AND XXXXXXX XXX XXXXXXXX
- AND -
(2) THE MARQUEE GROUP INC.
SHARE PURCHASE AGREEMENT
FOR THE SALE AND PURCHASE OF
ALL THE ISSUED SHARE CAPITAL OF
XXXX XXXXXXXX ASSOCIATES LIMITED
BIRD & BIRD
00 XXXXXX XXXX
XXXXXX XX0X 0XX
Tel: 0000 000 0000
Fax: 0000 000 0000
ref:CMC/RMD/MARQU/002
CONTENTS
1 DEFINITIONS AND INTERPRETATION....................................1
2 SALE OF THE SHARES................................................6
3 CONSIDERATION.....................................................7
4 COMPLETION........................................................8
5 INTERIM PAYMENT..................................................10
6 REPRESENTATIONS AND WARRANTIES...................................13
7 CONFIDENTIALITY..................................................19
8 PROTECTIVE COVENANTS.............................................19
9 ANNOUNCEMENTS....................................................21
10 NOTICES AND RECEIPTS.............................................21
11 RESOLUTIONS AND WAIVERS..........................................21
12 ASSIGNMENT.......................................................22
13 GENERAL..........................................................22
14 WHOLE AGREEMENT..................................................23
15 GOVERNING LAW....................................................23
16 PURCHASER'S WARRANTIES AND COVENANT..............................23
SCHEDULE 1
THE SELLERS AND THEIR SHAREHOLDINGS.........................................25
SCHEDULE 2
PARTICULARS OF THE COMPANY..................................................26
SCHEDULE 3
THE WARRANTIES..............................................................27
SCHEDULE 4
THE PROPERTY LICENCE........................................................50
THIS AGREEMENT is made on the day of 1998
BETWEEN
(1) THE PERSONS WHOSE NAMES AND ADDRESSES ARE SHOWN IN SCHEDULE 1 (each a
"SELLER" and together the "SELLERS");
(2) THE MARQUEE GROUP, INC. a company incorporated under the laws of the
state of Delaware, the principal office of which is at 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, XX 00000, XXX (the "PURCHASER")
RECITALS
(A) Xxxx Xxxxxxxx Associates Limited (the "COMPANY") (certain particulars of
which are set out in Schedule 2) is a private company limited by shares
incorporated in England and Wales on 3 November 1987 under the Companies
Acts 1985 having an authorised capital of (pound)1,000 divided into 1000
ordinary shares of (pound)1 each of which 500 shares have been issued
fully paid or credited as fully paid (the "SHARES").
(B) The Sellers are the registered holders and the beneficial owners of the
Shares set opposite their respective names in Schedule 1.
(C) The Sellers wish to sell and, in reliance upon the representations,
warranties, and undertakings set out in this Agreement, the Purchaser is
willing to purchase all the issued share capital of the Company on the
terms and subject to the conditions set out in this Agreement.
OPERATIVE PROVISIONS
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement and the Schedules
"ACCOUNTS" means all or any one of the audited balance sheet of the
Company as at the Accounts Date and the audited profit and loss account
of the Company for the financial period ended on the Accounts Date and
the notes to such accounts and the directors reports and the other
documents required by law to be annexed thereto;
"ACCOUNTS DATE" means 30 April 1998;
"ANNIVERSARY DATES" means the first, the second, the third, the fourth
and the fifth anniversary of Completion;
"AGREED TERMS" means terms contained in a form which has been agreed and
initialled by or on behalf of the parties for the purpose of
identification immediately prior to the signing of this Agreement;
1
"BUSINESS DAY " means Monday to Friday inclusive but excluding any day
which is a bank or public holiday in the country concerned;
"CASH CONSIDERATION" means that part of the consideration for the sale of
the Shares as is payable in cash under Clause 3;
"CHANGE OF CONTROL" means the change of control (as defined in Section
840 Taxes Act 1988) of the Purchaser (other than as a result of the
acquisition of shares in the Purchaser by SFX Entertainment Inc.) and as
a result of such change of control, Xx Xxxxxx Xxxxxxxxx ceasing to be
President and Chief Executive Officer of the Purchaser (whether
immediately on change of control or subsequently);
"COMMON STOCK" means the shares of no par value in the Common Stock of
the Purchaser quoted on the American Stock Exchange;
"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;
"CONSIDERATION" means the Cash Consideration, the Loan Notes and the
Consideration Shares;
"CONSIDERATION SHARES" means the Initial Consideration Shares and the
Deferred Consideration Shares;
"DEFERRED CONSIDERATION SHARES" means the Common Stock of the Purchaser
to be issued to the Sellers in accordance with the provisions of Clause
3.3 and ranking pari passu with the existing Common Stock of the
Purchaser at the date of issue;
"DISCLOSURE LETTER" means the letter from the Warrantors to the Purchaser
of today's date and which has been delivered to the Purchaser prior to
the signing of this Agreement;
"HOLDING COMPANY" and "SUBSIDIARY" have the meaning given in Section 736
and 736A of the Companies Xxx 0000;
"INITIAL CONSIDERATION SHARES" means the Common Stock of the Purchaser to
be issued by the Purchaser at Completion pursuant to Clause 3.1(b) and
ranking pari passu with the existing Common Stock of the Purchaser at the
date of issue;
"INSOLVENCY ACT" means the Insolvency Xxx 0000;
"ISSUE PRICE" means the average closing price of shares of Common Stock
as printed in the eastern edition of the Wall Street Journal over the 20
trading days ending three days prior to Completion or the relevant
Anniversary Date, as appropriate, (provided
2
that no account shall be taken of any trading day in respect of which the
said edition is not published) as converted to Pounds Sterling by the
application of the average spot rate of exchange for the purchase of
Pounds Sterling with US Dollars, as published by the eastern edition of
the Wall Street Journal at the close of business on the twenty business
days ending three days prior to Completion or the relevant Anniversary
Date, as appropriate (provided that no account shall be taken of any
business day in respect of which the said eastern edition of the Wall
Street Journal is not published);
"INTELLECTUAL PROPERTY RIGHTS" means all and any patents, trademarks,
service marks, trade names, registered designs, unregistered design
rights, copyrights and rights in confidential information, and all and
any other intellectual property rights, whether registered or
unregistered, and including all applications and rights to apply for any
of the same;
"LOAN NOTES" means the series of (pound)200,000 nominal unsecured loan
notes of the Purchaser in the agreed terms;
"PARTIES" means the parties to this Agreement;
PERMITTED ACTIVITIES" means those activities to be carried out by
Sponsasport Limited (of which Xxxxxxx Xxxxxxxx is a Director and
shareholder and Xxxxxxx Xxxxxxxx is Company Secretary and shareholder)
directly in connection with the following contracts and any other
activities of Sponsasport Limited approved in writing by the Purchaser
from time to time:
(a) Licence Agreement dated 16 October 1997 between (1) Sponsasport
Limited (2) Asda Stores Limited trading as Xxxxxx Clothing (3) Xxxx
Xxxxxxx (4) Xxxxxxx Promotions Limited.
(b) Letter dated 9 October 1997 from Umbro International to Sponsasport
Limited consenting to the above Agreement.
(c) Letter of agreement dated 22 December 1997 between Sponsasport
Limited and Umbro Europe Limited relating to the above Agreement.
(d) Agreement dated 1 July 1997 between (1) Newcastle United Football
Company Limited (2) Xxxx Xxxxxxx (3) Xxxxxxx Promotions Limited (4)
Sponsasport Limited.
"PERSONAL GUARANTEE" means a legal charge over 00 Xxx Xxxxxx,
Xxxxxxxxx-xxxx-Xxxx dated 9 July 1996 in the names of A.E. & G.A.
Xxxxxxxx in favour of Barclays Bank Plc, a guarantee in the sum of
(pound)150,000 from A.E. & G.A. Xxxxxxxx dated 9 July 1996 in favour of
Barclays Bank Plc, assignments of life policies in the name of X.X.
Xxxxxxxx with the Scottish Mutual Assurance Society (policy numbers
652666 and 454928) in favour of Barclays Bank plc relating to the
guarantee provided by Swiss
3
Bank Corporation for CHF 200,000 in favour of Federation Internationale
de Football Association ("FIFA") in relation to the FIFA License granted
to Xxxxxxx Xxxxxxxx;
"PROPERTY LICENCE" means a licence in the agreed terms and as set out in
Schedule 4 to be entered into between the Sellers and the Company
relating to occupation of office premises at Xxx Xxxxxxx, Xxxxxxx,
Xxxxxxx, Xxxx Xxxxxxxx, XX0 0XX;
"PURCHASER'S ACCOUNTANTS" means Ernst & Young;
"PURCHASER'S SOLICITORS" means Bird & Bird, 00 Xxxxxx Xxxx, Xxxxxx XX0X
0XX;
"PURCHASER'S STOCKBROKERS" means Continental Stock Transfer & Trust
Company;
"SELLERS' ACCOUNTANTS" means Xxxxxxx X. Xxxxxxxx & Co., 00 Xxxxxxxxxx
Xxxxx, Xxxxx Xxx, Xxxxxxxxxx X00 0XX;
"SELLERS' SOLICITORS" means Freeth Xxxxxxxxxx Xxxx Xxxxxxx, 00 Xxxxx
Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx XX0 0XX;
"SERVICE AGREEMENT" means the service agreement in the agreed terms to be
entered into between the Company and Xxxx Xxxxxxxx;
"TAX" shall have the meaning ascribed to it in the Tax Deed;
"TAXES ACT 1988" means the Income and Corporation Taxes Xxx 0000;
"TAX DEED" means the deed in relation to tax in the agreed terms;
"TAXATION WARRANTIES" means each and every warranty contained in Section
[D] of Schedule 3;
"UNTRADEABLE SHARES" means any Initial Consideration Shares or any issued
Deferred Consideration Shares which remain subject to the restrictions of
Clause 3.6;
"WARRANTIES" means all and any of the representations, warranties and
undertakings referred to in Clause 6 and Schedule 3; and
"WARRANTORS" means Xxxxxxx Xxxxxxx Xxxxxxxx and Xxxxxxx Xxx Xxxxxxxx.
1.2 References in this Agreement to any statutory provisions shall be
construed as references to those provisions as respectively amended,
consolidated or re-enacted (whether before or after Completion) from time
to time and shall include any provisions of which they are consolidations
or re-enactments (whether with or without amendment) except to the extent
that any amendment, consolidation or re-enactment made after Completion
creates or increases the liability of the parties under this Agreement or
the Tax Deed.
4
1.3 Where any Warranty is qualified by the expression "so far as the
Warrantors are aware" or "to the best of the Warrantors' knowledge
information and belief" or any similar expression that statement shall be
deemed to include an additional statement that it has been made after due
and careful enquiry unless stated otherwise. For the purposes of
establishing whether due and careful enquiry has been made the Warrantors
shall be deemed to have given the relevant matter due and careful thought
and to have taken appropriate advice from, and made proper enquiries of
the Company's auditors, tax advisors, insurance brokers, legal advisors
and employees but otherwise they shall not be under any obligation to
have taken specialist advice or to have employed or consulted any third
parties.
1.4 The Schedules form part of this Agreement and shall have the same force
and effect as if set out in the body of this Agreement and any reference
to this Agreement shall include the Schedules.
