Conformed Copy
--------------
EXHIBIT 2.1
DATED February, 2000
AGREEMENT
between
(1) THE SEVERAL PERSONS
as Vendors
(2) XXXXX.XXX, INC.
as Purchaser
- and -
(3) PARAGON SOFTWARE (HOLDINGS) LIMITED
relating to
the share capital of
PARAGON SOFTWARE (HOLDINGS) LIMITED
Xxxxxx & Xxxxxxx
Solicitors and Registered Foreign Lawyers
00 Xxxxxxxxxxx, Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxx XX0X 0XX
1. DEFINITIONS AND INTERPRETATION...................................... 4
2. CONDITIONS.......................................................... 13
3. SALE AND PURCHASE................................................... 13
4. CONSIDERATION....................................................... 13
5. WAIVERS OF PRE-EMPTION AND DISCHARGE................................ 13
6. COMPLETION.......................................................... 13
7. COMPLETION STATEMENT................................................ 13
8. CONDUCT OF BUSINESS PENDING COMPLETION.............................. 13
9. WARRANTIES.......................................................... 13
10. LIMITATIONS......................................................... 13
11. INDEMNITIES......................................................... 13
12. PROTECTION OF GOODWILL.............................................. 13
13. NO RIGHTS UNDER CONTRACTS
(RIGHTS OF THIRD PARTIES) ACT 1999.................................. 13
14. ANNOUNCEMENTS....................................................... 13
15. IMPLIED COVENANTS FOR TITLE AND FURTHER ASSURANCE................... 13
16. ASSIGNMENT.......................................................... 13
17. ENTIRE AGREEMENT: REMEDIES.......................................... 13
18. WAIVER, VARIATION AND RELEASE....................................... 13
19. COSTS AND EXPENSES.................................................. 13
20. PAYMENTS............................................................ 13
21. NOTICES............................................................. 13
i
22. DEFAULT INTEREST.................................................... 13
23. COUNTERPARTS........................................................ 13
24. INVALIDITY.......................................................... 13
25. AGREEMENT TO CONTINUE IN FULL FORCE AND EFFECT...................... 13
26. CONFIDENTIALITY..................................................... 13
27. GOVERNING LAW AND JURISDICTION...................................... 13
SCHEDULES
SCHEDULE 1 The Vendors
SCHEDULE 2 Directors of the Company and the Subsidiaries
SCHEDULE 3 Part 1 Properties
Part 2 Leases
Part 3 Inferior Leases
SCHEDULE 4 The Subsidiaries
SCHEDULE 5 Part 1 General Warranties
Part 2 Taxation Warranties
SCHEDULE 6 Basis of Preparation of Completion Statement
SCHEDULE 7 Part 1 & 2 Completion
SCHEDULE 8 Intellectual Property
Part 1 Registered Intellectual Property
Part 2 Material Unregistered Intellectual Property
Part 3 Licenses - In
Part 4 Licenses--Out
SCHEDULE 9 Information Technology
Part 1 IT Systems
Part 2 IT Contracts
ii
SCHEDULE 10 Products
SCHEDULE 11 Investment Representations
SCHEDULE 12 Escrow
EXHIBIT A Contracts List
AGREED FORM DOCUMENTS
Employment Agreements
Option Exchange Agreements
Registration Rights Agreement
Tax Deed
iii
THIS AGREEMENT is made on February, 2000
BETWEEN:
(1) THE SEVERAL PERSONS whose respective names and addresses are set out in
column (1) of Part A of Schedule 1 (the "Vendors");
(2) XXXXX.XXX, INC. (a Delaware corporation) whose address is 000 Xxxxxxxxxx
Xxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx 00000 XXX (the "Purchaser"). and
(3) PARAGON SOFTWARE (HOLDINGS) LIMITED whose registered office is at Xxxx 0,
Xx-xxx Xxxxxx, Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxx (the "Company").
WHEREAS:
(A) Paragon Software (Holdings) Limited (the "Company"), a company registered
in England and Wales with number 3476665, has at the date of this Agreement
an authorised share capital of (Pounds)5,000,000 divided into 47,197,222
Ordinary Shares of (Pounds)0.10 each, 1,441,650 'A' Preference Shares of
(Pounds)0.10 each, 1,633,980 'B' Preference Shares of (Pounds)0.10 each and
2,727,148 'C' Preference Shares of (Pounds)0.10 each of which 10,000,000
Ordinary, 1,441,650 "A" Preference, 1,633,980 "B" Preference and 2,727,148
"C" Preference Shares are issued (all fully paid or credited as fully paid)
and are owned by the Vendors in the proportions shown opposite their
respective names in column (2) of Schedule 1.
(B) The Purchaser has offered to purchase the Shares in reliance upon the
warranties and undertakings in this Agreement, and the Vendors have
severally agreed to sell the Shares to the Purchaser for the consideration
and otherwise upon and subject to the terms and conditions of this
Agreement.
WHEREBY IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement the following words and expressions have the
meanings set opposite them:
"Accounts" the Historic Accounts and the Balance Sheet Accounts;
"Accounting relevant statements of standard accounting practice
Standards" (including financial reporting standards) issued
pursuant to section 256, CA 85 by the ASB;
"ASB" Accounting Standards Board Limited (no.2526824) or such
other body prescribed by the Secretary of State from
time to time pursuant to section 256, CA 85;
"Affiliate" in relation to any body corporate, any Holding Company
or subsidiary undertaking of such body corporate or any
subsidiary undertaking of a Holding Company of such
4
body corporate;
"Agreement" this Agreement including its recitals and the
schedules but not the Tax Deed;
"Balance Sheet the consolidated financial statements of the Group
Accounts" prepared as at and for the year ended on the Balance
Sheet Date in accordance with US GAAP and reviewed,
but not audited, by the Company's Auditors;
"Balance Sheet 31 December, 1999;
Date"
"Business" collectively the products developed, under
development, and undertaken, by the Company and each
of the Subsidiaries at the date hereof, including
without limitation, the business of providing
personalization and synchronisation platforms for
mobile and internet devices;
"Business Day" a day (other than a Saturday or Sunday) when banks are
open for a full range of banking business in London;
"CA 85" Companies Xxx 0000;
"CAA" Capital Allowances Xxx 0000;
"Claim" any claim by the Purchaser in connection with this
Agreement or the Tax Deed;
"Company's Xxxxx & Xxxxx, Xxxx Xxxxx, Xxxxxxx XX0 0XX;
Auditors"
"Completion" Completion of the sale and purchase of the Shares
pursuant to this Agreement;
"Completion the completion statement to be prepared in accordance
Statement" with clause 7.1;
"Confidential all confidential information received or obtained as a
Information" result of entering into or performing, or supplied by
or on behalf of a party in the negotiations leading
to, this Agreement and which relates to:
(i) the Company and the Subsidiaries and their
respective Affiliates;
(ii) any aspect of the Business;
(iii) the provisions of this Agreement;
5
(iv) the negotiations relating to this Agreement;
(v) the subject matter of this Agreement; or
(vi) the Purchaser;
"Connected a person connected with any of the Vendors or the
Person" Directors (or any former director of the Company or
any of the Subsidiaries) within the meaning of section
839, ICTA 1988;
"Consideration" the Provisional Consideration, as adjusted pursuant
to the terms of this Agreement;
"Consideration the 3,450,050 shares of unregistered common stock in
Stock" the Purchaser to be issued fully paid to the Vendors
pursuant to clause 4.1;
"Contract" any contract, agreement, obligation, commitment,
understanding, arrangement or liability;
"Copyright" copyright, design rights, moral rights, topography
rights and database rights whether registered or
unregistered (including any applications for
registration of any such thing) and any similar or
analogous rights to any of the foregoing whether
arising or granted under the Law of England, the US or
of any other jurisdiction;
"Covenant the payments totalling US Dollars $4.5 million to be
Sums" made to the Covenantors and others (subject to the
deduction of tax and employee national insurance) as
set out in Part C of Schedule 1;
"Covenantors" those of the persons whose respective names and
addresses are set out in column (1) of Part C of
Schedule 1 who are entitled to a gross payment of
(Pounds)50,000 or more;
"Customer" any person who within the 24 months prior to the date
of this Agreement has been a client or customer of the
Business, or has been canvassed, solicited or
approached to become a client or customer of the
Business;
"Data the Data Protection Xxx 0000 and the Data Protection
Protection Act" Xxx 0000;
"Diligence the two identical sets of files numbered 1 through 9
Files" and the two unnumbered diligence files containing the
offer letters and employment contracts and the share
option agreements collated by or on behalf of the
Warrantors, the outside covers of each of which have
been signed for identification by or on behalf of the
Warrantors and the
6
Purchaser;
"Directors" the directors of the Company and the Subsidiaries named
in Schedule 2;
"Disclosed" fairly disclosed by the Disclosure Documents and by the
disclosures specifically referred to in the Disclosure
Letter and "Disclosure" shall be construed accordingly;
"Disclosure the Disclosure Letter and the Diligence Files;
Documents"
"Disclosure the letter described as such of even date herewith
Letter" addressed by the Warrantors to the Purchaser;
"Employment the employment agreements with the Managers in the
Agreements" agreed terms;
"Encumbrance" any interest or equity of any person (including any
right to acquire, option or right of pre-emption) or
any mortgage, charge, pledge, lien, assignment,
hypothecation, security interest, title retention or
any other security agreement or arrangement;
"ERA" Employment Rights Xxx 0000;
"Escrow Agent" Bank of New York
"Escrow a letter to be agreed by the parties thereto prior to
Letter" Completion so as to put into reasonable effect the
escrow arrangements contemplated by this agreement
between (1) the Escrow Agent (2) the Individual Vendors
and (3) the Purchaser setting out the terms and
conditions upon which the Escrow Stock will be held and
dealt with by the Escrow Agent as set out in paragraph
3 of Schedule 12;
"Escrow Stock" those Consideration Stock referred to in column (4) of
Schedule 1;
"Event" any payment, transaction, act, omission or occurrence
of whatever nature whether or not the Company or the
Purchaser is a party thereto and including:
(a) the execution of this Agreement and completion of
the sale of the Shares to the Purchaser; and
(b) the death of any person;
and references to an Event occurring on or before
Completion shall include an Event deemed, pursuant to
any Taxation Statute, to occur or be treated or
regarded as
7
occurring on or before Completion;
"Expert the independent Queen's Counsel nominated by the
Counsel" Purchaser and agreed to by the Vendors and, in default
of agreement, appointed by the President for the time
being of the Bar Council of England and Wales;
"FA" Finance Act;
"Final in relation to an Outstanding Claim a Settlement of
Determination" that Claim or the determination of that Claim by a
court of competent jurisdiction from which there is no
right of appeal or where neither party appeals within
the permitted time frame;
"Financial a financial year within the meaning ascribed to such
Year" expression by section 223, CA 85;
"GAAP" generally accepted accounting principles of the
relevant country, consistently applied;
"Governmental any government or any government agency, bureau, board,
Authority" commission, court, department, official, political
subdivision, tribunal or other instrumentality of any
government, whether federal, state, municipal or local,
domestic or foreign;
"Group" together the Company and the Subsidiaries;
"Hardware" any and all computer, telecommunications and network
equipment;
"Historic the audited balance sheet as at 31 December, 1998 and
Accounts" the audited profit and loss account for each of the
last three accounting reference periods ended on 31
December, 1998 of the Company and of each of the
Subsidiaries (other than the US Subsidiary), or since
incorporation if the relevant Subsidiary has not been
in existence for three accounting reference periods;
and the notes, reports, statements and other documents
which are or would be required by Law to be annexed to
the accounts of the company concerned and to be sent or
made available to members for such Financial Year, a
copy of each of which has been Disclosed;
"Holding a holding company within the meaning ascribed to such
Company" expression by sections 736 and 736A, CA 85;
"ICTA 1988" Income and Corporation Xxxxx Xxx 0000;
8
"Individual the Vendors other than the Institutional Vendors;
Vendors"
"Individual Titmuss Sainer Dechert, 2 Serjeants Inn, Xxxxxx XX0X
Vendors' 1LT;
Solicitors"
"Indemnities" the indemnities given by the Warrantors in clause 11;
"Initial Cash the payment of $3 million to be made in accordance
Consideration" with clause 4.1;
"Institutional 3i Group plc, Kennet I L.P., Access Technology
Vendors" Partners L.P., Access Technology Partners Brokers Fund
L.P., Xxxxxxxxx & Xxxxx California, Xxxxxxxxx & Xxxxx
Employee Venture Fund, X.X. XX, Xxxxxxxxx & Xxxxx
Paragon Software Investors L.P., Hikari Tsushin Inc
and 3Com Ventures Inc.
"Intellectual Patent Rights, Know-How, Copyright (including rights
Property" in Software) and Trade Marks;
"Intellectual agreements or arrangements relating to the Relevant
Property IP;
Agreements"
"IT Contracts" any agreements or arrangements with third parties
relating to IT Systems or IT Services, including all
hire purchase contracts or leases of Hardware owned or
used by the Company or any of the Subsidiaries,
licences of Software used by the Company or any of the
Subsidiaries, and other IT procurement;
"IP Materials" all documents, records, tapes, discs, diskettes and
any other materials whatsoever containing Copyright
works, Know-How or Software;
"IT Services" any services relating to the IT Systems or to any
other aspect of the Company's or any of the
Subsidiaries' data processing or data transfer
requirements, including facilities management, bureau
services, hardware maintenance, software development
or support, consultancy, source code deposit, recovery
and network services;
"IT Systems" Hardware, firmware and/or Software owned or used by
the Company or any of the Subsidiaries;
"ITA" Inheritance Tax Xxx 0000;
9
"Know-How" trade secrets and confidential business information
including details of supply arrangements, customer
lists and pricing policy; sales targets, sales
statistics, market share statistics, marketing surveys
and reports; marketing research; unpatented technical
and other information including inventions.
discoveries, processes and procedures, ideas, concepts,
formulae, specifications, procedures for experiments
and tests and results of experimentation and testing;
information comprised in Software in all cases, to the
extent that such information is confidential; together
with rights under all Law protecting the same including
by any action for breach of confidence and any similar
or analogous rights to any of the foregoing whether
arising or granted under the Law of England, the US or
any other jurisdiction;
"Law" the common law and any constitutional provision,
statute, statutory instrument, enactment, provision,
decree, writ or other law, ordinance, rule, directive,
regulation, instrument bye-law, SSAP, FRS, UITF, SAP or
published interpretation of any Governmental Authority
and any decree, injunction, judgment, order, ruling or
assessment, of any applicable jurisdiction, whether
federal, state, provincial or local, domestic or
foreign, including without limitation the United
Kingdom, the European Union and the US (and its
constituent states);
"Legal and full and unrestricted title with the benefit of quiet
Beneficial possession and free from lawful interruption and
Title" disturbance;
"Losses" actions, proceedings, losses, damages, liabilities,
claims, costs and expenses including fines, penalties,
clean-up costs, reasonable legal and other professional
fees and any VAT payable in relation to any such
matter, circumstance or item except to the extent that
the Purchaser obtains credit for such VAT as input tax;
"Managers" Xxxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxxx Xxxxxxxxx, Xxxxx
Xxxxxxx, Xxxxx Xxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxxx and
Xxxxxxx Xxxxx;
"Option the holders of the Options, as listed in Part B of
Holders" Schedule 1;
"Options" the options to subscribe for Ordinary Shares as listed
in Part B of Schedule 1 pursuant to the forms of
agreement with the Company annexed to the Disclosure
Letter;
"Options agreements for the release of Options and their
10
Exchange replacement by options to subscribe for shares of
Agreements" common stock of the Purchaser in the agreed forms;
"Ordinary the 10,000,000 issued Ordinary Shares of (Pounds)0.10
Shares" each in the capital of the Company;
"Outstanding a Claim against the Individual Vendors arising during
Claim" the Escrow Period and outstanding as at the expiry of
the Escrow Period which has been adjudged and confirmed
in writing to the Individual Vendors and the Purchaser
during the Escrow Period to be a prima facie Claim by
an Expert Counsel; and the "Value" of an Outstanding
Claim means the expected value of the Claim as
confirmed by that Expert Counsel in his written
opinion;
"Patent patent applications or patents, author certificates,
Rights" inventor certificates, utility certificates,
improvement patents and models and certificates of
addition including any divisions, renewals,
continuations, refilings, confirmations-in-part,
substitutions, registrations, confirmations, additions,
extensions or reissues thereof and any similar or
analogous rights to any of the foregoing whether
arising or granted under the Law of England, the US or
any other jurisdiction;
"Pension agreements or arrangements (whether legally enforceable
Schemes" or not) for the payment of any pensions, allowances,
lump sums or other like benefits on retirement or on
death or during periods of sickness or disablement for
the benefit of any present or former director, officer
or employee of the Company or of any of the
Subsidiaries or for the benefit of the dependants of
any such persons;
"Preference the 1,441,650 issued 'A' Preference Shares of
Shares" (Pounds)0.10 each, the 1,633,980 issued 'B' Preference
Shares of (Pounds)0.10 each and the 2,727,148 issued
'C' Preference Shares of (Pounds)0.10 each in the
capital of the company;
"Proceedings" any proceeding, suit or action arising out of or in
connection with this Agreement;
"Products" the products of the Company described in Schedule 10;
"Properties" the properties of which short particulars are set out
in Schedule 3 and the expression "Property" shall mean,
where the context so admits, any one or more of such
properties and any part or parts thereof;
"Provisional the consideration payable for the Shares as specified
in
11
Consideration" clause 4.1;
"Purchaser's KPMG;
Accountants"
"Purchaser's the Purchaser and its Affiliates;
Group"
"Purchaser's Xxxxxx & Xxxxxxx of 00 Xxxxxxxxxxx, Xxxxxx XX0X 0XX;
Solicitors"
"Registered the Intellectual Property owned by the Company or any
Intellectual of the Subsidiaries and listed in Part 1 of
Property" Schedule 8;
"Registration the Registration Rights Agreement in the agreed form;
Rights
Agreement"
"Relevant IP" all Registered Intellectual Property and Unregistered
Intellectual Property;
"Relevant $118.93 per share of Common Stock of the Purchaser
Price" which shall be adjusted as necessary after Completion
to reflect any stock dividends, stock splits, reverse
stock splits, consolidations, mergers or reorganisation
of the Purchaser's Common Stock, as determined from
time to time by the board of directors of the
Purchaser, acting in good faith and confirmed by the
auditors of the Purchaser to be fair and reasonable;
"RTPA" Restrictive Trade Practices Xxx 0000;
"Shares" together, the Ordinary Shares and the Preference
Shares;
"Software" any and all computer programs in both source and object
code form, including all modules, routines and sub-
routines thereof and all source and other preparatory
materials relating thereto, including user
requirements, functional specifications and programming
specifications, ideas, principles, programming
languages, algorithms, flow charts, logic, logic
diagrams, orthographic representations, file
structures, coding sheets, coding and including any
manuals or other documentation relating thereto and
computer generated works and any and all third party
software and MIS software;
"SSAP" a statement of standard accounting practice or
financial reporting standard in force at the date
hereof as issued by the Institute of Chartered
Accountants in England and
12
Wales adopted by the ASB as an Accounting Standard;
"subsidiary" a subsidiary within the meaning ascribed to such
expression by sections 736 and 736A, CA 85;
"subsidiary a subsidiary undertaking within the meaning ascribed to
undertaking" such expression by section 258, CA 85;
"Subsidiaries" the subsidiaries of the Company named in Schedule 4;
"Substance" includes (without limitation) any solid, fibre, dust,
liquid, gas, noise or electro-magnetic or other
radiation;
"Taxation" or (a) all forms of taxation (other than rates) whether
"Tax" chargeable directly or primarily against or
attributable directly or primarily to any member of the
Group or any other person including any charge, tax,
duty, levy, impost, withholding, liability, local,
foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including
taxes under U.S. Internal Revenue Code Section 59A),
customs duties, capital stock, franchise profits,
social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on
minimum, estimated, escheat/remittance of unclaimed
property, or other tax of any kind whatsoever, wherever
chargeable imposed for support of national, state,
federal, provincial, municipal or local government or
any other person and whether of the UK, the US or other
jurisdiction; and (b) any penalty, fine, surcharge,
interest, costs or addition thereto, whether disputed
or not, payable in connection with any taxation within
(a) above;
"Taxation any Governmental Authority or other authority
Authority" whatsoever competent to impose any Taxation whether in
the United Kingdom, the US or elsewhere;
"Tax Deed" the deed in the agreed terms containing certain
taxation covenants;
"Taxation any directive, statute, enactment, Law or regulation,
Statute" wheresoever enacted or issued, in force or entered into
prior to or on Completion providing for or imposing any
Taxation and shall include orders, regulations,
instruments, bye-laws or other subordinate legislation
made under the relevant statute or statutory provision
and any directive, statute, enactment, Law, order,
regulation or provision which amends, extends,
consolidates or replaces
13
the same or which has been amended, extended,
consolidated or replaced by the same provided that such
amendment, extension, consolidation, or replacement is
in force or was entered into on or prior to Completion;
"Tax the warranties set out in Part 2 of Schedule 5;
Warranties"
"TCGA" Taxation of Chargeable Gains Xxx 0000;
"TMA" Taxes Management Xxx 0000;
"Trade Marks" Trade or service xxxx applications or registered
trade or service marks, registered protected
designations of origin, registered protected geographic
origins, refilings, renewals or reissues thereof,
unregistered trade or service marks, domain names, get-
up and company names and business names in each case
with any and all associated goodwill and all rights or
forms of protection of a similar or analogous nature
including rights which protect goodwill whether arising
or granted under the Law of England, the US or of any
other jurisdiction;
"Trade Union" as defined in section 1, TULRCA;
"Trustee The Xxxxxxx Trustee Company Limited;
Vendor"
"TULRCA" Trade Union and Labour Relations (Consolidation) Xxx
0000;
"TUPE" Transfer of Undertakings (Protection of Employment)
Regulations 1981 (as amended);
"UITF" Urgent Issues Task Force;
"UK" United Kingdom;
"Unregistered Intellectual Property owned, licensed, used or
Intellectual exploited by the Company or any of the Subsidiaries
Property" other than Registered Intellectual Property;
"US" United States of America;
"US Lease" 0000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxxxxxxxxx,
for which short particulars are set out in Schedule 3
relating to Property in the US;
"US the Subsidiary Paragon Software, Inc.;
Subsidiary"
14
"VAT" Value Added Tax;
"VATA" Value Added Tax Xxx 0000;
"Vendors" the Individual Vendors and the Institutional Vendors;
"Warranties" the warranties set out in Schedule 5 but not, for the
avoidance of doubt, the representations, warranties,
covenants and undertakings set out in clause 9.8;
"Warrantors" the Individual Vendors;
"Warranty a Claim under the Warranties;
Claim"
"in the agreed in the form agreed between the Vendors and the
terms" Purchaser and signed for the purposes of
identification by or on behalf of each party.
