EXHIBIT 10.2
DATED 22 JUNE 2004
THE SEVERAL PERSONS
(as the Obligors)
-------------------------------------
DEED POLL OF WARRANTY AND INDEMNITY
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99 Bishopsgate
London EC2M 3XF
+44 (0)20 7710 1000 (Tel)
+44 (0)20 7374 4460 (Fax)
www.lw.com
Contact: Mike Bond / Rory Negus / Nick Cline
CONTENTS
Clause Page
- ------ ----
1. Interpretation........................................................................................... 1
1.1 Definitions..................................................................................... 1
1.2 Construction of certain references.............................................................. 3
1.3 Several liabilities............................................................................. 4
1.4 Headings........................................................................................ 4
1.5 Schedules....................................................................................... 4
2. Warranties............................................................................................... 5
2.1 General......................................................................................... 5
2.2 Purchaser's knowledge........................................................................... 5
2.3 Warranties to be independent.................................................................... 5
2.4 Damages......................................................................................... 5
2.5 Waiver of Claims................................................................................ 5
3. Restriction of Warrantors................................................................................ 6
3.1 Peter Gabriel................................................................................... 6
3.2 Restricted Business............................................................................. 6
3.3 Undertakings.................................................................................... 6
3.4 Separate undertakings........................................................................... 7
3.5 Reasonableness.................................................................................. 7
3.6 Void or unenforceable restrictions.............................................................. 7
3.7 Confidential information concerning the Company................................................. 8
4. Indemnities.............................................................................................. 8
4.1 Tax ........................................................................................... 8
4.2 Failure to give notice.......................................................................... 8
4.3 Termination of Subscription Agreement........................................................... 8
5. Working capital adjustment............................................................................... 8
6. Orderly sales restrictions............................................................................... 8
7. Confidentiality.......................................................................................... 9
7.1 Confidentiality................................................................................. 9
7.2 Permitted disclosure or use..................................................................... 9
7.3 Continuance of restrictions..................................................................... 9
8. Announcements............................................................................................ 10
8.1 Restrictions.................................................................................... 10
8.2 Permitted announcements......................................................................... 10
8.3 Continuance of restrictions..................................................................... 10
8.4 Announcements to customers and suppliers........................................................ 10
9. Provisions relating to this Deed......................................................................... 10
9.1 Exchange rates.................................................................................. 10
9.2 Assignment...................................................................................... 10
9.3 Whole agreement and variations.................................................................. 11
9.4 Deed survives Completion........................................................................ 11
9.5 Rights etc cumulative and other matters......................................................... 11
9.6 Release of Warrantors........................................................................... 11
9.7 Invalidity...................................................................................... 11
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9.8 Counterparts.................................................................................... 11
9.9 Costs........................................................................................... 11
9.10 Termination..................................................................................... 12
9.11 Notices......................................................................................... 12
10. Law and Jurisdiction..................................................................................... 14
10.1 English Law..................................................................................... 14
10.2 Jurisdiction.................................................................................... 14
10.3 Process Agent................................................................................... 14
10.4 Contracts (Rights of Third Parties) Act 1999.................................................... 15
schedule 1 : The Warrantors....................................................................................... 16
schedule 2 : The Investors........................................................................................ 17
schedule 3 : The Company.......................................................................................... 20
schedule 4 : The Subsidiaries..................................................................................... 22
schedule 5 : Warranties and Representations....................................................................... 26
schedule 6 : Tax.................................................................................................. 55
schedule 7 : Particulars of Premises.............................................................................. 68
schedule 8 : Obligors' Protection................................................................................. 70
schedule 9 : Escrow Mechanism..................................................................................... 73
schedule 10 : Obligors' Professional Fees......................................................................... 79
schedule 11 : Tax Indemnity....................................................................................... 80
schedule 12 : Working Capital Adjustment.......................................................................... 89
schedule 13 : Orderly Sales Provisions............................................................................ 94
schedule 14 : Employer National Insurance Limits.................................................................. 97
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THIS DEED POLL is made on 22 June 2004
BY
(1) THE SEVERAL PERSONS, (the "WARRANTORS") whose names and addresses are set
out in columns 1 and 2 of schedule 1; and
(2) THE SEVERAL PERSONS, (the "INVESTORS") whose names and addresses are set
out in columns 1 and 2 of schedule 2.
BACKGROUND:
(A) The Purchaser (as defined below) is considering making an offer (the
"OFFER") to purchase the entire issued and to be issued share capital of
On Demand Distribution Limited.
(B) In order to induce the Purchaser to make the Offer the Obligors are
entering into this Deed Poll intended to be for the benefit of the
Purchaser to, amongst other things, make the warranties as set out in this
Deed.
NOW IT IS AGREED AS FOLLOWS:
1. INTERPRETATION
1.1 DEFINITIONS
In this Deed, unless the context otherwise requires:
"AFFILIATE" means, in relation to a body corporate, any subsidiary or
holding company of such body corporate, and any subsidiary of any such
holding company for the time being;
"AGREED FORM" means, in relation to any document, a document in the terms
signed or initialled by or on behalf of the parties for identification;
"AUDITED ACCOUNTS" means the audited consolidated balance sheet of the
Company and the Subsidiaries made up as at the Balance Sheet Date and the
audited consolidated profit and loss account of the Company and the
Subsidiaries in respect of the financial year ended on the Balance Sheet
Date including, in each case, the notes thereto and the directors' report
and auditors' report;
"BALANCE SHEET DATE" means 31 March 2004;
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which
banks are open for ordinary banking business in London and Seattle,
Washington USA;
"CLAIM" means any claim by the Purchaser under this Deed including, but
without limitation, under the Warranties, the restrictive covenants in
clause 3, the indemnities in clause 4, the tax indemnity in schedule 11
and the working capital adjustment in schedule 12;
"COMPANY" means On Demand Distribution Limited, a company registered in
England and Wales under company number 03935034, with its registered
office at Box Mill, Mill Lane, Box, Corsham, Wiltshire, SN13 8PN;
"COMPANIES ACTS" means statutes from time to time in force concerning
companies including (without limitation) the Companies Act 1985, the
Companies Act 1989, Part V of the Criminal Justice Act 1993 and the
Companies Consolidation (Consequential Provisions) Act 1985;
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"COMPLETION" means completion of the transfer to the Purchaser of 100% of
the OD2 Shares the subject of the Offer;
"COMPLETION ACCOUNTS" means the accounts prepared in accordance with
schedule 12;
"COMPLETION DATE" means the date of Completion;
"CONSIDERATION" means the total consideration (in cash, Loudeye Shares,
Promissory Notes, Contingent Value Right or otherwise) including any
deferred or contingent consideration to be paid for the OD2 Shares
pursuant to the Offer;
"CONTINGENT VALUE RIGHT" shall have the meaning ascribed to it in the
Offer Document;
"DIRECTORS" means in relation to the Company or any of the Subsidiaries,
its directors;
"DISCLOSURE LETTER" means the letter dated the date hereof written and
delivered by or on behalf of the Warrantors to the Purchaser in Agreed
Form;
"EMPLOYEE" means any individual employed by or engaged to provide services
to the Company or to any Subsidiary;
"ENCUMBRANCE" includes any interest or equity of any person (including any
right to acquire, option or right of pre-emption); any mortgage, charge,
pledge, lien, assignment, hypothecation, security interest (including any
created by law), title retention or other security agreement or
arrangement; and any rental, hire purchase, credit or conditional sale or
other agreement for payment on deferred terms;
"ESCROW ACCOUNT" means an interest bearing account to be held by a
mutually acceptable escrow agent on such terms as the Obligors and the
Purchaser may agree, such agreement not to be unreasonably withheld;
"ESCROW CASH" means any cash paid into the Escrow Account;
"ESCROW SHARES" means the Loudeye Shares held by the Purchaser in
accordance with paragraph 1 of schedule 9;
"FURTHER LOUDEYE SHARES" shall have the meaning ascribed to it in the
Offer Document;
"GROUP" means the Company and its subsidiaries and each a Group Company;
"INITIAL LOUDEYE SHARES" shall have the meaning ascribed to it in the
Offer Document;
"LAW" or "LAWS" includes all applicable legislation, statutes, directives,
regulations, judgments, decisions, decrees, orders, instruments, by-laws,
and other legislative measures or decisions having the force of law,
treaties, conventions and other agreements between states, or between
states and the European Union or other supranational bodies, rules of
common law, customary law and equity and all civil or other codes and all
other laws of, or having effect in, any jurisdiction from time to time and
whether before or after the date of this Deed;
"LONDON STOCK EXCHANGE" means London Stock Exchange plc;
"LOUDEYE SHARES" means shares of common stock, par value $0.001 per share,
of the Purchaser;
"OBLIGORS" means together the Warrantors and the Investors and each an
Obligor;
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"OD2 SHARES" shall have the meaning ascribed to it in the Offer Document;
"OFFER" means the offer by the Purchaser to acquire the OD2 Shares;
"OFFER DATE" means the date upon which the Offer is declared wholly
unconditional;
"OFFER DOCUMENT" means the document proposed to be sent to, amongst
others, the shareholders in the Company setting out the terms of the
Offer;
"PREMISES" means the land and premises particulars of which are set out in
schedule 7;
"PROMISSORY NOTES" shall have the meaning ascribed to it in the Offer
Document;
"PURCHASER" means Loudeye Corp., a company incorporated under the laws of
the State of Delaware, with its principal place of business at 1130
Rainier Avenue South, Seattle, Washington 98144, United States of America;
"PURCHASER'S GROUP" means the Purchaser and each of its Affiliates;
"RELEVANT CLAIM" means any claim under this Deed for a breach of the
Warranties or the tax indemnity provisions in schedule 11;
"REPRESENTATIVE" shall have the meaning set out in schedule 9;
"RESTRICTED BUSINESS" has the meaning given in clause 3.1;
"SUBSIDIARIES" means the companies details of which are set out in
schedule 4; and
"WARRANTIES" means the warranties set out in schedule 5 and schedule 6.
1.2 CONSTRUCTION OF CERTAIN REFERENCES
In this Deed, where the context admits:
(A) words and phrases the definitions of which are contained or referred
to in Part XXVI Companies Act 1985 shall have the meanings thereby
attributed to them;
(B) every reference to a particular statutory provision or other Law
shall be construed also as a reference to:
(1) all other Laws made under the Law referred to; and
(2) (except to the extent that it would create or increase the
liability of any party under this Deed) to all such Laws as
amended, re-enacted, consolidated or replaced or as their
application or interpretation is affected by other Laws from
time to time,
whether before or after the date of this Deed;
(C) where any statement is to the effect that the Warrantors are
not aware of any matter or circumstance, or is a statement
qualified by the expression "so far as the Warrantor are
aware" or "to the best of the Warrantors' knowledge and
belief" or any similar expression, that statement shall be
deemed to include an additional statement that it has been
made after reasonable enquiry and the same shall apply in
relation to such statements as to the awareness or knowledge
of any other person;
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(D) references to clauses and schedules are references to clauses
of and schedules to this Deed, references to paragraphs are,
unless otherwise stated, references to paragraphs of the
schedule in which the reference appears, references to
exhibits are to documents in Agreed Form identified as such
and references to this Deed include the schedules and
exhibits;
(E) references to the singular shall include the plural and vice
versa and references to the masculine, the feminine and the
neuter shall include each other such gender;
(F) "person" includes any individual, partnership, body corporate,
corporation sole or aggregate, state or agency of a state, and
any unincorporated association or organisation, in each case
whether or not having separate legal personality;
(G) "company" includes any body corporate;
(H) references to the Warrantors include a reference to each of
them;
(I) references to the Investors include a reference to each of
them;
(J) references to the Obligors include a reference to each of
them;
(K) references to "indemnify" and "indemnifying" any person
against any liability or circumstance include indemnifying him
and keeping him harmless from all actions, claims, demands and
proceedings from time to time made against that person and all
losses, damages, payments, costs and expenses (including legal
costs and expenses on a full indemnity basis) made, suffered
or incurred by that person as a consequence of or which would
not have arisen but for that liability or circumstance and
where any payment made under any indemnity is subject to any
Tax (as defined in schedule 6) or cost or expense which would
not have been incurred by the payee but for the payment, it
shall be increased by such amount as is necessary to ensure
that the payee receives the same net amount as it would have
received had the payment not been so subject;
(L) words introduced by the word "other" shall not be given a
restrictive meaning because they are preceded by words
referring to a particular class of acts, matters or things;
and
(M) general words shall not be given a restrictive meaning because
they are followed by words which are particular examples of
the acts, matters or things covered by the general words and
the word "including" shall be construed without limitation.
1.3 SEVERAL LIABILITIES
Save as is otherwise mentioned in this Deed, all warranties,
representations, indemnities, covenants, agreements and obligations given
or entered into by more than one person in this Deed are given or entered
into severally, and in respect of the Investors, in relation to himself
only.
1.4 HEADINGS
The headings and sub-headings are inserted for convenience only and shall
not affect the construction of this Deed.
1.5 SCHEDULES
Each of the schedules shall have effect as if set out herein.
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2. WARRANTIES
2.1 GENERAL
Subject to the provisions of schedule 8:
(A) the Warrantors hereby jointly and severally warrant to and for the
benefit of the Purchaser in the terms of the Warranties and
acknowledge and accept that the Purchaser will make the Offer in
reliance upon each of the Warranties each of which is given on the
basis that it will remain true and accurate at all times up to the
Offer Date; and
(B) the Investors hereby warrant to and for the benefit of the Purchaser
in the terms of the warranties set out in paragraphs 2.1, 2.2 and 14
of schedule 5 so far as the same shall relate only to each Investor,
and acknowledge and accept that the Purchaser will make the Offer in
reliance upon each of the Warranties each of which is given on the
basis that it will remain true and accurate at all times up to the
Offer Date.
Any sum payable, or deemed payable, out of the Escrow Shares or the Escrow
Account in respect of any breach of the Warranties shall be treated as a
reduction in the Consideration.
2.2 PURCHASER'S KNOWLEDGE
The Warranties are given subject to matters fairly disclosed in this Deed
or in the Disclosure Letter with sufficient details to identify the nature
and scope of the matters disclosed.
2.3 WARRANTIES TO BE INDEPENDENT
Each of the Warranties shall be separate and independent and, save as
expressly provided, shall not be limited by reference to any other
Warranty or anything in this Deed.
2.4 DAMAGES
Subject to the provisions of schedule 8, in the event that any of the
Warranties is broken or untrue or misleading the amount deemed to be
payable (as far as possible by way of repayment of the Consideration) as
agreed liquidated damages shall be the aggregate of:
(A) the amount necessary to put the Purchaser, the Company and each of
the Subsidiaries into the position which would have existed if the
Warranties had not been broken and had been true and not misleading,
including the amount by which the value of any asset or contract
(including one warranted to exist but not in fact existing) thereby
is or becomes less and the amount of any liability which thereby
arises or is or becomes greater or which the Company or any
Subsidiary thereby incurs or to which any of them thereby becomes
subject; and
(B) all costs and expenses reasonably incurred by the Purchaser, the
Company or any of the Subsidiaries, directly or indirectly, as a
result of such breach or in order to remedy the same
and amounts payable under this clause 2.4 shall be determined without
reference to the Laws relating to the computation of damages for breach of
warranty. For the avoidance of doubt any such amount shall be settled from
the Escrow Shares or the Escrow Cash in accordance with the provisions of
schedule 8 and schedule 9.
2.5 WAIVER OF CLAIMS
The Obligors undertake to and for the benefit of the Purchaser that they
will not make or pursue any claim or action howsoever arising against any
of the "THIRD PARTIES" (being the Company, any of
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the Subsidiaries or any of the Employees) in respect of any loss or
liability the Obligors may incur pursuant to this Deed (or any other
document referred to herein) or otherwise in connection with the making of
the Offer, the preparation of the Offer Document, the sale of the OD2
Shares to the Purchaser or the preparation of the Disclosure Letter. The
rights of the Third Parties under this clause 2.5 are intended to be
enforceable under the Contracts (Rights of Third Parties) Act 1999 but
subject to the terms that the Purchaser has the right (which it may waive
in whole or in part in its absolute discretion and without the consent of
any Third Party) to have the sole conduct of any proceedings in relation
to the enforcement of such rights (including any decision as to the
commencement or compromise of such proceedings) but will not owe any duty
or have any liability to any of the Third Parties in relation to such
conduct. The rights of the Third Parties under this clause 2.5 are not
assignable and are subject to clauses 9.2 and 10 and the parties to this
Deed may rescind or vary this Deed without the consent of any of the Third
Parties.
3. RESTRICTION OF WARRANTORS
3.1 PETER GABRIEL
(A) Subject to clauses 3.1(B) and 3.1(C) below, Peter Gabriel undertakes
(for the benefit of the Purchaser, the Company, the Subsidiaries and
the Purchaser's successors in title) that he will not for the period
of 12 months from the date of this Deed:
(1) carry on or be engaged in any business which is wholly or
partly in competition with the Company or any member of the
Group with respect to the digital distribution of master
recordings as carried on by the Company;
(2) solicit or entice away or endeavour to entice away from the
Company or any Group Company any person who at the date of
this Deed or within 12 months hereof was a director or
employee of the Company, including for the avoidance of doubt
Charles Grimsdale, Ed Averdieck, John Grinham and David
Shepherd.
(B) It is acknowledged that Peter Gabriel has other business interests
relating inter alia to master recordings, musical compositions and
audio visual material and the exploitation thereof whether the
performances are those of Peter Gabriel or those of other performers
and nothing herein will interfere with the exploitation thereof
howsoever and Peter Gabriel shall be free to exploit such materials
with his third party licensees without fetter or inhibition.
(C) In the event that the Purchaser makes any damages claim against
Peter Gabriel or the Obligors for breach of the covenants in clause
3.1(A), the provisions of paragraphs 2.1 and 2.2 of schedule 8 shall
apply, but in no event will this in any way limit the ability of the
Purchaser to seek any equitable remedy for such breach, including
without limitation, injunctive relief.
3.2 RESTRICTED BUSINESS
In the remainder of this clause 3, "RESTRICTED BUSINESS" means the
business of providing digital media services to third party media
companies and retailer partners wheresoever carried on.
3.3 UNDERTAKINGS
Each of the Warrantors undertakes (for the benefit of the Purchaser, the
Company, the Subsidiaries and the Purchaser's successors in title) that it
will not from the date of this Deed:
(A) for the period of 30 months after the Offer Date, either on his own
account or in conjunction with or on behalf of any person, firm or
company, carry on or be engaged, concerned or
6
interested (directly or indirectly and whether as principal,
shareholder, director, employee, agent, consultant, partner or
otherwise) in carrying on any Restricted Business, other than:
(1) as a holder for investment purposes only (which shall exclude
a management function or material influence) of any shares,
debentures or other participation and a holding of not more
than 10 per cent of any class of shares or debentures shall be
deemed to be for investment purposes unless the contrary is
shown; or
(2) pursuant to any commercial agreement with any member of the
Purchaser's Group including the Group; and
(B) for the period of 30 months after the Offer Date, either on his own
account or in conjunction with or on behalf of any person, firm or
company, solicit or endeavour to entice away from the Company or any
of the Subsidiaries any person who at the Offer Date is (or who
within a period of one year prior to the Offer Date has been) an
officer, manager, senior employee, agent or consultant of the
Company or any of the Subsidiaries whether or not such person would
commit a breach of contract by reason of leaving service or office;
and
(C) for the period of 30 months after the Offer Date, either on his own
account or in conjunction with or on behalf of any person, firm or
company, in connection with any Restricted Business, solicit the
custom of or endeavour to entice away from the Company or any of the
Subsidiaries any person who at the Offer Date is (or who within a
period of one year prior to the Offer Date has been) a client or
customer of the Company or any of the Subsidiaries whether or not
such person would commit a breach of contract by reason of
transferring business; and
(D) at any time after the date of this Deed, directly or indirectly use
or attempt to use in the course of any business on its own account
or in conjunction with or on behalf of any person, firm or company,
any valid trade or service mark, trade name, design or logo (whether
registered or not and including the Listed IP referred to in
schedule 5) used in the business of the Company or any of the
Subsidiaries or any other name, logo, trade or service mark or
design which is or might be confusingly similar thereto.
3.4 SEPARATE UNDERTAKINGS
Each of the undertakings in clauses 3.1(A)(1), 3.1(A)(2), 3.3(A), 3.3(B),
3.3(C) and 3.3(D) shall be construed as a separate and independent
undertaking and if one or more of the undertakings is held to be void or
unenforceable, the validity of the remaining undertakings shall not be
affected.
3.5 REASONABLENESS
Each of Peter Gabriel, the Warrantors and the Obligors agree that each of
the restrictions and undertakings contained in clauses 3.1 and 3.3 are
reasonable and necessary for the protection of the Purchaser's legitimate
interests in the goodwill of the Company and the Subsidiaries, but if any
such restriction or undertaking shall be found to be void or voidable but
would be valid and enforceable if some part or parts of the restriction or
undertaking were deleted, such restriction or undertaking shall apply with
such modification as may be necessary to make it valid and enforceable.
3.6 VOID OR UNENFORCEABLE RESTRICTIONS
Without prejudice to clause 3.5, if any restriction or undertaking is
found by any court or other competent authority to be void or
unenforceable the parties shall negotiate in good faith to replace such
void or unenforceable restriction or undertaking with a valid provision
which, as far as possible, has the same commercial effect as that which it
replaces.
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3.7 CONFIDENTIAL INFORMATION CONCERNING THE COMPANY
Each of the Obligors shall not and shall procure that none of their
Affiliates or the officers, employees or agents of that Obligor or of any
such Affiliate shall make use of or divulge to any other party (other than
to the Obligors' professional advisers for any purposes of this Deed or
any matter arising out of it in which case the Obligors shall use all
reasonable endeavours to procure that such advisers keep such information
confidential on terms equivalent to this clause 3.7) any confidential
information relating to the Company and the Subsidiaries save only:
(A) in so far as the same has become public knowledge otherwise than,
directly or indirectly, through the breach by any Obligor of this
clause 3.7 or the failure of any such Affiliate, officer, employee
or professional adviser referred to above to keep the same
confidential; or
(B) to the extent required by Law or by any supervisory or regulatory
body having jurisdiction over them and whether or not the
requirement has the force of Law.
4. INDEMNITIES
4.1 TAX
Subject to the provisions of schedule 8, the Warrantors indemnify the
Purchaser in relation to tax liabilities on the terms of schedule 11.
4.2 FAILURE TO GIVE NOTICE
The Warrantors agree to indemnify the Purchaser and the Company against
all liabilities which may arise by the Company not having given sufficient
notice of the Offer to each holder of warrants granted by the Company or
loan notes issued by the Company.
4.3 TERMINATION OF SUBSCRIPTION AGREEMENT
The Warrantors agree to indemnify the Purchaser and the Company against
all liabilities which may arise under the subscription agreement (the
"SUBSCRIPTION AGREEMENT") dated 28 September 2000 between:
(A) Nick McKeown, Brent Bilger, Morgan Littlewood, Jeremy McKeown
(together the "ANGELS");
(B) the Company, and
(C) Peter Gabriel and Charles Grimsdale
in relation to the Company not continuing to supply after the Offer Date
any information to the Angels as required under clause 4 of the
Subscription Agreement. The Warrantors will use all reasonable endeavours
to procure the termination of and the release of the Company from the
Subscription Agreement as soon as possible following the Offer Date.
5. WORKING CAPITAL ADJUSTMENT
The provisions of schedule 12 shall apply in relation to an adjustment
which may be payable to the Purchaser in respect of a change in the
working capital of the Company.
6. ORDERLY SALES RESTRICTIONS
The provisions of schedule 13 shall apply in relation to the sale of any
Loudeye Shares.
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7. CONFIDENTIALITY
7.1 CONFIDENTIALITY
Subject to clause 7.2 and to clause 8 and without prejudice to clause 3.7,
the Obligors:
(A) shall treat as strictly confidential the provisions of this Deed and
the process of the negotiation and all information about any other
person obtained or received by it as a result of negotiating,
entering into or performing its obligations under this Deed
("CONFIDENTIAL INFORMATION"); and
(B) shall not, except with the prior written consent of the Purchaser
(which shall not be unreasonably withheld or delayed), make use of
(save for the purposes of performing its obligations under this
Deed) or disclose to any person any Confidential Information.
7.2 PERMITTED DISCLOSURE OR USE
Clause 7.1 shall not apply if and to the extent that the person using or
disclosing Confidential Information can demonstrate that:
(A) such disclosure is required by Law or by any supervisory, regulatory
or governmental body having jurisdiction over it (including the
London Stock Exchange, the Financial Services Authority, the Panel
on Take-overs and Mergers, the Serious Fraud Office, the Securities
and Exchange Commission and NASDAQ) and whether or not the
requirement has the force of Law; or
(B) such disclosure is made for the purposes of a contract or
arrangement to which a Group Company is a party, in connection with
obtaining the consent of a counter-party to such contract to the
change in control of the Company resulting from the Offer; or
(C) such disclosure is to its professional advisers in relation to the
negotiation, entry into or performance of this Deed or any matter
arising out of the same; or
(D) such disclosure is required in order to facilitate any assignment or
proposed assignment of the whole or any part of the rights or
benefits under this Deed which is permitted by clause 9.2; or
(E) in the case of disclosure or use, the Confidential Information
concerned was lawfully in its possession (as evidenced by written
records) prior to its being obtained or received as described in
clause 7.1(A); or
(F) in the case of disclosure or use, the Confidential Information
concerned has come into the public domain other than through its fault or
the fault of any person to whom such Confidential Information has been
disclosed in accordance with clause 7.1(B).