1.5 In this Agreement:-
(a) the masculine gender shall include the feminine and neuter and the
singular number shall include the plural and vice versa;
(b) references to persons shall include bodies corporate,
unincorporated associations and partnerships;
(c) any headings or side notes or, in the case of any legislation
specifically referred to, the inclusion in parentheses of the title
to the relevant Part, Section, Schedule or paragraph contained in
such legislation are for the sake of convenience only and shall not
affect the construction of this Agreement; and
(d) references to any party include a reference to the estate, personal
representative, successor, or permitted assigns of that party; and
(e) a person shall be deemed to be connected with another if that
person is connected with another within the meaning of section 839
of the Taxes Xxx 0000.
1.6 Except where the contrary is stated, any reference in this Agreement to a
Clause or Schedule is to a Clause or Schedule of this Agreement, and any
reference within a Clause or Schedule to a sub-clause, paragraph or other
sub-division is a reference to such sub-clause, paragraph or other
sub-division so numbered or lettered in that Clause or Schedule.
1.7 In construing this Agreement
(a) the rule known as the ejusdem generis rule shall not apply and
accordingly general words introduced by the word "other" shall not
be given a restrictive
5
meaning by reason of the fact that they are preceded by words
indicating a particular class of acts, matters or things; and
(b) general words shall not be given a restrictive meaning by reason of
the fact that they are followed by particular examples intended to
be embraced by the general terms.
2 SALE OF THE SHARES
2.1 Each of the Sellers shall sell with full title guarantee those of the
Shares set out opposite his name in Schedule 1 and the Purchaser relying
on the representations, warranties and undertakings of and indemnities by
the Sellers set out in this Agreement shall purchase the Shares on the
terms of this Agreement free from all claims, liens charges encumbrances
and equities and together with all rights attaching or accruing to them.
2.2 Each of the Sellers severally covenants with the Purchaser that save as
accurately and fairly disclosed in the Disclosure Letter:
(a) he has the right to sell and transfer the full legal and beneficial
interest in the Shares set out opposite his name in Schedule 1 to
the Purchaser on the terms set out in this Agreement; and
(b) on or after Completion he will, at his own cost and expense,
execute and do (or procure to be executed and done by any necessary
party) all such deeds, documents, acts and things as the Purchaser
may from time to time reasonably require in order to vest any of
the Shares set opposite his name in Schedule 1 in the Purchaser or
its assignee or as otherwise may be necessary to give full effect
to this Agreement; and
(c) he has the requisite power and authority to enter into and perform
this Agreement and (as appropriate) the Tax Deed and such entry and
performance will not breach, violate, infringe or otherwise affect
the rights of any person;
(d) this Agreement and (if appropriate) the Tax Deed will, when
executed, constitute binding obligations on him in accordance with
their respective provisions;
(e) the execution and delivery of, and performance by him of his
obligations under, this Agreement and (if appropriate) the Tax Deed
will not constitute a default under any instrument or arrangement
binding on him or otherwise to which he is a party or result in a
breach of any order, judgment or decree of any court or
governmental agency to which he is a party or by which he is bound;
(f) neither he nor any person connected with him has any interest,
directly or indirectly, in any business that has a close trading
relationship with or is or is likely to be competitive with the
business of the Company or in any asset which
6
within the two years preceding the date of this Agreement has been
acquired or disposed of by or leased to the Company;
(g) there is no option, right of pre-emption, right to acquire,
mortgage, charge, pledge, lien or other form of security or
encumbrance over or affecting any of the Shares set out opposite
his name in Schedule 1 nor is there any commitment to create or to
give any of the foregoing and no person has claimed to be entitled
to any of the foregoing.
2.3 Each of the Sellers hereby waives any rights of pre-emption conferred
upon him by the Articles of Association of the Company or in any other
way in respect of the Shares.
2.4 The parties shall not be obliged to complete the sale and purchase of any
of the Shares unless the sale and purchase of all the Shares is completed
simultaneously in accordance with this Agreement.
3 CONSIDERATION
3.1 The consideration for the sale of the Shares shall be (pound)2,096,768,
subject to any adjustments pursuant to Clause 5 and shall consist of:
(a) the sum of (pound)1,414,268 payable in cash on Completion (the
"Cash Consideration") and shall be satisfied by payment to the
Sellers of the cash amounts as set out in Schedule 1;
(b) the sum of (pound)432,500 which shall be satisfied by the allotment
and issue as fully paid and non-assessable by the Purchaser to the
Sellers of such number of Initial Consideration Shares as shall, at
the Issue Price, have a value of (pound)432,500 in aggregate;
(c) the sum of (pound)200,000 which shall be satisfied by the allotment
by the Purchaser to the Sellers of the Loan Notes;
(d) the sum of (pound)50,000 which shall be satisfied by the allotment
and issue as fully paid and non-assessable by the Purchaser to the
Sellers of the Deferred Consideration Shares in accordance with the
provisions of Clause 3.3.
3.2 The Sellers shall be entitled to the Consideration in equal proportions.
3.3 Upon each of the Anniversary Dates the Purchaser shall issue to the
Sellers such number of Deferred Consideration Shares as shall, at the
Issue Price, have a value of (pound)10,000 in aggregate and shall deliver
to the Sellers definitive share certificates for such Consideration
Shares.
3.4 In the event of a Change of Control, any Consideration which remains
outstanding pursuant to Clause 3.3, shall be due for payment within 14
days of the date of the
7
Change of Control and shall be satisfied by the payment of cash to the
Sellers in the percentages set out against their respective names in
Schedule 1.
3.5 If the Purchaser consolidates, sub-divides or reorganises its share
capital, declares any distribution or makes any issue by way of
capitalisation or rights to holders of its Common Stock during or by
reference to any period relevant for calculating the Issue Price the
amount of Deferred Consideration Shares or the Issue Price will be
adjusted as the Purchaser's Stockbrokers for the time being (acting
reasonably as experts and not as arbitrators) certify to be in their
opinion fair and reasonable.
3.6 Without the written consent of the Purchaser and save in respect of any
transfers of such number of Consideration Shares which at the Issue Price
have an aggregate maximum value of (pound)100,000 by the Sellers to
individuals who are clients of the Company none of the Sellers shall
dispose of, charge or otherwise encumber any interest in any of the
Consideration Shares or any other securities for the time being
representing or derived from those shares (whether by way of
consolidation, sub-division, capitalisation or rights issue or otherwise)
during the period of one year from the date of allotment of the relevant
Consideration Shares.
4 COMPLETION
4.1 Completion shall take place immediately following signature and exchange
of this Agreement when:
(a) the Sellers shall deliver or cause to be delivered to the Purchaser
(i) transfers of the Shares duly completed in favour of the
Purchaser and/or its nominees notified by the Purchaser;
(ii) the share certificates representing the Shares (or an express
indemnity in a form satisfactory to the Purchaser in the case
of any found to be missing);
(iii) all the Statutory and Minute Books of the Company and its
Common Seal and the Certificate of Incorporation;
(iv) the Tax Deed duly executed by each of the Warrantors;
(v) a letter of resignation (expressed to be with effect from the
end of the meeting of the Board of the Company referred to in
sub-clause (d) below), from Xxxxxxx Xxxxxxxx resigning office
as Director and Secretary of the Company, executed as a deed
in the agreed terms;
(vi) the resignation of the auditors of the Company in accordance
with section 394 of the Companies Xxx 0000, confirming that
there are no circumstances connected with their resignation
which should be brought to the notice of the members or
creditors of the Company and that there are no fees due to
them;
8
(vii) the Service Agreement, duly executed by Xxxxxxx Xxxxxxxx;
(viii) the Property Licence duly executed by the Sellers; and
(ix) the Disclosure Letter.
(b) the Warrantors shall procure that all indebtedness due from any of
the Warrantors or any person connected with them to the Company
shall have been satisfied in full prior to Completion;
(c) all indebtedness due from the Company to any of the Warrantors
(full particulars of which are contained in the Disclosure Letter
but excluding remuneration accrued but not yet due for payment)
shall have been satisfied in full without payment of interest prior
to Completion;
(d) the Sellers shall cause a meeting of the Board of the Company to be
held at which the Board shall:-
(i) appoint such persons as the Purchaser may nominate as
Directors and Secretary of the Company;
(ii) accept the letters of resignation referred to in sub-clause
(a)(v) and (a)(vi) above;
(iii) vote in favour of the registration of the Purchaser and/or
its nominees as members of the Company subject only to the
production of duly stamped and completed transfers in favour
of the Purchaser and/or its nominees in respect of the
Shares;
(iv) approve the Property Licence;
(v) change the accounting reference date of the Company to 31
December;
(vi) appoint Ernst & Young as auditors;
(e) the parties shall join in procuring that all existing bank mandates
in force for the Company shall be altered (in such manner as the
Purchaser shall at Completion require) so as (inter alia) to
reflect the resignations and appointments referred to above.
(f) the Purchaser shall not be obliged to complete this Agreement
unless the Sellers comply fully with the requirements of paragraphs
(a), (b), (d), and (e) of this Clause;
4.2 Upon completion of all the matters referred to in sub-clause 4.1 the
Purchaser shall:
9
(a) pay to the Sellers' Solicitors (whose receipt shall be a sufficient
discharge therefor) the Cash Consideration by way of telegraphic
transfer;
(b) allot the Initial Consideration Shares and issue the Loan Notes to
the Sellers and within five days of Completion deliver to the
Sellers' Solicitors definitive share certificates in respect of the
Initial Consideration Shares and certificates in the agreed terms
in respect of the Loan Notes in the names of the Sellers; and
(c) deliver to the Sellers' Solicitors a duly executed counterpart of:
(i) the Tax Deed;
(ii) the Service Agreement;
(iii) the Property Licence;
(iv) the Disclosure Letter;
(d) the Sellers shall not be obliged to complete this Agreement unless
the Purchaser complies fully with the requirements of paragraphs
(a), (b) and (c) of this Clause.
4.3 If in any respect either the Sellers or the Purchaser fail to comply with
all the provisions of Clauses 4.1 and 4.2 on the date for Completion then
the other of them may:
(a) defer Completion to a date not more than 28 days after the date for
Completion set by this Clause 4 (and so that the provisions of this
sub-clause 4.3 shall apply to Completion as so deferred); or
(b) proceed to Completion as far as practicable; or
(c) rescind this Agreement (without prejudice to its accrued rights and
remedies).
4.4 The Purchaser (with the reasonable cooperation of the Sellers) shall
procure as soon as reasonably practicable following Completion and in any
event within 28 days of Completion the full and unconditional release of
the Personal Guarantee and the Purchaser shall fully indemnify the
Sellers against any liability, loss, cost or claim arising out of or in
connection with the Personal Guarantee at any time after Completion.
5 INTERIM PAYMENT
5.1 On 31 August 1998 the Company paid pension contributions for the benefit
of the Sellers in the aggregate amount of (pound)125,000 (the "PENSION
PAYMENT") of which (pound)85,000 represented an amount equal to four
twelfths of (pouND)255,000.