1.2 The table of contents and headings in this Agreement are inserted for
convenience only and shall not affect its construction.
1.3 Unless the context otherwise requires words denoting the singular
shall include the plural and vice versa, references to any gender
shall include all other genders and references to persons shall
include bodies corporate, unincorporated associations and
partnerships, in each case whether or not having a separate legal
personality. References to the word "include" or "including" are to be
construed without limitation.
1.4 References to recitals, schedules and clauses are to recitals and
schedules to and clauses of this Agreement unless otherwise specified
and references within a schedule to paragraphs are to paragraphs of
that schedule unless otherwise specified.
1.5 References in this Agreement to any Law include a reference to that
Law, as amended, extended, consolidated or replaced from time to time
(whether before or after the date of this Agreement) and include any
order, regulation, instrument or other subordinate legislation made
under the relevant Law, except to the extent that any amendment,
extension, consolidation or replacement coming into force after the
date of this Agreement would increase or extend the liability of the
parties to one another.
1.6 Words and expressions defined in the Tax Deed shall to the extent not
inconsistent bear the same meanings in this Agreement.
1.7 References to any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, court, official or
any legal concept, state of affairs or thing shall in respect of any
jurisdiction other than England be deemed to include that which most
approximates in that jurisdiction to the English legal term.
15
1.8 Any reference to "writing" or "written" includes faxes and any non-
transitory form of visible reproduction of words.
1.9 Any agreement, covenant, representation, warranty, undertaking or
liability arising under this Agreement on the part of two or more
Vendors shall be deemed to be made or given by such persons severally
and the respective liability of the Warrantors for breach of the
Warranties or under the Tax Deed shall be several and proportionate to
the Consideration received by them respectively.
1.10 References to the Vendors or to the Warrantors shall be deemed to be
to each of them severally.
1.11 In Schedule 5, references to the Company shall be deemed to include a
corresponding reference to the Subsidiaries and each of them severally
and references to the Accounts are to those of the Company or the
relevant Subsidiary, as the case may be.
1.12 References to times of the day are to London time and references to a
day are to a period of 24 hours running from midnight.
1.13 References to '(Pounds)' or 'pounds sterling' are to the lawful
currency of the United Kingdom. References to "$" or US Dollars are to
United States Dollars.
2. CONDITIONS
2.1 Conditions precedent
Subject to clause 2.4, this Agreement is subject to and conditional
upon:
2.1.1 no Governmental Authority or regulatory body or trade union
or court or any other person or organisation in any
jurisdiction having, by the date on which all the other
conditions set out in this clause 2.1 have either been
satisfied or waived in accordance with clause 2.2;
(a) instituted or threatened any action, suit or
investigation to restrain, prohibit or otherwise
challenge or interfere with the transactions proposed
under this Agreement or any part thereof;
(b) threatened to take any action as a result or in
anticipation of the implementation of such transactions
or any part thereof; or
(c) proposed or enacted any statute or regulation which
would prohibit, materially restrict or materially delay
implementation of such transactions or any part thereof
or the operations of the Company or of any of the
Subsidiaries;
2.1.2 there having been no material adverse change in the
Business, assets, results of operations or financial
condition of the Group since the Balance Sheet Date;
16
2.1.3 there having been no change to the capital structure of the
Group other than pursuant to this Agreement and any other
agreement or deed executed pursuant thereto;
2.1.4 each of the Covenantors entering into undertakings to the
Purchaser in the terms of clause 12 as if they were
Individual Vendors in consideration of the payment of the
Covenant Sum;
2.1.5 consolidated accounts of the Group as at and for the year
ended on the Balance Sheet Date complying with the
requirements of CA 85, audited in accordance with UK GAAP
and applicable Laws, together with the notes, reports,
statements and other documents which are required by Law to
be annexed thereto being delivered to the Purchaser;
2.1.6 each Option Holder having executed and delivered to the
Purchaser an Options Exchange Agreement in the appropriate
agreed form,; and
2.1.7 each of the Managers having executed and delivered to the
Purchaser the Employment Agreements.
2.2 Waiver of conditions precedent
Notwithstanding clause 2.1, the Purchaser shall be entitled by notice in
writing given to the Vendors to waive (to such extent as it may think fit)
compliance with the conditions stated in clauses 2.1.3 through 2.1.8.
2.3 Time limit for satisfaction of conditions
The parties (other than the Institutional Vendors) shall respectively
use all reasonable endeavours to procure that the conditions stated in
clause 2.1 are fulfilled as soon as practicable and in any event on or
before 15 April, 2000 but if the conditions in clause 2.1 have not
been fulfilled or waived by that date (or by such later date as may be
agreed in writing between the Vendors and the Purchaser), then, save
for accrued rights arising in respect of the operative provisions
specified in clause 2.4, clauses 2 (except this clause 2.3) to 12
(inclusive) of this Agreement shall thereupon become null and void ab
initio and none of the parties shall have any rights against any other
party hereunder except for failure to use all such reasonable
endeavours.
2.4 Operative provisions
Notwithstanding clause 2.1, other than clauses 11 and 12 inclusive,
this Agreement shall come into force on the execution and exchange of
this Agreement and the remainder of this Agreement shall come into
force on the fulfilment and/or waiver of all conditions stated in
clause 2.1.
3. SALE AND PURCHASE
3.1 Obligation to sell and purchase
17
Subject to the terms of this Agreement, each of the Vendors shall sell
or procure to be sold legal and beneficial title to, with full title
guarantee, that number of Shares set opposite his name in column (2)
of Part A of Schedule 1 and the Purchaser shall purchase such
interests in the same together with all rights attaching thereto at
the date of this Agreement.
3.2 Dividends and distributions
The Purchaser shall be entitled to receive all dividends and
distributions declared, paid or made by the Company on or after the
date of this Agreement.
3.3 Sale of all Shares
The Purchaser shall not be obliged to complete the purchase of any of
the Shares unless the purchase of all the Shares is completed
simultaneously.
4. CONSIDERATION
4.1 Provisional Consideration
The Shares shall be sold in exchange for the issue (subject to clause
4.4) to the Vendors of the Consideration Stock set forth against their
respective names in column (3) of Schedule 1 and the payment of $3
million to Xx Xxxxxx.
4.2 Consideration Stock
When issued, the Consideration Stock shall be fully paid and non-
assessable.
4.3 Reduction in consideration
Any payment made by the Vendors in respect of a breach of clause 9.8
or by the Individual Vendors or the Warrantors in respect of a breach
of any Warranties or payment made under the Indemnities or the Tax
Deed, or any other payment made pursuant to this Agreement, shall be
and shall be deemed to be pro tanto a reduction in the price paid for
the Shares under this Agreement by the person making that payment.
4.4 Escrow
At Completion, the Escrow Stock shall be issued and the provisions of
the Escrow Letter shall have effect from Completion.
4.5 Additional Consideration
The Purchaser shall pay to Xx Xxxxx Xxxxxx, by way of additional
consideration, a cash sums of US$17 million in two instalments as
follows ;(a) US$7 million on the earlier of 31 August, 2000 and such
date as the Purchaser first registers shares of its common stock under
the Securities Act of 1933 of the USA pursuant to a registration on
Form S-3 and such registration becoming effective "the First
Registration Date") and (b) US $10 million on
18
the earlier of the First Registration Date or first anniversary of the
date of this Agreement . provided that, in respect of either or both
instalments:
4.5.1 Xx Xxxxxx may elect for such additional consideration to be
satisfied by the issue to him of shares of Common Stock in
the Purchaser to the value of the relevant instalment, taken
at the then market value of such Common Stock
4.5.2 the Purchaser may elect to satisfy such additional
consideration by the issue to Xx Xxxxxx of shares of Common
Stock in the Purchaser to the value of the relevant
instalment, taken at the then market value of such Common
Stock, provided that the Common Stock issued is, if required
by Xx Xxxxxx, immediately sold on his behalf for an amount
of not less than such value.
5. WAIVERS OF PRE-EMPTION AND DISCHARGE
5.1 Each of the Vendors hereby waives all rights of pre-emption or other
rights over any of the Shares conferred on him by the articles of
association of the Company or in any other way.
5.2 The Vendors and the Company agree that the subscription and
shareholders' agreement entered into between the Vendors and the
Company and dated 21 October, 1999 (the "Shareholders' Agreement")
shall automatically terminate with effect from Completion. Each party
to the Shareholders' Agreement agrees and confirms that as from
Completion, no party shall have any claim of any kind whatsoever
(whether outstanding or in the future) in relation to the
Shareholders' Agreement against the Company or any of its subsidiaries
and the Company shall be discharged from all obligations thereunder.
6. COMPLETION
6.1 Time and location
Subject as provided in clause 6.4, Completion shall take place at the
offices of the Purchaser's Solicitors on the second Business Day after
all the conditions in clause 2.1 have been fulfilled or waived or at
such other place and/or on such other date as may be agreed in writing
between the Purchaser and the Vendors.
6.2 Vendors' obligations
At Completion:
6.2.1 the Individual Vendors shall produce evidence of the
fulfilment of the conditions stated in clauses 2.1.5, 2.1.6
and 2.1.7;
6.2.2 the Individual Vendors shall deliver to the Purchaser each
of the documents listed in Part 1 of Schedule 7;
19
6.2.3 the Individual Vendors shall procure that all necessary
steps are taken properly to effect the matters listed in
Part 2 of Schedule 7 at board meetings of the Company and
each of the Subsidiaries and shall deliver to the Purchaser
duly signed minutes of all such board meetings; and
6.2.4 the Institutional Vendors shall (to the extent that it
applies to each of them) produce each of the documents
listed in paragraphs 1.2, 1.9, 1.12 and (where relevant)
1.15 of Part 1 of Schedule 7.
6.3 Purchaser's obligations
Subject to the Vendors complying with their obligations under clause
6.2 the Purchaser shall at Completion:
6.3.1 issue and deliver certificates representing the
Consideration Stock in the names of the persons entitled
thereto (other than the Escrow Stock), in the case of the
Individual Vendors, to the Individual Vendors' Solicitors
and, in the case of the Institutional Vendors, to such other
persons as they may each nominate in writing who are
respectively irrevocably authorised to receive the same and
whose receipt shall be an effective discharge of the
Purchaser's obligations under this clause 6.3.1;
6.3.2 issue and deliver the Escrow Stock to the Escrow Agent;
6.3.3 deliver to the Vendors a facsimile letter from the transfer
agent of the Purchaser confirming issuance of the
Consideration Stock;
6.3.4 pay the Initial Cash Consideration to the Individual
Vendors' Solicitors by bank transfer which payment shall
constitute a full discharge of the Purchaser's liability to
pay such sum;
6.3.5 deliver to the Vendors the Registration Rights Agreement and
a counterpart Tax Deed duly executed by the Purchaser;
6.3.6 pay to the Individual Vendors' Solicitors by way of bank
transfer the Covenant Sums (net of tax and employee national
insurance contributions) for the account of the persons
specified in Part C of Schedule 1, which payment shall
constitute a full discharge of the Purchaser's liability to
pay the Covenant Sums; and
6.3.7 grant to the relevant employees the options to subscribe for
shares of common stock of the Purchaser provided for in the
Options Exchange Agreements.
6.4 Vendors' failure to comply
If in any material respect the provisions of clause 6.2 and Schedule 7
are not complied with on the date of Completion applicable under
clause 6.1, the Purchaser shall not be obliged to complete this
Agreement and may:
20
6.4.1 defer Completion to a date not more than twenty-eight days
after the date set by clause 6.1 (and so that the provisions
of this clause 6.4 shall apply to Completion as so
deferred);
6.4.2 proceed to Completion so far as practicable and without
prejudice to its rights under this Agreement;
6.4.3 rescind this Agreement without prejudice to its rights and
remedies under this Agreement; or
6.4.4 waive all or any of the requirements contained in clause 6.2
at its discretion.
6.5 Company records
Upon Completion the Individual Vendors shall, and shall procure that
any other person shall, without delay send to such address as the
Purchaser may direct, all records, correspondence, documents, files,
memoranda and other papers relating to the Company and each of the
Subsidiaries or the Business not kept at any of the Properties.
7. COMPLETION STATEMENT
7.1 Preparation of Completion Statement
7.1.1 Forthwith after Completion, the Purchaser shall procure that
the Company shall prepare a Completion Statement for the
Group as at the close of business on the business day
immediately prior to the date of Completion and the
Purchaser shall submit it to the Individual Vendors for
review within 45 days after Completion.
7.1.2 The Completion Statement shall consist of a consolidated
balance sheet for the Group as at the close of business on
the business day immediately prior to the date of Completion
and a statement setting forth the net trading losses
incurred in the ordinary course of business of the Group
between January 1, 2000 and the close of business on the
business day immediately prior to the Completion Date (the
"Net Trading Losses"). The Completion Statement shall be
------------------
prepared in accordance with the principles set out in
Schedule 7.
7.1.3 Unless within 30 days after receipt of the Completion
Statement pursuant to clause 7.1.1 the Individual Vendors
notify the Purchaser in writing of any disagreement or
difference of opinion relating to the Completion Statement,
including full particulars of the amount of any disagreement
and the reasons for it, the parties shall be deemed to have
accepted such Completion Statement as final and binding.
7.1.4 If within the period of 30 days referred to in clause 7.1.3
the Individual Vendors notify the Purchaser of such
disagreement or
21
difference of opinion relating to the Completion Statement
("Notice of Disagreement") and if they are able to resolve
such disagreement or difference of opinion within 30 days of
the Notice of Disagreement, the parties shall be deemed to
have accepted such accounts (with any agreed amendments) as
final and binding.
7.1.5 If the Purchaser and the Individual Vendors are unable to
reach agreement within 30 days of the Notice of
Disagreement, within a further 20 days, at the option of
either party, the remaining matters in dispute shall be
referred to the decision of a "big 5" firm of independent
chartered accountants (the "Independent Accountant") to be
appointed (in default of nomination by agreement between the
Purchaser and the Individual Vendors) by the President for
the time being of the Institute of Chartered Accountants in
England and Wales on the following basis.
7.1.6 For each remaining matter in dispute, the Purchaser and the
Individual Vendors will each submit to the Independent
Accountant within 10 days of his appointment a written
statement setting forth such party's proposed resolution and
any supporting data and analysis.
7.1.7 The Independent Accountant shall act as an expert and not as
an arbitrator, the Arbitration Xxx 0000 shall not apply and
his decision shall (in the absence of manifest error) be
final and binding on the Purchaser and the Individual
Vendors for the purposes of Completion Statement. The costs
of the Independent Accountant and of each party for
presenting its case to the Independent Accountant shall be
apportioned between the Purchaser and the Individual Vendors
as the Independent Accountant shall decide.
7.1.8 The Purchaser shall give the Individual Vendors reasonable
access to the books and records of the Company in order to
enable the Individual Vendors to review the Completion
Statement delivered pursuant to clause 7.1.4.
7.1.9 Each of the Individual Vendors hereby appoints Xx Xxxxx
Xxxxxx to act on their behalf as their agent to review and
agree the Completion Statement pursuant to this clause 7.1.
Xx Xxxxx Xxxxxx shall have authority to bind all the
Individual Vendors and the references in clause 7.1 to the
Individual Vendors shall be deemed to be references to Xx
Xxxxx Xxxxxx only.
7.2 Adjustment of Provisional Consideration
The Provisional Consideration shall be adjusted after Completion in
accordance with the following provisions of this clause 7.2.
7.2.1 If the net assets of the Group as shown by the Completion
Statement are more than US Dollars $100,000 less than the
net
22
assets of the Group of (Pounds)7,505,195 as shown by the
Balance Sheet Accounts, the Individual Vendors shall pay to
the Purchaser a sum equal to:
(a) the amount (if any) by which the net assets as shown by
the Completion Statement are less (Pounds)7,505,195;
less
----
(b) the amount of the Net Trading Losses as determined or
agreed pursuant to clause 7.1.
7.2.2 Any amounts to be paid under clause 7.2.1 shall firstly be
satisfied by the cancellation of Escrow Stock in accordance
with Schedule 12 and thereafter by cancellation of
Consideration Stock held by the Individual Vendors within 14
days after the date on which the Completion Accounts have
been agreed or settled (whether under clause 7.1.5, 7.1.6 or
by virtue of a decision of the Independent Accountant or
otherwise).
8. CONDUCT OF BUSINESS PENDING COMPLETION
8.1 Each of the Individual Vendors hereby undertakes to the Purchaser
(acting for itself and as trustee for the Company and the
Subsidiaries) that in the period prior to Completion:
8.1.1 the Business will be carried on as a going concern in the
normal course;
8.1.2 no physical assets of the Company or of any of the
Subsidiaries shall be removed from any of the Properties
save in the ordinary course of normal day to day trading;
8.1.3 it will use all reasonable endeavours to maintain the trade
and trade connections of the Group;
8.1.4 it shall promptly give to the Purchaser full details of any
material changes in the Business, financial position and/or
assets of the Group;
8.1.5 the Company and each of the Subsidiaries shall maintain in
force policies of insurance with limits of indemnity at
least equal to, and otherwise on terms no less favourable
than, those policies of insurance currently maintained by
the Company and the Subsidiaries;
8.1.6 no amendment shall be made to any of the Pension Schemes
(except an amendment made solely to comply with legislative
requirements); and
8.1.7 (except to comply with any obligation imposed by Law or an
existing contractual obligation which has been Disclosed
(except
23
for sub-clauses (h) and (i) below)) neither the Company nor
any of the Subsidiaries shall:
(a) enter into, modify or agree to terminate any Contract or
incur any capital expenditure;
(b) appoint or employ any new employees or consultants;
(c) alter materially, or agree to alter materially, the terms
and conditions of employment (including benefits) of any
of its employees, nor dismiss any of its employees and no
Vendor shall directly or indirectly induce or endeavour to
induce any of such employees to terminate their employment
prior to Completion;
(d) dispose of any material assets used or required for the
operation of the Business or enter into any other
transaction otherwise than in the ordinary course of
business;
(e) create any Encumbrance over any of its assets or its
undertaking nor give any guarantees or indemnities in
respect of any third party;
(f) institute, settle or agree to settle any legal proceedings
relating to the Business;
(g) grant or modify or agree to terminate any rights or enter
into any agreement relating to Intellectual Property or
otherwise permit any of its rights relating to
Intellectual Property to lapse;
(h) incur or pay any management charge or similar charge to
any Vendor;
(i) incur any liabilities to any Vendor and no Vendor shall
incur any liabilities to the Company or any Subsidiary; or
(j) enter into or modify any subsisting agreement with any
Trade Union;
provided that the Vendors and the Group shall be entitled
to do any of the things specified in clauses 8.1.8(a)-(j)
(inclusive) with the prior written consent of any one of
Xxxxx Xxxxxxxx, Xxxx Xxxxx and Xxxxxxx Xxxx on behalf of
the Purchaser which consent shall not be unreasonably
withheld or delayed.
