EXHIBIT 2.1
CONFORMED COPY
DATED 10 OCTOBER 1999
Controls and Communications Limited (1)
The Racal Corporation (2)
Racal Electronics plc (3)
Global Crossing Ltd. (4)
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SALE AGREEMENT
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Xxxxxx Xxxxx Xxxxxxx
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CONTENTS
Clause Page
1. INTERPRETATION 1
2. CONDITIONS 2
3. SALE AND PURCHASE OF SHARES 4
4. CONSIDERATION AND INTER-COMPANY DEBT 5
5. PRE-COMPLETION CONDUCT AND TERMINATION RIGHTS 6
6. NET ASSET ADJUSTMENT 7
7. COMPLETION 8
8. WARRANTIES 11
9. LIMITATION OF CLAIMS 13
10. INDEMNITIES 19
11. PENSIONS 20
12. NAME AND USE OF MARKS 20
13. PROPERTY REORGANISATION 21
14. NOT USED 24
15. PARENT GUARANTEE 24
16. GENERAL 25
17. CONFIDENTIAL INFORMATION 30
18. GOVERNING LAW AND JURISDICTION 31
SCHEDULE I 33
The Parties 33
SCHEDULE II 34
Definitions 34
SCHEDULE III 49
Transfer Conditions 49
SCHEDULE IV 51
Telecom Group 51
SCHEDULE V 52
Completion Balance Sheet 52
Part A 52
Part B 56
SCHEDULE VI 57
Covenants and Warranties 57
Part A 57
Part B 58
Part C 78
SCHEDULE VII 80
Pension Arrangements 80
PART A 80
PART B 81
PART C 101
SCHEDULE VIII 116
Telecom Group Guarantees of Racal Group Members 116
SCHEDULE IX 117
Tax Covenant and Warranties 117
Part A 117
Part B - Tax Covenant 122
SCHEDULE X 144
Conduct between exchange and completion 144
SCHEDULE XI 148
Property Reorganisation 148
Part A: leasehold properties to be assigned to RTL 148
Part B: leasehold properties to be assigned to RPL
and to be sublet to RTL 149
Part C: leasehold properties to be sublet to RTL 150
SCHEDULE XII 153
Outstanding Negotiations 153
Part A 153
Engrossments or Equivalent 153
Part B 156
Proposed Transactions 156
AGREED FORM DOCUMENTS Party Responsible
Base Line Balance Sheet (LWD)
Data Room Index (LWD)
Powers of Attorney (LWD)
Trade Xxxx Licence (LWD)
Transitional Services Agreement (LWD)
Letter of resignation for directors and secretary (LWD)
FIRPTA Notice to IRS pursuant to Treas.
Reg.Sec.1.897-2(h)(2) (LWD)
FIRPTA Statement of Racal USA to Global (LWD)
Reorganisation Documents (LWD)
Adjusting Principles (LWD)
Carve-Out Accounts (LWD)
CONFORMED COPY
SALE AGREEMENT
THIS AGREEMENT is made 10 October 1999.
BETWEEN:
(1) Controls and Communications Limited (registered number 314979) whose
details are set out in Schedule I;
(2) The Racal Corporation (registered number 59-1785-1646) whose details are
set out in Schedule I;
(3) Racal Electronics Plc (registered number 497098) whose details are set
out in Schedule I ("Racal"); and
(4) Global Crossing Ltd. a company registered in Bermuda whose details are
set out in Schedule I ("Global").
WHEREAS:
(A) The Sellers are the beneficial owners and the registered holders of
those numbers of the Shares set opposite their respective names in
Schedule IV.
(B) The Sellers have agreed to sell and Global has agreed to purchase all
the Shares on and subject to the terms of this Agreement.
(C) In consideration of Global entering into this Agreement at the request
of the Guarantor, the Guarantor has agreed to guarantee the obligations
of Controls and Communications Limited and The Racal Corporation under
this Agreement.
IT IS AGREED:
1. INTERPRETATION
1.1 In this Agreement (including the Schedules), except so far as the
context otherwise requires, words and expressions shall have the
meanings set out in Schedule II.
1.2 In this Agreement, unless otherwise specified:
(a) references to clauses, subclauses, paragraphs, subparagraphs
and schedules are to clauses, subclauses, paragraphs and
subparagraphs of, and schedules in, this Agreement;
(b) headings to clauses and schedules are for convenience only
and do not affect the interpretation of this Agreement;
(c) references to a "company" shall be construed so as to include
any company, corporation or other body corporate, wherever
and however incorporated or established;
(d) references to a "person" shall be construed so as to include
any individual, firm, company, government, state or agency of
a state, local or municipal authority or government body or
any joint venture, association or partnership (whether or not
having separate legal personality);
(e) a reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been amended,
modified or re-enacted;
(f) references to times of the day are to London time;
(g) references to the one gender include all genders, and references
to the singular include the plural and vice versa; and
(h) references to "material to the business of the Telecom Group"
shall be read as a reference to matters which are material to
the operation and conduct of the business of the Telecom Group
taken as a whole.
1.3 The Recitals and Schedules to this Agreement form part of it.
2. CONDITIONS
2.1 Completion is conditional on the satisfaction (or where
permissible, waiver) of the Transfer Conditions set out in Schedule
III and the provisions of this clause 2.
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2.2 In the event that this Agreement has been terminated in accordance
with either clause 2.10 or clause 2.11 this Agreement shall on the
date of termination be of no further force and effect except that
this clause and clauses 1, 16, 17 and 18 shall continue in force
and such termination of this Agreement shall not affect the rights
of any parties for prior breaches of this Agreement.
2.3 The Sellers shall use all reasonable endeavours to procure the
satisfaction of the Transfer Conditions set out in paragraphs 1, 2,
3 and 5 of Schedule III as soon as practicable and will on request
keep Global informed with respect to progress in that regard.
2.4 Global shall use all reasonable endeavours to procure the
satisfaction of the Transfer Conditions set out in paragraphs 4 and
5 of Schedule III as soon as practicable and will on request keep
the Sellers informed with respect to progress in that regard.
2.5 The parties shall as soon as reasonably practicable provide all
information and assistance reasonably requested by any of them in
respect of action which is required or desirable in respect of the
satisfaction of the Transfer Conditions and shall not take any
steps which might prejudice or might reasonably be expected to
prejudice the satisfaction of the Transfer Conditions. If Global
shall not within 10 Business Days of the date of this Agreement
make the filing which it must make to obtain the consents set out
as paragraphs 4 and 5 of the Transfer Conditions for any reason
other than Racal failing to provide Global with the information
necessary for it to make the necessary filing, such conditions
shall lapse and be treated as waived.
2.6 At any time Global may waive the Transfer Conditions set out in
paragraphs 2, 3, 4 and 5 of Schedule III by notice to the Sellers.
2.7 The rights and obligations of the parties set out in Clauses 2.3 to
2.6 shall:
(a) not oblige any of the relevant parties to waive any of the
Transfer Conditions; and
(b) (in relation to each party's obligations) be subject to the
directors of Racal not thereby being in breach of their
fiduciary duties which shall without limitation, be construed
as obliging the directors of Racal to make a recommendation or
not to withdraw their recommendation to their shareholders (or
any class of their shareholders) to vote in favour of the
Transaction (or any part of it) if, acting in good faith,
such directors resolve that such recommendation would not be
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in the best interests of Racal and/or its shareholders.
2.8 If the Transfer Condition set out in paragraph 4 of Schedule III is
the only Transfer Condition which has not been satisfied by the
Long Stop Date or has become incapable of satisfaction in
circumstances where the other Transfer Conditions have been
satisfied or waived, the parties shall complete the sale and
purchase of the Shares after taking such appropriate steps as they
shall reasonably agree are necessary with regard to the assets or
revenues which give rise to the need for the German Clearance such
that the Agreement can be completed without the need for German
Clearance. If the parties are unable to agree any other way of
dealing with the matter Racal shall retain the relevant assets or
revenues and operate them for the benefit of Global.
2.9 NOT USED
2.10 Subject to clause 2.8, if any of the Transfer Conditions becomes
incapable of satisfaction or has not been satisfied by the Long
Stop Date, Global may on that date or at any time thereafter by
notice to the Sellers terminate this Agreement, in which case the
provisions of clause 2.2 shall apply.
2.11 Subject to clause 2.8, if any of the Transfer Conditions becomes
incapable of satisfaction or has not been satisfied by the Long
Stop Date, Racal (acting on behalf of the Sellers) may on that date
or at any time thereafter by notice to Global terminate this
Agreement, in which case the provisions of clause 2.2 shall apply.
3. SALE AND PURCHASE OF SHARES
3.1 On and subject to the terms of this Agreement, the Sellers shall
sell with full title guarantee the Shares set opposite their
respective names in Schedule IV to Global and Global shall purchase
all the Shares on Completion, in each case free from all charges,
liens, equities, encumbrances, claims or restrictions whatsoever
and together with all rights which are now, or at any time
hereafter may become, attached to them (including without
limitation the right to receive all dividends and distributions
declared, made or paid on or after Completion).
3.2 Global covenants to procure that its wholly owned subsidiary Global
Crossing Holdings Ltd advances the monies it draws down under the
Xxxxxxx Sachs Facility to fund the acquisition of the Shares.
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3.3 Global shall not be obliged to complete the purchase of any of the
Shares unless the sale to it of all the Shares is completed
simultaneously and if such sale is not completed on the Completion
Date then Global shall be entitled to rescind this Agreement
without liability of any kind on its part, but without prejudice to
its rights in respect of any pre-existing breach of the terms
hereof, including any breach giving rise to such right to rescind.
3.4 The Sellers agree to waive any rights which may have been conferred
on them under the Articles of Association or other constitutional
documents of each Telecom Group member whose shares are to be sold
pursuant to clause 3.1 or otherwise or in any other way to have any
of the Shares offered to them for purchase at any time on or before
the transfer of the Shares pursuant to the provisions of this
Agreement.
4. CONSIDERATION AND INTER-COMPANY DEBT
4.1 Prior to Completion (and not less than three Business Days prior
thereto), Racal will notify Global of its estimate of the
Inter-Company Net Debt plus the Finance Lease Net Debt at
Completion.
4.2 At Completion the parties will co-operate to ensure the discharge
of all Inter-Company Net Debt and, in particular, Global will
advance to such members of the Telecom Group as Racal may require
such amounts as Racal may require (which in aggregate may not
exceed the estimate for Inter-Company Net Debt given under clause
4.1) to put such members in funds to permit such discharge.
4.3 On Completion, Global shall pay to the Sellers the amount of (Pound
Sterling)1,000,000,000 (less the amount of the Inter-Company Net
Debt and the Finance Lease Net Debt estimated under clause 4.1)
together with the sum of (Pound Sterling)2,100,000 in respect of
RTL of which (Pound Sterling)10,000,000 shall be payable to The
Racal Corporation in respect of the shares in Racal USA, and (Pound
Sterling)10,000,000 shall be payable to Controls and Communications
Limited in respect of the Shares in RISL the balance to be divided
among the Sellers in the following proportions:
(a) 60% to Racal in respect of the shares in RTL; and
(b) 40% to Racal in respect of shares in RTNL.
4.4 To the extent that at Completion any sum is paid by a company to
another company under clause 4.2 in excess of the amount due, the
excess shall be repaid. If as a result the amount advanced by
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Global under clause 4.2 is different from the amount necessary to
discharge all Inter-Company Net Debt, the difference shall be paid
by Global to (if it advanced insufficient sums), or to Global (if
it has advanced too much) by, the relevant member of the Telecom
Group. In addition, the purchase price under clause 4.3 shall be
adjusted upwards (if net sums are repaid to Global) or downwards
(if net sums are payable by Global) but so that the aggregate of
sums paid by Global under this clause 4 to the Sellers and by way
of settlement of the Inter-Company Net Debt by members of the
Telecom Group (as adjusted under clause 4.4) shall always be the
sum of (Pound Sterling)1,000,000,000 less the Finance Lease Net
Debt at Completion.
4.5 Any Inter-Company Trading Debt and Inter-Company Trading
Receivables shall be paid by or to members of the Telecom Group to
or from all other members of the Racal Group on the date that such
would have been paid in the ordinary course of business.
5. PRE-COMPLETION CONDUCT AND TERMINATION RIGHTS
5.1 Save as provided in this Agreement or otherwise with the express
prior consent of Global, the Sellers agree that between the date of
this Agreement and Completion, they shall procure that the Telecom
Group shall continue to conduct its business in the ordinary course
and shall comply with the provisions of Schedule X and shall notify
Global immediately if they become aware of a fact or circumstance
which constitutes a breach of Schedule X.
5.2 The Agreement may be terminated at any time prior to Completion by
notice:
(a) by Racal (acting on behalf of the Sellers) if Global is in
material breach of its obligations under this Agreement and
such breach has not been remedied within 10 Business Days of
notice of such breach having been given to Global; or
(b) by Global on notice to the Sellers:
(i) if the board of directors of Racal withdraws or
materially amends its recommendation of the Transaction;
or
(ii) if the Sellers are in material breach or breaches of
their obligations which taken together are material in
the context of this Agreement (other than their
obligations under clause 8 to which sub-clause (iii)
below applies) under this Agreement and such breach has
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not been remedied within 10 Business Days of notice of
such breach having been given to the Sellers; or
(iii)pursuant to clause 8.12.
5.3 If this Agreement is terminated prior to Completion in accordance
with clause 5.2 each party's further rights and obligations cease
immediately on termination, except that termination does not affect
a party's accrued rights and obligations at the date of termination
and the provisions of clauses 1, 16, 17 and 18 shall remain in full
force and effect.
5.4 No party shall have the right to terminate or rescind this
Agreement after Completion or save as provided in clauses 2.7, 2.8,
3.3, 7.9, 7.12, 8.12 or this clause 5.
5.5 On or before Completion, Racal may procure the payment of a
dividend by RTL to its shareholders (the "Pre Completion
Dividend") less than RTL's distributable reserves. Before the
declaration of the dividend Racal shall produce to Global accounts
of RTL which demonstrate to Racal's satisfaction that such dividend
is lawful.
5.6 No earlier than 5 Business Days prior to Completion, Racal may
shorten any existing financial period of all members of the Telecom
Group to the same date. Racal shall ensure that Global is given
prior notice of such closure and the date selected.
6. NET ASSET ADJUSTMENT
6.1 From Completion, the parties shall give effect to Schedule V to
agree or determine the amount of the Completion Net Assets and
Finance Lease Net Debt at Completion.
6.2 If the aggregate of the Completion Net Assets at Completion exceeds
(Pound Sterling)220,365,000, Global shall pay to the Sellers an
amount equal to the excess to be divided amongst the Sellers as
Racal and Global may agree (or failing agreement as Racal may
specify) as additional consideration for the shares sold by each
such Seller.
6.3 If the amount of the Completion Net Assets is less than (Pound
Sterling)220,365,000, the Sellers shall pay to Global an amount
equal to the amount by which the Completion Net Assets are less
than (Pound Sterling)220,365,000 as a reduction in the
consideration for the shares sold by each Seller to be apportioned
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amongst the Sellers as Racal and Global may agree (or failing
agreement as Racal may specify).
6.4 If the amount of estimated Finance Lease Net Debt pursuant to
clause 4.1 is less than the Finance Lease Net Debt at Completion as
determined in accordance with Schedule V, the Sellers shall
promptly pay to Global an amount equal to the amount by which the
Finance Lease Net Debt exceeds the estimated Finance Lease Net Debt
as a reduction in the consideration for the shares sold by each
Seller.
6.5 If the amount of estimated Finance Lease Net Debt pursuant to
clause 4.1 is greater than the Finance Lease Net Debt at Completion
as determined in accordance with Schedule V, Global shall promptly
pay to the Sellers an amount equal to the amount by which the
estimated Finance Lease Net Debt exceeds the Finance Lease Net Debt
as additional consideration for the shares sold by each Seller.
6.6 All payments hereunder shall be made within five Business Days
after the agreement or determination of the amount of the
Completion Net Assets.
6.7 Any amount to be paid under clause 6.3 shall bear interest at one
per cent over the base lending rate of Barclays Bank PLC from the
Completion Date.
7. COMPLETION
7.1 Completion shall take place at the offices of Racal's Solicitors
within 5 Business Days of satisfaction or, where permitted, waiver
of the Transfer Conditions or at such other place and/or on such
other date as may be agreed between the parties.
7.2 On Completion, the Sellers shall have delivered to Global a
certificate in Agreed Form duly executed certifying any facts that
would exempt the transactions contemplated hereby from withholding
pursuant to Section 1445 of the Internal Revenue Code of 1986.
7.3 On Completion the Sellers shall cause to be delivered to Global
duly executed transfers of the Shares in favour of Global (or as
it may direct) together with the share certificates relating to
such shares.
7.4 On Completion, the Sellers shall cause to be delivered to Global:
(a) the Common Seal and Statutory Books of each Telecom Group
member made up to the Completion Date and each certificate of
incorporation and certificate of incorporation on change of
name for each Telecom UK Group member;
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(b) (unless otherwise agreed by Global) an unqualified letter of
resignation from the auditors of each Telecom UK Group member
complying in all respects with the requirements of section 392
Companies Act 1985 and, if there are any such auditors, an
unqualified letter of resignation from the auditors of Racal
USA, in each case, accompanied by a written confirmation that
such auditors have no claims for unpaid fees or expenses;
(c) irrevocable powers of attorney in the Agreed Form executed by
Racal in respect of Racal Telecom UK Group Shares and the
Racal USA Shares in favour of Global appointing Global to be
its lawful attorney in respect of the Shares;
(d) resignations in the Agreed Form from each director and
secretary of each Telecom Group member expressed to take
effect from the end of the meeting held pursuant to
clause 7.5; and
(e) receipts for any sums advanced to or repaid by the Racal Group
under clause 4.2 which shall be sufficient evidence of the
discharge of such sums by the relevant Racal Group Company.
7.5 On Completion the Sellers shall cause a board meeting of each
Telecom Group member to be duly convened and held at which:
(a) the transfers of the Shares shall be approved for registration
(subject only to their being duly stamped by, and at the cost
of, Global);
(b) such persons as may be nominated by Global shall be appointed
directors and secretary of the Telecom Group members (within
the maximum number, if any, permitted under their respective
constitutional documents);
(c) all existing instructions to the Telecom Group's bankers, bank
mandate forms and authorities shall be revoked and shall be
replaced with alternative instructions, bank mandates forms
and authorities in such form as Global may require;
(d) the registered offices of each of the Telecom Group members
shall be changed to places nominated by Global;
(e) subject to the Companies Act, the accounting reference dates
of each of the Telecom Group members shall be changed to dates
nominated by Global; and
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(f) the resignations of each director and secretary of each of the
Telecom Group members shall be accepted so as to take effect
from the end of the meeting.
7.6 On Completion Racal shall deliver to Global the Trade Xxxx Licence
and the Transitional Services Agreement executed by it and the
Transitional Services Agreement executed by Racal Services
(Communications) Ltd and RTL.
7.7 On Completion Global shall deliver to Racal the Transitional
Services Agreement executed by it.
7.8 On Completion, Global shall also:
(a) deliver to Racal the Trade Xxxx Licence executed by it; and
(b) pay or procure the payment of the Consideration to the Sellers
in accordance with the instructions provided by the Sellers at
least 2 Business Days prior to Completion provided that Global
shall not be required to transfer funds to more than four
accounts in total in the United Kingdom.
7.9 (a) Neither Global nor the Sellers are obliged to complete this
Agreement unless the other complies with all its obligations
under clause 7; and
(b) Global shall not be obliged to complete this Agreement unless
the transfer of all the Shares is completed simultaneously.
7.10 If Completion does not take place on the date set for Completion
because the Sellers fail to comply with any of their obligations
under clauses 7.3, 7.4 or 7.5 or Racal fails to comply with its
obligations under clause 7.6 or if Global fails to comply with any
of its obligations under clauses 7.7 or 7.8 Global may, if the
Sellers have failed so to comply, or Racal (acting on behalf of the
Sellers) if Global has failed so to comply by notice to the other
parties:
(a) proceed to Completion to the greatest extent reasonably
possible without limiting its rights under this Agreement;
(b) postpone Completion to 2 Business Days after the date set for
Completion; or
(c) terminate this Agreement.
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7.11 If any party postpones Completion to another date in accordance
with clause 7.10 the provisions of this Agreement apply as if that
other date is the date set for Completion.
7.12 If Completion has not occurred by the fifth Business Day after the
Long Stop Date any party may on that date or at any time thereafter
by notice to the other terminate this Agreement, in which case it
shall on that date be of no further force and effect except that
clauses 1, 16, 17 and 18 shall continue in force and such
termination of this Agreement shall not affect the rights of any
parties/or prior breaches of this Agreement.
8. WARRANTIES
8.1 The Sellers hereby represent and warrant to Global in the terms of
the Warranties.
8.2 The Warranties are qualified to the extent but only to the extent
of the facts and circumstances fairly disclosed in the Disclosure
Letter.
8.3 The Sellers undertake not to make any claim against a Telecom Group
member or a director, officer or employee of a Telecom Group member
which it may have in respect of (or seek to mitigate damages
payable in respect of any claim made against the Sellers by Global
by reference to) a misrepresentation, inaccuracy or omission in or
from information or advice provided by the Telecom Group member or
a director, officer, agent, adviser or employee of a Telecom Group
member for the purpose of assisting the Sellers to make a
representation, give a Warranty, enter into this Agreement or
prepare the Disclosure Letter unless such representation,
inaccuracy or omission was wilful.
8.4 Each Warranty is to be construed independently and (except where
this Agreement provides otherwise) is not limited by a provision of
this Agreement, the Tax Covenant or another Warranty and Global
shall have a separate Claim and right of action in respect of every
breach of each such Warranty.
8.5 Global confirms that it has not entered into this Agreement or any
document entered into hereunder or referred to herein in reliance
upon any representation, warranty or undertaking other than those
expressly contained herein and acknowledges that it has not relied
on, and will make no claim in respect of any such representation,
warranty or undertaking made or supplied by or on behalf of the
Sellers, Racal or any other person whatsoever which is not
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contained herein. Without limiting the general nature of the
foregoing, Global confirms that it has not relied on and will make
no claim against the Sellers, Racal or any other person whatsoever
in respect of any budget, forecast or other projection of any
nature made or supplied by or on behalf of any person.
8.6 Racal and the Sellers acknowledge that Global has relied upon the
Warranties in entering into this Agreement.
8.7 Where any of the Warranties is expressed to be given or made to the
best of the Sellers' knowledge or is qualified by reference to the
Sellers' awareness or is qualified in some other manner having
substantially the same effect, such statement shall be deemed to be
qualified by the additional statement that the knowledge of the
Sellers shall be limited to the actual knowledge of the person
listed in Part C of Schedule VI in relation to the Warranties set
out in Schedule VI against such person, such person having made
reasonable diligent enquiry of other employees of the Racal Group
in relation to the subject matter of the warranty in question.
8.8 The provisions of Schedule VI, Part A shall have effect.
8.9 Between the date of this Agreement and Completion, the Sellers
shall notify Global in writing as soon as reasonably practicable
after they become aware of a fact or circumstance which constitutes
or which might constitute a breach of clause 8.1 or 8.13 together
with the Sellers' best estimate of the amount of the liability.
The Sellers shall ensure that notification of each fact or
circumstance which constitutes or might constitute a breach of
clause 8.1 or 8.13 shall be given not less than two Business Days
before Completion.
8.10 (a) Any provision of this Agreement and agreements, certificates or
other instruments delivered pursuant to this Agreement which is
capable of being performed after but which has not been performed
at or before Completion, and (b) all representations, warranties,
covenants, indemnities, agreements and other undertakings contained
in this Agreement, and in any agreements, certificates or other
instruments delivered pursuant to this Agreement, shall survive and
not be affected by Completion and shall remain in full force and
effect.
8.11 The Sellers shall ensure that (save if and insofar as may be
necessary to give effect to this Agreement) neither they nor any
member of the Telecom Group will cause or permit anything to be
done or omitted to be done either before or at Completion which
would constitute a material breach of any of the Warranties if
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given at any time up to Completion or which would make any of the
Warranties materially inaccurate or materially misleading if they
were so given.
8.12 If Global has or would have at Completion a claim or claims against
the Sellers in aggregate of more than (Pound Sterling)75 million
which have arisen at or prior to Completion, Global may terminate
this Agreement by notice to the Sellers given at or before
Completion but for the avoidance of doubt, in the event that Global
terminates this Agreement, Global shall have no right to claim
damages or any other remedy against any of the Sellers in respect
of all or any part of such claim or claims other than pursuant to
clause 16.12. If Global does not terminate this Agreement pursuant
to this clause 8.12, Global may, subject to clause 9, claim damages
against the Sellers and exercise any other right, power or remedy
arising under this Agreement in respect of a claim or claims which
have arisen at or before Completion including such claim or claims
arising from a breach of Warranty had such Warranty been repeated
at Completion.
8.13 The Warranties shall be deemed to be given at the date of this
Agreement and to be repeated (mutatis mutandis) at Completion (save
that references to any fact, matter or thing existing, occurring or
having occurred at or before the date of this Agreement shall be
construed as references to at or before Completion).
9. LIMITATION OF CLAIMS
9.1 Global shall, on becoming aware of any Claim, promptly notify
Racal and the Sellers thereof, but the failure to so notify shall
not relieve the Sellers of any liability they may have to Global to
the extent such failure does not materially prejudice any of the
Sellers.
9.2 The Sellers shall have no liability in respect of any Claim unless
Global has served on the Sellers notice on or before:
(a) in the case of a Claim under the Tax Warranties or a claim
under the Tax Covenant relating to Racal USA, the expiration
of the statute of limitation relating to the relevant Tax
liability of Racal USA;
(b) in the case of any Claim under the Tax Warranties or a claim
under the Tax Covenant other than as described in paragraph
(a) above, six years from the Completion Date;
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(c) in the case of any Claim other than a Claim under the Tax
Warranties or a claim under the Tax Covenant, the later of (i)
the second anniversary of the Completion Date and (ii) the end
of the fourth month following the end of the second audited
financial period for each member of the Telecom Group,
giving such reasonable details of the Claim as Global then has and,
if practicable, including Global's then best estimate of the amount
of the liability of the Sellers in respect thereof, has as soon as
reasonably practicable upon receipt of any further details relating
to the Claim disclosed such further details to Racal and has issued
and served proceedings in respect thereof within nine months of the
date of such written notice if such Claim has not previously been
satisfied, settled or withdrawn.
9.3 No claim shall be made against any of the Sellers in respect of any
Claim unless the Claim (or series of related Claims) individually
exceeds (Pound Sterling)250,000 and unless the aggregate amount of
all Claims (excluding individual Claims of (Pound Sterling)250,000
or less) exceeds (Pound Sterling)10,000,000 PROVIDED that if such
aggregate amount does exceed (Pound Sterling)10,000,000, the
Sellers shall be liable for the full amount of such Claim or Claims
and not solely the amounts thereof in excess of (Pound
Sterling)10,000,000. For the purpose of determining whether a
Claim exceeds the minimum individual threshold of (Pound
Sterling)250,000 set out in this clause 9.3, Claims which consist
of a breach of paragraph L.12 of Schedule VI and which arise from
the unlawful exclusion (prior to the Completion Date) on grounds of
sex of an employee or former employee of the Telecom UK Group from
eligibility for, and/or membership of, Racal's Schemes (as defined
in Part B of Schedule VII) ("Pensions Claims") shall be aggregated
and treated as a single Claim. Any recovery in respect of Pensions
Claims shall be on an indemnity basis on the excess over (Pound
Sterling)250,000. Nothing in the Disclosure Letter shall be deemed
to be disclosed for this purpose in respect of Pensions Claims
unless individual claimants are specifically identified.
