EXHIBIT 10.14
DATED 12/TH/ APRIL 1999
XX. X. XXXXX AND OTHERS
- and -
SKYNET HOLDINGS INC
----------------
TAX COVENANT
----------------
ABX
Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxx
Xxxxxxxxx XX0 0XX
Tel: 00000 000 000
Fax: 00000 000 000
Ref: JDR/NM/9901062
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THIS DEED OF COVENANT is made on 12/th/ April 1999
BETWEEN :
(1) THE PERSONS whose names and addresses are stated in Schedule 1 (the
"COVENANTORS"); and
(2) SKYNET HOLDINGS INC, whose principal place of business is at 000 Xxxxx
Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000, XXX (the "BUYER").
RECITAL
This Deed is entered into pursuant to the Agreement (as defined in clause 1.1
below).
THIS DEED WITNESSES as follows:
1. INTERPRETATION
1.1 In this Deed:
"AGREEMENT" means the agreement dated 12/th/ April 1999 and made
between inter alia the Covenantors and the Buyer for
the acquisition of the entire issued share capital of
the Company
"COMPANY" means Freight on Board International Limited, a company
incorporated in England and Wales (registered no.
01586737 whose registered office is at Xxxx 00,
Xxxxxxxxx Xxxxxxxxxx Xxxxxx, Xxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxx XX0 0XX;
"DEMAND" means the issue of any notice, letter or other document
by or on behalf of any Tax Authority or the taking of
any other action by or on behalf of any Tax Authority
from which notice, letter, document or action it
appears that a Tax Liability is to be, or may come to
be, imposed on any Group Company;
"EVENT" means (without limitation) the death of any person, any
change in the residence of any person for the purposes
of Taxation, any payment, transaction, action, omission
or occurrence of whatever nature or any deemed
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distribution of income, and references to an event
occurring on or before Completion shall include the
combined result of two or more events the first of
which shall have taken place outside the ordinary
course of business of the relevant Group Company and
which shall have occurred on or before Completion, and
that event or those latter events occurring after
Completion shall have taken place inside the ordinary
course of business which shall be deemed for this
purpose to include Completion;
"Group Company" means the Company and any of the Subsidiaries
"Last Accounts" means the audited balance sheet of each Group Company
as at the Last Accounts Date, the audited profit and
loss account of each Group Company for the financial
period ended on the Last Accounts Date, and the audited
consolidated balance sheet as at such date and the
audited consolidated profit and loss account for such
period of the Company and the Subsidiaries and (in each
case) the auditor's and the directors' reports thereon;
"Last Accounts
DATE" means 31/st/ October 1998;
"THE MANAGEMENT
Accounts" means the unaudited consolidated balance sheet and
profit and loss account of the Company in respect of
the period ending 31/st/ January 1999;
"RELIEF" means any relief, allowance or credit in respect of
any Tax or deduction in computing income, profits or
gains for the purposes of any Tax;
"THE SUBSIDIARIES" has the meaning given in the Agreement;
"TAX" AND
"TAXATION" means all forms of taxation, charges, duties, imposts,
withholdings, rates, levies and governmental charges
(including any related fine, penalty, surcharge or
interest and whether
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national, state, provincial or local) of whatever
nature and whatsoever and whenever created, enacted or
imposed, and whether of the United Kingdom or
elsewhere;
"TAX ASSESSMENT" means any assessment, demand or other similar formal
notice of a tax liability issued by or on behalf of any
Tax Authority by virtue of which any Group Company is
liable to make a payment of Tax or will, with the
passing of time, become so liable (in the absence of
any successful application to postpone any such
payment);
"TAX AUTHORITY" means any local, municipal, governmental, state,
federal or other fiscal, revenue, customs or excise
authority, body or official anywhere in the world,
including without limitation the Inland Revenue and HM
Customs & Excise.
Save as otherwise expressly provided, words and expressions defined in the
Agreement shall have the same meaning in this Deed.