9. WARRANTIES
9.1 Extent of Warranties
In consideration of the Purchaser agreeing to purchase the Shares on
the terms contained in this Agreement, the Warrantors hereby:
24
9.1.1 in relation to the Company and each of the Subsidiaries
warrant, represent and undertake to the Purchaser
contracting for itself and for any permitted successor in
title to the Shares in the terms set out in Schedule 5;
9.1.2 in relation to the Company and each of the Subsidiaries
warrant, represent and undertake to the Purchaser
contracting as referred to in clause 9.1.1 that the
Warranties will be true and accurate and not misleading and
fulfilled down to Completion in all material respects
(unless the relevant Warranty is qualified as to
materiality, in which case such Warranty will be true and
accurate subject to such qualification) as if they had been
made or given at Completion and on the basis that a
reference to the actual time of Completion were substituted
for any express or implied reference to the time of this
Agreement;
9.1.3 undertake that (save only as may be necessary to give effect
to this Agreement) they shall not, and shall procure (as far
as they can) that the Company and the Subsidiaries shall
take all reasonable steps so as not, prior to Completion, to
do any act or thing or omit to do any act or thing the
commission or omission of which would constitute a breach of
any of the Warranties if they were given at Completion or
which would make any of the Warranties untrue or inaccurate
or misleading if they were so given on the basis mentioned
in clause 9.1.2;
9.1.4 without restricting the rights of the Purchaser or any
successor in title to the Shares or their ability to claim
damages on any basis available to them in the event of any
breach or non-fulfilment of any of the Warranties, undertake
to the Purchaser contracting as aforesaid that the
Warrantors will on demand pay to the Purchaser or such
successors:
(a) the full amount of any shortfall or diminution in the
value of any assets of the Company or any of the
Subsidiaries or of the Business and an amount equal to
any other loss suffered or incurred by the Purchaser,
the Company, any of the Subsidiaries or any such
successor as a result of or in relation to any act,
matter, thing or circumstance constituting a breach or
non-fulfilment of any of the Warranties; and
(b) all proper and reasonable costs, expenses and
disbursements suffered or incurred by the Purchaser,
the Company, any of the Subsidiaries or any such
successor directly or indirectly as a result of or in
relation to any breach or nonfulfilment of any of the
Warranties;
provided that any amount so payable shall be increased so as
to ensure that the net amount received by the Purchaser or
any such
25
successor shall after Taxation be equal to that which would
have been received had the payment and any increased payment
not been subject to Taxation;
9.1.5 further undertake to the Purchaser that upon any of them
becoming aware prior to Completion of the impending or
threatened occurrence or non-occurrence of any matter, event
or circumstance (including any omission to act) which would
or might reasonably be expected to cause or constitute a
breach (or which would have caused or constituted a breach
had such event occurred or been known to any of them prior
to the date of this Agreement) of any of the Warranties or
which would or might make any of the Warranties inaccurate
or misleading in any material respect or which would or
might give rise to a claim under the Indemnities or Tax Deed
(whether or not then executed) they will promptly give
written notice of such event to the Purchaser before
Completion with sufficient details as is available to them
to enable the Purchaser to assess accurately the impact of
such event and if so requested by the Purchaser use all
reasonable endeavours promptly to prevent or remedy the
same.
9.2 Obligation to make enquiries
In relation to any matter warranted "so far as the Warrantors are
aware", such Warranty shall be deemed to be given to the best of the
knowledge, information and belief of each of the Warrantors after
making due and careful enquiries of (except where stated otherwise)
Xxxxx Xxxxxx, Xxxx Xxxxx, Xxxxxx Xxxxxxx and Xxxxxx Xxxxx.
9.3 Investigation by Purchaser
None of the Warranties or the Indemnities or the Tax Deed shall be
deemed in any way modified or discharged by reason of any
investigation or inquiry made or to be made by or on behalf of the
Purchaser, and no information relating to the Company or to any of the
Subsidiaries of which the Purchaser has knowledge (actual or
constructive) other than by reason of its being Disclosed shall
prejudice any claim which the Purchaser shall be entitled to bring or
shall operate to reduce any amount recoverable by the Purchaser under
this Agreement; provided that the Purchaser shall not be entitled to
bring any claim in relation to any breach of which it was actually
aware prior to Completion which but for this proviso would entitle the
Purchaser to bring such a claim.
9.4 Information supplied by the Company and Subsidiaries
Any information supplied by or on behalf of the Company or on behalf
of any of the Subsidiaries (or by any officer, employee or agent of
any of them) to the Warrantors or their advisers in connection with
the Warranties, the Indemnities or the Tax Deed or the information
Disclosed in the Disclosure Documents shall not constitute a warranty,
representation or guarantee as to
26
the accuracy of such information in favour of the Warrantors and the
Warrantors hereby undertake to the Purchaser to waive any and all
claims which they might otherwise have against the Company or any of
the Subsidiaries or against any officer, employee or agent of any of
them in respect of such claims but so that this shall not preclude any
Warrantor from claiming against the other Warrantor under any right of
contribution or indemnity to which he may be entitled.
9.5 Separate and independent warranties
Each of the Warranties set out in the separate paragraphs of Schedule
5 shall be separate and independent and save as expressly otherwise
provided shall not be limited by reference to any other such Warranty
or by anything in this Agreement, the Disclosure Documents or the Tax
Deed.
9.6 [Intentionally left blank]
9.7 Pre-Completion material breach
If it is found on or prior to Completion that any of the Warranties is
in any material respect untrue, misleading or incorrect or if a claim
may be made under the Indemnities which is material in the context of
the transactions contemplated by this Agreement or if the Purchaser
becomes aware that the Vendors are in material breach of any other
term of this Agreement which is material in the context of this sale,
the Purchaser shall be entitled by notice in writing to the Vendors to
rescind this Agreement at any time prior to Completion whereupon the
obligations hereunder of the parties shall automatically terminate to
the intent that no party shall have any claim or right of action
against another save and provided always that the rights and
liabilities of the parties which have accrued prior to termination
shall continue to subsist.
If the Purchaser does not elect to rescind this Agreement, then the
Purchaser shall have no claim or right to claim under this Agreement
or otherwise howsoever against the Vendors in relation to the facts
and circumstances known to the Purchaser which gave rise to a right to
rescind this Agreement as a consequence of this clause 9.7.
9.8 Vendors' Title and Capacity Warranties
In consideration of the Purchaser agreeing to purchase the Shares on
the terms contained in this Agreement, each Vendor hereby represents,
warrants, covenants and undertakes as follows:
9.8.1 such Vendor has full power to enter into and perform this
Agreement and this Agreement constitutes a binding
obligation of such Vendor in accordance with its terms;
27
9.8.2 such Vendor owns the legal and (other than the Trustee
Vendor) beneficial title to the Shares set out opposite such
Vendor's name in column (2) of Schedule 1;
9.8.3 such Vendor is entitled to sell and transfer the Shares set
out opposite such Vendor's name in column (2) of Schedule 1
to the Purchaser with full title guarantee as such term is
expressed to have effect pursuant to clause 15 and otherwise
on the terms set out in this Agreement.
9.9 Limitations on Vendors' Title and Capacity Warranties
The maximum liability of any Vendor for breach of the representations,
warranties, covenants and undertakings set forth in clause 9.8 shall
not exceed the value at the date of the claim of the Consideration
Stock received by such Vendor. For the avoidance of doubt, the
limitation on liability of the Warrantors and other provisions set out
in clause 10 of this Agreement shall not apply in the case of any
breach of clause 9.8.
10. LIMITATIONS
10.1 The liability of the Warrantors (if any) pursuant to the Warranties
(and, where expressly stated, under this Agreement and the Tax Deed)
shall be limited in accordance with the following provisions of this
Clause notwithstanding any other provision of this Agreement.
10.1.1 The liability of the Warrantors (if any) under the
Warranties (other than the Warranties set out in paragraphs
2.1, 2.4.1, 2.4.2 and 6.1 of Part 1 of Schedule 5) (a) in
the case of the Warranties set out in Part 2 of Schedule 5
shall cease on the third anniversary of the Completion Date
and (b) in the case of the remaining Warranties shall cease
on the first anniversary of the Completion Date save as
regards any alleged breach of any of the Warranties in
respect of which notice in writing (containing details of
the event or circumstance giving rise to such breach or
claim, the nature thereof and the estimated total amount of
liability therefor) shall have been served on the Warrantors
prior to the relevant date;
10.1.2 Any claim shall, if it has not been previously satisfied or
withdrawn, be deemed to have been withdrawn and shall become
fully barred and unenforceable (and no new claim may be made
in respect of the facts giving rise to such withdrawn claim)
on the expiry of the period of six months commencing on the
date on which notice of the claim shall be given in
accordance with this Agreement unless by then proceedings in
respect of that claim shall have been issued and served upon
the Warrantors.
28
10.1.3 The Warrantors shall not be liable for breach of the
Warranties or under the Tax Deed unless the aggregate
liability of the Warrantors thereunder exceeds US$3 million;
10.1.4 The liability of each Individual Vendor for breach of the
Warranties (or, following Completion, in the case of Trustee
Vendor for any obligation under this Agreement or under the
Tax Deed shall not in any event exceed the value of the
Consideration Stock received by that Vendor (valued at the
Relevant Price) and such liability shall be satisfied fully
by the delivery up to the Purchaser by the relevant
Warrantor of such number of shares of common stock of the
Purchaser (comprising all or part of the Consideration
Stock) as shall equal the amount of such liability valued as
aforesaid. For the avoidance of doubt, the Purchaser shall
not have recourse in any circumstance to any other asset of
the relevant Warrantor and shall only have recourse to the
Consideration Stock in the manner set out in this clause;
10.1.5 The Purchaser shall not make any claim against the
Warrantors under this agreement or the Tax Deed unless the
amount that would otherwise be recoverable from the
Warrantors (but for this clause 10.1.5) in respect of the
claim (when aggregated with any other claims arising from
the same facts or circumstances as relate to, or the same
conduct that gives rise to, that claim exceeds $75,000.
10.1.6 The Warrantors shall not be liable to satisfy any breach or
claim if and to the extent that any breach or claim is based
upon a liability which is contingent only unless and until
such contingent liability becomes an actual liability and is
due and payable; but this sub-clause shall not operate to
avoid any claim made in respect of a contingent liability of
which notice is given within the applicable time limits
referred to in this sub-clause together with such material
details relating to that claim of which the Purchaser shall
be aware when giving it.
10.1.7 No representations, warranties or undertakings, express or
implied, statutory or otherwise, made by or on behalf of any
of the Warrantors to any other of the parties in connection
with or arising out of the acquisition of the Shares and
which are not contained in this Agreement or any other
documents which this Agreement expressly requires shall be
executed (together "the Agreed Documents") shall (save in
the event of fraud) give rise to any liability on the part
of the maker or makers of any such representations,
warranties or undertakings.
10.1.8 The Purchaser confirms that it has not relied on any
representation, warranty or undertaking of any Warrantor
which is not contained in the Agreed Documents.
29
10.1.9 The Purchaser agrees that its only remedies in relation to
the Agreed Documents shall be for breach of contract and it
irrevocably and unconditionally waives any right it may have
to claim damages for any pre-contractual misrepresentation
in relation to the subject-matter of the Agreed Documents
unless such misrepresentation was made fraudulently.
10.1.10 The Purchaser shall not be entitled to rescind this
agreement after Completion in any circumstances whatsoever.
10.1.11 The Purchaser shall have no claim if and to the extent that
any breach or claim occurs as a result of any legislation or
administrative practice (whether of the United Kingdom or
otherwise) not in force at the date of Completion which
takes effect retrospectively or occurs as a result of the
alteration of any legislation, including without limitation,
any change in the basis or method of calculation of or any
increase in the rates of Taxation in force at the date of
Completion.
10.1.12 The Warrantors shall be under no liability in respect of any
matters resulting from a change in accounting or in Taxation
policy or practice of the Purchaser or any member of the
Group including the method of submission of Taxation returns
introduced since or having effect after Completion.
10.1.13 If the Purchaser or the Group shall be entitled to recover
any sum (or claim reimbursement of any sum) from an insurer
or some other person by reason of or in respect of the
matter giving rise to a claim against the Warrantors the
Purchaser shall (and it shall procure that the Company and
the Subsidiaries shall) take such steps to enforce such
recovery or reimbursement as the Warrantors may reasonably
request provided that (i) the Purchaser, the Company and the
Subsidiaries are indemnified to their reasonable
satisfaction against all reasonable costs and expenses for
which the Purchaser or the Company or the Subsidiaries may
become liable as a consequence of taking such steps as the
Warrantors shall so request; and (ii) (save in the case of
an insurance claim) the action requested will not, in the
reasonable judgement of the Purchaser, be likely to have a
material adverse effect on the business of the Purchaser or
the Group; and (iii) the Warrantors have accepted liability
in respect of the claim;
10.1.14 The Warrantors shall have no liability in respect of any
claim to the extent that an allowance, provision or reserve
in respect of the matters to which the liability relates
shall be made in or the same shall be reflected in the
Completion Accounts.
10.2 If the Warrantors pay to the Purchaser an amount in respect of any
liability and the Purchaser subsequently recovers from a third party a
sum which is referable to that liability, the Purchaser shall promptly
repay to the Warrantors
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so much of the amount paid by them as does not exceed the sum
recovered from the third party less all reasonable costs, charges and
expenses incurred by the Purchaser, the Company or the Subsidiaries or
any of them (as the case may be) in recovering that sum from the third
party and any Taxation payable by any such company on that sum other
than a claim in respect of the Tax Warranties in which event Clause
7.2 of the Tax Deed shall apply.
10.3 Any liability of the Warrantors shall be computed after taking into
account any related corresponding savings by the Purchaser or its
successors in title and/or the Company or any Subsidiary including,
without prejudice to the generality of the foregoing, relating to
Taxation.
10.4 The Warrantors shall not be liable for any breach of the Warranties to
the extent that the facts or circumstances with respect to the breach
are Disclosed in the Disclosure Letter.
10.5 The Warrantors shall have no liability to the extent that the
circumstances giving rise to a particular claim would not have arisen
but for any voluntary act, omission, transaction or arrangement after
Completion of the Company or any of the Subsidiaries or the Purchaser
or any person connected with either any of them (applying for this
purpose section 839 of the Taxes Act to determine whether any person
is connected with another) and their directors, employees or agents
otherwise than in the ordinary and normal course of business of the
Company and of the Subsidiaries as presently carried on or pursuant to
a legally binding obligation made prior to the date of this Agreement
or outside the ordinary and normal course of business but which has
been Disclosed to the Purchaser.
10.6 The amount of the Warrantor's liability in respect of any matter shall
be reduced by the amount (if any) by which any provision for such
matter in the Accounts shall at the date of any claim relating to such
matter be confirmed by the auditors for the time being of the Company
at the request of any party to be an over-provision.
10.7 In calculating any damages payable to the Purchaser as a result of the
breach of any of the Warranties the Purchaser agrees that it shall not
be entitled to argue that the value of Shares would have exceeded the
Consideration had there been no breach of Warranty.
10.8 If any fact or circumstance comes to the notice of the Purchaser or
the Group which might constitute or give rise to a claim the Purchaser
shall:
10.8.1 forthwith notify the Warrantors giving full details so far
as practicable of the claim;
10.8.2 keep the Warrantors informed of all material developments in
relation to the claim; and
10.8.3 make or procure to be made available to the Warrantors or
their duly authorised agents on reasonable notice during
normal business
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hours all relevant books of account, records and
correspondence of the Company and the Subsidiaries for the
purposes of enabling the Warrantors to ascertain or extract
any information relevant to the claim.
10.9 If the Purchaser or the Group shall receive any claim ("Third Party
Claim") which shall be made by a third party against the Group,
which might constitute or give rise to a liability pursuant to this
Agreement the Purchaser shall (subject to being indemnified and
secured to its reasonable satisfaction against all reasonable costs
and expenses for which it or the Group may become liable):-
10.9.1 take such action as the Warrantors may reasonably request to
avoid, dispute, resist, appeal, compromise or defend or
mitigate any such Third Party Claims;
10.9.2 not make any admission of or settle or compromise any
liability which the Company may have in relation to the
Third Party claim without the prior written consent of the
Warrantors, such consent not to be unreasonably withheld or
delayed; and
10.9.3 if so required by the Warrantors in writing retain
solicitors chosen by the Warrantors to proceed on behalf of
the Purchaser of the Company in relation to the Third Party
Claim in accordance with the instructions of the Warrantors
and give to such solicitors all and every assistance and
information as they may require.
10.10 Duty to mitigate
For the avoidance of doubt it is hereby specifically agreed that
nothing in this Agreement shall in any way restrict or limit the
general obligation of the Purchaser to mitigate any loss or damage
which it may suffer in consequence of any matter giving rise to a
Claim (or capable of doing so).
10.11 No double recovery
To the extent that the Purchaser has received payment in respect of
a Claim under the Tax Deed, it shall not have a Claim in respect of
the same matter under the Warranties.
11. INDEMNITIES
11.1 Matters indemnified against
The Individual Vendors undertake to indemnify and keep the Purchaser
indemnified from and against and in respect of all Losses which may
be suffered or incurred by the Purchaser or the Company or any
Subsidiary arising directly or indirectly out of or in connection
with:
11.1.1 any failure of any Products to be Year 2000 Compliant;
23
11.1.2 in relation to any Contract of any member of the Group of
the type described in Warranty 15.4 of which true and
accurate copies have not been Disclosed in the Disclosure
Documents; and
11.1.3 any breach of the warranty set out in paragraph 2.4.1 of
Schedule 5; and
11.1.4 any claim made by Mr Xxxx Cable in relation to, or arising
from, the termination of his employment, which is not
provided for in the Completion Statement.
11.2 Application of clause 10
For the avoidance of doubt, the provisions of clause 10 (other than
clause 10.1.4 which shall apply) shall not apply to this clause 11.
12. PROTECTION OF GOODWILL
12.1 Covenants
As further consideration for the Purchaser agreeing to purchase the
Shares on the terms contained in this Agreement, and in consideration
of the Purchaser agreeing to pay the Covenant Sums, and with the
intent of assuring to the Purchaser the full benefit and value of the
goodwill and connections of the Group and as a constituent part of the
sale of the Shares, the Individual Vendors (but, in the case of the
Trustee Vendor, only in its capacity as trustee of the Xxxxxxx Trust)
hereby undertake (binding themselves and each of their Affiliates to
the Purchaser (contracting for itself and on behalf of the Company and
of each of the Subsidiaries and for any successor in title to the
Shares) that (except as directors or employees of the Company or of
any of the Subsidiaries or with the written consent of the Purchaser)
neither they nor their Affiliates shall whether on their own behalf or
with or on behalf of any person and whether directly or indirectly by
any person or business controlled by them or any Connected Person:
12.1.1 in the period from Completion to the second anniversary
thereof, carry on or be employed, engaged, concerned,
interested or in any way assist anywhere in the world which
is in competition with all or part of the Business provided
that nothing in this clause 12.1.1 shall prevent the
Individual Vendors nor any of their Subsidiaries from
holding for investment purposes only any units of an
authorised unit trust and/or not more than 3% of any class
of the issued share or loan capital of any company quoted on
a recognised investment exchange (as defined in the
Financial Services Act 1986);
12.1.2 in the period from Completion to the second anniversary
thereof, canvass, solicit or approach or cause to be
canvassed, solicited or approached (in relation to a
business which competes with all or part of the Business)
the custom of any Customer;
33
12.1.3 in the period from Completion to the second anniversary
thereof, interfere or seek to interfere or take such steps
as may interfere with supplies to the Company and/or any of
the Subsidiaries from any suppliers who shall have been
supplying goods or services to the Company or to any of the
Subsidiaries for use in connection with the Business at any
time during the period of 24 months prior to the date of
Completion;
12.1.4 in the period from Completion to the second anniversary
thereof, offer employment to or employ or offer to conclude
any Contract of services with employees of the Company or of
any of the Subsidiaries or procure or facilitate the making
of such an offer by any person, firm or company other than
as a result of a bona fide response to an advertisement or
entice or endeavour to entice any employees of the Company
or of any of the Subsidiaries to terminate their employment
with the Company or any of the Subsidiaries;
12.1.5 at any time after Completion use as a trade or business name
or xxxx or domain name or carry on a business under a title
containing the word 'Paragon' or any other word(s)
resembling the same; or
12.1.6 at any time after Completion disclose to any person
whatsoever or use to the detriment of the Company or any
Subsidiary or otherwise make use of, or through any failure
to exercise all due care and diligence cause any
unauthorised use of, any Confidential Information including
Know-How relating or belonging to the Company or to any of
the Subsidiaries or in respect of which the Company or any
of the Subsidiaries is bound by an obligation of confidence
to a third party save as required by Law or by any court of
competent jurisdiction.
Each undertaking contained in this clause 12.1 shall be read and
construed independently of the other undertakings herein as an
entirely separate and severable undertaking.
12.2 Severability of covenants
Whilst the undertakings in clause 12.1 are considered by the parties
to be reasonable in all the circumstances, if any one or more should
for any reason be held to be invalid but would have been held to be
valid if part of the wording thereof was deleted or the period thereof
reduced or the range of activities or area covered thereby reduced in
scope, the said undertakings shall apply with the minimum
modifications necessary to make them valid and effective.
12.3 Information in the public domain
34
The restriction contained in clause 12.1.6 shall not extend to any
confidential or secret information which may come into the public
domain otherwise than through the default of any of the Vendors or
Covenantors or in the circumstances referred to in Clause 26.2.
13. NO RIGHTS UNDER CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
A person who is not a party to this Agreement shall have no right under the
Contracts (Right of Third Parties) Xxx 0000 to enforce any of its terms.
14. ANNOUNCEMENTS
14.1 Restrictions on announcements
No press conference, announcement or other communication concerning
Confidential Information or the transactions referred to in this
Agreement, or in connection with the Group or otherwise relating to
the financial condition or trading or financial prospects of the
Group, shall be made or despatched by the Vendors or their agents,
employees or advisers to any third party without the prior written
consent of the Purchaser save as may be required by any:
14.1.1 Law;
14.1.2 existing contractual arrangements; or
14.1.3 any applicable Governmental Authority or regulatory
authority to which any of the Vendors are subject where such
requirement has the force of Law,
provided such communication shall be made only after consultation with
the Purchaser.