7.3 CONTINUANCE OF RESTRICTIONS
The restrictions contained in this clause 7 shall survive Completion and
shall continue without limit of time.
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8. ANNOUNCEMENTS
8.1 RESTRICTIONS
Subject to clauses 8.2 and 8.4, and whether or not any restriction
contained in clause 7 applies, no party to this Deed shall make any
announcement, (including any communication to the public, to any customers
or suppliers of the Company, or to all or any of the employees of the
Company) concerning the provisions or subject matter of this Deed or
containing any information about any other party without the prior written
approval of the Purchaser (which shall not be unreasonably withheld or
delayed).
8.2 PERMITTED ANNOUNCEMENTS
Clause 8.1 shall not apply if and to the extent that such announcement is
required by Law or by any supervisory, regulatory or governmental body
having jurisdiction over it (including the London Stock Exchange, the
Financial Services Authority, The Panel on Take-overs and Mergers, the
Serious Fraud Office, the Securities and Exchange Commission and NASDAQ)
and whether or not the requirement has the force of Law and provided that
any such announcement shall be made only after consultation with the other
parties. The Obligors consent to the terms of this Deed being filed with
the Securities and Exchange Commission without prior consultation.
8.3 CONTINUANCE OF RESTRICTIONS
The restrictions contained in this clause 8 shall survive Completion and
shall continue without limit of time.
8.4 ANNOUNCEMENTS TO CUSTOMERS AND SUPPLIERS
The Obligors and the Purchaser shall as soon as practicable after
Completion procure that a joint announcement of the sale and purchase of
the OD2 Shares is made to the customers and suppliers of the Company and
each Subsidiary in such form as they may agree.
9. PROVISIONS RELATING TO THIS DEED
9.1 EXCHANGE RATES
Where in this Deed any amount (the "AMOUNT") is required to be converted
between US Dollars and GB Pounds or vice versa, the rate to be used shall
be the mid-range (pound)/U.S. Dollar closing price as reported in the Wall
Street Journal on the last day of publication of the Wall Street Journal
before the determination of the Amount to be paid.
9.2 ASSIGNMENT
(A) This Deed shall be binding upon and enure for the benefit of the
successors of the parties or beneficiaries, but shall not be
assignable, save that the Purchaser may at any time assign all or
any part of its rights and benefits under this Deed, including any
of the Warranties and any other indemnities, undertakings and
obligations given or undertaken by the Warrantors and any cause of
action arising under or in respect of any of them, to any member of
the Purchaser's Group for so long as such assignee shall remain part
of the Purchaser's Group.
(B) Every such assignee shall be entitled to enforce the benefits
conferred upon it by such assignment and this clause 9.2 directly
against the Warrantors as permitted by the Contracts (Rights of
Third Parties) Act 1999 and for that purpose each such assignee
shall be entitled to the benefit of and be subject to all the
provisions of this Deed in any way relevant to the
10
rights assigned to it and conferred upon it by this clause 9.2. The
consent of no such assignee shall be required to any amendment to
this Deed.
9.3 WHOLE AGREEMENT AND VARIATIONS
(A) This Deed, together with any documents referred to in it,
constitutes the whole agreement between the parties relating to its
subject matter and supersedes and extinguishes any prior drafts,
agreements, and undertakings, whether in writing or oral, relating
to such subject matter, except to the extent that the same are
repeated in this Deed.
(B) No variation of this Deed shall be effective unless the prior
written consent of the Purchaser is obtained and following such
consent any amendment is made in writing and signed by each of the
parties.
9.4 DEED SURVIVES COMPLETION
The Warranties and all other provisions of this Deed, in so far as the
same shall not have been performed at Completion, shall remain in full
force and effect notwithstanding Completion.
9.5 RIGHTS ETC CUMULATIVE AND OTHER MATTERS
(A) The rights, powers, privileges and remedies provided in this Deed
are cumulative and are not exclusive of any rights, powers,
privileges or remedies provided by law or otherwise.
(B) No failure to exercise nor any delay in exercising any right, power,
privilege or remedy under this Deed shall in any way impair or
affect the exercise thereof or operate as a waiver thereof in whole
or in part.
(C) No single or partial exercise of any right, power, privilege or
remedy under this Deed shall prevent any further or other exercise
thereof or the exercise of any other right, power, privilege or
remedy.
9.6 RELEASE OF WARRANTORS
The Purchaser may release or compromise the liability of any of the
Obligors hereunder without affecting the liability of the other Obligors,
but such a release shall not act to increase the liability of any
remaining Obligor.
9.7 INVALIDITY
If any provision of this Deed shall be held to be illegal, void, invalid
or unenforceable under the Laws of any jurisdiction, the legality,
validity and enforceability of the remainder of this Deed in that
jurisdiction shall not be affected, and the legality, validity and
enforceability of the whole of this Deed in any other jurisdiction shall
not be affected.
9.8 COUNTERPARTS
This Deed may be executed in any number of counterparts, which shall
together constitute one Deed. Any party may enter into this Deed by
signing any such counterpart.
9.9 COSTS
Save as set out below, each party shall bear their own costs arising out
of or in connection with the preparation, negotiation and implementation
of this Deed. The Purchaser will pay the Obligors' reasonable accountancy,
legal and other costs and expenses incurred from the advisers listed in
11
schedule 10, actually incurred in relation to the preparation and
negotiation of the Offer, up to an aggregate limit of (pound)1,000,000
(inclusive of VAT), but the payment shall be conditional upon the Offer
having been made and becoming unconditional in all respects and the
Obligors providing in a form reasonably acceptable to the Purchaser the
following information in relation to such professional costs:
(A) a certification from the relevant professional advisor that the
rates charged are their standard rates and all time incurred in
relation to the said costs have been incurred solely in relation to
the Offer; and
(B) where applicable a copy of an invoice(s) which sets out the fee
earners, number of hours worked and the hourly rates applicable to
the fee earners, and details the total amount payable by the
Obligors to the relevant professional advisor.
9.10 TERMINATION
This Deed shall terminate and be of no further effect in the event that
the Offer lapses in accordance with its terms.
9.11 NOTICES
(A) Any notice or other communication required to be given under this
Deed or in connection with the matters contemplated by it shall,
except where otherwise specifically provided, be in writing in the
English language and shall be addressed as provided in clause
9.11(B) and may be:
(1) personally delivered, in which case it shall be deemed to have
been given upon delivery at the relevant address; or
(2) if within the United Kingdom, sent by first class pre-paid
post, in which case it shall be deemed to have been given two
Business Days after the date of posting; or
(3) if from or to any place outside the United Kingdom, sent by
pre-paid airmail or by air courier, in which case it shall be
deemed to have been given seven Business Days after the date
of posting in the case of airmail or two Business Days after
delivery to the courier in the case of air courier; or
(4) sent by fax, in which case it shall be deemed to have been
given when despatched, subject to confirmation of
uninterrupted transmission by a transmission report provided
that any notice despatched by fax after 17:00 hours (at the
place where such fax is to be received) on any day shall be
deemed to have been received at 09:00 on the next Business
Day.
(B) The addresses and other details of the parties referred to in clause
9.11(A) are, subject to clause 9.11(C):
For the Warrantors:
Name: Christopher Pike
(the "WARRANTORS' REPRESENTATIVE")
Address: On Demand Distribution Limited
Broad Quay House
Prince Street
12
Bristol
BS1 4DJ
Fax number: +44 (0)1179 058 828
For the Investors (excluding
Peter Gabriel and Michael Large):
Name: Quester Venture Partnership LLP
(the "INVESTORS' REPRESENTATIVE")
For the attention of: Jamie Brooke
Address: 29 Queen Anne's Gate
London
SW1H 9BU
UK
Fax number: +44 (0)207 222 5250
For Peter Gabriel and Michael Large:
Name: Michael Large
Address: The Malting Barn
185 Top Lane
Whitley
Melksham
SN12 8QL
UK
Fax number: 01225 744 370
For the Purchaser:
Name: Loudeye Corp.
For the attention of: Larry Madden
Address: 1130 Rainier Avenue South
Seattle
WA 98144
United States of America
Fax number: +1 206 832 4301
13
(C) Any party to this Deed may notify the other parties of any change to
its address or other details specified in clause 9.11(B) including
in the case of the Warrantors and the Investors, the name of their
respective representative provided that such notification shall only
be effective on the date specified in such notice or five Business
Days after the notice is given, whichever is later.
(D) For the purposes of this clause 9.11, the Warrantors shall together
constitute one party, notices to the Warrantors' Representative
addressed as set out in clause 9.11(B) shall be notice to all the
Warrantors, and any notice referred to in clause 9.11(C) shall be
signed on behalf of all of them. Any notice signed by or on behalf
the Warrantors' Representative, when served in accordance with this
clause 9.11, shall take effect as notice given by all the
Warrantors.
(E) For the purposes of this clause 9.11, the Investors (excluding Peter
Gabriel and Michael Large) shall together constitute one party,
notices to the Investors' Representative addressed as set out in
clause 9.11(B) shall be notice to all the Investors, and any notice
referred to in clause 9.11(C) shall be signed on behalf of all of
them. Any notice signed by or on behalf the Investors'
Representative, when served in accordance with this clause 9.11,
shall take effect as notice given by all the Investors.
(F) For the purposes of this clause 9.11, Peter Gabriel and Michael
Large shall together constitute one party and notices to Michael
Large addressed as set out in clause 9.11(B) shall be notice to each
of Peter Gabriel and Michael Large, and any notice referred to in
clause 9.11(C) shall be signed on behalf of all of them. Any notice
signed by or on behalf the Michael Large, when served in accordance
with this clause 9.11, shall take effect as notice given by both of
Peter Gabriel and Michael Large.
10. LAW AND JURISDICTION
10.1 ENGLISH LAW
This Deed shall be governed by, and construed in accordance with, English
Law.
10.2 JURISDICTION
In relation to any legal action or proceedings to enforce this Deed or
arising out of or in connection with this Deed ("PROCEEDINGS") each of the
parties irrevocably submits to the exclusive jurisdiction of the English
courts and waives any objection to Proceedings in such courts on the
grounds of venue or on the grounds that the Proceedings have been brought
in an inappropriate forum.
10.3 PROCESS AGENT
(A) Each of Investment Enterprise Partnership `NIF New Technology Fund
99A', Investment Enterprise Partnership `NIF New Technology Fund
99B', Investment Enterprise Partnership `NIF New Technology Fund
2000/01', Investment Enterprise Partnership `NIF New Technology Fund
2000/02', Investment Enterprise Partnership `NIF 21-ONE(1) and NIF
Ventures Co. Ltd (together the "NIF FUNDS"), appoint Quester Venture
Partnership, LLP of 29 Queen Anne's Gate, London, SW1H 9BU, UK as
their process agent to receive on their behalf service of process in
any proceedings in England. Service upon the process agent shall be
good service upon each of the NIF Funds whether or not it is
forwarded to and received by any of the NIF Funds. If for any reason
the process agent ceases to be able to act as process agent, or no
longer has an address in England, the NIF Funds irrevocably agree to
appoint a substitute process agent with an address in England
acceptable to the Purchaser and to deliver to the Purchaser a copy
of the substitute process agent's acceptance of that
14
appointment within 20 Business Days. In the event that the NIF Funds
fail to appoint a substitute process agent, it shall be effective
service for the Purchaser to serve the process upon the last known
address in England of the last known process agent for the NIF Funds
notified to the Purchaser, notwithstanding that such process agent
is no longer found at such address or has ceased to act.
(B) The Purchaser, appoints the Company of Box Mill, Mill Lane, Box,
Corsham, Wiltshire SN13 8PN as its process agent to receive on its
behalf service of process in any proceedings in England. Service
upon the process agent shall be good service upon the Purchaser,
provided always that a copy of any documents served are sent to the
Purchaser in accordance with the provisions of clause 9.11. If for
any reason the process agent ceases to be able to act as process
agent, or no longer has an address in England, the Purchaser
irrevocably agrees to appoint a substitute process agent with an
address in England acceptable to the Obligors and to deliver to the
Obligors a copy of the substitute process agent's acceptance of that
appointment within 20 Business Days. In the event that the Purchaser
fails to appoint a substitute process agent, it shall be effective
service for the Obligors to serve the process upon the last known
address in England of the last known process agent for the Purchaser
notified to the Obligors, notwithstanding that such process agent is
no longer found at such address or has ceased to act.
10.4 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
Except:
(A) pursuant to clauses 2.5, 3.1, 3.3 and 9.2, and
(B) for the benefit of the Purchaser
(in all such cases referred to in clause 10.4(A) and 10.4(B) it being
intended that such person(s) may rely on this Deed) no person who is not a
party to this Deed shall have any right under the Contracts (Rights of
Third Parties) Act 1999 to enforce any term of this Deed.
AS WITNESS the hands of the parties or their duly authorised representatives on
the date first before written have executed this Deed Poll.
15
SCHEDULE 1 : THE WARRANTORS
NUMBER OF OD2
SHARES UNDER
NUMBER OF OD2 EMPLOYEE NUMBER OF OD2
NUMBER OF SHARES UNDER UNAPPROVED SHARES UNDER
NAME OF WARRANTOR ADDRESS OF WARRANTOR OD2 SHARES EMI OPTIONS SHARE OPTION WARRANTS
- ------------------------ --------------------------- ---------- ------------- ------------- -------------
Charles Grimsdale Little Court, Grib Lane, 2,179,950 858,685 1,200,000 62,500
Blagdon, Somerset BS40
7SA
John Grinham 4 Iddesleigh Road, 0 498,591 0 31,863
Redland, Bristol BS6
6YJ
David Shephard 18 Noble Street, Sherston, 0 498,591 0 20,563
Wiltshire SN16 0NA
Edward Averdieck 41 Beauchamp Road, Clapham 0 443,192 0 32,463
Junction, London SW11 1PG
Christopher Pike Top Floor Flat, 18 The 0 415,493 0 0
Avenue, Sneyd Park, Bristol
BS9 1PE
Susan Moule Little Court, Grib Lane, 90,000 0 0 0
Blagdon, Somerset BS40
7SA
16
SCHEDULE 2 : THE INVESTORS
NUMBER OF OD2
SHARES UNDER
NON-EXEC NUMBER OF OD2
DIRECTORS' SHARES UNDER NUMBER OF OD2
NUMBER OF UNAPPROVED UNDER LOAN SHARES UNDER
NAME OF WARRANTOR ADDRESS OF WARRANTOR OD2 SHARES SHARE OPTION NOTES WARRANTS
- ------------------------ --------------------------- ---------- ------------- ------------- -------------
Peter Gabriel Box Mill, Mill Lane, Box, 3,541,650 526,291 1,145,259 0
Corsham, Wiltshire SN13
8PN
Michael Large The Malting Barn, 185 Top 0 249,296 0 0
Lane, Whitley, Melksham
SN12 8QL
Quester Venture 29 Queen Anne's Gate, 1,318,575 0 163,170 0
Partnership, LLP London, SW1H 9BU,
UK
Quester VCT2 plc 29 Queen Anne's Gate, 3,341,188 0 413,462 0
London, SW1H 9BU,
UK
Quester VCT3 plc 29 Queen Anne's Gate, 3,341,188 0 413,462 0
London, SW1H 9BU,
UK
Quester VCT4 plc 29 Queen Anne's Gate, 1,252,637 0 155,007 0
London, SW1H 9BU,
UK
17
NUMBER OF OD2
SHARES UNDER
NON-EXEC NUMBER OF OD2
DIRECTORS' SHARES UNDER NUMBER OF OD2
NUMBER OF UNAPPROVED UNDER LOAN SHARES UNDER
NAME OF WARRANTOR ADDRESS OF WARRANTOR OD2 SHARES SHARE OPTION NOTES WARRANTS
- ------------------------ --------------------------- ---------- ------------- ------------- -------------
Investment Enterprise Daiwa Yaesu Buildings, 275,000 0 0 0
Partnership `NIF New 1-2-1 Kyobashi, Chuo-ku,
Technology Fund 99A' Tokyo 104-0031,
Japan
Investment Enterprise Daiwa Yaesu Buildings, 275,000 0 0 0
Partnership `NIF New 1-2-1 Kyobashi, Chuo-ku,
Technology Fund 99B' Tokyo 104-0031,
Japan
Investment Enterprise Daiwa Yaesu Buildings, 650,000 0 0 0
Partnership `NIF New 1-2-1 Kyobashi, Chuo-ku,
Technology Fund 2000/01' Tokyo 104-0031,
Japan
Investment Enterprise Daiwa Yaesu Buildings, 650,000 0 400,787 0
Partnership `NIF New 1-2-1 Kyobashi, Chuo-ku,
Technology Fund 2000/02' Tokyo 104-0031,
Japan
18
NUMBER OF OD2
SHARES UNDER
NON-EXEC NUMBER OF OD2
DIRECTORS' SHARES UNDER NUMBER OF OD2
NUMBER OF UNAPPROVED UNDER LOAN SHARES UNDER
NAME OF WARRANTOR ADDRESS OF WARRANTOR OD2 SHARES SHARE OPTION NOTES WARRANTS
- ------------------------ --------------------------- ---------- ------------- ------------- -------------
Investment Enterprise Daiwa Yaesu Buildings, 0 0 400,787 0
Partnership Kyobashi, Chuo-ku,
`NIF 21-ONE(1)1-2-1 Tokyo 104-0031,
Japan
NIF Ventures Co. Ltd Daiwa Yaesu Buildings, 787,125 0 343,532 0
1-2-1 Kyobashi, Chuo-ku,
Tokyo 104-0031,
Japan
19
SCHEDULE 3 : THE COMPANY
Name: On Demand Distribution Limited
Number: 3935034
Registered Office: Box Mill, Mill Lane, Box, Corsham, Wiltshire SN13
8PN
Authorised Capital: (pound)3,584,943 comprising 35,849,430 ordinary
shares of(pound)0.10 each
Issued Capital: (pound)1,864,810.20 made up of 18,648,102 ordinary
shares of(pound)0.10 each
Directors: Christopher Paul Russell Pike
Edward Averdieck
James Dominic Brooke
Peter Brian Gabriel
Charles Henry Robertson Grimsdale
John Richard Grinham
Michael David Large
David Shephard
Secretary: Christopher Paul Russell Pike
Accounting Reference Date: 31 March
Auditors: Grant Thornton
Continuing Directors: Christopher Paul Russell Pike
Edward Averdieck
Charles Henry Robertson Grimsdale
John Richard Grinham
David Shephard
Shareholder and number of
shares held
Peter Gabriel 3,541,650
Charles Grimsdale 2,179,950
20
Susan Kelly Moule 90,000
Quester VCT 2 plc 3,341,188
Quester VCT 3 plc 3,341,188
Quester VCT 4 plc 1,252,637
Quester Venture Partners 1,318,575
Investment Enterprise Partnership 'NIF New 275,000
Tech Fund 99A'
Investment Enterprise Partnership 'NIF New 275,000
Tech Fund 99B'
Investment Enterprise Partnership 'NIF New 650,000
Tech Fund 2000/01'
Investment Enterprise Partnership 'NIF New 650,000
Tech Fund 2000/02'
NIF Ventures Co. Ltd 787,125
Nick McKeown 104,563
Brent Bilger 45,463
Morgan Littlewood 45,463
Jeremy McKeown 9,088
Mark Farmer 33,333
David Embleton 33,333
Dori Dana Haeri 33,333
WEA International Inc 381,475
Edel Music AG 137,925
RealWorld Records Ltd 45,975
Steve Thornton 62,500
Charles Bocock 9,175
Ian Cox 4,163
21
SCHEDULE 4 : THE SUBSIDIARIES
Name: ON DEMAND DISTRIBUTION SAS
Number: B437640188
Registered Office: 290 Bld Voltaire, 75011 Paris, France
Authorised Capital: (euro)38,200
Issued Capital: (euro)38,200
Details of Shareholders: On Demand Distribution Limited 100%
President: On Demand Distribution Limited
Represented by: Charles Grimsdale
Accounting Reference Date: 31 March
Auditors: Grant Thornton
43 Queen Square
Bristol
BS1 4QR
Tax residence: France
22
Name: ON DEMAND DISTRIBUTION S.R.L.
Company Registration Number: 1742478
Fiscal and Vat Number: 04361960968
Registered Office: Corso di Ports Vittoria 28, Milan, Italy
Authorised Capital: (euro)10,000
Issued Capital: (euro)10,000
Details of Shareholders: On Demand Distribution Limited 100%
Directors: Christopher Pike
Carlo Galassi
Accounting Reference Date: 31 December
Tax residence: Italy
23
Name: ON DEMAND DISTRIBUTION GMBH
Number: HRB 35078
Registered Office: Everhardstrasse 56, 50823 Koln, Germany
Authorised Capital: (euro)25,000
Issued Capital: (euro)25,000
Details of Shareholders: On Demand Distribution Limited 100%
Directors: Anke Fleischer
Accounting Reference Date: 31 December
Auditors: Grant Thornton
43 Queen Square
Bristol
BS1 4QR
Tax residence: Germany
24
Name: WEBAUDIONETWORK LIMITED
Number: 4163448
Registered Office: Box Mill, Mill Lane, Box, Corsham SN13 8PN
Authorised Capital: (pound)1
Issued Capital: (pound)1
Details of Shareholders: On Demand Distribution Limited 100%
Directors: Charles Grimsdale
Secretary: Christopher Pike
Accounting Reference Date: 31 March
Auditors: None
Tax residence: UK
25
SCHEDULE 5 : WARRANTIES AND REPRESENTATIONS
1. INTERPRETATION
1.1 DEFINITIONS
In this schedule, where the context admits:
"ACCREDITED INVESTOR" means:
(A) any natural person (i) whose individual net worth, or joint net
worth with such person's spouse, will at the time of the investment
in the Loudeye Shares exceed $1,000,000, or (ii) who had an
individual income in excess of $200,000 in each of the two most
recent years or joint income with such person's spouse in excess of
$300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
(B) a corporation, partnership, limited liability company or other legal
entity with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Loudeye Shares; or
(C) an entity all of the equity owners of which are as specified in (A)
or (B) above.
"AUTHORITY" means any competent governmental, administrative, supervisory,
regulatory, judicial, determinative, disciplinary, enforcement or tax
raising body, authority, agency, board, department, court or tribunal of
any jurisdiction and whether supranational, national, regional or local;
"AUTHORISATION" means any licence, consent, permit, approval or other
authorisation, whether public or private;
"COMPUTER CONTRACTS" means all arrangements and agreements under which any
third party provides any element of, or services relating to, the Computer
Systems, including leasing, hire purchase, licensing, escrow and
maintenance agreements;
"COMPUTER SYSTEMS" means all the computer hardware (including network and
telecommunications equipment) and software (including associated
preparatory materials, user manuals and other related documentation)
owned, used, leased or licensed by or to the Company;
"DISCLOSED" means disclosed in the Disclosure Letter;
"FORM OF ACCEPTANCE AND ELECTION" shall have the meaning ascribed to it in
the Offer Document;
"INTELLECTUAL PROPERTY" means:
(A) patents, utility models, trade marks, design rights, copyright,
database rights, topography rights, plant variety rights,
confidential information and knowledge (including know how,
inventions, secret formulae and processes, market information, and
lists of customers and suppliers), and rights protecting goodwill
and reputation;
(B) all other rights and forms of protection having a similar nature or
effect anywhere in the world to any of the rights described in (A)
above; and
(C) applications for or registrations of any of the rights described in
(A) or (B) above;
"LISTED IP" means the Intellectual Property referred to in the list
annexed to the Disclosure Letter;
26
"LISTED IP AGREEMENTS" means the agreements set out in the list annexed to
the Disclosure Letter;
"MANAGEMENT ACCOUNTS" means the consolidated management accounts of the
Company and the Subsidiaries for the period from the Balance Sheet Date;
"SECURITIES ACT" means the Securities Act of 1933 of the United States of
America;
"TREATY" means the Treaty establishing the European Community, as amended
by the Treaty on European Union and by the Treaty of Amsterdam;
"UK GAAP" means the generally accepted accounting principles in the United
Kingdom, consistently applied; and
"U.S. PERSON" means:
(A) any natural person resident in the United States;
(B) any partnership or corporation organized or incorporated under the
laws of the United States;
(C) any estate of which any executor or administrator is a U.S. Person;
(D) any trust of which any trustee is a U.S. Person;
(E) any agency or branch of a foreign entity located in the United
States;
(F) any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit
or account of a U.S. Person;
(G) any discretionary account or similar account (other than an estate
or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States;
and
(H) any partnership or corporation if:
(1) organised or incorporated under the laws of any foreign
jurisdiction; and
(2) formed by a U.S. Person principally for the purpose of
investing in securities not registered under the Act, unless
it is organized or incorporated, and owed, by accredited
investors (as defined in Section 230.501(a)) who are not
natural persons, estates or trusts.
The following are not "U.S. Persons":
(A) any discretionary account or similar account (other than an estate
or trust) held for the benefit or account of a non-U.S. Person by a
dealer or other professional fiduciary organized, incorporated, or
(if an individual) resident in the United States;
(B) any estate of which any professional fiduciary acting as executor or
administrator is a U.S. Person if:
(1) an executor or administrator of the estate who is not a U.S.
Person has sole or shared investment discretion with respect
to the assets of the estate; and
(2) the estate is governed by foreign law;
27
(C) any trust of which any professional fiduciary acting as trustee is a
U.S. Person, if a trustee who is not a U.S. Person has sole or
shared investment discretion with respect to the trust assets, and
no beneficiary of the trust (and no settlor if the trust is
revocable) is a U.S. Person;
(D) any employee benefit plan established and administered in accordance
with the law of a country other than the United States and customary
practices and documentation of such country;
(E) any agency or branch of a U.S. Person located outside the United
States if:
(1) the agency or branch operates for valid business reasons; and
(2) the agency or branch is engaged in the business of insurance
or banking and is subject to substantive insurance or banking
regulation, respectively, in the jurisdiction where located;
and
(F) the International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank,
the Asian Development Bank, the African Development Bank, the United
Nations, and their agencies, affiliates and pension plans, and any
other similar international organizations, their agencies,
affiliates and pension plans.