10
5.2 The Purchaser shall procure that the Purchaser's Accountants shall within
60 days after the end of the Company's current financial period ending 31
December 1998 (the "FINANCIAL PERIOD"):
(a) prepare and audit the Company's accounts for the Financial (the
"1998 ACCOUNTS") using the accounting policies and methods used in
the preparation of the Accounts and so as to give a true and fair
view of the profits or losses of the Company for the Financial
Period; and
(b) prepare a statement (the "PROFIT STATEMENT") of the Company's net
profit before taxation for the Financial Period (the "ADJUSTED
PROFIT") as ascertained from the 1998 Accounts but after adding
back:
(i) any dividends or other distributions declared or paid in
respect of the Financial Period;
(ii) the bonuses in the aggregate gross sum (before PAYE taxation)
of (pound)42,950 (and any related employer's national
insurance contributions) paid to Xxxxxxx Xxxxxxx and Xxxxxx
Xxxxxxx on 31 August 1998;
(iii) the gross amount (before PAYE taxation) of any bonus payments
paid or payable pursuant to the Service Agreement and any
related employer's national insurance contributions;
(iv) the amount of the Pension Payment;
(v) any liability incurred to the Purchaser or its subsidiaries
or associated companies for management or similar charges;
(vi) any directors fees paid or payable to any directors of the
Company nominated by the Purchaser;
(vii) any liabilities or losses incurred otherwise than in the
ordinary and proper course of the Company's business as
carried on at the Completion Date;
and also containing a calculation of the amount (the
"PRE-COMPLETION PROFIT") equal to one half of the Adjusted Profit.
5.3 Upon the completion of the preparation of the 1998 Accounts and the
Profit Statement by the Purchaser's Accountants they shall be presented
to the Sellers' Accountants for their approval. The Sellers shall procure
that the Sellers' Accountants communicate their decision as to whether or
not they approve the Profit Statement to the Sellers and the Purchaser
within 14 days of such presentation (the "APPROVAL PERIOD") and shall, in
the event of non approval, specify with reasonable particularity the
reasons for non approval. In the event that the Sellers' Accountants fail
to communicate their decision
11
to the Sellers and Purchaser within the Approval Period they shall be
deemed to have approved the Profit Statement.
5.4 The Purchaser and the Sellers shall use their best endeavours to procure
that the Sellers' Accountants and the Purchaser's Accountants shall have
access to all the books and records of the Company for the purposes of
enabling them to prepare or check, as the case may be, the Profit
Statement.
5.5 In the event that the Sellers' Accountants do not approve the Profit
Statement within the Approval Period the Sellers and the Purchaser shall
use their best endeavours to procure that the Sellers' Accountants and
the Purchaser's Accountants meet together promptly and in any case within
a period of 14 days of the end of the Approval Period to resolve any
dispute that has arisen between them with regard to the Profit Statement.
5.6 Any dispute with respect to the Profit Statement which is not settled
within 28 days of the end of the Approval Period shall (unless the
Sellers and the Purchaser otherwise agree in writing) be referred for
final determination to an Independent Accountant nominated jointly by the
Sellers and the Purchaser (or failing such nomination within ten days of
one party serving notice upon the other party to make such nomination)
nominated at the request of either party by the President for the time
being of the Institute of Chartered Accountants in England and Wales. The
Independent Accountant shall be instructed to render his decision (which
shall be communicated in writing to the Sellers and the Purchaser and
shall be final and binding on the Sellers and the Purchaser) within 21
days of his appointment. The fees and costs of the Independent Accountant
shall be borne and paid by the Sellers and the Purchaser in such
proportions as the Independent Accountant shall consider appropriate. The
parties shall provide to the Independent Accountant all such information
assistance and documentation as he may reasonably require.
5.7 Upon the approval of the Profit Statement under clauses 5.3 or 5.5 or the
determination of any dispute under clause 5.6 the Sellers and Purchaser
shall use their best endeavours to procure that the Sellers' Accountants
and the Purchaser's Accountants immediately issue the Profit Statement
signed by the Sellers' Accountants and the Purchaser's Accountants
respectively in the form so approved, resolved or decided which shall in
the absence of manifest error be final and binding on the Sellers and the
Purchaser.
5.8 If the Pre-Completion Profit as stated in the Profit Statement is less
than (pound)85,000, the Sellers shall within 7 days after the issue of
the Profit Statement pursuant to clause 5.7 pay an amount to the
Purchaser equal to the amount of the shortfall and the Consideration
shall be deemed to be reduced by the same amount.
5.9 If the Pre-Completion Profit as stated in the Profit Statement is more
than (pound)85,000 then the Purchaser shall within 7 days after the issue
of the Profit Statement pursuant to clause 5.7 pay an amount to the
Sellers equal to the amount of the excess and the Consideration shall be
deemed to be increased by the same amount.
12
5.10 In the event that any payment due under clauses 5.8 or 5.9 is not paid on
its due date then it will bear interest from the due date until the date
of actual payment at the rate of 3% per annum over the base rate from
time to time of Barclays Bank plc such interest to be payable upon
demand.
5.11 As further protection for the Sellers in respect of their rights and
obligations under this clause 5, the Purchaser undertakes and agrees to
procure that prior to the end of the Financial Period unless otherwise
agreed by the Sellers:
(a) there will be no change in the Company's accounting reference date;
(b) the Company shall not engage in any transactions except on an arms
length basis and in the ordinary course of its business as carried
on at the Completion Date;
(c) there shall be no material departure by the Company from the nature
of the business and the manner in which it is carried on as at the
Completion Date;
(d) nothing shall be done or omitted to be done which is intended
adversely to affect the amount of the Adjusted Profit;
(e) the Company shall not transfer or dispose of the whole or any part
of its business or merge all or any part of its business with any
other company, firm or business and the Company shall continue to
operate as a separate limited company;
(f) (save where the Purchaser is advised by a licensed insolvency
practitioner that the Company is trading whilst insolvent) the
Purchaser shall not take any steps to wind up the Company;
(g) no action shall be taken which has the effect of impeding the
Company's ability to carry on its business in the ordinary and
usual course on a basis consistent with the business carried on at
the Completion Date;
(h) the Company enjoys adequate working capital for the purposes of its
business and the development thereof;
(i) there shall be no material change in the basis on which, and the
manner in which, the Company acts for its clients and charges for
its services;
(j) the Company shall endeavour to retain its employees and there shall
be no material adverse change in the manner in which the Company
deals with its employees or the employees' terms and conditions of
employment.
6 REPRESENTATIONS AND WARRANTIES
6.1 The Warrantors hereby jointly and severally represent, warrant and
undertake to the Purchaser that:
13
(a) except as accurately and fairly disclosed to the Purchaser in the
Disclosure Letter, each of the statements set out in Schedule 3 is
true and accurate as at Completion; and
(b) all information contained in the Disclosure Letter is true and
accurate as at Completion and fairly presented and nothing of which
the Warrantors were aware as at Completion has been omitted from
the Disclosure Letter which renders any of that information
misleading as at Completion.
6.2 Each of the Warranties set out in the several paragraphs of Schedule 3 is
separate and independent and except as expressly provided to the contrary
in this Agreement is not limited:
(a) by reference to any other paragraphs of Schedule 3; or
(b) by anything in this Agreement or the Tax Deed;
and (save as provided in Clause 6.22 below) none of the Warranties
shall be treated as qualified by any actual or constructive
knowledge on the part of the Purchaser or any of its agents.
6.3 Each of the Warrantors agree with the Purchaser (as trustee for the
Company and its employees) to waive any rights or claims which he may
have against the Company and its employees in respect of any
misrepresentation, inaccuracy or omission in or from any information or
advice supplied or given to the Warrantors by any of the Company or its
employees in connection with the giving of the Warranties and the
preparation of the Disclosure Letter.
6.4 Without restricting the rights of the Purchaser or the ability of the
Purchaser to claim damages on any basis available to it in the event of
any breach of any of the Warranties, the Warrantors undertake with the
Purchaser that the Warrantors will, pay to the Purchaser within 7 days of
the earlier of agreement between the Warrantors and the Purchaser and, in
default of such agreement, final determination by order of a court of
competent jurisdiction a sum by way of damages as so agreed or finally
determined as being the amount necessary to put the Purchaser into the
position which would have existed if the Warranties had been true and
accurate and had not been misleading or breached (as the case may be)
together with all costs and expenses reasonably and properly incurred by
the Purchaser as a result of such breach.
6.5 In the event that the Purchaser obtains judgment (without leave to appeal
being granted) against the Warrantors or reaches agreement with the
Warrantors in respect of any claim for breach of the Warranties pursuant
to the Tax Deed or otherwise pursuant to this Agreement (other than a
claim arising under sub-clauses 2.1(c) and 2.2 of the Tax Deed)] then any
amount which shall have been agreed or finally adjudged or determined to
be owing by the Warrantors to the Purchaser shall, where and to the full
extent possible, be satisfied by the cancellation of any outstanding Loan
Notes or any
14
Untradeable Shares held by the Warrantors or by way of deduction from any
instalment (each an "OUTSTANDING INSTALMENT") of the Consideration due to
the Warrantors which remains to be satisfied pursuant to Clause 3.3 and
in the following order of priority:
(a) firstly by way of cancellation of any outstanding Loan Notes held
by the Warrantors (and pro rata as between the Warrantors) and by
deduction from the value of any Outstanding Instalment due to the
Warrantors, taking the Loan Notes and Outstanding Instalments in
reverse order of maturity, and in the case of any Loan Notes and
Outstanding Instalments which fall due for redemption or
satisfaction on the same date the deduction from the value of the
relevant Outstanding Instalment shall take place in priority to the
cancellation of the relevant Loan Notes;
(b) thereafter by the Warrantors offering and the Purchaser accepting
the cancellation of any issued Deferred Consideration Shares held
by the Warrantors which remain subject to the restrictions
contained in Clause 3.6 (and pro rata as between the Warrantors);
and
(c) thereafter by the Warrantors offering and the Purchaser accepting
the cancellation of any Initial Consideration Shares held by the
Warrantors which remain subject to the restrictions contained in
Clause 3.6 (and pro rata as between the Warrantors)
and for the purposes of paragraphs (b) and (c) of this Clause the value
attributable to the relevant Untradeable Shares for the purposes of such
cancellation shall be their Issue Price.
6.6 The Purchaser shall be entitled to take action in respect of any breach
or non-fulfilment of any of the representations, warranties,
undertakings, covenants or agreements on the part of the Warrantors or
any of them contained in or made pursuant to this Agreement both before
and after Completion and (save as provided in Clause 6.22 below) such
action may be taken after Completion in respect of any breach or
non-fulfilment discoverable by the Purchaser on or before Completion and
Completion shall not constitute a waiver of any of the Purchaser's
rights.
6.7 The Warrantors shall have no liability for a claim for breach of the
Warranties where the amount of such claim is less than (pound)5,000 and
the liability of the Warrantors in respect of the Warranties:
(a) shall not (when aggregated with any liability under the Tax Deed)
(i) arise unless the amount of all claims (ignoring for this
purposes any individual claims of less than (pound)5,000 each) made
in respect of the Warranties and/or the Tax Deed (or which would
have been made but for the operation of this paragraph or the
corresponding provision in the Tax Deed) exceeds (pound)30,000 or
(ii) exceed the sum of 2,096,768 as adjusted pursuant to Clause 5;
and
15
(b) shall terminate (but without prejudice to the rights and
obligations of the parties under the Tax Deed);
(i) on the seventh anniversary of Completion in respect of those
matters set out in Part D (Taxation) of Schedule 3; and
(ii) on 30 April 2000 in respect of all other matters contained in
Schedule 3;
provided that the limitations contained in this Clause 6.7 shall
not apply to any claim which (or the delay in discovery of which)
is a consequence of fraud, dishonesty or wilful concealment on the
part of the Warrantors, their agents or advisors.
6.8 Any payment made (or suffered by cancellation or deduction pursuant to
Clause 6.5) by the Warrantors for any breach of the Warranties or a
liability under the Tax Deed shall be deemed to be a reduction in the
Consideration.