1.2 In this Deed:
(a) references to any "TAX LIABILITY" of any Group Company shall mean
both liabilities of the relevant Group Company to make actual
payments of Tax (or amounts in respect of Tax) and also:
(i) the loss, or the setting off against Tax or against income,
profits or gains, of any Relief which would (were it not for the
said loss or setting off) have been available to any Group
Company and which has been taken into account in computing (and
so reducing or obviating the need for) any provision for Tax
including any provision for deferred Tax which appears or would
but for such taking into account have appeared in the Last
Accounts;
(ii) the loss of a right to repayment of Tax which has been treated as
an asset of any Group Company in preparing the Last Accounts or
the setting off of any right to repayment of Tax against any
actual Tax Liability in respect of which the Buyer would, but for
that setting off, have been able to make a claim against the
Covenantors under this Deed; and
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(iii) the setting off against income, profits or gains earned, accrued
or received on or before Completion of any Relief which arises
in respect of an Event occurring after Completion and not in
respect of any Event occurring on or before Completion in
circumstances where, but for such setting off, any Group Company
would have had actual Tax Liability in respect of which the
Buyer would have been able to make a claim against the
Covenantors under this Deed;
(b) in any case falling within any of sub-paragraphs (i), (ii) and (iii)
of clause 1.2(a), the amount that is to be treated for the purposes of
this Deed as a Tax Liability of any Group Company (the "DEEMED TAX
LIABILITY") shall be determined as follows:
(i) in a case which falls within sub-paragraph (i) of clause 1.2(a)
the Deemed Tax Liability shall be the amount of the additional
Tax which any Group Company is (or would but for the
availability of any Relief arising after Completion be) liable
to pay as a result of such loss or setting-off; and that Deemed
Tax Liability shall for the purposes of clause 7 of this Deed be
treated as an actual Tax Liability due and payable on the date
on which such additional Tax is or would have been due and
payable, as the case may be;
(ii) in a case which falls within sub-paragraph (ii) of clause
1.2(a), the Deemed Tax Liability shall be the amount of the
repayment that would have been obtained but for the loss or
setting off mentioned in that sub-paragraph;
(iii) in a case which falls within sub-paragraph (iii) of clause
1.2(a), the Deemed Tax Liability shall be the amount of Tax
which would have been payable by any Group Company but for such
setting-off; and that Deemed Tax Liability shall for the
purposes of clause 7 of this Deed be treated as an actual Tax
Liability due and payable on the date on which the amount of Tax
saved would have been due and payable had it not been saved;
(c) references to:
(i) "INCOME, PROFITS OR GAINS" shall include any other standard or
measure for the purposes of any tax and shall also include any
such income, profits or gains which are deemed to be earned,
accrued or received for the purposes of any Tax;
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(ii) income, profits or gains (as defined in paragraph (i) of this
sub-clause) as being earned, accrued or received on or before a
particular date or in respect of a particular period shall
include income, profits or gains which are deemed to have been
earned, accrued or received on or before that date or in respect
of that period for the purposes of any Tax;
(iii) any payment or distribution as being made on or before a
particular date shall include any payment or distribution which
has fallen due and payable on or before that date;
(iv) any "DIVIDEND" shall include anything which is deemed to be a
dividend or distribution for the purposes of any Tax and shall
also include any other Event which gives rise to an obligation
to account for advance corporation tax or amounts corresponding
to or similar to advance corporation tax.
(d) unless the context otherwise requires, references to:
(i) any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, court,
official or any legal concept or thing shall in respect of any
jurisdiction other than England be deemed to include what most
nearly approximates in that jurisdiction to the English legal
term; and
(ii) "WRITING" shall include any modes of reproducing words in a
legible and non-transitory form;
(e) headings shall be for convenience only and accordingly shall be
disregarded; and
(f) (i) 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 meaning by reason of the fact that
they are preceded by words indicating a particular class of
acts, matters or things; and
(ii) general words shall not be given a restrictive meaning by reason
of the fact that they are followed by particular examples
intended to be embraced by the general words.