9.4 The total amount of the liability of the Sellers in aggregate in
respect of:
(a) the aggregate amount of Claims arising from clause 3.1, Part A
of Schedule VI, clause 5.1, clause 6, clause 10.1 and (in so
far as it relates to any of the foregoing provisions) clause
15 and any claim arising from the Tax Covenant and any claim
referred to in clause 9.4(b) shall be limited to and in no
event exceed (Pound Sterling)1,000,000,000; and
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(b) the aggregate amount of Claims and claims under clauses 10.2,
10.3 and 10.5 shall be limited to and in no event exceed
(Pound Sterling)300 million,
PROVIDED THAT the total amount of liability of the Sellers in
aggregate in respect of the Claims whether arising under paragraph
(a) or paragraph (b) of this clause 9.4 shall not in any
circumstance exceed the Consideration.
9.5 The Sellers shall not be liable in respect of any Claim (including
any claim under the Tax Covenant) if and to the extent that the
loss occasioned thereby has been recovered under any other Claim
(including any claim under the Tax Covenant).
9.6 If the Sellers indemnify Global and/or the relevant Telecom Group
member in respect of any amount payable by Global and/or any
Telecom Group member by way of settlement, judgment or award in
respect of the matter giving rise to the Claim, then insofar as the
same would not have a detrimental effect on the business of any
member of the Global Group, the Sellers shall be afforded every
reasonable opportunity of resisting in the name of the relevant
Telecom Group member any claims against any Telecom Group member
which might constitute a breach of any of the Warranties (unless
the claims against any Telecom Group member which might constitute
a breach of any of the Warranties is by any member of the Racal
Group), and the Sellers shall subject as aforesaid (if they so
require) be allowed to have the conduct of any negotiations,
proceedings or appeals incidental thereto (keeping Global at all
reasonable times properly informed of the conduct) and to use
professional advisers approved by Global (such approval not to be
unreasonably withheld or delayed). If such legal advisers are
retained, the Sellers shall not be liable to Global for any legal
expenses of other legal advisers or any other expenses subsequently
incurred by Global in connection with the defence of the claim,
except that if the Sellers elect not to assume such defence or if
legal advisers for Global determine that there are issues which
raise conflicts of interest between Global and the Sellers, Global
and any Telecom Group member may retain legal advisers reasonably
satisfactory to them, and the Sellers shall pay any reasonable fees
and expenses of such legal advisers for Global and such members
promptly as statements therefor are received; PROVIDED THAT the
Sellers shall be obligated pursuant to this clause 9.6:(i) to pay
such amounts in the case of a conflict of interest only if the
Sellers reasonably agree that such conflict of interest existed
between Global and the Sellers, and (ii) to pay for only one firm
of legal advisers for Global and the Telecom Group members in any
jurisdiction unless Global and the Sellers agree that the use of
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one firm of legal advisers would present such legal advisers with a
conflict of interest.
9.7 If and so long as Racal exercises its rights under clause 9.6,
Global shall, and shall procure that the relevant Telecom Group
member shall:
(a) consult with the Sellers in respect of the circumstances
giving rise to such claim, and thereafter keep the Sellers as
informed as is reasonably practicable of all material
developments relating to such circumstances and Claim;
(b) if so requested by the Sellers, subject as aforesaid, take all
reasonable steps or proceedings as the Sellers may consider
necessary in order to mitigate or defend any such claim and
any adjudication in respect thereof or enforce against any
person (other than Racal or any other member of the Racal
Group) the rights of the relevant Telecom Group member and
Global in relation to the matter the subject of the claim and
shall procure that any Telecom Group member shall act in
accordance with any such requirements, and for this purpose
take all appropriate proceedings in the name of the relevant
Telecom Group member subject to being fully indemnified in
advance by the Sellers against all costs and expenses incurred
in connection therewith;
(c) at all reasonable times allow the Sellers and its agents
reasonable access on notice to personnel of the relevant
Telecom Group member and to inspect and take copies of all
necessary books, correspondence and records of the relevant
Telecom Group member which are relevant to such Claim and are
within the power, possession or control of Global or any
member of the Telecom Group to enable the Sellers to
investigate the Claim (subject always to keeping the same
confidential other than necessary disclosures in connection
with any such action or claim); and
(d) save with the Sellers' prior consent, and subject as
aforesaid, not admit liability in respect of or compromise, or
settle any such claims as aforesaid.
9.8 Any settlement agreed by the Sellers pursuant to clause 9.6 shall
not include any obligation on Global or a Telecom Group member to
take or omit to take any action.
9.9 The Sellers shall reimburse to Global or the relevant Telecom Group
member (as the case may be) all costs, charges, liabilities,
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damages and expenses incurred by them by Global's complying with
its obligations under paragraphs 9.6 and 9.7.
9.10 The Sellers shall not be liable in respect of a Claim to the
extent:
(a) that any amount has been included as a liability or a proper
provision has been made in respect thereof; or
(b) that the value of any asset has been reduced to take account
of the subject matter of such Claim,
in the Accounts of RTNL and RISL or the Completion Balance Sheet.
9.11 Where Global or any Telecom Group member is entitled to recover
from some other person any sum in respect of any matter or event
which has given rise to a Claim, Global shall and shall procure
that the relevant Telecom Group member shall use its or his
reasonable endeavours to recover that sum and any sum recovered
will reduce the amount of the relevant Claim provided that the
person so entitled shall not be obliged hereby to use such
reasonable endeavours if so to do would have a detrimental effect
on the business of any member of the Global Group but in such
circumstances the parties agree that the decision by Global not to
recover any such sum shall be relevant in considering whether its
obligations to mitigate have been satisfied.
9.12 Other than on the proof of fraud which is material in the context
of the Transaction, Global shall not be entitled to rescind or
repudiate this Agreement for any reason after Completion.
9.13 The Sellers shall not be liable in respect of any Claim arising
from any matters resulting from a change of accounting policy or
practice or the length of any accounting period of Global or any
Global Group member introduced after Completion.
9.14 If Racal pays to Global or any Telecom Group member an amount in
respect of any Claim and Global or any Telecom Group member (as the
case may be) subsequently actually recovers from a third party
(including any insurer) a sum which is directly referable to that
Claim, Global shall repay to Racal as soon as reasonably
practicable so much of the amount paid by Racal as does not exceed
the Sum Recovered from the third party. Global agrees to take all
reasonable steps to recover any such sum from a third party as soon
as reasonably practicable on the basis set out in clause 9.8. For
the purpose of this clause "Sum Recovered" means an amount equal to
the amount recovered from such third party minus (a) any increase
in liability to tax of a Telecom Group member and (b) the
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reasonable costs and expenses incurred by the Telecom Group member
in recovering such amount. Nothing herein shall preclude Global
from making a Claim for recovery of that portion of any increased
insurance premium that are fairly attributable to Claims previously
made hereunder whether or not such Claim is made within the period
specified in clause 9.2.
9.15 Nothing contained in this clause 9 shall limit Global's obligations
or the obligation of any Telecom Group member at common law to
mitigate any loss or damage resulting from or arising as a
consequence of any circumstances giving rise to any Claim.
9.16 Global acknowledges and confirms that at the time of entering into
this Agreement it is not aware of any Claim which would arise on
execution of this Agreement.
9.17 If Global makes any Claim or gives notice of any Claim to Racal
Global shall, and shall procure that any Telecom Group member shall
promptly, on a confidential basis solely for the purpose of
enabling Racal to assess the Claim or potential Claim:
(a) make available on reasonable notice to Racal and its
representatives or advisers such reasonable access to the
personnel of any relevant Telecom Group member and to any
relevant records and information as Racal may request in
connection with such Claim or potential Claim; and
(b) use all their endeavours to procure that the auditors (past
and present) of any relevant Telecom Group member make
available their audit working papers in respect of audits of
the relevant Telecom Group member's accounts for any relevant
accounting period in connection with such Claim or potential
Claim,
in all cases, subject always to keeping the same and any information
obtained herefrom confidential.
9.18 Notwithstanding any limitation in this clause 9 to the contrary, no
claim by Global which arises by reason of any fraudulent act,
fraudulent omission or fraudulent misrepresentation of or by any of
the Sellers which is material in the context of the Transaction
shall be subject to the limitations of this clause 9.
9.19 If the Sellers or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any individual,
corporation or other entity, then and in each such case, Racal or
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its successors or assigns (on the case may be) shall use all
reasonable endeavours to procure that the successors and assigns of
the surviving corporation shall assume all of its obligations
hereunder.
10. INDEMNITIES
10.1 The Sellers hereby undertake to procure that, as from Completion,
the Telecom Group members shall be released at Completion or as
soon as is reasonably practicable thereafter from all guarantees,
indemnities and other actual or contingent obligations and/or
comfort letters given or undertaken by them in respect of any and
all actual or contingent liabilities whatsoever of any Racal Group
member (including without limitation those specified in Schedule
VIII) and pending such release, the Sellers shall indemnify and
keep indemnified each Telecom Group member against any liability
whatsoever, including all costs, damages and expenses, suffered or
incurred by any of them in connection therewith.
10.2 The Sellers agree to indemnify Global against all liabilities,
losses, damages, costs and expenses (whether incurred before or
after Completion) arising from the failure of RISL to obtain or
maintain a registration under the Data Protection Xxx 0000.
10.3 Racal agrees to indemnify Global and RTL against any cost, loss,
claim, liability or expense arising primarily by reason of
Railtrack PLC being entitled or having the right to terminate any
of the Railtrack Agreements on the grounds that the Reorganisation
and/or this Agreement involves a breach of any provision of the
Railtrack Agreements prohibiting assignments if and only to the
extent that such costs, losses, claims, liabilities or expenses
exceed in the aggregate (Pound Sterling)10,000,000, provided that:
(a) Global shall be obliged to take all reasonable steps to
mitigate such costs, losses, claims, liabilities or expenses
and the extent of Racal's liability shall take account of
savings and reduced expenditure resulting as a consequence of
the termination of any of the Railtrack Agreements; and
(b) any claim hereunder must be made within two years of
Completion.
10.4 If Global becomes aware of any claim under clauses 10.2, 10.3 and
10.5 it shall notify Racal as soon as practicable and shall consult
with, and pay due regard to, Racal's views on all matters relating
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thereto, giving Racal all reasonable information about such claim
as Racal shall request.
10.5 Racal agrees to indemnify Global and RTL for any cost, loss, claim,
liability or expense (whether incurred before or after Completion)
arising from the termination of the agreement with Metromedia Fiber
Network Services Inc. referred to in B(d) of Schedule X.
10.6 If Railtrack plc terminates the Railtrack Agreements on the grounds
that the Reorganisation and/or this Agreement involves a breach of
any provision of the Railtrack Agreements prohibiting assignments
Racal agrees that BRTH or any other member of the Racal Group shall
have no claims for termination of the Reorganisation Documents by
RTL.
11. PENSIONS
The provisions of Schedule VII shall have effect in relation to the
retirement, pension and life assurance rights and benefits enjoyed by
the present and former employees of the Telecom Group.
12. NAME AND USE OF MARKS
12.1 Global agrees that the Telecom Group members will:
(a) (save as provided in the Trade Xxxx Licence) as soon as
reasonably practicable following Completion if any of the
Racal Marks are being used in their respective corporate names
or as part of a business or trading name or domain name,
change the same to a name which does not include any of the
Racal Marks (or any xxxx which is confusingly similar with any
of the Racal Marks); and
(b) as soon as reasonably practicable following the Completion
Date and in any event no later than six months after the
Completion Date, delete or remove the Racal Marks from all
stationery, advertising material, labels, manuals, packaging,
stocks of products and all other materials or documents in the
possession or under the control of the Telecom Group on which
the Racal Marks are incorporated and remove all fascia,
hoardings and the like bearing or referring to the Racal
Marks.
12.2 On and with effect from Completion Racal and Global shall enter
into the Trade Xxxx Licence.
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13. PROPERTY REORGANISATION
For the purposes of this clause 13, "Properties" shall mean the
properties used by members of the Telecom Group (including without
limitation wayleaves and easements but excluding the land over, through
or under which the wayleave or easement passes) brief particulars of
which are set out in the Data Room Index but in all cases excluding the
Telecommunications Apparatus as defined in the Telecommunications Xxx
0000.
13.1 Applications for Reversioner's Consent
(a) Subject to Racal obtaining the Consents Racal shall procure the
carrying out and implementation of the Property Reorganisation
and shall use all reasonable endeavours to obtain the Consents
before or as soon as practicable following Completion and for
that purpose Racal, RPL or RTL (as the case may be) shall
reasonably and promptly provide such information and assistance
and enter into and execute such documents as may be properly
required by the relevant Reversioner in relation to the grant
of its Consent (including where required under the terms of the
relevant lease an authorised guarantee agreement) and shall
keep Global fully informed of progress in relation to the
applications for Consent.
(b) Racal shall supply Global's Property Solicitors with a copy of
any draft Consent as soon as received from the relevant
Reversioner's Solicitors. Global's Property Solicitors shall
forthwith return it to Racal approved subject to any amendments
they may reasonably require.
(c) Racal shall forthwith return the amended draft Consent to the
relevant Reversioner's Solicitors and supply to Global's
Property Solicitors copies of any further correspondence or
further drafts of the Consent received from the Reversioner's
Solicitor and these provisions shall continue to apply until
all relevant parties have agreed the form and context of each
relevant Consent.
(d) The proposed assignee or proposed underlessee shall in each
case where properly required enter into direct covenants with
the relevant Reversioner as from the date of the assurance to
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pay the rents reserved by the relevant lease and perform and
observe the covenants on the part of the lessee therein
contained.
(e) The proposed assignee or proposed underlessee where applicable
and any guarantor shall promptly on being supplied with an
engrossment of the agreed form of Consent execute the same as
a deed and return it unconditionally to Racal.
(f) Racal shall continue to use all reasonable endeavours to obtain
the Consents including if necessary making application to a
court of competent jurisdiction for a declaration to the effect
that Consent is being unreasonably withheld in the event that
any application for Consent is refused or is not granted within
a reasonable period of time (unless counsel of at least five
years' call and suitably experienced in such matters advises
Racal in writing that such application has no reasonable
prospect of success and copy of such advice is given to Global's
Solicitors) and in such circumstances Global is to co-operate
with Racal and provide such information as may be required by
Racal in making such an application.
(g) Racal shall bear all costs and disbursements of all third party
lessors and their professional advisers in relation to the
obtaining of the Consents but not the stamp duty and Land
Registry fees in connection with the Property Reorganisation
which shall be borne by Global.
(h) Racal shall not be obliged under the above provisions to
guarantee as a condition of any of the Consents the performance
of the obligations of RPL or RTL.
13.2 Licence to Occupy
The proposed assignee or proposed underlessee shall between
Completion and completion of the relevant assignment sublease or
licence be entitled to occupy the relevant leasehold premises or part
thereof upon the terms and subject to the obligations and covenants
referred to and contained in Schedules XI and XII and otherwise upon
the terms of the existing lease.
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13.3 No variations or amendments to existing terms
Neither Racal, RPL or RTL shall vary or amend or agree or apply to
vary or amend any terms under which the Properties are held
(including any review of rent) except as may be necessary to obtain
the Consents (and with the prior consent of Global) or apply for any
consent or approval under the relevant lease (other than the
Consents) or serve any notices or counter notices or commence any
proceedings under the Landlord and Xxxxxx Xxx 0000 without the prior
consent of Global such consent not to be unreasonably withheld or
delayed.
13.4 Outstanding Negotiations
Racal shall until Completion use all reasonable endeavours to
diligently pursue all Outstanding Negotiations at the request and
under the direction of Global and shall keep Global fully informed of
all progress and provide copies of all communications in respect of
the same but Racal shall not be obliged to conclude any of the
Outstanding Negotiations referred to in Schedule XII Part B unless
Global has confirmed in terms satisfactory to Racal that Global will
indemnify Racal in relation to such matters.
13.5 Enforcement of Covenants
Racal or RPL (as the case may be) shall at the request of Global but
at the cost of Racal enforce the covenants on the part of the
relevant Reversioner contained in any relevant lease so far as may be
necessary to obtain the Consents.
13.6 Refusal of Consents
If any of the Consents required in respect of the proposed
sublettings or licences referred to in Schedule XI Part A is not
obtained or if for any other reason RPL (or any company authorised by
RPL under the terms of this agreement to occupy the whole or part of
the relevant leasehold property) vacates any part of the leasehold
properties referred to in that Schedule then Racal shall pay to
Global and shall indemnify Global fully in respect of all rent and
other sums which would otherwise have been payable by RPL (or any
company authorised by RPL under the terms of this agreement to occupy
the whole or part of the relevant leasehold property) whether to
Global or to any third party had the said subletting or licence
continued upon the terms set out in that Schedule until the date on
which RPL (or any company so authorised) shall vacate the premises in
question.
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13.7 Arbitration
Any disputes in relation to the terms of any sublease or licence
required to implement the Property Reorganisation shall be referred
to the decision of a suitably qualified Chartered Surveyor who in
default of agreement shall be appointed by the President for the time
being of the Royal Institution of Chartered Surveyors on the
application of either party and such surveyor shall act as an
arbitrator in accordance with the Arbitration Xxx 0000.
14. NOT USED
15. PARENT GUARANTEE
15.1 In consideration of Global entering into this Agreement with the
Sellers at the request of Racal, Racal, as primary obligor, hereby
irrevocably and unconditionally guarantees to Global the full and
complete performance by the Sellers of all their obligations under
this Agreement or the Tax Covenant or both and the payment of all
sums when due and payable by the Sellers (or any of them) to Global
under or pursuant to this Agreement or the Tax Covenant or both and
agrees to indemnify and keep indemnified Global against all losses
and damages sustained by it flowing from any non-payment or default
of any kind by the Sellers under or pursuant to the Agreement or the
Tax Covenant or both.
15.2 Racal agrees that if and each time that any of the Sellers fails to
make any payment when it is due under or pursuant to this Agreement
or the Tax Covenant or both, Racal shall on demand (without requiring
Global first to take steps against the Sellers or any other person)
pay that amount to Global.
15.3 The guarantee contained in this clause 15 is a continuing guarantee
and shall remain in force until all the obligations of each of the
Sellers under this Agreement and the Tax Covenant have been fully
performed and all sums payable by each of the Sellers have been
fully paid.
15.4 All payments to be made by Racal shall be made in full without
set-off or counterclaim and free and clear of and without any
deduction whatsoever except to the extent required by law and if any
deduction or withholding must be made by law, Racal will pay that
additional amount which is necessary to ensure that Global receives
a net amount equal to the full amount which it would have received
-24-
if the payment had been made without the deduction or withholding.
15.5 Racal shall pay interest on any amount due under this clause from the
date of demand until the date of payment in full as well after as
before any judgment) calculated on a daily basis at the rate set
out in clause 6.5.
15.6 Racal's obligations under this clause shall not be affected by any
matter or thing which but for this provision might operate to affect
or prejudice those obligations including without limitation:
(a) any time or indulgence granted to, or composition with, the
Sellers or any of them or any other person;
(b) the taking, variation, renewal or release of, or neglect to
perfect or enforce this Agreement, or any right, guarantee,
remedy or security from or against the Sellers or any of them or
any other person; or
(c) any enforceability or invalidity of any obligation of the
Sellers, so that this clause shall be construed as if there were
no such unenforceability or invalidity.
16. GENERAL
Assignment
16.1 None of the rights or obligations under this Agreement may be
assigned or transferred without the prior written consent of all the
other parties save as provided in clause 16.2.
16.2 No party may assign or transfer a right or obligation under this
Agreement, save that Global may assign some or all of its rights
under this Agreement:
(a) to another member of the Global Group if (i) the assignee
enters into a commitment in a form reasonably satisfactory to
Racal to be bound by and to perform all outstanding obligations
under this Agreement expressed to be obligations of Global and
(ii) Global shall guarantee the obligations of the assignee in
-25-
the same terms as Racal has guaranteed the obligations of the
Seller under clause 15; and
(b) by way of security to the Security Trustee.
16.3 Entire agreement
(a) This Agreement and the Transaction Documents constitute the
whole and only agreement between the parties relating to the
matters contemplated hereby.
(b) This Agreement supersedes and extinguishes any prior agreements,
undertakings, representations, warranties and arrangements of
any nature whatsoever, whether or not in writing, relating
thereto.
(c) Each party acknowledges that in entering into this Agreement
and the Transaction Documents or the terms set out in this
Agreement it is not relying upon any agreement, undertaking,
representation, warranty, promise, assurance or arrangement made
or given by any other party or any other person, whether or not
in writing, at any time before the execution of this Agreement
which is not expressly set out herein or therein.
(d) None of the parties shall have any right of action against any
other party to this Agreement arising out of or in connection
with any agreement, undertaking, representation, warranty,
promise, assurance or arrangement referred to in clause 16.3(b)
or 16.3(c) above (except as provided in clause 16.3(b) or
16.3(c) above or in the case of fraud or dishonesty).
16.4 Notices
(a) Any notice, consent or other communication given or made under
this Agreement shall be in writing.
(b) Any such notice or other communication shall be addressed as
provided in clause 16.4(d) and, if so addressed, shall be deemed
to have been duly given or made as follows:
(i) if sent by personal delivery, upon delivery at the address
of the relevant party if delivered before 3.00 pm on any
-26-
Business Day and, in any other case, at 10.00 am on the
next Business Day;
(ii) if sent by first class post (or, if sent overseas, by
airmail), three clear Business Days (or, if sent overseas,
seven Business Days) after the date of posting; and
(iii) if sent by facsimile, at the expiration of two hours after
the time of despatch, if despatched before 3.00 pm on any
Business Day and, in any other case, at 10.00 am on the
Business Day following the date of despatch but only if a
confirmation of the receipt by the recipient of the
facsimile appears correctly at the end of the of the
sender's facsimile.
(c) Any notice or other communication to be given or made under
this Agreement, the Tax Covenant or the Transaction Documents
by Global to the Sellers shall be deemed to be given or made if
given to Racal for itself and on behalf of the Sellers.
(d) The relevant addressee, address and facsimile number of each
party for the purpose of this Agreement,subject to clause
16.4(c), are those set out in Schedule I.
(e) A party shall notify the other parties to this Agreement of a
change to its name, relevant addressee, address or facsimile
number for the purposes of clause 16.4(d) provided that such
notification shall only be of effect on:
(i) the date specified in the notification as the date on
which the change is to take place; or
(ii) if no date is specified or the date specified is less than
three clear Business Days after the date on which the
notice is given, the date falling three clear Business Days
after notice of any such change has been given.
-27-
16.5 Remedies and waivers
(a) Subject always to the provision of clause 9, no delay or
omission on the part of any party to this Agreement in
exercising any right, power or remedy provided by law or
under this Agreement shall:
(i) impair such right, power or remedy; or
(ii) operate as a waiver thereof.
(b) The single or partial exercise of any right, power or remedy
provided by law or under this Agreement shall not preclude any
other or further exercise thereof or the exercise of any
other right, power or remedy.
(c) The single or partial exercise of any right, power or remedy
provided by law or under this Agreement shall not preclude any
other or further exercise thereof or the exercise of any other
right, power or remedy.
(d) The rights, powers and remedies provided in this Agreement are
cumulative and not exclusive of any rights, powers and remedies
provided by law.
(e) No variation of this Agreement shall be effective unless made in
writing, signed by or on behalf of the parties and expressed to
be such variation.
(f) No waiver by any party of any requirement of this Agreement or
of any remedy or right under this Agreement shall have effect
unless given by notice in writing signed by such party. No
waiver of any particular breach of the provisions of this
Agreement shall operate as a waiver of any repetition of such
breach.
(g) Any release, waiver or compromise or any other arrangement which
any party may give or enter into with any other party to this
Agreement in connection with this Agreement shall not affect
any right or remedy of such parties as regards any other party's
liabilities under or in relation to this Agreement and such other
party shall continue to be bound by this Agreement as if it
-28-
had been the sole contracting party.
16.6 Invalidity
If at any time any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any
jurisdiction, that shall not affect or impair:
(a) the legality, validity or enforceability in that jurisdiction of
any other provision of this Agreement; or
(b) the legality, validity or enforceability under the law of any
other jurisdiction of that or any other provision of this
Agreement.
16.7 NOT USED
16.8 No partnership
Nothing in this Agreement and no action taken by the parties pursuant
to this Agreement shall constitute, or be deemed to constitute, the
parties as a partnership, association, joint venture or other
corporate entity.
16.9 Further assurance
Each party shall after Completion from time to time on being
requested to do so by any other party, do or procure the doing of all
such acts and/or execute or procure the execution of all such
documents in a form reasonably satisfactory to the requesting party
and the requested party as is reasonably necessary for giving full
effect to this Agreement.
16.10 Announcements and confidentiality
Any party shall only make an announcement concerning the transactions
contemplated by this Agreement or any ancillary matter if and to the
extent required by:
(a) law; or
(b) any securities exchange or regulatory or governmental body to
which such party is subject, wherever situated, including
(without limitation) the London Stock Exchange, GNOSTIC,
the Securities and Exchange Commission or the Takeover Panel,
-29-
whether or not the requirement has the force of law;
provided that any such announcement shall be made only after
consultation with the other parties and having taken into account
other reasonable covenants and the party has taken all reasonable
steps to avoid the disclosure of confidential information.
16.11 Costs and expenses
Each party shall pay its own costs and expenses in relation to the
negotiation, preparation and execution and carrying into effect of
this Agreement.
16.12 Break-Up Fee
Racal agrees that if this Agreement shall be terminated by Global
pursuant to clause 5.2(b)(i) or clause 8.12 or, because of the
failure to satisfy the Transfer Condition set out in paragraph 1 of
Schedule III, pursuant to Clause 2.7, then Racal shall promptly pay
to Global an amount equal to (Pound Sterling)10 million.
16.13 Counterparts
(a) This Agreement may be executed in any number of counterparts,
and by the parties on separate counterparts, but shall not be
effective until each party has executed at least one
counterpart.
(b) Each counterpart shall constitute an original of this Agreement,
but all the counterparts shall together constitute but one and
the same instrument.
16.14 Insurance
To the extent that, prior to Completion, any of the Telecom Group
members were reliant on Racal Group reinsurance policies, Racal
undertakes to ensure that, at the request of the relevant members of
the Telecom Group (the "Claimants"), it will pursue insurance claims
under such insurance policies which the Claimant notifies to Racal
(but at the Claimant's risk and expense) and shall account to the
Claimant for any net payment received under such insurance policies.
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17. CONFIDENTIAL INFORMATION
17.1 Subject to the remainder of this clause 17, Racal undertakes to
Global that from the date of this Agreement they shall not and shall
procure (or in the case of advisers and agents, use all reasonable
endeavours to procure) that no other member of the Racal Group or any
director, officer or employee or adviser or agent of the Racal Group
shall disclose to any person other than Global or its advisers any
Confidential Information.
17.2 Subject to the remainder of this clause 17, Global undertakes to
Racal that from the date of this Agreement it shall not and shall
procure (or in the case of advisers and agents, use all reasonable
endeavours to procure) that no other member of the Global Group or
any director, officer or employee or adviser or agent of the Global
Group shall disclose to any person any Confidential Information.
17.3 Clauses 17.1 and 17.2 do not apply to:
(a) disclosure of Confidential Information to, or at the request of,
a director, officer or employee of Global or Racal or another
member of the Global Group or Racal Group or to a director,
officer or employee of a Telecom Group member whose function
requires him to have the Confidential Information;
(b) disclosure of Confidential Information required to be disclosed
by law, regulation, any revenue authority, the London Stock
Exchange or any other relevant stock exchange or any other
regulatory authority;
(c) disclosure of Confidential Information to an adviser provided
that such adviser shall be made aware of the confidential
nature of the information and Racal's obligations under clause
17.1 or Global's obligations under clause 17.2; or
(d) Confidential Information which becomes publicly known except by
breach of clause 17.1 or 17.2.