6.9 The Warranties are given subject to any matters accurately and fairly
disclosed in the Disclosure Letter and to the contents of the documents
contained in the indexed bundle annexed thereto and any other specific
information relating to the Company of which the Purchaser has actual
(but not imputed or implied) knowledge at the date hereof.
6.10 No liability shall arise on the part of the Warrantors in respect of any
breach of the Warranties:
(a) which arises as a result of any liability to Tax arising or being
increased as a result of any change in the basis or method of
calculation of Tax after Completion with retrospective effect;
(b) which arises as a result of any retrospective increase in rates of
Tax introduced after Completion;
(c) which arises as a result of any legislation or other governmental
regulation not in force at Completion; whether or not having
retroactive or retrospective effect;
(d) which arises as a result of any voluntary act, omission or
transaction of the Purchaser or the Company after Completion which
is outside the ordinary course of business of the Company;
(e) which arises as a result of any act, transaction, or omission
carried out by the Warrantors at the Purchaser's request and
direction unless necessary to comply with any applicable law or
statutory regulation enacted prior to Completion;
(f) which would not have arisen but for any winding up or cessation
after Completion of any business or trade carried on by the Company
except to the extent that such winding up or cessation is caused by
the subject matter of one or more claims under the Warranties
and/or under the Tax Deed;
16
(g) which arises as a result of any act, omission, transaction or
arrangement of the Company after Completion (whether or not in the
ordinary course of business of the Company) pursuant to a legally
binding obligation incurred on or before Completion details of
which have been accurately and fairly disclosed in the Disclosure
Letter;
(h) where and to the extent that specific provision or reserve
(including provision for deferred tax) is made for the matter
giving rise to the liability in the Accounts;
(i) arising solely from a change after Completion of the Company's
accounting policy or practice or a change of the accounting
reference date of the Company.
6.11 To the extent that any breach of the Warranties is capable of remedy the
Purchaser shall first afford the Warrantors 28 days to remedy the breach
complained of and for such purposes the Purchaser at the Warrantors' cost
shall make available to the Warrantors all assistance and all papers
documents and information in its possession, custody and control which
the Warrantors may reasonably require.
6.12 In the event that the Company or the Purchaser shall become aware of any
matter which is likely to constitute a breach of Warranty the Purchaser
shall as soon as reasonably practicable notify in writing the Warrantors
giving reasonable details of such matter and if so requested by the
Warrantors and at the Warrantors' cost shall provide copies of available
relevant documentation and thereafter shall keep the Warrantors informed
of developments and communications relating thereto. In any event notice
of any claim under the Warranties must be served by the Purchaser on the
Warrantors in writing specifying in reasonable detail the nature of the
claim and the breach that results (having regard to the information then
available to the Purchaser) and where reasonably practicable the amount
claimed before the date specified in Clause 6.7(b) and any claim shall
(if not previously satisfied or withdrawn) be deemed to have been waived
or withdrawn at the expiration of nine months after the date upon which
written notice thereof is given to the Warrantors (or such longer period
as the Warrantors may permit) unless legal proceedings shall already have
been issued against and served on the Warrantors.
6.13 Subject to the Warrantors indemnifying and securing the Purchaser and the
Company to their reasonable satisfaction against any liabilities, costs
or expenses which may be incurred in taking such action the Purchaser
shall take or procure that the Company takes such action as the
Warrantors may reasonably request to dispute, compromise or defend any
claim or demand giving rise to the claim for breach of Warranty or to
mitigate any resulting loss.
6.14 Where the Company or the Purchaser or any of them is entitled (whether by
reason of insurance or otherwise) to recover from a third party any sum
in respect of the damage or liability the subject of a claim under the
Warranties the Purchaser shall if so required by the Warrantors (subject
to the Warrantors indemnifying and securing the Purchaser
17
and the Company to their reasonable satisfaction against any liabilities,
costs or expenses which may be incurred in taking such action) procure
that the Company takes action as the Warrantors may reasonably require to
enforce such recovery and any claim against the Warrantors shall be
limited (in addition to the other limitations on the liability of the
Warrantors referred to in this Clause 6) to the amount by which the
amount of the Purchaser's claim as a result of such breach shall exceed
the amount so recovered (less any reasonable costs, charges and expenses
properly incurred by the Purchaser or the Company in connection
therewith).
6.15 Where in relation to any matter which has been the subject of any claim
for breach of the Warranties the Purchaser or the Company shall recover
any sum (whether by payment, discount, credit or otherwise) referable to
that matter the Purchaser shall forthwith repay to the Warrantors any
sums paid by the Warrantors in respect of such claim (or an appropriate
part thereof) not exceeding the sum recovered.
6.16 If and to the extent that the Warrantors make a payment to the Purchaser
in respect of any breach of the Warranties relating to any liabilities in
respect of which the Purchaser or the Company have a right to
reimbursement (in whole or in part) against any third party the Purchaser
shall upon the request of the Warrantors assign or procure to be assigned
to them for no consideration but at the cost of the Warrantors the
benefit of the right of reimbursement.
6.17 In the event of the Warrantors being liable to the Purchaser under the
Warranties in respect of an obligation of the Company to pay Tax and in
certain circumstances the payment of Tax will be repaid to the Company or
some other liability to Tax reduced directly in consequence (in whole or
in part) of the payment of Tax by the Company the liability of the
Warrantors shall be reduced and any amount paid to the Purchaser by the
Warrantors in respect of the liability to Tax shall be refunded when and
to the extent that the Company actually receives such repayment or
reduction in liability and the Purchaser shall procure that the Company
makes all reasonable claims to obtain the repayment or reduction when it
becomes aware that it is entitled to do so.
6.18 Any breach of the Warranties shall give rise only to an action in damages
by the Purchaser.
6.19 The provisions of Clause 2.3 of the Tax Deed shall additionally apply in
relation to any claim which could be made under the taxation warranties
as it applies to a claim under the Tax Deed.
6.20 Nothing herein shall in any way diminish the Purchaser's common law duty
to mitigate its loss.
6.21 The Purchaser undertakes to retain or procure the retention by the
Company of all such books, records, accounts, correspondence and other
papers of the Company as are material in the context of the liability of
the Warrantors under the Warranties or the Tax Deed during the
subsistence of the liability of the Warrantors under the Warranties or
(as the case may be) the Tax Deed.
18
6.22 The Purchaser warrants and undertakes to and for the benefit of the
Warrantors that (having made due enquiry of its advisors) it is not aware
of any fact, circumstance or information as at Completion upon the basis
of which it has or may have a claim against the Warrantors and/or Sellers
under this Agreement or any of the other documents referred to herein
other than under sub-clauses 2.1(c) and 2.2 of the Tax Deed (whether for
breach of the Warranties or under the Tax Deed or on any other account
whatsoever). The Purchaser acknowledges that the Warrantors are entering
into this Agreement on the basis that the foregoing warranty is true and
accurate in all respects and, without restricting the rights of the
Warrantors, the Purchaser hereby agrees that in the event of such
warranty being found to have been broken, misleading or untrue by reason
of the Purchaser being at Completion aware of any such fact, circumstance
or information then the Purchaser shall have no right to make any claim
against the Warrantors and/or the Sellers under this Agreement or any of
the other documents referred to herein in respect of such fact,
circumstance or information.
7 CONFIDENTIALITY
7.1 Each of the Sellers hereby undertakes to the Purchaser, for itself and as
trustee of the Company that he will:
(a) not at any time after the date of this Agreement (save as required
by law or regulatory authority) divulge or communicate to any
person other than to officers or employees of the Company whose
province it is to know the same or on the instructions of the Board
of Directors of the Company any confidential information concerning
the business, accounts, finance or contractual arrangements or
other dealings transactions or affairs of the Company which may
have come to his knowledge prior to Completion; and
(b) use his reasonable endeavours to prevent publication or disclosure
of any confidential information concerning such matters;
provided that such undertakings shall cease to have effect in
relation to any confidential information which comes into the
public domain otherwise than through the fault of any of the
Sellers.
8 PROTECTIVE COVENANTS
8.1 Xxxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx jointly and severally covenant with
the Purchaser (for itself and as trustee for the Company) that they will
not for a period of 5 years from Completion:
(a) except in relation to the Permitted Activities be concerned in any
business carrying on business within the United Kingdom or Great
Britain and Northern Ireland (including the Channel Islands and the
Isle of Man) or within the Republic of Ireland which is competitive
or likely to be competitive with any of the businesses carried on
by the Company at Completion; or
19
(b) except on behalf of the Company or in relation to the Permitted
Activities canvass or solicit orders for services similar to those
being provided by the Company at Completion from any person who is
at Completion or has been at any time within the year prior to
Completion a customer of the Company; or
(c) induce or attempt to induce any supplier of the Company to cease to
supply, or to restrict or vary the terms of supply, to the Company;
or
(d) induce or attempt to induce any employee of the Company to leave
the employment of the Company; or
(e) use or (in so far as it lies within his control) allow to be used
(except by the Company) any trade name used by the Company at
Completion or any other name intended or likely to be confused with
such a trade name; or
(f) spend more than 6 hours per month on Permitted Activities.
8.2 For the purposes of this Clause:
(a) Xxxx Xxxxxxxx is concerned in a business if he carries it on as
principal or agent or if:
(i) he is a partner, director, employee, seconde, consultant or
agent in, of or to any person who carries on the business; or
(ii) he has any direct or indirect financial interest (as
shareholder or otherwise) in any person who carries on the
business disregarding any financial interest of a person in
securities which are listed on the American Stock Exchange or
the London Stock Exchange or traded on the Alternative
Investment Market, if that person, the remaining Sellers and
any person connected with him or them are interested in
securities which amount to less than three per cent of the
issued securities of that class and which, in all
circumstances, carry less than three per cent of the voting
rights (if any) attaching to the issued securities of that
class.
8.3 Each of the restrictions in each paragraph or sub-clause above shall be
enforceable by the Purchaser independently of each of the others and its
validity shall not be affected if any of the others is invalid; if any of
those restrictions is void but would be valid if some part of the
restrictions were deleted the restriction in question shall apply with
such modification as may be necessary to make it valid without in any way
extending the scope of the restrictions.
8.4 Xxxx Xxxxxxxx acknowledges that the above provisions of this Clause are
no more extensive than is reasonable to protect the Purchaser as the
purchaser of the Shares.
20
8.5 If any provision of this Agreement or of any other agreement or
arrangement of which it forms part is subject to registration under the
Restrictive Trade Practices Xxx 0000, it shall not take effect until the
day after particulars of the agreement or arrangement have been given to
the Director General of Fair Trading under section 24 of that Act.
9 ANNOUNCEMENTS
Neither the Sellers nor the Purchaser shall make or permit any person connected
with any of them to make any announcement concerning the sale and purchase of
the Shares or any ancillary matter before, on or after Completion except as
required by law or other applicable regulation or with the written approval of
the other, such approval not to be unreasonably withheld or delayed.
10 NOTICES AND RECEIPTS
10.1 Any notice or other document to be served under this Agreement may be
delivered or sent by first class registered post (or airmail if to a
destination outside the country where it is despatched) or facsimile
process to the party to be served at his address appearing in this
Agreement or at such other address as he may have notified to the other
parties in accordance with this Clause.
10.2 Any notice or document shall be deemed to have been served:
(a) if delivered, at the time of delivery; or
(b) if posted, at 10.00 am on the second or (if sent to a destination
outside the country where it is despatched) seventh business day in
the country of the recipient after it was put into the post; or
(c) if sent by facsimile process, at the expiration of 2 hours after
the time of despatch, if despatched before 3.00 pm on any business
day in the country of the recipient, and in any other case at 10.00
am on the business day in the country of the recipient following
the date of despatch.