1.2 CONSTRUCTION
In this schedule where the context admits:-
(A) any question whether a person is connected with another shall be
determined in accordance with s.839 Income and Corporation Taxes Act
1988, (subject to the deletion of the words from "Except" to
"arrangements" in sub-section (4) thereof) which shall apply in
relation to this schedule as it applies in relation to that act;
(B) references to the "Company" shall include each of the Subsidiaries;
(C) reference to any English Law and to any English legal term for any
action, remedy, method of judicial proceeding, legal document, legal
status, court, official or any legal concept or thing shall in
respect of any jurisdiction other than England be deemed to include
that which most nearly approximates in that jurisdiction to the
English legal term; and
(D) where, in this schedule 5, a term is defined in and for the purposes
of a particular paragraph, the relevant definition shall apply,
where the context admits, for all other purposes of this schedule.
2. THE COMPANY AND THE WARRANTORS
2.1 CAPACITY
Each of the Obligors has full power and authority to enter into and
perform this Deed and the Form of Acceptance and Election, and may execute
and deliver this Deed and the Form of Acceptance and Election and perform
his obligations thereunder without requiring or obtaining the consent of
its shareholders or of any other person or Authority and this Deed
constitutes valid and binding obligations of the Obligors in accordance
with its terms.
28
2.2 OWNERSHIP OF OD2 SHARES
(A) Each Obligor warrants that it:
(1) is the registered and sole beneficial owner of the number of
OD2 Shares and/or rights to subscribe for shares as set out
against its name in schedule 1 or schedule 2 as the case may
be and has the right to transfer the entire legal and
beneficial title to the same free from any Encumbrances;
(2) there is no dispute concerning the title of such Obligor to
its OD2 Shares or its ability to sell the same and no other
person has claimed to have title to any of such OD2 Shares or
to be entitled to any interest therein;
(3) no Obligor is engaged in any litigation, arbitration or other
proceedings in any way relating to his title to the OD2 Shares
to be sold by him, and the Company has not received any
application for the rectification of its register of members;
and.
(B) There are no circumstances likely to give rise to any of the matters
referred to in paragraph 2.2(A) in respect of the OD2 Shares to be
sold by each such Obligor.
2.3 LIABILITIES OWING TO OR BY WARRANTORS
Other than accrued salary and expenses incurred in the ordinary course of
their employment there is not outstanding any indebtedness or other
liability (actual or contingent) owing by the Company to any Warrantor or
to any Director or any person connected with any of them, nor is there any
indebtedness owing to the Company by any such person.
2.4 COMPETING INTERESTS
None of the Warrantors nor any person connected with any of them has any
interest, direct or indirect, in any business other than that now carried
on by the Company which is or is likely to be or become competitive with
the business or any proposed business which the board of the Company has
resolved to enter into.
3. THE COMPANY'S CONSTITUTION
3.1 SHARE CAPITAL
The OD2 Shares comprise the whole of the issued and allotted share capital
of the Company and schedule 4 contains true particulars of the authorised
and issued share capital of the Subsidiaries and all the shares there
shown as issued are in issue fully paid and are beneficially owned and
registered as set out therein and free from any Encumbrances. There is no
dispute concerning the title to any such shares and no other person has
claimed to have title to the same or to be entitled to any interest
therein and there is no litigation, arbitration or other proceedings in
any way relating to the title to such shares and no Subsidiary has
received any application for the rectification of its register of members.
There are no circumstances likely to give rise to any such dispute,
proceedings or application.
3.2 CAPITALISATION TABLE
The fully diluted equity spreadsheet set out in the Disclosure Letter
fully and accurately details the holders' name, address (being the
residential or principal place of business), number of shares held and any
rights to call for the allotment, issue, sale, transfer or conversion of
any share or loan capital under any option or other agreement (including
conversion rights), in the Company.
29
3.3 OPTIONS ETC.
No person has the right (whether exercisable now or in the future and
whether contingent or not) to call for the allotment, issue, sale,
transfer or conversion of any share or loan capital of the Company under
any option or other agreement (including conversion rights and rights of
pre-emption).
3.4 MEMORANDUM AND ARTICLES
The copy of the memorandum and articles of association of the Company
annexed to the Disclosure Letter is true and complete and has embodied
therein or annexed to it a copy of every resolution or agreement as is
required by law to be embodied in or annexed to it, and sets out
completely the rights and restrictions attaching to each class of
authorised share capital of the Company.
3.5 COMPANY RESOLUTIONS
Neither the Company nor any class of its members has passed any resolution
(other than resolutions relating to business at annual general meetings
which was not special business) which have not been filed at Companies
House.
4. THE COMPANY AND ITS INVESTMENTS
4.1 PARTICULARS OF THE COMPANY AND SUBSIDIARIES
The particulars of the Company and the Subsidiaries set out in schedule 3
and schedule 4 are true and complete and, other than the Subsidiaries, the
Company has no subsidiaries.
4.2 INVESTMENTS, ASSOCIATIONS AND BRANCHES
The Company:-
(A) is not the holder or beneficial owner of, and has not agreed to
acquire, any share or other capital of any other company or
corporation (whether incorporated in the United Kingdom or
elsewhere) other than of the Subsidiaries;
(B) is not, and has not agreed to become, a member of any partnership,
joint venture, consortium or other unincorporated association, body
or undertaking in which it is to participate with any other in any
business or investment; and
(C) has no branch, agency or place of business outside England and no
permanent establishment (as that expression is defined in the
relevant double taxation relief orders current at the date of this
Deed) outside the United Kingdom.
4.3 CITY CODE
During the 10 years prior to the date of this Deed, the Company has not:-
(A) had at any time any equity share capital listed or admitted to
trading on the London Stock Exchange;
(B) had any dealings in its equity share capital advertised in a
newspaper on a regular basis for a continuous period of at least 6
months;
(C) had at any time any equity share capital subject to a marketing
arrangement as described in s. 163(2)(b) Companies Act 1985, such as
dealings on the Unlisted Securities Market or Alternative Investment
Market; or
30
(D) filed a prospectus with the Registrar of Companies for the issue of
any equity share capital.
5. THE COMPANY AND THE LAW
5.1 COMPLIANCE WITH LAWS
The Company has conducted its business in all material respects in
accordance with all applicable Laws of the United Kingdom and each other
jurisdiction in which it has an establishment or conducts any business and
there is no order, decree or judgment of any Authority outstanding against
the Company or, so far as the Warrantors are aware, any person for whose
acts the Company is vicariously liable which may have a material adverse
effect upon the assets or business of the Company.
5.2 AUTHORISATIONS
(A) All Authorisations necessary under any Law for utilising any of the
assets of the Company or carrying on effectively any aspect of its
business in the places and in the manner in which such business is
now carried on have been obtained by the Company and all of them are
in full force and effect and none of them is limited in duration or
subject to onerous conditions.
(B) All reports, returns and information required by any Law or as a
condition of any Authorisations to be made or given to any person or
Authority in connection with the Company's business have been made
or given to the appropriate person or Authority.
(C) The utilisation of any of the assets of the Company or the carrying
on of any aspect of the Company's business or any business now being
carried on at any of the Premises is not in breach of any of the
terms and conditions of any Authorisation and so far as the
Warrantors are aware there is no circumstance which indicates that
any Authorisation is likely to be suspended, cancelled or revoked or
that any of them will expire within a period of one year from the
date of this Deed.
(D) The making of or Completion of the Offer will not give rise to any
restriction on the right of the Company to carry on its business
which does not now apply to the Company.
5.3 BREACH OF THE LAW
Neither the Company, nor any of its officers, agents or employees (during
the course of their duties in relation to the Company) have committed, or
omitted to do, any act or thing the commission or omission of which is, or
could be, in contravention of any Law and no notice or communication has
been received with respect to any alleged, actual or potential violation
of or failure to comply with, any Law.
5.4 LITIGATION
(A) Neither the Company, nor any of its officers, agents or employees
(during the course of their duties in relation to the Company) is
engaged in or the subject of any litigation or arbitration or
administrative or criminal proceedings whether as claimant,
plaintiff, defendant or otherwise. The Company has not received any
written or verbal notification that it is subject to any
investigation or enquiry by any Authority which adversely affects or
is likely to have an adverse effect on the Company's business and/or
the ability of the Company or any purchaser to carry on the
Company's business in the same manner and to the same extent as
previously carried on.
31
(B) The Company has not received any written or verbal notification that
any litigation or arbitration or administrative or criminal
proceedings or investigation or enquiry are pending or threatened or
against the Company or any such officer, agent or employee; and so
far as the Warrantors are aware there are no facts or circumstances
likely to give rise to the same.
(C) Neither the Company nor any of its officers or employees (in the
course of his duties in relation to the Company) has been a party to
any undertaking or assurance given to any Authority or the subject
of any injunction or other similar court order which is still in
force.
5.5 FAIR TRADING
(A) No agreement, practice or arrangement carried on by the Company or
to which the Company is or has in the 4 years prior to the date of
this Deed been a party:
(1) is in breach of or would on the expiry or withdrawal of any
applicable transitional period provided for under Schedule 13
Competition Act 1998 be in breach of the Chapter I or the
Chapter II prohibition as defined in the Competition Act 1998;
or
(2) infringes Article 81 of the Treaty or constitutes an abuse of
a dominant position contrary to Article 82 of the Treaty or
infringes any regulation or other enactment made under Article
83 and/or Article 308 of the Treaty or is or has been the
subject of any enquiry, complaint, investigation or proceeding
in respect thereof; or
(3) has been notified to the Director General of Fair Trading (or
any "regulator" as that term is defined in s.54 Competition
Act 1998) pursuant to the Competition Act 1998 or to the
Competition Directorate-General of the Commission of the
European Communities (the "European Commission") and/or to the
EFTA Surveillance Authority; or
(4) is by virtue of its terms or by virtue of any practice for the
time being carried on in connection therewith a "Consumer
Trade Practice" within the meaning of s.13 Fair Trading Act
1973 and susceptible to or under reference to the Consumer
Protection Advisory Committee or the subject matter of a
report to the Secretary of State or the subject matter of an
Order by the Secretary of State under the provisions of Part
II of that Act; or
(5) infringes any other competition, restrictive trade practice,
anti-trust, fair trading or consumer protection Law applicable
in any jurisdiction in which the Company has assets or carries
on or intends to carry on business or in which the activities
of the Company may have an effect.
(B) The Company has not received notice that it is or has been the
subject of any enquiry, complaint, investigation, proceeding,
reference or report under the Fair Trading Act 1973, the Competition
Act 1998 or the Competition Act 1980 or has constituted an
anti-competitive practice within the meaning of that Act.
(C) The Company has not given any assurance or undertaking (written or
oral) to the Restrictive Practices Court, the Director General of
Fair Trading, the Competition Commission, the Secretary of State for
Trade and Industry, the European Commission, the EFTA Surveillance
Authority or the Courts of the European Communities, or to any other
Authority and is not subject to or in default or contravention of
any such assurance or undertaking or any Article, Act, decision,
direction, regulation, order or other instrument or undertaking
relating to any matter referred to in this paragraph 5.5.
32
(D)
(1) None of the activities of the Company as currently conducted
could give rise to the imposition of any anti-dumping duty or
other sanction under any trade regulation Law in respect of
any products manufactured by the Company in recognised
market-economy countries or in which the Company trades from
such countries.
(2) No anti-dumping duty or other sanction under any trade
regulation legislation is or has been in force in any area in
which the Company carries on or intends to carry on business
in respect of products manufactured by the Company or in which
the Company trades.
(3) No undertaking has been given by the Company to any Authority
under any anti-dumping or other trade regulation Law.
(E)
(1) The Company is not and has not been in receipt of any aid
which could be construed as falling within Article 87(1) of
the Treaty other than existing aid as that term is defined in
Council Regulation 659/99/EC.
(2) The Company is not and has not received any written
notification that it is the subject of an enquiry, complaint,
investigation, proceeding or review in relation to the receipt
or alleged receipt by it of any aid or alleged aid or the
misuse by it of any aid received by it and the Company is not
aware of any pending or threatened enquiry, complaint,
investigation, proceeding or review in relation to any such
matters.
(F)
(1) The Company is not a party to any contract or involved in the
award of any contract of whatever nature which was awarded or
is proposed to be awarded in breach of any Law or
administrative practice relating to the procurement of works,
goods or services or which has been, is or could reasonably be
the subject of an enquiry, complaint, investigation,
proceeding or review in relation to such matters.
(2) So far as the Warrantors are aware, there is no pending or
threatened enquiry, complaint, investigation, proceeding or
review in relation to any matter described in paragraph
5.5(F)(1) above.
5.6 PRODUCT LIABILITY
(A) There is no claim in respect of Product Liability outstanding or
threatened against or expected by the Company in relation to its
business and so far as the Warrantors are aware there are no
circumstances which are likely to give rise to any such claim. For
this purpose "Product Liability" means a liability arising out of
death, personal injury or damage to property caused by a defective
product or defective services sold, supplied or provided by the
Company in the course of its business on or prior to the date of
this Deed.
(B) The Company has not manufactured, sold or supplied any product or
service which:-
(1) is, was or will become, in any material respect, faulty or
defective; or
33
(2) does not comply in any material respect with any warranty or
representation, express or implied, made by or on behalf of
the Company in respect of it or with all Laws, standards and
requirements applicable to it; or
(3) was sold or supplied on terms that the Company accepts an
obligation to service or repair or replace such products after
delivery.
(C) The Company has not received a prohibition notice, a notice to warn
or a suspension notice under the Consumer Protection Act 1987 in
relation to any of its products.
5.7 HEALTH AND SAFETY
The Company has in relation to its plant and machinery and other fixed
assets, the Premises, its employees and any person who might be affected
by the conduct of the Company's business, complied in all material
respects with all requirements of all Laws relating to health and safety
including those imposed by the Health and Safety at Work etc Act 1974 and
all regulations made thereunder, and no written notice has been received
by the Company from any Authority in relation to any actual or alleged
breach of such requirements and neither is the Company in receipt of any
claim by any person in relation to any such breach and the Warrantors are
not aware of any circumstances which may lead to such action or claim.
5.8 ENVIRONMENTAL
(A) DEFINITIONS
For the purpose of this paragraph 5.8, the following terms shall have the
following meanings:
"ENVIRONMENT" means all or any of the media of air, water and land
(wherever occurring) and any living organisms or systems supported
by those media and in relation to the media of air and water
includes without limitation, the air and water within buildings and
the air and water within other natural or man-made structures above
or below ground and includes all natural resources and the built
environment;
"ENVIRONMENTAL LAW" means all or any Laws, and any relevant code of
practice, guidance, note, standard or other advisory material issued
by any Authority which from time to time relates to Environmental
Matters;
"ENVIRONMENTAL MATTERS" means the pollution of the Environment, the
protection of the Environment and human health, the health and
safety of employees and other persons in the workplace or as a
result of workplace activities, the protection of natural amenity,
the creation of any noise, vibration, radiation, common law or
statutory nuisance, or the production, disposal, release, use,
storage, spillage, deposit, escape, discharge, leak, emission,
recovery, transport of, or radiation from any hazardous material or
waste;
"ENVIRONMENTAL PERMITS" means all Authorisations or agreements
required under Environmental Law in relation to the carrying on of
the business of the Company or the occupation or use of the Premises
or Former Premises; and
"FORMER PREMISES" means any land or premises or interest therein
formerly owned or occupied by the Company.
(B) BASIS OF WARRANTIES
34
The Warranties contained in this paragraph 5.8 are given on the
basis that the Warrantors acknowledge that the Purchaser has not
searched any public register or made enquiries of any Authority and
has no knowledge of any matters which might be revealed by such
searches or enquiries.
(C) ENVIRONMENTAL MATTERS
(1) The Company and the Subsidiaries have complied at all times
with Environmental Law.
(2) All necessary Environmental Permits have been lawfully
obtained and are in full force and effect and the Company and
the Subsidiaries have complied at all times with all
conditions and limitations in all Environmental Permits.
(3) The Company and the Subsidiaries have complied with any
internal or published statements of corporate environmental
policy and operating procedures.
5.9 INDUCEMENTS
So far as the Warrantors are aware no officer, agent or employee of the
Company or any of the Subsidiaries has paid or accepted any unlawful bribe
or inducement (monetary or otherwise) or used any of the Company's assets
unlawfully to obtain an advantage for himself or any other person.
5.10 FRAUD ETC
As far as the Warrantors are aware, no officer, agent or employee of the
Company has committed or purported to commit the Company to any contract,
commitment, engagement, arrangement or obligation of any kind which is not
in accordance with the authority given to such officer, agent or employee
by the directors of the Company or any officer or executive of the Company
responsible for conferring such authority and no officer, agent or
employee of the Company or any of its customers or suppliers or any other
person has committed any fraud upon the Company or has misappropriated any
of its property or assets or falsified any of its records.
6. THE COMPANY'S AND WARRANTORS' SOLVENCY
6.1 WINDING-UP
No order has been made, petition presented or resolution passed for the
winding up of the Company or any of the Warrantors and no meeting has been
convened for the purpose of winding up the Company or any of the
Warrantors.
6.2 ADMINISTRATION AND RECEIVERSHIP
No steps have been taken for the appointment of an administrator or
receiver (including an administrative receiver) of all or any part of the
Company's or any of the Warrantors' assets.
6.3 COMPOSITIONS
Neither the Company nor any of the Warrantors has made or proposed any
arrangement or composition with its or his creditors or any class of its
or his creditors.
6.4 INSOLVENCY
Neither the Company nor any of the Warrantors is insolvent, or unable to
pay its or his debts within the meaning of the insolvency legislation
applicable to the Company and the Warrantors respectively
35
and neither the Company nor any of the Warrantors has stopped paying its
or his debts as they fall due.
6.5 UNSATISFIED JUDGMENTS
No distress, execution or other process has been levied against the
Company or action taken to repossess goods in the Company's possession. No
unsatisfied judgment is outstanding against the Company.
6.6 FLOATING CHARGES
No floating charge created by the Company has crystallised and, so far as
the Warrantors are aware, there are no circumstances likely to cause such
a floating charge to crystallise.
6.7 ANALOGOUS EVENTS
No event analogous to any of the matters detailed in paragraph 6.1 to 6.6
has occurred in or outside England in respect of the Company or any of the
Subsidiaries.
7. THE COMPANY'S ACCOUNTS AND RECORDS
7.1 BOOKS AND RECORDS
All accounts, books, ledgers, financial and other records of whatsoever
kind ("RECORDS") of the Company:
(A) have been fully, properly and accurately maintained on a consistent
basis, are up to date and in the possession and control of the
Company and contain true, complete and accurate records of all
matters required by law to be entered therein;
(B) do not contain or reflect any material inaccuracies or
discrepancies; and
(C) give and reflect a true and fair view of the financial, contractual
and trading position of the Company and of its fixed and current
assets and liabilities (actual and contingent) debtors and creditors
(as appropriate) and all other matters which ought or would normally
be expected to appear therein
and no notice or allegation that any of the records is incorrect or should
be rectified has been received.
7.2 ACCOUNTS
The Audited Accounts:
(A) were prepared in accordance with the requirements of all relevant
Laws and accounting practices generally accepted in the United
Kingdom at the time they were audited and commonly adopted by
companies carrying on business similar to that of the Company
(including all applicable Statements of Standard Accounting Practice
and Financial Reporting Standards published by the Accounting
Standards Board or the Accounting Standards Committee and not
superseded and all applicable Statements of Recommended Practice
published by bodies recognised by the Accounting Standards Board);
(B) show a true and fair view of the assets and liabilities of the
Company as at, and the profits of the Company for the accounting
reference period ended on, the Balance Sheet Date;
36
(C) are not affected by any unusual or non-recurring items;
(D) in the case of consolidated financial statements, show a true and
fair view of the state of affairs of the Company and the
Subsidiaries as a whole; and
(E) apply bases and policies of accounting which have been consistently
applied in the audited financial statements of the Company and, in
the case of the Company and the Subsidiaries, in the audited
consolidated financial statements for the three accounting reference
periods ending on the Balance Sheet Date.
7.3 LOSSES
The losses of the Company for the four years ended on the Balance Sheet
Date as shown by the Audited Accounts and the audited accounts for such
previous years and the trend of losses thereby shown have not (save as
fairly disclosed in such accounts) been affected by the inclusion of
non-recurring items of income or expenditure, by transactions of an
abnormal or unusual nature or entered into otherwise than on normal
commercial terms or by any other factors rendering such losses for all or
any of those periods exceptionally high or low.
7.4 PROVISION FOR LIABILITIES
Full provision has been made in the Audited Accounts for all actual
liabilities of the Company outstanding at the Balance Sheet Date and
proper provision (or note) in accordance with generally accepted
accounting principles in the United Kingdom at the time they were audited
has been made therein for all other liabilities of the Company then
outstanding whether contingent, quantified, disputed or not including the
cost of any work or material for which payment has been received or credit
taken, any future loss which may arise in connection with uncompleted
contracts and any claims against the Company in respect of completed
contracts.
7.5 MANAGEMENT ACCOUNTS
The Management Accounts have been carefully prepared in accordance with
accounting policies consistent with those used in preparing the Audited
Accounts and on a basis consistent with the management accounts prepared
in the preceding year. The cumulative profits, assets and liabilities of
the Company stated in the Management Accounts have not been materially
mis-stated and are not materially inaccurate and the Warrantors do not
consider the Management Accounts misleading.
7.6 RETURNS
The Company has complied with the provisions of the Companies Acts and all
returns, particulars, resolutions and other documents required under any
Law to be delivered on behalf of the Company to the Registrar of Companies
or to any other Authority have been properly made and delivered. All such
documents which have been so delivered, whether or not required by any
Law, were true and accurate when so delivered and the Company has not
received notification of the levy of any fine or penalty for
non-compliance by the Company or any director of the Company.
8. THE COMPANY'S BUSINESS AND THE EFFECT OF THE SALE
8.1 BUSINESS SINCE THE BALANCE SHEET DATE
Since the Balance Sheet Date:
37
(A) the Company has carried on its business in the ordinary and usual
course so as to maintain it as a going concern and without any
interruption or alteration in the nature, scope or manner of its
business;
(B) there has been no material deterioration in the financial or trading
position, profitability, prospects or turnover of the Company;
(C) there has been no significant event or occurrence (including the
loss of any significant customer or supplier) which has had or may
following Completion have a material adverse affect on the Company's
business or its value, profitability or prospects;
(D) the Company has not borrowed or raised any money or taken any form
of financial facility (whether pursuant to a factoring arrangement
or otherwise);
(E) the Company has paid its creditors in accordance with their
respective credit terms or (if not) within the time periods usually
applicable to such creditors and save as disclosed there are no
debts outstanding by the Company which have been due for more than
six weeks;
(F) the Company has not entered into, or agreed to enter into, any
commitment to acquire or dispose of on capital account any asset of
a value in excess of (pound)50,000 or any commitment involving
expenditure by it on capital account;
(G) no share or loan capital has been issued or agreed to be issued by
the Company;
(H) other than in respect of any bonus issue of shares validly declared
pursuant to the exercise of any employee share options, no
distribution of capital or income has been declared, made or paid in
respect of any share capital of the Company and (excluding
fluctuations in overdrawn current accounts with bankers) no loan or
share capital of the Company has been repaid in whole or part or has
become liable to be repaid in whole or part;
(I) the Company has not done or omitted to do anything which might
prejudicially affect its goodwill; and
(J) no substantial customer or supplier representing more than five per
cent of sales or suppliers of any product or service of the Company
has since 31 December 2003:
(1) ceased or reduced the level of its trade with or supplies to
the Company or indicated an intention to do any of the
foregoing; or
(2) changed or indicated an intention to change the terms on which
it is prepared to trade with or supply the Company.
8.2 COMMISSION
No one is entitled to receive from the Company any finder's fee,
brokerage, or other commission in connection with this Deed or the sale
and purchase of shares in the Company.
8.3 CONSEQUENCE OF SHARE ACQUISITION BY THE PURCHASER
The acquisition of the OD2 Shares by the Purchaser and compliance with the
terms of this Deed will not:
(A) cause the Company to lose the benefit of any licence, consent,
permit, approval or authorisation (public or private) or any right
or privilege it presently enjoys or relieve any person of any
obligation to the Company (whether contractual or otherwise) or
enable any
38
person to determine any such obligation or any contractual right or
benefit now enjoyed by the Company or to exercise any right whether
under an agreement with the Company or otherwise;
(B) result in any present or future indebtedness of the Company becoming
due or capable of being declared due and payable prior to its stated
maturity;
(C) give rise to or cause to become exercisable any right of
pre-emption;
(D) result in a breach of, or constitute a default under any provision
of the memorandum or articles of association of the Company;
(E) result in a breach of, or constitute a default under any order,
judgement or decree of any Authority by which the Company is bound
or subject; and
(F) result in a breach of, or constitute a default under the terms,
conditions or provisions of any agreement, understanding,
arrangement or instrument (including, but not limited to, any of the
Company's contracts)
and, to the best of the knowledge and belief of the Warrantors, the
Company's relationships with clients, customers, suppliers and employees
will not be adversely affected thereby and the Warrantors are not aware of
any circumstances (whether or not connected with the Purchaser or the sale
of the OD2 Shares) indicating that, nor have they been informed or are
otherwise aware that any person who now has business dealings with the
Company would or might cease to do so from and after the Offer Date.