17.4 The restrictions contained in this clause 17 shall apply without
limit in time.
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18. GOVERNING LAW AND JURISDICTION
18.1 This Agreement is governed by, and shall be construed in
accordance with, the laws of England.
18.2 Each party submits to the jurisdiction of the English courts for
all purposes relating to this Agreement.
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SCHEDULE I
The Parties
Name Registered Registered Office Addressee/Fax
Number
Controls and 314979 Western Road, Xxxxx Xxxxxxxxx
Communications Bracknell, Fax no: 00000 000 000
Limited Xxxxxxxxx XX00 0XX
The Racal 00-0000-0000 c/o Xxxxx Xxxxxxxxx
Corporation Fax no: 00000 000 000
Racal 000000 Xxxxxxx Xxxx Xxxxx Xxxxxxxxx
Electronics Bracknell Fax No: 00000 000000
Plc Xxxxxxxxx XX00 0XX
Global N/A Wessex House, Xxxxx Xxxxxx
Crossing Ltd. 00 Xxxx Xxxxxx Fax No:
Hamilton, Bermuda (000) 000 000 0000
-33-
SCHEDULE II
Definitions
"Accounts" the statutory accounts for the
year ended 31 March 1999 for RTL,
RTNL and RISL
"Agreed Form" in relation to any document, the
form of that document which has
been agreed by Racal and Global
(subject to such amendments as
Racal and Global may agree, such
agreement not to be unreasonably
withheld or delayed by either
party) and initialled for
identification by or on behalf of
Racal and Global
"Balance Sheet Date" 23 July 1999
"Base Line Balance Sheet" the balance sheet of the Telecom
Group in the Agreed Form at the
Balance Sheet Date
"Board" or "Directors" as the context requires, the board
of directors of Racal or the board
of directors of Global
"BRTH" Racal Communications (Services)
Limited formerly known as BRT
Holdings Limited a company
registered in England under No.
3132438
"Business Day" a day (other than a Saturday or
Sunday) on which banks are open
for business in London
"Carve-Out Accounts" has the meaning given in Schedule
VI Part B (warranty A7)
-34-
"Cash" at the relevant time, the
aggregate amount of cash held by,
and the positive balances standing
to the credit of the bank accounts
of each member of the Telecom
Group
"Claim" any claim arising under this
Agreement or any other document
entered into hereunder or referred
to herein but excluding (unless
otherwise stated) any claim
arising under (i) the Tax
Covenant, (ii) any breach of any
warranty or covenant set forth in
clause 6, clause 10.1, clause 15
(but only insofar as it relates to
any of the foregoing provisions),
(iii) the indemnities under
clauses 10.2, 10.3 and 10.5, (iv)
clause 3.1, (v) Part A of Schedule
VI
"Companies Act" the Companies Xxx 0000, as amended
-35-
"Competing Transaction" any of the following (other than
the transactions contemplated by
this Agreement) involving any
Telecom Group Member:
(i) any merger, consolidation,
share exchange, exchange
offer, business
combination,
recapitalisation,
liquidation, dissolution
or other similar
transaction involving such
person;
(ii) any sale, lease, exchange,
mortgage, pledge, transfer
or other disposition of
all or substantially all
of the shares or assets of
such person;
(iii) any public announcement of
a proposal, plan or
intention to do any of the
foregoing or any agreement
to engage in any of the
foregoing
"Completion" completion of the Transaction
"Completion Balance Sheet" has the meaning given in Schedule
V
"Completion Date" the date on which Completion
occurs
"Completion Net Assets" the number in the Completion
Balance Sheet that corresponds to
"Net Assets (Excluding Net Debt)"
((Pound Sterling)220,365,000) as
at the Base Line Balance Sheet
"Confidential Information" all information not publicly
known, insofar as it is used in or
otherwise relates to the business,
customers or financial or other
-36-
affairs of any Telecom Group
member (for the purposes of
clauses 17.1 and 17.3) or any
member of the Racal Group (for the
purposes of clauses 17.2 and
17.3), including, without
limitation, information relating
to:
(a) the marketing of goods or
services including,
without limitation,
customer names and lists
and other details of
customers, sales targets,
sales statistics, market
share statistics, prices,
market research reports
and surveys, and
advertising or other
promotional materials; or
(b) future projects, business
development or planning,
commercial relationships
and negotiations
"Consents" any approval licence or consent
required from any Reversioner
necessary to effect the Property
Reorganisation and the expression
"Consent" shall include the
execution and completion of any
document required by the relevant
Reversioner for the purpose of or
in connection with the evidencing
of the grant of such approval
licence or consent (whether or not
incorporating other
provisions)
"Consideration" the aggregate amount referred to
in clause 4.3 as payable by Global
to the Sellers
-37-
"Covenantor" Global and/or Racal
"Data Room" the data room containing
information relating to the
Telecom Group located at the
offices of the Racal Solicitors
"Data Room Index" the index of documents including
the supplemental index in the
Agreed Form relating to the
information in the Data Room
"Disclosure Letter" the letter of the same date as
this Agreement from Racal to
Global referred to in clause 8
"dollars" or "$" US dollars
"Encumbrance" includes any encumbrance, charge,
debenture, mortgage, pledge, lien,
assignment, hypothecation,
security interest, title
retention, option, claim, right to
acquire, right of possession,
right of pre-emption, restriction
or other security agreement or
arrangement
"Fieldforce" the division of Racal Services
(Communications) Ltd whose
principal business as at the date
of this Agreement is the
installation, repair and
maintenance of communications for
the railway's telecommunications
network and related technical
equipment
"Finance Lease Debt" at the relevant time, the
aggregate amount payable (whether
or not due and including all
principal, interest, charges, fees
and expenses but excluding
interest charges for future
periods) by RTL to Railtrack plc
under the Finance Lease dated 30
June 1994
-38-
"Finance Lease Net Debt" at the relevant time, the Finance
Lease Debt less the Finance Lease
Receivables
"Finance Lease Receivables" at the relevant time, the
aggregate amount receivable
(whether or not due and including
all principal, interest, charges,
fees and expenses but excluding
interest charges for future
periods) by RTL from BRTH under
the Telecommunications Services
Agreement dated 23 July 1999 or
any other substitute document
envisaged by the Reorganisation
Documents when executed
"Global Auditors" Xxxxxx Xxxxxxxx
"Global Group" Global and its subsidiary
undertakings from time to time
"Global Property Solicitors" such solicitors as may be
appointed from time to time by
Global in relation to property
matters
"Global Solicitors" Xxxxxxx Xxxxxxx & Xxxxxxxx of 00
Xxxxxxxxxxx, Xxxxxx
"Xxxxxxx Sachs Facility" the facility envisaged by a letter
dated 8 October 1999 from the
Security Trustee and another to
Global Crossing Holdings Limited
"Guarantor" Racal
"ICTA 1988" the Income and Corporation Taxes
Xxx 0000
"Intellectual Property" inventions, patents, trade marks,
service marks, designs (whether
registered or unregistered),
copyrights (including without
limitation, rights in software),
confidential information, know-
how, customer lists, database
-39-
rights, business or trade names,
trading goodwill and all rights
and forms of protection of a
similar nature or having similar
or equivalent effect to any of
these which may exist anywhere in
the world and all applications and
rights to apply for the protection
of, any of the foregoing
"Intellectual Property Rights" the Intellectual Property which is
owned by Telecom Group members and
which is material to the business
of the Telecom Group details of
which are disclosed in Sections 9,
10, 11 and 12 and Index II.9, 10,
11 and 12 in the Data Room Index
"Inter-Company Debt" at the relevant time, the
aggregate amount payable (whether
or not due and including all
principal, interest, charges, fees
and expenses) by members of the
Telecom Group to all other members
of the Racal Group (other than any
other members of the Telecom
Group) in respect of all
borrowings, overdrafts,
intercompany balances and
outstanding indebtedness but
excluding (i) all sums payable in
respect of Inter-Company Trading
Debt; (ii) any amounts payable
under the finance lease) dated 30
June 1994 between RTL and
Railtrack; and (iii) any amounts
payable by members of the Telecom
US Group to members of the Racal
Group
"Inter-Company Net Debt" at the relevant time, the amount
of the Inter-Company Debt less the
amount of the Inter-Company
Receivables (which may be a
positive or a negative amount)
"Inter-Company Trading Debt" at the relevant time, the
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aggregate amount payable (whether
or not due) in the ordinary course
of trading by members of the
Telecom Group to all other members
of the Racal Group (other than any
other members of the Telecom
Group)
"Inter-Company Receivables" at the relevant time, the
aggregate amount receivable
(whether or not due and including
all principal, interest, charges,
fees and expenses) by members of
the Telecom Group from all other
members of the Racal Group (other
than any other member of the
Telecom Group) in respect of all
borrowings, overdrafts,
intercompany balances and
outstanding indebtedness but
excluding all sums to be received
in respect of Inter-Company
Trading Receivables
"Inter-Company Trading at the relevant time, the
Receivables" aggregate amount to be received
(whether or not due) in the
ordinary course of trading by
members of the Telecom Group from
all other members of the Racal
Group (other than any other
members of the Telecom Group)
"ION" International Optical Network
L.L.C.
"July Management Accounts" the management accounts for the
Telecom UK Group to be prepared in
accordance with Schedule X as at
23 July 1999 which shall include a
profit and loss account for the
period commencing 1 April 1999 and
ending on that date and a balance
sheet as at that date
"London Stock Exchange" London Stock Exchange Limited
-41-
"Long Stop Date" 15 December 1999
"new PTO Licence" has the meaning given to it in
paragraph 2 of Schedule III
"non-Railtrack Properties" Properties which are not located
on land owned, leased or licenced
by Railtrack plc or any other
member of the Railtrack group
"Outstanding Negotiations" means the wayleaves, licences and
leases in the process of
negotiation as listed in Schedule
XII Parts A and B
"Pre-Completion Dividend" has the meaning given to it in
clause 5.5
"pounds" or "(Pound Sterling)" UK pounds sterling
"Properties" except as defined for clause 13,
the properties which are material
to the business of the Telecom
Group brief particulars of which
are set out in Section 7 and Index
II.7 of the Data Room Index
"Property Owner" in respect of each leasehold
property, the person designated as
the "Property Owner" in Schedule
XI
"Property Reorganisation" (a) the assignment to RTL of
the leasehold properties
listed in Schedule XI Part
A (where not already held
by RTL) and where
indicated in that part of
the Schedule the grant of
a sublease or licence of
part to RPL for occupation
by Field Force or
Translink on the terms set
out in that part of the
Schedule and otherwise
upon the terms of the
relevant lease;
-42-
(b) the assignment to RPL of
the leasehold properties
listed in Schedule XI Part
B and the grant of a
sublease or licence of
part to RTL on the terms
set out in that part of
the Schedule;
(c) the grant of a licence of
part of the property
referred to in Schedule XI
Part C on the terms set
out in that part of the
Schedule;
(d) the assignment to RTL of
the leasehold properties
listed in Schedule XI Part
D; and
(e) the assignment to RPL of
the leasehold property
listed in Schedule XI Part
E on the terms set out in
the Schedule
the circular to be sent to
"Racal Circular" shareholders of Racal in relation
to the Transaction pursuant to the
Listing Rule of the London Stock
Exchange
"Railtrack Agreements" the Finance Lease Agreement dated
30 June 1994, the Grant of Use
date 30 June 1994, the two Deeds
of Grant dated 2 August 1995, the
Management Agreement dated 31
March 1995 and the National Radio
Network Agreement dated 30 June
1994 in each case entered into
between Railtrack plc and RTL and
all of the above are included at
Section 9.1.1B of the Data Room
-43-
Index as modified, amended or
supplemented from time to time
"Racal Auditors" Deloitte & Touche, Hill House, 0
Xxxxxx Xxx Xxxxxx, Xxxxxx XX0X 0XX
"Racal EGM" the Extraordinary General Meeting
of Racal to be convened in
connection with the Transaction
and certain steps in relation
thereto, including any adjournment
thereof
"Racal Group" Racal and its subsidiary
undertakings from time to time
"Racal Marks" the word Racal and any other word
or xxxx incorporating Racal
"Racal Shareholders" holders of Racal Shares
"Racal Solicitors" Xxxxxx Xxxxx Xxxxxxx of 00 Xxxxxxx
Xxxxxxx, Xxxxxx, XX0X 0XX
"Racal Telecom UK Group Shares" the shares in RTL, RISL and RTNL
referred to in Schedule IV
"Racal USA" Racal Telecommunications, Inc., a
company organised under the laws
of Delaware
"Racal USA Shares" 1000 shares of Racal USA, as
specified in Schedule IV
"Reorganisation" the reorganisation of the Racal
Group, its successors and assigns,
as effected or to be effected by
the Reorganisation Documents
"Reorganisation Documents" each of the reorganisation
agreements in the Agreed Form and
the Intra-Group Business Transfer
Agreement executed on
1 October 1999 between BRTH and
RTL in relation to Fieldforce and
the Intra-Group Business Transfer
Agreement executed on 1 October
-44-
1999 between BRTH and RTL in
relation to Translink
"Reversioner" means in respect of each leasehold
property any person entitled to an
interest in reversion (whether
mediate or immediate) whose
consent is necessary to the
assignment or subletting or
licence of any of the leasehold
properties and relevant
Reversioner shall be construed
accordingly
"RISL" Racal Internet Services Limited (a
company registered in England
under No 3231692)
"RPL" Racal Properties Limited
"RTL Racal Telecommunications Limited
(a company registered in England
under No 2089583)
"RTNL" Racal Telecommunications Networks
Limited, (a company registered in
England under No 2089583)
"RTPA" the Restrictive Trade Practice Xxx
0000
"Security Trustee" Xxxxxxx Sachs International
"Sellers" Racal, Controls and Communications
Limited and The Racal Corporation
"Shareholder Funds" at the relevant time, the sum of
the aggregate amount of issued and
paid up share capital of each
member of the Telecom Group and
all of the reserves (whether
or not distributable) standing
to the credit of each member of
the Telecom Group less debit
balances where relevant
"Shares" the shares in the Telecom Group
-45-
listed in Schedule IV
"subsidiary undertaking" a subsidiary undertaking as that
term is defined in section 258 of
the Companies Act
"Tax" has the meaning given in the Tax
Covenant
"Tax Covenant" the covenant to be given by Racal
to Global set out in Schedule IX
"Tax Warranties" means those warranties set out in
Part C of Schedule IX
"Telecom Group" or "Telecom RTL, RTNL, RISL and Racal USA or
Companies" any one of them as the context
requires and "Telecom Group
member" shall be construed
accordingly
"Telecom Group Shares" the Racal USA Shares and the
Telecom UK Group Shares
"Telecom UK Group" the Telecom Group (excluding Racal
USA) or any of such companies and
"Telecom UK Group member" shall be
construed accordingly
"Telecom UK Group Shares" the shares in the members of the
Telecom UK Group as set out in
Schedule IV
"Telecom US Group" Racal USA and ION or either of
them as the context requires
"TCGA" the Taxation of Chargeable Gains
Xxx 0000
"Trade Xxxx Licence" the licence to use the Racal Marks
in the Agreed Form to be granted
by Racal to Global
"Transaction" the transfers by members of the
Racal Group of their interest in
the Telecom Group to Global
-46-
"Transfer Conditions" the conditions as described in
Schedule III
"Transaction Documents" this Agreement, the Disclosure
Letter, the Trademark Licence and
the Transitional Services
Agreements
"Transitional Services Agreement" the agreement in Agreed Form
relating to the provision of
services after Completion
"Translink" the division of Racal Services
(Communications) Ltd whose
principal business as at the date
of this Agreement is the provision
of infrastructure services,
advanced information systems and
project support for the rail and
transport community
"UK GAAP" United Kingdom generally accepted
accounting principles and
practices including applicable
financial reporting standards,
Statements of Standard Accounting
Practice and abstracts of the
Urgent Issues Task Force
"Umpire" the person described in paragraph
9 of Schedule V
"United Kingdom" or "UK" the United Kingdom of Great
Britain and Northern Ireland
"United States" or "US" the United States of America and
its territories and possessions and
any other areas subject to its
jurisdiction
"US GAAP" United States generally accepted
accounting principles and
practices
"Warranties" the warranties set out in Part B
of Schedule V and Part C of
Schedule IX
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SCHEDULE III
Transfer Conditions
Completion will be conditional upon:
1. the Racal Shareholders having passed the necessary resolution at the
Racal EGM to approve and implement the Transaction;
2. the granting of a national public telecommunications operators licence
(the "new PTO Licence") (in a standard form and on standard terms
(including a period of 25 years from an effective date of no earlier
than September 1994 and applying the Telecommunications Code contained
in Schedule 2 to the Act currently the subject of the consultation
period established by the Telecommunications Act 1984) to RTL under
section 7 of the Telecommunications Xxx 0000;
3. the Secretary of State for Trade and Industry having:
(a) been duly notified in relation to each of the Telecommunications
Licences (as defined and referred to in paragraph J.3 of Part B
of Schedule VI) and the new PTO licence on the proposed change
in control of the Telecom Companies concerned pursuant to this
Agreement; and
(b) confirmed to the Telecom Companies and Global that such change in
control will not lead to the revocation of any of the
Telecommunications Licences or the new PTO licence (except for the
revocation of the closed-user group licence issued to RTL under
section 7 of the Telecommunications Xxx 0000 on 13 March 1998 (the
"CUG licence") following the grant of the new PTO licence in
circumstances where the CUG licence will no longer be required by
RTL for the purposes of carrying on any of its businesses);
4. the German competition authorities indicating in terms satisfactory to the
parties that they consent to the completion of the Transaction or any
applicable waiting period having expired or been terminated (the "German
Clearance"); and
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5. any applicable waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Xxx 0000 relating to the proposed acquisition of the Shares
having expired or been terminated.
-49-
SCHEDULE IV
Telecom Group
Name of Country of Registered Shares to be Beneficial
Company Registration Number transferred and
(England unless Registered
stated) Owner
RTL - 2495998 100,000 ordinary Racal
shares
RISL - 3231692 500,000 (300,000 Controls and
A shares; 200,000 Communications
B shares) Limited
RTNL - 2089583 19,250,000 Racal
ordinary shares
Racal USA USA (State of - 1,000 shares of The Racal
Delaware) $1.00 Corporation
-50-
SCHEDULE V
Completion Balance Sheet
Part A
1. Global shall procure that employees and members of the Telecom UK Group
prepare a balance sheet of the Telecom UK Group as at the Completion Date
(the "Completion Balance Sheet") within 30 Business Days of the Completion
Date and deliver it to the Racal Auditors for review by them as soon as
reasonably practicable and in any event to be completed by not later than
10 Business Days from the date of receipt by them of the draft Completion
Balance Sheet. Global shall procure that the Telecom UK Group permits the
Racal Auditors such reasonable access to the records and staff of the
Telecom UK Group as they may reasonably require for the purposes of the
Racal Auditors fulfilling their obligations contained in this Schedule.
2. The Completion Balance Sheet shall be drawn up by the Telecom UK Group in
accordance with the following principles:
(a) under the historic cost accounting convention applying UK GAAP and on
the same basis and in accordance with the same accounting principles,
policies and practices as have been applied in the preparation of the
Base Line Balance Sheet; and
(b) reflecting in any event the bases and adjustments set out in
paragraph 3, out so that if the provisions of paragraph 3 and the
provisions of this paragraph 2 conflict with each other, the
provisions of paragraph 3 shall prevail.
3. For the avoidance of doubt, in the Completion Balance Sheet:
(a) the book values for the cost, accumulated depreciation and provisions
for asset impairment for fixed assets as used in the Base Line
Balance Sheet shall be used adjusted only to reflect additions,
disposals and depreciation charged in the period between the Balance
Sheet Date and the Completion Date. The depreciation charges used to
determine in the Completion Balance Sheet shall use the same rates
as in preparing the Base Line Balance Sheet and additions (including
the capitalisation of overheads) shall be calculated on the same
-51-
basis used as in preparing the Base Line Balance Sheet;
(b) the same book values for cost and provisions of stocks as were used
in the Balance Line Balance Sheet, except as adjusted for actual
additions and usage during the period shall be used;
(c) the provision for any liability for Tax arising pursuant to s 179
TCGA in respect of the British Rail Board Assets as defined in the
Tax Covenant as a consequence of the sale contemplated by this
Agreement (the "Section 179 Liability") shall be (Pound Sterling)
5 million;
(d) any SSAP24 asset (representing accrued over payment of pensions) will
be excluded;
(e) save as set out in paragraph (c), corporation tax balances will be
excluded;
(f) the provision for FRS 3 fundamental re-organisation shall be equal
to the amount of (Pound Sterling)9,300,000 less amounts actually
charged in respect thereof in the financial year commencing
1 April 1999;
(g) recognising the adjustment for the accounting treatment of share
options under the heading "ESOT" in the Base Line Balance Sheet; and
(h) external borrowings (if any) shall be included as a liability in the
Completion Net Assets with the exception of the Finance Lease.
4. If the Racal Auditors following the review conclude that the draft
Completion Balance Sheet does not comply with the basis for preparation
set out in paragraphs 2 and 3 above, they may make adjustments to the
draft Completion Balance Sheet.
5. A draft of the Completion Balance Sheet (reflecting such adjustments (if
any) made by the Racal Auditors in accordance with paragraph 4) together
with a draft report of the Racal Auditors in the form set out in Part B
of this Schedule (the "Report") shall be delivered by Racal to Global not
later than seven days after the same shall have been prepared and reviewed
and Global and the Global Auditors may review the same in order to satisfy
themselves that the draft Completion Balance Sheet have been prepared and
reviewed in accordance with the provisions of this Schedule and that the
-52-
details contained in the Report are correct.
6. For the purposes of preparing the Completion Balance Sheet and in
connection with any dispute arising following preparation of the
Completion Balance Sheet, the Global Auditors shall be entitled
access to the working papers of the Racal Auditors relating to the
Base Line Balance Sheet and Completion Balance Sheet at reasonable
times and on reasonable notice.
7. Unless within 28 days of the receipt of the same (inclusive of the day
of receipt) Global gives notice to Racal in writing of any respect in
which they are not satisfied being either that the draft Completion
Balance Sheet have not been prepared and/or reviewed in accordance with
the provisions of this Schedule or that the details contained in the
draft Report are incorrect, the Completion Balance Sheet and the said
Report shall be final and binding between the parties (as they shall be
if within the period of 28 days Global gives written notice to Racal that
they are so satisfied).
8. If Global does give notice to Racal in writing that they are not so
satisfied and if the matter or matters in dispute are not resolved by
the parties within 56 days of Global receiving the draft Completion
Balance Sheet (inclusive of the day of receipt) the matter may be
referred by either Global or Racal to the Umpire, who shall act as an
expert and not as an arbitrator, and the decision of the Umpire as to
any matter so in dispute and as to the proper contents of the
Completion Balance Sheet and of the said Report shall be final and
binding between the parties in the absence of manifest error. The
provisions of paragraphs 9 and 10 of this Schedule shall apply in
relation to any reference to such Umpire.
9. The Umpire shall be a Chartered Accountant or firm of Chartered
Accountants agreed on by Racal and Global or, if they cannot agree on
such within seven days of any party giving notice in writing to the
other that it desires an Umpire to be appointed, such Chartered
Accountant or firm of Chartered Accountants as may be nominated on
the application of any of them by the President or other senior
officer for the time being of the Institute of Chartered Accountants
in England and Wales.
10. The parties hereby agree and undertake that if any disagreement or
dispute under this Agreement is referred to the Umpire:
(a) the parties will each use all reasonable endeavours to co-operate
with the Umpire in resolving such disagreement or dispute, and for
that purpose will provide to him all such information and
-53-
documentation as he may reasonably require;
(b) the Umpire shall have the right to seek such professional assistance
and advice as he may require in fulfilling his duties; and
(c) the fees of the Umpire (and any professional fees incurred by him)
shall be borne as to half by Global and as to half by Racal unless
the Umpire directs otherwise provided that if either party fails to
pay its share of any such fee within seven days of the relative
invoice being rendered to the parties or either of them the other
party shall be entitled to pay the full amount of the fee and
thereupon to recover one half thereof from the first-mentioned
party as a debt due and payable on demand.
11. Upon the resolution of any dispute concerning the contents of the draft
Completion Balance Sheet or the draft Report (howsoever resolved) the
draft Completion Balance Sheet and the draft Report shall be amended to
accord with the resolution of any such dispute and such Completion Balance
Sheet and such Report so amended shall be final and binding between the
parties.
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Part B
FORM OF REPORT
To: Racal
Global
1. We confirm that we have reviewed (without carrying out an
audit) the combined balance sheet of members of the Telecom
UK Group to the Completion Date. These accounts are the
Completion Balance Sheet referred to in the Agreement entered
into between, amongst others, your respective companies on 10
October 1999 relating to the transfer to Global of the
Telecom Group (the "Agreement"). The Completion Balance
Sheet is attached.
2. In our opinion the Completion Balance Sheet have been drawn
up in accordance with the provisions of Schedule V to the
Agreement.
3. Based on the Completion Balance Sheet we confirm that the
Completion Net Assets (as defined in the Agreement) is (Pound
Sterling) *** and the amount of Finance Lease Net Debt (as
defined in the Agreement) is (Pound Sterling) ***.
Signed .......................
[Racal Auditors]
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SCHEDULE VI
Covenants and Warranties
Part A
COVENANTS
Each party (the "Covenantor") warrants to the other parties in the
following terms:
(a) the Covenantor is a company duly incorporated and validly existing
under the laws of its place of incorporation and possesses the
capacity to xxx in its own name and has the corporate power and
authority to carry on, in all material respects, its own business
as now being conducted and to own, lease and operate its property
and other assets;
(b) subject to the terms and conditions of this Agreement, the Covenantor
has the legal right and the necessary corporate power and authority
to enter into and perform this Agreement and any other documents
to be executed by it pursuant hereto;
(c) subject to the terms and conditions of this Agreement, this Agreement
and the other documents which are to be executed by it pursuant
hereto will, when executed and subject to any necessary shareholder
approvals and assuming the due authorisation, execution and delivery
thereof by the other parties, constitute valid and binding
obligations of the Covenantor;
(d) subject to the terms and conditions of this Agreement, the
execution and delivery of, and the performance by the
Covenantor of its obligations under, this Agreement and any
other documents to be executed by it pursuant hereto will not:
(i) result in a breach of any provision of the constitutional
documents of the Covenantor;
(ii) result in a breach of or give any third party a right to
terminate or modify, or result in the creation of any
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encumbrance or constitute a default under any agreement,
licence or other instrument or result in a breach of any order,
judgment or decree of any court, governmental agency or
regulatory body to which the Covenantor is a party except where
any such matter or occurrence would not have a material
adverse effect on the Covenantor and its group companies
taken as a whole;
(iii) except as otherwise stated herein or therein, require the
consent of its shareholders or the shareholders of any of
its parent undertakings; or
(v) save as provided herein or therein, require any governmental or
third party approvals or the consent of any other person which
has not been obtained.
Part B
WARRANTIES
Except where the context otherwise requires references in this Part B to the
Company shall be construed as references to each member of the Telecom Group.