10.3 In proving service of a notice or document it shall be sufficient to
prove that delivery was made or that the envelope containing the notice
or document was properly addressed and posted as a prepaid registered
post or airmail letter or that the facsimile message was properly
addressed and despatched as the case may be.
10.4 The receipt of the Sellers' Solicitors for any sum or document to be paid
or delivered to a Seller will discharge the Purchaser's obligation to pay
or deliver it to that Seller.
10.5 The Purchaser agrees that service or delivery of any documents on it
(including service of any proceedings) may be effected by service upon
the Purchaser's Solicitors in accordance with this Clause 10.
11 RESOLUTIONS AND WAIVERS
21
11.1 In relation to the Company the Sellers shall procure the convening of all
meetings, the giving of all waivers and consents and the passing of all
resolutions as are necessary under the Companies Xxx 0000, its Articles
of Association or any agreement or obligations affecting it to give
effect to this Agreement.
11.2 For so long after Completion as it remains the registered holder of any
of the Shares each of the Sellers will hold them and any distributions,
property and rights hereafter deriving from them in trust for the
Purchaser and will deal with the Shares and any distributions, property
and rights hereafter deriving from them as the Purchaser directs and will
on request by the Purchaser execute an instrument of proxy or other
document which enables the Purchaser or its representative to attend and
vote at any meeting of the Company.
12 ASSIGNMENT
None of the rights or obligations under this Agreement may be assigned or
transferred without the prior written consent of all the parties, save
that the Purchaser may (without the Sellers' consent) assign any or all
of its rights (but not its obligations) under this Agreement to any
subsidiary, holding company, or subsidiary of any holding company, of the
Purchaser provided that any such assignment shall be on terms that if an
assignee of any of the Purchaser's rights ceases to be a subsidiary,
holding company, or subsidiary of any holding company, of the Purchaser,
the assignee shall, before so ceasing, reassign to the Purchaser (or any
subsidiary, holding company or subsidiary of any holding company of the
Purchaser) all such rights and provided further that any such assignment
shall not in any way extend the scope or nature of any of the obligations
or restrictions of the Sellers and/or the Warrantors under this Agreement
or limit the scope or nature of their rights under this Agreement.
13 GENERAL
13.1 Each of the obligations, warranties and undertakings set out in this
Agreement which is not fully performed at Completion will continue in
force after Completion.
13.2 Where any obligation, representation, warranty or undertaking in this
Agreement is expressed to be made, undertaken or given by the Sellers,
they shall be jointly and severally responsible in respect of it unless
otherwise stated.
13.3 The Purchaser may release or compromise in whole or in part the liability
of any of the Sellers under this Agreement or grant any time or other
indulgence without affecting the liability of any other of the Sellers.
13.4 Time is of the essence in relation to this Agreement.
13.5 Each party shall pay the costs and expenses incurred by him or it in
connection with the entering into and completion of this Agreement.
22
13.6 This Agreement may be executed in any number of counterparts, all of
which, taken together shall constitute one and the same Agreement and any
party may enter into this Agreement by executing a counterpart.
14 WHOLE AGREEMENT
14.1 This Agreement and the documents referred to in it contain the whole
agreement between the parties relating to the transactions contemplated
by this Agreement and supersede all previous agreements, arrangements and
understandings between the parties relating to these transactions.
14.2 The parties acknowledge that in agreeing to enter into this Agreement he
or it has not relied on any representation, warranty or other assurance
except those set out in this Agreement and waives all rights and
remedies, which, but for this Clause might be available to it in respect
of such representation, warranty or other assurance provided that nothing
in this Clause shall limit or exclude any liability for fraudulent
misrepresentation.
15 GOVERNING LAW
This Agreement is governed by and shall be construed in accordance with
English law. Each of the parties submits to the exclusive jurisdiction of
the English courts for all purposes relating to this Agreement.
16 PURCHASER'S WARRANTIES AND COVENANT
16.1 The Purchaser covenants that it shall use its reasonable endeavours to
file the reports required to be filed by it under the US Securities
Xxxxxxxx Xxx 0000, as amended (the "EXCHANGE ACT") and the rules and
regulations of the US Securities and Exchange Commission (the
"COMMISSION") thereunder, and it shall, if feasible, take such further
action as any holder of Consideration Shares may reasonably request, all
to the extent required from time to time to enable such holder to sell
Consideration Shares without registration under the US Securities Act of
1933 (the "SECURITIES ACT") within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be
amended from time to time or (b) any similar rules or regulations
hereafter adopted by the Commission. Upon the written request of any
holder of Consideration Shares, the Purchaser shall deliver to such
holder a written statement as to whether it has complied with such
requirements.
16.2 Provided that a period of at least 2 years has elapsed since the later of
the date any Consideration Shares were acquired from the Purchaser or an
affiliate of the Purchaser (within the meaning of Rule 144 under the
Securities Act), the Purchaser shall, upon the request of any holder
thereof who is not an affiliate of the Purchaser and has not been an
affiliate of the Purchaser during the preceding 3 months, use its
reasonable efforts
23
(subject to applicable law) to arrange for the exchange of the
certificates representing such Consideration Shares for new certificates
omitting any legend relating to restrictions on the transfer of such
Consideration Shares.
16.3 The Purchaser hereby warrants and represents to the Sellers that:
(a) neither the execution of this Agreement or the Loan Notes by the
Purchaser nor the completion of the transaction as contemplated by
this Agreement will violate, conflict with or result in the breach
of any term, limitation in or provisions of, or constitute a
default (or an event that, with the giving of notice or the lapse
of time or both, would constitute a default) under the terms,
provisions or conditions of the constitutional documents of the
Purchaser or any agreement to which the Purchaser is a party or by
which the Purchaser is bound, or violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the
Purchaser;
(b) no consent or approval by, notice to or registration with any
governmental or other authority is required on the part of the
Purchaser in connection with the execution of this Agreement or the
Loan Notes or the completion of the transaction as contemplated in
it;
(c) the Consideration Shares, when issued pursuant to this Agreement,
shall be duly authorised, validly issued, fully paid and
nonassessable and the certificates representing the Consideration
Shares and the Loan Notes, when delivered pursuant to this
Agreement, shall be in due and proper form and shall be duly and
validly executed by the officers of the Purchaser named thereon;
(d) the execution, delivery and performance by the Purchaser of the
Agreement and the Loan Notes, and all other documents contemplated
hereby and thereby, the fulfilment of and the compliance with the
respective terms and provisions hereof and thereof, and the
consummation by the Purchaser of the transactions contemplated
hereby and thereby, have been duly authorised by the Board of
Directors of the Purchaser (which authorisation has not been
modified or rescinded and is in full force and effect) and no other
corporate action is necessary for the Purchaser to enter into this
Agreement and the Loan Notes, and all other documents contemplated
hereby and thereby, and to consummate the transactions contemplated
hereby and thereby;
(e) this Agreement and the Loan Notes constitute valid and binding
obligations of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms;
IN WITNESS of which this Agreement has been executed by the parties or their
duly authorised representatives on the date which appears first on page 1.
24
SCHEDULE 1
THE SELLERS AND THEIR SHAREHOLDINGS
XXXXXXX XXXXXXX XXXXXXXX 250 Shares
0 Xxxxxxx Xxxxx
Xxxxxxx
Xxxx Xxxxxxxx
XX0 0XX
GILLIAN XXX XXXXXXXX 250 Shares
0 Xxxxxxx Xxxxx
Xxxxxxx
Xxxx Xxxxxxxx
XX0 0XX
25
SCHEDULE 2
PARTICULARS OF THE COMPANY
(1) Company Number: 2187441
(2) Share Capital: (i) Authorised:- (pound)1,000
(ii) Issued:- (pound)500
(3) Registered Holders: See Schedule 1
(4) Registered Office: The Chantry, Xxxxxxx Xxxxx, Xxxxxxx,
Xxxx Xxxxxxxx XX0 0XX
(5) Directors: Xxxxxxx Xxxxxxx Xxxxxxxx, Xxxxxxx Xxx Xxxxxxxx
(6) Secretary: Gillian Xxx Xxxxxxxx
(7) Auditors: Xxxxxxx X Xxxxxxxx & Co
(8) Accounting reference date: 30 April
26
SCHEDULE 3
THE WARRANTIES
A. General
B. Accounts/Financial
C. Business
D. Tax
E. Intellectual Property etc
F. Directors/Employees etc
A. GENERAL
A.1 THE RECITALS AND THE SCHEDULES
The information relating to the Sellers and the Company contained in the
Recitals and Schedules 1 and 2 to this Agreement is true and accurate.
A.2 AUTHORITY AND CAPACITY
A.2.1 The execution and delivery of, and the performance by, each
Seller of its obligations under this Agreement and the Tax Deed
will not:
(a) relieve any other party to a contract with the Company of
its obligations or enable that party to vary or terminate
its rights or obligations under that contract; or
(b) result in the creation or imposition of any lien, charge or
encumbrance of any nature on any of the property or assets
of the Company.
A.3 MEMORANDUM AND ARTICLES OF ASSOCIATION
The copy of the Memorandum and Articles of Association of the Company
delivered by the Warrantors to the Purchaser is true complete and
accurate in all respects and has embodied in it or annexed to it true,
accurate and complete copies of all resolutions agreements and consents
required by law to be so embodied or annexed.
A.4 COMPLIANCE WITH COMPANIES ACTS
A.4.1 As far as the Warrantors are aware the Company and its
respective officers (in their capacities as such) have complied
with the provisions of the Companies Xxx 0000 and in particular
(without prejudice to the generality of the foregoing) all
documents required to be filed with the Registrar of Companies
in respect of the Company have been duly filed.
27
A.4.2 The Statutory Books and Minute Books of the Company have been
properly written up and contain a true accurate and complete
record of the matters which should be dealt with in such books
and no notice or allegation that any of them is incorrect or
should be rectified has been received.
A.4.3 All returns and particulars, resolutions and other documents
which the Company is required by law to file with or deliver to
the Registrar of Companies have been correctly made up and duly
filed or delivered.
A.5 OWNERSHIP OF THE SHARES
A.5.1 The Shares constitute the whole of the issued and allotted share
capital of the Company.
A.5.2 No person is entitled, or has claimed to be entitled, to require
the Company to issue any share or loan capital either now or at
any future date whether contingently or not.
A.6 SUBSIDIARIES, ASSOCIATIONS AND BRANCHES
The Company:
A.6.1 does not hold or beneficially own and has not agreed to acquire
any securities of any other corporation (whether incorporated in
the United Kingdom or elsewhere); or
A.6.2 is not and has not agreed to become a member of any partnership
or other unincorporated association, joint venture or consortium
(other than recognised trade associations); or
A.6.3 does not have outside the United Kingdom any branch or any
permanent establishment.
A.7 OWNERSHIP OF ASSETS
A.7.1 The Company owns all the assets necessary to enable it to
continue to run its business in the manner and on the scale in
which it has been conducted in the year preceding the date of
this Agreement.
A.7.2 Particulars of all fixed assets acquired or agreed to be
acquired by the Company since the Accounts Date are set out in
the Disclosure Letter.
A.7.3 Except for current assets offered for sale or sold in the
ordinary course of trading, the Company has not since the
Accounts Date disposed of any of the assets included in the
Accounts or any assets acquired or agreed to be acquired since
the Accounts Date.
28
A.7.4 None of the property, assets, undertaking, goodwill or uncalled
capital of the Company is subject to any encumbrance (including,
without limitation, any debenture, mortgage, charge, lien,
deposit by way of security, xxxx of sale, lease, hire-purchase,
credit-sale or other agreement for payment on deferred terms,
option or right of pre-emption) or any agreement or commitment
to give or create any of the foregoing.
A.8 VULNERABLE TRANSACTIONS
A.8.1 The Company has not been party to a transaction pursuant to or
as a result of which an asset owned, purportedly owned or
otherwise held by it is liable to be transferred or
re-transferred to another person or which gives or may give rise
to a right of compensation or other payment in favour of another
person in the event of the insolvency of any person other than
the Company.
A.8.2 No transaction at an undervalue (within the meaning of section
423 of the Insolvency Act 1986) (a) relating to any of the
Shares or (b) to which the Company has been a party, has been
effected prior to the date of this Agreement.
A.9 COMPLIANCE WITH STATUTES
As far as the Warrantors are aware the Company has not, nor has any of
its respective officers, agents or employees (during the course of their
duties), done or omitted to do anything which is a contravention of any
statute, order, regulation or the like giving rise to any fine, penalty
or other liability on the part of the Company.
A.10 LICENCES AND CONSENTS
The Company has all licences (including statutory licences) and consents
necessary to own and operate its assets and to carry on its business as
it does at present and none of the Warrantors is aware of anything that
might prejudice the continuation or renewal of any of those licences or
consents.
A.11 INSIDER CONTRACTS
A.11.1 The Company is not party to any contract or arrangement in which
any of the Warrantors or any person connected with any of them
is interested, directly or indirectly.
A.11.2 The Company is not party to, nor has its profits or turnover
during the five financial periods ended on the Accounts Date
been affected by, any contract or arrangement which is not of an
entirely arm's length nature.
A.11.3 None of the Sellers nor any person connected with any of them is
a party to any outstanding agreement or arrangement for the
provision of finance,
29
goods, services or other facilities to or by the Company or in
any way relating to the Company or its affairs.
A.12 LITIGATION
A.12.1 The Company is not engaged in any litigation or arbitration
proceedings and there are no such proceedings pending or
threatened by the Company.
A.12.2 The Warrantors do not know of anything which is likely to give
rise to any litigation or arbitration proceedings by or against
the Company.
A.12.3 As far as the Warrantors are aware the Company is not the
subject of any investigation or inquiry by any governmental,
administrative or regulatory body.
A.13 INSOLVENCY
A.13.1 No receiver or administrative receiver has been appointed in
respect of the Company or in respect of the whole or any part of
the assets or undertaking of the Company.
A.13.2 No administration order has been made and no petition has been
presented for such an order in respect of the Company.
A.13.3 No meeting has been convened at which a resolution will be
proposed nor has any resolution been passed nor has any petition
been presented or order made for the winding up of the Company.
A.13.4 The Company has not stopped or suspended payment of its debts,
become unable to pay its debts (within the meaning of Section
123 of the Insolvency Act) or otherwise become insolvent.
A.13.5 No unsatisfied judgment, order or award is outstanding against
the Company and no written demand under Section 123(1)(a) of the
Insolvency Act has been made against the Company and no distress
or execution has been levied on, or other process commenced
against, any asset of the Company.
A.13.6 No voluntary arrangement has been proposed under Section 1 of
the Insolvency Act in respect of the Company.
A.13.7 No circumstances have arisen which entitle any person to take
any action, appoint any person, commence proceedings or obtain
any order of the type mentioned in paragraphs A.13.1 to A.13.6.
30
B. ACCOUNTS/FINANCIAL
B.1 ACCOUNTS
B.1.1 The Accounts:
(a) have been prepared under the historic cost convention (as
modified for the revaluation of land and buildings) and in
accordance with generally accepted accounting principles
and practices, the Companies Xxx 0000 and other applicable
statutes and regulations; and
(b) correctly state the assets of the Company and give a true
and fair view of the state of affairs of the Company as at
the Accounts Date and of the profit or loss of the Company
for the period ended on the Accounts Date.
B.1.2 Without prejudice to the generality of the Warranty contained in
paragraph B.1.1, the Accounts:
(a) comply with the requirements of the Companies Xxx 0000 and
of any other relevant legislation;
(b) have been prepared on a consistent accounting basis with
the corresponding audited accounts of the Company for the
preceding financial year;
(c) are not affected by and do not include any unusual or
non-recurring items;
(d) contain either adequate provision to cover, or full
particulars in notes of, all the known liabilities and
other financial commitments (whether ascertained or
contingent and whether or not quantified or disputed) of
the Company as at the Accounts Date;
(e) make proper and adequate provision for:
(i) all bad and doubtful debts;
(ii) depreciation and obsolescence in respect of plant
machinery fixtures and fittings and vehicles;
(iii) all amounts required to be deducted from any payments
made to any person whether under the Pay As You Earn
regulations legislation relating to National
Insurance Contributions relating to Statutory Sick
Pay or any other legislation whatsoever.
31
B.1.3 The debts included in the Accounts have realised or will
realise, in the ordinary course of collection, their nominal
amounts less any provision for bad and doubtful debts included
in the Accounts.
B.1.4 As far as the Warrantors are aware no debt owing to the Company
at the date of this Agreement (other than debts included in the
Accounts) will not in the ordinary course of collection realise
its nominal amount plus any accrued interest.
B.1.5 There is no material difference between the accounting and
taxation treatment of any item in the Accounts and of any asset
acquired since the Accounts Date.
B.1.6 The Company is the owner free from encumbrances or other third
party rights in the nature of security or title retention of all
its undertaking and assets which are included or which ought to
have been included in the Accounts or which have been acquired
since the Accounts Date and all such assets are in its
possession or under its control.
B.2 ACCOUNTING RECORDS
The unaudited management accounts of the Company for the period of five
months ended 31 May 1998 (a copy of which is attached to the Disclosure
Letter) have been prepared on a consistent basis and do not misstate to a
material extent the assets and liabilities of the Company and its results
for the period ended 31 May 1998.
B.3 ACCOUNTING RECORDS
All proper and necessary accounting and other books and records
(including all invoices and other records required for value added tax
purposes) of the Company relating to its financial and trading position
have been fully properly and accurately written up on a proper and
consistent basis.
B.4 POSITION SINCE THE ACCOUNTS DATE
Since the Accounts Date:
B.4.1 the business of the Company has been carried on in the ordinary
and usual course and there has not been any material change in
the nature of the assets and liabilities shown in the Accounts;
B.4.2 there has been no deterioration in the turnover, or trading
prospects of the Company;
B.4.3 no directors fees have been paid and no resolution (whether by
the appropriate Board of Directors or by the appropriate General
Meeting) that such fees be paid in respect of the current or any
previous financial year has
32
been proposed or passed by the Company;
B.4.4 the Company has not disbursed any cash except in the ordinary
course of its business and all amounts received by the Company
have been deposited with the Company's bankers and appear in the
appropriate books of account;
B.4.5 no dividends or other distributions have been declared, paid or
made by the Company;
B.4.6 the Company has not entered into any capital transaction as
vendor, purchaser, lessor or lessee or otherwise undertaken any
material commitment on its capital account.
B.5 BORROWINGS ETC
B.5.1 The Company has not received notice (whether formal or informal)
from any person who is currently, or who has at any time since
the Accounts Date been a lender to it requiring repayment of any
indebtedness or intimating the enforcement by any such lender of
any security which it may hold over any assets of the Company
and the Warrantors are not aware of any circumstances likely to
give rise to any such notice being given or which would enable
any such notice to be given.
B.5.2 The total amount borrowed by the Company from its bankers does
not exceed its overdraft facilities as set out in the Disclosure
Letter.
B.5.3 Since the Accounts Date the Company has not lent any money which
has not been repaid to it or acquired the benefit of any debt
(present or future) save for debts in respect of the normal
course of trading.
B.5.4 The Company has no outstanding loan capital nor any money
borrowed (other than under the overdraft facilities disclosed in
relation to 5.2 above), including money raised by factoring.
B.5.5 The Company has no outstanding liability (whether present or
future) in respect of any guarantee or indemnity.
B.5.6 Since the Accounts Date the Company has paid each of its
creditors on or before the relevant due date for payment (save
for any disputed amounts) and has not made any agreement to
postpone or delay any payment of its debts and "paid" in this
context means that either cash has been paid or a cheque has
been given or despatched to the relevant creditor and has not
been cancelled by the Company.
B.6 PLANT AND EQUIPMENT
Of the plant, machinery, fixtures, fittings, equipment, vehicles,
furniture, materials and
33
other assets (not being current assets) included in the Accounts or
acquired by the Company since the Accounts Date:
B.6.1 none has been sold or disposed of at a figure lower than book
value or an open market arm's length value whichever is the
higher;
B.6.2 none has been or has been agreed to be let on hire or hire
purchase or sold on deferred terms; and
B.6.3 none was acquired at a price in excess of market value at the
time of acquisition.
B.7 GOVERNMENT GRANTS
The Company is not subject to any arrangement for receipt or repayment of
any grant, subsidy or financial assistance from any government department
or other body.
B.8 BANK ACCOUNTS
The statement of the Company's bank accounts and of the credit or debit
balances on them attached to the Disclosure Letter is correct as at the
close of business on 28 August 1998 and the Company does not have any
other bank or deposit account (whether in credit or overdrawn) not
included in the statement and since the date of that statement there has
not been any payment out of any of the accounts except for payments in
the ordinary course of business and the balance on the accounts is not
substantially different from the balances shown on the statement.
B.9 WORKING CAPITAL
The Company has sufficient working capital for the continuation of its
business as carried on prior to Completion and to make the payment of ACT
due in respect of the net dividend of (pound)36,808 paid on 31 August
1998.
34
C. BUSINESS
C.1 SUPPLIERS AND CUSTOMERS
The Warrantors have no reason to believe (but without having made any
enquiry of any third party) that any supplier customer or person who has
had regular dealings with the Company within the twelve months prior to
Completion will cease dealing with the Company or may substantially
reduce its dealings with the Company after Completion as a result of the
acquisition by the Purchaser of the Company.
C.2 TRADING CONTRACTS AND OUTSTANDING OFFERS
C.2.1 The Company has observed and performed in all material respects
the terms and conditions on its part to be observed and
performed under its current trading contracts.
C.2.2 The Company will not be required after Completion to undertake
any work or supply any goods or services under a contract
entered into on or before Completion except on normal commercial
terms.
C.2.3 No offer, tender or the like which is capable of being converted
into an obligation of the Company by an acceptance or other act
of some other person is outstanding, except in the ordinary
course of its business.
C.3 MATERIAL CONTRACTS
The Company is not party to any contract, arrangement, or obligation
which, whether by reason of its nature, term, scope, price or otherwise,
which:
C.3.1 is not in the ordinary course of its business; or
C.3.2 is incapable of performance in accordance with its terms within
six months of the date on which it was entered into or
undertaken; or
C.3.3 is expected to result in a loss to the Company on completion of
performance; or
C.3.4 is of an unusually onerous nature or cannot be fulfilled or
performed by the Company on time and without undue or unusual
expenditure of money and effort.