14.2 Time limit
The restrictions contained in this clause 14 shall continue to apply
for a period of 2 years from Completion.
Clause 14.1 shall not apply to any press release, announcement or
other comment made by the Vendors concerning the transactions referred
to in this Agreement made with the consent of the Purchaser, such
consent not to be unreasonably withheld.
14.3 Legal and regulatory requirements
The Purchaser and each of the Vendors undertake to provide all such
information known to him or it or which on reasonable enquiry ought to
be known to him or as may reasonably be required by the Vendors or the
Purchaser in relation to the Group or any member of it for the purpose
of complying with the requirements of Law or of any Governmental
Authority to
35
which any of the parties is subject where such requirement has the
force of Law.
15. IMPLIED COVENANTS FOR TITLE AND FURTHER ASSURANCE
15.1 Implied covenants for title
The Law of Property (Miscellaneous Provisions) Xxx 0000 (LPMPA)
applies to all dispositions of property made under or pursuant to this
Agreement save that the word "reasonably" shall be deleted from the
covenant set out in section 2(1)(b), LPMPA, and the covenant set out
in section 3(1), LPMPA shall not be qualified by the words "other than
any charges, encumbrances or rights which that person does not and
could not reasonably be expected to know about".
15.2 Further assurance
In addition to clause 15.1, the Vendors shall, from time to time on
being required to do so by the Purchaser, now or at any time in the
future, do or procure the doing of all such acts and/or execute or
procure the execution of all such documents in a form satisfactory to
the Purchaser as the Purchaser may reasonably consider necessary for
giving full effect to this Agreement and securing to the Purchaser the
full benefit of the rights, powers and remedies conferred upon the
Purchaser in this Agreement at the reasonable cost and expense of the
Vendors.
15.3 Registration
From and after the date of this Agreement, and for a period of one
year following Completion, Xx Xxxxx Xxxxxx shall promptly provide all
such information, documentation and other assistance as may reasonably
be required by the Purchaser in connection with any registration or
sale of any of its shares of Common Stock in the United States.
16. ASSIGNMENT
16.1 Limited assignment
No party (unless expressly provided herein) may assign the benefit of
this Agreement whether absolutely or by way of security except (in the
case of the Purchaser only) by way of an absolute assignment following
Completion to an Affiliate of the Purchaser (and provided that the
Purchaser shall not be released from any of its obligations hereunder)
and further provided that if such Affiliate shall cease to be an
Affiliate of the Purchaser, it shall forthwith reassign the benefit of
the Agreement to the Purchaser. Subject to the Registration Rights
Agreement, nothing in this clause 16.1 shall restrict the ability of
any Vendor to transfer his Consideration Stock after Completion
provided further that (a) the Trustee Vendor may assign the benefit of
this Agreement to another trust company to which it has transferred
its Consideration Stock and which trustee has agreed in writing to be
bound by
36
the provisions of this Agreement (and all other outstanding agreements
referred to herein) and (b) if the Trustee Vendor shall transfer the
Consideration Stock to other trustees, such trustees shall agree in
writing to be bound by the provisions of clause 12.
16.2 Successors in title
Subject to clause 16.1, this Agreement shall be binding upon and enure
for the benefit of the personal representatives and permitted assigns
and successors in title of each of the parties and references to the
parties shall be construed accordingly.
17. ENTIRE AGREEMENT: REMEDIES
17.1 Entire agreement
This Agreement together with any documents referred to herein
constitutes the whole and only agreement between the parties relating
to the subject matter hereof and supersedes and extinguishes any prior
drafts, previous agreements, undertakings, representations, warranties
and arrangements of any nature whatsoever, whether or not in writing
between the parties, in connection with the subject matter hereof.
17.2 Non-exclusion of fraud
Nothing in this Agreement, the Tax Deed or in any other document
referred to herein shall be read or construed as excluding any
liability or remedy as a result of fraud.
18. WAIVER, VARIATION AND RELEASE
18.1 No waiver by omission, delay or partial exercise
No omission to exercise or delay in exercising on the part of any
party to this Agreement any right, power or remedy provided by Law or
under this Agreement shall constitute a waiver of such right, power or
remedy or any other right, power or remedy or impair such right, power
or remedy. No single or partial exercise of any such right, power or
remedy shall preclude or impair any other or further exercise thereof
or the exercise of any other right, power or remedy provided by Law or
under this Agreement.
18.2 Specific waivers to be in writing
Any waiver of any right, power or remedy under this Agreement must be
in writing and may be given subject to any conditions thought fit by
the grantor. Unless otherwise expressly stated, any waiver shall be
effective only in the instance and only for the purpose for which it
is given.
18.3 Variations to be in writing
37
No variation to this Agreement shall be of any effect unless it is
agreed in writing and signed by or on behalf of each party.
18.4 Non-release of all Vendors or Warrantors
Any liability to the Purchaser under this Agreement or under the Tax
Deed (when executed) may in whole or in part be released, compounded
or compromised or time or indulgence given by the Purchaser in its
absolute discretion as regards any of the Vendors or Warrantors under
such liability without in any way prejudicing or affecting its rights
against any other or others of the Vendors or Warrantors under the
same or like liability, whether joint or several or otherwise.
19. COSTS AND EXPENSES
19.1 Payment of Costs
The Purchaser shall on Completion settle accounts submitted to it in
accordance with a costs schedule initialled by or on behalf of Xx
Xxxxx Xxxxxx and the Purchaser. Subject thereto and save as otherwise
stated in this Agreement, each party shall pay its own costs and
expenses in relation to the negotiation, preparation, execution and
carrying into effect of this Agreement and other agreements forming
part of the transaction.
19.2 Company and Subsidiaries to pay no costs.
For the avoidance of doubt, neither the Company nor any of the
Subsidiaries shall pay any costs or expenses in connection with any
investigation of the affairs of the Group or the negotiation,
preparation, execution and carrying into effect of this Agreement, the
Tax Deed and the other transactions contemplated hereby.
20. PAYMENTS
All payments to be made under this Agreement and/or the Tax Deed shall be
made in full without any set-off or counterclaim and free from any
deduction or withholding save as may be required by Law in which event such
deduction or withholding shall not exceed the minimum amount which it is
required by Law to deduct or withhold and the payer will simultaneously pay
to the payee such additional amounts as will result in the receipt by the
payee of a net amount equal to the full amount which would otherwise have
been receivable had no such deduction or withholding been required.
21. NOTICES
21.1 Form of notices
Any communication to be given in connection with the matters
contemplated by this Agreement shall except where expressly provided
otherwise be in writing and shall either be delivered by hand or
facsimile transmission. Delivery by courier shall be regarded as
delivery by hand.
38
21.2 Address and facsimile
Such communication shall be sent to the address or facsimile number
(if any) of the Vendors as referred to in Schedule 1 of this Agreement
or to such other address or facsimile number as may previously have
been communicated to the Purchaser in accordance with this clause.
Each communication shall be marked for the attention of the relevant
person. In the case of communication to the Purchaser such
communications shall be sent to the address or facsimile number set
out below or to such other address or facsimile number as may have
been previously communicated to the Vendors in accordance with this
clause.
Purchaser - facsimile number x0 000 000 0000 For the attention of
General Counsel
3i - UK facsimile number 01189 584340 For the attention of Trevor Hope
cc. 3i Legal facsimile 0121 609 3643 For the attention of Xxxx
Decasare
Trustee Vendor facsimile number 01624 662249F For the attention of Xxx
Xxxxxx
21.3 Deemed time of service
A communication shall be deemed to have been served:
21.3.1 if delivered by hand at the address referred to in clause
21.2, at the time of delivery;
21.3.2 if sent by facsimile to the number referred to in clause
21.2, at the time of completion of transmission by the
sender.
If a communication would otherwise be deemed to have been delivered
outside normal business hours (being 9:30 a.m. to 5:30 p.m. on a
Business Day) in the time zone of the location of the recipient under
the preceding provisions of this clause, it shall be deemed to have
been delivered at the next opening of such business hours in such
location.
21.4 Proof of service
In proving service of the communication, it shall be sufficient to
show that delivery by hand was made or that the facsimile was
despatched and a confirmatory transmission report received.
21.5 Change of details
A party may notify the other parties to this Agreement of a change to
its name, relevant person, address in the United Kingdom or facsimile
number for the purposes of clause 21.1 Provided that such notification
shall only be effective on:
39
21.5.1 the date specified in the notification as the date on which
the change is to take place; or
21.5.2 if no date is specified or the date specified is less than
five clear Business Days after the date on which notice is
deemed to have been served, the date falling five clear
Business Days after notice of any such change is deemed to
have been given.
21.6 Applicability to Proceedings
For the avoidance of doubt, the parties agree that the preceding
provisions of this clause 21 shall apply in relation to the service of
any writ, summons, order, judgment or other document relating to or in
connection with any Proceedings. The Trustee Vendor hereby appoints
Messrs. Xxxxxxxx Xxxxxx as its agent for service of process. The
Purchaser hereby appoints Xxxxx.xxx (Europe) Limited, an English
Company, as its agent for service of process at its registered office.
22. DEFAULT INTEREST
22.1 Interest on late payment
If a party which is required to pay any sum under this Agreement fails
to pay any sum payable by it under this Agreement on the due date for
payment (the "defaulting party"), it shall pay interest on such sum
for the period from and including the due date up to the date of
actual payment (after as well as before judgment) in accordance with
this clause.
22.2 Amount
The defaulting party shall pay interest at the rate which is the
aggregate of 2% per annum and the base rate from time to time of
Barclays Bank plc.
22.3 Basis of payment
Interest under this clause shall accrue from day to day and shall be
paid by the defaulting party payable monthly in arrears.
23. COUNTERPARTS
23.1 Execution in counterparts
This Agreement may be executed in any number of counterparts and by
the parties on different counterparts, but shall not be effective
until each party has executed at least one counterpart.
23.2 One agreement
Each counterpart shall constitute an original of this Agreement but
all the counterparts shall together constitute one and the same
agreement.
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24. INVALIDITY
Each of the provisions of this Agreement is severable. If any such
provision is or becomes illegal, invalid or unenforceable in any respect
under the Law of any jurisdiction, the legality, validity or enforceability
in that jurisdiction of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
25. AGREEMENT TO CONTINUE IN FULL FORCE AND EFFECT
This Agreement together with the Tax Deed shall, to the extent that it
remains to be performed, continue in full force and effect notwithstanding
Completion.
26. CONFIDENTIALITY
26.1 Prohibition on disclosure
Each of the Vendors hereby undertakes with the Purchaser that it shall
both during and after the term of this Agreement preserve the
confidentiality of, and not directly or indirectly reveal, report,
publish, disclose or transfer or use for its own or any other purposes
Confidential Information except:
26.1.1 in the circumstances set out in clause 26.2;
26.1.2 to the extent otherwise expressly permitted by this
Agreement; or
26.1.3 with the prior consent in writing of the party to whose
affairs such Confidential Information relates.
26.2 Permitted disclosures
The circumstances referred to in clause 26.1.1 are:
26.2.1 where the Confidential Information, before it is furnished
to any of the Vendors, is in the public domain;
26.2.2 where the Confidential Information, after it is furnished to
any of the Vendors, enters the public domain otherwise than
as a result of (i) a breach by any of the Vendors of its
obligations in this clause 26 or (ii) a breach by the person
who disclosed that Confidential Information of a
confidentiality obligation and any of the Vendors is aware
of such breach;
26.2.3 if and to the extent the Vendors make disclosure of the
Confidential Information to any person:
(a) in compliance with any requirement of Law;
(b) in response to a requirement of any applicable
Governmental Authority or regulatory authority to which
the Vendors are subject where such requirement has the
force of Law;
41
(c) in order to obtain tax or other clearances or consents
from the Inland Revenue or other relevant taxing or
Governmental Authorities; or
(d) to the professional advisers of the Vendors.
provided that any such information disclosable pursuant to paragraphs
(a), (b) or (c) of clause 26.2.3 shall be disclosed only to the extent
required by Law and only after consultation with the Purchaser.
26.3 No time limit
The restrictions contained in this clause shall continue to apply
after Completion without limit in time.
27. GOVERNING LAW AND JURISDICTION
27.1 English law
This Agreement shall be governed by and construed in accordance with
English law.
27.2 Courts of England
The parties to this Agreement irrevocably agree that the courts of
England shall have exclusive jurisdiction to settle any dispute which
may arise out of or in connection with this Agreement and that
accordingly any Proceedings may be brought in such courts.
27.3 Each party irrevocably waives any objection which it might at any time
have to the Courts of England being nominated as the forum to hear and
decide any Proceedings and to settle any disputes brought in any court
referred to in this clause 27 shall be conclusive and binding upon the
parties and may be enforced in the courts of any other jurisdiction.
27.4 Without prejudice to any other permitted mode of service the parties
agree that service of any writ, notice or other document for the
purposes of any proceedings begun in England shall be duly served upon
it if delivered personally or sent by registered post in accordance
with clause 21.
AS WITNESS the hands of the parties or their duly authorised representatives on
the date first appearing at the head of this Agreement.
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SCHEDULE 5
The Warranties
(Note that under clause 1.10 references herein to the Company shall be
deemed to include a corresponding reference to the Subsidiaries and each of
them severally and references to the Accounts are to those of the Company
or the relevant Subsidiary, as the case may be.)
Part 1
General warranties
1. Preliminary
1.1 Information
1.1.1 The facts set out in the recitals and Schedules 1, 2, 3, 4, 8, 9 and
10 are true and accurate and not misleading in any material respect.
1.1.2 The Disclosure Documents and Diligence Files have been prepared on
behalf of the Warrantors in good faith and the Warrantors have not
deliberately withheld any material information therefrom.
1.1.3 So far as the Warrantors are aware, the information Disclosed in
writing to the Purchaser by the Warrantors regarding the current
financial and trading position and status of product development and
contractual negotiations of the Company comprises all information
reasonably necessary for the assessment of the financial and trading
prospects of the Company.
1.2 Power to contract
Each Covenantor (as defined in the Tax Deed) has full power to enter
into and perform the Tax Deed and the Tax Deed when executed will
constitute a binding obligation on each Covenantor in accordance
with its terms.
2. The Company
2.1 The particulars of the Company set out in the recitals, Schedule 1,
Schedule 2 and Schedule 4 are true and complete.
2.2 Memorandum and articles of association
The copy of the memorandum and articles of association of the
Company which is comprised in the Disclosure Documents is true and
complete in all respects and has embodied in it or annexed to it a
copy of every such resolution and agreement as is referred to in
section 380(4), CA85 and the Company has at all times carried on its
business and affairs in all respects in accordance with its
memorandum and articles of association and all such resolutions and
agreements.
49
2.3 Statutory returns
The Company has complied with the provisions of CA85 and all
returns, particulars, resolutions and other documents required to be
filed with or delivered to the Registrar of Companies or to any
other authority whatsoever by the Company have been correctly and
properly prepared and so filed or delivered and all statutory
records required to be kept by the Company have been properly kept
and will be so kept until Completion.
2.4 Share capital
2.4.1 The Shares constitute the whole of the issued share capital of the
Company. There is no Encumbrance or any form of agreement (including
conversion rights and rights of pre-emption) on, over or affecting
the Shares or any unissued shares, debentures or other securities of
the Company and there is no agreement or commitment to give or
create any of the foregoing except for the Options, true and
complete details of which are set out in Part B of Schedule 1. No
claim has been made by any person to be entitled to any of the
foregoing and no person has the right (exercisable now or in the
future and whether contingent or not) to call for the issue of any
share or loan capital of the Company under any of the foregoing
except as set out in Part B of Schedule 1.
2.4.2 The Company has not at any time:
(a) repaid, redeemed or purchased (or agreed to repay, redeem or
purchase) any of its own shares, or otherwise reduced (or
agreed to reduce) its issued share capital or any class of
it or capitalised (or agreed to capitalise) in the form of
shares, debentures or other securities or in paying up any
amounts unpaid on any shares, debentures or other
securities, any profits or reserves of any class or
description or passed (or agreed to pass) any resolution to
do so; or
(b) directly or indirectly provided any financial assistance for
the purpose of the acquisition of shares in the Company or
any holding company of the Company or for the purpose of
reducing or discharging any liability incurred in such an
acquisition whether pursuant to sections 155 and 156 CA 85
or otherwise.
2.5 Solvency
The Company has not stopped payment and is not insolvent nor unable
to pay its debts according to section 123, Insolvency Act 1986 (or
other applicable Law). No order has ever been made or petition
presented or resolution passed for the winding up of the Company and
no distress, execution or other process has ever been levied on any
of its assets. No administrative or other receiver or trustee in
bankruptcy has been appointed by any person over the business or
assets of the Company or any part thereof, nor has any order been
made or petition presented for the appointment of an administrator
in respect of the Company.
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2.6 The US Subsidiary:
2.6.1 The US Subsidiary (i) is a corporation duly organised, validly
existing and in good standing under the laws of the State of
Georgia, (ii) has all necessary corporate power and authority to
own, operate or lease the properties and assets now owned, operated
or leased by it and to carry on its business as now conducted and
(iii) is duly qualified or licensed to do business as a foreign
corporation in good standing in all jurisdictions in which the
character or the location of the assets owned, operated or leased by
any of them or the nature of the business conducted by any of them
requires licensing or qualification. The jurisdictions referred to
in clause (iii) above are set forth above in Schedule 4. All
corporate actions taken by the US Subsidiary have been duly
authorised, and the US Subsidiary has not taken any action that in
any respect conflicts with, constitutes a default under or results
in a violation of any provision of its governing documents.
3. Connected business
3.1 Subsidiaries
The particulars of the Subsidiaries are set out in Schedule 4 are
true and complete and the shares in the Subsidiaries are held by the
Company free from all Encumbrances and with all rights now or
hereafter attaching thereto.
3.2 Connected transactions
The Company:
3.2.1 is not and has not agreed to become the holder or owner of any class
of any shares, debentures or other securities of any other body
corporate (whether incorporated in the United Kingdom, the United
States of America or elsewhere) other than the Subsidiaries ;
3.2.2 has not agreed to become a subsidiary of any other body corporate or
under the control of any group of bodies corporate or consortium;
3.2.3 is not and has not agreed to become a member of any partnership,
joint venture, consortium or other unincorporated association other
than a recognised trade association or agreement or arrangement for
sharing commissions or other income;
3.2.4 has no branch, place of business or substantial assets outside
England and Wales, or any permanent establishment (as that
expression is defined in any relevant Order in Council made pursuant
to section 788, ICTA 1988) in any country outside the United Kingdom
(other than, in the case of the US Subsidiary, in California, US);
and
3.2.5 save as otherwise Disclosed pursuant to paragraphs 3.2.1 to 3.2.4,
does not have any interest, legal or beneficial, in any shares or
other capital or securities
51
or otherwise howsoever in any other
firm, company, association, venture or legal person or entity.
4. Accounts
4.1 General
The Balance Sheet Accounts:
4.1.1 were prepared in accordance (and comply) with US GAAP in compliance
with all applicable Law on a basis consistent with preceding
accounting periods of the Company (save insofar as necessary to
reflect any differences between US GAAP and UK GAAP) and with the
books of account of the Company and are true and accurate in all
material respects;
4.1.2 fairly present the assets, liabilities and state of affairs of the
Company at the Balance Sheet Date and of its losses for the
financial year ended on such date;
4.2 Losses
The losses of the Company for the three years ended on the Balance
Sheet Date or where a Company does not have 3 years Accounts from
the date of its incorporation as shown by the Balance Sheet Accounts
and by the Historic Accounts and the trend of losses shown by them
have not (except as disclosed in them) been affected to a material
extent by inconsistencies of accounting practices, by the inclusion
of non-recurring items of income or expenditure, by transactions
entered into otherwise than on normal commercial terms or by any
other factors rendering such losses for all or any of such periods
exceptionally high or low.
4.3 Books of account
All accounts, books, ledgers, financial and other necessary records
of whatsoever kind of the Company (including all invoices and other
records required for VAT purposes):
4.3.1 have been fully, properly and accurately maintained, are in the
possession of the Company and contain true and accurate records of
all matters including those required to be entered in them by the CA
85 and any other Acts or regulations or orders for the time being in
force and no notice or allegation that any of the same is incorrect
or should be rectified has been received;
4.3.2 do not contain or reflect any material inaccuracies or
discrepancies;
4.3.3 give and reflect a true and fair view of the matters which ought to
appear in them and in particular of the financial, contractual and
trading position of the Company and of its plant and machinery,
fixed and current assets and liabilities (actual and contingent),
debtors and creditors; and
4.3.4 contain accurate information in accordance with generally accepted
accounting principles relating to all transactions to which the
Company has been a party.
52
4.4 Historic Accounts
4.4.1 The Historic Accounts were prepared in accordance (and comply) with
the requirements of CA85, UK GAAP and all applicable Law on a basis
consistent with preceding accounting periods of the Company and with
the books of account of the Company;
4.4.2 provide a true and fair view of the assets, liabilities and state of
affairs of the Company at the date of such accounts and of its
profits for the financial year ended on such date.
5. Post-Balance Sheet Date events
5.1 Since the Balance Sheet Date, the Company:
5.1.1 has carried on its business in the ordinary and usual course and
without entering into any transaction, assuming any liability or
making any payment not provided for in the Balance Sheet Accounts
which is not in the ordinary course of business and without any
interruption or alteration in the nature, scope or manner of its
business;
5.1.2 has not experienced and nor has there become apparent any material
deterioration in its financial position or turnover or suffered any
diminution of its assets by the wrongful act of any person and the
Company has not had its business or profitability materially and
adversely affected by the loss of any important Customer or source
of supply or by any abnormal factor not affecting similar businesses
to a like extent and so far as the Warrantors are aware, having made
due and careful enquiry of the Managers, there are no facts which
are likely to give rise to any such effects;
5.1.3 has not acquired or disposed of or agreed to acquire or dispose of
any assets or assumed or incurred or agreed to assume or incur any
material liabilities (actual or contingent) otherwise than in the
ordinary course of business;
5.1.4 has not declared, made or paid any dividend, bonus or other
distribution of capital or income (whether a qualifying distribution
or otherwise) or paid (or agreed to pay) any management charge and
(excluding fluctuations in overdrawn current accounts with bankers)
no loan or loan capital of the Company has been repaid in whole or
in part or has become due or is liable to be declared due by reason
of either service of a notice or lapse of time or otherwise
howsoever;
5.1.6 has not made any change to the remuneration, terms of employment,
emoluments or pension benefits of any present or former director,
officer or employee of the Company who on the Balance Sheet Date was
entitled to remuneration in excess of (Pounds)50,000 per annum and
has not appointed or employed any additional director, officer or
employee entitled as aforesaid;
5.1.7 has not released any debts in whole or in part and has not written
off debts in an amount exceeding (Pounds)50,000 in the aggregate;
53
5.1.8 has not entered into Contracts involving capital expenditure in an
amount exceeding in the aggregate (Pounds)100,000;
5.1.9 has not become aware that any event has occurred which would
entitle any third party to terminate any Contract or any benefit
enjoyed by it or call in any money before the normal due date
therefor;
5.1.10 has not purchased stocks in quantities or at prices materially
greater than was the practice of the Company prior to the Balance
Sheet Date,
5.1.11 has paid its creditors within the times agreed with such creditors
and does not have any debts outstanding which are overdue for
payment by more than four weeks;
5.1.12 has not borrowed or raised any money or taken any financial
facility (except such short term borrowings from bankers as are
within the amount of any overdraft facility which was available to
the Company at the Balance Sheet Date) or since the Balance Sheet
Date renegotiated or received any notice from any banker that such
banker wishes to renegotiate any overdraft facility available to
the Company at the Balance Sheet Date;
5.1.13 has not made any change to its accounting reference date and no
accounting period of the Company has ended since the Balance Sheet
Date;
5.1.14 has not made a payment or incurred an obligation to make a payment
which will not be deductible in computing trading profits for the
purposes of corporation tax or as a management expense of the
Company; and
5.1.15 (including any class of its members) has not passed any resolution
whether in general meeting or otherwise.
6. Transactions with the Vendors, Directors and Connected Persons
6.1 Loans and debts
There is not outstanding:
6.1.1 any indebtedness or other liability (actual or contingent) owing by
the Company to any Vendor or any Affiliate of any Vendor or
Director or any Connected Person or owing to the Company by any
Vendor or any Affiliate of any Vendor or Director or any Connected
Person; or
6.1.2 any guarantee or security for any such indebtedness or liability as
aforesaid.
6.2 Arrangements with Connected Persons
6.2.1 There is not outstanding, and there has not at any time during the
last six years been outstanding, any agreement, arrangement or
understanding (whether legally enforceable or not) to which the
Company is a party and in which any Vendor, Affiliate of any
Vendor, Director or former director of the Company
54
or any Connected Person is or has been interested whether directly
or indirectly.
6.2.2 The Company is not a party to, nor has its profits or financial
position during the last six years been affected by, any agreement
or arrangement which is not entirely of an arm's length nature.
6.3 Competitive interests
6.3.1 No Vendor, Affiliate of any Vendor, Director, former director of
the Company nor any Connected Person, either individually,
collectively or with any other person or persons, has any estate,
right or interest, directly or indirectly, in any business other
than that now carried on by the Company which is or is likely to be
or become competitive with any aspect of the Business of the
Company save as registered holder or other owner of any class of
securities of any company if such class of securities is listed on
any recognised investment exchange (as defined in the Financial
Services Act 1986) and if such person (together with Connected
Persons and Affiliates) holds or is otherwise interested in less
than 5 % of such class of securities.
6.3.2 The Vendors either individually, collectively or with any other
person or persons are not interested in any way whatsoever in any
Intellectual Property used and not wholly owned by the Company.
6.4 Benefits
6.4.1 No Connected Person or Affiliate of any Vendor, Director or former
director of the Company is entitled to or has claimed entitlement
to any remuneration, compensation or other benefit from the
Company.
7. Finance
7.1 Borrowings
7.1.1 Full and accurate details of all loan, overdraft and other
financial facilities available to the Company (and the amounts
drawn thereunder as at a date not more than two days before the
date of this Agreement) have been Disclosed and neither the Vendor
nor the Company have done anything whereby they may be prejudiced.
The total amount borrowed by the Company from any source does not
exceed any limitation on its borrowing powers contained in the
Articles of Association of the Company or in any debenture or loan
stock trust deed or instrument or any other document executed by
the Company and the amount borrowed by the Company from each of its
bankers does not exceed the overdraft facility agreed with such
banker. The Company has no outstanding loan capital (nor has it
agreed to create or issue) any loan capital nor has it factored any
of its debts or engaged in financing of a type which would not
require to be shown or reflected in the Last Accounts.
7.2 Debts owed to the Company
55
7.2.1 None of the Company or the Warrantors considers any of the debts
owing to the Company (but which are not yet due) to be
irrecoverable in whole or in part. The Company does not own the
benefit of any debt (whether present or future) other than debts
which have accrued to it in the ordinary course of business.
7.3 Bank accounts
Particulars of the balances on all the Company's bank accounts as
at a date not more than two working days before the date of this
Agreement have been Disclosed and the Company does not maintain any
other accounts with any bank or other deposit-taker. Since the date
of such particulars there have been no payments out of any such
bank accounts except for routine payments which have been
Disclosed.
7.4 Financial facilities
The Warrantors have Disclosed full details and true and correct
copies of all documents relating to all debentures, acceptance
credits, overdrafts, loans or other financial facilities
outstanding or available to the Company and all Encumbrances to
which any asset of the Company is subject. Neither the Warrantors
nor the Company have done anything whereby the continuance of any
such facility or Encumbrance in full force and effect might be
affected or prejudiced.
7.5 Grants etc.
7.5.1 Save as Disclosed, the Company has not applied for or received any
grant, subsidy or financial assistance of any kind from any
Governmental Authority.
7.5.2 The Company has not done, or omitted to do, any act or thing which
could result and the acquisition of the Shares by the Purchaser
will not result in all or any part of any or being grant, subsidy
or other similar payment made or due to be made to it becoming
repayable forfeited or withheld in whole or in part.
7.6 Options and guarantees
7.6.1 The Company is not responsible for the indebtedness of any other
person nor party to any option or pre-emption right or any
guarantee, suretyship or any other obligation (whatever called) to
pay, purchase or provide funds (whether by the advance of money,
the purchase of or subscription for shares or other securities or
the purchase of assets or services or otherwise) for the payment
of, or as an indemnity against the consequence of default in the
payment of, any indebtedness of any other person.
7.6.2 No person other than the Company or a Subsidiary has given any
guarantee of or security for any overdraft, loan or loan facility
granted to the Company or any Subsidiary.
7.7 Payment of obligations
56
There has been no delay by the Company in the payment of any
material obligation due for payment.
The Properties
8.1 General
8.1.1 The Properties comprise all the land and premises owned,
controlled, used or occupied by the Company and all the rights or
interests vested in the Company relating to any land and premises
at the date hereof and the particulars set out in Schedule 3 are
true and accurate and not misleading.
8.1.2 Those of the Properties which are occupied or otherwise used by the
Company in connection with their business are occupied or used by
right of ownership or under lease or licence, the terms of which
permit such occupation of use.
8.1.3 Where, in relation to any of the Properties, the Company has
reached an agreement governing its current use or occupation of the
Property or where it has entered into option or pre-emption
agreements (or any similar agreements) in relation to any lands
adjacent to the Properties, details of those have been Disclosed.
8.1.6 The Company has not:
(a) surrendered any lease, licence or tenancy to the landlord
without first satisfying itself that the landlord had good
title to accept such surrender and without receiving from
the landlord an absolute release from all liability arising
under such lease, licence or tenancy;
(b) assigned, or otherwise disposed of, any lease, licence or
tenancy without receiving a full and effective indemnity
from the assignee or transferee in respect of its liability
under such lease, licence or tenancy;
(c) been a guarantor of a tenant's liability under any lease,
licence or tenancy; or
(d) assigned or otherwise disposed of any leasehold property in
such a way that it retains any other residual liability in
respect thereof.
8.1.7 Where the Company is shown as the lessee of any of the Properties,
it is the legal and beneficial owner of the leasehold title and has
Legal and Beneficial Title to the same and is in sole and undisputed
occupation thereof.
8.1.8 The Company has in its possession or unconditionally held to its
order all the documents of title and other documents and papers
necessary to prove title thereto and all such deeds and documents
are properly stamped and registered relating to each of the
Properties.
8.1.9 The Properties, title deeds and documentation relating thereto, and
all fixtures and fittings and plant, equipment and other chattels on
the Properties, are not subject to any Encumbrance or overriding
interest (as defined in section 70,
57
Land Registration Act 1925) nor is there any person in possession
or occupation of or who has or claims any right of any kind in
respect of any of the Properties adversely to the estate, interest,
right or title therein of the Company;
8.1.10 The Properties are free from any mortgage, debenture, charge, rent
charge, lien or other encumbrance securing the repayment of monies
or any other obligation or liability of the Company or any other
party.
8.1.11 There are no rights, interests, covenants, restrictions,
reservations. licences or easements or any disputes or outstanding
notices (whether given by a landlord, a local authority or any
other person) nor (without prejudice to the generality of the
foregoing) are there any other matters or things which adversely
affect the proper use and enjoyment of any of the Properties for
the purpose of the business now being carried on at the Properties
by the Company.
8.1.13 None of the Properties is subject to the payment of any outgoings
other than the commercial rates and taxes and all sums due to date
in respect thereof have been paid.
8.1.14 No proposal relating to the rateable value of any of the Properties
has been determined by the Valuation and Community Charge Tribunal
or Land Tribunal and there is no subsisting proposal to challenge
the rateable value of any of the Properties.
8.1.15 There are no disputes affecting any of the Properties which would
restrict or terminate the continued possession, occupation or
enjoyment of any of the Properties or with any adjoining or
neighbouring owner in relation to boundaries, easements, rights or
means of access to the Properties.
8.1.16 Each of the Properties has the benefit of all other easements and
rights necessary for its proper use and enjoyment for the purposes
of the business now being carried on at the Properties by the
Company and such easements and rights are held on terms which do
not entitle any person to terminate or curtail the same.
8.1.19 There are no unpaid charges for the construction or adoption of any
road or sewer or other service serving the Property.
8.2 Planning
8.2.1 In relation to each of the Properties, its existing use is set out
in Part 1 of Schedule 3 ("Existing Use").
8.2.2 To the best of the Company's knowledge after due enquiry the
Properties and all developments thereto and thereon (including any
quarrying activity) comply in all material respects with the
provisions of the Planning Acts, bye laws and Building Regulations
or similar legislation and all permissions, licences or consents
issued thereunder are unconditional or are subject to conditions
58
which have been satisfied or are subject to continuing conditions
which are not onerous and all of which have been and are being
complied with.
8.2.7 The consents and permissions referred to in paragraph 8.2.2 are
valid, subsisting and unimpeachable and are also either
unconditional or subject only to conditions which have been
satisfied so that nothing further remains to be done thereunder and
are also neither temporary nor personal.
8.3 Statutory and Other Obligations
The Company has complied and is complying with all applicable
statutory and local requirements in relation to the Properties
occupied by it, the use thereof, the business carried out thereat
and the employment of persons, plant and equipment therein.
8.4 Leasehold Properties
8.4.1
(a) All leases (which expression includes underleases and
tenancy agreements, contractual licences and other similar
agreements) under which the Company holds or exercises
rights in respect of the Properties are:
(i) valid and in full force;
(ii) reduced to writing and duly executed by both parties,
and have been furnished for inspection by the
Purchaser's legal advisers; and
(iii) duly stamped and registered (where applicable)
(b) The Company has paid all rent and performed and observed in
all material respects all covenants and conditions on the
part of the tenant contained in the leases under which the
Properties are held.
(c) There are no material subsisting breaches or any material
non-performance or observance of any covenant, condition or
agreement contained in any lease under which the Properties
are held whether on the part of the tenant, the landlord or
either of their predecessors in title.
8.4.2 Where any of the Properties is leasehold, particulars of each lease
vested in the Company are set out in Part 2 of Schedule 3 and in
relation to each such lease:
(a) the landlord and all superior landlords had good title to
grant the lease and any superior leases respectively and all
abstracts and epitomes of all superior titles have been
placed with the title deeds to the Property to which the
lease relates;
59
(b) any consent necessary for the grant of the lease has been
obtained and a copy of the consent is with the title deeds
to the Property to which the lease relates;
(c) the receipt for the payment of rent which fell due
immediately prior to the date hereof is unqualified;
(d) no notices of breaches of any covenants or conditions
contained in the lease have been given or received on the
part of either the landlord or the Company and the landlord
has not refused to accept rent or made any complaint of
breach of covenant;
(e) no alterations, improvements or additions have been made to
the Property to which the lease relates since the grant of
the lease or in respect of all such alterations,
improvements or additions made all necessary consents and
approvals have first been obtained;
(f) VAT is not chargeable on the rent or any other payment to be
made under the lease and no election has been made by the
landlord to waive exemption from VAT in respect of the
lease.
8.5 Inferior leases
The Company is in actual occupation of each of the Properties and no
other person is or will be entitled to occupy or use any part of any
of the Properties.
8.6 Statutory compliance/environmental issues
8.6.1 The Company is not knowingly in breach of and has not received
notice of and the Warrantors are not aware of any allegation of
breach of the requirements of any Law concerning health, safety or
environmental matters or any regulations, orders, notices or
directions made under any of such Laws which in any such case affect
any of the Properties.
8.6.2 Where required, a fire certificate has been issued in respect of
each of the Properties and each of the Properties complies in all
respects with current fire regulations and the current requirements
of the insurers of the Properties.
8.7 Condition and repair
8.7.1 The Company is not aware of any structural or other defects in
respect of the buildings and structures on or comprising any of the
Properties.
8.7.2 So far as the Warrantors are aware, there are no latent or
patent defects in the buildings and structures on or
comprising the Properties and in the construction of the
buildings and its structures on or comprising the
Properties.
8.8 Representations and Warranties for Property in the United States
60
The US Lease is valid and is in full force and effect and has not
been assigned, modified, supplemented or amended in any way except
as described in this Agreement and represents the entire agreements
between the parties thereto with respect to the Property leased in
the US.
9. Environmental
9.1 In paragraph 9.2 the following words and expressions shall have the
following meanings:
"Environment" means the environment generally including all of its physical
and ecological aspects including, without limitation, air (including,
without limitation, that within buildings or natural or man-made structures
above or below ground); water (including, without limitation, the open sea,
coastal or inland waters and ground waters, drains and sewers); and land,
(including, without limitation, the seabed or river bed under any water as
described above, surface land and sub-surface land);
"Environmental Law" means any Law relating to the Environment whether
generated under the Law of the United Kingdom, the European Community, the
United States of America (and its constituent states) or arising from any
common or customary Law.
"Environmental Licence" means any Governmental Authority, statutory, local
authority or other licence, approval, consent, permit or authorisation of
whatever kind relating to Environmental Law.
9.2 To the best of the Company's knowledge after due enquiry the Company
has, at all times complied in all material respects with
Environmental Law and any Environmental Licence and the Company has
not received any notice from any local authority or other official
agency under any Environmental Law regarding any damage to the
Environment or violation of any Environmental Law, whether actual,
alleged or potential.
10. Other assets
10.1 Title
10.1.1 The Company has Legal and Beneficial Title to all assets of the
Company which are included in the Accounts or have otherwise been
represented as being the property of the Company or which were at
the Balance Sheet Date used or held for the purposes of its business
and (except for assets disposed of or realised by the Company in the
ordinary course of business) the Company retains such title to all
such assets free from any Encumbrance, hire or hire purchase
agreement or leasing agreement or agreement for payment on deferred
terms and all such assets are in the possession and control of the
Company and are sited within the United Kingdom or the State of
California, US.
61
The Company has not acquired or agreed to acquire any material
asset on terms that title to such asset does not pass to the
Company until full payment is made.
10.1.3 A copy of the asset register of the Group as of 31 December, 1999
is attached to the Disclosure Letter.
10.2 Encumbrances
The Company has Legal and Beneficial Title to all assets which have
been acquired by the Company since the Balance Sheet Date and the
same are in the possession and control of the Company and none is
the subject of any Encumbrance nor has the Company created or
agreed to create any Encumbrance or entered into any factoring
arrangement, hire-purchase, conditional sale or credit sale
agreement which has not been Disclosed and in respect of any such
Encumbrance, arrangement or agreement so Disclosed there has been
no default by the Company in the performance or observance of any
of the provisions thereof.
10.3 Condition of assets
The plant and machinery (including fixed plant and machinery) and
all vehicles and office and other equipment shown in the Accounts
or acquired since the Balance Sheet Date or otherwise used in
connection with the Business which have not been disposed of in the
ordinary course of business:
10.3.1 do not contravene any requirement or restriction having the force
of Law;
10.3.2 constitute all of the plant and machinery necessary to conduct the
Business;
10.4 Rental payments
Rentals payable by the Company under any leasing, hire-purchase or
other similar agreement to which it is a party are set out in the
Disclosure Documents and have not been and are not likely to be
increased and all such rentals are fully deductible by the Company
for tax purposes.
11. Insurance
Particulars of all policies of insurance of the Company now in
force have been Disclosed and such particulars are true and correct
and all premiums due on such policies have been duly paid and all
such policies are valid and in force. So far as the Warrantors are
aware there are no circumstances which might lead to any liability
under such insurance being avoided by the insurers or the premiums
being increased. There is no claim outstanding under any such
policies and so far as the Warrantors are aware there are no
circumstances likely to give rise to a claim.
12. Litigation
12.1 Litigation and arbitration proceedings
62
12.1.1 Save as plaintiff in the collection of debts (not exceeding
(Pounds)5,000 in the aggregate) arising in the ordinary course of
business, the Company is not now engaged in any litigation,
arbitration or criminal proceedings, or any other proceedings
before any tribunal, assessor or expert in any jurisdiction, and
(so far as the Warrantors are aware, having made due and careful
enquiry of the Managers) there are no lawsuits or arbitration
proceedings pending or threatened by or against the Company or any
person for whose acts or defaults the Company may be vicariously
liable.
12.1.2 The Company has not since its incorporation, been involved in any
litigation, arbitration, criminal proceedings or material dispute
with any person who is or was a supplier or Customer of importance
to the Company or the Business, or where such litigation,
arbitration, proceedings or dispute resulted in adverse publicity
or loss of goodwill.
12.1.3 There is no matter or fact in existence which might give rise to
any legal proceedings or arbitration involving the Company
including any which might form the basis of any criminal
prosecution against the Company, nor (so far as the Warrantors are
aware, having made due and careful enquiry of the Managers) are
there pending, or in existence any investigations or enquiries by
or on behalf of any Governmental Authority or other body in respect
of the affairs of the Company;
12.1.4 No direction has been given to the Company or to any officer of the
Company by any person or body lawfully empowered so to do for the
giving of evidence to, the production of documents before, or the
making of discovery to any Governmental Authority or other body or
any authorised officer of such body.
12.2 Injunctions, etc.
No injunction or order for specific performance has been granted
against the Company.
12.3 Orders and judgments
The Company is not subject to any order or judgment given by any
court or Governmental Authority agency which is still in force and
has not given any undertaking to any court or to any third party
arising out of any legal proceedings.
13. Licences
13.1 General
The Company has all necessary licences (including statutory
licences), permits, consents and authorities (public and private)
for the proper and effective carrying on of the Business and in the
manner in which the Business is now carried on and all such
licences, permits, consents and authorities are valid and
subsisting and the Company is not in breach of any of the terms and
conditions thereof and the Warrantors know of no reason and are not
aware of
63
any fact or circumstances which (with or without the giving of
notice or lapse of time) would be likely to give rise to any reason
why any of them should be suspended, cancelled or revoked whether
in connection with the sale to the Purchaser or otherwise and, so
far as the Warrantors are aware, there are no factors that might in
any way prejudice the continuance or renewal of any of those
licences, permits, consents or authorities and the Company is not
restricted by contract from carrying on any activity in any part of
the world.
13.2 Financial Services Xxx 0000
The Company does not carry on, nor does it purport to carry on, nor
has it at any time since 28/th/ April 1988 carried on, or purported
to carry on, investment business in the United Kingdom within the
meaning of section 3, Financial Services Xxx 0000 nor has it
contravened any provision of such Act.
13.3 Data Protection Act
The Company has registered or applied to register itself under the
Data Protection Act and all regulations made thereunder in respect
of all registrable personal data held by it, and all due and
requisite fees in respect of such registrations have been paid.