A. Financial information
A.1 The copies of the statutory accounts for the year ended 31 March 1999
for RTL, RTNL and RISL annexed to the Disclosure Letter are each a
true and complete copy. Such accounts each:
(a) give a true and fair view of the financial position and state of
affairs of RTL, RTNL and RISL as appropriate at 31 March 1999 as
at the dates stated and of its profit or loss for the period to
which they relate;
(b) have been prepared in accordance with UK GAAP at 31 March 1999,
with the Companies Act and other applicable statutes; and
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(c) have been prepared, unless otherwise expressly stated therein,
on a basis consistent with the basis applied in the corresponding
accounts for the preceding financial year.
A.2. The July Management Accounts will be prepared on a basis consistent
with UK GAAP applied on a consistent basis with the Carve-Out
Accounts with due care and attention, and will show a reasonably
accurate view of the state of affairs of the Telecom UK Group as at
the date and the results for the period ended on that date in respect
of which they will be prepared, but it is hereby acknowledged that
they will not be prepared on a statutory basis. Such management
accounts will include a balance sheet which is consistent with the
column headed "Revised Management Accounts" in the Base Line Balance
Sheet prior only to reflecting the column headed "Purchase
Consideration" and reclassifying the group loan accounts in the
columns headed "Transfer Fieldforce" and "Transfer Translink".
The July Management Accounts will report sales in the profit and loss
account of not less than (Pound Sterling)58.9 million and a loss
before interest, exceptional items and taxation of not more than
(Pound Sterling)6.6 million.
The July Management Accounts will not include any "exceptional" items
as that term is used in FRS3 other than a provision for costs
"fundamental reorganisation" which commenced in the financial year
ended 31 March 1999.
A.3 The 31 March Balance Sheet (contained in the Carve-Out Accounts) has
been prepared in accordance with UK GAAP and provides an accurate
view of the combined state of the affairs of the Telecom Group as
reflected in the Racal Group financial statements as at those dates
and as adjusted to show the affairs of that group as if the
transactions referred to in the Reorganisation Documents had taken
place on 1 April 1996 (by reference, where applicable to the
equivalent assets to those referred to in the Reorganisation
Documents) and on the basis set out in the notes thereto as further
detailed in the adjustment principles in the Agreed Form (the
"Adjusting Principles").
A.4 The judgements identified in the Adjusting Principles in preparing
the 31 March Balance Sheet and the Base Line Balance Sheet were made
in good faith such that the presentation based on the exercise of
those judgements was reasonable.
A.5 The Base Line Balance Sheet was prepared as set out in Warranty A.3
(substituting 23 July, 1999 for the date set out therein) other than
in respect of adjustments for recognition of pension surplus on
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acquisition of BRTH, related deferred tax, the reversal of the ESOT
accrual and the balances relating to RNS BV as reflected in the Racal
Group financial statements which were reflected in the 31 March
Balance Sheet, but not in the Base Line Balance Sheet and was
prepared in a manner consistent with the basis of preparation of the
31 March Balance Sheet. The Base Line Balance Sheet reflects the
balance sheet contained in the July Management Accounts (headed
"Revised Management Accounts") adjusted in respect of purchase
consideration (and the related reclassification of the related Group
Loans of Translink and Fieldforce), tax, SSAP24, ESOT Deferred Tax
and Completion Dividend.
A.6 The "External turnover" line on page 7 (note 4) of the Carve-Out
Accounts is substantially an accurate reflection of the "revenue" of
the Telecom Group for each of the previous three (3) years after
appropriately excluding the businesses transferred under the
Reorganisation Documents.
A.7 The Finance Director of Racal, having made enquiries of his senior
staff, is aware of no matter which would cause the proforma profit
and loss accounts of the Telecom Group and the related footnotes in
the Agreed Form (the "Carve-Out Accounts") to be materially altered
if they were to be required to be published for the purposes of a
shareholder circular seeking approval of the transactions
contemplated hereby at the date hereof.
A.8 At the Balance Sheet Date, the Telecom Group had no indebtedness for
borrowed money other than intra group indebtedness and the Finance
Lease.
B. Business since the Balance Sheet Date
B.1 Since the Balance Sheet Date the Company has carried on its business
in the ordinary course and so as to maintain the same as a going
concern without any material interruption or alteration in the
nature, scope or manner of such business and there has been no
material adverse change in the financial or trading position of the
Company.
B.2 Since the Balance Sheet Date:
(a) no member of the Telecom Group has:
(i) acquired or disposed or any material business or assets,
made any material capital expenditure or incurred any
material capital commitments, in each case outside the
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ordinary course of its business; or
(ii) entered into any material contract, obligation or other
arrangement outside the ordinary course of its business; or
(iii) incurred any liability, contingent or otherwise, for any
brokers' fees or break-up, termination or similar fees or
expenses; or
(iv) incurred any indebtedness for borrowed money other than intra
group indebtedness; or
(v) paid or declared any dividend.
(b) there has been no material damage, destruction or loss with respect
to any material asset or property owned, leased or otherwise used by
any member of the Telecom Group (whether or not covered by
insurance).
(c) contracted for or otherwise obligated itself to provide dark fibre,
IRUs (indefeasible rights of use) or transfers of network capacity
which such contracts or obligations purport to generate aggregate
revenue prior to Completion in excess of (Pound Sterling)30 million.
C. Share Capital and constitution
C.1 The register of members of the Company contains complete and accurate
records of its members and all issues and transfers of shares in the
capital of the Company have been registered in accordance with the
Articles of Association of the Company from time to time in force and
have in relation to Racal USA been registered in accordance with the
by-laws of Racal USA .
C.2 The Company has complied in all material respects with the provisions
of the Companies Act and Racal USA has complied in all material
respects with the provisions of Delaware law and all returns,
particulars, resolutions and other documents required under any
legislation to be delivered on behalf of the Company to the Registrar
of Companies or to any other authority whatsoever have been properly
made and delivered.
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C.3 The copy of the Memorandum and Articles of Association of each
Telecom UK Group member and the constitutional documents of Racal USA
disclosed in the Data Room is up to date, true and complete.
C.4 The Telecom UK Group Shares and the Racal USA Shares constitute all
the shares in issue in the capital of the Telecom Companies and have
been properly allotted and issued and are fully paid. There is no
outstanding option or right to acquire any interest whatsoever in any
share in the capital of the Company. Neither Racal USA nor any
Telecom UK Group member has any outstanding debentures or loan notes.
D. Subsidiary Undertakings and related operations
References in this paragraph D to any procedures under English law
shall in the case of Racal USA be deemed to be references to
applicable US laws.
D.1 The Telecom UK Companies are limited companies incorporated under
English law. Racal USA is a corporation incorporated under the laws
of the State of Delaware and is in good standing.
D.2 Other than as referred to in warranty D.11 no Telecom Group member is
the holder or beneficial owner of any shares or securities of any
other person (whether incorporated in the United Kingdom or
elsewhere) and none has agreed to acquire any such shares or
securities.
D.3 Other than as referred to in Warranty D.11 no Telecom Group member is
or has agreed to become a member of any partnership, joint venture,
consortium or other incorporated or unincorporated association and no
Telecom UK Group member has a branch, agency, place of business or
establishment outside the United Kingdom. Racal USA has no branches,
agency, place of business or establishment outside the United States
of America.
D.4 No order has been made or petition presented for the purpose of
winding up the Company or for the appointment of any provisional
liquidator or for any administration order to be made in relation to
the Company. No receiver (including any administrative receiver or
manager) has been appointed in respect of the whole or any part of
the property of the Company nor has any distress, execution or other
process been levied against the Company.
D.5 No voluntary arrangement has been proposed under Section 1 of the
Insolvency Xxx 0000 in respect of the Company and save as
contemplated by this Agreement no compromise or arrangement has been
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proposed under Section 425 of the Companies Act in respect of the
Company.
D.6 So far as the Sellers are aware the Company has not at any time
during the two years immediately prior to the date of the Agreement:
(a) entered into a transaction with any person at an undervalue (as
referred to in Section 238(4) of the Insolvency Act 1986); or
(b) been given a preference by any person as referred to in Section
239(4) of the Insolvency Xxx 0000.
D.7 The Company has not given a power of attorney or other authority by
which a person may enter into an agreement, arrangement, or
obligation on the Company's behalf (other than in authority for a
director or employee to enter into an agreement in the usual course
of that person's duties).
D.8 No action is being taken by the Registrar of Companies to strike the
Company off the Register under Section 652 of the Companies Act.
D.9 The Company is not insolvent or unable to pay its debts within the
meaning of section 123 of the Insolvency Xxx 0000. The Company
has not stopped paying its debts as they fall due.
D.10 No person is entitled to receive a finders fee, brokerage or
commission from the Company in connection with this Agreement.
D.11 Racal USA has no assets or liabilities other than those arising out
of its holding of shares in ION or those associated with maintaining
a corporation of good standing. Racal USA has no material liability,
contingent or otherwise, except for intercompany indebtedness which
such intercompany indebtedness shall be either capitalised or waived
prior to Completion.
E. Assets
E.1 Save for assets held by the Company
(a) subject to retention of title or similar arrangements arising in
the ordinary course of the business of the Company; or
(b) which are leased assets or assets hired or rented on hire purchase
in the ordinary course of the business details of which are contained
in the Data Room;
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the Company is the legal and beneficial owner of all the material
assets used in its business (excluding the Properties). The assets
owned by the Company together with those it has the right to use (or
has a contract for capacity for) are all the assets necessary for the
effective operation of the business. Save as aforesaid, no person
has the right to call for any payment in respect of any of those
assets and the Company has not created or agreed to create any
Encumbrance over any part of its undertaking or assets (other than
Encumbrances arising by the operation of law in the ordinary course
of business of the Company) nor so far as the Sellers are aware are
such assets subject to any Encumbrance howsoever created.
E.2 Maintenance contracts are in force for all the material assets of the
Company where it is both normal to have such assets maintained by
independent or specialist contractors, and the Company is obliged to
maintain or repair under a leasing or similar agreement. So far as
the Sellers are aware such assets have been regularly maintained in
accordance with
(a) safety regulations required to be observed in relation to them
(including, without limitation, in accordance with any railway
safety code); and
(b) the provisions of the applicable lease or similar agreement.
E.3 No debts shown in the Base Line Balance Sheet will, if all
appropriate collection action is taken, be realisable at less than
their book value, subject to bad debt provisions reflected on the
Base Line Balance Sheet in accordance with Racal's policy, practices
and judgments referred to in warranty A.1.
F. Properties
F.1 The Properties comprise all of the land and premises owned, occupied
or otherwise used by the Telecom UK Group for the purpose of its
business and the Telecom UK Group are or (following completion of the
Property Reorganisation) will be the legal and beneficial owner of
all of the Properties (including the Rights as granted by the Deeds
of Grant) free from any financial incumbrances and all deeds and
documents necessary to prove title to each Property are in possession
of the Sellers and/or the Telecom UK Group or are the subject of
acknowledgements for production.
F.2 The Telecom UK Group has not entered into any agreement to acquire or
dispose of any land or premises or any interests therein which has
not been completed.
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F.3 The Properties are not subject to any outgoings other than uniform
business rate (except rating surcharge), water rates and insurance
premiums and also in the case of the leasehold properties, rent and
service charges and any other payments referred to in the relevant
leases or licences and neither the Sellers nor the Telecom UK Group
are in arrears with any such outgoings.
F.4 Neither the Sellers nor the Telecom UK Group have received any
written notice of material breach of any agreements, covenants,
restrictions or other matters to which the Properties are subject.
F.5 Neither the Sellers nor the Telecom UK Group have received any
claims or notices of disputes or orders or notices affecting the
Properties.
F.6 Neither the Sellers nor the Telecom UK Group have received any
written notice that the present use of any of the Properties or any
development carried out on, is in material breach of any relevant
planning legislation and building regulations applicable thereto.
F.7 Neither the Sellers nor the Telecom UK Group have received any
written notice of material non- compliance with any applicable
statutory and by-law requirements with respect to the Properties.
F.8 The Properties are served by all means of access, services and other
facilities necessary for their current use. No right or easement is
restricted in any way or is capable of being lawfully interrupted or
terminated by any person.
F.9 None of the Properties has a book value in excess of (Pound
Sterling)1,000,000.
F.10 Neither the Sellers nor the Telecom UK Group have received any
written notice of breaches of tenant covenants of a material nature
in the case of any of the leasehold properties. Neither the Sellers
nor the members of the Telecom UK Group have received any notices or
complaints alleging such breaches.
F.11 Subject to the Property Reorganisation taking place, there is no
person in possession or occupation of, or who has or claims a right
or interest of any kind in, the Properties adverse to the interest in
them of the Telecom UK Group.
F.12 No fact or circumstance exists which materially and adversely affects
the use or enjoyment of the Properties or casts doubt on the Telecom
UK Group's right or title to the Properties.
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F.13 Where the Properties are subject to leases, tenancies or licences the
tenant or licensee has in all material respects complied with its
obligations under the lease, tenancy or licence.
F.14 Except in relation to the Properties the Telecom UK Group has no
liability arising out of the conveyance, transfer, lease, tenancy,
licence, agreement or other documents relating to land, premises or
an interest in land or premises.
F.15 Neither the Sellers nor the Telecom UK Group require access to any
land owned by Railtrack PLC or the British Railways Board ("BRB") in
order to maintain its SDH network, other than as disclosed by the
documents in the Data Room.
F.16 The Telecom UK Group has the exclusive benefit of all of the Rights
(as defined in the Deeds of Grant (as defined below) which it is
hereby acknowledged are not exclusive Rights) in respect of easements
over certain property of Railtrack PLC and BRB in England, Wales and
Scotland granted to BR Telecommunications Limited by the four Deeds
of Grant (Document: 7.16.1.1, 7.16.2.1, 7.16.3.1 and 7.16.4.1 in the
Data Room) (the "Deeds of Grant").
G. Insurance
G.1 Particulars of all current insurance policies relating to the assets
and business of the Company have been disclosed to Global and are
adequately summarised in or otherwise disclosed in the Data Room.
All premiums due in respect of such policies have been paid. Details
of all material claims within the last 3 years are contained in the
Data Room.
G.2 So far as the Sellers are aware, there are no circumstances which
could reasonably be expected to lead to any liability under such
insurance being avoided by the relevant insurers or the premiums
being increased and there is no claim outstanding under any such
policy and, so far as the Sellers are aware, there are no
circumstances likely to give rise to such a claim.
H. Commercial agreements and arrangements
H.1 There have been disclosed in the Data Room to Global:
(a) all contracts, commitments and obligations of the Company
which are material to the business of the Telecom Group
(including those with the top 20 customers of the Telecom
Group by revenue over the last 12 months) and which are
now outstanding or which will become capable of giving
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rise to such a contract by an order or acceptance by another party
or parties;
(b) copies of all material agency, distribution or licence agreements or
arrangements to which the Company is a party.
(c) details of all discounts, overriders, rebates, allowances and other
special terms or similar arrangements which are outside the ordinary
course of business offered or granted to the Company by its suppliers
or granted by the Company to its customers;
(d) all contracts entered into other than in the usual course of business,
including all joint venture, partnership or similar agreements;
(e) all contracts with clauses permitting the counterparty to terminate
such agreement on a change of control of the Company;
(f) all agreements (other than relating to Properties) which can only be
terminated by the Company in accordance with its terms on giving
12 months' notice or more; and
(g) any contracts entered into under or pursuant to the Private Finance
Initiative or subject to Private Finance Initiative terms and
conditions.
H.2 There are no outstanding liabilities or commitments of the Company
arising from the disposal of any interest in shares or other assets
(other than in respect of the disposal of assets in the ordinary
course of business) previously owned by the Company.
H.3 The Company has not given any covenants limiting or excluding its
right to do business and/or compete in any area or field (whether
limited by reference to a geographical area or type of business) with
any other person nor is it a party to any agreement or arrangement
which would infringe any provision of the Competition Xxx 0000, if
such provision were now in force, or Articles 81 or 82 (formerly
Articles 85 and 86) of the European Community Treaty, the United
States Xxxxxxx Antitrust Act of 1890 (as amended) or the United
States Xxxxxxxx-Xxxxxx Act of 1938 (as amended).
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H.4 Neither the Company nor so far as the Sellers are aware any other
party to any agreement or arrangement with the Company which is
either (i) one of the top 20 customers of the Telecom Group as a
whole by revenue over the last 12 months or (ii) one of the top 20
suppliers to the Telecom Group as a whole by expenditure over the
last 12 months or (iii) material to the business of the Company, is
in default to any material extent thereunder such that (in the case
of (iii)) the relevant agreement or agreements could be terminated in
advance of its stated term, or there is a contractual right which if
exercised would result in a material reduction in income or material
increase in the cost of providing services.
H.5 The Intra-Group Business Transfer Agreement executed on 1 October
1999 between BRTH and RTL in relation to Fieldforce and the Intra-
Group Business Transfer Agreement executed on 1 October 1999 between
BRTH and RTL in relation to Translink are in effect.
H.6 The Reorganisation Documents other than those referred to in H.5
above, will be duly executed prior to Completion and, upon execution
in accordance with Schedule X, be in effect.
I. Intellectual Property Rights
I.1 The Company identified in the first column of paragraph I.1 of the
Disclosure Letter is the legal and beneficial owner, free from
Encumbrances of the Intellectual Property Rights appearing opposite
its name in the second column of such Document.
I.2 The Company identified in the first column of paragraph I.2 of the
Disclosure Letter is the registered proprietor of the registered
Intellectual Property Rights appearing opposite its name in the
second column and all renewal and maintenance fees and taxes due and
payable prior to the Completion Date in respect of the registered
Intellectual Property Rights have been paid in full. So far as the
Seller is aware each other action required to maintain and protect
the registered Intellectual Property Rights has been taken.
I.3 So far as the Sellers are aware, there is no subsisting infringement
of any of the Intellectual Property Rights by any third party and no
claims concerning such infringement or potential infringement have
been made or considered by any Telecom Group member and so far as the
Sellers are aware, no fact or circumstance exists which might give
rise to such a claim.
I.4 The Company identified in the first column of paragraph I.4 of the
Disclosure Letter is the applicant for the registration of the
Intellectual Property Rights appearing opposite its name in the
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second column and the Company has not been notified of any grounds
for refusing an existing application for registration of any of such
Intellectual Property Rights and so far as the Sellers are aware no
such grounds exist.
I.5 So far as the Sellers are aware, the activities of each Telecom Group
Company and the use of the Intellectual Property Rights by any
Telecom Group Member do not infringe the rights of any third party.
I.6 No member of the Telecom Group has granted or is obliged to grant
licences and no Company is obliged to enter into assignments,
undertakings, security interests or other rights in respect of any of
the Intellectual Property Rights to any third party outside the
ordinary course of business for a period of longer than three (3)
years and which are not on arm's length terms.
I.7 All the material Confidential Information is adequately and properly
documented in accordance with good business practice to enable Global
to acquire and retain its full benefit.
I.8 The Company has not disclosed and is not obliged to disclose
Confidential Information where the disclosure could have a material
adverse effect on the business except on condition that the
disclosure is to be treated as being of a confidential nature.
I.9 The Intellectual Property Rights and the Company's ownership interest
in them will not be adversely affected by the transaction
contemplated by this Agreement.
I.10 So far as the Sellers are aware, no member of the Racal Group uses
any Intellectual Property owned or licensed by any member of the
Telecom Group. No member of the Telecom Group uses any Intellectual
Property owned or licensed by any member of the Racal Group.
I.11 The Intellectual Property Rights owned by and licensed to each member
of the Telecom Group is all the Intellectual Property that is
necessary to carry on the business of each such member in the same
manner that it is presently carried on.
J. Compliance and litigation
J.1 The members of the Telecom UK Group have conducted their businesses
in all material respects in accordance with all applicable laws and
regulations of the United Kingdom and the terms of the
Telecommunications Licences referred to in J.3 below and Racal USA
has conducted its business in all material respects in accordance
with all applicable laws and regulations of the United States or any
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state thereof and there is no order, decree or judgment of any Court
or any governmental agency of the United Kingdom or, so far as the
Sellers are aware, any foreign country outstanding against any
Telecom Group member which may have a material adverse effect upon
the assets or businesses of the Company (and no notice has been
received threatening any of the same).
J.2 Save as claimant in proceedings for the collection of, so far as the
Sellers are aware, debts (not exceeding (Pound Sterling)50,000 in the
aggregate) arising in the ordinary course of its business, no member
of the Telecom Group is engaged in any litigation or arbitration
proceedings. There are no litigation or arbitration proceedings
pending or threatened by or against members of the Telecom Group, no
injunction has been granted against members of the Telecom Group and
members of the Telecom Group, and the Sellers are not aware of
circumstances which may give rise to such proceedings. The Company
has not given any undertaking to any court or to any third party
arising out of any legal proceedings.
J.3 The members of the Telecom Group have been granted all licences under
the Telecommunications Xxx 0000 and the Wireless Xxxxxxxxxx Xxx 0000
that are necessary for their current operations and businesses
("Telecommunications Licences") and these continue to be in full
force and effect and no Telecom Group member has been notified of any
ground for revoking, or not renewing, or of any proposal for amending
or of any proceedings which may be taken in relation to, any of the
existing Telecommunications Licences.
J.4 The Director General of Telecommunications ("DG") has not made any
determination or taken any action under any of the Telecommunications
Licences for the purposes of enforcing compliance with their terms
which relates specifically and exclusively to any Telecom Group
member rather than being of general industry effect, against any
Telecom Group member and is not in the process of doing so and, so
far as the Sellers are aware, no Telecom Group member has acted in a
manner that would cause it to be the subject of a Determination by
the Director General. For the purposes of this paragraph,
Determination shall be defined as a formal response by the DG
resulting from a specific investigation undertaken by Oftel in
accordance with its duties under the Telecommunications Xxx 0000.
J.5 No member of the Telecom Group is in violation of its respective
Memorandum or Articles of Association or Certificate of Incorporation
or By-laws or equivalent constitutive documents.
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K. Employees
K.1 The basis of the remuneration payable to officers and employees of
each Telecom Group member at the date hereof is the same as that in
force at the Balance Sheet Date and no Telecom Group member is under
any contractual or other obligation to increase the rates of
remuneration of or make any redundancy, severance, bonus, commission
or incentive or other similar payment to any of its officers or
employees at any future date in connection with their employment or
the termination of their employment which has not been disclosed in
the Data Room.
K.2 There are no employees of any Telecom Group member employed under
contracts which cannot be terminated on six months' notice or less
without payment of compensation (other than the statutory rights to
payments of compensation) which have not been disclosed in the Data.
K.3 Copies of the consultancy contracts and contracts of service of all
officers and employees of the Company earning in excess of (Pound
Sterling)50,000 per annum and of any person who has been offered
employment, consultancy or secondment and of all collective
agreements of the Company with trade unions, staff associations or
other body representing a material number of employees of the Company
have been disclosed in the Data Room. Accurate particulars of the
full-time and part-time employees are disclosed in the Data Room
together with the standard terms of employment of each grade of
employee of the Company.
K.4 No Telecom Group member is engaged or involved in any dispute
relating to employees or any person referred to in K.3 above, and so
far as the Sellers are aware, there are no circumstances which could
reasonably be expected to give rise to any such dispute which have
not been disclosed in the Data Room.
K.5 There has not during the past two years been any actual or threatened
strike, work stoppage, work to rule, lock out or overtime ban or any
other form of industrial action which has disrupted the businesses of
any member of the Telecom Group and so far as the Sellers are aware
no fact or circumstance exists which might give rise to a dispute
with a trade union, staff association or body representing a material
number of its employees.
K.6 There is no agreement between any Telecom Group member and an
employee or former employee with respect to this employment, his
ceasing to be employed or his retirement which is not included in
written terms of his employment or previous employment.
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K.7 Within the year ending on the date of this Agreement, no Telecom
Group member has:
(a) given notice of redundancies to the Secretary of State and
started consultations with a trade union under chapter II of
Part IV the Trade Union and Labour Relations (Consolidation)
Xxx 0000 or failed to comply with its obligations thereunder;
(b) failed to comply with any duty to inform and consult a trade
union or appropriate representatives under the Transfer of
Undertakings (Protection of Employment) Regulations 1981.
K.8 Subject to normal staff turnover, the employees referred to in
warranty K3 are all those necessary to operate the businesses of the
Telecom Companies and prior to 1 October 1999 were engaged primarily
in those businesses.
K.9 There is no term of employment for any employee of any member of the
Telecom Group which provides that a change in control of any member
of the Telecom Group shall entitle the employee to treat the change
of control as amounting to a breach of the contract or entitling him
to any payment or benefit whatsoever or entitling him to treat
himself as redundant or otherwise dismissed or released from any
obligation.
K.10 No officer or employee of any member of the Telecom Group earning in
excess of (Pound Sterling)50,000 has given notice terminating his or
her employment or is under notice of dismissal.
K.11 Each member of the Telecom Group has at all relevant times complied
in all material respects with all its obligations under statute and
otherwise concerning the health and safety at work of its employees.
K.12 Racal USA has at no time employed any person under a contract of
employment.
K.13 All the directors other than Xxxxx Xxxxxxxxx, Xxxxxx Xxxx, Xxxxx
Xxxxx, Xxxxx X'Xxxxxx are employed by the Telecom Group.
L. Pension warranties
The Warranties in paragraphs L.1 to L.12 are only given in respect of
the Telecom Group at the date on which the Warranties are given in
respect of the period before that date and for the purposes of the
Warranties in paragraphs L1 to L12 the following defined terms shall
have the following meanings:
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"Benefit" means pension, lump sum, gratuity or other
like benefit given or to be given on
retirement or death;
"Disclosed Scheme" means any of Racal's Schemes (as defined in
Part B of Schedule VII), the RS(C) Section
(as defined in Part C of Schedule VII) and
the British Railways Superannuation Fund and
"Disclosed Schemes" means all of them;
"Employee" means any employee, director, former employee or
former director of a Telecom Group member and
"Employees" means all of them;
"Trustees of the means the trustees of each of Racal's
Disclosed Schemes" Schemes, the trustees of the Railways
Pension Scheme insofar as it relates to the
RS(C) Section and the trustees of the
British Railways Superannuation Fund.
L.1 Apart from under the Disclosed Schemes, no Telecom Group member has
(a) participated in a scheme which provides Benefits or (b) any legal
obligation to provide or contribute to or make any other payment in
respect of the provision of any Benefit for or in respect of any
Employee.
L.2 There have been no claims in the last three years under the
Disability Insurance Plan referred to in document 2(a) of the index
of documents relating to the Racal Executive Pension Plan (as defined
in Part B of Schedule VII).
L.3 Material particulars of the Disclosed Schemes and the benefits
payable thereunder have been disclosed in the Data Room including but
not limited to the current trust deed and rules, the most recent
explanatory booklet, other relevant documents which contain details
of the current benefits (including those which may not be reflected
in the trust deed, rules or explanatory booklet) as well as a
schedule of all the employees of the Telecom UK Group members who are
members of or have any rights to benefits under the Disclosed Schemes
(disclosed at document 8 of each index of documents relating to
Racal's Schemes in the Data Room and document 119 of Appendix I to
the Disclosure Letter (the "Schedule of Members")) and such
particulars are true, complete and up to date at the date stated.
The Schedules of Members contains complete and accurate details
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relevant to the Relevant Employees (as defined in Part B of Schedule
VII) of the Disclosed Schemes.
L.4 Each lump sum benefit (except a refund of contributions) payable
under each Disclosed Scheme on the death in service before normal
retirement age of a member of the Disclosed Scheme is at the date of
this Agreement fully insured under a policy effected with an
insurance company.
L.5 No plan, proposal or intention to amend, discontinue (in whole or in
part) or exercise a discretion in relation to a Disclosed Scheme
which constitutes a binding legal commitment has been communicated to
a Relevant Employee (as defined in Part B of Schedule VII) who is a
member of the Disclosed Scheme and the Disclosed Scheme is not in the
process of being wound-up.