8.4 GRANTS
The Company has not applied for or received any grant or other financial
assistance from any Authority.
8.5 INSURANCES
(A) Full particulars of all the insurance policies (including the limit
and basis of cover under each policy and the amount of the
applicable excess) in which the Company has an interest (the
"COMPANY'S INSURANCEs") are given in the Disclosure Letter. The
Company's Insurances afford the Company adequate cover against fire
and such other risks as companies carrying on a similar business to
the Company commonly cover by insurance and in particular:
(1) the assets of the Company are insured in their full
replacement value;
(2) the Computer Systems are insured for all foreseeable risks to
their full replacement value, together with incidental
expenses, including, without limitation, costs and expenses of
data recovery and reconstruction; and
(3) the Company is now, and has at all material times been, fully
covered against accident, damage, injury, third party loss
(including product liability), loss of profits and other risks
normally insured against by companies carrying on a similar
business.
(B) All the Company's Insurances are in full force and effect and will
be maintained in full force without alteration pending Completion
and all premiums have been paid on time. So far as the Warrantors
are aware, there are no circumstances which might lead to any
liability under any of the Company's Insurances being avoided by the
insurers or the premiums being
39
increased. There is no claim outstanding under any of the Company's
Insurances nor are the Warrantors aware of any circumstances likely
to give rise to a claim.
8.6 TRADING NAME
The Company does not trade under any name other than its corporate name.
8.7 TRADE ASSOCIATIONS
Full particulars of all trade or business associations of which the
Company is a member are set out in the Disclosure Letter, and the Company
is now and has been at all material times in compliance in all material
respects with the regulations or guidelines laid down by any such trade or
business association.
8.8 TERMS OF BUSINESS
True and complete copies of the standard terms upon which the Company
carries on business or provides goods or services to any person are
annexed to the Disclosure Letter and the Company does not provide and has
not provided any goods or services to any person on terms which differ
from its standard terms as so annexed.
9. THE COMPANY'S ASSETS
9.1 NET ASSET VALUE
Save for any depreciation which has been applied in accordance with UK
GAAP and the Company's normal accounting policies, in the period between
the Balance Sheet Date and the date of this Deed, the value of the net
tangible assets (which shall exclude any assets included in working
capital) of the Company at the date of this Deed determined in accordance
with the same accounting policies as those applied in the Audited Accounts
(and on the basis that each fixed asset is valued at a figure no greater
than the value attributed to it in the Audited Accounts or, in the case of
any fixed asset acquired by the Company after the Balance Sheet Date, at a
figure no greater than cost) is not less than the value of the net
tangible assets of the Company at the Balance Sheet Date as shown in the
Audited Accounts.
9.2 ASSETS AND CHARGES
(A) Except for current assets disposed of by the Company in the ordinary
course of its business, the Company is the owner legally and
beneficially of and has good marketable title to all assets included
in the Audited Accounts and all assets which have been acquired by
the Company since the Balance Sheet Date and no Encumbrance is
outstanding nor is there any agreement or commitment to give or
create or allow any Encumbrance over or in respect of the whole or
any part of the Company's assets, undertaking, goodwill or uncalled
capital and no claim has been made by any person that he is entitled
to any such Encumbrance.
(B) Since the Balance Sheet Date, save for disposals in the ordinary
course of its business, the assets of the Company have been in the
possession of, or under the control of, the Company.
(C) No asset is shared by the Company with any other person. The Company
does not require or depend for the continuation of its business or
for the continuation of the method or manner or scope of operation
of its business in the same way or manner or on the same basis as
heretofore upon any assets, premises facilities or services of any
other person.
(D) No charge in favour of the Company is void or voidable for want of
registration.
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9.3 DEBTS
Save to the extent of the provision or reserve thereof contained or
reflected in the Audited Accounts, any debts owed to the Company as
recorded in the Company's books and records are good and collectable in
the ordinary course of business. The rights of the Company in respect of
such debts are valid and enforceable and are not subject to any defence,
right of set-off or counter-claim, withholding or other deduction and no
act has been done or omission permitted whereby any of them has ceased or
might cease to be valid and enforceable in whole or in part. No amount
included in the Audited Accounts as owing to the Company at the Balance
Sheet Date has been released for an amount less than the value at which it
was included in the Audited Accounts or is now regarded by the Warrantors
as irrecoverable in whole or in part. The Company has not factored or
discounted any of its debts or other receivables or agreed to do so.
9.4 TITLE RETENTION
The Company has not acquired or agreed to acquire any material asset on
terms that property therein does not pass until full payment is made.
9.5 FIXED ASSETS
All fixed assets of the Company including all fixed and movable plant and
machinery, vehicles, Computer Systems and other equipment used in, or in
connection with, the business of the Company:
(A) are in good repair and condition (taking into account their age and
level of use), are in satisfactory working order and have been
regularly and properly serviced and maintained and none is
dangerous, inefficient, obsolete or in need of renewal or
replacement;
(B) are not unsafe, dangerous or in such a physical condition as to
contravene the terms of any contract (express or implied) between
the Company and any of its employees, customers or any other person,
or otherwise contravene or infringe any Law applicable to the
Company or any obligation to which it is subject or breach any duty
of care which it owes;
(C) are capable, and will (subject to fair wear and tear) be capable,
over the period of time during which they will be written down to a
nil value in the accounts of the Company, of doing the work for
which they were designed or purchased; and
(D) are not surplus to the Company's current or proposed requirements.
9.6 INTELLECTUAL PROPERTY RIGHTS
(A) Apart from the Listed IP, the Company does not own any registered
Intellectual Property or applications to register Intellectual
Property.
(B) The Listed IP contains details of all material unregistered
Intellectual Property owned by the Company.
(C) The Company is the sole legal, beneficial and (where relevant)
registered owner of the Listed IP.
(D) All Intellectual Property owned by the Company is owned free from
Encumbrances.
(E) None of the Warrantors own any Intellectual Property that is used by
the Company.
(F) In the last 4 years, the Company has not received:
41
(1) notice that any Intellectual Property owned by or licensed to
the Company is being claimed, opposed or challenged by any
third party;
(2) written advice from an in-house or external professional
expressing doubt on the validity of any Intellectual Property
owned by or licensed to the Company.
(G) All fees, costs, charges and taxes required to maintain the Listed
IP with the relevant registries and authorities have been duly paid
on time.
(H) The confidential information and know how used by the Company is
kept confidential, and has not been disclosed to third parties other
than in the ordinary course of business.
(I) The Company is not subject to any injunction or undertaking
prohibiting the infringement of Intellectual Property.
(J) The activities of the Company that relate to making sound or video
recordings available to third parties (whether through streaming,
downloading or any other means) have not infringed the Intellectual
Property of any third party during the last 4 years. The Warrantors
have no reason for believing that any other activities of the
Company may have infringed the Intellectual Property of any third
party during the last 4 years.
(K) The Warrantors have no reason for believing that any material
Intellectual Property owned by the Company may have been infringed
during the last 2 years.
(L) The Company is not engaged in proceedings, nor has it in the last 2
years received or given written notice threatening proceedings, for
infringement of Intellectual Property.
(M) Save as may appear from the Listed IP Agreements:
(1) no third party has been authorised to use any material
Intellectual Property owned by the Company nor has a third
party been granted any other right, title or interest in such
Intellectual Property;
(2) other than off the shelf software licences the Company does
not use or control any Intellectual Property under licence
from a third party.
(N) So far as the Warrantors are aware, the terms of the Listed IP
Agreements have been complied with by all parties in all material
respects.
(O) In the last 2 years, the Company has not given or received written
notice that purports to avoid, repudiate, rescind or terminate any
agreement authorising the use of Intellectual Property.
(P) Apart from the Listed Domain Names, the Company does not own any
domain names.
(Q) The Company complies in all material respects with all applicable
laws and regulations regarding the collection, handling and use of
personal data.
(R) The Company has not been subject to nor threatened with any
objections, claims, investigations or proceedings (whether of a
criminal, civil or administrative nature) in respect of the manner
in which the Company collects, handles or uses personal data.
9.7 COMPUTER SYSTEMS
(A) Complete and accurate particulars of the Computer Systems have been
Disclosed;
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(B) Save as may appear from any Computer Contracts that have been
Disclosed, the Company is the sole owner of the Computer Systems
free from Encumbrances;
(C) The Company is entitled to use and, where necessary, to grant
sub-licences to third parties to use the Computer Systems for the
normal purposes of its business. All royalties and other payments
due under the Computer Contract have been paid when due and there
has been no act or default by the Company or, where appropriate, its
sub-licensees or any other person which may in any way result in any
of the Computer Contracts being terminated. None of such licences
will be terminable as a result of the execution or completion of
this Deed or the Offer.
(D) The Computer Systems have been regularly maintained and supported
and the Company has the benefit of appropriate maintenance and
support agreements in respect of the Computer Systems with an
independent contractor (not being any of the Warrantors or any
person connected with any of them), details of which are Disclosed.
(E) The Computer Systems have adequate capability and capacity for all
the processing and other functions currently required by the Company
as of the Offer Date.
(F) The Company has an appropriate disaster recovery contract with a
reputable independent service provider (not being any of the
Warrantors or any person connected with any of them), details of
which are Disclosed.
(G) The Company has and follows appropriate procedures for ensuring the
security of the Computer Systems and the confidentiality and
integrity of all data stored within it.
(H) The Company has possession of control of the source code of all
software in the Computer Systems (other than commercial off the
shelf software), and has all rights necessary to modify or procure
the modification of such software.
(I) During the last three years, the Computer Systems have not:
(1) failed to function in any material respect;
(2) been infected by any software virus (so far as the Warrantors
are aware); nor
(3) been accessed by any unauthorised person (so far as the
Warrantors are aware).
10. PREMISES
10.1 TITLE TO PREMISES
(A) The particulars of the Premises shown in schedule 7 are true and
correct. Except as shown the Company has no other estate or interest
in or over land or premises and does not occupy any other land or
premises and has not entered into any agreement to acquire or
dispose of any land or premises or any estate or interest therein
which has not been completed.
(B) The owner of each of the Premises shown in schedule 7 is solely
legally and beneficially entitled to and has good and marketable
title to and exclusive occupation of such Premises.
(C) Each of the Premises is held free from any Encumbrance, lease,
sub-lease, tenancy, licence or right of occupation, rentcharge,
exception, reservation, right, easement, quasi-easement or privilege
(or agreement for any of the same) in favour of a third party.
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(D) The leases, sub-leases, tenancies, licences or agreements for any of
the same under which the Premises are held are valid and subsisting
against all persons, including any person in whom any superior
estate or interest is vested.
(E) There are appurtenant to each of the Premises all rights and
easements necessary for its current use and enjoyment (without
restriction as to time or otherwise).
10.2 MATTERS AFFECTING PREMISES
(A) There is no covenant, restriction, burden, stipulation or outgoing
affecting any Premises which is of an onerous or unusual nature or
which conflicts with its current use.
(B) No material breach of any covenant affecting the Company's title to
the Premises is outstanding and the rent and any other sums due
under any lease of the Premises has been paid up to date.
(C) There are no disputes regarding boundaries, easements, covenants or
other matters relating to the Premises or their use.
(D) No breach of any planning laws, bye-laws, building regulations and
other legislation has been committed in relation to the Premises.
(E) The Company has not received any notice or order affecting the
Premises from any authority or third party.
10.3 OUTSTANDING PREMISES LIABILITIES
Except in relation to the Premises, the Company has no liabilities (actual
or contingent) arising out of the conveyance, transfer, lease, sublease,
tenancy, licence, agreement or other document relating to land or premises
or an estate or interest in or over land or premises, including leasehold
premises assigned or otherwise disposed of.
11. THE COMPANY'S CONTRACTS
11.1 NO OTHER CONTRACTS
There are not in force in relation to the Company's business, assets or
undertaking any agreements, undertakings, understandings, arrangements or
other engagements, whether written or oral, to which any of the Warrantors
or any person connected with them is a party or of which it has the
benefit or to which it is otherwise subject, the benefit of which would be
required to be assigned to or otherwise vested in the Company to enable
the Company to carry on its business and/or to enjoy all the rights and
privileges attaching thereto and/or to any of its assets and undertaking
in the same manner and scope and to the same extent and on the same basis
as the Company has carried on business or enjoyed such rights prior to the
date of this Deed.
11.2 THE COMPANY'S CONTRACTS
Each of the Company's contracts is valid and binding and no notice of
termination of any such contract has been received or served by the
Company. So far as the Warrantors are aware there are no circumstances
which currently or may in the future give rise to any counterparty giving
notice to terminate any contract or failing to renew any contract with the
Company or any of the Subsidiaries.
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11.3 CONTRACTUAL ARRANGEMENTS
The Company is not a party to or subject to any agreement, transaction,
obligation, commitment, understanding, arrangement or liability which:
(A) is of six months or greater duration or is incapable of complete
performance in accordance with its terms within six months after the
date on which it was entered into or undertaken or is otherwise of a
length that is greater than is customary in businesses of a similar
nature to that of the Company; or
(B) is known by the Warrantors or by the Company to be likely to result
in a loss to the Company on completion of performance; or
(C) cannot readily be fulfilled or performed by the Company on time and
without undue or unusual expenditure of money or effort; or
(D) involves or is likely to involve obligations, restrictions,
expenditure or receipts of an unusual, onerous or exceptional
nature; or
(E) is a contract for services (other than contracts for the supply of
electricity or other utilities or normal office services) or is in
the nature of an agency, distribution, franchise or management
agreement; or
(F) requires the Company to pay any commission, finder's fee, royalty or
the like; or
(G) involves liabilities which may fluctuate in accordance with an index
or rate of currency exchange or interest or movements in the price
of any securities or commodities; or
(H) is a contract for the supply of assets to the Company on hire,
lease, hire purchase, credit or deferred payment terms; or
(I) is dependent on the guarantee or covenant of or security provided by
any other person; or
(J) in any way restricts the Company's freedom to carry on the whole or
any part of its business in any part of the world in such manner as
it thinks fit; or
(K) is a contract for the sale of shares or assets comprising a business
undertaking which contains warranties or indemnities under which the
Company still has a remaining liability or obligation; or
(L) can be terminated as a result of any change in the underlying
ownership or control of the Company, or would be materially affected
by such change; or
(M) is in any way otherwise than in the ordinary course of the Company's
business.
11.4 SUBSTANTIAL OR SIGNIFICANT CONTRACTS
No contract, agreement, transaction, obligation, commitment,
understanding, arrangement or liability entered into by the Company and
now outstanding or unperformed involves any of the following:
(A) obligations on the part of the Company which will cause or are
likely to cause the Company to incur expenditure or an obligation to
pay money in excess of (pound)100,000; or
45
(B) obligations on the part of the Company to purchase any specified
minimum quantity or any specified minimum percentage of its total
requirement for any service, bandwidth or music for download from
any one supplier; or
(C) the supply by the Company of any product or services whether by way
of lease or outright sale or otherwise to any one customer such that
the value of such supplies exceeds or is likely to exceed 5 per
cent. of the total turnover of the Company in the financial year
ending on the Balance Sheet Date or in any subsequent year.
11.5 DEFAULTS
(A) Neither the Company nor, so far as the Warrantors are aware, any
other party to any agreement with the Company is in default
thereunder, and the Company is not aware of any invalidity or
grounds for termination, avoidance, rescission or repudiation of any
agreement to which the Company is a party which, in any such case,
would be material in the context of the financial or trading
position of the Company nor (so far as the Warrantors are aware) are
there any circumstances likely to give rise to any such event.
(B) Full details of any customers (or any persons to whom the Company in
the course of business has supplied goods and services in the 12
months ending on the date of this Deed) who have defaulted (or who
are believed by the Company to be likely to default) in any material
respect in the payment when due of any monies to the Company are
specified in the Disclosure Letter.
11.6 SURETIES
No Warrantor nor any other person has given any guarantee of or security
for, any overdraft loan, loan facility or off-balance sheet financing
granted to the Company nor has the Company given any guarantee of or
security for any overdraft loan, loan facility or off-balance sheet
financing granted to any of the Warrantors or any person connected with
any of them and there is not now outstanding in respect of the Company any
guarantee or warranty or agreement for indemnity or for suretyship given
by or for the accommodation of the Company or in respect of the Company's
business.
11.7 POWERS OF ATTORNEY
No power of attorney given by the Company (other than to the holder of an
Encumbrance solely to facilitate its enforcement) is now in force. No
person, as agent or otherwise, is entitled or authorised to bind or commit
the Company to any obligation not in the ordinary course of the Company's
business, and the Warrantors are not aware of any person purporting to do
so.
11.8 INSIDER CONTRACTS
Other than in respect of:
(A) the subscription agreement dated 28 September 2000 between, amongst
others, the Company, Peter Gabriel and Charles Grimsdale;
(B) the debenture dated 24 April 2003 to secure the Company's
obligations under various loan notes to, amongst others, Peter
Gabriel (dated 24 April 2003) and the related inter creditor
agreement dated 24 April 2003;
(C) the investment agreement dated 21 December 2001 between, amongst
others, the Company, Charles Grimsdale, Peter Gabriel and other
directors; and
46
(D) the investment agreement dated 29 November 2000 between, amongst
others, the Company, Charles Grimsdale, Peter Gabriel and other
directors and the IP Assignment Agreement between salestech.co.uk
limited and the Company dated 15 November 2000:
(1) there is not outstanding, and there has not at any time during
the last six years been outstanding, any agreement or
arrangement to which the Company is a party and in which
(a) any of the Warrantors;
(b) any person beneficially interested in the Company's
share capital;
(c) any Director; or
(d) any person connected with any of them
is or has been interested, whether directly or
indirectly.
(2) the Company is not a party to, nor have its profits or
financial position during such period been affected by, any
agreement or arrangement which is not entirely of an arm's
length nature; and
(3) all costs incurred by the Company have been charged to the
Company and not borne by any of the Warrantors or any person
connected with any of them or any other person.
11.9 DEBTS
There are no debts owing by or to the Company other than debts which have
arisen in the ordinary course of business, nor has the Company lent any
money which has not been repaid.
11.10 OPTIONS AND GUARANTEES
The Company is not a party to any option or pre-emption right, and it has
not given any guarantee, suretyship, comfort letter or any other
obligation (whatever called) to pay, provide funds or take action in the
event of default in the payment of any indebtedness of any other person or
in the performance of any obligation of any other person.
11.11 TENDERS, ETC.
No offer, tender, or the like is outstanding which is capable of being
converted into an obligation of the Company by an acceptance or other act
of some other person and the Company is not in negotiations with, nor has
it put proposals forward or entered into discussions with any customer or
supplier for the renewal of any existing business or acquisition of any
new business.
11.12 DOCUMENTS
All title deeds and agreements to which the Company is a party and other
documents owned by or which ought to be in the possession or control of
the Company are in the possession or control of the Company and are
properly stamped and are free from any Encumbrance.
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11.13 MSN CONTRACT
The Company has signed an agreement dated 01 June 2004, with Microsoft
Corporation in relation to the provision of the OD2 music service, the
full terms of which are contained in the Disclosure Letter.
12. THE COMPANY AND ITS BANKERS
12.1 BORROWINGS
The total amount borrowed by the Company from its bankers does not exceed
its facilities and the total amount borrowed by the Company from
whatsoever source does not exceed any limitation on its borrowing
contained in its articles of association, or in any debenture or loan
stock deed or other instrument.
12.2 CONTINUANCE OF FACILITIES
Full details of all overdrafts, loans or other financial facilities
outstanding or available to the Company are given in the Disclosure Letter
and true and correct copies of all documents relating thereto are annexed
to the Disclosure Letter and neither the Warrantors nor the Company has
done anything whereby the continuance of any such facilities in full force
and effect might be affected or prejudiced.
12.3 OFF-BALANCE SHEET FINANCING
The Company has not engaged in any borrowing or financing not required to
be reflected in the Audited Accounts.
12.4 BANK ACCOUNTS
Full particulars of all the bank and deposit accounts of the Company and
of the credit or debit balances on such accounts as at 28 May 2004 (the
"STATEMENT DATE") are given in the Disclosure Letter. Since the Statement
Date there have been no payments out of any such accounts except for
routine payments in the ordinary course of the Company's business.
13. DIRECTORS, EMPLOYEES AND WORKERS
13.1 DIRECTORS
The details set out in schedule 3 and schedule 4 show the full names of
and offices held by each person who is a director of the Company or its
Subsidiaries and no other person is a director or shadow director of the
Company or its Subsidiaries.
13.2 WORKFORCE
(A) The names of all of the Employees are set out in the Disclosure
Letter.
(B) There is no person who has accepted an offer of employment made by
the Company or its Subsidiaries whose employment has yet to start
and there are no offers of employment which have been issued and
remain open for acceptance.
(C) other than the Employees, there are no workers, consultants, agency
workers or other individuals employed or otherwise engaged (either
personally or through a personal services company) by the Company or
any Subsidiary.
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13.3 TERMS AND CONDITIONS OF ENGAGEMENT
(A) The terms and conditions of engagement in respect of each Employee
are Disclosed, together with (to the extent not detailed in such
terms and conditions): name of employer, name, sex, date of birth,
length of continuous service, date of commencement of engagement,
notice period (or date of expiry of fixed term), the position held
and job location, country of domicile, country of residence,
governing law of contract, salary, fees or wages (stating whether
overtime is contractual or discretionary), pay review date, holiday
entitlement, pension entitlement, commission, profit sharing, bonus
and incentive arrangements.
(B) No Employee is entitled to benefits or other payments (including
payments on redundancy, retirement or termination of employment)
that exceed the required level for such benefits or payments as set
out by Law from time to time.
(C) No changes to the terms and conditions or benefits of any Employee
have been proposed or agreed or are due to be considered within 12
months after Completion.
(D) The Company has no legal obligation or ex gratia arrangement to pay
pensions, gratuities, superannuation, allowances or any other
benefit to any person who is not an Employee.
13.4 SHARE SCHEMES
(A) Details of any shares, share options or rights in respect of shares
in the Company or any Subsidiary held by any person including
details of the plan or scheme under which they are granted are set
out in full in the Disclosure Letter.
(B) The Company or any Subsidiary is not obliged to grant any options or
rights under any share ownership or share option plan.
13.5 OUTSTANDING OBLIGATIONS
No amounts due to, or in respect of any Employee are in arrears or unpaid
and there are no amounts other than salary in respect of the month in
which Completion occurs and unpaid expenses incurred in the ordinary
course) that have accrued but are not yet due to be paid.
13.6 TERMINATION OF EMPLOYMENT
During the 12-month period prior to Completion no person has ceased to be
employed by the Company or any Subsidiary (other than through death or
retirement at normal retirement age), and no person has given or received
notice terminating his employment.
13.7 ABSENT EMPLOYEES
(A) No Employee is absent due to:
(1) maternity, adoption, paternity or parental leave;
(2) disability;
(3) sickness lasting for more than two consecutive weeks;
(4) other leave of absence;
(5) secondment; or
49
(6) for any other reason.
(B) No person has a legal or contractual right to return to work in the
Company or any Subsidiary.
(C) No Employee is currently claiming under any medical, health or
disability benefit plan provided as a benefit of his employment.
13.8 DISPUTES OR CLAIMS
The Company or any Subsidiary is not involved in any existing, pending or
threatened industrial claim or dispute or a claim or dispute by or in
respect of any Employee, former employee or employee representative
("EMPLOYMENT DISPUTE") and has not been involved in any Employment Dispute
in the 12 months prior to Completion. There are no facts that might
suggest that there may be grounds for any Employment Dispute; or that any
of the provisions of this Deed (including the identity of the Purchaser)
may lead to any Employment Dispute.
13.9 LOANS TO EMPLOYEES
The Company or any Subsidiary has not made any loan or advance that is
outstanding to any Employee or former employee.
13.10 COMPLIANCE WITH LEGISLATION
(A) The Company and the Subsidiaries have complied in all material
respects with all laws and codes of practice in respect to its
employees.
(B) The Company and the Subsidiaries have maintained adequate records
regarding the service of each Employee, and will deliver these
records to the Purchaser or to such person as the Purchaser may
direct, at Completion.
(C) There are no Employees who are persons not granted leave to enter or
remain in the United Kingdom, or who are not entitled to work in the
United Kingdom in terms of the Asylum and Immigration Act 1996.
13.11 TRANSFER OF UNDERTAKINGS
(A) During the 12 month period prior to Completion, the Company and the
Subsidiaries have not been party to any relevant transfer as defined
in the Transfer of Undertakings (Protection of Employment)
Regulations 1981 (a "RELEVANT TRANSFER").
(B) No Employee (or former employee) has transferred to the Company or
any Subsidiary under a Relevant Transfer who at any time prior to
the Relevant Transfer:
(1) was a member of an occupational pension scheme; or
(2) was a member of a scheme providing an interest in or option
over shares where that scheme has not been materially
replicated by the Company or any Subsidiaries.
13.12 EMPLOYEES REPRESENTATIVES AND COLLECTIVE AGREEMENTS
(A) The Company and any Subsidiaries have not recognised (or done any
act which might be construed as recognition of) any trade union,
whether voluntarily or in terms of the statutory procedure set out
in the Trade Union and Labour Relations (Consolidation) Act 1992,
nor
50
entered into any kind of collective agreement, understanding or
arrangement with a trade union in relation to any of the Employees.
(B) The Company or any Subsidiary has no agreement or arrangement with
and has not at any time provided information to or consulted with, a
works council, staff association or any other employee
representative in relation to any of the Employees.