The Company and its employees have complied in all material
respects with the requirements of the Data Protection Act.
14. Trading
14.1 Tenders, etc.
No offer, tender or the like is outstanding which is capable of
being converted into an obligation of the Company by an acceptance
or other act of some other person.
14.2 Delegation of powers
There are in force no powers of attorney given by the Company other
than to the holder of an encumbrance solely to facilitate its
enforcement nor any other authority (express, implied or
ostensible) given by the Company to any person to enter into any
Contract or commitment or do anything on its behalf other than any
authority of employees to enter into routine trading contracts in
the normal course of their duties.
14.3 Consequence of acquisition of Shares by Purchaser
Neither the acquisition of the Shares by the Purchaser nor
compliance with the terms of this Agreement will:
14.3.1 (so far as the Warrantors are aware) cause the Company to lose the
benefit of any right or privilege it presently enjoys;
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14.3.2 relieve any person of any obligation to the Company (whether
contractual or otherwise) or legally entitle any person to
determine any such obligation or any right or benefit enjoyed by
the Company or to exercise any right whether under an agreement
with or otherwise in respect of the Company;
14.3.3 conflict with or result in the breach of or constitute a default
under any of the terms, conditions or provisions of any agreement
or instrument to which the Company is now a party or any loan to or
mortgage created by the Company or of its memorandum or articles of
association;
14.3.4 result in any present or future indebtedness of the Company
becoming due and payable or capable of being declared due and
payable prior to its stated maturity;
14.3.5 cause any director, officer or senior employee of the Company to
leave employment; or
14.3.6 conflict with, violate or result in a breach of any Law applicable
to the Company, or entitle any person to receive from the Company
any finder's fee, brokerage or other commission,
14.4 Guarantees and warranties
The Company has not given any guarantee or warranty or made any
representation in respect of articles or trading stock, sold or
contracted to be sold by it, save for any warranty or guarantee
implied by law and (save as aforesaid) has not accepted any
liability or obligation to service, maintain, repair, take back or
otherwise do or not do anything in respect of any articles or stock
that would apply after any such article or stock has been delivered
by it.
14.5 Fair trading, etc.
So far as the Warrantors are aware (having made due and careful
enquiry of the Managers) the Company is not and has not been party
to or directly or indirectly concerned in any agreement,
arrangement, understanding, decision, activity or concerted
practice (whether or not legally binding) or in the pursuit of any
course of conduct which is:
14.5.1 registrable under the RTPA, notifiable under the Competition Xxx
0000 or capable of giving rise to an investigation by the Director
General of Fair Trading or a reference to the Competition
Commission;
14.5.2 in contravention or breach of the EC Treaty, the Fair Trading Xxx
0000, the Consumer Credit Xxx 0000, the Resale Prices Xxx 0000, the
Trade Descriptions Xxx 0000, the RTPA, the Competition Xxx 0000,
the Consumer Protection Xxx 0000, the Competition Xxx 0000 or any
regulations, orders, notices or directions made thereunder;
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14.5.3 is otherwise registrable, unenforceable or void or renders the
Company or any of its officers liable to administrative, civil or
criminal proceedings under any anti-trust, trade regulation or
similar legislation in any jurisdiction where the Company carries
on business;
14.5.4 prohibited by section 4(1) of the Competition Acts 1991 and 1996 or
which, for the purposes of section 5 of the Competition Acts 1991
and 1996, constitutes an abuse, either solely or jointly with any
other undertaking, of a dominant position in the State or a
substantial part of the State;
14.5.5 in contravention or breach of the EC Treaty, the Restrictive
Practices Xxx 0000, the Prices Acts 1958 - 1972, the Mergers,
Takeovers and Monopolies (Control) Acts 1978 - 1996, the
Merchandise Marks Acts 1887 to 1970, the Consumer Information Xxx
0000, Packaged Goods (Quality Control) Xxx 0000, Dangerous
Substances Acts, 1972 to 1979, Hire Purchase Acts 1946 to 1960, the
Sale of Goods and Supply of Services Xxx 0000, the Consumer Credit
Xxx 0000, the European Communities (Unfair Terms in Consumer
Contracts ) Regulations 1995, the European Communities Acts 1972 to
1998 or any applicable Regulation or Directive of the European
Commission or of the Council of the European Communities or any
regulations, orders or any applicable Regulation or Directive of
the European Commission or of the Council of the European
Communities or any regulations, orders, notices or directions made
thereunder; or
is otherwise registrable, unenforceable or void or renders the Company or
any of its officers liable to administrative, civil or criminal proceedings
under any anti-trust, trade regulation or similar legislation in any
jurisdiction where the Company carries on business.
14.6 Restrictions on trading
The Company is not and has not been a party to any Contract,
understanding or practice restricting the freedom of the Company to
provide and take goods and services by such means and from and to
such persons and into or from such place as it may from time to
time think fit.
14.7 Possession of records
14.7.1 All title deeds and agreements to which the Company is a party and
all other documents owned by, or which ought to be in the
possession of or held unconditionally to the order of, the Company
are in the possession of the Company.
14.7.2 The Company does not have any of its records, systems, controls,
data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent on or held by any means
(including any electronic, mechanical or photographic process
whether computerised or not) which (including all means of access
thereto and therefrom) are not under the exclusive ownership and
direct control of the Company.
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14.8 Business names
The Company does not use on its letterhead, books or vehicles or
otherwise carry on the Business under any name other than its
corporate name.
14.9 Unlawful acts
Neither the Company nor any officer has been prosecuted for any
criminal, illegal or unlawful act connected with the Company.
14.10 Sensitive payments
No officer or employee of the Company has made or received any
Sensitive Payment in connection with any Contract or otherwise. For
the purposes of this clause the expression "Sensitive Payments"
(whether or not illegal) shall include (i) commercial bribes,
bribes or kickbacks paid to any person, firm or company including
Governmental Authority officials or employees or (ii) amounts
received with an understanding that rebates or refunds will be made
in contravention of Law either directly or through a third party or
(iii) political contributions or (iv) payments or commitments
(whether made in the form of commissions, payments or fees for
goods received or otherwise) made with the understanding or under
circumstances that would indicate that all or part thereof is to be
paid by the recipient to central or local Governmental Authority
officials or as a commercial bribe influence payment or kickback.
15. Contracts
15.1 Material Contracts
All Contracts to which the Company is a party have been Disclosed
and the Company is not a party to or subject to any Contract which:
15.1.1 is incapable of complete performance in accordance with its terms
within six months after the date on which it was entered into or
undertaken;
15.1.2 is likely to result in a loss to the Company on completion of
performance;
15.1.3 cannot readily be fulfilled or performed by the Company on time and
without undue or unusual expenditure of money and effort;
15.1.4 involves or is likely to involve obligations, restrictions,
expenditure or receipts of an unusual, onerous or exceptional
nature and not in the ordinary course of business;
15.1.5 requires an aggregate consideration payable by the Company in
excess of (Pounds)25,000;
15.1.6 involves or is likely to involve the supply of goods by or to the
Company the aggregate sales value of which will represent in excess
of 5 % of the turnover of the Company for the year ended on the
Balance Sheet Date;
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15.1.7 is a Contract for services (other than IT Contracts or Contracts
for the supply of electricity or normal office services);
15.1.8 requires the Company to pay any commission, finder's fee, royalty
or the like;
15.1.9 is in any way otherwise than in the ordinary and proper course of
the Company's business;
15.1.10 contains any "most favoured nation" or similar provision; or
15.1.11 involves or may involve any sharing, licensing, transfer or escrow
of any Intellectual Property otherwise than as listed in Schedule
8 or in the IT Contracts.
15.2 Performance of Contracts
15.2.1 The terms of all Contracts of the Company have been complied with
by the Company and so far as the Warrantors are aware (having made
due and careful enquiry of the Managers) by the other parties to
the Contracts in all material respects and so far as the
Warrantors are aware (having made due and careful enquiry of the
Managers), there are no circumstances likely to give rise to a
default by the Company or by the other parties under any such
Contract.
15.2.2 All the Contracts of the Company except those between the Company
and its employees may be assigned by the Company without the
consent of any other party.
15.2.3 There are no outstanding claims, separately or in the aggregate,
of material amounts, against the Company on the part of Customers
or other parties in respect of defects in quality or delays in
delivery or completion of Contracts or deficiencies of design or
performance or otherwise relating to liability for goods or
services sold or supplied by the Company and no such claims are
threatened or so far as the Warrantors are aware (having made due
and careful enquiry of the Managers) anticipated and so far as the
Warrantors are aware (having made due and careful enquiry of the
new Managers) there is no matter or fact in existence in relation
to goods or services currently sold or supplied by the Company
which might give rise to the same.
15.2.4 The Company has no knowledge of the invalidity of or grounds for
rescission, avoidance or repudiation of any agreement or other
transaction to which the Company is a party and has received no
notice of any intention to terminate, repudiate or disclaim any
such agreement or other transaction.
15.3 Agency and distribution agreements
The Company is not a party to any subsisting agency or
distributorship agreement.
15.4 Products
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The Disclosure Documents include true and accurate copies of all
Contracts which the Company has ever had for the deployment of
Products, the material terms of which are summarised in Exhibit A.
16. Employees
16.1 Particulars of employees
The particulars shown in the schedule of employees comprised in the
Disclosure Documents are true and complete and show in respect of
each Director, officer and employee of the Company his date of
birth, the date on which he commenced continuous employment with
the Company for the purposes of ERA and all remuneration payable
and other benefits provided or which the Company is bound to
provide (whether now or in the future) to each such person and
include full particulars of all remuneration arrangements
(particularly profit sharing, incentive and bonus arrangements to
which the Company is a party whether binding or not) and each
Director, officer and employee of the Company is listed therein.
16.2 Service Contracts
There is no Contract of service in force between the Company and
any of its Directors, officers or employees which is not terminable
on twelve weeks notice or less by the Company without compensation
(other than any compensation payable under Parts X and XI, ERA) or
otherwise in accordance with section 86, ERA. There are no
consultancy or management services agreements in existence between
the Company and any other person, firm or company, and there are no
agreements or other arrangements (binding or otherwise) between the
Company or any employers' or trade association of which the Company
is a member and any Trade Union. There are no outstanding pay
negotiations with any employees or Trade Unions.
16.3 Benefits
There are no amounts owing to present or former directors, officers
or employees of the Company other than not more than one month's
arrears of remuneration accrued or due or for reimbursement of
business expenses incurred within a period of three months
preceding the date of this Agreement and no moneys or benefits
other than in respect of remuneration or emoluments of employment
are payable to or for the benefit of any present or former
director, officer or employee of the Company, nor any dependant of
any present or former director, officer or employee of the Company.
16.4 Liabilities and payments
Save to the extent (if any) to which provision or allowance has
been made in the Accounts:
16.4.1 no liability has been incurred or is anticipated by the Company for
breach of any Contract of employment or for services or for
severance payments or for
69
redundancy payments or protective awards or for compensation for
unfair dismissal or for failure to comply with any order for the
reinstatement or reengagement of any employee or for sex, race or
other discrimination or for any other liability accruing from the
termination or variation of any Contract of employment or for
services;
16.4.2 no gratuitous payment has been made or promised by the Company in
connection with the actual or proposed termination, suspension or
variation of any Contract of employment or for services of any
present or former director, officer or any dependant of any present
or former director, officer or employee of the Company; and
16.4.3 the Company has not made or agreed to make any payment to or
provided or agreed to provide any benefit for any present or former
director, officer or employee of the Company.
16.5 Relevant legislation
16.5.1 The Company has in relation to each of its employees (and so far as
relevant to each of its former employees) complied in all material
respects with:
(a) all obligations imposed on it by all relevant statutes,
regulations and codes of conduct and practice affecting its
employment of any persons and all relevant orders and awards
made thereunder and has maintained current, adequate and
suitable records regarding the service, terms and conditions
of employment of each of its employees; and
(b) all collective agreements, recognition agreements and
customs and practices for the time being affecting its
employees or their conditions of service.
16.5.2 The Company has not been served with any improvement and/or
prohibition notices pursuant to sections 21 and 22, Health and
Safety at Work etc. Xxx 0000.
16.5.3 The Company is not in breach of any of the following Acts nor has
it been prosecuted under any of such Acts:
Children and Young Persons Xxx 0000
Shops Xxx 0000
Xxxxxxxxx Xxx 0000
Health and Safety at Work etc. Xxx 0000.
16.5.4 There is no liability or claim against the Company outstanding or
(so far as the Warrantors are aware, having made due and careful
enquiry of the Managers) anticipated under the Equal Pay Xxx 0000,
the Sex Discrimination, the Race Relations Xxx 0000, the ERA, TUPE,
the Social Security and Housing Benefits Xxx 0000, the Social
Security Contributions and Benefits Xxx 0000, TULRCA or the Trade
Union Reform and Employment Rights Xxx 0000.
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16.5.5 Within a period of one year preceding the date of this Agreement,
the Company has not given notice of any redundancies to the
Secretary of State or started consultations with any independent
trade union under the provisions of Part IV, TULRCA or under TUPE
nor has the Company failed to comply with any such obligation under
the said Part IV.
16.5.6 There is no unfair labour practice charge or complaint against the
US Subsidiary pending before the US National Labour Relations Board
or any other Governmental Authority arising out of the activities
of the US Subsidiary and it has no knowledge of any facts or
information which would give rise thereto.
16.6 Termination of employment
16.6.1 No present director, officer or employee of the Company has given
or received notice terminating his employment except as expressly
contemplated under this Agreement and Completion of this Agreement
will not entitle any employee to terminate his employment or
trigger any entitlement to a severance payment or liquidated
damages.
16.6.2 The Company has complied with all recommendations made by the
Advisory Conciliation and Arbitration Service and with all awards
and declarations made by the Central Arbitration Committee in
respect of its employees.
16.7 Share and other schemes
16.7.1 Save as Disclosed, the Company does not have in existence
nor is it proposing to introduce, and none of its
directors, officers or employees participate in (whether or
not established by the Company) any employee share trust,
share incentive scheme, share option scheme or profit
sharing scheme for the benefit of all or any of its present
or former directors, officers or employees or the
dependants of any of such persons or any scheme whereunder
any present or former director, officer or employee of the
Company 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 or any other
person, firm or company including any profit-related pay
scheme established under Chapter III, Part V, ICTA 1988.
16.7.2 No trading arrangements existed in relation to the shares
of the Company within the meaning of section 203F ICTA 1988
prior to 6 April 1998 and since that date shares in the
Company have not constituted readily convertible assets for
the purpose of that section.
16.8 Disputes and claims
16.8.1 No dispute exists or can reasonably be anticipated between the
Company and a material number or category of its employees or any
Trade Union(s) and so far as the Warrantors are aware there are no
wage or other claims outstanding
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against the Company by any person who is now or has been a
director, officer or employee of the Company.
16.8.2 The Company has not had during the last three years any strike,
work stoppages, slowdown or work-to-rule by its employees or lock-
out, nor, so far as the Warrantors are aware, is any anticipated,
which has caused, or is likely to cause, the Company to be
materially incapable of carrying on its business in the normal and
ordinary course.
16.9 Transfer of undertakings
The Company has not been a party to any relevant transfer as
defined in TUPE nor has the Company failed to comply with any duty
to inform and consult any Trade Union under the said regulations
within the period of one year preceding the date of this Agreement.
16.10 Agreements with Trade Unions
The Company is not a party to any agreement or arrangement with or
commitment to any trade unions or staff association nor to its
knowledge are any of its employees members of any trades union or
staff association, nor has it done any act which might be construed
as recognition of a Trade Union.
16.12 Intellectual Property Assignment
All past and present directors, officers, employees and consultants
have executed and delivered binding agreements containing
confidentiality and invention assignment provisions in the form
attached to the Disclosure Letter acknowledging and assigning to
the Company all Intellectual Property.
17. Pension Schemes
17.1 US Pension Plans
The Disclosure Letter sets forth a true and complete list of each
"employee benefit plan", as such term is defined in the US Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
whether or not subject to ERISA, and each bonus, incentive or
deferred compensation, severance, termination, retention, change of
control, stock option, stock appreciation, stock purchase, phantom
stock or other equity-based, performance or other employee or
retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or unwritten,
that provides or may provide benefits or compensation in respect of
any employee or former employee of the US Subsidiary or the
beneficiaries or dependants of any such employee or former employee
(such employees, former employees, beneficiaries and dependants
collectively, the "US Employees") or under which any US Employee is
or may become eligible to participate or derive a benefit with
respect to which the US Subsidiary or the Business may have any
liability or obligation (collectively, the "Plans"). Each US Plan
intended to be qualified under section 401(a) of the Code, and the
trust (if any) forming a part
72
thereof, has received a favourable determination letter from the
IRS as to its qualification under the US Internal Revenue Code of
1986, as amended (the "Code") and to the effect that each such
trust is exempt from taxation under section 501(a) of the Code, and
nothing has occurred since the date of such determination letter
that could adversely affect such qualification or tax-exempt
status. No US Plan is subject to section 412 of the Code or section
302 or Title IV of ERISA. Each of the US Plans has been operated
and administered in all respects in compliance with all Laws. No US
Employee is or may become entitled to post-employment benefits of
any kind by reason of employment by the US Subsidiary, including,
without limitation, death or medical benefits (whether or not
insured), other than (a) coverage provided pursuant to the terms of
any Plan specifically identified as providing such coverage in the
Disclosure Letter or mandated by section 4980B of the Code or (b)
retirement benefits payable under any Plan qualified under section
401(a) of the Code. The consummation of the transactions
contemplated by this Agreement will not result in an increase in
the amount of compensation or benefits or the acceleration of the
vesting or timing of payment of any compensation or benefits
payable to or in respect of any US Employee.
17.2 General
Other than as Disclosed there are no other Pension Schemes for
current or past directors or employees of the Company and no member
of the Group has any obligation to provide, or contribute towards
the provision of, retirement benefits, death benefits and the like,
for employees.
18. Intellectual Property
18.1 Ownership and rights
18.1.1 Parts 1, 2 and 3 of Schedule 8 respectively contain particulars of
all Registered Intellectual Property and material Unregistered
Intellectual Property.
18.1.2 Other than as set out in Parts 3 and 4 of Schedule 8, the Company
is the sole beneficial owner of all Relevant IP and IP Materials.
All IP Materials are in the possession or under the control of the
Company.
18.1.3 The Company does not require any further Intellectual Property in
relation to the development, manufacture, marketing or sale of its
products or services or in relation to any of the processes
employed in the Business, other than that which is listed in Part 3
of Schedule 8.
18.2 Enforcement
18.2.1 The Company has taken all prudent steps to protect its interest in
the Registered Intellectual Property and, so far as the Warrantors
are aware, the Registered Intellectual Property is valid and
subsisting. None of the Registered Intellectual Property is the
subject of outstanding or threatened disputes, claims or
proceedings for cancellation, revocation, opposition, interference,
rectification or contested ownership.
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18.2.2 Where registration is available, the Company is taking all
reasonable steps to prosecute applications for registration of all
Registered Intellectual Property in the countries covered by those
registrations and the Company has received no adverse opinion
whether from any registry concerned or its own advisers in relation
thereto.
18.2.3 All Registered Intellectual Property has been maintained and all
renewal fees have been paid on time.
18.2.4 Except as necessary for the operation of the Business and subject
to reasonable confidentiality obligations, all Know-How of the
Company has been kept secret and confidential and has not been
disclosed to third parties.
18.2.5 As far as the Warrantors are aware, nothing has been done by the
Company or any other person, to diminish or otherwise affect the
reputation of unregistered Trade Marks owned, used or otherwise
exploited by the Company.
18.3 Intellectual Property Agreements
18.3.1 Parts 3 and 4 of Schedule 8 respectively contain particulars of all
Intellectual Property Agreements whereby:
(a) the Company uses or exploits any Intellectual Property
belonging to a third party ("Licences-In"); or
(b) the Company has authorised or otherwise permitted any use
whatsoever of any Intellectual Property, or granted to any
third party any right or interest in respect of any
Intellectual Property ("Licences-Out").
18.3.2 Save as set out in Schedule 8, none of the Relevant IP has been
charged, mortgaged, licensed or otherwise encumbered.
18.3.3 All Intellectual Property Agreements are valid and binding and none
has been the subject of any breach or default by the Company or any
other party or of any event which with notice or lapse of time or
both would constitute a default.
18.3.4 There are no disputes, claims or proceedings arising out of or
relating to the Intellectual Property Agreements.
18.3.5 All Intellectual Property Agreements have been duly recorded or
registered with the proper authorities whenever a requirement to do
so exists.
18.4 Infringement
18.4.1 The Company has taken reasonable precautions to ensure that, and so
far as the Warrantors are aware, the Company has not infringed and
does not infringe any Intellectual Property of a third party as a
result of the Company's use or exploitation of the Relevant IP, nor
will such use or exploitation give rise to any infringement
dispute, claims or proceedings against the Company.
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18.4.2 There are not and have not been any disputes, claims or proceedings
threatened or in existence in any court or tribunal in respect of
any of the Relevant IP as such or in respect of any use or
exploitation thereof by the Company.
18.4.3 So far as the Warrantors are aware there has been and is no current
or anticipated infringement by any third party of any Relevant IP.
19. Information technology and telecommunications
19.1 Identification and ownership
19.1.1 The Disclosure Letter contains brief particulars of all material IT
Systems.
19.1.2 The Disclosure Letter contains brief particulars of all material IT
Contracts.
19.1.3 Save as Disclosed, all material IT Systems and data are owned by
the Company, and are not wholly or partly dependent on any
facilities or services not under the exclusive ownership and
control of the Company.
19.1.4 All the IT Contracts are valid and binding. None of the IT
Contracts has been the subject of any breach or default on the part
of the Company and on the part of any other person, or of any event
which (with notice or lapse of time or both) would constitute a
default, or is liable to be terminated or otherwise adversely
affected by the transaction contemplated by this Agreement.
19.1.5 The Company has in its possession or in its control (including via
an escrow arrangement in customary form) the source code of all
material Software owned by it. The Company uses no bespoke Software
that it does not own.
19.2 Computer Operation and Maintenance
19.2.1 All material IT Systems are in good working order, function in
accordance with all applicable specifications, and have been and
are being properly and regularly maintained and replaced.
19.2.2 All IT Services provided by any third party are being and have been
provided in accordance in all material respects with all applicable
specifications agreed by the Company with such third party.
19.2.3 The Company has full and unrestricted access to and use of the IT
Systems, and (except as stated in the IT Contracts Disclosed) no
third party agreements or consents are required to enable the
Company to continue such access and use following Completion.
19.2.4 So far as the Warrantors are aware:
(a) it is not necessary or desirable to incur any further
expenditure on the modification, development, expansion or
(save in the normal course of business) replacement of the
IT Systems; and
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(b) the present capacity of the IT Systems is sufficient in the
normal course of business in order to satisfy the
requirements of the Company with regard to data processing
and communications during the current financial year.
19.2.5 No part of the IT Systems is or has been infected by any virus or
other extraneously-induced malfunction, and no person has had
unauthorised access to the IT Systems or any data stored thereon.
The Company operates a documented procedure to avoid such
infections and unauthorised access.
19.2.6 All data processed using the IT Systems and/or the IT Services has
been regularly archived in hard copy form. Such hard copies have
been properly stored and catalogued, and are available for
inspection as required by the Company from time to time.
19.2.7 The Company has taken reasonable steps to ensure that its business
can continue in the event of a failure of the IT Systems (whether
due to natural disaster, power failure or otherwise).
20. Legislation
The Company has not received notice of and is not aware of any
allegation of breach of, the requirements of any legislation which
is applicable to it.
21. Year 2000
Assuming continued provision of applicable utilities e.g. electrical power,
the operation of the IT Systems, the Products and the provision of the IT
Services has been unaffected by the change in year from 1999 to 2000 or by
any related change in the field configurations containing date information
within the IT Systems and the Products ("Year 2000 Compliant"). In
particular:
21.1 there has been no error, malfunction or change in the operation,
functionality or performance of the IT Systems, the Products or the
provision of the IT Services;
21.2 no value for current date will cause any interruption in the
operation of the IT Systems, the Products or the provision of the
IT Services;
21.3 all manipulations of time-related data will produce the desired
results for all valid date values within the applicable domain;
21.4 date-based functionality has behaved consistently for dates prior
to, during and after the year 2000;
21.5 date elements in interfaces and data storage have permitted
specifying the century to eliminate date ambiguity without human
intervention, including leap year calculations; and
21.6 where any date element is represented without a century, the
correct century shall be unambiguous for all manipulations
involving the element and in all
76
interfaces and data storage, the century in any date shall be
specified either explicitly or by unambiguous algorithms or
inferencing rules.
21.7 the Company has conducted and concluded an appropriate Year 2000
readiness review for all of its IT Systems, the Products and IT
Services, including assessment, implementation (including
remediation, upgrading and replacement of the IT Systems, the
Products and IT Services as necessary), validation testing and
contingency planning. With respect to Software obtained from third
parties (licensed Software shareware and freeware) that is
incorporated into IT Systems, the Products and IT Services, the
Company has obtained appropriate confirmations from all providers
of such software that it is Year 2000 Compliant.
22. Products
22.1 The Products comply in all respects with all specifications and
descriptions and provide all functionality described in Schedule 10
to this Agreement, all Contracts for the Products and all operating
manuals and other literature of the Company.
22.2 The Disclosure Letter lists all third party Software incorporated
in the Products. All such Software is duly licensed to the Company.
None of such licences;
22.3.1 are terminable by the licensor on or before 31 January 2001;
22.3.2 are terminable on any change of control of any Group Company or
licensor;
22.3.3 provide for the payment of more than a nominal royalty per annum;
22.3.4 restrict the ability of any Group Company to grant sub-licences to
Customers of the Products on such terms as the Company may in its
discretion determine; or
22.3.5 restrict the geographic area in which such Software may be used or
sublicenced.
Part 2
Taxation warranties
23. Taxation
23.1 General
23.1.1 Notices and returns
All notices, returns, computations and registrations of the Company
required to be made by Law for the purposes of Taxation have been
made punctually on a proper basis and are correct and none of them
is, or as far as the Warrantors
77
are aware is likely to be, the subject of any dispute with any
Taxation Authority.
23.1.2 All information supplied by the Company to Taxation Authorities for
the purposes of Taxation was when supplied and remains complete and
accurate in all material respects.
23.1.3 Payment of Tax due
All Taxation which the Company is liable to pay prior to Completion
has been or will be so paid prior to Completion.
23.1.4 Penalties or interest on Tax
The Company has not within the period of six years ending on the
date of this Agreement paid or become liable to pay any penalty,
fine, surcharge or interest charged by virtue of the provisions of
the TMA or any other Taxation Statute.
23.1.5 Compliance with PAYE, national insurance contribution and Tax
collection obligations
(a) All income tax deductible and payable under the PAYE system
and/or any other Taxation Statute has, so far as is required
to be deducted, been deducted from all payments made or
treated as made by the Company and all amounts due to be
paid to the Inland Revenue prior to the date of this
Agreement have been so paid, including all Tax chargeable on
benefits provided for directors, employees or former
employees of the Company or any persons required to be
treated as such.
(b) All deductions and payments required to be made under any
Taxation Statute in respect of national insurance and social
security contributions (including employer's contributions)
have been so made.
(c) All payments by the Company to any person which ought by Law
to have been made under deduction of Tax have been so made
and the Company (if required by Law to do so) has accounted
to the Inland Revenue for the Tax so deducted.
(d) Proper records as required by Law have been maintained in
respect of all such deductions and payments and all
applicable regulations have been complied with.
(e) The Disclosure Documents contain details so far as they
affect the Company of all current dispensations agreed with
the Inland Revenue in relation to PAYE and all notifications
given by the Inland Revenue under section 166, ICTA 1988.
23.1.6 Investigations
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The Company has not been subject to any visit, audit,
investigation, discovery or access order by any Taxation Authority
and so far as the Warrantors are aware there are no circumstances
existing which make it likely that a visit, audit, investigation,
discovery or access order will be made.
23.1.7 Residence
The Company is and always has been resident for Taxation purposes
only in the jurisdiction in which it is incorporated.
23.1.8 Tax provision
Provision or reserve in accordance with generally accepted
accounting principles has been made in the Accounts for all
Taxation assessed or liable to be assessed on the Company or for
which it is accountable in respect of income, profits or gains
earned, accrued or received or deemed to be earned, accrued or
received on or before the Balance Sheet Date, including
distributions made down to such date or provided for in the
Accounts and proper provision has been made in the Accounts for
deferred Taxation in accordance with generally accepted accounting
principles.
23.1.9 Concessions and arrangements
The amount of Taxation chargeable on the Company during any
accounting period ending on or within the six years before the
Balance Sheet Date has not so far as the Warrantors are aware
depended on any concessions, agreements or other formal or informal
arrangements with any Taxation Authority.
23.1.10 Anti-avoidance provisions
The Company has not entered into or been a party to any scheme or
arrangement of which the main purpose, or one of the main purposes,
was the avoidance of or the reduction in or the deferral of a
liability to Taxation.
23.1.11 Section 765, ICTA 1988
The Company has not without the prior consent of the Treasury
carried out or agreed to carry out any transaction under section
765, ICTA 1988 which would be unlawful in the absence of such
consent and has, where relevant, complied with the requirements of
section 765A(2), ICTA 1988 (supply of information on movement of
capital within the EU) and any regulations made or notice given
thereunder.
23.1.12 Transactions requiring clearance or consent
All particulars furnished to any Taxation Authority in connection
with an application for clearance or consent by the Company or on
its behalf or affecting the Company has been made and obtained on
the basis of full and accurate disclosure to the relevant Taxation
Authority of all relevant material facts and considerations, and
any transaction for which clearance or consent
79
was obtained has been carried into effect only in accordance with
the terms of the relevant clearance or consent.
23.1.13 Calculation of Taxation liability
The Company has sufficient records relating to past events to
permit accurate calculation of the Taxation liability or relief
which would arise upon a disposal or realisation on completion of
each asset owned by the Company at the Balance Sheet Date or
acquired by the Company since that date but before Completion.
23.1.14 Claims and disclaimers
The Company has duly submitted all claims and disclaimers the
making of which has been assumed for the purposes of the Accounts.
23.1.15 Outstanding claims, elections and appeals
The Disclosure Documents contain full particulars of all matters
relating to Taxation in respect of which the Company is or at
Completion will be entitled:
(a) to make any claim (including a supplementary claim),
disclaimer or election for relief under any Taxation
Statute;
(b) to appeal against any assessment or determination relating
to Taxation; to apply for a postponement of Taxation.
23.2 Corporation tax, including corporation tax on chargeable gains
23.2.1 Base values and acquisition costs
If each of the capital assets of the Company was disposed of on the
date hereof for a consideration equal to the book value of that
asset in, or adopted for the purposes of, the Accounts or, in the
case of assets acquired since the Balance Sheet Date, equal to the
consideration given upon its acquisition, no liability to
corporation tax on chargeable gains or balancing charges under the
CAA would arise and for the purpose of determining the liability to
corporation tax on chargeable gains there shall be disregarded any
relief and allowances available to the Company other than amounts
falling to be deducted under section 38, TCGA.
23.2.2 Capital allowances
All expenditure which the Company has incurred or may incur under
any subsisting commitment on the provision of machinery, plant or
buildings has qualified or will qualify (if not deductible as a
trading expense for trade carried on by the Company) for writing-
down allowances or industrial building allowances (as the case may
be) under CAA and where appropriate notices have been given to the
Inland Revenue under section 118, FA 1994.
23.2.3 Leased assets
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The Company has not made any claim for capital allowances in
respect of any asset which is leased to or from or hired to or from
the Company and no election affecting the Company has been made or
agreed to be under sections 53 or 55, CAA in respect of such
assets.
23.2.4 Finance leases
The Company is not a lessee under a lease to which the provisions
of Schedule 12 to the FA 1997 apply or could apply.
23.2.5 Short life assets
The Company has not made any election under section 37, CAA nor is
it taken to have made such an election under section 37(8)(c), CAA.
23.2.6 Long life assets
The Company does not own and has not owned a long life asset
(within the meaning of section 38A, CAA) in respect of which any
claim for capital allowances would be subject to the provisions of
section 38E-38G, CAA.
23.2.7 Industrial buildings
None of the assets of the Company expenditure on which has
qualified for a capital allowance under Part I, CAA has at any time
been used otherwise than as an industrial building or structure.
23.2.8 Distributions
(a) No distribution within the meaning of sections 209, 2 10 and
211, ICTA 1988 has been made (or will be deemed to have been
made) by the Company after 5/th/ April, 1965 except
dividends shown in its audited accounts and the Company is
not bound to make any such distribution.
(b) No elections have been made pursuant to section 246A, ICTA
1988 in respect of any dividends nor has the Company made a
distribution to which the provisions of paragraph 2 of
Schedule 7, FA 1997 have been, or could be, applied.
(c) The Company has not received a dividend in respect of which
the payer has made an election under section 246A, ICTA 1988
nor a distribution to which the provisions of paragraph 2 of
Schedule 7, FA 1997 have been, or could be, applied.
23.2.9 Repayments of share capital
The Company has not any time after 6/th/ April, 1965 repaid,
redeemed or repurchased or agreed to repay, redeem or repurchase or
granted an option under which it may become liable to purchase any
shares of any class of its issued share capital nor has the Company
after that date capitalised or agreed
81
to capitalise in the form of shares or debentures any profits or
reserves of any class or description or otherwise issued or agreed
to issue any share capital other than for the receipt of new
consideration (within the meaning of Part VI, ICTA 1988) or passed
or agreed to pass any resolution to do so.
23.2.10 Demergers
The Company has not been engaged in nor been a party to any of the
transactions set out in sections 213 to 218 inclusive, ICTA 1988
nor has it made or received a chargeable payment as defined in
section 218(1), ICTA 1988.
23.2.11 Issues of securities
No securities (within the meaning of section 254(1), ICTA 1988)
issued by the Company and remaining in issue at the date of this
Agreement were issued in such circumstances that the interest
payable thereon falls to be treated as a distribution under either
sections 209(2)(d), 209(2)(da) or 209(2)(e), ICTA 1988, nor has
the Company agreed to issue such securities in such circumstances.
23.2.12 Capital distributions
The Company has not received any capital distribution to which the
provisions of section 189, TCGA could apply.
23.2.13 Land sold and leased back
The Company has not entered into any transaction to which the
provisions of section 779 or 780, ICTA 1988 have been or could be
applied.
23.2.14 Foreign loan interest
The Company has not since 31/st/ March, 1982 received any foreign
loan interest in respect of which double-taxation relief will or
may be restricted under section 798, ICTA 1988.
23.2.15 Non-deductible payments
No rents, interest, annual payments or other sums of an income
nature paid or payable by the Company or which the Company is
under an existing obligation to pay in the future are or may be
wholly or partially disallowable as deductions, management
expenses or charges in computing profits for the purposes of
corporation tax by reason of the provisions of sections 74, 79,
125, 338, 339,779 to 784 inclusive, 787 or 788, ICTA 1988 or any
other statutory provision or otherwise.
23.2.16 No unremittable income or gains
No claim has been made by the Company under sections 584, 585 or
723 ICTA 1988 or under section 279, TCGA.
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23.2.17 Payments to directors, officers or employees
The Company has not made or agreed to make any payment to or
provided or agreed to provide any benefit for any Director or
former director, officer or employee of the Company, whether as
compensation for loss of office, termination of employment or
otherwise, which is not allowable as a deduction in calculating
the profits of the Company for Taxation purposes whether up to or
after the Balance Sheet Date.
23.2.18 Transfer pricing
The Company is not a party to any transaction or arrangement under
which it may be required to pay for any asset or any services or
facilities of any kind an amount which is in excess of the market
value of that asset or those services or facilities, neither is or
was the Company a party to any transaction or arrangements to
which the provisions of section 770A and Schedule 28 AA, ICTA 1988
may apply and nor will the Company receive any payment for an
asset or any services or facilities of any kind that it has
supplied or provided or is liable to supply or provide which is
less than the market value of that asset or those services or
facilities.
23.2.19 Transactions not at arm's length
The Company has not disposed of or acquired any asset in
circumstances falling within section 17 or 19, TCGA nor given or
agreed to give any consideration to which section 128(1)(2), TCGA
could apply.
23.2.20 Chargeable debts
The Company is not owed a debt, other than a debt on a security,
on the disposal or satisfaction of which a liability to
corporation tax on chargeable gains will arise by reason of
section 25 1, TCGA.
23.2.21 Relief for loans to traders and qualifying corporate bonds
No chargeable gain has or is likely to arise pursuant to section
253 (5), (6), (7) or (8) or section 254 (9) or (10), TCGA.
23.2.22 Chargeable policies
The Company has not acquired benefits under any policy of
assurance otherwise than as the original holder of legal and
beneficial title.
23.2.23 Postponement of gains relating to-overseas trade
No claim or election affecting the Company has been made (or
assumed to be made) under sections 140, 140C or 187 TCGA.
23.2.24 Depreciatory transactions
83
(b) The Company has not been a party to any scheme or
arrangement whereby the value of an asset has been
materially reduced as set out in sections 30-34, TCGA.
23.2.25 Gifts
The Company has not received any assets by way of gift as
mentioned in section 282, TCGA and the Company has not held, and
does not hold, shares in a company to which section 125, TCGA
could apply.
23.2.26 Non-resident companies
(a) There has not accrued or arisen any income, profit or gain
in respect of which the Company may be liable to corporation
tax by virtue of the provisions of section 13, TCGA or
Chapter IV of Part XVII, ICTA 1988.
(b) The Company has not been served with a notice in respect of
the unpaid corporation tax liability of any company pursuant
to section 19 TCGA.
23.2.27 Controlled foreign companies
No notice of the making of a direction under section 747, ICTA
1988 has been received by the Company and no circumstances exist
which would entitle the Inland Revenue to make such a direction
or to apportion any profits of a controlled foreign company to
the Company pursuant to section 752, ICTA 1988.
23.2.28 Agent for non-residents
The Company has not been a party to any transaction or
arrangement whereby it is or may hereafter become liable for
Taxation under or by virtue of section 42A, ICTA 1988 or
regulations made thereunder or section 126, FA 1995.
23.2.29 Profit-related pay
No scheme registered under Chapter III of Part V, ICTA 1988
applies to the Company or any of its employees and no application
for registration of a scheme so applying has been made.
23.2.30 Payment from pension funds
The Company has not received a payment out of funds held for the
purposes of an exempt approved scheme in respect of which an
amount is recoverable by the Inland Revenue under section 601,
ICTA 1988.
23.2.31 Claims and elections
84
(a) The Disclosure Documents contain full particulars of all
claims and elections made (or assumed to be made) under
sections 23, 152-162 or 000, 000, 000, 000, XXXX insofar as
they could affect the chargeable gain or allowable loss
which would arise in the event of a disposal by the Company
of any of its assets, and indicates which assets (if any) so
affected would not on a disposal give rise to relief under
Schedule 4, TCGA.
(b) The Disclosure Documents contain full particulars of
elections made under
(i) Regulation 10 of The Exchange Gains and Losses
(Alternative Method of Calculating of Gain or Loss)
Regulations 1994 and whether or not such elections
have been varied
(ii) Regulation 3 or 4 of The Local Currency Elections
Regulations 1994 and such election is still valid.
23.2.32 Loan relationships
(a) all interests, discounts and premiums payable by the Company
in respect of its loan relationships (within the meaning of
section 81, FA 1996) are eligible to be brought into account
by the Company as a debit for the purposes of Chapter 11 of
Part IV, FA 1996 at the time and to the extent that such
debits are recognised in the statutory accounts of the
Company.
(b) The Disclosure Documents contain full particulars of any
debtor relationship (within the meaning of section 103, FA
1996) of the Company which relates to a relevant discounted
security (within the meaning of paragraph 3 of Schedule 13,
FA 1996) to which paragraph 17 or 18 of Schedule 9, FA 1996
applies.
(c) The Company has not been a party to a loan relationship
which had an unallowable purpose (within the meaning of
paragraph 13 of Schedule 9, FA 1996).
(d) The Disclosure Documents contain full particulars of:
(i) any loan relationships to which the Company is a
party to which paragraph 8 of Schedule 15, FA 1996
has applied or will apply on the occurrence of a
relevant event (within the meaning of paragraph 8(2)
of Schedule 15, FA 1996);
(ii) the amount of any deemed chargeable gain or deemed
allowable loss that has arisen or will arise on the
occurrence of such relevant event; and
(iii) any election made pursuant to paragraph 9 of Schedule
15, FA 1996.
85
(e) The Company has not entered into any transaction to which
paragraph 11 of Schedule 9, FA 1996 applies.
23.3 Corporation tax - groups of companies
23.3.1 Group relief and consortium relief
The Disclosure Documents contain full particulars of all
arrangements and agreements relating to group relief (as defined
by section 402, ICTA 1988) to which the Company is or has been a
party and:
(a) all claims by the Company for group relief were when made
and are now valid and have been or will be allowed by way of
relief from corporation tax;
(b) the Company has not made nor is liable to make any payment
under any arrangement or agreement save in consideration for
the surrender of group relief allowable to the Company by
way of relief from corporation tax;
(c) the Company has received all payments due to it under any
arrangement or agreement for any surrender of group relief
made by it and the payments are not liable to be refunded in
whole or in part;
(d) no such payment exceeds or could exceed the amount permitted
by section 402(6), ICTA 1988; and
(e) no arrangements such as are specified in section 410(1)-(6),
ICTA 1988 exist or existed for any period of account in
respect of which a surrender has been made or purports to
have been made.
23.3.2 Surrender of advance corporation tax
The Disclosure Documents contain full particulars of all
arrangements and agreements to which the Company is or has been a
party relating to the surrender of advance corporation tax made
or received by the Company under section 240, ICTA 1988 and:
(a) the Company has not paid nor is liable to pay for the
benefit of any advance corporation tax which is or may
become incapable of set-off against the Company's liability
to corporation tax;
(b) the Company has received all payments due to it under any
arrangement or agreement for any surrender of advance
corporation tax made by it and the payments are not liable
to be refunded in whole or in part;
(c) no such payment exceeds or could exceed the amount permitted
by section 240(8), ICTA 1988; and
86
(d) no arrangements such as are specified in section 240(11),
ICTA 1988 whereby any person could obtain control of the
Company exist or existed for any period in respect of which
a claim under section 240, ICTA 1988 has been made or
purports to have been made.
23.3.3 Transfer of Tax refunds
The Disclosure Documents contain full particulars of all
arrangements and agreements relating to the transfer of tax
refunds to which the Company is or has been a party and:
(a) all claims by the Company for the transfer of tax refunds
were when made and are now valid and have been or will be
allowed by way of discharging the liability of the Company
to pay any corporation tax;
(b) the Company has not made nor is liable to make any payment
under any arrangement or agreement save in consideration for
the transfer of tax refunds allowable to the Company by way
of discharge from liability to corporation tax and
equivalent to the Taxation for which the Company would have
been liable but for the transfer;
(c) the Company has received all payments due to it under any
such arrangement or agreement or transfer of tax refunds
made by it and the payments are not liable to be refunded in
whole or in part;
(d) no such payment exceeds or could exceed the amount permitted
by section 102(7), FA 1989; and
(e) no arrangements such as specified in section 410(1)-(6),
ICTA 1988 exist or existed for any period in respect of
which a claim under section 102, FA 1989 has been made or
purports to have been made.
23.3.4 Acquisitions from group members
No tax has been or may be assessed on the Company pursuant to
section 190, TCGA in respect of any chargeable gain accrued prior
to the date of this Agreement and the Company has not at any time
within the period of six years ending with the date of this
Agreement transferred any asset other than trading stock
including any transfer by way of share exchange within section
135, TCGA to any company which at the time of disposal was a
member of the same group as defined in section 170, TCGA.
23.3.5 Leaving the group
The execution or completion of this Agreement or any other event
since the Balance Sheet Date will not result in any chargeable
asset being deemed to have been disposed of and re-acquired by
the Company for Taxation purposes pursuant to section 178 or 179,
TCGA or as a result of any other Event since the Balance Sheet
Date.
23.3.6 Group income
87
The Disclosure Documents contain full particulars of all
elections made by the Company under section 247, ICTA 1988 and
all such elections are now in force and the Company has not paid
any dividend without advance corporation tax or made any payment
without deduction of income tax in the circumstances specified in
section 247(6), ICTA 1988 and no assessment has been made on the
Company in respect of advance corporation tax which ought to have
been paid or income tax which ought to have been deducted.
23.4 Close companies
23.4.1 Close company status
The Company has at all times been a close company within the
meaning of sections 414 and 415, ICTA 1988.
23.4.2 Close investment-holding company status
The Company has not in any accounting period beginning after
31/st/ March, 1989 been a close investment-holding company as
defined in section 13A, ICTA 1988.
23.4.3 Distributions
No distribution within section 418, ICTA 1988 has ever been made
by the Company.
23.4.4 Loans to participators
Any loans or advances made or agreed to be made by the Company
within sections 419 and 420 or 422, ICTA 1988 have been Disclosed
and the Company has not released or written off or agreed to
release or write off the whole or any part of any such loans or
advances.
23.5 Inheritance tax
23.5.1 No transfers of value and associated operations
The Company has made no transfers of value within sections 94 and
202, ITA nor has the Company received a transfer of value such
that liability might arise under section 199, ITA nor has the
Company been party to associated operations in relation to a
transfer of value as defined by section 268, ITA.
23.5.2 Inland Revenue charge
There is no unsatisfied liability to inheritance tax attached to
or attributable to the Shares or any asset of the Company and
none of them are subject to an Inland Revenue charge as mentioned
in section 237 and 238, ITA.
23.5.3 Power of sale, mortgage or charge
88
No asset owned by the Company nor the Shares are liable to be
subject to any sale, mortgage or charge by virtue of section 212,
ITA.
23.6 VAT
23.6.1 Returns and payments
(a) The Company is a taxable person duly registered for the
purposes of VAT.
(b) The Company has complied with all statutory provisions,
rules, regulations, orders and directions in respect of VAT,
has promptly submitted accurate returns, and the Company
maintains full and accurate VAT records, has never been
subject to any interest, forfeiture, surcharge or penalty
nor been given any notice under sections 59 or 64, VATA nor
been given a warning within section 76(2), VATA nor has the
Company been required to give security under paragraph 4 of
Schedule 11, VATA.
(c) VAT has been duly paid or provision has been made in the
Accounts for all amounts of VAT for which the Company is
liable.
23.6.2 Taxable supplies and input tax credit
All supplies made by the Company are taxable supplies and the
Company has not been and so far as the Warrantors are aware will
not be denied full credit for all input tax by reason of the
operation of sections 25 and 26, VATA and regulations made
thereunder or for any other reasons and no VAT paid by the
Company is not input tax as defined in section 24, VATA and
regulations made thereunder.
23.6.3 VAT groups
The Company is not and has not been for VAT purposes a member of
any group of companies other than the Group and no act or
transaction has been effected in consequence whereof the Company
is or may be held liable for any VAT arising from supplies made
by another company and no direction has been given nor will be
given by H M Customs & Excise under Schedule 9A, VATA as a result
of which the Company would be treated for the purposes of VAT as
a member of a group.
23.6.4 Transactions between connected persons
The Company has not been or agreed to be party to any transaction
or arrangement in relation to which a direction has been or could
be made under paragraph 1 of Schedule 6, VATA or to which
paragraph 2(3A) of Schedule 10, VATA applied.
23.6.5 Charge to VAT as agent or representative
89
The Company is not and has not agreed to become liable for VAT by
virtue of sections 47 and 48, VATA.
23.6.6 VAT and Properties
The Company or its relevant associate for the purposes of
paragraph 3(7) of Schedule 10, VATA has exercised the election to
waive exemption from XXX (xxxxxxxx xx xxxxxxxxx 0 xx Xxxxxxxx 00,
XXXX) only in respect of those Properties listed (as having been
the subject of such an election) in the Disclosure Documents and:
(a) neither the Company nor its relevant associate has any
intention or obligation to exercise such an election in
respect of any other of the Properties;
(b) all things necessary for the election to have effect have
been done and in particular any notification and information
required by paragraph 3(6) of Schedule 10, VATA has been
given and any permission required by paragraph 3(9) of
Schedule 10, VATA has been properly obtained;
(c) a copy of the notification and of any permission obtained
from H M Customs & Excise in connection with the election is
included in the Disclosure Documents;
(d) no election has or so far as the Warrantors are aware will
be disapplied or rendered ineffective by virtue of the
application of the provisions of paragraph 2 (3AA) of
Schedule 10, VATA;
(e) in no case has the Company charged VAT, whether on rents or
otherwise, which is not properly chargeable; and
(f) the Company has not agreed to refrain from making an
election in relation to any of the Properties.
23.6.7 Capital goods scheme
The Company does not own and has not at any time within the
period of ten years preceding the date hereof owned any assets
which are capital items subject to the Capital Goods Scheme under
Part XV of the VAT Regulations 1995.
23.6.8 Bad debt relief
The Company has not made any claim for bad debt relief under
section 36, VATA and details of any claim it could make have been
Disclosed.
23.6.9 Self-billing
The Company has not entered into any self-billing arrangement in
respect of supplies made by any other person nor has it at any
time agreed to allow any
90
such person to make out VAT invoices in respect of supplies made
by the Company.
23.7 Stamp duty
23.7.1 Stamp duty
All stampable documents wheresoever executed (other than those
which have ceased to have any legal effect) to which the Company
is a party and which are necessary to establish title to any of
the Company's assets have been duly stamped or stamped with a
particular stamp denoting that no stamp duty is chargeable. Since
the Balance Sheet Date there have been and are no circumstances
or transactions to which the Company is or has been a party such
that a liability to stamp duty or any penalty in respect of such
duty will arise on the Company.
23.7.2 Stamp duty reserve tax
Since the Balance Sheet Date the Company has not incurred any
liability to or been accountable for any stamp duty reserve tax
and there has been no agreement within section 87(1), FA 1986
which could lead to the Company incurring such a liability or
becoming so accountable.
24. US TAXATION
24.1 Filing of Tax Returns
The US Subsidiary has timely filed with the appropriate Taxation
Authorities all returns, reports, estimates, information returns
and statements (collectively, "Tax Returns") required to be filed
in respect of any material Taxes on or before the date of
Completion. The Tax Returns filed are complete, correct and
accurate in all material respects. The US Subsidiary has
disclosed on its Tax Returns all positions taken on such Tax
Returns that could give rise to a substantial understatement of
Tax within the meaning of Section 6662 of the Code. The US
Subsidiary has not requested any extension of time within which
to file any such Tax Returns. The US Subsidiary has delivered to
the Purchaser true and correct copies of all Tax Returns.
24.2 Payment of Taxes
All material Taxes of the US Subsidiary, in respect of periods or
portions thereof ending on or before the date of Completion, have
been paid, or will have been paid, or an adequate reserve has
been established therefor in conformity with generally accepted
accounting principles consistently applied, as set forth in the
Disclosure Documents, and the US Subsidiary has no liability for
Taxes in excess of the amounts so paid or reserves so
established. All Taxes that the US Subsidiary has been required
to collect or withhold have been duly collected or withheld and,
to the extent required when due, have been or will be duly paid
to the proper Taxation Authority. No claim has ever been made by
a Taxation Authority in a jurisdiction where the US Subsidiary
91
does not file Tax Returns that it is or may be subject to taxation by
such jurisdiction.
24.3 Audit History
All Tax Returns of the US Subsidiary, for all periods ended on or
prior to the date of Completion have been either examined by the
United States Internal Revenue Service (the "IRS") or other Taxation
---
Authorities or relate to closed periods, all deficiencies asserted as
a result of such examinations have been paid or finally settled, and
it is not anticipated that any issue will be raised by the IRS or
other Taxation Authority in any such examination which, by
application of similar principles, reasonably could be expected to
result in a proposed deficiency for any other period not so examined.
There are no audits pending or threatened of any of the US
Subsidiary's Tax Returns by any Taxation Authority, and there are no
claims which have been or may be asserted relating to any of the US
Subsidiary's Tax Returns filed for any year which if determined
adversely would result in the assertion by any Taxation Authority of
any deficiency. There have been no waivers or extensions of statutes
of limitations by the US Subsidiary.
24.4 Asset Liens
There are no liens for Taxes (other than for current Taxes not yet
due and payable) on any assets of the US Subsidiary.
24.5 Tax Elections
All material elections with respect to Taxes affecting the US
Subsidiary that are effective as of the date hereof are set forth in
the Disclosure Documents. The US Subsidiary has not: (i) made nor
will it make a consent dividend election under Section 565 of the
United States Internal Revenue Code of 1986, as amended (the "Code");
(ii) consented at any time under Section 341(f)(1) of the Code to
have the provisions of Section 341(f)(2) of the Code apply to any
disposition of the US Subsidiary's assets; (iii) agreed, nor is
required, to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise; (iv) made an
election, nor is required, to treat any asset of the US Subsidiary as
owned by another person pursuant to the provisions of former Section
168(f) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, or
as "tax-exempt bond financed property" or "tax-exempt use property"
within the meaning of Section 168 of the Code; or (v) made any of the
foregoing elections nor is required to apply any of the foregoing
rules under any comparable state, local or foreign Tax provision.
24.6 Prior Affiliated Groups
The US Subsidiary has no liability for the Taxes of any other person
(i) under United States Treasury Regulation Section 1.1502-6 (or any
similar provision of Law), (ii) as a transferee or successor, (iii)
by contract, or (iv) otherwise.
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24.7 Power of Attorney
There is no power of attorney granted by the US Subsidiary relating
to any Tax that is currently in force.
24.8 Tax Sharing Agreements
There are no, and at the date of Completion there will be no, Tax-
sharing agreements or similar arrangements with respect to or
involving the US Subsidiary and, after the date of Completion, the US
Subsidiary shall not be bound by any such Tax-sharing agreements or
similar arrangements or have any liability thereunder for amounts due
in respect of periods prior to the date of Completion.
24.9 Partnerships and Single Member LLCs
Except as set forth in the Disclosure Documents, the US Subsidiary is
not (i) subject to any joint venture, partnership, or other
arrangement or contract which is treated as a partnership for United
States federal income Tax purposes nor (ii) owns a single member
limited liability company which is treated as a disregarded entity.
24.10 Withholding
The US Subsidiary is not a "United States real property holding
corporation" within the meaning of Section 897 of the Code.
24.11 Parachute Payments
The US Subsidiary is not a party to any agreement, contract,
arrangement or plan that has resulted or could result, separately or
in the aggregate, in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code or which would result
in a disallowed deduction under Section 162(m) of the Code.
24.13 Permanent Establishment
The US Subsidiary has never had a permanent establishment in any
foreign country, as defined in any applicable Tax treaty or
convention between the United States of America and such foreign
country.
24.14 Tax-Exempt Interest
None of the assets of the US Subsidiary directly or indirectly
secures any debt the interest on which is Tax-exempt under Section
103(a) of the Code.
24.15 International Boycott
The US Subsidiary has never participated in nor is participating in
an international boycott within the meaning of Section 999 of the
Code.
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SCHEDULE 5A
1. Public Filings. The Company has filed all forms, reports, and
---------------
documents (the "Company Public Reports") required to be filed with the
SEC and the National Association of Securities Dealers and other U.S.
federal or state securities law authorities, exchanges or self-
regulatory bodies (the "Securities Authorities") prior to the Closing
Date.
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SCHEDULE 6
Basis for preparation of the Completion Statement
1. GENERAL REQUIREMENTS
The consolidated Completion Statement of the Group shall represent the
assets and liabilities of the Group and be prepared on the basis of US
GAAP as applied by companies carrying on a similar business to that of
the Business, but for the avoidance of doubt:
1.1 sums receivable in respect of debtors shall not be included at sums
higher than the amounts collectible, making appropriate provision for
doubtful debts;
1.2 stocks and work-in-progress shall be valued at the lower of cost and
net realisable value;
1.3 no value shall be attributable to goodwill or any other intangible
asset other than as attributed in the Balance Sheet Accounts;
1.4 no value shall be attributable to research and development costs;
1.5 immovable property and other fixed assets shall be included at their
net book value as at the Balance Sheet Date (or at cost if purchased
after the Balance Sheet Date) less depreciation at the rates used in
the Balance Sheet Accounts;
1.6 full provision shall be made for all Taxation including deferred
Taxation, but no value shall be attributable to deferred tax assets on
an individual or net basis.
SCHEDULE 7
Completion
Part 1
1. VENDORS' OBLIGATIONS
On Completion, the Vendors shall deliver to the Purchaser as required by
clause 6.2:
1.1 evidence reasonably satisfactory to the Purchaser of the fulfilment of the
conditions set out in clause 2.1;
1.2 a copy of the minutes of a meeting of the directors of each of the Vendors
that is a body corporate authorising the execution by that Vendor of this
Agreement and the Tax Deed (such copy minutes being certified as correct by
the secretary of that Vendor) or in the case of Hikari Tsushin Inc
("Hikari") a written confirmation from a legal adviser of Hikari of the due
authority of its signatory to this Agreement;
1.3 certificates from each of the banks at which the Company and each of the
Subsidiaries maintains an account of the amount standing to the credit or
debit of all such accounts as at the close of business two Business Days
prior to Completion in respect of the United Kingdom banks and three
Business Days prior to Completion in respect of the US banks;
1.4 the cash book balances of the Company and each of the Subsidiaries as at
Completion with statements reconciling such cash book balances and the
relevant cheque books with the balances on the bank accounts of the Company
and each of the Subsidiaries as shown by the certificates referred to in
paragraph 1.3;
1.5 the cheque books relating to all the bank accounts of the Company and each
of the Subsidiaries together with confirmation that no cheques have been
written by the Company or any of the Subsidiaries since preparation of the
statements referred to in paragraph 1.4;
1.6 evidence in the agreed terms that all debts and accounts (if any) between
any member of the Group or any Affiliate of any member of the Group (of the
one part) and the Vendors and any Connected Person or Affiliate of any of
the Vendors (of the other part) have been fully paid and settled;
1.7 legal opinion of Manx counsel to the Trustee Vendor addressed to the
Purchaser in terms reasonably acceptable to the Purchaser;
1.8 the Tax Deed duly executed as a deed by each of the parties thereto other
than the Purchaser;
1.9 transfers of the Shares duly executed by the registered holders thereof in
favour of the Purchaser or its nominee(s) together with the relevant share
certificates in the names of such registered holders;
1.10 such waivers, consents or other documents (including any power of attorney
under which any document required to be delivered under Part 1 of this
schedule has been executed) in the agreed terms to enable the Purchaser and
its nominee(s) to be registered as the holders of the Shares;
1.11 certificates in respect of all issued shares in the capital of each of the
Subsidiaries and duly executed transfers of all shares in any Subsidiary
held by any nominee or trustee for the Company including any subsidiary in
favour of such persons as the Purchaser shall direct;
1.12 irrevocable powers of attorney in the agreed terms executed by each of the
holders of the Shares in favour of the Purchaser or its nominee(s) to
enable the beneficiary (pending registration of the transfers of the
Shares) to exercise all voting and other rights attaching to the Shares and
to appoint proxies for this purpose;
1.13 the statutory registers and minute books (properly written up to the time
immediately prior to Completion), the common seal (if any), the certificate
of incorporation and (if applicable) any certificate of incorporation on
change of name of the Company and each of the Subsidiaries;
1.14 the documents of title to the Properties;
1.15 the written resignations in the agreed terms of those Directors specified
by the Purchaser and the secretary or secretaries of the Company and the
Subsidiaries in form reasonably satisfactory to Purchaser from their
respective offices, such resignations to take effect from Completion;
1.16 the written resignation of the auditors of the Company and of each of the
Subsidiaries in the agreed terms to take effect from Completion containing
the statements referred to in section 394(1), CA 85 that they consider
there are no such circumstances as are mentioned in that section and
confirming that they have deposited or shall deposit that statement in
accordance with section 394(2), CA 85 at the respective registered offices
of the Company and each of the Subsidiaries;
1.17 employment agreements in the agreed form, duly executed by the Managers;
1.18 a release in the agreed form from each Vendor and written termination of
the Shareholders Agreement of the Company; and
1.19 an agreement in a form reasonably acceptable to the Purchaser amending the
terms of the agreement between Navarre Corporation and PSL dated 20 July
1999 so as to ensure that the definition of products which Navarre is
entitled to distribute does not extend to products of, or incorporating
products of other companies in the Purchaser's Group.
Part 2
On Completion, the Vendors shall cause a board meeting of the Company and of
each of the Subsidiaries to be held at which:
1. in the case of the Company only, the said transfers of the Shares shall be
passed for registration and registered (subject to the same being duly
stamped, which shall be at the cost of the Purchaser);
2. the resignations referred to in paragraphs 1.15 and 1.16 of Part 1 shall be
tendered and accepted so as to take effect at the close of the meeting;
3. persons nominated by the Purchaser (in the case of directors subject to any
maximum number imposed by the relevant articles of association) shall be
appointed additional directors and appointed secretaries;
4. all existing instructions and authorities to bankers shall be revoked and
shall be replaced with alternative instructions, mandates and authorities
in such form as the Purchaser may require;
5. the registered office shall be changed as directed by the Purchaser;
6. the accounting reference date shall be changed as directed by the
Purchaser;
7. KPMG shall be appointed auditors; and
8. in the case of the Subsidiaries only, transfers shall be passed for
registration and registered (subject to the same having been duly stamped
at the cost of the Company) and declarations of trust in a form
satisfactory to the Purchaser shall be executed in respect of all shares in
the Subsidiaries held by any person other than the Company as nominee for
the Company or another Subsidiary.
SIGNED by XXXXX XXXXXX
/s/ XXXXX XXXXXX
SIGNED for and on behalf of THE XXXXXXX TRUSTEE COMPANY LIMITED
By: /s/ D A M XxXXXXXX.
By: /s/ XXX XXXXXX
SIGNED for and on behalf of 3i GROUP PLC
By: /s/ TREVOR HOPE
By: ........................................
SIGNED for and on behalf of
KENNET I LP.
By: /s/ C SYVRET
By: /s/ DIRECTOR KENNET CAPITAL MANAGEMENT (JERSEY) LIMITED
SIGNED for and on behalf of
ACCESS TECHNOLOGY PARTNERS L.P
By: /s/ XXXXXX XXXXXXXX
By: ........................................
SIGNED for and on behalf of
ACCESS TECHNOLOGY PARTNERS BROKERS FUND L.P
By: /s/ XXXXXX XXXXXXXX
By: ..........................................
SIGNED for and on behalf of
XXXXXXXXX & XXXXX CALIFORNIA
By: /s/ XXXXXX XXXXXXXX
By: .......................................
SIGNED for and on behalf of
XXXXXXXXX & XXXXX EMPLOYEE VENTURE FUND X.X. XX
By: /s/ XXXXXX XXXXXXXX
By: ..........................................
SIGNED for and on behalf of
XXXXXXXXX & XXXXX PARAGON SOFTWARE INVESTORS L.P.
By: /s/ XXXXXXXXXXX XXXXXXX
By: for XXXXX XXXXX
SIGNED for and on behalf of 3 COM VENTURES INC
By: /s/ XXXXXX X. XXXXXXX
SIGNED by HIKARI TSUSHIN INC
By: /s/ XXXXXXXX XXXXX
SIGNED for and on behalf of XXXXX.XXX, INC.
By: /s/ XXXXX XXXXXXXX
SIGNED for and on behalf of PARAGON SOFTWARE (HOLDINGS) LIMITED
By: /s/ XXXXX XXXXXX