2. COVENANT TO PAY
2.1 Subject to the provisions of clause 3 the Covenantors hereby jointly and
severally covenant with the Buyer that they will pay to the Buyer a sum
equal to each of the following:
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(a) any Tax Liability of any Group Company arising:
(i) as a direct or indirect consequence of any Event which occurred
on or before Completion or was deemed to occur on or before
Completion for the purposes of any Tax; or
(ii) in respect of any income, profits or gains which were earned,
accrued or received on or before Completion or in respect of a
period ending on or before Completion;
(b) any Tax Liability of any Group Company arising as a direct or
indirect consequence of any of the following occurring or being deemed
to occur on or before Completion:
(i) the payment of any dividend; or
(ii) the disposal of any asset or the supply (including the
undertaking of an obligation in respect of or the making of
arrangements for any future supply) of any service or business
facility of any kind (including a loan of money or the letting,
hiring or licensing of any tangible or intangible property) in
circumstances where the consideration actually received (if any)
for such disposal or supply is less than the consideration
deemed to have been received for the purposes of any Tax but
only to the extent that the Tax Liability is attributable to the
difference between the consideration (if any) actually received
by any Group Company and the consideration deemed to have been
received for the purposes of any Tax; or
(iii) any Group Company ceasing to be a member of any group or
associated with any other company for the purposes of any Tax;
or
(iv) any Event or the earning of any income, profits or gains which
results in any Group Company becoming liable to pay or bear a
Tax Liability chargeable directly or primarily against or
attributable directly or primarily to another person; or
(v) any other Event which gives rise to a Tax Liability on deemed
(as opposed to actual) income, profits or gains;
(c) any depletion in or reduction in value of the assets or increase in
the liabilities of the Buyer or any Group Company as a result of any
inheritance tax which:
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(i) is at Completion a charge on any of the shares or assets of Buyer
or any Group Company or gives rise to the power to sell, mortgage
or charge any of the shares or assets of the Buyer or any Group
Company; or
(ii) after Completion becomes a charge on or gives rise to a power to
sell, mortgage or charge any of the shares or assets of the Buyer
or any Group Company being a liability in respect of inheritance
tax payable as a result of the death of any person (whenever
occurring) within seven years after a transfer of value or a
deemed transfer of value where such transfer of value or deemed
transfer of value occurred on or before Completion.
For the avoidance of doubt, the assets of the Buyer or any Group
Company are deemed to be depleted by such amount as is necessary to
pay in order to discharge or remove any charge on or power to sell,
mortgage or charge, any of the shares or the assets of the Buyer or
any Group Company, and notwithstanding any provision in this Deed the
Buyer or any Group Company, any Group Company may disregard any right
to pay Tax in instalments in discharging or removing a charge or
power;
(d) any costs and expenses reasonably and properly incurred by the Buyer
or any Group Company in connection with any such Tax Liability or
depletion in or reduction in the value of assets or increase in
liabilities as is mentioned in clauses 2.1(a) to 2.1(c) inclusive or
with any Demand therefor or in taking or defending any action under
this Deed; and
(e) any amount recovered by the Buyer from the Covenantors pursuant to
this Deed shall be treated as a reduction in the Consideration
received by the Covenantors for the Shares under the Agreement.
3. LIMITS ON COVENANT
3.1 The covenant given by clause 2 shall not apply to any claim in respect of
any Tax Liability of any Group Company:
(a) to the extent that allowance provision or reserve in respect of the
matter or thing giving rise to such claim has been provided for,
reserved or noted in the Last Accounts;
(b) to the extent that such Tax Liability would not have arisen but for a
change in the rate of Tax or change in legislation or published
administrative practice made after the date hereof or change in the
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interpretation of the law after the date hereof, or a change by any
Tax Authority in the method of applying or calculating the rate of Tax
after the date hereof, or change made by any Tax Authority in any
extra statutory concession or previously published practice;
(c) to the extent that such Tax Liability would not have arisen but for
(i) any change in the treatment of assets and liabilities or of the
Tax attributable to timing differences (including capital allowances)
in future accounts of any Group Company or (ii) any other change in
the accounting bases upon which any Group Company prepares its future
accounts other than a change required to ensure compliance with the
law or with any Generally Accepted Accounting Practice applicable to