(C) The Company and the Subsidiaries have complied with all collective,
workforce and other agreements and obligations affecting its
relations with, or the conditions of service of the Employees.
(D) The Company and the Subsidiaries have at all times complied with its
obligations to inform and/or consult with employee representatives
of the Employees.
13.13 PENSION
(A) Neither the Company nor any Subsidiary has at any time been:
(1) a party to or had any obligation to any scheme or arrangement
for the provision of any pension, retirement (including on
early retirement) or death benefits (including in the form of
a lump sum) (together referred to as "PENSION BENEFITS") to or
for the benefit of any of the Employees, Former Employee or
present or former officers of the Company or any of their
families or dependants (such scheme or arrangement being a
"RELEVANT SCHEME"); or
(2) obliged to provide Pension Benefits to any Employee or Former
Employee.
(B) Neither the Company nor any Subsidiary provides, participates in or
contributes to or has any obligation to provide, participate in or
contribute to, nor has it or they ever provided, participated in or
contributed to, any gratuity or allowance under a Relevant Scheme.
(C) No Employee or Former Employee is entitled to any Pension Benefits
that become payable before their normal retirement age as stated in
their contract of employment or the benefit scheme itself.
(D) The Company and each Subsidiary complies and has at all times
complied in all material respects with any duty to facilitate access
to a stakeholder pension arrangement under Section 3 of the Welfare
Reform and Pensions Act 1999.
(E) No proposal or announcement has been made to any Employee or
Director about the introduction, continuance, increase or
improvement of any pension, lump sum, death, ill-heath, disability
or accident benefit.
(F) The Disclosure Letter contains the rate of contributions which the
Company and any Subsidiary currently pays to a pension scheme in
respect of each Employee and former employee.
(G) All employer's and employees' contributions or other payment which
have fallen due for payment to, or in respect of, the Employees or
any former employees by the Company and/or any Subsidiary prior to
Completion have been paid.
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14. INVESTMENT REPRESENTATIONS
14.1 STATUS
Each shareholder or person entitled to acquire shares or securities in the
Company is either:
(A) an Accredited Investor; or
(B) not a U.S. Person and is not acquiring any part of the Consideration
for the account of or on behalf of such a U.S. Person.
14.2 HOLDING FOR OWN ACCOUNT
Each Obligor confirms that such Obligor is acquiring the Consideration for
such Obligor's own account, for investment purposes only, and not with a
view toward the resale or distribution thereof, except pursuant to
effective registrations or qualifications relating thereto under the
Securities Act and applicable U.S. state securities or "blue sky" laws or
pursuant to an exemption therefrom.
14.3 OBLIGOR'S BUSINESS EXPERIENCE
Each Obligor has such knowledge and experience in financial and business
matters so that such Obligor is capable of evaluating the relative merits
and risks of an investment in the Purchaser. Each Obligor has adequate
means of providing for its, his or her current economic needs and possible
personal contingencies, has no need for liquidity in its, his or her
investment in the Purchaser and is able financially to bear the risks of
such investment.
14.4 OFFSHORE TRANSACTION
(A) Each Obligor agrees that it will not offer or sell or otherwise
transfer or assign any part of the Consideration or the right to
receive any part of the Consideration (i) in the United States or
to, or (ii) for the benefit or account of, a U.S. Person, until one
year after Completion, other than pursuant to registration under the
Securities Act, Regulation S promulgated under the Securities Act or
another available exemption from the registration requirements of
the Securities Act. Each Obligor also agrees that, from the date of
this Deed to the date one year following Completion, it will require
any purchaser of any part of the Consideration to certify to such
Obligor either that:
(1) it is not a U.S. Person and its is not acquiring any part of
the Consideration for the account or benefit of a U.S. Person;
or
(2) it is a U.S. Person acquiring such part of the Consideration
in a transaction not requiring registration under the
Securities Act.
(B) Each Obligor agrees that it will not engage in hedging transactions
with regard to the Consideration unless in compliance with the
Securities Act.
14.5 UNREGISTERED SECURITIES; REGISTRATION RIGHTS
Each Obligor understands that:
(A) the Consideration will not have been registered under the Securities
Act or the securities laws of any state or other jurisdiction in
reliance upon exemptions from such registration requirements for
non-public offerings;
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(B) the Consideration may not be sold, pledged or otherwise transferred
except pursuant to effective registration statements under the
Securities Act and qualification under applicable state securities
or blue sky laws or pursuant to an exemption therefrom; and
(C) the Purchaser is not under any obligation to register the
Consideration under the Securities Act or any state securities laws,
or to take any action to make any exemption from any such
registration provisions available (except to the extent provided in
the terms of the Offer).
14.6 LEGENDS
Each Obligor understands that the Consideration, and any securities issued
in respect of or in exchange for the Consideration, will bear the
following legend (or a legend with similar effect) and that all transfers
of any such securities must satisfy the provisions of such legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, REGULATION S
PROMULGATED UNDER THE ACT OR ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS AND, IN THE CASE OF A TRANSACTION NOT
SUBJECT TO SUCH REGISTRATION REQUIREMENTS, UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE ACT.
HEDGING TRANSACTIONS INVOLVING THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS (INCLUDING SALES VOLUME LIMITATIONS) SET FORTH
IN THAT CERTAIN DEED POLL OF WARRANTY AND INDEMNITY DATED AS OF 22
JUNE, 2004, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY UPON
REQUEST.
14.7 STOP TRANSFER INSTRUCTIONS
Each Obligor agrees that, in order to ensure compliance with the transfer
restrictions described in this paragraph 14, the Purchaser shall issue
`stop transfer' instructions to its stock transfer agent.
14.8 NO REQUIREMENT TO TRANSFER
The Purchaser shall not be required:
(A) to transfer or have transferred on its books any part of the
Consideration that has been sold or otherwise transferred in
violation of any of the provisions of this Deed or the Offer; or
(B) to treat as owner of such Consideration or to accord the right to
vote or pay dividends to any purchaser or other transferee to whom
such Consideration shall have been so transferred in violation of
any provision of this Deed or the Offer.
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14.9 NO PUBLIC SOLICITATION
Each Obligor represents that at no time was such Obligor presented with or
solicited by any general mailing, leaflet, public promotional meeting,
newspaper or magazine article, radio or television advertisement, or any
other form of general advertising or general solicitation in connection
with the transactions contemplated by this Deed or the Offer.
14.10 PRINCIPAL RESIDENCE OR PRINCIPAL PLACE OF BUSINESS
The address shown after each shareholder or person entitled to acquire
shares in schedule 1 and schedule 2 is such person's principal residence
if such person is an individual or such person's principal place of
business if it is an entity.
14.11 CONSULTATION WITH COUNSEL
Each Obligor has carefully read this Deed and, to the extent such Obligor
believes necessary, has discussed with such Obligor's legal advisors the
representations, warranties and agreements that such Obligor makes herein
and the applicable limitations upon such Obligor's resale of the
Consideration.
15. LIABILITIES OF THE COMPANY
The Company has incurred no liability for any costs or professional fees
in connection with the making of the Offer and has not taken any action in
breach of section 151 of the Companies Act 1985 in connection with the
making of or completion of the Offer.
54
SCHEDULE 6 : TAX
1. INTERPRETATION
In this schedule and in schedule 11, where the context admits:
"TAX" means all forms of taxation, duties, levies, and imposts whether of
the United Kingdom or any other jurisdiction including (without
limitation) corporation tax, including instalment payments in respect of
corporation tax, advance corporation tax, the charge under s.419 Taxes Act
1988, the charge under s.747 Taxes Act 1988, income tax, capital gains
tax, the charge under s.601(2) Taxes Act 1988, value added tax, the charge
to tax under Schedule 9A Value Added Tax Act 1994, duties of excise,
customs and other import duties, inheritance tax, stamp duty, stamp duty
reserve tax, stamp duty land tax, capital duties, national insurance
contributions, landfill tax, insurance premium tax, climate change levy,
aggregates levy, local authority council taxes, petroleum revenue tax,
amounts payable in consideration for the surrender of group relief or
advance corporation tax or refunds pursuant to s.102 Finance Act 1989, and
any payment whatsoever which the Company may be or become bound to make to
any person as a result of the operation of any enactment relating to any
such taxes or duties and all penalties, fines, charges and interest
relating to any of the foregoing or resulting from a failure to comply
with the provisions of any enactment relating to taxation;
"TAXES ACT 1988" means Income and Corporation Taxes Act 1988;
"TCGA 1992" means the Taxation of Chargeable Gains Act 1992;
"VALUE ADDED TAX" and "VAT" mean value added tax as provided for in the
Value Added Tax Act 1994 and legislation supplemental thereto or
replacing, modifying or consolidating it;
references to income or profits or gains earned, accrued or received shall
include income or profits or gains treated as earned, accrued or received
for the purposes of any legislation; and
references to the "COMPANY" include each of the Subsidiaries.
2. GENERAL TAXATION MATTERS
2.1 RESIDENCE
The Company is and always has been resident for Tax purposes only in the
jurisdiction in which it is incorporated.
2.2 TAX PROVISIONS
Full provision or reserve has been made in the Audited Accounts for all
Tax liable to be assessed on the Company or for which it is accountable in
respect of income, profits or gains earned, accrued or received on or
before the Balance Sheet Date and any event on or before the Balance Sheet
Date including distributions made down to such date or provided for in the
Audited Accounts and full provision has been made in the Audited Accounts
for deferred Tax calculated in accordance with generally accepted
accounting practice.
2.3 RETURNS
The Company has properly and punctually made all returns and provided all
information required for Tax purposes, all such returns and information
remain correct and complete and none of such returns is disputed by the
Inland Revenue or any other Taxation authority concerned (in the United
Kingdom
55
or elsewhere) and the Warrantors are not aware that any dispute is likely,
or that any event, act or omission has occurred which would or might give
rise to any penalty or interest. The Disclosure Letter contains details of
any amendments made to any such return either by the Company or the Inland
Revenue or other authority concerned and any such amendment made by the
Company was properly and punctually made and is not disputed by the Inland
Revenue or the Taxation authority concerned (as the case may be).
2.4 RECORDS
The Company has kept and preserved all such records and information as may
be needed to enable it to deliver correct and complete returns for its
accounting periods.
2.5 PAYMENT OF TAX
The Company has duly and punctually paid all Tax which it has become
liable to pay. The Company is under no liability to pay any penalty, fine
or interest in connection with any claim for Tax and the Warrantors are
not aware of any circumstances existing which may give rise to any such
penalty, fine or interest.
2.6 CORPORATION TAX INSTALMENT PAYMENTS
The Company is not and has never been a large company for the purposes of
the Corporation Tax (Instalment Payments) Regulations 1998.
2.7 AUDITS
The Company has in the last seven years neither received any visit or
inspection from any Tax authority nor any notice of enquiry into any
return made by the Company.
2.8 TRANSFERRED TAX REFUNDS
The Disclosure Letter contains particulars of all arrangements and
agreements relating to the transfer of tax refunds to which the Company is
or has been a party; and
(A) all claims by the Company for the transfer of tax refunds were when
made and are now valid and have been or will be allowed by way of
discharging the liability of the recipient company to pay any
corporation tax;
(B) the Company has received all payments due to it under any such
arrangement or agreement or transfer of tax refunds made by it and
no such payment is likely to be repaid; and
(C) save in respect of this Deed, there have not been in existence in
relation to the Company any such arrangements as are referred to in
s.410 Taxes Act 1988.
2.9 SPECIAL ARRANGEMENTS AND CONCESSIONS
(A) Full details of any special arrangements (including, without
limitation, any arrangements relating to the taxation of foreign
exchange gains and losses and/or derivative contracts and/or loan
relationships) which have been made with any Tax authority or relied
upon by the Company, in either case within the last seven years, are
set out in the Disclosure Letter.
(B) Full details of any arrangements relating to the discharge of any
liability for corporation tax of the Company by any other company or
the discharge of any liability for corporation tax of any other
company by the Company are set out in the Disclosure Letter.
56
(C) The Company has not taken any action which has had, or is likely to
have, the result of prejudicing or disturbing any such arrangement.
3. DISTRIBUTIONS AND PAYMENTS
3.1 DISTRIBUTIONS
(A) No distribution within the meaning of ss.209, 210 and 212 Taxes Act
1988 has been made by the Company except dividends shown in its
audited accounts nor is the Company bound to make any such
distribution.
(B) No securities (within the meaning of s.254(1) Taxes Act 1988) issued
by the Company and remaining in issue at the date hereof were issued
in such circumstances that the interest payable thereon falls to be
treated as a distribution under ss.209(2)(d), 209(2)(da) or
209(2)(e) Taxes Act 1988.
(C) The Company has not made or received any distribution which is an
exempt distribution within s.213 Taxes Act 1988.
(D) The Company has not received any capital distribution to which the
provisions of s189 TCGA 1992 could apply.
(E) The Company has not issued any share capital, nor granted options or
rights to any person which entitles that person to require the issue
of any share capital to which the provision of s.249 Taxes Act 1988
could apply.
3.2 PAYMENTS UNDER DEDUCTION
(A) All payments by the Company to any person which ought to have been
made under deduction of Tax have been so made and the Company has
(if required by law to do so) provided certificates of deduction to
such person and accounted to the Inland Revenue for the Tax so
deducted.
(B) The Disclosure Letter contains details of any payments made by the
Company in relation to which no tax, or tax at a reduced rate, has
been deducted in reliance on the provisions of s.349A or s.349E
Taxes Act 1988.
3.3 PAYMENTS AND DISALLOWANCES
No rents, interest, annual payments or other sums of an income nature
which the Company is under an obligation to pay in the future are wholly
or partially disallowable as deductions or charges in computing profits
for the purposes of corporation tax by reason of the provisions of ss.74,
125, 338, 338B, 577, 577A, 779 to 784, and 787 Taxes Act 1988 or
otherwise.
4. GROUP RELIEF
The Disclosure Letter contains particulars of all arrangements and
agreements relating to group relief under section 402 ICTA to which the
Company is or has been a party and:
(A) all claims by the Company for group relief were when made and are
now valid and have been or will be allowed by way of relief from
corporation tax;
(B) the Company has not made nor is liable to make any payment under any
such arrangement or agreement save in consideration for the
surrender of group relief allowable to the Company
57
by way of relief from corporation tax and equivalent to the Tax for
which the Company would have been liable had it not been for the
surrender;
(C) the Company has received all payments due to it under any such
arrangement or agreement for surrender of group relief made by it
and no such payment is liable to be repaid;
(D) the Company is not a dual resident investing company within the
meaning of s.404 Taxes Act 1988; and
(E) save in respect of this Deed, there have not been in existence in
relation to the Company any such arrangements as are referred to in
s.410 Taxes Act 1988.
5. CLOSE COMPANIES
(A) No distribution within s. 418 Taxes Act 1988 has been made by the
Company.
(B) The Company has not made (and will not be deemed to have made) any
loan or advance to a participator or an associate of a participator
so as to become liable to make any payment under s.419 Taxes Act
1988.
6. ANTI-AVOIDANCE
6.1 S.765 TAXES ACT 1988
The Company has not without the prior consent of the Treasury been a party
to any transaction for which consent under s.765 Taxes Act 1988 was
required. Where such consent would have been required but for the
provisions of s.765A(1) Taxes Act 1988, the Company has complied in full
with the requirements of The Movements of Capital (Required Information)
Regulations 1990 and a copy of the notification required pursuant thereto
is annexed to the Disclosure Letter.
6.2 CONTROLLED FOREIGN COMPANIES
(A) The company does not have and has not at any time had any interest
in any Controlled Foreign Company:
(B) For the purposes of paragraph 7.3(A), "Controlled Foreign Company"
means any company (a "FOREIGN COMPANY") in respect of which both:
(1) that foreign company is a controlled foreign company within
the meaning of s.747(2) Taxes Act 1988; and
(2) in the event that an apportionment of the chargeable profits
of that foreign company pursuant to s.752 Taxes Act 1988 falls
to be made under s.747(3) Taxes Act 1988, the total proportion
of the foreign company's chargeable profits that would be
apportioned to the Company and to persons who are connected to
or associated with the Company, would be at least;
(a) 25 per cent in respect of one or more accounting periods
ending on or after 01 July 1999; or
(b) 10 per cent in respect of one or more accounting periods
ending before 01 July 1999.
58
6.3 ANTI-AVOIDANCE
(A) The Company has not at any time entered into or been a party to a
transaction or series of transactions either
(1) containing steps inserted without any commercial or business
purpose or
(2) being transactions to which any of the following provisions
apply:
ss. 703, 730, 737A-C, 739, 774, 776, 779, 780, 781 or 786
Taxes Act 1988, s.168A Finance Act 1994, schedule 9 paragraph
13 Finance Act 1996, paragraph 21 schedule 20 Finance Act
2000, paragraph 16 schedule 12 Finance Act 2002, schedule 29
paragraph 111 Finance Act 2002, schedule 26 paragraph 23
Finance Act 2002 or paragraph 5 schedule 7 AC TCGA 1992
without, in the appropriate cases, having received clearance in
respect thereof from the Inland Revenue.
(B) The Company has never been requested to furnish information pursuant
to notices served under ss. 745 or 778 Taxes Act 1988.
(C) In respect of every transaction or series of transactions under
which the Company is an affected person within the meaning of
Schedule 28AA Taxes Act 1988:
(1) provision between the Company and other affected persons is
not susceptible to adjustment by the Inland Revenue; and
(2) the Company has prepared and retained all such documentation
as is necessary to identify the terms of the transactions and
the methodology used in arriving at arm's length terms for
such transactions.
6.4 RENT FACTORING ETC
The Company has not entered into a finance agreement as defined in s.43A
Taxes Act 1988 such as will result in any finance amount (as defined in
s.43B Taxes Act 1988) or lease premium (as referred to in s.43D Taxes Act
1988) being treated as taxable income of the Company.
7. CAPITAL ASSETS
7.1 BASE VALUES
(A) The Disclosure Letter contains full particulars of:
(1) the extent to which the book value of an asset or a particular
class of assets as shown in the Audited Accounts is in excess
of either:-
(a) the amount falling to be deducted under s.38 TCGA 1992
from the consideration receivable on a disposal of that
asset, or
(b) the balance of the qualifying expenditure attributable
to that asset or pool of assets, as the case may be,
brought forward into the accounting period in which
Completion will occur and save to the extent disclosed,
no such excess exists; and
59
(2) the extent to which provision for Tax in respect of such
excess has been made in the Audited Accounts.
7.2 ROLL-OVER/HOLD OVER RELIEF
The Disclosure Letter contains full particulars of all claims made by the
Company under ss.152 to 156, s.158, s.165, s179B, ss.242 to 245, s.247 or
s.248 TCGA 1992 and no such claim has been made by any other person (in
particular pursuant to s.165 or s.175 TCGA 1992) which affects or could
affect the amount or value of the consideration for the acquisition of any
asset by the Company taken into account in calculating liability to
corporation tax on chargeable gains on a subsequent disposal.
7.3 VALUE SHIFTING
The Company does not hold, and has never held, any shares upon the
disposal of which ss.31, 31A or 32 TCGA 1992 could apply.
7.4 CONNECTED PARTY AND INTRA-GROUP TRANSACTIONS
(A) The Company has not disposed of or acquired any asset to or from any
person connected with it within s.839 Taxes Act 1988 or in
circumstances such that the provision of s.17 TCGA 1992 could apply
to such disposal or acquisition.
(B) The Company has not acquired any asset (past or present) from any
other company then belonging to the same group of companies as the
Company within the meaning of s.170(2) to (14) TCGA 1992.
(C) The Company has not made, and is not entitled to make, a claim
pursuant to s.172 TCGA 1992 in relation to disposals made before 01
April 2000.
(D) The Company has not made any joint election under s.171A TCGA 1992.
(E) The Company has not made any joint election under s.179A TCGA 1992.
(F) The Company has not made any claim under s.140 TCGA 1992
(Postponement of charge on transfer of assets to non-resident
company).
7.5 GROUP RECONSTRUCTIONS
The Company has not been party to any scheme of reconstruction or
reorganisation to which the provisions of s.139 TCGA 1992, s.703 Taxes Act
1988 or to which s.343 Taxes Act 1988 could apply.
7.6 CHARGEABLE DEBTS
The Company is not owed a debt, other than a debt on a security, on the
disposal or satisfaction of which a liability to corporation tax on
chargeable gains will arise by reason of s.257 TCGA 1992.
7.7 RELIEF FOR LOSSES TO TRADERS AND QUALIFYING CORPORATE BONDS
No claim for relief has been allowed to the Company pursuant to ss.253 and
254 TCGA 1992 in respect of any loan and no chargeable gain has or is
likely to arise pursuant to ss.253(5), (6), (7), or (8) or s.254(9) or
(10) of the TCGA 1992.
60
7.8 CHARGEABLE POLICIES
The Company has not acquired benefits under any policy of assurance
otherwise than as original beneficial owner.
7.9 GAINS ACCRUING TO NON-RESIDENT COMPANIES OR TRUSTS
There has not accrued any gain in respect of which the Company may be
liable to corporation tax on chargeable gains by virtue of the provisions
of s.13 or s.87 TCGA 1992.
7.10 COMPANY MIGRATION
There are no circumstances pursuant to which the Company may become liable
to tax pursuant to s.185 (Deemed disposal of assets on company ceasing to
be resident in U.K.), s.187 (Postponement of charge on deemed disposal)
TCGA 1992 or s.132 (Liability of other persons for unpaid tax) Finance Act
1988 or s.191 TCGA 1992 (Non-payment of tax by non-resident companies).
7.11 RECOVERY OF UNPAID TAX
There are no circumstances in existence which could lead to a notice
requiring payment of unpaid tax being served on the Company pursuant to
s.190(3) Taxation of Chargeable Gains Act 1992 (Tax recoverable from
another group company or controlling director) or schedule 28 paragraph 3
Finance Act 2000 (Recovery of tax payable by non-resident company).
8. INTANGIBLE ASSETS
8.1 GENERAL
(A) The Disclosure Letter contains full particulars of all assets of the
Company to which the provisions of Schedule 29 Finance Act 2002
apply ("INTANGIBLE ASSETS").
(B) No election has been made by the Company under paragraph 10 Schedule
29 Finance Act 2002 in respect of any Intangible Assets of the
Company.
(C) The Disclosure Letter contains full particulars of the extent to
which the book value of any Intangible Assets as shown in the
Audited Accounts exceeds their tax written down value.
8.2 CLAIMS
The Disclosure Letter contains full particulars of:
(A) all claims made by the Company under Part 7 Schedule 29 Finance Act
2002 and no such claim has been made by any other person (in
particular by virtue of Part 9) which affects or could affect the
cost for tax purposes of any asset acquired by the Company; and
(B) any declaration of provisional entitlement to relief made under
paragraph 43 Schedule 29 Finance Act 2002.
8.3 CONNECTED PARTIES AND INTRA-GROUP TRANSACTIONS
(A) The Disclosure Letter contains full particulars of any Intangible
Asset acquired from any other company then belonging in the same
group of companies as the Company within the meaning of Part 8
Schedule 29 Finance Act 2002.
(B) The Company has not made any election under paragraph 66 Schedule 29
Finance Act 2002.
61
8.4 RECONSTRUCTIONS
The Disclosure Letter contains full particulars of:
(A) any scheme of reconstruction to which the Company has been a party
and to which provisions of Part 11 Schedule 29 Finance Act 2002
apply;
(B) any claim or election made by the Company pursuant to paragraph 86
(Postponement of charge on transfer of assets to non-resident
company) or paragraph 109 (Asset ceasing to be intangible asset:
postponement of gain in certain cases) Schedule 29 Finance Act 2002;
and
(C) any applications for clearance made by the Company under paragraphs
84(6), 85(5), 86(9) or 87(8) Schedule 29 Finance Act 2002.
9. CLAIMS, ELECTIONS AND CLEARANCES
9.1 CLAIMS AND ELECTIONS
All claims for any relief, allowance or repayment and all elections made
for tax purposes by the Company in the previous seven years have been duly
and promptly made and remain valid.
9.2 CLAIMS BY THE COMPANY
The Company has made no claim under any of the following:
(A) s.279 TCGA 1992 (assets situated outside the United Kingdom);
(B) s.24(2) TCGA 1992 (assets of negligible value);
(C) s.280 TCGA 1992 (tax on chargeable gains payable by instalments);
(D) ss.242 and 243 Taxes Act 1988 (surplus franked investment income);
(E) s.584 Taxes Act 1988 (unremittable income arising outside the United
Kingdom); or
(F) schedule 15 and/or 16 of the Finance Act 2000 (corporate venturing
scheme).
9.3 ELECTIONS
The Disclosure Letter contains full particulars of all elections made by
the Company under the following provisions:
(A) ss.524, 527 and 534 Taxes Act 1988 (lump sum receipts for patents
and copyright);
(B) s.83 Capital Allowances Act 2001 (short life assets) ; and
(C) s.290 Capital Allowances Act 2001 (leasehold interests).
9.4 TAX RELIEF FOR EXPENDITURE OF RESEARCH AND DEVELOPMENT
The Disclosure Letter contains full details of all claims made by the
Company under schedule 20 Finance Act 2000 or schedule 12 Finance Act
2002.
62
10. DOUBLE TAX RELIEF
10.1 CLAIMS
All claims in respect of double tax relief made by the Company within the
last seven years have been duly and promptly made and remain valid.
11. MISCELLANEOUS
11.1 LEASEHOLDS
The Company is not liable to Tax under the provisions of ss.34, 35 and 36
Taxes Act 1988 nor does it own any leasehold interest to which the said
s.35 applies.