L.6 The actuarial method and assumptions as contained in the Actuary's
letter referred to in Part B of Schedule VII to this Agreement which
are being used to calculate the Unadjusted Transfer Amount for the
purposes of Part B of Schedule VII in respect of Racal's Schemes are
the same method and assumptions used in the latest actuarial
valuations of Racal's Schemes as at 1 April 1998.
L.7 The normal retirement date for all Employees under the Racal Staff
Pension & Life Assurance Scheme and the Racal Executive Manager and
Senior Manager Pension Scheme (both as defined in Part B of
Schedule VII) who commenced employment with the Racal Group on or
after 1 January 1988 is age 65 for both men and women.
L.8 All contributions and other amounts due and payable at the Completion
Date to the Trustees of the Disclosed Schemes from the Telecom UK
Group members in respect of any of the Employees have been paid.
Employee contributions have been paid to the Trustees of the
Disclosed Schemes within the time limits prescribed by the Pensions
Xxx 0000 and underlying regulations.
L.9 Racal's Schemes and the Railways Pension Scheme and the British
Railways Superannuation Fund are approved as exempt approved schemes
(within the meaning of Chapter I of Part XIV ICTA 1988) and there is
in force a contracting-out certificate (as defined in the Pension
Schemes Act 1993) in relation to the Telecom UK Group members in
respect of Racal's Schemes and in relation to Racal
Telecommunications Ltd in respect of the RS(C) Section and the
British Railways Superannuation Fund and nothing has been done or
omitted to be done which will or may result in Racal's Schemes
ceasing to be exempt approved schemes or in any contracting-out
certificate being cancelled, surrendered or varied.
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L.10 There are no actions, claims or suits (other than routine claims for
benefits) outstanding against the trustees of Racal's Schemes or
against the Telecom UK Group members in respect of any act, event or
omission or other matter arising out of or in connection with Racal's
Schemes in relation to the provision of any Benefit to or in respect
of the Employees and so far as the Sellers are aware, no such actions
claims or suits have been threatened.
L.11 So far as the Sellers are aware, no notice has been received by RTL
of any actions, claims or suits (other than routine claims for
benefits) outstanding, pending or threatened against RTL in respect
of the RS(C) Section (as defined in Part C of Schedule VII) or
against the Trustee of the Railways Pension Scheme in respect of any
act, event or omission or other matter arising out of or in
connection with the RS(C) Section in relation to the provision of any
Benefit to or in respect of the Employees.
L.12 So far as the Sellers are aware, the Disclosed Schemes have at all
times been operated in accordance with all applicable laws and
regulatory requirements (including without limitation the
requirements of Article 141 of the Treaty of Rome relating to equal
benefits and admission to membership but excluding any requirement to
equalise the guaranteed minimum pensions) and the Telecom UK Group
Members have complied with Article 141 of the Treaty of Rome as it
applies to the eligibility of an Employee to join, contributions made
to and the provision of Benefit.
M. Records
M.1 None of the records, systems, data or information of any Telecom
Group member is recorded, stored, maintained, operated or otherwise
wholly or partly dependent on or held or accessible by any means
which are not under the exclusive ownership and direct control of the
Company or covered by the Reorganisation Documents or Transitional
Services Agreement.
M.2 The Company's statutory books and accounting records which it is
required to maintain by law have been completed in all material
respects in accordance with the law.
N. Suppliers and customers
N.1 During the year ending on the date of this Agreement no supplier or
customer of the Telecom Group as a whole (who accounts for more than
5% of the expenditure of revenue) has:
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(a) stopped or given written notice of intention to stop trading
with the Telecom Group;
(b) substantially reduced or given written notice of intention
to substantially reduce trading with the Telecom Group; or
(c) changed or given written notice of intention to change
substantially the terms on which it trades with the Telecom
Group.
O. Environment
O.1 So far as the Sellers are aware the Company has not disposed of, kept
or stored in or under any of the Properties nor in water or the
ground or groundwater on or under the Properties any Hazardous
Substances in breach of Environmental Laws.
O.2 So far as the Sellers are aware the condition of any of the
Properties (based on their current use) is not such that any
investigation, treatment or remediation of Hazardous Substances are
or could be required under Environmental Law.
P. Year 2000
P.1 In relation to the year 2000 compliance program described in the
documents disclosed as document 7A in Section 11.7 and documents I
11.7A and I 11.7.1 to I 11.7.11 of the Data Room ("Y2K Program"), so
far as of the Sellers are aware:
(a) the Company has sufficient resources and skilled personnel
at its disposal in order to complete the Y2K Program in
accordance with its terms; and
(b) completion of the Y2K Program in accordance with its terms
will enable the business of the Company to continue
uninterrupted notwithstanding the century date change;
P.2 If the Y2K Program is fully implemented then the Company will not be
in breach of any statements regarding year 2000 compliance given to
any third party.
Q. Reorganisation
Q.1 There has been disclosed in the Data Room true and complete copies of
all the Reorganisation Documents and Railtrack Agreements.
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Q.2 There is no contract or arrangement which is other than on arm's
length terms outstanding between any member of the Telecom Group (on
the one hand) and any member of the Racal Group or any of its
associates (on the other hand).
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Part C
Name of Person Warranties
Xxxxxx Xxx All
Xxxx Xxxxxx All
Xxx Xxxxxxxx Section A
Xxxx Xxxxxxxx Sections C and D
Xxxxx Xxxxx Sections F and O and
Warranty E1
Xxxx Xxxxxxxxxx Sections F and O
Xxxxxxxx Xxxxx Section H and Warranties D3
and E2
Xxxxxx Xxxxxxxxxx Section H and Warranties D3,
D6 and D7
Xxx Xxxx Section I
Xxxxxxxx Xxxxxx Warranties J1, J2 and K4
Xxxxxxx Xxxxxxxx Warranties J3 and J4
Xxxxx Xxxxx Section K
Xxxxx Xxxxxxxx Section L
For the purposes of this Schedule the following definitions shall
apply:
"Environment" all or any of the following media
namely air, water or land
including without limitation such
media within buildings or other
natural man made structures above
or below ground, any living
organisms or systems;
"Environmental Laws" all or any international,
European, national or local, civil
or criminal law, common law,
statutes, statutory instruments,
regulation, directive, statutory
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guidance and regulatory codes of
practice, order, decree,
injunction or judgment which
relate to the Environment or
Environmental Matters and which is
in force or enacted (including
without limitation, the
Environment Xxx 0000 as if the
provisions of which were fully in
force and the first full set of
statutory guidance as is brought
into force thereunder) as at
Completion or which were in force
at an earlier date, are no longer
in force but under which the
Company still has obligations and
liabilities;
"Environmental Matters" (i) pollution or contamination
of the Environment;
(ii) the generation,
manufacture, processing,
handling, storage,
distribution, use,
treatment, removal,
transport, disposal,
release, spillage, deposit
or discharge of Hazardous
Substances;
(iii) the exposure of any worker
to Hazardous Substances;
or
(iv) the creation of any noise,
vibration, radiation,
common law or statutory
nuisance or other material
adverse impact on the
Environment;
"Hazardous Substances" any substance capable of causing
pollution or contamination of the
Environment including any waste.
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SCHEDULE VII
Pension Arrangements
PART A
1. Application of this Schedule
1.1 Part B of this Schedule shall apply to those of Racal's
Schemes which are the Racal Executive Pension Plan, the
Racal Executive Manager and Senior Manager Pension Scheme
and the Racal Staff Pension & Life Assurance Scheme (as
respectively defined in paragraph 2 below). Part B of this
Schedule comprises the detailed provisions agreed between
Racal and Global for the temporary continued participation
of the Telecom UK Group in Racal's Schemes, for the
establishment of Global's Scheme to take effect thereafter
and sets out the agreed basis for transfers in respect of
certain of the Telecom UK Group's employees' accrued rights
under Racal's Schemes to be made to Global's Scheme.
1.2 Part C of this Schedule shall apply to that one of Racal's
Schemes which is the RS(C) Section (Racal Services
(Communications) Limited having prior to Completion become
the Designated Employer thereunder in place of Racal
Telecommunications Limited) of the Railways Pension Scheme
(as respectively defined in paragraph 11 below). Racal
Telecommunications Limited will be withdrawn from the RS(C)
Section with effect from the Completion Date and will
thereupon establish a new Shared Cost Section of the
Railways Pension Scheme. Part C of this Schedule comprises
the provisions agreed between Racal and Global for the
apportionment or transfer of assets (on a Share of Fund
basis) from the RS(C) Section to The New Racal
Telecommunications Limited Section (as defined in Part C of
this Schedule).
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PART B
2. Definitions
In this Part B of this Schedule the definitions and rules of
interpretation set out or referred to in clause 1 shall apply and in
addition the following words and expressions shall unless the context
otherwise requires have the meanings set opposite them:
"Actuary's Letter" the letter of even date from
Racal's Actuary to Global's
Actuary a copy of which letter is
set out in Appendix 1 to this
Schedule;
"Actuarial Assumptions" the actuarial methods and
assumptions set out in the
Actuary's Letter;
"Final Transfer Amount" the Unadjusted Transfer Amount
relating to Transferring Members
adjusted in accordance with the
Actuary's Letter in respect of the
period from the Completion Date to
the Payment Date;
"Global's Actuary" Mr Xxxxxxx Xxxxx of Towers Xxxxxx
or such other actuary as Global
may for the time being appoint for
the purposes of this Part B of
this Schedule;
"Global's Scheme" the retirement benefits scheme or
schemes nominated, established or
to be established by or at the
instance of Global in accordance
with paragraph 4 of this Schedule;
"Interest" interest at an annual rate being 2
per cent above the base lending
rate from time to time of Barclays
Bank plc such interest to accrue
daily and be compounded monthly;
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"Interim Period" the period from (and including)
the Completion Date up to (and
excluding) the Partition Date;
"Partition Date" the earlier of:
(a) the date which is six
months after the
Completion Date or such
earlier or later date as
Racal and Global shall
agree in writing for this
purpose;
(b) the date of termination of
participation arising as a
result of Racal exercising
its powers under
paragraphs 3(c) or 3(i)
below;
(c) the date with effect from
which the Inland Revenue
shall require the Telecom
UK Group's participation
in Racal's Schemes to
cease; or
(d) the date notified by
Global to Racal in writing
as the date on which the
participation of the
Telecom UK Group in
Racal's Schemes is to
cease, such date not
falling less than one
month after such notice is
given;
"Payment Date" the date which is one month after
the earliest date on which all of
the following are and remain
satisfied:
(a) the calculation of the
Unadjusted Transfer Amount
is either agreed by
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Global's Actuary in
accordance with
paragraph 5 of this
Schedule or determined by
the independent actuary in
accordance with
paragraph 8 of this
Schedule;
(b) Global's Scheme is either
approved as an exempt
approved scheme (under
ICTA 1988, section 592) by
the Board of Inland
Revenue or permitted by
the Board of Inland
Revenue to receive payment
of transfer values from
Racal's Schemes
notwithstanding that
Global's Scheme is not an
exempt approved scheme;
(c) the trustees of Racal's
Schemes and the trustees
of Global's Scheme have
received the approval of
the Board of Inland
Revenue to the payment by
the trustees of Racal's
Schemes and the receipt by
the trustees of Global's
Scheme of the Final
Transfer Amount (which
approvals Racal and Global
shall use their respective
reasonable endeavours to
obtain as soon as
practicable after the
Partition Date);
(d) each member of the Telecom
UK Group holds or is named
in a contracting-out
certificate in respect of
Global's Scheme;
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(e) the trustees of Global's
Scheme have confirmed to
the trustees of Racal's
Schemes that they are able
and willing to receive the
Final Transfer Amount;
(f) the trustees of Racal's
Schemes have received the
original forms of request
or consent to transfer for
each Transferring Member
and a transfer agreement
executed (conditional only
on receipt of the payment
due under paragraph 6 of
this Schedule) by the
trustees of Global's
Scheme in the form annexed
to this Schedule;
(g) the Transferring Members
have been admitted to
Global's Scheme on the
terms referred to in
paragraph 4 of this
Schedule;
"Racal's Actuary" Xx Xxxxx Xxxxxx of Xxxxxxx X
Xxxxxx Limited or such other
actuary as Racal may for the time
being appoint for the purposes of
this Part B of this Schedule;
"Racal Executive Pension the retirement benefits scheme
Plan" known as the Racal Group Executive
Pension Plan which is currently
governed by a trust deed dated
9 November 1983 as amended;
"Racal Executive Manager the retirement benefits scheme
and Senior Manager Pension known as the Racal Group
Scheme" Executive Manager & Senior Manager
Pension Scheme which is currently
governed by a trust deed dated
29 May 1987 as amended;
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"Racal's Schemes" for the purpose of this Part B of
this Schedule each of the Racal
Executive Pension Plan, the Racal
Executive Manager and Senior
Manager Pension Scheme and the
Racal Staff Pension & Life
Assurance Scheme;
"Racal Staff Pension & Life the retirement benefits scheme
Assurance Scheme" known as the Racal Group Staff
Pension & Life Assurance Scheme
which is currently governed by a
trust deed dated 29 May 1987 as
amended including liabilities in
respect of the Racal Group
Retirement Benefits Scheme;
"Relevant Employees" those employees of the Telecom UK
Group who immediately before the
Completion Date are either active
members of Racal's Schemes or who
are eligible to become active
members of Racal's Schemes on or
after the Completion Date, and who
in either case remain employed by
the Telecom UK Group and in active
membership of Racal's Schemes on
the Completion Date or at any
relevant time during the Interim
Period;
"Service Credits" means in respect of each
Transferring Member the period of
pensionable service calculated and
verified in accordance with
paragraphs 5.1 and 5.2 of this
Schedule (or determined in
accordance with paragraph 8 of
this Schedule) by equating the
value of benefits in respect of
credited service in Global's
Scheme with the value of benefits
under Racal's Schemes in respect
of pensionable service to the
Partition Date this being
calculated in accordance with the
Actuarial Assumptions using the
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method specified in the Actuary's
Letter.
"Transferring Members" those of the Relevant Employees:
(i) who have not ceased to be
active members of Racal's
Schemes during the Interim
Period; and
(ii) who become members of
Global's Scheme with
effect on and from the
Partition Date pursuant to
the offer of membership
referred to in paragraph 4
below; and
(iii) who in accordance with the
invitation issued under
paragraph 4 of this
Schedule consent to or
request a payment or
transfer from Racal's
Schemes to Global's Scheme
in respect of the benefits
under Racal's Schemes for
and in respect of them and
who before the Payment
Date have not either
withdrawn his or her
consent or request or
ceased to be active
members of Global's
Scheme.
"Unadjusted Transfer Amount" such amount as shall be calculated
by Racal's Actuary and verified by
Global's Actuary in accordance
with paragraph 5 of this Schedule
(or in the absence of verification
by him determined in accordance
with paragraph 8 of this Schedule)
as is equal to the value
(calculated and adjusted in
accordance with the Actuarial
Assumptions) as at the Completion
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Date of the accrued benefits
(other than those referred to in
paragraph 7 of this Schedule)
prospectively and contingently
payable to and in respect of the
Transferring Members under Racal's
Schemes by reference to
pensionable service up to the
Completion Date and pensionable
earnings at that time (making
allowance in accordance with the
Actuarial Assumptions for
projected increases in final
pensionable earnings of the
Transferring Members from the
Completion Date to the assumed
date of retirement or earlier
death or withdrawal from service).
For the purpose of this definition
and wherever referred to in this
Part B of this Schedule
"pensionable earnings", "final
pensionable earnings" and
"pensionable service" and cognate
expressions shall have the
meanings respectively adopted by
that one of Racal's Schemes as is
relevant to the Relevant Employee
or Transferring Member concerned.
3. Interim Period
It is hereby agreed that:
(a) subject to the approval of the Board of Inland
Revenue (which approval Racal and Global hereby
undertake to use their respective reasonable
endeavours to obtain before or as soon as
practicable after the Completion Date) Racal will
use its reasonable endeavours to procure that each
member of the Telecom UK Group is permitted to
continue to participate in Racal's Schemes in
respect of Relevant Employees during the Interim
Period on the terms set out in this Part B of this
-87-
Schedule. Global agrees that such participation
shall cease on the day before the Partition Date;
(b) Racal and Global shall use their respective
reasonable endeavours to procure that each member of
the Telecom UK Group shall continue to be covered by
the holding company contracting-out certificates in
relation to Racal's Schemes, that the Relevant
Employees remain in contracted-out employment
(within the meaning of the Pension Schemes Act 1993)
by reference to Racal's Schemes during the Interim
Period and that each member of the Telecom UK Group
is removed from the holding company contracting-out
certificates with effect from the Partition Date.
If any member of the Telecom UK Group is required to
apply for the issue to it of contracting-out
certificates in relation to Racal's Schemes, Global
shall procure that the member of the Telecom UK
Group shall issue the necessary notices to the
Relevant Employees and shall make the necessary
elections to the National Insurance Contributions
Office;
(c) Global shall procure that each member of the Telecom
UK Group discharges all of its obligations as a
participating employer under Racal's Schemes and
shall during the Interim Period and by not later
than the second working day of the month following
that to which the payment relates on a calendar
monthly basis pay (or procure payment by each member
of the Telecom UK Group) to the trustees of Racal's
Schemes;
(i) member contributions (if any) of the
Relevant Employees under the rules of
Racal's Schemes made from time to time
(including additional voluntary
contributions);
(ii) employer contributions in respect of each
Relevant Employee from time to time at the
following rates of pensionable earnings:
(aa) 29.6% in respect of Relevant
Employees who are members of the
Racal Executive Pension Plan;
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(bb) 14.3% in respect of the Relevant
Employees who are members of the
Racal Executive Manager and Senior
Manager Pension Scheme; and
(cc) 10.1% in respect of the Relevant
Employees who are members of the
Racal Staff Pension & Life
Assurance Scheme;
or, following the receipt of one month's prior
notice of a change in the rate of employer
contributions, such other rates as the trustees of
Racal's Schemes from time to time require on advice
from Racal's Actuary acting as the actuary to
Racal's Schemes and certified by him as being
determined on the relevant basis applicable
generally to Racal's Schemes where such variation is
due either to acts or omissions of Global or the
Telecom UK Group during the Interim Period other
than any acts or omissions which give rise to
payments by Global or the Telecom UK Group to the
trustees of Racal's Schemes under paragraphs 3(d) to
(h) inclusive or where such variation is due other
than to acts or omissions of Racal in relation to
persons who are not Relevant Employees; and
(iii) on the first payment of contributions under
paragraph 3(c)(ii), an additional amount
equal to (Pound Sterling)100 multiplied by
the number of Relevant Employees
immediately before the Completion Date.
If any member of the Telecom UK Group or Global fails to pay
any of the contributions set out in this paragraph 3(c) by
the due date, Global shall in addition pay (or procure
payment by the Telecom UK Group) to the trustees of the
relevant Racal's Schemes Interest on the unpaid
contributions from the latest due date to the actual date of
payment together with all costs, fines, levies, liabilities
or penalties incurred by the trustees of Racal's Schemes by
reason of such late payment and if any contribution remains
unpaid for more than five days Racal shall have the right to
terminate without notice the participation in Racal's
Schemes of any or all of the members of the Telecom UK Group
with effect from the last day of the period in respect of
which contributions have been received by Racal's Schemes;
-89-
(d) Racal shall procure that there shall, during the
Interim Period, be no material amendment or
termination of Racal's Schemes in respect of the
Relevant Employees without the prior agreement of
Global (which agreement will not unreasonably be
withheld or delayed) provided that nothing contained
in this paragraph 3(d) shall prevent such
alterations and modifications as Racal may from time
to time require to be made to Racal's Schemes to
comply with legislation or as Racal's Schemes'
actuaries advise to be necessary or prudent or in so
far as the same do not materially affect the
obligations, liabilities, rights and interests of
the Telecom UK Group or the Relevant Employees
thereunder;
(e) Global shall procure that each member of the Telecom
UK Group:
(i) shall not exercise any power or discretion
conferred on it under any of Racal's
Schemes (except either a power to permit
voluntary early retirement on cost neutral
terms as calculated by Racal's Schemes'
actuaries or to permit early retirement in
accordance with paragraph 3(g) of this Part
B of this Schedule) without in any such
case the prior written approval of Racal
(which approval may be given on such terms
as to payment by the relevant member of the
Telecom UK Group of additional
contributions under Racal's Schemes and
otherwise as Racal may determine); and
(ii) shall irrevocably appoint Racal as its
representative for the purpose of every
provision of the Pensions Xxx 0000 which
either requires the employers under Racal's
Schemes to be consulted by the trustees or
enables another employer to represent it
for any other purpose; and
(iii) shall not before the Partition Date suffer
any event which is or would lead to the
happening in relation to any member of the
Telecom UK Group of a relevant insolvency
-90-
event (as defined for the purpose of the
Pensions Xxx 0000, section 75); and
(iv) in the case of those of the Relevant
Employees who are members of the Racal
Staff Pension & Life Assurance Scheme,
shall not before the Partition Date
increase the rate of or otherwise pay any
remuneration to any Relevant Employee which
either alone or in aggregate would have the
effect of increasing the aggregate of those
Relevant Employees' pensionable earnings or
final pensionable earnings under the Racal
Staff Pension & Life Assurance Scheme
during the Interim Period by more than the
rate specified for those Relevant Employees
in the Actuarial Assumptions; and
(v) in the case of those of the Relevant
Employees who are members of the Racal
Executive Manager and Senior Manager
Pension Scheme or the Racal Executive
Pension Plan, shall not before the
Partition Date increase the rate of or
otherwise pay any remuneration to any
Relevant Employee which either alone or in
aggregate would have the effect of
increasing the Relevant Employee's
pensionable earnings or final pensionable
earnings under Racal's Schemes during the
Interim Period by more than the rate
specified for that Relevant Employee in the
Actuarial Assumptions; and
(vi) shall not do or omit to do during the
Interim Period any act or thing which would
prejudice the status of Racal's Schemes as
exempt approved schemes or contracted-out
schemes.
(f) if notwithstanding paragraph 3(e)(i), (iv) or (v)
the liability of Racal's Schemes in relation to any
Relevant Employee is increased by the exercise by
any member of the Telecom UK Group of any discretion
exercisable by them or if the pensionable earnings
or final pensionable earnings of Relevant Employees
is increased by more than the amount permitted under
-91-
paragraph 3(c)(iv) or (v), Global shall (or shall
procure that the Telecom UK Group shall) immediately
pay to the trustees of Racal's Schemes such amount
calculated by Racal's Actuary and certified by him
as being determined on the basis of the Actuarial
Assumptions as is equal to the increase in the value
of the liabilities of Racal's Schemes together with
Interest from the date being five days after
delivery to Global of Racal's Actuary's calculation
and certificate;
(g) if any Relevant Employee retires from service with
any member of the Telecom UK Group and for any
reason becomes entitled to an immediate early
retirement pension from Racal's Schemes Global shall
(or shall procure that the Telecom UK Group shall)
immediately pay to Racal's Schemes:
(1) such amount as Racal's Actuary shall
calculate and certify as being (on the
basis of the Actuarial Assumptions) the
additional cost of providing the immediate
early retirement benefits payable to and in
respect of the Relevant Employee over and
above:
(aa) in the case of early retirement on
ill health or redundancy grounds
that part of the Final Transfer
Amount that would have been paid by
the Racal's Schemes to Global's
Scheme if the Relevant Employee had
become a Transferring Member but
calculated on the basis that the
Relevant Employee's retirement date
is the Partition Date and Payment
Date;
(bb) in all other cases the cost of
providing benefits payable upon
voluntary early retirement (on cost
neutral terms as advised by Racal's
Scheme's actuary); and
(ii) the capital value as calculated by Racal's
Actuary and certified by him as being
determined on the basis of the Actuarial
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Assumptions of the cost to Racal's Schemes
of providing such continued life cover (if
any) as may fall to be provided in respect
of such Relevant Employee under the
provisions of Racal's Schemes;
together with Interest from the date being five days after
delivery to Global of Racal's Actuary's calculation and
certificate;
(h) if any of Global or the Telecom UK Group breaches
any of the provisions of this Part B of this
Schedule and such breach results in the creation of,
or increase in, any liability on the part of any of
Racal's Schemes the trustees or the directors of the
trustees of Racal's Schemes, Global shall (save
where a payment or contribution is due in respect of
that breach under another paragraph of this Part B
of this Schedule) immediately pay to the trustees of
Racal's Scheme an amount equal in value to any such
liability (where appropriate calculated by Racal's
Actuary and certified by him as being determined on
the basis of the Actuarial Assumptions) together
with Interest from the date being five days after
delivery to Global of Racal's Actuary's calculation
and certificate;
(i) Global shall (or shall procure that the Telecom UK
Group shall) in addition to all other sums due from
it and the Telecom UK Group under this Schedule pay
to the trustees of Racal's Schemes for all actuarial
work by or on behalf of the trustees of Racal's
Schemes carried out by third parties pursuant to a
request to the trustees of Racal's Schemes by Global
or the Telecom UK Group in respect of any Relevant
Employee (such work to include that related to early
retirement cases but not voluntary early retirement
on cost neutral terms) on and after the Completion
Date. The trustees of Racal's Schemes shall submit
an invoice to Global or the Telecom UK Group and
Global shall settle (or procure settlement of) such
invoice within five working days of receiving the
invoice. The charges for the work shall be
calculated on a time/cost basis using rates which
are calculated on the same basis as applies to other
like work for Racal's Schemes. If Global or the
Telecom UK Group fail to pay the invoice within
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five days of its receipt, Global shall in addition
pay (or procure the payment of) Interest on the
amount of the invoice to the trustees of Racal's
Schemes from the due date to the date of payment and
Racal shall have the right to terminate, without
notice, any member of the Telecom UK Group's
participation in Racal's Schemes with effect from
the last day of the period for which contributions
have been received;
(j) Racal and Global shall give all such consents and
execute all such documents in their power as may be
required to give effect to this paragraph 3 and each
of them shall provide the other with all such
information and data as shall reasonably be required
for the purposes of this paragraph 3 and for the
purpose of the calculation of the Unadjusted
Transfer Amount and the Final Transfer Amount;
(k) If any member of the Telecom UK Group or Global is
required to make a payment to the trustees of
Racal's Schemes in excess of the payment required
under the relevant provision of this Part B of this
Schedule and Global has not consented in writing to
the payment, Racal shall (subject to Global and the
Telecom UK Group not being in breach of their
obligations under this Part B of this Schedule) on
Global's written demand reimburse Global or the
Telecom UK Group for the additional payment actually
paid by any member of the Telecom UK Group or Global
in excess of the payment due under the relevant
provision of this Part B of this Schedule. If Racal
fails to pay any of the amounts set out in this
paragraph 3(k) within ten working days of a written
demand made by Global (such demand to be made after
payment by Global or the Telecom UK Group of the
payment in question), Racal shall in addition pay
Global Interest on the unpaid amount from the date
of the sixth business day after the demand to the
actual date of payment. Global holds the benefit of
this paragraph 3(k) for itself and as trustee for
each member of the Telecom UK Group.
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4. Global's Scheme
4.1 Global hereby undertakes that with effect from a date not
later than the Partition Date it will have nominated or
established one or more retirement benefits schemes:
(a) in which each member of the Telecom UK Group
participates;
(b) each of which is approved or capable of approval
under Chapter I of Part XIV of the ICTA 1988;
(c) each of which is a contracted-out scheme on a salary
related basis (as defined in the Pension Schemes Act
1993);
(d) each of which is a final salary scheme; and
(e) to which the trustees of each of Racal's Schemes can
make a transfer of cash and/or assets without
prejudicing the approval of Racal's Schemes as
exempt approved schemes.
Global shall as soon as practicable and not later than two months
before the Partition Date provide to Racal such information in
relation to Global's Scheme as Racal shall reasonably require for the
purposes of this Schedule.
4.2 Global shall not later than two months before the Partition
Date submit to Racal drafts of notices to be issued to the
Relevant Employees who are members of Racal's Schemes on the
Partition Date. Such notices shall offer membership of
Global's Scheme with effect from the Partition Date and
shall require such offer of membership to be accepted within
30 days of the date of the offer. The offer of membership
shall be on terms which meet the requirements of paragraph
4.4 and shall include a request or an invitation to consent
to the transfer of benefits from Racal's Schemes to Global's
Scheme and an option form and an explanatory statement (to
be issued by the Telecom UK Group on behalf of Racal's
Schemes) of the options available to them in relation to
their rights under Racal's Schemes and shall be in such form
and shall include such discharges as the trustees of Racal's
Schemes may reasonably require and shall contain a statement
that the consent or request to transfer shall be given or
made by a date not later than 45 days after the date of the
notice.
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If Global's Scheme provides benefits which are (in the opinion of
Racal's Actuary) other than materially the same as those provided
under Racal's Schemes such that the Service Credits will not be year
for year the issue of the request or invitation to consent to
transfer referred to in this paragraph may be deferred pending
calculation and verification of the Service Credits in accordance
with paragraphs 5.1 and 5.2 of this Schedule (or determined in
accordance with paragraph 8 of this Schedule). The request or
invitation to consent to transfer shall thereafter be issued to each
Relevant Employee and shall include reference to the Service Credit
to be granted under Global's Scheme if the Relevant Employee becomes
a Transferring Member and a statement that the consent or request to
transfer shall be given or made by a date not later than 45 days
after the date of the notice.
4.3 As soon as practicable after the notices have been agreed
Global shall procure that such notices are issued to each of
the Relevant Employees at the time of issue and Global shall
forthwith confirm in writing to Racal that such notices have
been issued and shall list the Relevant Employees to whom
they are issued.
4.4 Global shall procure (subject to receipt by the trustees of
Global's Scheme of the Final Transfer Amount and in default
thereof any amount due from Racal to Global under paragraph
6(b)) that Global's Scheme shall provide benefits for and in
respect of each Transferring Member in respect of his
pensionable service under Racal's Scheme in the form of
Service Credits such that the benefits under Global's Scheme
shall in Global's Actuary's opinion (and agreed by Racal's
Actuary) be no less favourable overall than the benefits
under Racal's Schemes in respect of each Transferring
Member's pensionable service thereunder up to the Partition
Date on the terms of Racal's Schemes applicable to the
Transferring Member in force immediately prior to the
Partition Date and calculated on the basis of the Actuarial
Assumptions.
4.5 Global shall procure that at the Payment Date Global's
Actuary shall provide to Racal a certificate confirming that
to the best of his knowledge and belief at the Payment Date,
Global's Scheme has no liabilities or, if it has
liabilities, that the liabilities are fully funded for on
the basis prescribed for the purposes of s56 of the Pensions
Xxx 0000.
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5. Determination of Transfer Amount
5.1 On or immediately after the Partition Date
(a) Racal shall procure that Racal's Actuary will
calculate the Unadjusted Transfer Amount and (within
90 days after the later of the Partition Date or the
date on which sufficient data for the purpose of
calculating the Unadjusted Transfer Amount has been
provided by Global to Racal's Actuary) submit his
findings together with such data and other
information as is, in the reasonable opinion of
Racal's Actuary, necessary to verify the calculation
to Global's Actuary for verification by him; and
(b) Global shall procure that Global's Actuary shall
within 30 days of the submission to him of Racal's
Actuary's calculation or, if later, within 90 days
of the submission to him of the data necessary to
carry out verification, verify that the calculation
of the Unadjusted Transfer Amount is in accordance
with this Part B of this Schedule; and
(c) Global shall procure that Global's Actuary shall
calculate the Service Credits and within 30 days of
the submission to him of the calculation of the
Unadjusted Transfer Amount submit the Service
Credits as so calculated with all material details
of the applicable benefits under Global's Scheme to
Racal's Actuary for verification by him.
5.2 If Global's Actuary is able (within 30 days of the
submission to him of the findings of Racal's Actuary or
within 60 days, if Global's Actuary has within that 30 days
raised any objection to Racal's Actuary's calculation) to
verify that the calculation of the Unadjusted Transfer
Amount is mathematically correct and in accordance with this
Part B of this Schedule, Global's Actuary shall immediately
notify Racal's Actuary in writing to that effect and the
Unadjusted Transfer Amount as so verified shall be the
Unadjusted Transfer Amount. If Global's Actuary is unable
to verify Racal's Actuary's calculations the matter shall be
referred to an independent actuary pursuant to paragraph 8
below.
5.3 If Racal's Actuary is able (within 30 days of the submission
to him of the findings of Global's Actuary or within 60
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days, if Racal's Actuary has within that 30 days raised any
objection to Global's Actuary's calculation) to verify that
the calculation of the Service Credits is mathematically
correct and in accordance with this Part B of this Schedule,
Racal's Actuary shall immediately notify Global's Actuary in
writing to that effect and the Service Credits as so
verified shall be the Service Credits. If Racal's Actuary
is unable to verify Global's Actuary's calculations the
matter shall be referred to an independent actuary pursuant
to paragraph 8 below.
5.4 If the issue to Relevant Employees of the request or
invitation to consent to transfer is deferred in accordance
with paragraph 4.2 of this Schedule, the calculations in
paragraphs 5.1 and 5.2 shall be done in respect of each
Relevant Employee on the assumption that he or she will
become a Transferring Member but for the avoidance of doubt
the Unadjusted Transfer Amount shall be that part only of
the amount calculated and verified in accordance with
paragraphs 5.1 and 5.2 (or determined in accordance with
paragraph 8) of this Schedule as relates to those Relevant
Employees who become Transferring Members.
6. Payment of Transfer Amount
Subject to Global and to each member of the Telecom UK Group having
performed each of their obligations under this Part B of this
Schedule (provided that neither Global nor any member of the Telecom
UK Group shall be regarded as not having performed an obligation
where any failure to perform an obligation has prior to the Payment
Date been remedied to Racal's satisfaction) and to all of the
conditions in the definition of Payment Date having been and
remaining fulfilled:
(a) Racal shall use its reasonable endeavours to procure that on
the Payment Date the trustees of Racal's Schemes make a
payment to the trustees of Global's Scheme of an amount
equal to the Final Transfer Amount. The Final Transfer
Amount shall be paid by way of a transfer of such assets of
Racal's Schemes (excluding property) as Racal, Global and
the trustees of Racal's Schemes and the trustees of Global's
Scheme shall agree having a mid market value on the last
business day before the Payment Date equal to the Final
Transfer Amount. In the event of failure by the date which
is seven days before the Payment Date to agree on the assets
to be transferred, the Final Transfer Amount shall be
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satisfied by Racal's Schemes paying an amount in cash equal
to the Final Transfer Amount and that amount shall be the
Final Transfer Amount in the case of such a transfer in
cash;
(b) If by the date falling seven business days after the Payment
Date the trustees of Racal's Schemes have paid to the
trustees of Global's Scheme an amount which is either nil or
is less than the Final Transfer Amount (such excess of the
Final Transfer Amount over the amount paid being the
"Shortfall"), Racal shall forthwith on Global's written
demand pay in cash to Global an amount equal to 69% of the
Shortfall and Global shall immediately pay an amount equal
to the Shortfall to the trustees of Global's Scheme together
with Interest on the Shortfall from the Payment Date to the
actual date of payment of the Shortfall.
7. Additional voluntary contributions
7.1 Any additional voluntary contributions made for the
acquisition of money purchase benefits by the Transferring
Members to Racal's Schemes together with the accrued
investment return thereon shall be disregarded for the
purposes of determining the Unadjusted Transfer Amount or
the Final Transfer Amount.
7.2 Racal shall use its reasonable endeavours to procure that on
the Payment Date the trustees of Racal's Schemes shall
procure the payment or transfer to the trustees of Global's
Scheme in addition to the Final Transfer Amount any sums or
policies as at the Payment Date which under Racal's Schemes
relate to the additional voluntary contributions referred to
in paragraph 7.1 and, that the trustees of Racal's Schemes
notify the trustees of Global's Scheme of the respective
entitlement of each Transferring Member in relation thereto.
7.3 Global shall procure that each Transferring Member in
respect of whom a transfer is made under this paragraph 7
shall be entitled under Global's Scheme to money purchase
benefits equivalent on the date of transfer to the amount
transferred.
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8. Disputes
Any dispute between Racal's Actuary and Global's Actuary concerning
the calculation of the Unadjusted Transfer Amount, the Final Transfer
Amount or the Service Credits in accordance with this Part B of this
Schedule and/or the Actuary's Letter shall, in the absence of
agreement between them, be referred at the option of Racal or Global
to an independent actuary agreed by Racal and Global or, failing such
agreement within 14 days of one party calling upon the other in
writing so to agree, appointed by the President for the time being of
the Institute of Actuaries. Any such independent actuary shall reach
his decision on the basis of the provisions of this Part B of this
Schedule and the Actuary's Letter and shall act as an expert and not
as an arbitrator and his decision shall (in the absence of manifest
error) be final and binding. The charges and expenses of the
independent actuary in respect of any such reference shall be borne
as the independent actuary directs.
9. Assistance by Global
Global undertakes that during and after the Interim Period no action
will be taken by it or any person controlled by Global either
directly or indirectly which would result in Racal's Schemes being
required to pay to Global's Scheme amounts larger than the aggregate
of the Final Transfer Amount and any amounts due under paragraph 7 of
this Schedule.
10. Global's protection
10.1 Immediately following the Partition Date, Racal shall instruct
Racal's Schemes' Actuary to state in writing whether, in his opinion,
any of Racal's Schemes is likely at or immediately before the
Partition Date to have been less than 100% funded on the basis
prescribed for the purposes of Section 56 of the Pensions Xxx 0000.
(a) If Racal's Schemes' Actuary is of the opinion that that
which is or are relevant of Racal's Schemes is or are 100%
or more than 100% funded on that basis, Racal shall procure
that the trustees of Racal's Schemes notify Global in
writing that on the basis of actuarial advice they are of
the view that no debt is treated as due under s75 of the
Pensions Xxx 0000 in respect of the cessation of
participation of the Telecom UK Group in Racal's Schemes at
the Partition Date;
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(b) If Racal's Schemes' Actuary is unable to give an opinion as
described in (a) above Racal shall instruct him to produce
and copy to Global an actuarial valuation of those Racal's
Schemes as at or immediately before the Partition Date (the
"First Valuation") on the basis prescribed for the purposes
of Section 56 of the Pensions Xxx 0000. The First Valuation
shall be at the expense of the trustees of Racal's Schemes.
10.2 If the First Valuation reports a deficit in the assets of Racal's
Schemes giving rise to a debt due from the Telecom UK Group to the
trustees of Racal's Schemes under Section 75 of the Pensions Xxx 0000
at or immediately before the Partition Date, Global shall pay or
procure that the Telecom UK Group shall pay that debt to the trustees
of Racal's Schemes on their demand in accordance with the relevant
provisions of the Pensions Xxx 0000 and regulations made thereunder.
10.3 Forthwith upon payment by Global or the Telecom UK Group of the debt
referred to in paragraph 10.2 Racal shall pay to Global by way of
adjustment of the Consideration payable by Global under this
Agreement an amount equal to 69% of A minus B, where;
A is the amount of the debt actually paid by Global or the
Telecom UK Group to Racal's Schemes; and
B is the amount, if any, quantified in his reasonable opinion
by Racal's Actuary and agreed by Global's Actuary as
represents the part of the increase, if any, in the debt
actually paid over that which would have been paid by the
Telecom UK Group if it had ceased to participate in Racal's
Schemes on the Completion Date as is both attributable to
the Relevant Employees during the Interim Period and to any
change after the Completion Date in:
(i) the basis prescribed for the purposes of s 56 of the
Pensions Xxx 0000; or
(ii) market conditions.
PART C
11. Definitions
In this Part C of this Schedule the definitions and rules of
interpretation set out or referred to in clause 1 shall apply and in
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addition the following words and expressions shall unless the context
otherwise requires have the meanings set opposite them:
"Actuarial Assumptions" the actuarial methods and assumptions
adopted for the purpose of the actuarial
valuation as at 31 December 1998 of the
Railways Pension Scheme Shared Cost
Section;
"RS(C) Section" the Racal Telecommunications Shared Cost
Section of the Railways Pension Scheme
under which Racal Services (Communications)
Limited is the Designated Employer;
"The New Racal the Shared Cost Section of the Railways
Telecommunications Pension Scheme to be established with
Limited Section" effect from the Completion Date by Racal
Telecommunications Limited;
"Railways Pension the retirement benefits scheme known as the
Scheme" Railways Pension Scheme which is currently
governed by a deed of amendment and
consolidation dated 14 November 1994 as
amended;
"Racal's Actuary" Xx Xxxxx Xxxxxx of Xxxxxxx X Xxxxxx Limited
or such other actuary as Racal may for the
time being appoint for the purposes of this
Part C of this Schedule;
"Relevant Employees" those persons who are either
(i) employees of Racal
Telecommunications Limited who are
active members of the RS(C) Section
immediately before the Completion
Date; or
(ii) employees of a member of the
Telecom UK Group immediately before
the Completion Date who have a
right to a deferred pension under
the RS(C) Section;
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"Trustee" Railways Pension Trust Company Limited
being the trustee of the Railways Pension
Scheme.
12. The New Racal Telecommunications Limited Section
12.1 Global hereby acknowledges that with effect from the
Completion Date Racal Telecommunications Limited will
establish a new Shared Cost Section of the Railways Pension
Scheme.
12.2 Global shall as soon as practicable and by not later than
the date which is two months following the Completion Date,
submit to Racal and to the Trustee drafts of notices to be
issued to the Relevant Employees. Such notices shall offer
membership of The New Racal Telecommunications Limited
Section with effect from the Completion Date and shall be on
terms which meet the requirements of the Trustee and Racal.
The notices shall, if any consent to transfer is required by
the Trustee, include a request or an invitation to consent
to the transfer of benefits from the RS(C) Section to The
New Racal Telecommunications Limited Section and an option
form and an explanatory statement (to be issued by Racal
Telecommunications Limited on behalf of the Trustee) of the
options available to them in relation to their rights under
the RS(C) Section and shall be in such form and shall
include such discharges as the Trustee may reasonably
require. The notice shall in any event disclose the effect
and duration of those provisions of the RS(C) Section which
require or permit Share of Fund transfers (as described in
paragraph 13 of this Schedule). Racal and Global shall use
their reasonable endeavours to procure that the request or
invitation to consent to transfer shall be made or given by
a date to be agreed with the Trustee as soon as practicable
after the Completion Date.
12.3 Global shall (or shall procure that Racal Telecommunications
Limited shall) immediately pay to the Trustee for the
account of Racal Services (Communications) Limited or the
RS(C) Section such sums due in respect of any fees, costs,
expenses, liabilities or other charges (where appropriate,
calculated by the Trustees' actuary or its representatives
on the basis of the Actuarial Assumptions) which are
chargeable or recoverable from Racal Services
(Communications) Limited or the RS(C) Section which relate
to the Relevant Employees and any period after the
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Completion Date or in connection with the Trustee's
determination of the apportionment or transfer from the
RS(C) Section to The New Racal Telecommunications Limited
Section. If Global or Racal Telecommunications Limited
fails to pay any amount within five days of Racal's
direction to pay that amount, Global shall in addition pay
(or procure payment of) Interest on the amount due from the
due date to the date of payment.
12.4 Global undertakes that after the Completion Date no action
will be taken by it or any person controlled by Global
either directly or indirectly which would result in:
(a) the apportionment to The New Racal Telecommunications
Limited Section exceeding that referred to in this
Part C of this Schedule; or
(b) any person claiming to be entitled to membership or
continued membership of the RS(C) Section on or after
the Completion Date.
13. Determination and payment of transfers between the RS(C) Section
and The New Racal Telecommunications Limited Section
Racal and Global shall use all reasonable endeavours to procure that
as soon as practicable after the Completion Date the Trustee shall in
respect of each Relevant Employee who consents to or requests a
transfer from the RS(C) Section to The New Racal Telecommunications
Limited Section transfer or apportion assets from the RS(C) Section
to The New Racal Telecommunications Limited Section on a Share of
Fund basis (as defined in the Railways Pension Scheme). Racal shall
procure that Racal Services (Communications) Limited shall, during
such period after the Completion Date as Racal determines to be
reasonable, give any consent needed by the Trustee in order to make
Share of Fund transfers in respect of any Relevant Employee not
entitled thereto (otherwise than by virtue of Racal Services
(Communications) Limited's consent).
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APPENDIX 1
Actuary's Letter
(All references to Ranger are to Racal and all references to Ghost are to
Global)
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10 October 1999
Direct tel 0000-000 0000
Direct fax 0000-000 0000
PROJECT GHOST
ACTUARY'S LETTER (for DB Transfer)
Dear Sirs
Seller's Schemes
This is the Actuary's Letter as defined in Part B of Schedule VII to the Sale
Agreement between Ranger and Ghost. Terms defined in Part B of Schedule VII
have the same meanings in this letter.
The Unadjusted Transfer Amount at the Completion Date will be based on rates
of earnings as at the Completion Date. These figures will include the annual
review as at 1st July 1999 and the first projected increase in these earnings
is therefore assumed to take place on 1st July 2000. The Unadjusted Transfer
Amount at the Completion Date will be calculated as the market adjusted value
of the past service reserve as follows:
k%
past service reserve x -----
NDY%
where NDY% is the percentage net dividend yield on the FT-SE All Share Index
at the close of business on the Completion Date and k% has the following
values:
k%
Ranger Group Staff Pension & Life Assurance Scheme ("Ranger 2.480
Staff Scheme")
Ranger Group Executive Manager & Senior Manager Pension Scheme 2.489
("Ranger EM & SM Scheme")
Ranger Group Executive Pension Plan ("Ranger EPP") 2.502
The past service reserve at the Completion Date of the benefits prospectively
and contingently payable to and in respect of each Transferring Member will
be calculated as the present value of benefits accrued at the Completion Date
(based on projected final pensionable earnings) using the actuarial
assumptions set out below. The benefits valued will be the pensions and
dependant's benefits payable on retirement, death or withdrawal, including
the 6%/12% reserve to cover early retirements. Provision will be made for
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pension benefits payable on death in service only to the extent that they are
calculated by reference to pensionable service actually completed or credited
prior to the Completion Date proportioned to total pensionable service to
normal retirement age. No provision will be included in respect of lump sum
benefits prospectively payable on death in service.
The Final Transfer Amount at Payment Date will be the adjusted value of the
following:
A + B
Item A is the Unadjusted Transfer Amount, calculated as described above,
adjusted for Fund Return (as described below) for the period between
Completion Date and Payment Date.
Item B is the joint contributions received after the Completion Date in
respect of Transferring Members at rates (a) and (b) below (or such other
rates as shall be required under paragraph 3(c) of the Schedule) and any
amounts received under paragraph 3(f) in respect of Transferring Members less
deductions for (c) death benefits and (d) expenses. These deductions will be
calculated as a percentage of Pensionable Earnings of the Transferring
Members and will be adjusted for Fund Return between the dates the
contributions are paid and Payment Date.
Ranger Staff Ranger EM & SM Ranger EPP
Scheme
% % %
(a) Employer 10.1 14.3 29.6
Contributions
(b) Employees 3.5/5 5 5
Contributions
(c) Death Benefits 0.9 1 1.5
(d) Expenses 0.7 0.7 0.8
Fund Return will be:
(i) for complete quarters (which commence 1 January, 1 April, 1 July and
1 October), the return achieved by the main portfolio manager for
each of the Ranger Schemes (as set out below) on the assets they
manage within the relevant Ranger Scheme as calculated and published
by Combined Actuarial Performance Services Limited ("CAPS").
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Ranger Scheme Main Portfolio Manager
Ranger Staff Scheme Mercury Asset Management Limited
Ranger EM & SM Scheme Deutsche Asset Management Xxxxxx
Xxxxxxxx
Ranger EPP Mercury Asset Management Limited
(ii) in respect of the periods (a) from Completion Date to the next
quarter commencement day (as detailed in (i) above) and (b) from (and
including) the next quarter commencement day following the end of the
final complete quarter between Completion Date and Payment Date and
ending 1 week prior to Payment Date, the change in the FTSE All Share
Index (Total Return); and
(iii) in respect of the one week period ended on Payment Date, Interest.
If Ghost or any member of the Telecom UK Group establishes identical schemes,
Service Credits will be calculated on a "year for year" basis. If the
benefits are different, the Service Credits will be calculated such that the
benefits granted are actuarially equivalent in respect of each Transferring
Members, using the assumptions specified in this letter, to the value of the
benefits accrued in the relevant Ranger Scheme to Partition Date based on
pensionable service to, and pensionable earnings at that date.
The assumptions to be used in calculating the past service reserve are as
follows:
Interest : 7.5% p.a.
Salary Growth : 5.5% p.a. (Ranger Staff Scheme,
Ranger EM & SM Scheme)
6.5% p.a. (Ranger EPP)
Earnings Cap : 3.5% p.a.
Pension Increases : As guaranteed. Limited Price
Indexation (LPI) valued as 3.2%
p.a. Greater of LPI and 4% p.a.
valued as 4.1% p.a.
Revaluation in deferment on GMPs : Fixed rate revaluation as per
statutory specifications.
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Leaving Service Revaluation on : 3.5% p.a.
benefits in excess of GMPs
Commutation : All members' exercise their
retirement option to cash lump sums
as per the scheme rules.
Mortality
Pre-retirement : Males A67/70 Ult - 3 years, females
FA75/78 Ult - 3 years
Post-retirement : Males PMA80 (C=1995), females PFA80
(C=1995)
Marital Status : At normal retirement age 90% of
males are married, 80% of females
are married.
Male members are assumed to have
wives aged 3 years younger.
Female members are assumed to have
husbands aged 2 years older.
Withdrawals (not applicable to : Independent age related rates as
Ranger EPP members where nil per the attached Table.
withdrawal is assumed)
Retirements : All retirements are assumed to take
place at normal retirement age.
Redundancy Loading : 6% (Ranger EM & SM Scheme, Ranger
EPP) or 12% (Ranger Staff Scheme)
of the liability attributable to
those members expected (on the
basis of these decrements) to
retire from active service at
normal retirement age.
Yours faithfully
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx MA FIA ASA
Principal Account Director
X X Xxxxxx
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The Ranger Staff Scheme
The Ranger Group EM & SM Scheme
Withdrawal Decrements
Age Males Females
% %
16 18.8 24.4
20 15 19.5
25 12.8 16.6
30 10.5 13.7
35 9 11.7
40 8.3 10.7
45 6.8 8.8
50 5.3 6.8
55 3 3.9
59 - -
There are no withdrawals assumed for the Ranger EPP.
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ANNEXURE
Agreed Form of Transfer Agreement
Schedule VII
THIS TRANSFER AGREEMENT is made the day of 2000
BETWEEN
(1) Racal STAFF TRUSTEE LIMITED (registered number 1989848) whose
registered office is at Xxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx XX00 0XX
(the "Transferring Trustee")
(2) [Global'S SCHEME TRUSTEES LIMITED] (registered number [ ])
whose registered office is at [ ]
(the "Receiving Trustee").
RECITALS
(A) Agreement
This Transfer Agreement is made following an Agreement (the
"Agreement") dated [ ] 1999 made between (1)
Racal Electronics Plc ("Racal") and (2) [Global] ("Global") under
which Racal agreed to transfer certain of its then subsidiaries to
Global.
(B) The Racal Group Staff Pension & Life Assurance Scheme
The Transferring Trustee is the present trustee of the Racal Group
Staff Pension & Life Assurance Scheme (the "Racal Scheme") currently
governed by the provisions of a deed dated 29 May 1987 as amended
(the "Transferring Trust Deed").
(C) The [Global] Pension & Life Assurance Scheme
The Receiving Trustee is the present trustee of the [Global] Pension
& Life Assurance Scheme (the "Receiving Scheme") which is currently
governed by the provisions of a deed dated [ ] (the
"Receiving Trust Deed"). The Receiving Scheme is an exempt approved
scheme for the purposes of Chapter I of part XIV of the Income and
Corporation Taxes Act 1988 and is contracted-out for the purposes of
the Xxxxxxx Xxxxxxx Xxx 0000.
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(D) Transferring Scheme Transfer-out provisions
Clause 7 of the Transferring Trust Deed provides, in effect, that the
Transferring Trustee shall be entitled to transfer from the Racal
Scheme such assets representing the value of the benefits applicable
to each employee as determined by the Transferring Scheme's Actuary
and subject to the consent of Racal.
Under the Agreement, Racal (the Principal Employer of the
Transferring Scheme) agreed to use its reasonable endeavours to
procure that the Transferring Trustee would transfer to the Receiving
Trustee in respect of the Transferring Members (as defined in
Recital (H) below) an agreed amount. Racal has requested that the
Transferring Trustee transfer the said agreed amount in respect of
the Transferring Members to the Receiving Trustee. The Transferring
Trustee has considered Racal's request and after consulting the
Transferring Trustee's Actuary has determined to pay the agreed
amount which will be calculated in accordance with Schedule VII to
the Agreement (the "Final Transfer Amount").
(E) Approval of the PSO
Clause 7 of the Transferring Trust Deed further provides that the
Transferring Trustee may secure benefits by transferring to another
retirement benefits scheme which complies with certain conditions (in
particular the relevant approval of the Inland Revenue). The
Agreement also requires the approval of the PSO to the making of the
transfer payment provided for by this Transfer Agreement. The
approval of the PSO has been obtained.
(F) Determination by the Transferring Trustee to transfer
Subject to the execution of this Transfer Agreement, the Transferring
Trustee has determined to transfer the Final Transfer Amount in
respect of the Transferring Members (as defined in recital (H) below)
to be held by the Receiving Trustee under the trusts of the Receiving
Scheme. The actuarial basis for the calculation for the Final
Transfer Amount has been agreed with the Actuary to Global(being the
basis set out in the Agreement) and the Final Transfer Amount will be
so calculated.
(G) Receiving Scheme transfer-in provisions
Rule [ ] of the Receiving Trust Deed and Rules provides that the
Receiving Trustee will [at the request of the Receiving Scheme's
Principal Employer] accept into the Receiving Scheme a transfer
payment from a previous pension arrangement.
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(H) The transfer offer
The Agreement provided that Global would use its reasonable
endeavours to procure the Receiving Scheme would (subject as provided
in the Agreement) provide in respect of each of the Transferring
Members benefits in respect of his Pensionable Service before the
Partition Date (as defined in the Agreement) in the form of Service
Credits as agreed pursuant to the Agreement.
On [date] 2000 an announcement letter (the "Announcement Letter") was
issued to (amongst others) all [ ] employees in the
Transferring Scheme. The Announcement Letter gave details (inter
alia) of the benefits which would be provided for and in respect of
them if they agreed to a transfer being made from the Transferring
Scheme to the Receiving Scheme. A copy of the Announcement Letter is
annexed to this Transfer Agreement as Appendix 1.
Certain of those employees being the employees whose names are set
out in Appendix 2 (the "Transferring Members") have agreed to such
transfers from the Transferring Scheme to the Receiving Scheme.
OPERATIVE PROVISIONS
1. Transfer
The Transferring Trustee shall, on the Payment Date (as defined in
the Agreement) transfer the Final Transfer Amount to the Receiving
Trustee (to be held by it upon the trusts of the Receiving Scheme and
with and subject to the powers and provisions for the time being
applicable to other property held upon the trusts of the Receiving
Scheme). The form of the Final Transfer Amount shall be determined
in accordance with Schedule VII to the Agreement.
2. Receiving Trustee's agreement
The Receiving Trustee hereby agrees that (in consideration of the
transfer referred to in clause 1 above) it will grant to and in
respect of each Transferring Member the applicable benefits described
in the Announcement Letter.
3. Transferring Trustee's discharge
The transfer to be made under clause 1 above shall operate as a
complete discharge to the Transferring Trustee in respect of the
benefits to which the Final Transfer Amount relates.
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4. Receipt
Within five working days of receipt of the transfer referred to in
clause 1 above the Receiving Trustee shall write to the Transferring
Trustee acknowledging receipt of such.
5. Successors to be bound
References in this Transfer Agreement to the Receiving Trustee and
the Transferring Trustee include their respective successors in
office as trustees of the Receiving Scheme and the Transferring
Scheme.
6. Governing law
This Transfer Agreement shall be governed by the law of England and
the parties hereto submit to the exclusive jurisdiction of the
English courts in relation to all matters pertaining hereto.
7. Heading to clauses
The heading to the recitals and clauses of this Transfer Agreement
shall not affect its interpretation.
IN WITNESS whereof these presents were entered into the day and year first
before written.
EXECUTED as a deed by the affixing of the )
Common Seal of Racal Staff Trustee Limited )
in the presence of:- )
Director
Director/Secretary
EXECUTED as a deed by the affixing of the )
Common Seal of [ ] Limited )
in the presence of:- )
-114-
Director
Director/Secretary
-115-
SCHEDULE VIII
Telecom Group Guarantees of Racal Group Members
1. RTL is a guarantor under a Facility Agreement dated 29 March 1999 for
Racal for the provision of credit facilities up to (Pound
Sterling)370 million.
2. RTL is a guarantor under a 1992 ISDA Master Agreement dated 25 April
1997 between Racal and Barclays Bank Plc.
3. RTNL is a guarantor under a Facility Agreement dated 29 March 1999
for Racal Electronics Plc for the provision of credit facilities up
to (Pound Sterling)270 million.
4. RTNL is a guarantor under a 1992 ISDA Master Agreement dated 12
January 1996 between Racal Electronics Plc and Chemical Bank.
5. RTNL is a guarantor under a 1992 ISDA Master Agreement dated 25 April
1997 between Racal Electronics Plc and Barclays Bank Plc.
-116-
SCHEDULE IX
Tax Covenant and Warranties
The Warranties in Part C of this Schedule are the Tax Warranties
Part A - Definitions
1. In this Schedule:
(a) the following words and expressions have the meanings respectively
set opposite them:
"British Rail Board the assets acquired in April 1994 by RTL
transfer Assets" pursuant to a scheme under section 85
and/or section 86 Xxxxxxx Xxx 0000;
"Covenantor's Relief" means a Relief which arises to the Company
on or before Completion and is not a
Deferred Relief;
"Deferred Relief" means any Relief which:
(i) is taken into account in computing
any provision for deferred tax
which appears in the Completion
Balance Sheet or in eliminating
such a provision; or
(ii) is taken into account in the
Completion Balance Sheet as an
asset;
"Demand" any document issued or any claim made or
action taken whether before or after the
date hereof by or on behalf of any person,
authority or body whatsoever (whether of
the United Kingdom or elsewhere in the
world) from which it appears to Global or
the Company that the Company has or may
have a Tax liability;
"Event" any transaction, act, event or omission of
whatever nature including, without
limitation, a receipt or accrual of income
or gains, distribution, failure to
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distribute, acquisition, disposal,
transfer, payment of any loan or advance
and also including Completion;
"FA" Finance Act;
"Group Relief" (a) relief the subject of a surrender
or claim pursuant to Chapter IV of
Part X ICTA 1988;
(b) advance corporation tax the subject
of a surrender or claim pursuant to
s 240 ICTA 1988; and
(c) any tax refund the subject of a
surrender or claim pursuant to
s 102 FA 1989;
"Relief" any relief, allowance, deduction in
computing profits, credit or right to
repayment of Tax (including repayment
supplement or interest thereon) granted by
or pursuant to any legislation or otherwise
for Tax purposes whether of the United
Kingdom or elsewhere in the world;
"Tax" any and all forms of taxes, levies,
imposts, contributions, duties and charges
in the nature of taxation (including all
instalment payments in respect thereof) and
all withholdings or deductions in respect
thereof of whatever nature whenever imposed
whether of the United Kingdom or the United
States or elsewhere, (including, without
limitation, for the avoidance of doubt,
National Insurance contribution liabilities
in the United Kingdom and corresponding
obligations elsewhere, taxes on gross or
net income, profits or gains and taxes on
receipts, sales, use, property, occupation,
franchise, ad valorem, transfers or value
added and customs duties and stamp tax) and
whether directly or primarily chargeable
against, recoverable from or attributable
to the Company or any other person
including all fines, penalties, charges and
interest relating to the same;
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"TCGA" the Taxation of Chargeable Gains Xxx 0000;
(b) references to income or profits or gains shall include any other
measure by reference to which Tax is computed;
(c) references to income or profits or gains earned, accrued, arising or
received by any person shall include income or profits or gains which
are for the purposes of any Tax treated as earned, accrued, arising
to or received by such person;
(d) references to income or profits or gains earned, accrued, arising or
received on or before a particular date (including, without limita-
tion, Completion) or in respect of a particular period shall include
income or profits or gains which are for the purposes of any Tax
treated as earned or accrued, arising or received on or before that
date or in respect of that period;
(e) references to the occurrence of Events on or before a particular date
(including without limitation, Completion) or in respect of a
particular period shall include Events which are for the purposes
of any Tax treated as having occurred or existed at or before that
date or in respect of that period;
(f) references to any Tax liability of the Company shall include:
(i) payments of or in respect of Tax by the Company since the
Balance Sheet Date;
(ii) liabilities of the Company to make payments of or in
respect of Tax;
(g) references to the "Company" shall mean and include each member
of the Telecom Group as if each were referred to
-119-
expressly in place of the Company and references to the "Covenantor"
shall mean, in relation to each member of the Telecom Group, the
company agreeing to sell the shares in such member or in such company
of which the member is a subsidiary (as defined in Section 736 of the
Companies Act 1985);
(h) for the purposes of this Covenant a Tax liability shall be deemed to
have become due and payable by the Company if such Tax liability
would have been due and payable by the Company but for the
utilisation of any Relief other than a Covenantor's Relief;
(i) for the purposes of this Covenant, a payment of Tax deemed to be made
in accordance with the provisions of paragraph (h) above shall be
deemed to be due on the date on which that Tax would have been due
(assuming that an assessment or other notification of the Tax had
been made at the earliest permissible time and no appeal had been
made against the assessment or notification) but for the availability
of the Relief concerned;
(j) references to paragraphs are to paragraphs of Part B of this Covenant
unless otherwise stated;
(k) This Covenant shall have effect mutatis mutandis as if ION were a
Company in relation to which The Racal Corporation was the Covenantor
on the following basis:
(i) to reflect the fact that The Racal Corporation has only a 50%
interest in ION (so that, the liability of The Racal Corporation is
limited to 50% of the amount for which it would otherwise have been
liable, the amount of any Over Provision taken into account under
clause 6 shall be 50% of the amount which
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would otherwise be taken into account, and so on); and
(ii) to the extent that The Racal Corporation or Global undertake
obligations in relation to ION, they will only be required to
use reasonable endeavours to comply with those obligations
having regard to the provisions of any shareholder or similar
agreement relating to ION.
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Part B - Tax Covenant
1. Covenant
Subject as hereinafter expressly provided, the Covenantor hereby
covenants, with effect from Completion, to pay (such payment to be by
way of reduction, to the extent possible, of the purchase price payable
to such Covenantor hereunder), to Global (whether or not the Company is
or may be entitled to claim reimbursement of the payment from any person)
an amount equal to:
(a) any Tax liability of the Company arising in respect of or as a
consequence of any Event or Events occurring on or before
Completion or in respect of or by reference to any income,
profits or gains earned, accrued, arising or received on or
before Completion; and
(b) without prejudice to the generality of 1(a) above, any Tax
liability of the Company under s179 TCGA in respect of the
British Rail Board Assets and arising as a consequence of
entering into Completion of this Agreement; and
(c) any repayment of Taxation to the extent that the repayment has
been taken into account as an asset in the Completion Balance
Sheet but is not available or is lost, reduced or cancelled; and
(d) any payment of Taxation made or to be made by the Company under
Section 132 FA 1988 by virtue of the relationship on or at any
time before Completion of the Company with a "migrating company"
(within the meaning of that section); and
(e) any payment of Taxation which would not have been made but for a
Deferred Relief not being available or being lost, reduced or
cancelled; and
(f) any liability of the Company to repay (other than to another
member of the Telecom Group) the whole or any part of any payment
made to the Company on or before Completion for the surrender of
Group Relief or advance corporation tax;
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(g) any liability of the Company in respect of VAT which is not
Telecom VAT and which arises as a result of the Company having
been a member of the Pre-Sale VAT Group (defined terms being
used in paragraph 12);
and
(h) all reasonable out-of-pocket legal and accounting costs and
expenses properly incurred by Global and/or the Company in
connection with any Tax liability, repayment, payment or
liability as is referred to in any of paragraphs 1(a) - (g) in
respect of which the Covenantor is liable under this Covenant
or in connection with any action taken in avoiding, resisting or
settling such Tax liability, repayment, payment or liability or
in consequence of any successful claim made by Global under this
Covenant.
2. Limitations and exclusions
2.1 Such limitations in Clause 9 of this Agreement as are expressly
stated to apply to this Covenant shall do so as if set out herein.
2.2 The Covenantor shall not be liable under this Covenant in respect of
any Tax liability of the Company:
(a) save in the case of a Tax liability of Racal USA, to the extent
that such Tax liability arises or is increased or that any
provision or reserve which has been made in the Completion
Balance Sheet is insufficient by reason of the imposition of
Tax or any increase in rates of Tax or any change made after
Completion in law or in Inland Revenue or Customs and Excise or
other Tax authority's published practice or procedure or in a
judicial interpretation of the law where such change in judicial
interpretation takes the form of either the House of Lords or
the Court of Appeal overruling a decision of an inferior court
(which for the purposes of the House of Lords shall include the
Court of Appeal); or
(b) to the extent that it would not have arisen but for a voluntary
act, omission, transaction or arrangement of Global (or its
successors in title to the Shares) or of the Company, or of any
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company controlled by Global, or of a person or persons
controlling Global or of directors or employers of Global or any
company mentioned in this paragraph (b), in each case, occurring
after Completion which:
(i) is not in the ordinary course of its business as carried on
at Completion; and
(ii) is not pursuant to any legally binding agreement entered
into before Completion;
(c) to the extent that the Tax liability would not have arisen or
would have been reduced or eliminated but for the failure or
omission on the part of any Company to comply with a written
request of the Covenantor or its duly authorised advisers to
make any valid claim, election, surrender or disclaimer, to give
any valid notice or consent, or to do any other thing under the
provisions of any enactment or regulation relating to Tax after
Completion, the making, giving or doing of which was taken into
account in computing the provisions for Tax in the Completion
Balance Sheet; or
(d) to the extent that any Relief is available to the Company to set
against or otherwise mitigate the Tax liability, other than
(a) any Relief taken into account as an asset or in reducing any
provision for Tax in the Completion Balance Sheet; and (b) any
Relief arising from an Event occurring, or from income, profits
or gains arising after Completion; or
(e) to the extent that the Tax liability would not have arisen or
would have been reduced or eliminated but for any claim,
election, surrender or disclaimer made or notice or consent
given after Completion by the Company or Global or any of its
subsidiary undertaking or any person connected with any of them
under provisions of any enactment or regulation relating to Tax
other than any claim, election, surrender, disclaimer, notice or
consent assumed to have been made, given or done in computing
the amount of any allowance, provision or reserve in the
Completion Balance Sheet or which is made at the prior request
of the Covenantor pursuant to paragraph 5; or
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(f) to the extent that the Company or Global obtains the benefit of
a Relief in an accounting period ending before Completion for an
expenditure, reserve or provision which was recognised in the
Completion Balance Sheet but was not, in preparing the
Completion Balance Sheet, treated as deductible or allowable for
Tax purposes and which is not treated as a deferred tax asset in
preparing the Completion Balance Sheet; or
(g) to the extent that the Tax liability arises or is increased as a
result of a change in accounting policy or practice of the
Company as used for the purposes of the Accounts otherwise than
to comply with generally accepted accounting practice, or from
a change in the length of an accounting period of the Company,
in either case, introduced after Completion; or
(h) to the extent that the Tax liability would not have arisen but
for a failure on the part of Global or the Company to comply
with its obligations under paragraph 3 or 5; or
(i) to the extent that provision or reserve for such Tax liability
is made in the Completion Balance Sheet; or
(j) to the extent that such Tax liability would not have arisen but
for any election made pursuant to paragraph 13.
3. Manner of making and conduct of claims
3.1 If Global or the Company shall become aware of any Demand (other than
by the Covenantor giving notice thereof to Global under this
paragraph 3.1) which may give rise to a liability on the part of the
Covenantor under this Covenant or the Tax Warranties Global shall as
soon as reasonably practicable give notice thereof to the Covenantor
setting out reasonable details of the Demand. If the Covenantor
becomes aware of any such Demand it shall as soon as reasonably
practicable give notice thereof to Global.
3.2 If the Covenantor shall, within 30 days of the date of any notice
given to it under paragraph 3.1 or of it otherwise becoming aware
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of any such Demand, indemnify and secure Global and the Company to
Global's reasonable satisfaction against all losses, costs and
expenses which may be incurred thereby and secure Global and the
Company to Global's reasonable satisfaction against any further
liability to Tax which may be so incurred, then Global shall procure
that the Company will take such action as the Covenantor may
reasonably and promptly by written notice request to avoid, dispute,
resist, appeal or compromise any Demand, and in connection with any
action so requested by the Covenantor:
(a) the appointment of solicitors and other professional advisers to
the Company shall be subject to the prior written approval of
Global, such approval not to be unreasonably withheld or delayed;
(b) the Covenantor shall ensure that no substantive correspondence,
pleading or other document is sent, transmitted, issued, entered
into or in any way published in connection with the relevant
Demand by the Covenantor or its advisers without the prior
approval of Global, such approval not to be unreasonably
withheld or delayed;
(c) the Covenantor shall submit no computations or returns, nor make
any settlement or compromise of the subject matter of the Demand,
nor agree any matter in the conduct of any dispute in relation
thereto which is likely to affect the amount of the Demand, or
the future liability of the Company to Tax, without the prior
written approval of Global, such approval not to be unreasonably
withheld or delayed;
(d) if any dispute arises between Global and the Covenantor as to
whether any Demand should at any time be settled in full, or
contested in whole or in part, such dispute shall be referred
for determination to a Barrister, of at least ten years
call at the English Bar with relevant experience, appointed by
agreement between Global and the Covenantor or (if they do not
agree) upon the application by either party to the President for
the time being of The Law Society, whose determination shall be
final. The Barrister so appointed shall be asked to advise
whether, in his opinion (acting as an expert and not as an
arbitrator) there is a reasonable case for appealing against the
-126-
Demand and shall be instructed, if the dispute relates to a
Demand issued by a Tax authority outside the United Kingdom, to
obtain such advice from professional advisers of the relevant
jurisdiction as he thinks necessary in order to arrive at his
opinion, and also to determine how the costs of obtaining his
opinion should be allocated between the parties hereto. If, but
only if, such opinion is in the affirmative shall an appeal be
made and that Demand not then settled. Any further dispute
arising between the parties as to whether any further appeal
should be pursued following determination of an earlier appeal
(whether or not in favour of the Company) shall be resolved in
a similar manner; and
(e) save as otherwise expressly provided herein, Global shall
procure that the Company shall give the Covenantor all
reasonable co-operation and assistance for the purposes of
taking such action as aforesaid.
3.3 Global and the Company shall be free to pay or settle any Demand on
such terms as they may in their absolute discretion think fit and
without prejudice to their rights and remedies under this Covenant
if, within 30 days of the date of any notice given to it under
paragraph 3.1 or of it otherwise becoming aware of any such Demand,
the Covenantor fails to request the action to be taken as stated in
paragraph 3.2.
4. Mitigation
The Covenantor may by notice in writing to Global elect to mitigate or
eliminate any liability under this Covenant by surrendering or procuring
the surrender to the Company of any Relief other than a Deferred Relief to
the extent permitted by law but without any payment being made in
consideration of the surrender, and the Covenantor shall be absolved from
all liability under this Covenant to the extent of the amount of Tax
liability relieved by such surrender. Global shall procure that the
Company takes all such steps as the Covenantor may reasonably require to
permit and effect any such surrender.
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5. Tax Returns and computations
5.1 Subject to paragraph 5.2 below, the Covenantor or its duly authorised
agents shall at the Covenantor's expense be responsible for, and have
the conduct of preparing, submitting to and agreeing with all
relevant Tax authorities all Tax returns and computations of the
Company and determining the amount of any instalment payment of
corporation tax to be made by the Company, including (without
limitation) claims and/or surrenders by way of Group Relief, for all
Tax accounting periods of the Company ending on or before Completion
subject to all such returns, computations, documents and substantive
correspondence relating thereto and the proposed amount of any
instalment payments being submitted in draft form to Global or its
duly authorised agents for comment. Global or its duly authorised
agent shall comment within 21 days of such submission. If the
Covenantor has not received any comments within 21 days, Global and
its duly authorised agents shall be deemed to have approved such
draft documents. The Covenantor is not obliged to take into account
any comments or suggestions made by Global save for comments or
suggestions which the Covenantor considers (acting in good faith) to
be reasonable. Global shall each respectively afford (or procure the
affordance) to the Covenantor or its duly authorised agents of
information and assistance which may reasonably be required to
prepare, submit and agree all such outstanding Tax returns and
computations. Global undertakes to procure that the Company shall at
the request of the Covenantor sign and submit to the relevant Tax
authority all such notices of claim, surrender or consent to
surrender (including provisional or protective notices of claim,
surrender or consent to surrender in cases where any relevant Tax
computations have not yet been agreed) and all such other documents
and returns as the Covenantor shall reasonably request, consistently
with the provisions of this Covenant, to give effect to the foregoing
provisions PROVIDED THAT neither the Covenantor nor its agents shall
be entitled to require the Company:
(a) to take any action under this paragraph 5.1 which could result
in the Company incurring a Tax liability or making a payment of
Tax in respect of which Global could have a claim under this
covenant or could have had a claim but for the provisions of
paragraph 9.2 of this Agreement; or
(b) to sign any return, computations, documents or correspondence
which are not true and accurate in all material respects.
5.2 The Covenantor or its duly authorised agents shall be responsible
for, and have exclusive conduct of all outstanding matters relating
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to agreeing with the Inland Revenue (and any other relevant Tax
authority) the amount of any Tax liability referred to in paragraph
1(b) of this Covenant including (without limitation) submitting all
forms of claims, correspondence, amendments or appeals in respect
thereof and conducting the negotiation, agreement and settlement of
all issues and disputes relating thereto with the relevant Tax
authority and determining the amount of any instalment of corporation
tax to be made by the Company in relation thereto. The Covenantor
shall notify Global as soon as is reasonably practicable in writing
of any claims, amendments, appeals in respect of any Tax liability
referred to in this paragraph 5.2 and shall keep Global informed (to
the extent possible) of all negotiations and shall submit in draft
form to Global for comment all substantive correspondence relating
thereto before submitting such correspondence to the relevant Tax
authority. Global or its duly authorised agent shall comment within
21 days of such submission. If the Covenantor has not received any
comments within 21 days, Global and its duly authorised agents shall
be deemed to have approved such draft documents. If Global or its
duly authorised agents have any comment or suggestion, the Covenantor
shall adopt any such comment or suggestion only to the extent it
considers (acting in good faith) that it is appropriate to do so.
The Covenantor and Global shall each respectively afford (or procure
the affordance) to the other or their duly authorised agents of
information and assistance which may reasonably be required to
prepare, submit and agree all such outstanding issues relating to the
Tax liability referred to in this paragraph 5.2. Global undertakes
to procure that the Covenantor shall sign, execute and submit such
correspondence, claims, returns and appeals relating thereto save to
the extent that Global or the Covenantor reasonably consider that the
same are not complete and accurate in all material respects.
5.3 Global and its duly authorised agents shall be responsible for, and
have the conduct of preparing, submitting to and agreeing with all
relevant Tax authorities all Tax returns and computations of Racal
USA for the Tax accounting periods during which Completion takes
place; provided that Global shall procure that all such returns,
computations, documents and substantive correspondence relating
thereto are submitted in draft form to the Covenantor or its duly
authorised agents for comment. The Covenantor or its duly authorised
agents shall comment within 21 days of such submission. If Global
has not received any comments within 21 days, the Covenantor and its
duly authorised agents shall be deemed to have approved such draft
documents. If the Covenantor or its duly authorised agents have any
comment or suggestion with respect to such part of the return;
computation or document as relates to the period prior to Completion,
Global shall procure that the Company shall not unreasonably refuse
to adopt such comment or suggestion. The Covenantor shall afford (or
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procure the affordance) to Global or its duly authorised agents of
information and assistance which may reasonably be required to
prepare, submit and agree all such Tax returns and computations.
5.4 To the extent that the Covenantor has or is entitled to documents or
information which are/is relevant in determining any liability to Tax
of members of the Telecom UK Group in respect of periods ending after
Completion, the Covenantor shall afford (or procure the affordance)
to Global or its duly authorised agents access to such documents or
information at reasonable times (subject to reasonable notice having
been given).
6. Over Provisions
6.1 The Covenantor may request the auditors for the time being of the
Company (not later than six years after Completion) to certify at the
Covenantor's request and expense, whether any provision in the
Completion Balance Sheet has proved to be an over provision (the
amount by which there is an over provision being referred to in this
paragraph 6 as the "Over Provision") and Global shall, on receipt of
such request and at the expense of the Covenantor, procure that the
Company provides any information or assistance reasonably required in
order to allow the auditors to provide that certificate.
6.2 The amount of any Over Provision shall be calculated without taking
into account:
(a) a retrospective change in the law of Taxation announced after
Completion; or
(b) any Relief other than a Covenantor's Relief; or
(c) any act of Global or the Company carried out after Completion
other than in the ordinary course of business as carried on at
Completion.
6.3 If any amount shall be certified by the auditors in accordance with
paragraph 6.1 above to be an Over Provision (other than in respect of
the Section 179 Liability) in respect of the Company, then:
(a) the Over Provision shall first be set off against any payment
then due from the Covenantor under this Covenant or the Tax
Warranties; and
(b) to the extent there is an excess, a refund of the excess shall
be made to the Covenantor (within five Business Days of the
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certificate being given) of any previous payment or payments
made by the Covenantor under this covenant or the Tax Warranties
(and not previously refunded under this Covenant or the Tax
Warranties) up to the amount of such excess; and
(c) if the payment mentioned in paragraph 6.3(b) above do not
exhaust the excess, or if there are no such payments, the
remainder of that excess shall be carried forward to be set
off against any payment which may in the future become due
from the Covenantor under this Covenant or the Tax
Warranties.
6.4 If any amount shall be certified by the auditors in accordance with
paragraph 6.1 above to be an Over Provision in respect of the Section
179 Liability, then the amount of such Over Provision shall be paid
by Global to the Covenantor by way of a reduction, to the extent
possible, of the purchase price hereunder, within five Business Days
of such certificate being given.
6.5 Where a certificate has been provided by the auditors in accordance
with paragraph 6.1 or 6.4 above, either the Covenantor or Global may
(at the expense of the requesting party), request the auditors to
review the certificate in the event that there are relevant
circumstances or facts of which it was not aware and which were not
taken into account at the time when such certificate was produced,
and to certify whether in the light of those circumstances, the
amount of the certification remains correct or whether ir should be
amended.
6.6 If following a request under paragraph 6.5 above the certificate is
amended, the revised amount of the Over Provision shall be
substituted for the purposes of paragraph 6.3 or 6.4 (as the case may
be) and any adjusting payment that is required shall be made within
five Business Days of the amendment of the certificate.
6.7 For the purposes of this paragraph 6, "Section 179 Liability" shall
be as defined in paragraph 3 of Schedule V of this Agreement.
7. Payment of Claims
7.1 Payments by the Covenantor pursuant to the covenants in paragraph 1
shall be made on the days specified in paragraph 7.2 below.
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7.2 The days referred to in paragraph 7.1 are as follows:
(a) if the Tax liability giving rise to claim under this Covenant
involves an actual payment of Tax by the Company, the day which
is the later of five Business Days after demand is made therefor
by or on behalf of the Claimant, and three Business Days before
the date on which that Tax becomes due and payable to the
relevant Tax authority;
(b) if the Tax liability giving rise to a claim under this Covenant
does not involve an actual payment of Tax but involves the
denial, loss, use or setting off in whole or in part of a Relief
which is a right to repayment of Tax, the day which is the later
of five Business Days after demand is made therefor by or on
behalf of the Claimant, and the day on which such Tax would
otherwise have been repaid;
(c) in any other case five Business Days after demand is made
therefor by or on behalf of the Claimant.
7.3 For the purposes of this paragraph, references to the day on which an
amount of Tax becomes due and payable to the relevant Tax authority
shall be interpreted as follows:
(a) if, pursuant to paragraph 3, the Company disputes or appeals
against a Demand in respect of such Tax, but the Company is
nevertheless required by law, as a condition to pursuing
such dispute or appeal, to pay such Tax, the last day on
which such Tax is so required to be paid without the Company
incurring any penalty or liability for interest in respect
thereof, provided that the provisions of paragraph 8 shall
apply to reimburse the Covenantor for any repayment
(including interest or repayment supplement) to which the
Company is entitled;
(b) if, pursuant to paragraph 3, the Company disputes or appeals
against a Demand for such Tax, and the Company is not so
required, the day on which the Tax in question is finally
determined to be due and payable by the Company, pursuant to
an agreement under s 54, Taxes Management Xxx 0000, or any
legislative provision corresponding to that section, or
pursuant to a decision of a court or tribunal from which
either no appeal lies, or in respect of which no appeal is
made within the prescribed time limit; or
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(c) in any other case, the first day on which such Tax needs to be
paid in order to avoid, incurring any penalty or liability for
interest in respect thereof.
7.4 If the Covenantor or Global (as the case may be) fails to pay any sum
due from them under this covenant on the due date for payment it
shall pay interest on that sum from the due date until actual payment
at the rate of 3% per annum above the base rate for the time being of
National Westminster Bank plc compounded monthly save, in the case of
a payment by the Covenantor, to the extent that Global is compensated
for late payment by the liability under paragraph 1 extending to
interest.
7.5 All sums payable by the Covenantor or Global hereunder shall be paid
free of and without any rights of counterclaim or set off, and
without deduction or withholding on any ground whatsoever, save only
as may be required by law. If any such deduction or withholding is
required by law the payer shall be obliged to pay to the payee such
amount as will ensure that, after any such deduction or withholding
has been made, the payee shall have received a sum equal to the
amount that it would otherwise have received in the absence of any
such deduction or withholding, as reduced by any credit to which the
payee may be entitled on account of such deduction or withholding.
7.6 If any competent authority for Tax purposes charges to Tax any sum
paid (the "original payment") to the Covenantor or Global hereunder
the payer shall be obliged to pay to the payee such additional amount
(the "additional payment") as will ensure that, after the payment of
the Tax so charged on the original payment and any Tax chargeable on
the additional payment, there shall remain a net sum equal to the
amount of the original payment, such additional payment to be paid
three Business Days after the payee has served notice that Tax on the
original payment has become due and payable.
8. Corresponding savings and refunds
8.1 If any Tax liability which has resulted in a payment having been made
by the Covenantor under this Covenant or for breach of any of the Tax
Warranties has given rise to a Relief for the Company or Global which
would not otherwise have arisen, then
(a) Global shall procure that full details of such Relief are
given to the Covenantor as soon as reasonably practicable; and
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(b) to the extent that the liability of Global or the Company to
make an actual payment of or in respect of Tax is reduced by
reason of such Relief from the amount that such liability
would have been but for the availability of such Relief,
Global shall, on or as soon as reasonably practicable after
the date when Global or the Company would have been under an
obligation to pay the Tax liability so reduced, make a
repayment to the Covenantor of an amount equal to the lower
of the amount by which such liability is so reduced and the
amount of the payment referred to at the beginning of this
paragraph 8.1 made by the Covenantor.
8.2 If the Covenantor at any time pays to Global an amount pursuant to a
claim under this Covenant or under the Tax Warranties and before the
seventh anniversary of Completion Global or the Company is or becomes
entitled to recover from some other person (other than the Company or
Global, but including any Tax authority) any sum in respect of the
matter giving rise to such claim (other than by reason of any Relief
which arises in respect of an Event occurring after Completion or
which was taken into account in fixing the amount of the Tax
provision (or in determining that no Tax provision was necessary) in
the Completion Balance Sheet), Global, if so required by the
Covenantor, will (and will procure that the Company will), at the
cost of the Covenantor and upon the Covenantor providing security to
the reasonable satisfaction of Global against all costs which may
thereby be incurred, take all reasonable steps to enforce such
recovery and Global shall promptly following such recovery repay to
the Covenantor the lesser of:
(a) the sum so recovered by Global or the Company from such
other person (including sums recovered in respect of costs
and any interest or repayment supplement received in respect
of the sum recovered, but less any costs of recovery not
previously reimbursed, and less any Tax chargeable on the
sum recovered); and
(b) the amount referred to above paid by the Covenantor to Global.
9. Global's further obligations
9.1 Global undertakes that it will procure that the Company preserves,
and affords to the Covenantor reasonable access to, all documents,
records, correspondence, accounts and other information whatsoever in
respect of or relevant for the purpose of determining the liability
of the Company to Tax in respect of periods ending on or before
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Completion until such time as the Covenantor shall cease to have any
liability or contingent liability under the terms of this Covenant.
9.2 Global hereby undertakes to the Covenantor that it will procure that
the Company duly pays and discharges each and every amount of Tax in
respect of which provision was made in the Completion Balance Sheet,
or which was taken into account in computing the amount of any such
provision, and which, in either case, had not been paid and
discharged at Completion.
9.3 Global hereby agrees with the Covenantor that it will not, and will
procure that the Company will not, without the prior written consent
of the Covenantor, disclaim any Relief claimed by the Company on or
prior to Completion or claim any Relief in relation to an accounting
period ending on or before Completion which has not been claimed by
the Company on or prior to Completion.
9.4 Global shall procure that the Company shall refrain from doing any
act or thing (including, in particular, the carry-back of losses from
accounting periods ending after Completion) in relation to periods
ending after Completion which:
(a) would affect the Company's ability to make claims for
allowances or Reliefs, in respect of accounting periods
ending on or before Completion; or
(b) would reduce or extinguish any Relief or allowance available
in accounting periods ending on or before Completion.
10. Surrender of Reliefs
10.1 Global shall procure that, to the extent that it can lawfully do so
without incurring any liability to Tax within the scope of paragraph
1 of this Covenant, the Company:
(a) accepts from the Covenantor, or any other company not
included in the definition of the Company hereunder and
specified by the Covenantor, the surrender of any Group
Relief as the Covenantor may direct in respect of an
accounting period of the Company commencing before
Completion; and
(b) surrenders any Group Relief to any company not included in
the definition of the Company hereunder, specified by the
Covenantor, in respect of any accounting period of the
Company ending on or before Completion.
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10.2 Subject to paragraph 10.3, for a surrender under paragraph 10.1(a),
Global shall procure that the Company pays to the Covenantor, or as
the Covenantor directs, an amount equal to the Tax saved by the
Company in consequence of such surrender on the date such Tax would
otherwise have been payable to the Tax authority.
10.3 The total payments made by the Company under paragraph 10.2, when
added to any corporation tax actually payable by the Company, shall
not exceed the amount of corporation tax taken into account in
calculating the provision for Tax in the Completion Balance Sheet in
respect of the Company.
10.4 Payment under paragraph 10.2 shall be made on the later of the date
that the corporation tax saved as a result of the surrender is, or
but for the surrender would have been, due and payable, and five
Business Days after demand is made therefor by or on behalf of the
Covenantor.
10.5 No payment shall be made for a surrender under paragraph 10.1(b).
11. Global's warranty and indemnity
11.1 Global warrants and represents to each Covenantor and its successors
in title that Global does not intend to permit the corporation tax
liabilities of the Company, to the extent provided for in the
Completion Balance Sheet and to the extent payable by the Company to
remain undischarged, and that it is not entering into this
transaction on the assumption referred to in s 767AA(2) ICTA 1988.
11.2 Global hereby covenants with each Covenantor that is will indemnify
such Covenantor and keep it indemnified against any liability
arising pursuant to:
(i) s 767A ICTA 1988, in circumstances where the taxpayer
company (as defined in s 767(1)) is the Company; or
(ii) s 767AA ICTA 1988, in circumstances where the relevant
transferred company or associated company as defined in
s 767AA is the Company; or
(iii) s 132 FA 1988, in circumstances where the Company ceases to
be resident in the United Kingdom after Completion; or
(iv) s 190 TCGA 1992, in circumstances where the unpaid tax
referred to in s 190(1) is first assessed on the Company;
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to the extent that the corporation tax to which the liability
relates:
(a) has been the subject of a claim by Global hereunder which
has been satisfied; or
(b) is one in respect of which the Covenantor has (disregarding
any limit on the amount of such liability) no liability
hereunder
12. VAT
12.1 In this paragraph:
(a) "Pre-Sale VAT Group" means the group of bodies corporate of
which the members of the Telecom UK Group are at Completion
members for the purposes of section 43 VATA 1994, and of
which Racal plc is the representative member;
(b) "Telecom VAT" means output tax (as defined in section 24 VATA
1994) (and related interest or penalties), attributable to
supplies, acquisitions and imports made by the Telecom Group
less input tax deductible from it on supplies to and
acquisitions and imports made to the Telecom UK Group;
(c) "Telecom Repayment VAT" means the amount of input tax (as
defined in section 24 VATA 1994) deductible in relation to
supplies to and acquisitions and imports made by the
Telecom UK Group to the extent that it exceeds both output
tax (and related interest or penalties) attributable to
supplies, acquisitions and imports made to the Telecom Group
and any other penalty or interest imposed for VAT purposes
in respect of any previous VAT deductions or claims
attributable to supplies, acquisitions and imports by the
Telecom UK Group.
12.2 In determining for the purposes of paragraph 12.1 by or to whom a
supply, acquisition or import is made, section 43(1)(b) of the Value
Added Tax Act 1994 shall be ignored and it shall be assumed that
each member of the Telecom UK Group is separately registered for VAT
purposes. In determining supplies, acquisitions and imports for the
purposes of the definitions in paragraph 12.1 (b) and (c), those
falling within section 43(1)(a) VATA 1994 shall be ignored.
12.3 Racal shall procure that each member of the Telecom UK Group shall
leave the Pre-Sale VAT Group as of Completion, insofar as it is a
member of the Pre-Sale VAT Group at the date of this Agreement and
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Global shall procure that the members of the Telecom UK Group provide
reasonable assistance required by Racal to ensure the same.
12.4 Global shall pay (or procure that the relevant member of the Telecom
UK Group pays) to Racal or as Racal directs, the amount of any
Telecom VAT which is provided for in the Completion Balance Sheet,
such payment to be made in cleared funds not later than three
Business Days before it is due to the relevant taxation authority to
the extent that no member of the Telecom UK Group has already paid
such amounts to Racal or a member of the Pre-Sale VAT Group which is
not a member of the Telecom UK Group.
12.5 Racal shall pay to Global or as Global directs, the amount of any
Telecom Repayment VAT shown in the Completion Balance Sheet, such
payment to be made in cleared funds not later then 30 days after the
end of the prescribed period current at Completion to the extent
such amount has not already been paid to Global or any member of
Telecom UK Group.
12.6 Global shall on request provide or procure to be provided to
Racal (or as it directs) any information and copies of documents in
the possession, custody or power of Global or Racal or any member of
the Telecom UK Group required by any company in the Pre-Sale VAT
Group in connection with calculating the VAT liability of the Pre-
Sale VAT Group or complying with any requirement to submit an EC
sales list or Intrastat declarations.
13. Racal USA
At or after Completion, the Covenantor agrees if Global notifies the
Covenantor in writing of its intention to make an election with respect
to a member of the Telecom UK Group to be classified as a disregarded
entity or otherwise for US federal income tax purposes, to join with
Global in making such election. Such election shall, at the option of
Global, be retroactive to a pre-Completion period. Global shall indemnify
the Covenantor and any subsidiaries of the Covenantor against all costs
and expenses, including without limitation all Taxes (including reasonable
attorneys' and accountants' fees and other reasonable out-of-pocket
expenses incurred in connection therewith) arising solely as a direct
result of the filing of such election.
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Part C - Tax Warranties
1. TAX WARRANTIES
1.1 General
1.1.1 Each member of the Telecom Group is and has at all times
been resident only in its place of incorporation for all Tax
purposes. No member of the Telecom Group is liable to pay
nor has at any time incurred any liability to Tax chargeable
under the laws of any jurisdiction other than its place of
incorporation.
1.1.2 Each member of the Telecom Group has paid all Tax which it
has become liable to pay and no member of the Telecom Group
has any liability to pay any penalty, surcharge, fine or
interest in connection with Tax.
1.1.3 Each member of the Telecom Group has within applicable time
limits made all returns, provided all information and
maintained all records in relation to Tax as it is required
to make, provide or maintain and has fully complied on a
timely basis with all notices served on it and any other
requirements lawfully made of it by any Tax authority. All
returns are true, accurate and complete and no return (and
nothing in a return), is disputed or is yet to be determined
by, or is subject to agreement with, a Tax authority.
1.1.4 Each member of the Telecom Group has complied in all
material respects with its obligations under any statutory
provisions requiring the deduction or withholding of Tax
from amounts paid or received by such member, whether on its
own behalf or as agent, and has complied with all reporting
requirements in relation to the Tax deducted and has
properly accounted for any Tax so deducted or withheld to
any relevant Tax authority (other than amounts which have
not yet become due to be paid).
1.1.5 No member of the Telecom Group is nor does any member of the
Telecom Group expect to be involved in a dispute or audit in
relation to Tax. No Tax authority has investigated or
indicated that it intends to investigate any Tax affairs of
any member of the Telecom Group.
1.1.6 Other than as described in the Disclosure Letter, no Tax
authority has agreed to operate any special arrangement
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(that is, an arrangement which is not based on a strict
application of all relevant Tax legislation, published
extra-statutory concessions and published statements of
practice) in relation to the affairs of any member of the
Telecom Group. With respect to any special arrangement
described in the Disclosure Letter, the availability of any
such arrangement will not be prejudiced as a result of the
acquisition or change of control of any member of the
Telecom Group resulting from this Agreement, and each
relevant member of the Telecom Group has acted in accordance
with the terms of any such arrangement.
1.2 Arm's length dealings
Except as disclosed in the Disclosure Letter, no member of the
Telecom Group is and no member of the Telecom Group expects to be a
party to any transaction, agreement or arrangement otherwise than by
way of a bargain at arm's length which will be binding on such member
after Completion, or any transaction, agreement or arrangement
(whether or not by way of a bargain at arm's length) under which it
has been or is or may be required after Completion to make any
payment for any goods, services or facilities provided to it which is
in excess of the market value of such goods, services or facilities
or under which it has been, or is or may be required after Completion
to provide goods, services or facilities for a consideration which is
less than the market value of such goods, services or facilities
and/or in consequence of which it will be liable to Tax in respect of
any amount deemed for Tax purposes to be income or gains of the
relevant member of the Telecom Group but not actually income or gains
of the member of the Telecom Group. No material adjustment or
investigation has been made or threatened in writing to any member of
the Telecom Group under the transfer pricing legislation of any
jurisdiction.
1.3 Chargeable gains
The Disclosure Letter contains details of each claim under section
152 or 153 of the TCGA (replacement of business assets) made before
the date of this Agreement to which section 154 of the TCGA (new
assets which were depreciating assets) applies and which affects any
asset owned by any member of the Telecom UK Group on or after the
Balance Sheet Date (except where the held-over gain is treated as
having accrued before the Balance Sheet Date).
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1.4 Loan relationships
1.4.1 In respect of every loan relationship (as defined by section
81 of the Finance Act 1996) to which any member of the
Telecom UK Group is a party and to which it will remain a
party after Completion the relevant member of the Telecom UK
Group has used in its statutory accounts an accruals basis
of accounting which is an authorised accounting method for
the purposes of Chapter II of Part IV of that Act.
1.4.2 No member of the Telecom UK Group is and no member of the
Telecom UK Group has since the Balance Sheet Date been a
party to a loan relationship which has or had an unallowable
purpose for the purposes of paragraph 13 of Schedule 9 to
the Finance Xxx 0000.
1.5 Value added tax
1.5.1 No member of the Telecom UK Group is a member of a group of
companies for the purpose of section 43 of the VATA (groups
of companies) other than the group of companies of which the
representative member is Racal plc. Racal has made, given,
obtained and kept up-to-date, full and accurate records,
invoices and documents appropriate or required for the
purposes of the VATA and has complied in all respects with
all other applicable VAT legislation and in particular has
filed all returns and made all payments of VAT on a timely
basis and no member of the Telecom UK Group has been
required by a Tax authority to give security under the VATA.
1.5.2 No member of the Telecom UK Group owns an asset which is a
capital item, the input tax on which may be subject to
adjustment in accordance with Part XV of the Value Added Tax
Regulations 1995 (capital goods scheme).
1.5.3 No member of the Telecom UK Group, nor any company of which
a member of the Telecom UK Group is a relevant associate
within the meaning of paragraph 3(7) of Schedule 10 to the
VATA (election to waive exemption), has elected to waive
exemption under paragraph 2 of Schedule 10 in relation to
any land except as disclosed in the Disclosure Letter. Each
election of that type disclosed in the Disclosure Letter has
effect.
1.5.4 No member of the Telecom UK Group is and no member of the
Telecom UK Group agreed to become an agent, manager or
factor for the purposes of section 47 of the VATA (agents,
etc.) of a person not resident in the United Kingdom.
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1.6 Stamp Duty
All documents by virtue of which each member of the Telecom UK Group
has any right or in the enforcement of which the relevant member of
the Telecom UK Group is interested have been duly stamped.
1.7 Group Relief
Except as reflected in the Completion Balance Sheet no member of the
Telecom UK Group is nor will it be under any obligation to make or
have any entitlement to receive in respect of any period ending on or
before Completion any payment for group relief as defined in section
402(6) Taxes Act 1988 or any payment for the surrender of the benefit
of an amount of Advance Corporation Tax or a repayment of such
payment.
2. TAX WARRANTIES RELATING TO RACAL USA
2.1 General
2.1.1 There is no contract or agreement, plan or arrangement by
Racal USA entered into on or before Completion covering any
person that, individually or collectively, could give rise
to the payment of any amount after Completion that would not
be deductible by such member by reason of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"),
as now in effect.
2.1.2 No consent under Section 341(f) of the Code has been filed
with respect to Racal USA.
2.1.3 No closing agreement pursuant to Section 7121 of the Code
(or any similar provision of state, local or foreign law)
has been entered into by or with respect to Racal USA.
2.1.4 Racal USA is not a party to any Tax allocation or sharing
agreement nor has in the last six years been a member of any
group filing a combined or consolidated Tax return (other
than a group the common parent of which was a member of the
Telecom Group) nor has any liability to a Tax authority for
the Taxes of any person (other than of any member of the
Telecom Group) under U.S. Treasury regulation
Section 1.1502-6 (or any similar provision of the laws of
any other jurisdiction) or as a transferee or successor.
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2.1.5 No claim for unpaid Taxes has become a lien against the
property of Racal USA or is being asserted against Racal
USA.
2.1.6 There are no outstanding agreements, waivers or arrangements
extending the statutory period of limitation applicable to
any claim for, or the period for the collection or
assessment of, Taxes due from or with respect to Racal USA
for any taxable period.
2.1.7 No assessment in relation to any alleged deficiency in Taxes
has been proposed in writing against Racal USA.
2.1.8 Ion is and at all times since its formation has been
classified as a partnership for US federal income tax
purposes.
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SCHEDULE X
Conduct between exchange and completion
The Sellers shall ensure that (unless it has obtained the prior consent of
Global as provided in clause 8.3) each Telecom Group member will:
1. not create, allot, issue, acquire, repay or redeem any share or loan
capital or agree, arrange or undertake to do any of those things or
acquire or agree to acquire, an interest in a corporate body;
2. operate its business in the ordinary course, including (without
limitation) not accelerating sales or collection of amounts due (from
debtors or otherwise) or deferring expenditures or payment of
obligations;
3. except in the ordinary course of business not acquire or dispose of,
or agree to acquire or dispose of, a material asset or assume or
incur, or agree to assume or incur, a material liability, obligation
or expense (actual or contingent) and for the purposes of this
paragraph 3 material means an asset with a value of (Pound Sterling)5
million or which generates income exceeding (Pound Sterling)5 million
and a liability or expense of (Pound Sterling)5 million;
4. not make, or agree to make, any single item of capital expenditure
exceeding in total (Pound Sterling)10 million (or its equivalent at
the time) or incur, or agree to incur, a commitment or commitments
involving capital expenditure exceeding in total (Pound Sterling)5
million (or its equivalent at the time);
5. not declare, pay or make any dividend or distribution save for the
Pre-Completion Dividend;
6. not pass a shareholders resolution;
7. not make a claim under section 152 or 153 of TCGA (as defined in
Schedule XII) which affects an asset owned by a Telecom Group member;
8. not create, or agree to create, an Encumbrance over any of the
Properties or any other asset;
9. not enter into, terminate or amend a material long-term, onerous or
unusual agreement, arrangement or obligation ("long term" for this
purpose meaning unlikely to have been fully performed in accordance
with its terms within 12 months and a material agreement, arrangement
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or obligation means such an agreement, arrangement or obligation
under which payment of (Pound Sterling)5 million can be made);
10. (except in the usual course of its business) not amend the terms of
employment or engagement of a director, other officer or any class of
employees or provide, or agree to provide, a gratuitous payment or
benefit to a director, officer or any class of employees (or any of
their dependants) or employ or dismiss any officer, director or
employee where amendments exceed (Pound Sterling)50,000;
11. not amend, or agree to amend, the terms of its borrowing or
indebtedness in the nature of borrowing or create, incur, or agree to
create or incur, borrowing or indebtedness in the nature of borrowing
other than through inter company indebtedness or the Finance Lease.
12. except in the usual course of its business not give, or agree to
give, a guarantee, indemnity or other agreement to secure, or incur
financial or other obligations with respect to, another person's
obligation;
13. not commence, compromise or settle any litigation or arbitration
proceedings or release, discharge or compound any liability or claim
if to do so would have a material impact on the Telecom Group outside
the ordinary course of business;
14. conduct its business in all material respects in accordance with all
applicable legal and administrative requirements in any jurisdiction;
15. maintain insurance cover for the Telecom Group on the basis
subsisting on the date hereof;
16. keep Global properly informed of all material matters relating to
businesses, assets and affairs of the Telecom Group and, subject to
Racal's being given reasonable prior notice, afford to Global and its
representatives reasonable access at reasonable intervals to the
properties, directors and senior management and the documents, books
and records of the Telecom Group which are in its possession provided
that such access may be terminated or withheld by Racal if such
interferes or is likely to interfere in any way with the normal day
to day operation of the Company;
17. not to modify any of the rights attached to any Shares;
18. except as required by law or regulation (including without limitation
any requirement of the London Stock Exchange to publish a press
announcement or circular to shareholders) not knowingly initiate,
solicit or encourage, nor will any member of the Racal Group
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knowingly initiate, solicit, or encourage through any officer,
director, employee or agent of any thereof (including by way of
furnishing information), or take any other action to facilitate
knowingly, any inquiries or the making of any proposal that
constitutes, or would reasonably be expected to lead to, any
Competing Transaction;
19. except as expressly provided for in the existing terms of the
Reorganisation Documents and the Railtrack Agreements, not contract
or engage or engage in any other arrangement between any member of
the Telecom Group (on the one hand) and any member of the Racal group
or any of its affiliates (on the other hand) other than on arm's
length terms;
20. not amend, modify, waive or supplement any of the existing terms of
the Reorganisation Documents or the Railtrack Agreements;
21. not invest in, lend to or otherwise transfer to any property or
assets to Racal USA or ION;
22. not permit Racal USA to incur any liability, contingent or otherwise;
23. not enter into new contracts or commitments for the sale, lease or
transfer of network capacity, including dark fibre and IRUs;
24. to procure that all payments to be made by the Telecom Group in
respect of the amount under the heading "ESOT" in the Base Line
Balance Sheet ((Pound Sterling)1,811,000) have been made on or prior
to Completion so that the Telecom Group shall have no further
liability or obligations in respect of that amount.
A. In addition to the above, pending Completion, Racal shall procure
that a circular (the "Circular") be sent to Racal's shareholders
convening an extraordinary general meeting of shareholders of Racal
and containing a unanimous recommendation of the board of directors
of Racal to vote in favour of the necessary resolution to approve and
implement the Transaction and the Circular will be despatched to
those entitled to receive the same within ten Business Days of the
date of this Agreement and, prior to the despatch of the Circular,
Global shall be entitled to review and comment on the Circular and
any drafts thereof.
B. Racal shall procure:
(a) to the extent any of the Reorganisation Documents have not
been executed then they are executed by the relevant parties
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as soon as reasonably practicable and in any event no later
than ten Business Days from the date of this Agreement. Any
breach of this undertaking shall entitle Global to terminate
this Agreement pursuant to clause 5.2(b)(ii);
(b) all reasonable assistance requested by Global is provided to
enable Global to obtain consent to changes of control of any
government contracts;
(c) it shall provide all reasonable assistance and access to its
accountants and employees (i) to enable the Telecom UK Group
to consider (and to the extent permitted by the Companies
Act) to enable its members to provide financial assistance
under sections 151-158 of the Companies Act and (ii) to
enable the Telecom Group to be in a position to prepare
accounts complying with US GAAP; and
(d) to cause Racal USA to terminate the Backhaul Services
Agreement - Product Order, dated 4 October 1999, between
Metromedia Fiber Network Services Inc. and Racal Telecom,
Inc.
C. Racal consents to Global's retention of Deloitte & Touche for the
purpose of assisting in the preparation of audited accounts for the
Telecom Group and the issuance of a report thereon.
D. Racal undertakes to prepare and furnish to Global the July Management
Accounts promptly, and in any event within ten Business Days of the
date of this Agreement. Any breach of this undertaking shall entitle
Global to terminate this Agreement pursuant to clause 5.2(b)(ii).
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SCHEDULE XI
Property Reorganisation
Part A: leasehold properties to be assigned to RTL
[Schedule not included]
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Part B: leasehold properties to be assigned to RPL and to be sublet to RTL
[Schedule not included]
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Part C: leasehold properties to be sublet to RTL
[Schedule not included]
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Part D: leasehold properties to be assigned to RTL
[Schedule not included]
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Part E: leasehold properties to be assigned to RPL and sublet
[Schedule not included]
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SCHEDULE XII
Outstanding Negotiations
Part A
Engrossments or Equivalent
Data Room Reference Property address
7.2.5 Beckenham Junction
7.2.8 Ardley Tunnel, Bicester
7.2.15 Hills Road, Cambridge
7.2.18 Crown Street, Carlisle
7.2.21 Near Colchester Station
7.2.23 Xxxxxxx Road, Coventry
7.2.29 Xxxxxxxxx Xxxxxx, Xxxxxxxxx
7.2.35 Red Cow Crossing, Exeter
7.2.37 Xxxxx Xxxx, Xxxxxxxxx
0.0.00 Xxxxx 0/0 Xxxxxxx, Xxxxxxx (not engrossment)
7.2.40 Suites 4/5 Skypark, Glasgow (not engrossment)
7.2.55 00 Xxxxxxxxxx Xxxx, Xxxxxx
7.2.58 Clerkenwell Green, London
7.2.61 Rail House, Manchester
7.2.71 Penzance (section 106 Agreement only)
7.2.74 Farlington Junction, Portsmouth
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7.2.94 Gorse Hill, Swindon
7.2.104 Wrottesley Road/Harrow Road, Willesden
7.2.108 Xxxxxx House, York (part property, holding over)
7.5.1 Quayside Tower, Birmingham
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Wayleaves and Licences in the process of negotiation
Party Address Purpose
British Waterways South Quay, Docklands Connection to
highway
Landlord Prince Regent Road, Belfast Diverse cable
entries
Landlord Xxxxx 00/00 Xxxxxxxxx Xxxxxxx xxxxx
Xxxx Xxx Xxxxxxx entries
Xxxxxx Xxxxx Xxxxxx Xxxxx, Xxxxxxxx Drop from viaduct
Management Co to ground
British Railways Board Xxxx Xxxxxx House, Nottingham Diverse cable
entries
Unknown (as yet) Selsdon Way, Docklands Cable chamber
St Boniface College Xxxxx Xxxxx, Plymouth Connection to
highway to railway
Telehouse London Additional rack
space and cable
access wayleaves
Telecity London Additional rack
space
London switch London Rack space
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Part B
Proposed Transactions
Property
Unit A2 [1-4] Surrender of existing Lease of
Xxxxx Court Unit A2 [1-2] by RPL. Grant of
Xxxx Industrial Estate new FRI Lease of Unit A2 [1-4] to
Leigh RTL for term of 15 years at rent
of (Pound Sterling)34,320 p.a.
exclusive subject to 3 yearly
upward only reviews.
Chineham Gate Grant of 4 FRI leases to RTL of
Crockford Lane four main office floors of
Chineham Chineham Gate, Chineham,
Basingstoke Basingstoke for term expiring in
June 2013 at total rent of (Pound
Sterling)595,000 p.a. exclusive
subject to 5 yearly upward only
reviews.
Satec House Purchase of freehold for (Pound
Xxxxxx Xxxx Xxxxxxxx)000,000 by RPL. Grant of
Crewe FRI lease by RPL to RTL for term
of 25 years at rent of (Pound
Sterling)82,500 p.a. exclusive
subject to 5 yearly upward only
reviews.
2-7 Clerkenwell Green Grant of underlease of part of
Xxxxxx XX0 yard at rear of building by RTL to
London Electricity for electrical
transformer chamber for term of 25
years (less 3 days) at rent of
5p. p.a.
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SIGNED by Xxxxx Xxxxxxxxx )
on behalf of ) Xxxxx Xxxxxxxxx
Controls and Communications Limited )
SIGNED by Xxxxx Xxxxxxxxx )
on behalf of ) Xxxxx Xxxxxxxxx
The Racal Corporation )
SIGNED by Xxx Xxxxxx Xxxxxxxx )
on behalf of ) Xxx Xxxxxx Xxxxxxxx
Racal Electronics Plc )
SIGNED by Xxxxxx Xxxxx )
on behalf of ) Xxxxxx Xxxxx
Global Crossing Ltd. )
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