any Group Company at Completion;
(d) to the extent that such Tax Liability would not have arisen or would
have been reduced or eliminated but for a failure on the part of any
Group Company to make any claim, election surrender or disclaimer or
give any notice or consent or do anything after Completion the making
giving or doing of which was taken into account in preparing the Last
Accounts and of which specific notice and details was given to the
Buyer at least 10 business days before the last date on which such
claim, election, surrender, disclaimer, notice or consent could
validly be made or given;
(e) to the extent that such Tax Liability would not have arisen but for
some act, omission, transaction or arrangement whatsoever carried out
at the written request or with the written approval of the Buyer or
its authorised representative prior to Completion or which was
expressly authorised by the Agreement;
(f) to the extent that such Tax Liability arises or is increased as a
result of the withdrawal or postponement by any Group Company, after
Completion of any claim for Relief made on or before Completion;
(g) to the extent that the Buyer has already been compensated by the
Covenantors (pursuant to a claim for a breach of any of the
Warranties) in respect of the same liability;
(h) to the extent that such Tax Liability would not have arisen but for a
voluntary transaction, action or omission carried out or effected by
any Group Company at any time after Completion, other than any such
transaction, action or omission:
(i) carried out or effected pursuant to a legally binding commitment
created on or before Completion; or
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(ii) carried out or effected in either the ordinary course of
business or the ordinary course of disposing of capital assets
of any Group Company; or
(iii) carried out or effected at the written request of the
Covenantors;
(i) to the extent that such Tax Liability arises in consequence of an
Event which has occurred since the Last Accounts Date and before
Completion in the ordinary course of business and for the purpose of
this Deed the following shall not be regarded as occurring in the
ordinary course of business of any Group Company (provided that this
clause 3.1(i) shall not be taken to imply that any Event not included
in the following is thereby to be regarded as occurring in the
ordinary course of business of the relevant Group Company):
(i) any payment of a dividend (including any transaction which is
deemed for any Tax purposes to constitute the payment of a
dividend) or the making of any distribution as defined in Part
VI or Section 418 of ICTA;
(ii) any acquisition, disposal or supply, or deemed acquisition or
supply, of any assets goods services or facilities of whatever
nature for a price or consideration deemed for any Tax purposes
to be different from the price or consideration (if any)
actually received or paid;
(iii) any event giving rise to a liability to Tax under any of the
provisions of Sections 126 to 129 inclusive of and Schedule 23
to the Finance Xxx 0000 or of Part XVII of ICTA (Tax Avoidance);
(iv) any Event which results in any Group Company becoming liable to
pay or bear any Tax which is primarily chargeable against
recoverable from or attributable to another person (other than
Tax required to be deducted or withheld by any Group Company on
making any payment);
(v) any Event giving rise to a liability under Section 419 of ICTA;
(vi) any variation in the share capital of any Group Company or any
alteration of the rights attaching to any shares in the capital
of any Group Company;
(vii) any failure to deduct, account for or pay income tax under the
PAYE regulations or national insurance contributions under
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the applicable regulations;
(viii) any failure to account for or pay any value added tax in
accordance with the Value Added Tax Xxx 0000 and all orders,
provisions, directions, conditions or regulations made or
imposed thereunder
4. RECOVERY FROM OTHER PERSONS
4.1 If any payment becomes due from the Covenantors pursuant to clause 2 and
any Group Company either is immediately entitled at the due date for the
making of that payment to recover from some other person (including any Tax
Authority) any sum in respect of the Tax Liability that has resulted in
that payment becoming due from the Covenantors, or at some subsequent date
becomes entitled to make such a recovery, then the Buyer shall procure that
the relevant Group Company shall promptly notify the Covenantors of its
entitlement and shall, if so required by the Covenantors, provided the
Covenantors meet all reasonable expenses thereby incurred, take all
appropriate steps to enforce that recovery (keeping the Covenantors fully
informed of the progress of any action taken) and shall account to the
Covenantors for whichever is the lesser of:-
(a) any sum so recovered (including any interest or repayment supplement
paid by the Tax Authority or other person on or in respect thereof
less any Tax chargeable on the relevant Group Company in respect of
that interest); and
(b) the amount already paid by the Covenantors pursuant to clause 2 in
respect of the Tax Liability in question.