11.2 FOREIGN EXCHANGE GAINS AND LOSSES
The Disclosure Letter contains full details of all claims to defer
unrealised exchange gains made by the Company pursuant to s.139 Finance
Act 1993.
11.3 DERIVATIVE CONTRACTS
The Disclosure Letter contains full details of all qualifying contracts
with non resident persons for the purposes of s.168 Finance Act 1994 or
paragraph 31 Schedule 26 Finance Act 2002.
11.4 FINANCE LEASES
The Company is not a party to any finance lease to which Schedule 12
Finance Act 1997 would apply.
11.5 LOAN RELATIONSHIPS
(A) The Company applies an authorised accruals method of accounting (as
that term is defined in s.85 Finance Act 1996) in respect of all
loan relationships (as that term is defined in s.81 Finance Act
1996) to which it is a party.
(B) The Disclosure Letter contains full particulars of any loan
relationship to which the Company is a party, whether as debtor or
creditor, where any other party to that loan relationship is
connected with the Company for the purposes of Chapter II of Part IV
Finance Act 1996 or where the Company or the other party to the loan
relationship has a major interest in the other as "major interest"
is defined in paragraph 20 Schedule 9 Finance Act 1996.
(C) The Disclosure Letter contains full particulars of any loan
relationship to which the Company is a party and to which s.92 or
s.93 Finance Act 1996 applies.
(D) The Disclosure Letter contains full particulars of any debtor
relationship (as that term is defined in s.103 Finance Act 1996) of
the Company which relates to a relevant discounted security (as that
term is defined in paragraph 3 of schedule 13 Finance Act 1996) to
which paragraph 17 or paragraph 18 of schedule 9 Finance Act 1996
applies.
(E) The Company has not entered into any transaction to which paragraph
11(1) of schedule 9 Finance Act 1996 applies.
(F) The Company is not entitled to be, released from any liability which
arises under a debtor relationship of that Company.
63
11.6 REVERSE PREMIUMS
(A) The Company has not since the Balance Sheet Date received or become
entitled to receive a reverse premium (within the meaning of
Schedule 6 paragraph 1 Finance Act 1999 or otherwise being any
payment received as an inducement to acquire an interest in land) in
respect of any premises.
(B) The Company is not, and has not since the Balance Sheet Date been,
under an obligation to pay a premium to a third party as an
inducement to that third party to agree to acquire an interest in
land.
11.7 COMMUNITY INVESTMENT TAX RELIEF
The Disclosure Letter contains details of any investment made by the
Company in a community development finance institution for the purposes of
Schedule 16 Finance Act 2002, which was made within the previous five
years.
12. TAXATION OF EMPLOYEES AND AGENTS
12.1 P.A.Y.E.
The Company has properly operated the Pay As You Earn system, making such
deductions and payments of tax as required by law from all payments to or
treated as made to employees, ex-employees, officers and ex-officers of
the Company and punctually accounted to the Inland Revenue for all such
tax and all returns required pursuant to s.203 Taxes Act 1988 and
regulations made thereunder have been punctually made and are accurate and
complete in all respects.
12.2 DISPENSATIONS
The Disclosure Letter contains details of all PAYE settlement agreements
entered into and all dispensations obtained by the Company.
12.3 BENEFITS FOR EMPLOYEES
(A) The Company has not made any payment to or provided any benefit for
any officer or employee or ex-officer or ex-employee of the Company
which is not allowable as a deduction in calculating the profits of
the Company for taxation purposes.
(B) The Company has not issued or agreed to issue any shares or
securities or interests in shares or securities to any person where
the shares are acquired by reason of that person's past, present or
future office or employment or any other benefit in respect of which
the Company will or would, if the prescribed circumstances arise, be
required on or after the Offer Date to operate PAYE or pay or
account for any national insurance contributions.
12.4 SUB-CONTRACTORS
The Company is not and never has been either a contractor or a
sub-contractor for the purposes of Chapter IV Part XIII Taxes Act 1988.
12.5 NATIONAL INSURANCE
The Company has paid all national insurance contributions for which it is
liable and has kept proper books and records relating to the same.
64
13. STAMP DUTIES
13.1 STAMP DUTY
The Company has duly paid all stamp duty on documents and transactions to
which it is a party and which are liable to stamp duty.
13.2 STAMP DUTY RESERVE TAX AND STAMP DUTY LAND TAX
The Company has made all returns and paid all stamp duty reserve tax and
stamp duty land tax in respect of any transaction in securities and/or
land in respect of which it is liable to account for stamp duty reserve
tax or stamp duty land tax.
13.3 UNDERTAKINGS AND PAYMENTS ON ACCOUNT
The Disclosure Letter contains details of any undertakings given by or on
behalf of the Company in respect of stamp duty or stamp duty reserve tax
and full details of any payment made on account of or lodged with the
Inland Revenue or other Tax authorities in respect of stamp duty.
13.4 WITHDRAWAL OF RELIEFS
The Disclosure Letter contains details of any document or transaction to
which the Company is a party which was executed within the previous three
years and which has been relieved from stamp duty in whole or in part
pursuant to the provisions of s.42 Finance Act 1930, s.151 Finance Act
1995 or s.76 Finance Act 1986.
13.5 CONTRACTS FOR THE SALE OF AN ESTATE OR INTEREST IN LAND
The Company has not entered into any contract or agreement for the sale of
an estate or interest in land in the United Kingdom which is or may be
chargeable with stamp duty pursuant to s.115 Finance Act 2002.
14. VALUE ADDED TAX
14.1 COMPLIANCE
The Company has complied with all statutory provisions and regulations
relating to value added tax and has duly paid or provided for all amounts
of value added tax for which the Company is liable.
14.2 TAXABLE SUPPLIES
All supplies made by the Company are taxable supplies and the Company is
not and will not be denied credit for any input tax by reason of the
operation of s.26 Value Added Tax Act 1994 and regulations made
thereunder.
14.3 VAT GROUPS
The Company is not and has not been, for VAT purposes a member of a group
of companies for VAT purposes full details of which are contained in the
Disclosure Letter.
14.4 SECTION 8 SUPPLIES
No supplies of a material amount have been made to the Company to which
the provisions of s.8 Value Added Tax Act 1994 might apply.
65
14.5 OFFENCES
The Company has not committed any offence contrary to s.60 or s.72 Value
Added Tax Act 1994, nor has it received any penalty liability notice
pursuant to s.64(3), surcharge liability notice pursuant to s.59, or
written warning issued pursuant to s.76(2) of that Act.
14.6 SECURITY
The Company has not been required to give security under paragraph 4
schedule 11 Value Added Tax Act 1994.
14.7 ELECTIONS
The Disclosure Letter contains details and copies of all elections,
together with the relevant notification, made by the Company pursuant to
paragraph 2 schedule 10 Value Added Tax Act 1994.
14.8 DEVELOPERS
The Company is not and has not been in relation to any land, building or
civil engineering work a developer within the meaning of paragraph 5(5)
schedule 10 Value Added Tax Act 1994.
14.9 INTEREST
The Company has not paid and is not liable to pay any interest pursuant to
s.74 Value Added Tax Act 1994.
14.10 CAPITAL GOODS SCHEME
The Disclosure Letter contains details of any assets of the Company to
which the provisions of Part XV Value Added Tax Regulations 1995 (the
Capital Goods Scheme) apply and in particular:
(A) the identity (including in the case of leasehold property, the term
of years), date of acquisition and cost of the asset; and
(B) the proportion of input tax for which credit has been claimed
(either provisionally or finally in a tax year and stating which).
15. INHERITANCE TAX AND GIFTS
15.1 POWERS OF SALE FOR INHERITANCE TAX PURPOSES
There are not in existence any circumstances whereby any such power as is
mentioned in s.212 Inheritance Tax Act 1984 could be exercised in relation
to any shares in, securities of, or assets of, the Company.
15.2 GIFTS
(A) The Company is not liable to be assessed to corporation tax on
chargeable gains or to inheritance tax as donor or donee of any gift
or transferor or transferee of value.
(B) The Company has not been a party to associated operations in
relation to a transfer of value within the meaning of s.268
Inheritance Tax Act 1984.
(C) No Inland Revenue charge (as defined in s.237 Inheritance Tax Act
1984) is outstanding over any asset of the Company or in relation to
any shares in the capital of the Company.
66
(D) The Company has not received any asset as mentioned in s.282 TCGA
1992.
67
SCHEDULE 7: PARTICULARS OF PREMISES
PRESENT DATE OF AND CURRENT PRINCIPAL
DEMISED PREMISES TENANT PARTIES TO LEASE TERM YEARLY RENT
5th Floor The Company Arnolfini 5 year lease (pound)115,625
Bush House 3 year break clause
Prince Street Lease from 01 July
Bristol 2004
BS1
United Kingdom
Broad Quay House The Company Regus Expires 31 July 2004 (pound)272,412
Prince Street
Bristol
BS1 4DJ
United Kingdom
Spaces Personal Storage The Company Spaces Personal One month rolling contract (pound)3,708
10 Clift House Road Storage 4 weeks notice to terminate
Ashton Gate
Bristol
BS3 1RX
United Kingdom
Suite 10 The Company Chapman Taylor LLP 6 month rolling contract (pound)28,200
3rd Floor Expires 29.11.2003
Macmillon House 4 weeks notice to terminate
96 Kensington High Street
London
W8 4SG
United Kingdom
DETAILS OF ANY TENANCY TO WHICH
CURRENT THE PREMISES ARE SUBJECT (OR ANY
DEMISED PREMISES USE AGREEMENT FOR SUCH TENANCY)
5th Floor Office Space None
Bush House
Prince Street
Bristol
BS1
United Kingdom
Broad Quay House Office Space None
Prince Street
Bristol
BS1 4DJ
United Kingdom
Spaces Personal Storage Office Space None
10 Clift House Road
Ashton Gate
Bristol
BS3 1RX
United Kingdom
Suite 10 Office Space None
3rd Floor
Macmillon House
96 Kensington High Street
London
W8 4SG
United Kingdom
68
Regus Business Centre On Demand Regus One Year contract (euro) 21,600
Lago Richini No 6 Distribution S.r.l. Expires 28.02.2005
20122 Milan
Italy
290 Boulevard Voltaire On Demand Bail Lafon 9 year lease (euro) 21,953
75011 Paris Distribution sas Letting agent: Expires 31.03.2010
France Muriel Forest-Vergez 3 year break clauses
Stammstrasse 90 On Demand Udo Krone & Rose One year rolling contract (euro) 10,800
5823 Cologne Distribution GmbH Haferkamp Expires 01.06.2005
Germany
Regus Business Centre Office Space None
Lago Richini No 6
20122 Milan
Italy
290 Boulevard Voltaire Office Space Sept a Voir is a sub-tenant of
75011 Paris On Demand Distribution sas
France
Stammstrasse 90 Office Space IT Synergy is a sub-tenant of On
5823 Cologne Demand Distribution GmbH
Germany
69
SCHEDULE 8: OBLIGORS' PROTECTION
1. NON-APPLICATION TO CERTAIN CLAIMS.
For the avoidance of doubt, no provision in this schedule shall apply to
any claim under clauses 4.2 and 4.3 of this Deed.
2. LIMITATIONS ON RECOVERY
2.1 SOLE RIGHT OF RECOURSE
The sole right of recourse of the Purchaser for any Relevant Claim and for
any amounts due under schedule 12 following the preparation of the
Completion Accounts and for any damages payable under clause 3.1(A), shall
be limited (in accordance with the terms of schedule 9) to the Escrow
Shares, the Escrow Cash and, subject to paragraphs 2.2 and 6.4 of schedule
9, any further Consideration due under the Offer.
2.2 MAXIMUM CLAIM
The total amount which the Purchaser may claim for:
(A) all Relevant Claims; and
(B) any amounts due under schedule 12 following the preparation of the
Completion Accounts; and
(C) any damages payable under clause 3.1(A),
shall not, in aggregate, exceed 15% of the Consideration.
3. TIME LIMITS
The Obligors shall have no liability in respect of any Relevant Claim
unless the Purchaser shall have given notice in writing to the Obligors of
such claim not later than the last Business Day before the date which is
18 months after the Offer Date and such Relevant Claim is either (i)
settled between the Purchaser and the Obligors or (ii) the Purchaser has
commenced proceedings in respect of such Relevant Claim within 3 months of
the date of such notice.
4. NO DUPLICATION OF RECOVERY
4.1 NO DOUBLE RECOVERY
The Purchaser shall not be entitled to recover damages or otherwise obtain
reimbursement or restitution more than once in respect of the same loss
(including for the avoidance of doubt under the Warranties and the
indemnities in clause 4 and schedule 11), but to the extent any loss is
not satisfied in full by any particular damages claim or reimbursement,
this provision shall not apply to the difference between the amount
recovered and the loss suffered.
4.2 CLAIMS UNDER WARRANTIES OR TAX INDEMNITY
In the event that the Purchaser is entitled to claim under the indemnity
contained in schedule 11 or under the Warranties in respect of the same
subject matter, the Purchaser may claim under either or both but payments
under the indemnity contained in schedule 11 shall pro tanto satisfy and
70
discharge any claim which is capable of being made under the Warranties in
respect of the same subject matter and vice versa.
5. RELEVANCE OF LIMITATIONS IN CIRCUMSTANCES OF FRAUD ETC
Nothing in this Deed shall limit the ability of the Purchaser to recover
any amount from any Obligor in respect of a Claim against any Obligor if
it is (or the delay in the discovery of which is) the consequence of
fraud, wilful misconduct or wilful concealment by that Obligor.
6. THIRD PARTY CLAIMS
6.1 The Purchaser shall notify the Obligors in writing of:
(A) any claim made against it by a third party which may give rise to a
Relevant Claim;
(B) any claim that any Group Company is entitled to bring against a
third party which claim is based on circumstances which may give
rise to a Relevant Claim.
6.2 The Purchaser shall procure that the conduct, negotiation, settlement or
litigation of the claim by or against such third party is, so far as is
reasonably practicable and having regard to the interests of the Company
and Loudeye (which shall include the preservation and maintenance of the
goodwill of the Purchaser Group (including the Group) with any customer or
supplier of the Company or the Subsidiaries), carried out in accordance
with the wishes of the Warrantors and at their cost subject to their
giving timely instructions to the Purchaser and indemnifying and securing
the Purchaser and/ or the Company to the Purchaser's reasonable
satisfaction against all costs and expenses which might be incurred by the
Purchaser or the Company in so doing. Nothing in this paragraph 6 shall
apply to any Relevant Claim under the Warranties contained in schedule 6
or the indemnity in schedule 11.
6.3 The Purchaser shall, at the Warrantors' cost, provide and shall procure
that the Group provides to the Warrantors and their professional advisers
reasonable access to premises and personnel and to any relevant assets,
documents and records within their power, possession or control for the
purpose of investigating any Relevant Claim and enabling the Obligors to
take the action referred to in sub-paragraph 6.2 and shall allow the
Obligors and their advisers to take copies of any relevant documents or
records at their expense.
7. LIMITATIONS ON LIABILITY
7.1 No rights to the Escrow Shares shall be waived by the Obligors or Escrow
Cash released to the Purchaser under schedule 9 in respect of any Relevant
Claim unless the amount of any such Relevant Claim, when aggregated with
all other Relevant Claims, made on the same occasion or previously, is
equal to or exceeds(pound)10,000 (in which case the Obligors shall be
liable for the whole amount and not simply the excess).
7.2 No rights to the Escrow Shares shall be waived by the Warrantors or Escrow
Cash released to the Purchaser under schedule 9 in respect of any Relevant
Claim unless the amount of such Relevant Claim exceeds(pound)1,000 (in
which case the Obligors shall be liable for the whole and not simply the
excess).
7.3 No Escrow Shares shall be waived by the Obligors or Escrow Cash released
to the Purchaser under schedule 9 in respect of and to the extent that:
(A) the Purchaser has actual knowledge of the subject matter of the
Relevant Claim on or before the Offer Date;
71
(B) an allowance, provision or reserve in respect of any liability the
subject of the Relevant Claim was made or taken into account, or
payment or discharge of which was taken into account, in or in
preparing the Accounts;
(C) it would not have arisen or would have been reduced or eliminated
but for:
(1) any claim, election, surrender or disclaimer made or notice or
consent given or any other thing done after Completion by any
Group Company or the Purchaser or any person connected with
them;
(2) it is attributable to or arises as a result of:
(a) any voluntary act or omission of the Purchaser (or any
persons deriving title from it) or any Group Company
after Completion done or suffered outside the ordinary
course of business;
(b) a change in the law (whether retrospectively or not);
(3) the Purchaser is indemnified against any loss or damage
suffered by it under the terms of any insurance policy for the
time being in force and any claim under such insurance policy
is successful and covers the whole amount of any loss or
damage which would otherwise have been recoverable from the
Warrantors;
(4) the Purchaser would have been so indemnified under paragraph
7.3(C)(3) had the insurance policies held by the Group
immediately prior to Completion remained in full force and
effect;
(5) any action taken at the request or direction of the Purchaser
(including any changes to accounting policies);
(6) a breach of the Purchaser's obligations under this Deed;
(7) has been or is made good or is otherwise compensated for
without cost to the Purchaser or any Group Company.
7.4 Where the subject matter of the Relevant Claim is capable of remedy, the
Obligors shall not be liable for the Relevant Claim if the breach or
default is remedied by them to the reasonable satisfaction of the
Purchaser within 30 days of receipt by them of the notification of the
Claim pursuant to paragraph 3 above.
72
SCHEDULE 9 : ESCROW MECHANISM
1. INTERPRETATION
1.1 DEFINITIONS
In this schedule, where the context admits:
"DEFERRED CONSIDERATION" shall have the meaning ascribed to it in the
Offer Document;
"EARN OUT CONSIDERATION" shall have the meaning ascribed to it in the
Offer Document;
"ESCROW PERIOD" shall have the meaning set out in paragraph 3 of this
schedule;
"RELEVANT PERCENTAGE" means the percentages listed in column 3 of the
table at paragraph 2.1 of this schedule;
"SERIES B NOTES" shall have the meaning ascribed to it in the Offer
Document;
"SERIES C NOTES" shall have the meaning ascribed to it in the Offer
Document; and
SET-OFF AMOUNT shall have the meaning set out in paragraph 6.4 of this
schedule.
2. ESCROW ARRANGEMENTS
2.1 The Purchaser will retain the following amounts of Initial Loudeye Shares
otherwise due to be issued to the Obligors under the terms of the Offer
and/or Loudeye Shares due under the Optionholder Alternative (as set out
in the Offer Document) and hold them on the terms set out in this
schedule:
NUMBER OF INITIAL LOUDEYE
NAME SHARES IN ESCROW RELEVANT PERCENTAGE
Charles Grimsdale 342,276 16.36%
John Grinham 42,835 2.05%
Edward Averdieck 38,410 1.84%
Christopher Pike 33,552 1.60%
David Shephard 41,923 2.00%
Peter Gabriel 420,973 20.12%
Michael Large 20,131 0.96%
Susan Moule 7,268 0.35%
Quester Venture Partners LLP 119,653 5.72%
Quester VCT2 plc 303,194 14.49%
Quester VCT3 plc 303,194 14.49%
73
Quester VCT4 plc 113,669 5.43%
Investment Enterprise
Partnership `NIF New
Technology Fund
99A' 22,207 1.06%
Investment Enterprise
Partnership `NIF New
Technology Fund 99B' 22,207 1.06%
Investment Enterprise
Partnership `NIF New
Technology Fund 2000/01' 52,489 2.51%
Investment Enterprise
Partnership `NIF New
Technology Fund 2000/02' 84,853 4.06%
Investment Enterprise
Partnership `NIF 21-ONE(1) 32,364 1.55%
NIF Ventures Co. Limited 91,302 4.36%
TOTALS 2,092,500 100%
2.2 Each of the Obligors irrevocably directs the Purchaser to, and consents
and agrees to, the holding of the Escrow Shares by the Purchaser on the
terms set out in this schedule. Each of the Obligors irrevocably directs
the Purchaser to, and consents and agrees to, the Purchaser retaining the
Relevant Percentage of each of their respective entitlements to (when and
if the same shall become due, provided that with respect to entitlements
that may become due following the expiration of the Escrow Period, the
Purchaser shall be entitled to retain amounts (of either cash or Loudeye
Shares, but not to exceed the Relevant Percentages) that may be necessary
to satisfy Claims made prior to the expiration of the Escrow Period):
(A) any cash;
(B) any Loudeye Shares; and
(C) any Further Loudeye Shares
whether due under a Promissory Note or otherwise, but due to them under
the terms of the Offer and/or the Optionholder Alternative (as set out in
the Offer Document), such cash and/or Loudeye Shares to be held on the
terms of this schedule and deemed to be Escrow Cash or Escrow Shares as
appropriate.
2.3 For the avoidance of doubt, in the event of any discrepancy between the
terms of this schedule and:
(A) the terms of the Offer; or
(B) the terms of any Promissory Note
74
the terms of this schedule shall prevail in all respects irrespective of
whether this Deed is dated prior to the date of the Offer or any
Promissory Note and irrespective of whether the Offer or Promissory Notes
contain any terms to the effect that the terms of such document are the
whole agreement between the parties.
3. ESCROW PERIOD
The Escrow Shares and Escrow Cash will be held by the Purchaser or in the
Escrow Account respectively on the terms set out in this Deed until the
later of:
(A) the settlement of the Completion Accounts;
(B) the date which is 18 months from the Offer Date;
(C) the conclusion of any legal proceedings in the courts of England and
Wales to judgment, settlement or waiver in respect of any Claim; or
(D) the expiration of any notice of a Relevant Claim pursuant to
paragraph 3 of schedule 8
the period from the Offer Date to such date being the "ESCROW PERIOD".
4. ESCROW MECHANISM
4.1 All Loudeye Shares which are the subject of paragraphs 2.1 and 2.2 above
shall be issued by the Purchaser in the name of the relevant Obligor, but
the certificates in respect of such Loudeye Shares shall be held by the
Purchaser until the end of the Escrow Period or until any Claims under the
terms of this Deed are settled.
4.2 All cash amounts (if any) which are the subject of paragraph 2.2 above
shall be paid into the Escrow Account until the end of the Escrow Period
or until any Claims under the terms of this Deed are settled.
4.3 For the avoidance of doubt, if the Purchaser is required to actually pay
over any amount of cash or actually issue any Loudeye Shares pursuant to a
Promissory Note prior to the end of the Escrow Period, the Purchaser shall
retain (in the case of Loudeye Shares) or pay into the Escrow Account (in
the case of cash) the Relevant Percentages of such Loudeye Shares or cash
that would otherwise be payable to each Obligor under such Promissory Note
and any such Loudeye Shares and/or cash shall be considered Escrow Shares
and Escrow Cash for the purposes of this schedule 9. The retention by the
Purchaser of such Escrow Shares or payment into the Escrow Account of such
Escrow Cash resulting from any Promissory Note shall be deemed to satisfy
in full the Purchaser's obligations under the terms of the Promissory Note
in respect of such Escrow Shares or Escrow Cash.
5. APPOINTMENT OF REPRESENTATIVE
5.1 Each of the Obligors approve the joint appointment of and jointly appoint
Christopher Pike, Jamie Brooke and Michael Large as the joint
representative of the Obligors (the "REPRESENTATIVE") and as the attorney
and agent for and on behalf of each Obligor with respect to the taking by
the Representative of any and all actions and the making of any decisions
required or permitted to be taken by the Representative under this
schedule including the exercise of the power to:
(A) authorise the release or delivery to the Purchaser of Escrow Shares
or give instructions to release the Escrow Cash from the Escrow
Account in satisfaction of any Claim to the Purchaser;
75
(B) enter into agreements with the holder of the Escrow Account in
relation to the operation of the Escrow Account;
(C) agree to, negotiate, enter into settlements and compromises of, and
comply with orders of courts with respect to, such Claim;
(D) resolve, settle or compromise any Claim hereunder;
(E) take all actions contemplated by schedule 12 in relation to the
Completion Accounts (as the same is defined in schedule 12); and
(F) take all actions necessary in the judgment of the Representative to
accomplish the foregoing.
For the avoidance of doubt Christopher Pike, Jamie Brooke and Michael
Large shall act as a joint Representative and their joint consent is
required to take any action under their joint appointment as
Representative. The Representative will have authority and power to act on
behalf of each Obligor with respect to the disposition, settlement or
other handling of all Claims hereunder. Each Obligor will be bound by all
actions taken and documents executed by the Representative in connection
with this Deed, and the Purchaser will be entitled to rely on any action
or decision of the Representative. In performing the functions specified
in this Deed, the Representative will not be liable to any Obligor in the
absence of gross negligence or wilful misconduct on the part of the
Representative. The Obligors (excluding Quester Venture Partnership, LLP,
Quester VCT2 plc, Quester VCT3 plc, Quester VCT4 plc (together "QUESTER"),
Investment Enterprise Partnership `NIF New Technology Fund 99A',
Investment Enterprise Partnership `NIF New Technology Fund 99B',
Investment Enterprise Partnership `NIF New Technology Fund 2000/01',
Investment Enterprise Partnership `NIF New Technology Fund 2000/02',
Investment Enterprise Partnership `NIF 21-ONE(1) and NIF Ventures Co. Ltd
(together "NIF")) shall severally indemnify the Representative and hold
each of them harmless against any loss, liability or expense incurred
without gross negligence or wilful misconduct on the part of the
Representative and arising out of or in connection with the acceptance or
administration of their duties in this schedule or schedule 12. Quester
may at any time by written notice to each of the Purchaser, Christopher
Pike and Michael Large, remove Jamie Brooke as a joint representative and
replace him with such other employee of Quester in his place.