C.3.5 requires an aggregate consideration payable by the Company in
excess of (pound)10,000; or
C.3.6 involves payment by the Company by reference to fluctuations in
the Index of Retail Prices or any other index; or
35
C.3.7 requires payment of any sum by the Company in any currency other
than sterling; or
C.3.8 is for the provision of management or similar services to the
Company and which is not terminable by it on less than three
months' notice without compensation.
C.4 AGENCIES, ETC.
The Company is not party to any agreement or arrangement which restricts
its freedom to carry on the whole or any part of its business in any part
of the world in such manner as it thinks fit.
C.5 ANTI-COMPETITIVE ARRANGEMENTS
C.5.1 The Company is not at Completion, a party to any agreement,
arrangement, concerted practice or course of conduct which:
(a) is subject to registration under the Restrictive Trade
Practices Acts 1976 and 1977;
(b) contravenes the provisions of the Resale Prices Xxx 0000 or
any secondary legislation or adopted under the Fair Trading
Xxx 0000;
(c) infringes Article 85 or 86 of the Treaty establishing the
European Economic Community or any other anti-trust or
similar legislation in any jurisdiction in which the
Company carries on business or has assets or sales; or
(d) is void or unenforceable (whether in whole or in part) or
may render the Company liable to proceedings under any such
legislation as is referred to in paragraphs (a) to (c)
above.
C.5.2 The Company has not given any undertaking and no order has been
made against or in relation to the Company pursuant to any
anti-trust or similar legislation in any jurisdiction in which
the Company carries on business or has assets or sales.
C.6 PLANT IN WORKING ORDER
All vehicles and computer equipment owned or used by the Company:
C.6.1 is in satisfactory working order;
C.6.2 has been properly serviced and maintained;
C.6.3 is not surplus to the Company's requirements; and
36
C.6.4 is in the possession of the Company.
C.7 INSURANCE
C.7.1 All the assets and undertaking of the Company of an insurable
nature are and have at all material times been insured in
amounts representing their full replacement or reinstatement
value against fire and other risks normally insured against by
persons carrying on the same classes of business as those
carried on by the Company and the Company is now and has at all
material times been adequately covered against accident, damage,
injury, third party loss, loss of profits and other risks
normally covered by insurance.
C.7.2 The list of current policies of insurance of the Company
attached to the Disclosure Letter is true and complete and no
premium due to be paid and payable in respect of any policy is
outstanding.
C.7.3 There are no circumstances which would or might entitle the
Company to make a claim under any policy of insurance or which
under the terms of any policy of insurance would or might be
required to be notified to the insurers and there are no pending
claims under any policy of insurance which have not been
admitted by the insurers.
C.7.4 No liability in respect of any claim made or pending against the
Company will exceed in amount the limit of insurance cover in
force for the benefit of the Company against such a claim and
there is no insurance policy under which the Company may be
required to bear any excess provision out of its own funds.
C.8 PROPERTIES
Except in respect of the Property Licence, the Company has no right or
interest in land property or buildings.
C.9 NO POWERS OF ATTORNEY
The Company has not granted any power of attorney or similar authority
which remains in force.
37
D. TAXATION
In this Part D of Schedule 4 "tax" and "tax authority" shall have the same
meanings as they have for the purposes of the Tax Deed, and clause 1 of the Tax
Deed shall apply for the purposes of this Part D of Schedule 4.
D.1 GENERAL
D.1.1 Tax returns
All necessary information, notices, computations and returns
which are required by law to have been submitted by the Company
to the Inland Revenue, H M Customs and Excise and any other
relevant tax or excise authorities, whether of the United
Kingdom or elsewhere, have been submitted within the prescribed
time limits including for the avoidance of doubt all claims,
disclaimers and elections which on or before Completion are
required by law to have been made, given or delivered for tax
purposes. All such information, notices, computations and
returns submitted to the Inland Revenue, H M Customs and Excise
and such other authorities were at the date to which they were
made up true and accurate in all material respects and are not
the subject of any material dispute with such authorities.
D.1.2 Tax liabilities
(a) All tax prior to Completion for which the Company is liable
or for which it is liable to account has been duly paid
(insofar as such tax ought to have been paid) and the
Company has made full provision in the Accounts in respect
of all tax for which it will or may become chargeable or
accountable in respect of all accounting periods or other
tax periods ending on or before the Accounts Date.
(b) The Company has properly and punctually deducted and
accounted for tax which it has been required by law to
deduct or for which it has been required to account in
respect of any payments made or deemed to have been made by
it. In particular the Company has properly operated the
PAYE system and has duly made all deductions and payments
required to be made in respect of national insurance
contributions (including employer's contributions).
D.1.3 Penalties and interest
The Company has not within the past twelve months paid or become
liable to pay, nor, so far as the Warrantors are aware, are
there any circumstances by reason of which it is likely to
become liable to pay, any penalty, fine, surcharge or interest
in respect of tax.
38
D.1.4 Investigations
There is no material dispute or disagreement outstanding nor so
far as the Warrantors are aware is any contemplated at
Completion with any tax authority regarding:
(a) the computation of any gains, profits or losses of the
Company for tax purposes;
(b) any liability or potential liability to tax (including
penalties or interest) recoverable from the Company; or
(c) the availability to the Company of any relief from tax.
D.1.5 Deductions
All rents, interest and annual payments paid or payable by the
Company since the Accounts Date are wholly allowable as
deductions or charges in computing income for the purposes of
corporation tax.
D.1.6 Residence
The Company is, and has since its incorporation been, resident
for tax purposes only in the United Kingdom.
D.1.7 No transactions between persons under common control.
No transactions or arrangements involving the Company have taken
place or are in existence which are such that any of the
provisions of s.770 to s.773 Taxes Act 1988 have been or, so far
as the Warrantors are aware, could be applied to them.
D.1.8 Loans
The Company is not a party to any loan relationship (within the
meaning of s.81 Finance Act 1996) which has an unallowable
purpose (within the meaning of paragraph 13 of Schedule 9 to
that Act) and the Company applies an authorised accounting
method within s.85 of that Act in relation to its treatment in
the Accounts of all loan relationships to which the Company is a
party.
D.1.9 Disclosure Letter
The Disclosure Letter lists all concessions, agreements and/or
other formal or informal arrangements with any tax authority
(other than such as are published by a tax authority in the UK)
from which the Company has or will benefit, or by which the
Company is bound and (in either case) which are being applied at
Completion.
39
D.1.10 Records
The Company maintains proper and up to date information and
records of all transactions and activities in which it has been
involved and of its tax affairs which will or are likely to be
relevant in calculating any tax liability of the Company:
(a) for any accounting or other period ending, or in respect of
any event occurring, on or before Completion in relation to
which no final agreement relating to tax has yet been
reached with the relevant tax authority; and
(b) for any such period ending or event occurring after
Completion; and
(c) as required by law.
D.1.11 Expenses
The aggregate amount of payments or expenditure made or incurred
by the Company since the Accounts Date (other than dividends and
disclosed capital expenditure) which will not be wholly
deductible in computing the taxable profits of the Company or
which will not be a charge on an income for the purposes of
corporation tax is consistent with the level of such payments in
previous accounting periods.
D.1.12 Assets
(a) The Company has not since the Accounts Date disposed of any
asset otherwise than in the ordinary course of its trade.
(b) In respect of any disposal by the Company immediately
following Completion of an asset which it owned at
Completion:
(i) for a consideration equal to the value of that asset
taken for the purposes of the Accounts (if it was
owned by the Company on the Accounts Date) the tax
liability thereby incurred would not exceed the
amount taken into account in computing the provision
for deferred tax as stated in the Accounts; and
(ii) for a consideration equal to that for which the
asset was acquired (if it was acquired after the
Accounts Date) no liability to tax would arise.
D.1.13 The Company has not on or before Completion been party to any
scheme or arrangement:
(a) in respect of which any tax clearance has not been obtained
which could
40
have been obtained; or
(b) which was or included a reorganisation or reduction of
share capital of the Company.
D.1.14 The Company has not been party to any scheme or arrangement as a
result of which on the future disposal of any asset owned on
Completion the allowable loss or chargeable gain otherwise
arising or any liability to tax is liable to be adjusted by any
tax authority.
D.1.15 The Company has not carried out or been engaged in any
transaction or arrangement in respect of which there has been or
may have been substituted for the consideration given or
received by the Company (including a nil consideration) a
different consideration for tax purposes and the Company has no
obligation to enter into any such transaction or arrangement in
the future.
D.2 CAPITAL ALLOWANCES
D.2.1 All expenditure which the Company has incurred or is liable to
incur under any subsisting commitment on the provision of plant
or machinery has qualified or will qualify (if not deductible as
a trading expense) for capital allowances.
D.2.2 All allowances available to the Company in respect of capital
expenditure incurred prior to Completion or to be incurred under
any subsisting commitment will be available in computing the
taxable profits of the Company.
D.2.3 The Company has not elected to have any asset treated as a
short-life asset under s.37 Capital Allowances Xxx 0000.
D.2.4 None of the assets of the Company is or may be a long-life asset
within the meaning of Xxxxxxx 0X xx Xxxx XX Xxxxxxx Xxxxxxxxxx
Xxx 0000.
D.2.5 The Disclosure Letter contains accurate details of the written
down values for the purposes of capital allowances of the
capital assets of the Company (including industrial buildings,
plant and machinery and patents) as at the Accounts Date.
D.2.6 The Company is not in dispute with any person as to any
entitlement to capital allowances under s.51 Capital Allowances
Xxx 0000 and at Completion as far as the Warrantors are aware
there are no circumstances which might give rise to such a
dispute.
D.3 CAPITAL GAINS
D.3.1 No election under s.35(5) Taxation of Chargeable Gains Xxx 0000
has been made in relation to the Company.
41
D.3.2 The Company is not a member of a group of companies as defined
in s.170 Taxation of Chargeable Gains Xxx 0000.
D.4 STAMP DUTY
All documents in the possession of the Company and in the
enforcement of which the Company may be interested have been
duly stamped. There is no liability to any fine or penalty in
respect of stamp duty or stamp duty reserve tax nor as far as
the Warrantors are aware are there any circumstances which may
result in the Company becoming liable to any such fine or
penalty.
D.5 VALUE ADDED TAX
D.5.1 Registration
The Company is duly registered for the purposes of value added
tax.
D.5.2 VAT group
The Company is not treated for value added tax purposes as a
member of any group of companies.
D.5.3 Exemption
The Company is not partially exempt for the purposes of value
added tax.
D.5.4 The Company is not the owner or to be treated as the owner of a
capital item to which Part XV Value Added Tax Regulations 1995
applies.
D.5.5 Neither the Company nor any relevant associate of the Company
(within the meaning of paragraph 3 (7) of Schedule 10 Value
Added Tax Act 1994) has been a party to any arrangements
relating to an election in accordance with paragraph 2 and 3 of
Schedule 10 Value Added Tax Xxx 0000 nor are they liable nor is
it likely that they will be liable to a self-supply charge
within the meaning of paragraphs 5 and 6 of Schedule 10 Value
Added Tax Xxx 0000.
D.6 CAPITAL TRANSFER TAX AND INHERITANCE TAX
D.6.1 No transfer of value (as defined by the Inheritance Tax Act
1984) or disposal by way of gift (within the meaning of s.102
Finance Act 1986) has at any time been made by the Company.
D.6.2 The Company has not been entitled to an interest in possession
in settled property (as defined for the purposes of inheritance
tax).
D.6.3 No Inland Revenue charge (as defined in s.237 Inheritance Tax
Act 1984) is outstanding over any asset of the Company or in
relation to any of the shares in the capital of the Company.
42
D.6.4 As far as the Warrantors are aware there are no circumstances in
existence whereby the power mentioned in s.212 (1) Inheritance
Tax Act 1984 could be exercised in relation to the shares or any
assets of the Company.
D.7 CLOSE COMPANIES
D.7.1 The Company is a close company for tax purposes as defined in
s.414 Taxes Xxx 0000.
D.7.2 The Company is not, nor has it at any time been, a close
investment-holding company as defined in s.13A Taxes Xxx 0000.
D.7.3 The Company has not since 5 April 1965 done anything so as to
give rise to an assessment under s.419 (as extended by s.422)
Taxes Xxx 0000 (loan to participators and associates).
D.8 DISTRIBUTIONS
D.8.1 The Company has not since its incorporation:
(a) made any distribution or deemed distribution within the
meanings of ss.209, 210 or 418 Taxes Act 1988
(distributions and deemed distributions) except as provided
for in its audited accounts;
(b) repaid, redeemed or purchased or agreed to repay, redeem or
purchase any of its 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.
D.8.2 The Company has not issued any share capital which is of a
relevant class as defined in s.249(2) Taxes Xxx 0000 nor does
the Company own any such share capital (shares carrying the
right to bonus share capital).
D.8.3 The Company has not issued any security (as defined in s.254(1)
Taxes Act 1988) outstanding on Completion in circumstances such
that any interest or other payment payable in respect of it may
be treated as a distribution under s.209 Taxes Xxx 0000.
43
E. INTELLECTUAL PROPERTY ETC
E.1 SECRET OR CONFIDENTIAL INFORMATION OR PROPERTY
The Company has not at any time (save in the ordinary course of
business or to its professional advisers) disclosed to any person other than
the Purchaser:
E.1.1 any of its secret or confidential information or property
(including, without limitation, financial and technical
information, designs, drawings, plans, statistics, documents,
files, records and papers); or
E.1.2 any other information relating to its business or affairs the
disclosure of which might or could cause loss or damage to or
adversely affect the Company; or
E.1.3 any secret or confidential information relating to its
manufacturers, suppliers, customers, clients and agents or to
any other person who has or has had any dealings with it.
E.2 INTELLECTUAL PROPERTY RIGHTS
E.2.1 The Company does not own, use, infringe or require to use any
letters patent, trade xxxx, service xxxx, registered design,
registrable business name, copyright or similar Intellectual
Property Right.
E.2.2 Full details of all registered Intellectual Property Rights
(including applications to register the same) and all
commercially significant unregistered Intellectual Property
Rights owned or used by the Company are set out in the
Disclosure Letter.
E.2.3 The Company is the sole legal and beneficial owner of or
applicant for the Intellectual Property Rights referred to in
paragraph E.2.2 above free of all encumbrances.
E.2.4 Full details are set out in the Disclosure Letter of all licence
and other agreements relating to Intellectual Property Rights to
which the Company is a party (whether as licensor or licensee)
or which relate to any Intellectual Property Right owned by the
Company. The Company is not in breach of any such agreement and,
so far as the Warrantors are aware, no third party is in breach
of any such agreement.
E.2.5 All the Intellectual Property Rights described in paragraph
E.2.3 above and all agreements disclosed in relation to
paragraph E.2.4 above are valid and subsisting and nothing has
been done or omitted to be done by the Company, and the
Warrantors are unaware of any act or omission of any third
party, which would jeopardise the validity or subsistence of any
of such Intellectual Property Rights or such agreements.
E.2.6 The Company owns or has licensed to it all Intellectual Property
Rights it
44
requires to carry on its business as such business has been
carried on during the year prior to Completion and such rights
and the Company's ability to use such rights will not be
affected by the acquisition of the Company by the Purchaser.
E.2.7 The Warrantors are not aware of any unauthorised use by any
person of any Intellectual Property Rights or confidential
information of the Company.
E.3 COMPUTER KNOW-HOW AND MARKETING INFORMATION
E.3.1 For the purposes of paragraphs E.3.2, E.3.3 and E.3.4 below:
(a) "Computer Know-How" means all information (including that
comprised in or derived from data, discs, tapes, manuals,
source codes, flow-charts and specifications) relating to
the use or programming of any computer which is not
intended by the persons in possession of the information
for use by unauthorised persons and any computer software
in whatever form held; and
(b) "Marketing Information" means all information relating to
the marketing of any products or services (including
customer names and lists, sales targets, sales statistics,
market share statistics, marketing surveys and reports,
marketing research and any advertising or other promotional
materials).
E.3.2 All Computer Know-How and Marketing Information used by the
Company is owned by or is the subject of a valid grant of rights
to the Company and is not subject to any restriction which
materially and adversely affects the Company's ability to use it
for the purposes of its business.
E.3.3 The Company has not disclosed nor is obliged to disclose any
Computer Know- How or Marketing Information of a confidential
nature to any person other than its employees save in the
ordinary course of business.
E.3.4 The Company is not in breach of any agreement under which any
Computer Know-How or Marketing Information was or is to be made
available to it.
E.4 DATA AND RECORDS
E.4.1 All the records and systems (including but not limited to
computer systems), data and information of the Company are
recorded, stored, maintained or operated or otherwise held by
the Company and are not wholly or partly dependent on any
facilities or means (including any electronic, mechanical or
photographic process, computerised or otherwise) which are not
under the exclusive ownership and control of the Company.
E.4.2 The Company has not disclosed to any third party any such
records, control or other systems, data and information as is
referred to in subparagraph E.4.1
45
above save in the ordinary course of business or to its
professional advisers.
E.4.3 As far as the Warrantors are aware the Company has complied with
all relevant requirements of the Data Protection Xxx 0000,
including the following:
(a) the data protection principles established in that Act;
(b) requests from data subjects for access to data held by it;
and
(c) the requirements relating to the registration of data
users.
E.4.4 The Company has not received a notice or allegation from either
the data protection registrar or a data subject alleging
non-compliance with the data protection principles or
prohibiting the transfer of data to a place outside the United
Kingdom.
E.4.5 No individual has claimed or will have the right to claim
compensation from any of the Company under that Act for loss or
unauthorised disclosure of data prior to Completion.
E.5 BUSINESS NAMES
The Company does not carry on business under a name other that its own
corporate name.
E.6 YEAR 2000
E.6.1 All computer software used by the Company is Year 2000 compliant.
46
F. EMPLOYEES
F.1 PARTICULARS OF EMPLOYEES
F.1.1 The persons whose names are set out in the list attached to the
Disclosure Letter are all the employees of the Company and the
particulars of their employment set out in that list are
accurate. No person who was formerly employed by any company has
a right to return to work.
F.1.2 The terms and conditions of employment of all employees of the
Company are set out in the employment contract copies of which
are enclosed with the Disclosure Letter.
F.1.3 All subsisting contracts of employment to which the Company is a
party are terminable by it on three months' notice or less
without compensation (other than compensation in accordance with
the Employment Rights Act 1996).
F.1.4 No employee of the Company has been given notice of termination
of his employment (or had his employment terminated without
notice) since the Accounts Date and no employee of the Company
has left its employment of his own accord since that date or
indicated his intention of doing so.
F.1.5 Full particulars are contained in the Disclosure Letter of any
outstanding offer of employment made to any person by the
Company and there is no person who has accepted an offer of
employment made by the Company but whose employment has not yet
started.
F.1.6 Full particulars are contained in the Disclosure Letter of any
agreement for the provision of consultancy services or the
services of personnel to the Company and of the terms applicable
to the secondment to the Company of any person.
F.2 SALARY COSTS
F.2.1 Since the Accounts Date no change has been made (or agreed) in
the rate of remuneration or the emoluments or pension benefits
of any employee of the Company.
F.2.2 Since the Accounts Date no change has been made (or agreed) in
the rate of remuneration or the emoluments or pension benefits
of any director or ex- director of the Company and no change has
been made (or agreed) in the terms of engagement (including as
to the level of fees) of any director of the Company.
F.3 COMPENSATION AND OTHER SUMS DUE TO EMPLOYEES
F.3.1 The Company does not have any liability to pay compensation for
loss of office or employment to any present or former officer or
employee or to make any
47
payment under the provisions of the Employment Rights Xxx 0000,
the Sex Discrimination Acts 1975 and 1986, the Race Relations
Xxx 0000, the Disability Discrimination Xxx 0000, the Equal Pay
Xxx 0000 and/or Article 119 of the Treaty of Rome and no such
sums have been paid since the Accounts Date.
F.3.2 Except in respect of normal accruals of remuneration or
emoluments of employment, no sum is payable to or for the
benefit of any employee or director of the Company.
F.3.3 The Company has no obligation to make any payment on redundancy
in excess of the statutory redundancy payment and the Company
has not operated any discretionary practice of making any such
excess payments.
F.4 NO BONUS SCHEMES
There is no scheme or arrangement in operation by or in relation to the
Company under which any employee or other person is entitled to a
commission or remuneration of any other sort calculated by reference to
the whole or part of the turnover, profits or sales of the Company.
F.5 LABOUR RELATIONS
F.5.1 There is not and during the three years preceding Completion
there has not been any industrial action affecting the Company
and to the best of the knowledge, information and belief of the
Warrantors there are no facts or circumstances which are likely
to give rise to such industrial action.
F.5.2 The Company is not a party to any collective agreement or trade
dispute (within the meaning of the Trade Union and Labour
Relations (Consolidations) Act 1992)) or any dismissal
procedures agreement (within the meaning of the Employment
Rights Act 1996) or any proceedings before any court or tribunal
under or by virtue of the provisions of the said Act of 1992 and
to the best of the knowledge, information and belief of the
Warrantors there are no facts or circumstances which are likely
to give rise to the Company becoming a party to any such
agreement or becoming involved in any such dispute or
proceedings.
F.5.3 The Company has in all material respects complied with its
obligations to employees and former employees and any relevant
trade union. No claim has been made or threatened against the
Company or against any person whom the Company is or may be
liable to compensate or indemnify and no enquiry or
investigation has been made or threatened by the Commission for
Racial Equality, the Equal Opportunities Commission or any
health and safety enforcement body, in respect of any act,
event, omission or other matter arising out of or in connection
with:
48
(a) any application for employment by any person;
(b) the employment or termination of employment of any person;
(c) any retirement/death/disability benefit or any other
benefit of whatever type;
and, after making due and careful enquiries, the Warrantors are
not aware of any circumstance which may give rise to any such
claim or investigation.
F.6 LOANS TO EMPLOYEES
The Company has not made any loan or advance to any of its present or
future officers or employees which is outstanding.
F.7 NO PENSION SCHEMES
The Company has not in the two years before Completion paid, provided or
contributed towards, and the Company is not under any obligation or
commitment (whether or not legally enforceable) to pay, provide or
contribute towards, any retirement/death/disability benefit for or in
respect of any present or past employee (or any spouse, child or
dependant of any of them) of the Company or of any predecessor in
business of the Company.
49
SCHEDULE 4
THE PROPERTY LICENCE
50
/s/ Xxxx Xxxxxxxx
-----------------------
SIGNED by Xxxx Xxxxxxxx )
in the presence of: )
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Xxxxxxx Xxxxxxxx
--------------------------
SIGNED by Xxxxxxx Xxxxxxxx )
in the presence of: )
Witness Signature:
Witness Address:
Witness Occupation:
/s/ Xxx Xxxxxx
--------------------
SIGNED by Xxx Xxxxxx )
the duly authorised representative of )
The Marquee Group Inc. )
51