5. RELIEFS AND CORRESPONDING SAVINGS
5.1 Where a Tax Liability in respect of which payment has been made by the
Covenantors to the Buyer under clause 2 of this Deed has resulted in any
Group Company obtaining a Relief or right to repayment of Tax ("the
Relevant Relief") which would not otherwise have arisen then:
(a) the Relevant Relief shall first be set off against any payment then
due from the Covenantors under this Deed; and
(b) to the extent there is an excess, a refund shall be made to the
Covenantors of any previous payment or payments made by the
Covenantors under this Deed and not previously refunded under this
clause up to the amount of such excess;
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(c) to the extent that the excess referred to in paragraph (b) of this
sub-clause is not exhausted under that paragraph, the remainder of
that excess shall be carried forward and set off against any future
payment or payments which become due from the Covenantors under this
Deed.
5.2 If, at the Covenantors' request and expense, the auditors for the time
being of the Buyer or relevant Group Company determine that any provision
for Tax in the Last Accounts (excluding a provision for deferred Tax) has
proved to be an overprovision then the amount of such overprovision shall
be applied in the same manner as a Relevant Relief would be applied under
paragraph (a), (b) and (c) of clause 5.1
6. CLAIMS PROCEDURE
6.1 Upon the Buyer or any Group Company becoming aware of a Demand relevant for
the purposes of this Deed, the Buyer shall or shall procure that the
relevant Group Company shall so soon as may be practicable (and in any
event at least 10 business days prior to the latest date on which an appeal
against or an application to postpone any Tax due could be made) give
written notice together with such details as are then available to the
Buyer or the relevant Group Company to the Covenantors, and the Buyer shall
or shall procure that the relevant Group Company shall (if the Covenantors
shall first indemnify and secure it against all costs and expenses,
including interest on overdue Tax which may be reasonably incurred thereby)
take such action and give such information and assistance in connection
with its affairs as the Covenantors may reasonably and promptly by written
notice request to avoid, resist, appeal or compromise the Demand; PROVIDED
THAT neither the Buyer nor the relevant Group Company shall be obliged to
appeal against any Tax Assessment raised on it if, having given the
Covenantors written notice of the receipt of that Tax Assessment, it has
not within 5 business days thereafter received preliminary instructions in
writing from the Covenantors, in accordance with the preceding provisions
of this sub-clause, to make that appeal; AND PROVIDED FURTHER THAT neither
the Buyer nor the relevant Group Company shall be obliged to take any
action under this clause which involves contesting any Tax Assessment
before any court or other appellate body (excluding the authority or body
demanding the Tax in question) unless the Covenantors furnish the Buyer or
the relevant Group Company with the written opinion of leading Tax Counsel
to the effect that an appeal against the Tax Assessment in question is a
reasonable course of action given the amounts involved and the likelihood
of success.
7. DUE DATE OF PAYMENT
7.1 Where the Covenantors becomes liable to make any payment pursuant to clause
2 the due date for the making of that payment shall be:
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(a) in a case that involves an actual payment of Tax by any Group Company
the date that is 5 business days before the last date on which the
relevant Group Company would have had to have paid to the appropriate
Tax Authority the Tax that has given rise to the Covenantors'
liability under this Deed in order to avoid incurring a liability to
interest or a charge or penalty in respect of that Tax Liability; or
(b) in a case falling within any of sub-paragraph (i) of clause 1.2(a) or
within the clause 2.1(c) or 2.1(d) the date falling 5 business days
after the date when the Covenantors have been notified by the Buyer or
the relevant Group Company that the auditors for the time being of the
Buyer or the relevant Group Company have (acting reasonably)
certified, at the request of the Buyer or the relevant Group Company,
that the Covenantors have a liability for a determinable amount under
clause 2 or the date on which repayment would have been received.
7.2 If any payment required to be made by the Covenantors under this Deed is
not made by the due date for the making thereof then, except to the extent
that the Covenantors' liability under clause 2 compensates the Buyer for
the late payment by virtue of its extending to interest and penalties, that
payment shall carry interest from that due date until the date when the
payment is actually made at the rate of 2 per cent above the base rate from
time to time of National Westminster Bank PLC.
8. DEDUCTIONS FROM PAYMENTS
8.1 All sums payable by the Covenantors under this Deed shall be paid free and
clear of all deductions or withholdings whatsoever, save only as are
required by law.
8.2 If any deductions or withholdings are required by law to be made from any
of the sums payable as mentioned in sub-clause 8.1 of this Deed, the
Covenantors shall be obliged to pay to the relevant person such sum ("Tax
Payment") as shall, after the deduction or withholding has been made, leave
that person with the same amount as it would have been entitled to receive
in the absence of any such requirement to make a deduction or withholding.
8.3 If any sum payable by the Covenantors under this Deed (other than interest
under clause 7.2 of this Deed) shall be subject to a Tax Liability in the
hands of the recipient, the Covenantors shall be under the same obligation
to make an increased payment in relation to that Tax Liability as if the
liability were a deduction or withholding required by law.
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9. BUYER'S COVENANT
9.1 The Buyer undertakes to the Covenantors to pay to the Covenantors by way of
adjustment to the price paid for the Shares under the Agreement an amount
equal to any liability of the Covenantors, or any other person falling
within Section 767A(2) or 767AA(4) ICTA by virtue of a relationship which
that person has with the Covenantors for corporation tax (and any related
interest, penalties, costs and expenses) assessed on the Covenantors or on
any such person pursuant to Sections 767A, 767AA or 767B ICTA as a result
of any Group Company failing to pay any corporation tax assessed on it;
9.2 The Covenant contained in clause 9.1 shall not apply to any Taxation in
respect of which the Buyer would have a claim under this Deed or to any
Taxation which the Covenantors have recovered from any Group Company under
any statutory right of recovery and the Covenantors shall procure that no
recovery under such statutory right is sought to the extent that payment
has been made to the Covenantors by the Buyer under clause 9.1 in respect
of that Tax.
10. MAXIMUM LIABILITY OF COVENANTORS
The total liability of the Covenantors under the Agreement and this Deed
shall not in any event exceed the aggregate consideration which all the
Sellers receive for their shares under the Agreement and the liability of
each individual Covenantor shall not exceed the following sums:
(a) Xx X.X. Xxxxx (Pounds)1,199,980
(b) Xx X.X. Xxxxxxx (Pounds)150,010
(c) Xx X.X. Xxxx (Pounds)150,010
11. GENERAL
11.1 The following provisions of the Agreement shall be incorporated in this
Deed mutatis mutandis (as nearly as the circumstances permit) as if
specifically set out herein:
Clause 12 - General
Clause 13 - Notices
IN WITNESS whereof this document has been executed as a deed and is delivered on
the day and year first above written.
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SCHEDULE 1
THE COVENANTORS
Name Address
Xxxx Xxxxxxx Xxxxxx Xxxxx Xxxxx Xxxxx
Xxxxxxxxx Xxxx
Xxxxxxxxx
Xxxxxx-xx-Xxxxxx
Xxxx XX0 0XX
Xxxxxxxxxxx Xxxxx Xxxxxxx 0 Xxxxxx Xxxxx
Xxxxxxx
Xxxxxxxxx
XX0 0XX
Xxxxx Xxxxxx Xxxx 0 Xxxxx Xxxxx
Xxxxxxxxxx Xxxxx
Xxxxxx
XX00 0XX
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EXECUTED AND DELIVERED AS A DEED ) /s/ XXXX XXXXX
BY XXXX XXXXXXX XXXXXX XXXXX )
In the presence of: )
Witness: XXXXX XXXXXX, SOLICITOR, XXXXXX
EXECUTED AND DELIVERED AS A DEED ) /s/ C XXXXXXX
BY XXXXXXXXXXX XXXXX XXXXXXX )
In the presence of: )
Witness: XXXXX XXXXXX, SOLICITOR, XXXXXX
EXECUTED AND DELIVERED AS A DEED ) /s/ XX XXXX
BY XXXXX XXXXXX XXXX )
In the presence of: )
Witness: XXXXX XXXXXX, SOLICITOR, XXXXXX
EXECUTED AND DELIVERED AS A DEED
For and on behalf of
SKYNET HOLDINGS INC
By
/s/ XXXXXXXXX XXXXX
-------------------
XXXXXXXXX XXXXX
Director
/s/ XXXXXX X. XXXXXXXX
----------------------
XXXXXX X. XXXXXXXX
Secretary
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