6. WAIVER OF ESCROW CASH AND ESCROW SHARES
6.1 WAIVER OF ESCROW CASH
Following judgment being obtained against all or any of the Obligors from
a court or tribunal of competent jurisdiction or any Claim against all or
any of the Obligors being settled by the Representative in favour of the
Purchaser each Obligor hereby irrevocably waives his or its right to such
amount of Escrow Cash as shall be calculated by the following formula:
where:
N = the amount of Escrow Cash to which the relevant Obligor waives
their rights;
A = the amount owed pursuant to the Claim; and
B = the Relevant Percentage specified next to such Obligor's name in
paragraph 2.1.
76
6.2 WAIVER OF ESCROW SHARES
Following judgment being obtained against all or any of the Obligors from
a court or tribunal of competent jurisdiction or any Claim against all or
any of the Obligors being settled by the Representative in favour of the
Purchaser each Obligor hereby irrevocably waives his or its right to such
number of Escrow Shares as shall be calculated by the following formula:
where:
N = the number of Escrow Shares to which the relevant Obligor waives
their rights;
A = the amount owed pursuant to the Claim;
B = the Relevant Percentage specified next to such Obligor's name in
paragraph 2.1; and
C = the closing share price of the Loudeye Shares on NASDAQ on the
last day on which NASDAQ is open for the settlement of trades in
Loudeye Shares before the settlement of the Claim or judgment having
been given.
6.3 Without limiting the foregoing, any Claim by the Purchaser (or portion
thereof) which has not been contested by the Representative within 30 days
after receipt thereof shall be deemed to have been settled in favour of
the Purchaser and the corresponding amount of Escrow Cash or number of
Escrow Shares waived by the Obligors under this paragraph 6.
6.4 The Purchaser agrees that in respect of any Claim, the waiver by the
Obligors pursuant to paragraphs 6.1 and/or 6.2 of their right to all or
some of any Escrow Cash and/or Escrow Shares shall constitute full and
final settlement of the whole (or as the case may be part) of the Claim,
provided that such waiver meets the total liability of the Claim. If there
are insufficient Escrow Shares or Escrow Cash available to make payment in
full of the Claim the amount outstanding shall be applied against any
Escrow Shares or Escrow Cash which may, at a later date, become the
subject of this schedule. Following any such waiver, should there be any
amount still due under any Claim (the "SET-OFF AMOUNT"), the Purchaser
shall be entitled to set-off against payments due under any outstanding
Promissory Notes or the payment of any further Consideration due under the
Offer (whether by Promissory Note or otherwise and including, without
limitation, any Deferred Consideration and Earn Out Consideration) in
accordance with the Relevant Percentages of each Obligor up to the Set-Off
Amount, provided always that the total amount which the Purchaser may
claim under the Warranties, the tax indemnity in schedule 11, the
Completion Accounts in schedule 12 and the covenant in clause 3.1(A) shall
not exceed 15% of the total Consideration payable under the Offer. Any
such set-off applied in satisfaction of a Claim shall be deemed to satisfy
in full the Purchaser's obligation under the Offer and/or any Promissory
Note to the extent of the Set-Off Amount.
6.5 If any Set-Off Amount is settled by way of set-off against any amount due
under any Series B Note or Series C Note, such note shall be deemed to
have its principal amount reduced from the date of its issue by the amount
of such Set-Off Amount and accordingly no interest shall accrue on such
Set-Off Amount. Each Obligor undertakes to surrender any certificate in
respect of any B Promissory Note or C Promissory Note which has been the
subject of a Set-Off Amount for reissue by the Purchaser for such lower
amount as is equal to the original principal amount minus any Set-Off
Amount.
6.6 Each of the Obligors irrevocably agrees that their Escrow Shares and
Escrow Cash will be used to satisfy any Claim under this Deed in the
percentage proportions set out in paragraph 2.1 irrespective
77
of whether it is a breach of the Warranties or any indemnity or
restrictive covenant given by all or some only of the Warrantors or
otherwise.
7. ORDER OF SATISFACTION OF CLAIM
Following judgment being obtained against the Obligors from a court or
tribunal of competent jurisdiction or any Claim being settled by the
Representative in favour of the Purchaser, such Claim shall be settled
first from the Escrow Cash (if any), secondly from the Escrow Shares,
thirdly from any cash payable under the Offer, which does not become
Escrow Cash, by way of set-off pursuant to paragraph 6.4 and fourthly from
any Further Loudeye Shares payable under the Offer, which do not become
Escrow Shares, by way of set-off pursuant to paragraph 6.4.
8. RELEASE TO OBLIGORS
On the first Business Day following the expiry of the Escrow Period and
following written notice from the Representative on behalf of the
Obligors:
(A) the Purchaser and the Representative shall give instructions in
relation to the Escrow Account to transfer to each Obligor the
amount of Escrow Cash (together with any accrued interest); and
(B) the Purchaser shall release to each Obligor the remaining number of
Escrow Shares to which he is entitled pursuant to the this schedule
less any Escrow Cash and/or Escrow Shares in respect of which each such
Obligor has waived their rights pursuant to paragraph 6 above.
9. RELEASE TO PURCHASER
On the first Business Day following any waiver pursuant to paragraph 6,
then following written notice from the Purchaser to the Representative to
that effect:
(A) the Purchaser and the Representative shall give instructions in
relation to the Escrow Account to transfer such amount of Escrow
Cash to the Purchaser; and
(B) such number of Escrow Shares as are the subject of such waiver may,
without limitation and in the Purchaser's sole discretion, be
cancelled, held in treasury by the Purchaser or reissued by the
Purchaser to another person;
and upon such waiver the Consideration shall be deemed to have been
reduced accordingly. At the request of the Purchaser, each Obligor shall
execute such stock transfer instructions as may be reasonably necessary
(if any) to effect the release of such Escrow Shares to the Purchaser.
78
SCHEDULE 10: OBLIGORS' PROFESSIONAL FEES
PROFESSIONAL ADVISOR WORK PROVIDED FEES
Osborne Clarke Legal Services to the Obligors
Broadview International Financial Services and Markets Act 2000
Limited (Financial Promotion) Order 2001,
paragraph 15 of part II of
Schedule 4 advice to the directors
of the Company regarding the
implications of the Offer
Gray Cary Legal Services to the Obligors
Grant Thornton Audit of the Company's accounts to US
GAAP for the purposes of the
Purchaser's 8-K filing with the
Securities and Exchange Commission
Sheridans Legal Services to certain of the Obligors
KPMG Preparation of the Company's Accounts
in accordance with US GAAP
Total (pound)1,000,000 inclusive of VAT
79
SCHEDULE 11: TAX INDEMNITY
1. INTERPRETATION
1.1 DEFINITIONS
The following words and expressions shall have the following meanings:
"AUDITORS" means the auditors from time to time of the Company;
"DEEMED TAX LIABILITY" has the meaning given in paragraph 1.2(B);
"DISTRIBUTIOn" has the meaning given in paragraph 1.2(D)(3);
"EVENT" includes the existence of any state of affairs and any payment,
transaction, action or omission, any change in the residence of any person
for the purposes of any Tax, the death of any person, and a failure to
take any action which would avoid an apportionment or deemed distribution
of income (regardless of whether the taking of any such action after the
Offer Date could have avoided such apportionment or deemed distribution)
and shall also include Completion and reference to an Event occurring on
or before the Offer Date shall be deemed to include any combination of two
or more Events only the first of which shall have occurred on or before
that date outside the ordinary course of business and the second of which
shall have occurred after the Offer Date within the ordinary course of
business;
"GROUP RELIEF" means any loss, allowance, credit, exemption or set-off or
other amount eligible for surrender by way of group relief in accordance
with the provisions contained in sections 402 to 413 Taxes Act;
"INCOME, PROFITS OR GAINS" has the meaning given in paragraph 1.2(D)(1);
"PROCEEDINGS" means any proceeding, suit or action arising out of or in
connection with this schedule;
"RELEVANT AMOUNT" has the meaning set out in paragraph 5.3;
"RELEVANT COMPANY" has the meaning set out in paragraph 2.1(C);
"RELIEF" means any relief, allowance, credit, exemption or set-off in
respect of any Tax or any deduction in computing Income, Profits or Gains
for the purposes of any Tax;
"TAX ASSESSMENT" means any assessments, demand, determination or other
similar formal notice issued by or on behalf of any Tax Authority by
virtue of which the Company or any of the Subsidiaries is liable or is
likely to become liable to make a payment of Tax or will, or is likely to
with the passing of time, become so liable (in the absence of any
successful application to postpone any such payment) and shall also mean
any self-assessment made by the Company, any of the Subsidiaries or any
other person in respect of any amount of Tax which any of them either
considers that it is liable to pay or considers that it will, with the
passing of time, become liable to pay;
"TAX AUTHORITY" means the Inland Revenue, Customs & Excise, Department of
Social Security and any taxing or other authority (whether within or
outside the United Kingdom) competent to impose any Taxation; and
"TAX LIABILITY" has the meaning given in paragraph 1.2(A).
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1.2 CONSTRUCTION OF CERTAIN REFERENCES
(A) references to any "TAX LIABILITY" of the Company or any of the
Subsidiaries shall mean both liabilities of the Company or that
Subsidiary to make actual payments of Tax (or amounts in respect of
Tax), regardless of whether any such liability shall have been
discharged in whole or in part on or before the Offer Date save to
the extent that such discharge is taken into account in the Audited
Accounts, and also:
(1) the loss of any Relief where such Relief has been taken into
account in computing and so reducing or eliminating any
provision for deferred Tax which appears in the Audited
Accounts (or which but for such Relief would have appeared in
the Audited Accounts) or where such Relief was treated as an
asset of the Company in the Audited Accounts or was taken into
account in the computing any deferred Tax asset which appears
in the Audited Accounts;
(2) the loss of a right to repayment of Tax (including any
repayment supplement) which has been treated as an asset of
the Company or the relevant Subsidiary in preparing the
Audited Accounts or the setting off of any such right to
repayment of Tax against any actual Tax Liability in respect
of which the Purchaser would, but for that setting off, have
been able to make a claim against the Warrantors or any of
them under this schedule;
(3) the setting off or use against Income, Profits or Gains which
were earned, accrued or received on or before the Offer Date
or in respect of a period ended on or before the Offer Date or
against any Tax otherwise chargeable in respect of an Event
occurring (or deemed to occur) on or before the Offer Date or
in respect of a period ended on or before the Offer Date of
any Relief which arises as a consequence of or by reference to
an Event occurring (or deemed to occur) after the Offer Date
or in respect of a period commencing after the Offer Date and
not as a consequence of or by reference to any Event occurring
(or deemed to occur) on or before the Offer Date or in respect
of a period ended on or before the Offer Date in circumstances
where, but for such setting off, the Company or the relevant
Subsidiary would have had an actual Tax Liability in respect
of which the Purchaser would have been able to make a claim
against the Warrantors or any of them under this schedule; and
(4) any payment or repayment referred to in paragraph 2.1(D).
(B) in any case falling within any of paragraphs 1.2(A)(1), 1.2(A)(2),
1.2(A)(3), or paragraph 1.2(A)(4), the amount that is to be treated
for the purposes of this schedule as a Tax Liability of the Company
or the relevant Subsidiary (the "DEEMED TAX LIABILITY") shall be
determined as follows:
(1) in a case which falls within paragraph 1.2(A)(2) the Deemed
Tax Liability shall be the amount of the repayment and any
related supplement that would have been obtained but for the
loss or setting off mentioned in that paragraph;
(2) in a case which falls within paragraphs 1.2(A)(1) or 1.2(A)(3)
and where the Relief that was lost or the subject of the
setting off was a deduction from or offset against Tax, the
Deemed Tax Liability shall be the amount of that Relief;
(3) in a case which falls within paragraphs 1.2(A)(1) or 1.2(A)(3)
and where the Relief that was the subject of the setting off
was a deduction from or offset against Income, Profits or
Gains, the Deemed Tax Liability shall be the amount of Tax
which has been saved in consequence of the setting off; and
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(4) in a case which falls within paragraph 1.2(A)(4) the amount of
the payment or repayment.
(C) in determining any Tax Liability for the period from 1 April 2004 to
the Offer Date the accounting period in which the Offer Date occurs
shall be deemed to end on the Offer Date and a new accounting period
commenced immediately after the Offer Date.
(D) references to:
(1) "Income, Profits or Gains" shall include any standard or
measure for the purposes of any Tax and shall also include any
income, profits or gains which are deemed to be earned,
accrued or received for the purposes of any Tax;
(2) Income, Profits or Gains (as defined in paragraph 1.2(D)(1))
as being earned, accrued or received on or before a particular
date or in respect of a particular period shall mean Income,
Profits or Gains which are regarded as having been, or are
deemed to have been, earned, accrued or received on or before
that date or in respect of that period for the purposes of any
Tax;
(3) any "Distribution" shall include anything which is, or is
deemed to be, a dividend or distribution for the purposes of
any Tax;
(4) any Distribution as occurring on or before a particular date
shall include any Distribution which has fallen due to be made
on or before that date for the purposes of any Tax; and
(5) any "subsidiary of the Warrantors" shall mean any company of
which the Warrantors, or any one or more of the Warrantors,
have control for the purposes of section 416 Taxes Act.
2. INDEMNITY
2.1 Subject to the provisions of schedule 8 (and for the avoidance of doubt
paragraph 2 of schedule 8) and paragraph 3 of this schedule, the
Warrantors hereby jointly and severally covenant with the Purchaser to pay
to the Purchaser (so far as possible by way of repayment of the
Consideration payable under the Offer) an amount equal to any of the
following:
(A) any Tax Liability of the Company and/or any of the Subsidiaries
arising as a consequence of any Event which occurred on or before
the Offer Date or arising in respect of or by reference to any
Income, Profits or Gains which were earned, accrued or received on
or before the Offer Date;
(B) any liability of the Company and/or any of the Subsidiaries to
employer's national insurance arising as a consequence of the
exercise by any employee or officer of any Group Company of any
option (granted before the Offer Date), at any time, to subscribe
for any shares in the Company if the amount of such employer's
national insurance exceeds the amount listed for any employee or
officer in schedule 14, in which case the Warrantors shall be liable
for the excess only above the amount listed in schedule 14;
(C) any Tax Liability of the Company and/or any of the Subsidiaries
arising as a consequence of or by reference to any of the following
occurring or being deemed to occur at any time after the Offer Date:
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(1) the disposal by any Relevant Company of any asset or of any
interest in or right over any asset;
(2) the making by any Relevant Company of any such payment or
deemed payment as constitutes a chargeable payment for the
purposes of section 214 Taxes Act or the making of any such
payment or deemed payment by any person, not being the
Purchaser and not being a company, that is acting in pursuance
of a scheme or arrangements made with any Relevant Company or
(3) any Relevant Company ceasing to be resident in the United
Kingdom for the purposes of any Tax; or
(4) any Relevant Company failing to pay the whole of the Tax
charged by any Tax Assessment made in respect of that Relevant
Company within six months of the date of that Tax Assessment,
and, for the purposes of this paragraph, the term "Relevant Company"
shall mean such of the Warrantors as are companies and any company,
other than the Company or any of the Subsidiaries, that may be
treated for the purposes of any Tax as being, or as having at any
time been, either a member of the same group of companies as any of
the Warrantors or otherwise associated with any of the Warrantors;
or
(D) any payment for Group Relief surrendered or any repayment of any
payment previously made for the surrender of Group relief required
to be made by the Company or any of the Subsidiaries in respect of
accounting periods ending before the Offer Date;
(E) any Tax liability arising to the Company or any of the Subsidiaries
under Section 179 TCGA 1992 or under Section 111 Finance Act 2002 as
a consequence an Event occurring at any time on or before the Offer
Date; and
(F) any costs and expenses reasonably and properly incurred and payable
by the Purchaser, the Company and/or any of the Subsidiaries in
connection with any successful claim under this paragraph 2 therefor
or in taking or defending any action under this schedule.
3. LIMITS ON LIABILITY
3.1 Without prejudice to the provisions of schedule 8, the Warrantors shall
not be liable for any claim under paragraph 2 or under the Warranties
relating to Taxation:
(A) to the extent that provision or reserve in respect of that Tax
liability was made in the Audited Accounts or in the Completion
Accounts; or
(B) to the extent that the liability arises or is increased as a result
only of:
(1) any increase in rates of Tax;
(2) any change in the bases upon which Accounts are prepared or
any change in accounting practices or principles;
(3) any change in the accounting date of the Company or the
relevant Subsidiary; or
(4) or any change in law made,
in each case after the Offer Date with retrospective effect; or
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(C) to the extent that the liability would not have arisen but for a
voluntary transaction, action or omission carried out or effected by
the Purchaser or the Company or any of the Subsidiaries at any time
after the Offer Date, other than any such transaction, action or
omission:
(1) carried out or effected under a legally binding commitment
created on or before the Offer Date; or
(2) carried out or effected in the ordinary course of the business
carried on by the Company or the relevant Subsidiary as at the
Offer Date;
where in either such case such act or transaction was carried out
without the consent of the Warrantors or any of them and where the
Purchaser, the Company or the relevant Subsidiary knew or ought
reasonably to have known that such act or transaction would give
rise to such liability; or
(D) to the extent that any Income, Profits or Gains to which the
liability is attributable were actually earned or received by or
actually accrued to the Company and/or any of the Subsidiaries but
were not (in either such case) reflected in the Audited Accounts; or
(E) to the extent that the liability is attributable to the Company
and/or any of the Subsidiaries ceasing to be entitled to the small
companies' rate of corporation tax; or
(F) to the extent that the Purchaser has made recovery in respect of the
liability by means of a claim for breach of any of the Warranties or
under another claim under this schedule; or
(G) to the extent that the liability arises or is increased as a result
of a cessation of trade or a major change in the nature or conduct
of the Company's (or the relevant Subsidiary's) trade after the
Offer Date; or
(H) to the extent that the liability is in respect of employer's
national insurance contributions in respect of the exercise of share
options by any employee or officer where such employer's national
insurance contributions does not exceed the amount listed in
schedule 14 for that employee or officer; and if the liability does
exceed the amount in schedule 14, the Warrantors shall only be
liable for the excess over that amount.
4. MITIGATION
4.1 The Purchaser shall, at the direction in writing of the Warrantors,
procure that the Company and/or the Subsidiaries take all such steps as
the Warrantors may reasonably require to:
(A) use in the manner hereinafter mentioned all such Reliefs arising as
a consequence of or by reference to any Event occurring (or deemed
to occur) on or before the Offer Date or in respect of a period
ended on or before the Offer Date and not as a consequence of or by
reference to an Event occurring (or deemed to occur) after the Offer
Date or in respect of a period commencing after the Offer Date as
are available to the Company and/or the Subsidiaries to reduce or
eliminate any Tax Liability in respect of which the Purchaser would
have been able to make a claim against the Warrantors or any of them
under this schedule, the said use being to effect the reduction or
elimination of any such Tax Liability to the extent specified by the
Warrantors and permitted by law, and to provide to the Warrantors,
at the Warrantors' expense, a certificate from the auditors (for the
time being) of the Company and/or any of the Subsidiaries confirming
that all such Reliefs have been so used;
84
(B) make all such claims and elections specified by the Warrantors in
respect of any accounting period of the Company and/or any of the
Subsidiaries commencing before the Offer Date as have the effect of
reducing or eliminating any such Tax Liability as is mentioned in
paragraph 4.1(A), provided that no such claim or election shall
require the Company or any of the Subsidiaries to use any Relief
which arises as a consequence of or by reference to an Event
occurring (or deemed to occur) after the Offer Date or in respect of
a period commencing after the Offer Date; and
(C) allow the Warrantors to reduce or eliminate any Tax Liability by
surrendering, or procuring the surrender by any company other than
the Company or any of the Subsidiaries, of Group Relief or advance
corporation tax to the Company and/or any of the Subsidiaries to the
extent permitted by law but without any payment being made in
consideration for such surrender.
5. OVER-PROVISIONS, RELIEFS, SAVINGS ETC.
5.1 If the Auditors certify (at the request and expense of the Warrantors)
that any provision for Tax in the Audited Accounts (excluding any
provision for deferred Tax) has proved to be an over-provision (otherwise
than by reason of change in the rate of corporation tax applicable to any
accounting period ended on or before the Offer Date by virtue of a change
of law after the Offer Date) then the amount of such over provision shall
be dealt with in accordance with paragraph 5.3.
5.2 If the Auditors certify (at the request and expense of the Warrantors)
that any Tax Liability which has resulted in a payment having been made or
becoming due from the Warrantors under this schedule will give rise to a
Relief for the Company or any of the Subsidiaries which would not
otherwise have arisen and where such Relief relates to a reduction or
elimination of a liability to make an actual payment of Tax in respect of
which the Warrantors would not have been liable under this schedule, then
the amount of that Relief shall be dealt with in accordance with paragraph
5.3, provided that if the Relief in question is a deduction from or offset
against Income, Profits or Gains, the amount to be so dealt with shall be
a sum equal to the amount of Tax that would be saved through the use of
that Relief on the basis of the rates of tax current at the date of the
certification made by the Auditors under this paragraph.
5.3 Where it is provided under paragraphs 5.1 or 5.2 that any amount (the
"RELEVANT AMOUNT") is to be dealt with in accordance with this paragraph:
(A) the Relevant Amount shall first be set off against any payment then
due from the Warrantors under this schedule; and
(B) to the extent there is an excess, a refund shall be made to the
Warrantors of the whole or such part of any previous payment or
payments made by the Warrantors under this schedule and not
previously refunded under this Clause up to the amount of such
excess as will leave the Purchaser in the same net after tax
position that it would have been in had there been no such excess;
and
(C) to the extent that the excess referred to in paragraph 5.3(B) of
this Clause is not exhausted under that paragraph, the remainder of
that excess shall be carried forward and set off against any future
payment or payments which become due from the Warrantors under this
schedule.
5.4 Where any such certification as is mentioned in paragraphs 5.1 or 5.2 has
been made, the Warrantors or the Purchaser or the Company may request the
Auditors to review such certification in the light of all relevant
circumstances, including any facts which have become known only since such
certification, and to certify whether such certification remains correct
or whether, in the light of those circumstances, the amount that was the
subject of such certification should be amended.
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5.5 If the Auditors certify under paragraph 5.4 that an amount previously
certified should be amended, that amended amount shall be substituted for
the purposes of paragraph 5.3 as the Relevant Amount in respect of the
certification in question in place of the amount originally certified, and
such adjusting payment (if any) as may be required by virtue of the
above-mentioned substitution shall be made as soon as practicable by the
Warrantors or (as the case may be) to the Warrantors.
6. RECOVERY FROM OTHER PERSONS
6.1 If, in the event of any payment becoming due from the Warrantors under
paragraph 2 or the Warranties relating to Taxation, the Company or any of
the Subsidiaries either is immediately entitled at the due date for the
making of that payment to recover from any person (not being the Company
or any of the Subsidiaries but including any Tax Authority) any sum in
respect of the Tax Liability or liability under the Warranties relating to
Taxation that has resulted in that payment becoming due from the
Warrantors, or at some subsequent date becomes entitled to make such a
recovery, then the Purchaser shall promptly notify or procure that the
Company or the Subsidiary entitled to make that recovery shall promptly
notify the Warrantors of its entitlement and shall, if so required by the
Warrantors and at the Warrantors' sole expense, take all appropriate steps
to enforce that recovery (keeping the Warrantors fully and promptly
informed of the progress of any action taken); and if the Warrantors have
made a payment under paragraph 2 in respect of the Tax Liability or a
payment in respect of the relevant Warranty relating to Taxation, the
Purchaser shall account to the Warrantors (by way of reissuing such number
of Escrow Shares as were waived by the Warrantors to settle such payment
obligation) for whichever is the lesser of:
(A) any sum so recovered by the Company or the relevant Subsidiary in
respect of that Tax Liability or liability under the relevant
Warranty relating to Taxation (including any interest or repayment
supplement paid by the Tax Authority or other person on or in
respect of this schedule less any Tax chargeable on the Company or
the relevant Subsidiary in respect of that interest);
(B) the amount paid by the Warrantors under paragraph 2 in respect of
that Tax Liability or the amount paid under the relevant Warranty
relating to Taxation; and
(C) such amount as will leave the Purchaser in the same net after tax
position that it would have been in had no such sum been recovered.
7. DISPUTES AND CONDUCT OF TAX CLAIMS
7.1 Subject to the other provisions of this paragraph 7 the Purchaser and its
professional advisers shall have the sole conduct of the tax affairs of
the Company and the Subsidiaries.
7.2 Upon the Purchaser, the Company or any of the Subsidiaries becoming aware
of a Tax Assessment of which none of the Warrantors is then aware, which
could give rise to a claim under this schedule or the Warranties relating
to Taxation, the Purchaser shall promptly (having regard for any relevant
time limit) give written notice of that Tax Assessment to the Warrantors
or, as the case may be, shall procure that the Company or the relevant
Subsidiary promptly give written notice of that Tax Assessment to the
Warrantors but so that any notice which any of the Warrantors has in their
capacity as a director of the Company for the time being or in any other
capacity shall be deemed to be awareness by them for the purposes of this
Clause.
7.3 The Purchaser shall further procure that the Company and/or the relevant
Subsidiary (if the Warrantors shall indemnify the Purchaser, the Company
and/or the relevant Subsidiary to the Purchaser's reasonable satisfaction
against all losses, costs, damages and expenses, including interest on
overdue Tax, which may be incurred thereby) take such action and give such
information and assistance in connection with the affairs of the Company
and/or the relevant Subsidiary as the
86
Warrantors may reasonably and promptly by written notice request to avoid,
dispute, defend, resist, appeal or compromise the claim the subject of the
Tax Assessment (such a claim where action is so requested being
hereinafter referred to as a "DISPUTE"), provided that:
(A) the Purchaser shall not be obliged to appeal, nor shall it be
obliged to procure that either the Company or any of the
Subsidiaries appeal against any Tax Assessment if, the Warrantors
having been given written notice of the receipt of that Tax
Assessment in accordance with the preceding provisions of this
Clause, the Company or the relevant Subsidiary have not within 14
days thereafter received instructions in writing from the
Warrantors, in accordance with the preceding provisions of this
Clause, to make that appeal;
(B) the Purchaser shall not be obliged to procure that either Company or
any of the Subsidiaries take any action under this Clause which
involves contesting any Tax Assessment before any court or other
appellate body (excluding the authority or body demanding the Tax in
question) unless the Warrantors furnish the Company or that
Subsidiary with the written opinion of tax counsel who is a Queens
Counsel (or equivalent) to the effect that an appeal against the Tax
Assessment in question will, on the balance of probabilities, be
successful;
(C) neither the Purchaser nor the relevant Subsidiaries shall be obliged
to take any action which may increase the future liability to Tax of
the Purchaser or any company which is for this time being a member
of the same group of companies as the Purchaser including any
Subsidiaries; and
(D) if any of the Warrantors is in material breach of its obligations
under this schedule the provisions of this paragraph 7.3 shall cease
to apply.
8. TAX RETURNS
8.1 The Warrantors or their duly authorised agent shall procure the
preparation of the Tax returns of the Company and the Subsidiaries for all
accounting periods ended on or before the Balance Sheet Date, to the
extent that the same shall not have been prepared before the Offer Date
and submit them to the Purchaser.
8.2 The Purchaser shall procure that the Company and the Subsidiaries shall
cause the returns mentioned in paragraph 8.1 to be authorised, signed and
submitted to the relevant Tax Authority without amendment or with such
amendments as the Purchaser reasonably considers to be necessary and shall
give the Warrantors or their agent all such assistance as may reasonably
be required to agree those returns with the appropriate authorities,
provided that the Purchaser shall not be obliged to procure that either
the Company or any of the Subsidiaries take any such action as is
mentioned in this Clause in relation to any Tax return that is not true
and accurate in all material respects.
8.3 The Warrantors or their duly authorised agent shall, prepare all
documentation and deal with all matters (including correspondence)
relating to the Tax returns of the Company and the Subsidiaries for all
accounting periods ended on or before the Balance Sheet Date, provided
that the Warrantors shall not without the prior written consent of the
Purchaser (not to be unreasonably withheld or delayed) transmit any
communication (written or otherwise) to the relevant Tax Authority or
agree any matter with the relevant Tax Authority.
8.4 The Purchaser shall procure that the Company and the Subsidiaries shall
afford such access to their books, Audited Accounts and records as is
necessary and reasonable to enable the Warrantors or their duly authorised
agent to prepare the returns and conduct matters relating thereto in
accordance with the Warrantors' rights under this paragraph 8.
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8.5 Nothing done by the Company or by any of the Subsidiaries pursuant to this
paragraph 8 shall in any respect restrict or reduce any rights the
Purchaser may have to make a claim against the Warrantors under this
schedule in respect of any such Tax Liability as is mentioned in paragraph
2.
9. DUE DATE OF PAYMENT
9.1 Subject to the provisions of schedule 8 and schedule 9, where the
Warrantors become liable to make any payment under paragraph 2, the due
date for the waiver of any Escrow Shares or Escrow Cash shall be the later
of the date falling seven days after the Purchaser has served a notice on
the Warrantors demanding that payment and:
(A) in a case that involves an actual payment of Tax by the Company
and/or any of the Subsidiaries, the date that is the last date on
which the Company or the relevant Subsidiary would have had to have
paid to the appropriate Tax Authority the Tax that has given rise to
the Warrantors' liability under this schedule in order to avoid
incurring a liability to interest or a charge or penalty in respect
of that Tax Liability; or
(B) in any case that involves a Tax Liability falling within Clause
1.2(A)(1) or 1.2(A)(3) the last date upon which Tax would have been
required to be paid to the relevant Tax Authority in respect of the
period in which the loss or set off of the Relief occurs (assuming
for this purpose that the Company had sufficient profits or was
otherwise in position to use the Relief); or
(C) in any case that involves a Tax Liability falling within Clause
1.2(A)(2) the date upon which the repayment was due from the
relevant Tax Authority; or
(D) in any case that involves a Tax Liability falling within Clause
1.2(A)(4) the date upon which the payment or repayment is made.
9.2 Any dispute as to the amount specified in any notice served on the
Warrantors shall be determined by the Auditors at that time (the costs of
that determination being shared equally by the Warrantors and the
Purchaser).
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SCHEDULE 12: WORKING CAPITAL ADJUSTMENT
1. INTERPRETATION
In this schedule, where the context admits:
"COMPLETION ACCOUNTS" means the accounts prepared in accordance with
paragraph 2 and agreed or determined in accordance with paragraph 3;
"COMPLETION ACCOUNTS DATE" means 31 May 2004;
"FRS" means a Financial Reporting Standard published by the Accounting
Standards Board and in force at the date of this Deed;
"NET WORKING CAPITAL" means the aggregate value of all current assets
(excluding fixed assets, goodwill, patents, trademarks and other
intangible assets) minus the aggregate value of all liabilities and
provisions (in accordance with paragraph 89 of schedule 4 of the Companies
Act 1985 and FRS 12 in respect of contingent liabilities) and excluding
any reserves or capital created by the upward revaluation of assets
subsequent to the Balance Sheet Date, all as shown in or derived from the
Completion Accounts;
"OBLIGORS' ACCOUNTANTS" means Grant Thornton;
"POST BALANCE SHEET COSTS" means the aggregate amount of all overheads (as
such term has historically been set out and accounted for in the
management accounts of the Company) incurred in the period from 01 June
2004 to the Offer Date inclusive excluding any employer's national
insurance due in respect of the exercise of any EMI options held by
certain officers of the Company;
"PURCHASER'S ACCOUNTANTS" means such firm of accountants as may be
nominated by the Purchaser from time to time;
"REPRESENTATIVE" shall have the meaning set out in paragraph 5 of schedule
9;
"SORP" means a Statement of Recommended Practice published by bodies
recognised by the Accounting Standards Board and in force at the date of
this Deed; and
"SSAP" means a Statement of Standard Accounting Practice originally
published by the Accounting Standards Committee and not since superseded
and in force at the date of this Deed.
2. COMPLETION ACCOUNTS
2.1 PREPARATION
The Warrantors shall as soon as practicable, and in any event within 30
Business Days after the Offer Date, procure that Completion Accounts for
the Company and the Subsidiaries shall be prepared in accordance with this
schedule and the parties shall use their best endeavours to secure
compliance with this schedule by their respective accountants. The
Purchaser shall promptly supply all such information and provide access to
all such records and personnel at the Company as the Warrantors and any
independent firm of accountants appointed under paragraph 3.3 shall
reasonably require in relation to the preparation of the Completion
Accounts. The Warrantors, if so required by the Purchaser or such
independent firm, shall use all reasonable endeavours with the reasonable
assistance of the Purchaser, to obtain for the Purchaser or such
independent firm access to the working papers of the Company's auditors
prepared in relation to the audit of the Audited Accounts.
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2.2 DESCRIPTION
The Completion Accounts shall consist of a consolidated balance sheet of
the Company and the Subsidiaries as at the close of business on the
Completion Accounts Date, a statement of the Net Working Capital on the
Completion Accounts Date and the Post Balance Sheets Costs as at the Offer
Date and shall be substantially in the form of the Audited Accounts.
2.3 GENERAL REQUIREMENTS
Subject to the specific requirements of paragraph 2.4 which shall take
priority over the general requirements set out below, the Completion
Accounts shall:-
(A) make full provision for all actual, future and contingent
liabilities of the Company and the Subsidiaries as at the Offer Date
in accordance with FRS 12;
(B) be prepared under the historic cost convention and in accordance
with the requirements of all relevant Laws and generally accepted
accounting policies, bases, methods, practices and procedures and
with all SSAPs, FRSs, and applicable SORPS;
(C) show a true and fair view of the state of affairs of the Company and
the Subsidiaries at the Completion Accounts Date; and
(D) subject to paragraphs 2.3(A), 2.3(B) and 2.3(C), apply and adopt the
same policies, bases, methods, practices and procedures of
accounting as applied or adopted for the purposes of the Audited
Accounts.
2.4 SPECIFIC REQUIREMENTS
In preparing the Completion Accounts:
(A) no value shall be attributed to goodwill or any other intangible
asset;
(B) other fixed assets shall be included at the value at which they were
included in the Audited Accounts, (or, if acquired after the Balance
Sheet Date, at their cost) less, in each case, depreciation on a pro
rata basis at the rates used in the Audited Accounts and, in each
case, less full provision for damage or impairment on the same basis
used in preparing the Audited Accounts;
(C) no value shall be attributed to any assets (including in particular
any prepayment or debt) except to the extent that (following the
Offer Date) the Company or a Subsidiary will have the benefit of the
same;
(D) full provision shall be made for rebates and discounts that will
fall due and fees, bonuses and commissions that will become payable
after the Completion Accounts Date in either case in respect of
sales or other transactions that took place before the Completion
Accounts Date;
(E) full provision shall be made for any liability arising as a result
of the change of control of the Company as a result of the making of
the Offer or on Completion;
(F) full provision shall be made in respect of the cost of making good
dilapidations and/or wants of repair on or to the Premises as would
usually have been accrued for in any accounts of the Company;
(G) full provision shall be made for any debts due in the ordinary
course of trading outstanding and uncollected at the Completion
Accounts Date for a period of more than 60 days past the
90
due date and proper provision or reserve shall be made for all other
bad or doubtful debts included in the Completion Accounts on the
basis of the information available at the time the Completion
Accounts are prepared;
(H) full provision shall be made for any repairs or other servicing
required in relation to any vehicles or other plant and machinery;
(I) full provision shall be made for liabilities disclosed in the
Disclosure Letter;
(J) provision shall be made for all tax and deferred tax in accordance
with normal accounting principles;
(K) full provision shall be made for the preparation of all year end tax
returns of the Company for all years to 31 March 2005, to the extent
they have not already been prepared;
(L) full provision shall be made for all professional fees incurred,
invoiced or to be invoiced to the Company in connection with any
aborted equity offering or initial public offering of shares in the
Company;
(M) full provision, shall be made for all employer's national insurance
payable by the Company in respect of the exercise of any option to
subscribe for shares in the Company; and
(N) full provision, regardless of when the same shall become due or
payable, shall be made at the Completion Accounts Date for all
bonuses payable to Employees, directors, former employees or former
directors of any Group Company payable as result of the Purchaser
making the Offer.
3. PROCEDURE
3.1 SUBMISSION OF DRAFT
(A) As soon as the draft Completion Accounts shall have been prepared,
the Warrantors shall send a copy to the Purchaser together with such
working papers used in connection with the preparation of the same
as it considers necessary or appropriate to understand and agree the
Completion Accounts and shall in addition, at the same time, send to
the Purchaser its calculation of the Net Working Capital and the
Post Balance Sheet Costs.
(B) Unless the Purchaser shall within 30 Business Days after receipt of
the draft Completion Accounts (and associated papers and calculation
as provided in paragraph 3.1(A)) serve a notice in writing on the
Obligors that it objects to the draft Completion Accounts
(identifying the reason for any objection and the amount(s) or
item(s) in the draft Completion Accounts and/or calculation which
is/are in dispute) (such notification being, for the purposes of
this paragraph 3, an "OBJECTION NOTICE") the Purchaser shall be
deemed to have irrevocably agreed to the draft Completion Accounts,
the calculation of the Net Working Capital and the Posts Balance
Sheet Costs for all purposes of this Deed.
3.2 AGREEMENT OF DRAFT
If, within the period referred to in paragraph 3.1(B), the Purchaser shall
serve upon the Obligors an Objection Notice then the Purchaser and the
Representative shall use their reasonable endeavours to reach agreement
upon adjustments to the draft Completion Accounts. Neither the
Representative nor the Purchaser shall be entitled to propose any
adjustments to the draft Completion Accounts except: (i) in the case of
the Purchaser, an adjustment relating to any asset, liability or overhead
amount referred to in its Objection Notice and (ii) in the case of either
of them, an adjustment by way of
91
counter-proposal to an adjustment proposed by the other of them, being in
each case, a revision of an adjustment referred to in the Objection
Notice.
3.3 INDEPENDENT ACCOUNTANT
If the Representative and the Purchaser are unable to reach agreement
within 30 Business Days following service of the Objection Notice, either
the Representative or the Purchaser shall be entitled to refer the matter
or matters in dispute to an independent firm of chartered accountants (the
"FIRM") agreed upon between them or (failing agreement) to be selected (at
the instance of either of them) by the President for the time being of the
Institute of Chartered Accountants in England and Wales. The Firm shall
act as experts not as arbitrators and shall determine the matter or
matters in dispute (which may include any dispute concerning the
interpretation of any provision of this Deed affecting the Completion
Accounts or their jurisdiction to determine the dispute or the content or
interpretation of their terms of reference) and their decision shall be
final and binding. The Firm may, so far as is reasonable, instruct
valuers, solicitors and other professional advisers to the extent they
consider necessary to reach their determination. The fees and expenses of
the Firm (including the fees of any professional advisers appointed by
them as aforesaid) shall be borne by the Obligors and the Purchaser in
proportion to the amount of the disputed items with respect to which such
party's claim was unsuccessful (for example, if there is a
(pound)1,000,000 dispute regarding the Completion Accounts and the Firm
determines that the Representative's claim prevails with respect to
(pound)250,000 of such disputed amount and the Purchaser's claim prevails
with respect to (pound)750,000 of such disputed amount, then the Obligors
would be obligated to pay seventy five percent (75%) of the fees and
expenses and the Purchaser would be obligated to pay twenty five percent
(25%) of the fees and expenses).
3.4 ACCOUNTS FINAL AND BINDING
If within the period referred to in paragraph 3.1(B) the Purchaser shall
not have served an Objection Notice on the Obligors, or if such notice is
served and the Purchaser and the Representative shall subsequently agree
the draft Completion Accounts or the matters in dispute are referred to
the Firm under paragraph 3.3, the draft Completion Accounts, as adjusted
(where applicable) so as to be in accordance with the agreement of the
Purchaser and the Representative or the determination of the Firm shall be
the Completion Accounts for the purposes of this Deed and shall be final
and binding on the parties.
3.5 INFORMATION AND EXPLANATIONS
The Obligors and the Obligors' Accountants shall provide such information
and explanations relating to the draft Completion Accounts and their
preparation as the Purchaser's Accountants, or the Firm shall reasonably
require.
4. ADJUSTMENT OF CONSIDERATION
When the Completion Accounts have become final and binding, the
Consideration payable to the Obligors shall be pro rata reduced in the
proportions set out in paragraph 2.1 of schedule 9 by the aggregate of:
(A) the amount (if any) by which the Net Working Capital of the Company
and the Subsidiaries as at the Completion Accounts Date as shown by
the Completion Accounts is more negative than negative
(pound)600,000; and
(B) the amount (if any) by which the Post Balance Sheet Costs as shown
by the Completion Accounts are more than `C' as calculated by the
following formula:
92
where
D = number of Business Days elapsed from and including 01 June 2004
to the Offer Date inclusive.
4.2 PAYMENT
Any reduction in the Consideration pursuant to paragraph 4 shall be paid
by the Obligors in accordance with the provisions of schedule 9 and
paragraphs 2.1 and 2.2 of schedule 8, but for the avoidance of doubt no
other provisions of schedule 8 shall apply to any reduction in the
Consideration pursuant to this schedule 12.
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SCHEDULE 13: ORDERLY SALES PROVISIONS
1. INTERPRETATION
In this schedule, where the context admits:
"AVERAGE DAILY TRADING PRICE" means the average trading price of Loudeye
Shares on NASDAQ on the Trading Day immediately prior to the Proposed Sale
Date;
"ADTV" means the average daily trading volume of Loudeye Shares on NASDAQ
for the thirty Trading Days immediately preceding the Proposed Sale Date;
"MAXIMUM SHARE AMOUNT" means the amount calculated in accordance with
paragraph 3;
"PROPOSED SALE DATE" means the date on which any Obligor proposes to sell
any Loudeye Shares;
"TRADING DAY" means a day on which NASDAQ is open for the settlement of
trades in Loudeye Shares; and
"VWAP" means the volume weighted average price of Loudeye Shares on NASDAQ
for the thirty Trading Days immediately preceding the Proposed Sale Date.
2. RESTRICTIONS ON SALE
Subject to paragraph 7 of this schedule, but notwithstanding any other
provisions of this Deed or the Offer Document, each Obligor agrees not to
publicly sell, offer for sale, transfer or otherwise dispose of any
Loudeye Shares issued in connection with the Offer, if the aggregate
number of Loudeye Shares sold by all Obligors on any given Trading Day
would exceed the Maximum Share Amount. At least two Business Days prior to
any Proposed Sale Date, each Obligor (a "NOTIFYING OBLIGOR") shall notify
the Purchaser regarding the number of Loudeye Shares it proposes to sell
and the Proposed Sale Date. If the aggregate number of Loudeye Shares
proposed to be sold by all Obligors on any given Proposed Sale Date would
exceed the Maximum Share Amount, the Purchaser shall notify each such
Notifying Obligor of the number of Loudeye Shares it may sell, which shall
be pro rated amongst the Notifying Obligors based upon the number of
Loudeye Shares each proposed to sell.
3. CALCULATION OF MAXIMUM SHARE AMOUNT
The following table sets out (expressed as a percentage of ADTV) the
Maximum Share Amount which may be sold on any given trading day depending
on the Average Daily Trading Price expressed (as a Percentage of VWAP).
MAXIMUM SHARE AMOUNT WHICH MAY BE SOLD
AVERAGE DAILY TRADING PRICE EXPRESSED AS A ON ANY GIVEN TRADING DAY EXPRESSED AS A
PERCENTAGE OF VWAP PERCENTAGE OF ADTV
- ------------------------------------------ ---------------------------------------
Greater than 150% Up to 50%
>115% to 150% Up to 35%
>110% to 115% Up to 30%
>105% to 110% Up to 25%
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>100% to 105% Up to 20%
>95% to 100% Up to 15%
>90% to 95% Up to 10%
85% to 90% Up to 5%
Less than 85% 0%
4. TRANSFEREES OF SHARES
Each Obligor will procure that any transferee acquiring Loudeye Shares
from such Obligor prior to the date such shares have been registered under
the U.S. Securities Act of 1933 and sold on NASDAQ shall agree to be bound
by the foregoing orderly sales limitation.
5. LEGENDS
Each Obligor acknowledges and agrees that the Loudeye Shares issued to it
in connection with the Offer, and any securities issued in respect of or
in exchange for such shares will bear the following legend (or a legend
with similar effect):
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS (INCLUDING SALES VOLUME LIMITATIONS) SET FORTH
IN THAT CERTAIN DEED POLL OF WARRANTY AND INDEMNITY DATED AS OF 22
JUNE, 2004, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY UPON
REQUEST.
6. STOP TRANSFER INSTRUCTIONS
Each Obligor agrees that the Purchaser shall issue `stop transfer'
instructions to its stock transfer agent to ensure compliance with the
trading restrictions described in this schedule.
7. EXEMPT DISPOSALS
The provisions of this schedule shall not apply with respect to the sale
by the persons listed below of Loudeye Shares not to exceed the number of
Loudeye Shares set out opposite their name::
NUMBER OF INITIAL LOUDEYE SHARES PERMITTED TO BE SOLD,
OBLIGOR OFFERED FOR SALE, TRANSFERRED OR OTHERWISE DISPOSED OF
- ---------------- ------------------------------------------------------
Peter Gabriel 458,188
Mike Large 217,037
Charles Grimsdale 728,518
John Grinham 51,684
Dave Shephard 49,159
Ed Averdieck 46,867
95
Christopher Pike 37,137
Totals: 1,588,590
96
SCHEDULE 14 : EMPLOYER NATIONAL INSURANCE LIMITS
ASSUMED EMPLOYER
NATIONAL INSURANCE
EMPLOYEE AMOUNT
Peter Gabriel (pound) 42,307.63
Charles Grimsdale (pound)104,709.31
Michael Large (pound) 20,040.48
John Grinham (pound) 4,786.47
David Shephard (pound) 4,786.47
Edward Averdieck (pound) 4,254.64
Christopher Pike (pound) 3,988.73
Paul Summerfield (pound) 974.42
Stanislas Hintzy (pound) 10,048.53
Anke Fleischer (pound) 8,541.25
Sally Clayton (pound) 2,773.40
Deon Fourie (pound) 2,773.40
Paul Smith (pound) 2,411.65
Michael Jones (pound) 1,205.82
Carlo Galassi (pound) 1,909.22
James Routley (pound) 1,823.85
Peter Helps (pound) 1,823.85
Steve Robbins (pound) 1,607.77
Bruce Storrie (pound) 1,607.77
Allan Rogers (pound) 1,406.79
Phillip Shepherd (pound) 1,205.82
Geoffrey Roberts (pound) 1,205.82
Nicholas Swallow (pound) 1,215.87
Andrew Avery (pound) 361.75
Denis Geoghegan (pound) 361.75
Margaret Davis (pound) 1,738.40
Inderjeet Singh Tak (pound) 803.88
Charlotte Bale (pound) 803.88
Matthew Rigby (pound) 803.88
Eric Munier (pound) 2,009.71
Joe Ballard (pound) 1,004.85
James Innes (pound) 602.91
Alistair Dutton (pound) 602.91
Neil Elkins (pound) 602.91
Steve Morris (pound) 321.55
Richard Cain (pound) 241.16
Phillip Austin (pound) 241.16
Peter Armstrong (pound) 241.16
Andy Rich (pound) 241.16
Tim Swallow (pound) 241.16
Roger Cooper (pound) 241.16
Neil Caddick (pound) 241.16
Louise Cronin (pound) 241.16
Suzanne Prestidge (pound) 241.16
Robert Poulton (pound) 241.16
Jenny Dack (pound) 241.16
97
Jon Reynolds (pound) 241.16
Pinky Shetty (pound) 241.16
Stefan Vallbracht (pound) 602.91
Sarah Laval (pound) 602.91
Letitia Massot (pound) 602.91
Sergio DeCataldis (pound) 602.91
Daniel Narayanan (pound) 160.78
Lara Insull (pound) 160.78
Michael Simmonds (pound) 160.78
Jon Pepper (pound) 160.78
Lee Jones (pound) 160.78
Paul Smeddles (pound) 160.78
Sarah Creasy (pound) 160.78
Menno Wiegeraad (pound) 602.91
Albert Pastore (pound) 562.72
Christoph Schick (pound) 1,507.28
(pound) 246,772.43
98
SIGNED AS A DEED by Charles Grimsdale -----------------------------------
in the presence of:
- -----------------------------------
Name:
Address:
Occupation:
SIGNED AS A DEED by Peter Gabriel -----------------------------------
in the presence of:
- -----------------------------------
Name:
Address:
Occupation:
SIGNED AS A DEED by Michael Large -----------------------------------
in the presence of:
- -----------------------------------
Name:
Address:
Occupation:
SIGNED AS A DEED by Edward Averdieck -----------------------------------
in the presence of:
- -----------------------------------
Name:
Address:
Occupation:
SIGNED AS A DEED by John Grinham -----------------------------------
in the presence of:
- -----------------------------------
Name:
Address:
Occupation:
99
SIGNED AS A DEED by David Shephard -----------------------------------
in the presence of:
- -----------------------------------
Name:
Address:
Occupation:
SIGNED AS A DEED by Christopher Pike -----------------------------------
in the presence of:
- -----------------------------------
Name:
Address:
Occupation:
SIGNED AS A DEED by Susan Moule -----------------------------------
in the presence of:
- -----------------------------------
Name:
Address:
Occupation:
SIGNED AS A DEED by
QUESTER CAPITAL MANAGEMENT LIMITED
in its capacity as manager of
QUESTER VENTURE PARTNERSHIP LLP
acting by
, a director and -----------------------------------
, a director/secretary -----------------------------------
SIGNED AS A DEED by
Quester VCT2 plc acting by
, a director and -----------------------------------
, a director/secretary -----------------------------------
100
SIGNED AS A DEED by
Quester VCT3 plc acting by
, a director and -----------------------------------
, a director/secretary -----------------------------------
SIGNED AS A DEED by
Quester VCT4 plc acting by
, a director and -----------------------------------
, a director/secretary -----------------------------------
SIGNED AS A DEED by
Investment Enterprise Partnership `NIF New
Technology Fund 99A' acting by
in the presence of:
- ----------------------------------- -----------------------------------
Name: Authorised signatory
Address:
Occupation:
SIGNED AS A DEED by
Investment Enterprise Partnership `NIF New
Technology Fund 99B' acting by -----------------------------------
Authorised signatory
in the presence of:
- -----------------------------------
Name:
Address:
Occupation:
101
SIGNED AS A DEED by
Investment Enterprise Partnership `NIF New
Technology Fund 2000/01' acting by -----------------------------------
Authorised signatory
in the presence of:
- -----------------------------------
Name:
Address:
Occupation:
SIGNED AS A DEED by
Investment Enterprise Partnership `NIF New
Technology Fund 2000/02' acting by -----------------------------------
Authorised signatory
in the presence of:
- -----------------------------------
Name:
Address:
Occupation:
SIGNED AS A DEED by
NIF Ventures Co. Limited acting by -----------------------------------
Authorised signatory
in the presence of:
- -----------------------------------
Name:
Address:
Occupation: