EXHIBIT 2.1
(1) PHARMCHEM, INC.
(2) NEWINCCO 140 LIMITED
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AGREEMENT FOR THE SALE AND PURCHASE OF THE ENTIRE ISSUED SHARE
CAPITAL OF MEDSCREEN LIMITED
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[O LOGO]
90 Long Acre
London WC2E 9TT
Tel: 020 7208 8888
Fax: 020 7208 8800
email: olsmail@olswang.com
Ref: AAB/FCP/10043.2
CONTENTS
CLAUSE PAGE
1. DEFINITIONS AND INTERPRETATION.................................................. 1
2. AGREEMENT FOR SALE.............................................................. 5
3. CONSIDERATION................................................................... 5
4. COMPLETION...................................................................... 6
5. GUARANTEES AND LOAN ACCOUNTS AND INDEBTEDNESS................................... 8
6. WARRANTIES AND INDEMNITIES...................................................... 9
7. TAX............................................................................. 12
8. ACCESS TO RECORDS............................................................... 12
9. PROTECTION OF THE INTERESTS OF THE BUYER AND THE SELLER......................... 13
10. INSURANCE ARRANGEMENTS.......................................................... 16
11. PAYMENTS AND INTEREST........................................................... 16
12. BOOKS AND RECORDS............................................................... 17
13. ASSIGNMENT...................................................................... 18
14. ANNOUNCEMENTS AND CONFIDENTIALITY............................................... 18
15. COSTS........................................................................... 18
16. NOTICES......................................................................... 18
17. THIRD PARTY RIGHTS.............................................................. 19
18. WAIVER.......................................................................... 20
19. CUMULATIVE RIGHTS............................................................... 20
20. FURTHER ASSURANCE............................................................... 20
21. NO MERGER....................................................................... 20
22. COUNTERPARTS.................................................................... 20
23. ENTIRE AGREEMENT................................................................ 20
24. GOVERNING LAW AND JURISDICTION.................................................. 21
SCHEDULE 1
DETAILS OF THE COMPANY.......................................................... 22
SCHEDULE 2
WARRANTIES...................................................................... 23
PART 1 - GENERAL................................................................ 23
PART 2 - ACCOUNTS, FINANCIAL, BANKING AND CURRENT TRADING....................... 26
PART 3 - COMPLIANCE AND LITIGATION.............................................. 30
PART 4 - CONTRACTS.............................................................. 34
PART 5 - ASSETS................................................................. 37
PART 6 - ENVIRONMENTAL MATTERS.................................................. 39
PART 7 - PROPERTY............................................................... 41
PART 8 - EMPLOYMENT............................................................. 43
PART 9 - PENSIONS............................................................... 47
PART 10 - INTELLECTUAL PROPERTY................................................. 50
PART 11 - INFORMATION TECHNOLOGY................................................ 54
PART 12 -- TAXATION............................................................. 56
SCHEDULE 3
TAX COVENANT.................................................................... 65
SCHEDULE 4
PROPERTY........................................................................ 80
SCHEDULE 5
LIMITATIONS ON SELLER'S LIABILITY............................................... 81
THIS AGREEMENT is made on 2002
BETWEEN:
(1) PHARMCHEM, INC., a body corporate incorporated in Delaware, USA whose
principal place of business is at 4600 N. Beach Street, Haltom City,
Texas 76137, USA ("SELLER");
(2) NEWINCCO 140 LIMITED, a company incorporated in England and Wales
(registered number 4386697) whose registered office is at Third Floor,
90 Long Acre, London WC2E 9TT ("BUYER").
RECITALS:
(A) The Company (as defined below) is a private company limited by shares.
Further details about the Company are set out in schedule 1.
(B) The Seller wishes to sell and the Buyer wishes to buy all of the issued
share capital of the Company on the terms of this Agreement.
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, the following words and expressions shall have the
following meanings unless the context requires otherwise:
"ACCOUNTS" the individual accounts (within the
meaning of section 226 Companies Act
1985) of the Company for the financial
year ended on the Accounts Date,
together in each case with the notes,
directors' and auditors' reports and all
other statements incorporated in or
annexed to them;
"ACCOUNTS DATE" 31 December 2001;
"ASSIGNMENT OF DEBT" the assignment of debt between the
Company (1), the Buyer (2) and the
Seller (3) in the agreed form;
"ASSOCIATE" in relation to any person, a person who
is connected with that person within the
meaning of section 839 Taxes Act;
"BANK" each bank with which the Company has an
account;
"BANK INDEBTEDNESS" the aggregate indebtedness of the
Company to Lloyds TSB Bank plc as at
close of business on 22 March 2002 under
term loan facilities granted pursuant to
facility letters dated 28 September
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2001;
"BANK INDEBTEDNESS STATEMENT" the statement setting out the
calculation of the Bank Indebtedness;
"BUSINESS DAY" a day which is not a Saturday, a Sunday
or a bank or public holiday in England;
"BUYER'S GROUP" the Buyer, any subsidiary of the
Buyer, any holding company of the Buyer
and any subsidiary of any holding
company of the Buyer, from time to time;
"BUYER'S SOLICITORS" Olswang of 90 Long Acre, London WC2E 9TT;
"CASH AMOUNT" the aggregate amount of any cash of
the Company in hand or at the Bank as at
the close of business on 22 March 2002
(reconciled so as to be reduced by the
aggregate amount of any cheques which
have been drawn but not yet presented on
the account and reconciled so as to be
increased by the aggregate amount of any
cheques received but not yet credited to
the account as at close of business on
22 March 2002);
"CASH AMOUNT STATEMENT" the statement setting out the
calculation of the Cash Amount;
"COLLECTING BUSINESS" the business of sample collection in
connection with drug and alcohol
testing;
"COMPANY" Medscreen Limited, a private company
limited by shares incorporated in
England and Wales with registered number
2055216;
"COMPLETION" Completion of the sale and purchase of
the Shares in accordance with this
Agreement;
"COMPLETION DATE" the date on which Completion takes
place;
"DISCLOSURE LETTER" the disclosure letter in the agreed form
from the Seller to the Buyer, dated with
the date of this Agreement;
"ENCUMBRANCE" a mortgage, charge, pledge, lien,
option, restriction, right of first
refusal, right of pre-emption or other
third party right, interest or claim of
any kind, or any other encumbrance or
security interest of any kind (other
than a lien arising as a
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matter of law);
"LEASE" the leases listed in schedule 4;
"MANAGEMENT ACCOUNTS" means the unaudited management accounts
of the Company comprising a balance
sheet as at 31 January 2002 and a profit
and loss account for the period which
began on 31 December 2001 and ended on
31 January 2002;
"MANAGEMENT TEAM" Fiona Begley;
"MATERIAL AGREEMENT" any contract, arrangement or obligation
to which the Company is a party and
which involves expenditure by the
Company in excess of L30,000 per annum
or, as the case may be, provides income
to the Company in excess of L45,000 per
annum (whether pursuant to one contract,
arrangement or obligation or pursuant to
a number of contracts, arrangements or
obligations entered into by the Company
with a single party in any consecutive
12 month period), or which is outside
the ordinary course of its business;
"PROCEEDINGS" any action or proceedings before a court
or tribunal or a statutory, governmental
or regulatory body (including an
arbitration);
"PROPERTY" the leasehold property demised by the
Lease;
"RELIEF" any allowance, credit, exemption,
deduction or relief from, in respect of,
or in computing, Tax or any right to the
repayment of Tax;
"RESTRICTED AREA" Algeciras, Antwerp, Barcelona, Bergen,
Brisbane, Chiba, Dubai, Durban,
Fujiairah, Hamburg, Hong Kong, Kawasaki,
Lavera, Mongstad, Panama, Ravenna,
Rotterdam, Santos, Singapore, Tarragona,
Ulsan, Valparaiso, Yokohama (each a
"RESTRICTED AREA");
"SELLER'S PERMITTED BUSINESS" the business of sample collection in the
United Kingdom in connection with drug
and alcohol testing and the testing and
analysis of samples, in each case for
those of the customers of the Seller
(which for the avoidance of doubt could
also be customers of the Company) whose
principal place of business is outside
the United Kingdom;
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"SELLER'S SOLICITORS" Hammond Suddards Edge of 7 Devonshire
Square, Cutlers Gardens, London EC2M
4YH;
"SHARES" all the issued shares in the capital of
the Company;
"TAX" OR "TAXATION" has the meaning given to it in the Tax
Covenant;
"TAX AUTHORITY" has the meaning given to it in the Tax
Covenant;
"TAX COVENANT" the tax covenant and other provisions
relating to Tax set out in schedule 3;
"TAXES ACT" the Income and Corporation Taxes Act
1988;
"TCGA" the Taxation of Chargeable Gains Act
1992;
"UK BUSINESS" the business carried on in the United
Kingdom of sample collection in
connection with drug and alcohol
testing, the testing and analysis of
samples and the provision of management
solutions, education and training
regarding drug and alcohol problems in
the work place;
"UNITED KINGDOM" England, Wales, Scotland and Northern
Ireland;
"VAT" value added tax;
"VATA" the Value Added Tax Act 1994;
"WARRANTIES" the warranties of the Seller contained
in clause 6.1 and set out in schedule 2;
and
"WARRANTY CLAIM" a claim for any breach of any of the
Warranties.
1.2 Any statement which refers to the awareness, knowledge or belief of the
Seller or any similar expression shall be deemed to include an
additional statement that it has been made after due and careful enquiry
of the directors of the Company and all such other people of whom the
Seller may reasonably be expected to make enquiries given the subject
matter of the relevant provision, and the awareness, knowledge or belief
of the Seller shall be deemed to include that of each such person.
1.3 In this Agreement, unless the context requires otherwise:
1.3.1 any reference to the parties or a recital, clause or schedule is
to the parties or the relevant recital, clause or schedule of or
to this Agreement and any reference in a schedule to a paragraph
is to a paragraph of that schedule or, where relevant, that part
of the schedule;
1.3.2 the clause headings are included for convenience only and shall
not affect the interpretation of this Agreement;
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1.3.3 use of the singular includes the plural and vice versa;
1.3.4 use of any gender includes the other genders;
1.3.5 any reference to "PERSONS" includes individuals, firms,
partnerships, companies, corporations, associations,
organisations, governments, states, foundations and trusts (in
each case whether or not having separate legal personality);
1.3.6 "FINANCIAL YEAR", "HOLDING COMPANY" and "SUBSIDIARY UNDERTAKING"
have the meanings given to them by sections 223, 736 and 258
Companies Act 1985 respectively;
1.3.7 any reference to a statute, statutory provision or subordinate
legislation ("LEGISLATION") shall be construed as referring to
that legislation as amended and in force from time to time and
to any legislation which re-enacts or consolidates (with or
without modification) any such legislation;
1.3.8 any reference to a document being "IN THE AGREED FORM" means a
document in a form agreed by the parties and either entered into
on the date of this Agreement by the relevant parties or
initialled by the parties or on their behalf, in the latter case
with such amendments as they may subsequently agree;
1.3.9 any phrase introduced by the terms "including", "include", "in
particular" or any similar expression shall be construed as
illustrative and shall not limit the sense of the words
preceding those terms; and
1.3.10 any reference to an agreement includes any form of arrangement,
whether or not in writing and whether or not legally binding.
1.4 The schedules and recitals form part of this Agreement and shall have
effect as if set out in full in the body of this Agreement, and any
reference to this Agreement includes the schedules and recitals.
1.5 Any undertaking by a party not to do any act or thing includes an
undertaking not to allow, cause or assist the doing of that act or thing
and to exercise all rights of control over the affairs of any other
person which that party is able to exercise (directly or indirectly) in
order to secure performance of that undertaking.
2. AGREEMENT FOR SALE
At Completion the Seller shall sell and the Buyer shall buy the Shares
free from all Encumbrances and otherwise with full title guarantee, and
with all rights attaching to them at Completion or subsequently,
including the rights to receive all dividends and other distributions
declared, paid or made on or after Completion.
3. CONSIDERATION
3.1 The purchase price for the Shares shall be the sum of L7,007,052.93.
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3.2 If the Buyer agrees (the date on which such agreement is reached being
referred to as "the Agreement Date") to dispose of any interest in the
Company and/or the business carried on by the Company as at the date of
this Agreement, prior to or within the period of 12 months commencing on
the Completion Date, the Buyer will pay to the Seller a percentage ("the
Relevant Percentage") of the amount equal to A where:
A = B - {C+[D x (0.15 x E )]}
---
365
and:
B = the aggregate consideration (direct or indirect and including
without limitation any debt assumed and any other benefit derived
from the disposal and any deferred element of such consideration)
for the Company and/or its business pursuant to such disposal
less the Buyer's expenses in connection with the disposal.
C = L6,813,069.68;
D = the amount subscribed for shares and loan capital in the Buyer
on the Completion Date and retained by the Buyer up to and on the
Agreement Date;
E = the number of days elapsed from the Completion Date until and
including the Agreement Date.
3.3 If the Agreement Date falls prior to or within the period of six months
commencing on and including the Completion Date, the Relevant Percentage
shall be 50%. If the Agreement Date falls within the period of six
months immediately following the six month period described in the
previous sentence the Relevant Percentage shall be 25%.
3.4 If part only of the share capital of the Company and/or its business are
disposed of in accordance with clause 3.2, the figures represented by C
and D in the formula described in clause 3.2 shall be reduced so as to
be the same proportion of the original figures as the proportion of such
share capital and/or business disposed of.
3.5 Any amount payable to the Seller pursuant to clause 3.2 shall be paid to
the Seller within 5 Business Days of the date on which the relevant
amount of consideration (B in the above formula) is paid or otherwise
accounted for.
4. COMPLETION
4.1 The Assignment of Debt shall be entered into by the parties to it
immediately after this Agreement is executed.
4.2 Completion shall take place at the offices of the Buyer's Solicitors
immediately after the Assignment of Debt is executed.
4.3 At Completion, the Seller shall deliver to the Buyer:
4.3.1 a transfer of the Shares in favour of the Buyer duly executed by
the Seller;
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4.3.2 the share certificates representing the Shares;
4.3.3 the Disclosure Letter signed by the Seller;
4.3.4 the resignation from their respective offices of each of the
directors other than Fiona Begley and the secretary of the
Company in the agreed form, duly executed as a deed;
4.3.5 a certified copy of a letter of resignation in the agreed form
from the auditors of the Company;
4.3.6 the consent of Comerica Bank, California to the sale of the
Shares to the Buyer and any other waivers or consents necessary
to enable the Buyer or its nominees to be registered as holders
of the Shares;
4.3.7 statements for each bank account of the Company at the close of
business on 22 March 2002, together with a complete and accurate
reconciliation of those statements to cash book balances, and
the cheque books and bank mandates in respect of those accounts;
4.3.8 a certificate of non-crystallisation from Lloyds TSB Bank plc;
4.3.9 a legal opinion from Sonnenschein Nash & Rosenthal in the agreed
form;
4.3.10 a power of attorney in favour of the Buyer in the agreed form
duly executed by the Seller as a deed;
4.3.11 the seal (if any) and statutory books, certificate of
incorporation (and any certificate of incorporation on change of
name) of the Company, complete and up-to-date up to but not
including Completion;
4.3.12 a certified copy of the minutes of a meeting of the directors of
the Seller (or analogous evidence of authorisation) resolving
that the Seller should enter into this Agreement, and each other
document to be signed by it at Completion, and authorising the
execution of those documents by each person signing on behalf of
the Seller.
4.4 The Seller shall ensure that a board meeting of the Company is held at
Completion at which:
4.4.1 the people (if any) nominated by the Buyer are appointed as
additional directors and secretary (as the case may be) of the
Company with immediate effect;
4.4.2 the resignations referred to in clauses 4.3.4 and 4.3.5 are (if
not previously accepted at any other board meeting of the
Company) accepted with effect from the close of the meeting;
4.4.3 Smith & Williamson are (if not previously appointed) appointed
auditors of the Company;
7
4.4.4 the transfer referred to in clause 4.3.1 is (subject only to its
being duly stamped) approved for registration;
and shall also ensure at Completion that a written resolution of the
Company is passed pursuant to which new articles of association are
adopted in such form as the Buyer may require.
4.5 At Completion, the Buyer shall deliver to the Seller:
4.5.1 a counterpart Disclosure Letter duly signed by way of
acknowledgement of receipt by the Buyer;
4.5.2 a certified copy of the minutes of a meeting of the directors of
the Buyer in the agreed form resolving that the Buyer should
enter into this Agreement, and each other document to be signed
by it at Completion, and authorising the execution of those
documents by each person signing on behalf of the Buyer;
and shall pay the sum of L7,007,052.93 to the Seller in accordance with
clause 11.
5. GUARANTEES AND LOAN ACCOUNTS AND INDEBTEDNESS
5.1 The Seller shall ensure that on or before Completion the Company is
released from any guarantees, security interests and indemnities given
by it in favour of the Seller or any Associate of the Seller.
5.2 As an independent and primary obligation, the Buyer hereby
unconditionally and irrevocably agrees to indemnify and keep indemnified
the Seller on demand against all liabilities, losses, claims, costs and
expenses arising on or after Completion from or in connection with any
subsisting guarantees, security interests and indemnities given by the
Seller (including, but not limited to its obligations as surety under
the Lease), reasonable details of which are contained in the Disclosure
Letter with express reference to this clause.
5.3 The Buyer shall use all reasonable endeavours after Completion to obtain
the release of the Seller absolutely from the subsisting guarantees
given by it in respect of the Lease, provided that neither the Buyer nor
the Company shall be obliged to incur any monetary obligation greater
than that set out in clause 5.3.2. Without limitation to the foregoing
provisions of this clause, the Buyer shall:
5.3.1 make available the Buyer to the relevant landlord as a
substitute guarantor in the place of the Seller; and/or
5.3.2 pay or procure that the Company pays to the relevant landlord a
rent deposit of an amount equal to a maximum of one month's rent
(under the relevant lease).
In the event that the relevant landlord requires a rent deposit of more
than one month's rent, the Seller may, at its own discretion, contribute
an amount equal to any additional deposit required and the Buyer shall
co-operate in effecting this. If any
8
such rent deposit (representing more than one month's rent) is refunded
in whole or in part by the landlord or if the Buyer (or the Company) and
the Seller otherwise reach agreement with the landlord for a reduction
of the rent deposit, the parties contributing the deposit shall share
the resulting repayment or reduction pro rata to the amounts in which
they have contributed to such deposit.
5.4 The Seller shall ensure that on or before Completion all monies owing by
the Seller or any Associate of the Seller to the Company, other than the
indebtedness assigned pursuant to the Assignment of Debt, are paid or
set off in full, whether or not then due for payment.
5.5 The Seller acknowledges and confirms that:
5.5.1 as at Completion there is no outstanding indebtedness owed by
the Company to the Seller or any of the Seller's Associates; and
5.5.2 if at Completion there is any indebtedness owed by the Company
to the Seller or any of the Seller's Associates, it hereby
waives, on its own behalf and on behalf of each of its
Associates, such indebtedness.
6. WARRANTIES AND INDEMNITIES
6.1 The Seller warrants to the Buyer that except as fairly disclosed in the
Disclosure Letter, and subject to clause 6.6, each of the Warranties is
accurate at the date of this Agreement.
6.2 Each of the Warranties is separate and is to be construed independently
of the other Warranties and any other provisions of this Agreement.
6.3 The Seller acknowledges that the Buyer is entering into this Agreement
in reliance on the Warranties.
6.4 Subject to clause 6.1 and to paragraphs 12.1 and 12.2 of schedule 5,
neither the Buyer's right to make Warranty Claims nor the quantum of any
Warranty Claim made shall be affected by any actual or constructive
knowledge which the Buyer or any of its agents or advisers might have on
the date of this Agreement. This clause shall apply whether that
knowledge was obtained as a result of an investigation made by or on
behalf of the Buyer into the Company or in any other way.
6.5 Without prejudice to paragraph 12.1 of schedule 5, the Seller
unconditionally and irrevocably waives (except in the case of fraud or
dishonesty) any rights it may have against (and undertakes (except in
the case of fraud or dishonesty) not to make any claims against or
pursue any action to join in as a third party or seek a contribution or
indemnity from) the Company, or any directors or employees of the
Company on whom the Seller has or may have relied, in connection with
preparing the Disclosure Letter or agreeing to any terms of this
Agreement.
6.6 Schedule 5 (Limitations on Seller's liability) shall apply to limit,
qualify or exclude, in accordance with its terms, any liability which
the Seller might otherwise have in respect of any breach of the
Warranties and, where expressly stated, a claim under the
9
Tax Covenant, provided that no provision of that schedule shall apply to
any such liability arising out of or in connection with any dishonest or
fraudulent act or omission, or any deliberate non-disclosure, by or on
behalf of the Seller.
6.7 BANK INDEBTEDNESS STATEMENT
6.7.1 As soon as reasonably practicable following Completion the Buyer
will prepare the Bank Indebtedness Statement and, if the amount
of the Bank Indebtedness exceeds L1,163,069.68, deliver the same
to the Seller.
6.7.2 Within 10 Business Days of the receipt by the Seller of the
draft Bank Indebtedness Statement the Seller shall inform the
Buyer in writing whether or not it accepts the draft Bank
Indebtedness Statement and, if not, shall specify in writing the
amount and nature of any item which it does not accept.
6.7.3 If the Seller confirms in writing that it accepts the draft Bank
Indebtedness Statement, or if it fails to inform the Buyer
within 10 Business Days of receipt whether or not it accepts the
draft Bank Indebtedness Statement such draft shall be the Bank
Indebtedness Statement for the purposes of this Agreement.
6.7.4 If the Seller informs the Buyer, in accordance with clause 6.7.2
that it does not accept the draft Bank Indebtedness Statement
the Seller and the Buyer shall hold discussions in good faith
with a view to agreeing the Bank Indebtedness Statement. If such
agreement is reached and is confirmed in writing by the parties,
it shall be final and binding on the parties.
6.7.5 Any dispute about the draft Bank Indebtedness Statement which
remains unresolved 30 Business Days after receipt by the Seller
of the draft Bank Indebtedness Statement shall, at the request
of either the Buyer or the Seller, be referred for final
determination to an independent firm of chartered accountants
nominated jointly by the Buyer and the Seller or, failing such
nomination within 10 Business Days after a request by either the
Buyer or the Seller, such firm shall be nominated at the request
of either the Buyer or the Seller by the President for the time
being of the Institute of Chartered Accountants in England and
Wales. Such independent firm shall act as experts and not as
arbitrators and (in the absence of manifest error) its decisions
(both as to the manner in which its determination is to be made
and as to the subject matter of its determination) shall be
final and binding on the parties.
6.7.6 All costs incurred by the Seller in reviewing and agreeing the
Bank Indebtedness Statement shall be borne by the Seller and all
such costs incurred by the Buyer shall be borne by the Buyer.
The fees of such independent firm shall be payable by the Buyer
and the Seller in such proportions as such independent firm
determines (or failing such determination equally by the Seller
on the one hand and the Buyer on the other hand).
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6.7.7 Each party will co-operate fully with the other and, if
applicable, with the independent firm appointed under clause
6.7.5 (including giving all reasonable access to records,
information, and to personnel) with a view to enabling the draft
Bank Indebtedness Statement to be prepared and subsequently
discussed and, if applicable, with a view to enabling any such
independent firm to make any determination required by clause
6.7.5, and in particular the Buyer shall procure that the
Company shall permit the Seller and its advisers (and, if
applicable, such independent firm) to have access to, and (where
reasonable) to take copies (at the Seller's cost) of any records
or information belonging to the Company which the Seller may
reasonably require for the purpose of reviewing the draft Bank
Indebtedness Statement
6.7.8 The Seller covenants with the Buyer to pay to the Buyer within 5
Business Days of the agreement or determination of the Bank
Indebtedness Statement pursuant to this Agreement an amount
equal to the amount by which any Bank Indebtedness as determined
by the Bank Indebtedness Statement exceeds L1,163,069.68.
6.8 CASH AMOUNT STATEMENT
6.8.1 As soon as reasonably practicable following Completion the Buyer
will prepare the Cash Amount Statement and, if the Cash Amount
is less than L650,000, deliver the Cash Amount
Statement to the Seller.
6.8.2 Within 10 Business Days of the receipt by the Seller of the
draft Cash Amount Statement the Seller shall inform the Buyer in
writing whether or not it accepts the draft Cash Amount
Statement and, if not, shall specify in writing the amount and
nature of any item which it does not accept.
6.8.3 If the Seller confirms in writing that it accepts the draft Cash
Amount Statement, or if it fails to inform the Buyer within 10
Business Days of receipt whether or not it accepts the draft
Cash Amount Statement such draft shall be the Cash Amount
Statement for the purposes of this Agreement.
6.8.4 If the Seller informs the Buyer, in accordance with clause 6.8.2
that it does not accept the draft Cash Amount Statement the
Seller and the Buyer shall hold discussions in good faith with a
view to agreeing the Cash Amount Statement. If such agreement is
reached and is confirmed in writing by the parties, it shall be
final and binding on the parties.
6.8.5 Any dispute about the draft Cash Amount Statement which remains
unresolved 30 Business Days after receipt by the Seller of the
draft Cash Amount Statement shall, at the request of either the
Buyer or the Seller, be referred for final determination to an
independent firm of chartered accountants nominated jointly by
the Buyer and the Seller or, failing such nomination within 10
Business Days after a request by either the Buyer or the Seller,
such firm shall be nominated at the request of either the Buyer
or the Seller by the President for the time being of the
Institute of Chartered Accountants in England and Wales. Such
independent firm shall act as experts and not as arbitrators and
(in the absence of manifest error) its
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decisions (both as to the manner in which its determination is
to be made and as to the subject matter of its determination)
shall be final and binding on the parties.
6.8.6 All costs incurred by the Seller in reviewing and agreeing the
Cash Amount Statement shall be borne by the Seller and all such
costs incurred by the Buyer shall be borne by the Buyer. The
fees of such independent firm shall be payable by the Buyer and
the Seller in such proportions as such independent firm
determines (or failing such determination equally by the Seller
on the one hand and the Buyer on the other hand).
6.8.7 Each party will co-operate fully with the other and, if
applicable, with the independent firm appointed under clause
6.8.5 (including giving all reasonable access to records,
information, and to personnel) with a view to enabling the draft
Cash Amount Statement to be prepared and subsequently discussed
and, if applicable, with a view to enabling any such independent
firm to make any determination required by clause 6.8.5, and in
particular the Buyer shall procure that the Company shall permit
the Seller and its advisers (and, if applicable, such
independent firm) to have access to, and (where reasonable) to
take copies (at the Seller's cost) of any records or information
belonging to the Company which the Seller may reasonably require
for the purpose of reviewing the draft Cash Amount Statement
6.8.8 The Seller covenants with the Buyer to pay to the Buyer within 5
Business Days of the agreement or determination of the Cash
Amount Statement pursuant to this Agreement an amount equal to
the amount by which the Cash Amount as determined by the Cash
Amount Statement is less than L650,000.
6.9 Any amount paid by or on behalf of the Seller in respect of a breach of
the Warranties and/or pursuant to a claim made under the Tax Covenant
and/or pursuant to clauses 6.7.8 or 6.8.8 shall be deemed to reduce the
purchase price payable for the Shares by, and be a repayment of, that
amount.
7. TAX
The Seller covenants to the Buyer in relation to Tax in the terms set
out in schedule 3.
8. ACCESS TO RECORDS
The Buyer shall procure that the Company shall, for a period of seven
years following Completion and subject to the following provisions of
this clause 8, allow the Seller and/or its professional advisers upon
reasonable notice and at reasonable times to have such access to the
books, records and financial information of the Company as the Seller
may reasonably require with respect to periods prior to Completion,
including, without limitation, for the purpose of the preparation of the
Seller's annual accounts, tax computations or other requirement of a
regulatory body. The Seller hereby agrees to procure that any such
information or documentation shall be kept confidential and shall not be
disclosed to any person save to the extent that it is
12
required to be included in the Seller's annual accounts or tax
computations, or to be given to or required to be disclosed (publicly or
otherwise) by a regulatory body.
9. PROTECTION OF THE INTERESTS OF THE BUYER AND THE SELLER
9.1 The Seller shall not, directly or indirectly, alone or jointly with any
other person, and whether as shareholder, partner, director, principal,
consultant, officer, employee or agent or in any other capacity:
9.1.1 for a period of 30 months starting on the Completion Date, carry
on or be engaged, interested or concerned in, or assist, any
business which involves an activity being carried out within the
United Kingdom which competes with the UK Business carried on by
the Company as at Completion, provided that nothing in this
clause 9.1.1 shall prevent the Seller from carrying on or being
engaged, interested or concerned in the Seller's Permitted
Business;
9.1.2 for a period of 30 months starting on the Completion Date accept
from any person who was a customer of the Company during the
period of 12 months ending on the Completion Date, business
which involves an activity being carried out within the United
Kingdom which competes with the UK Business carried on by the
Company as at Completion provided that nothing in this clause
9.1.2 shall prevent the Seller from accepting business
comprising the Seller's Permitted Business;
9.1.3 for a period of 30 months starting on the Completion Date accept
from any person:
9.1.3.1 who has its principal place of business in a Restricted
Area and was a customer of the Company within that
Restricted Area at any time during the period of 12
months ending on the Completion Date; or
9.1.3.2 for whom the Company made a collection in a Restricted
Area during the 12 months ending on the Completion Date,
business which involves a collection being made in that
Restricted Area which competes within that Restricted Area with
the Collecting Business carried on by the Company as at
Completion;
9.1.4 for a period of 30 months starting on the Completion Date
solicit from any person who was a customer of the Company at any
time during the period of 12 months ending on the Completion
Date, business which involves an activity being carried out
within the United Kingdom which competes with the UK Business
carried on by the Company as at Completion provided that,
subject to clause 9.1.5, nothing in this clause 9.1.4 shall
prevent the Seller from soliciting from persons whose principal
place of business is outside the United Kingdom business
comprising or which would comprise the Seller's Permitted
Business;
13
9.1.5 for a period of 30 months starting on the Completion Date
solicit from any person:
9.1.5.1 who has its principal place of business in a Restricted
Area and was a customer of the Company within that
Restricted Area at any time during the period of 12
months ending on the Completion Date; or
9.1.5.2 for whom the Company made a collection in a Restricted
Area during the 12 months ending on the Completion Date,
business which involves a collection being made in that
Restricted Area which competes within that Restricted Area with
the Collecting Business carried on by the Company as at
Completion;
9.1.6 for a period of 30 months starting on the Completion Date, and
to the detriment of the Collecting Business in the Restricted
Areas or to the detriment of the UK Business in the United
Kingdom in each case carried on by the Company as at Completion,
induce or attempt to induce any supplier of materials or
services to any such business during the period of 12 months
ending on the Completion Date to cease to supply, or to restrict
or adversely to vary the terms of supply to, that business,
provided that this clause 9.1.6 shall be without prejudice to
the ability of the Seller or any of its Associates to otherwise
deal with such suppliers;
9.1.7 for a period of two years starting on the Completion Date, and
to the detriment of the UK Business in the United Kingdom
carried on by the Company as at Completion, employ or engage the
services of any person employed or engaged by the Company in a
senior/managerial or sales position on the Completion Date or
any other person who held such a position during the period of
12 months ending on the Completion Date;
9.1.8 for a period of two years starting on the Completion Date, and
to the detriment of the UK Business in the United Kingdom
carried on by the Company as at Completion, solicit or entice
away, or endeavour to solicit or entice away, any person
employed or engaged by the Company in a senior/managerial or
sales position on the Completion Date to leave that position,
whether or not that person would commit a breach of his contract
by so leaving;
and for the avoidance of doubt, nothing shall prevent or restrict the Seller
from using any collecting agents it wishes in the Restricted Areas provided that
such use is not in breach of clause 9.1.6.
9.2 Nothing in clause 9.1 shall prohibit the Seller from holding any
interest in any securities listed or dealt in on any securities exchange
if the Seller and any Associate of the Seller are together interested in
securities which amount to less than 5 per cent of the issued securities
of that class and which in all circumstances carry less than 5 per cent
of the voting rights (if any) attaching to the issued securities of that
class, and if neither the Seller nor any Associate of the Seller is
involved in the management of
14
the business of the issuer of the securities or any subsidiary
undertaking of that issuer except by virtue of the exercise of any
voting rights attaching to the securities.
9.3 The Seller shall not disclose or use any confidential information
relating to the Company and shall use all reasonable endeavours to
prevent the publication or disclosure of any such confidential
information. This clause shall not prohibit disclosure of confidential
information pursuant to a legal obligation involuntarily incurred or if
required by the law of any relevant jurisdiction or by any competent
regulatory or governmental body or securities exchange or court in any
relevant jurisdiction, provided that in any such case, the Seller shall
take all such steps as may be reasonable and practicable in the
circumstances to notify the Buyer before the relevant disclosure is
made. This clause shall not apply to confidential information which the
Buyer has authorised to be disclosed or which is in or becomes part of
the public domain without breach of this clause or of clause 9.5.
9.4 The Seller shall not at any time after the Completion Date use in any
manner in the course of any business the name MEDSCREEN or any
confusingly similar name, mark, sign or logo, or present itself or
permit itself to be presented as in any way connected (other than
historically) with the Company or interested in the Shares.
9.5 The Seller shall ensure that none of its Associates from time to time
takes or omits to take any action which, if taken or omitted by the
Seller, would constitute a breach of clause 9.1, 9.3 or 9.4.
9.6 The Buyer shall not at any time after the Completion Date, without the
prior written consent of the Seller, use in any manner in the course of
any business, the name PHARMCHEM or any confusingly similar name, mark,
sign or logo or present itself or permit itself to be presented as in
any way connected (other than historically) with the Seller.
9.7 The Buyer shall ensure that none of its Associates from time to time
(including, after Completion, the Company or any of its Associates)
takes or omits to take any action which, if taken or omitted by the
Buyer, would constitute a breach of clause 9.6.
9.8 Since the Seller has confidential information relating to the Company
and a detailed awareness of the Company's customer connections, and
since the purchase price payable for the Shares has been calculated on
the basis that the Seller would assume the obligations set out in this
clause 9, the parties acknowledge that each of those obligations is
reasonable as to subject matter, area and duration and is necessary to
provide the Buyer with the full benefit of the goodwill of the Company.
9.9 Without prejudice to any other remedy which may be available to the
Buyer or the Seller, as appropriate, the parties agree that the Buyer
shall be entitled to seek injunctive or other equitable relief in
relation to a breach of clauses 9.1, 9.3, 9.4 and 9.5, and that the
Seller shall be entitled to seek injunctive or other equitable relief in
relation to a breach of clauses 9.6 and 9.7, it being acknowledged that
an award of damages might not be an adequate remedy in the event of such
a breach.
9.10 If any provision of this clause shall be found by any court of competent
jurisdiction to be invalid or unenforceable but would be valid or
enforceable if some part of the
15
provision were deleted and/or its duration or scope were reduced, the
provision in question shall apply with such modifications as may be
necessary to make it valid.
9.11 Each of the obligations assumed by the Seller in this clause 9 is
separate and shall be construed and be enforceable independently of the
others, and is assumed without prejudice to any other obligations of the
Seller implied at law or in equity.
10. INSURANCE ARRANGEMENTS
10.1 Subject to clause 10.4, the Seller undertakes to make arrangements so
that cover continues to be provided for the Company under its existing
insurance arrangements for 15 days after Completion, or such shorter
period as the Buyer may notify to the Seller from time to time.
10.2 The Seller undertakes to account to the Company for any proceeds payable
with respect to loss incurred by the Company that the Seller may receive
pursuant to the insurance arrangements described in clause 10.1.
10.3 The Seller shall, at the request of the Buyer and at the Buyer's cost,
provide such assistance as is reasonable to pursue and seek recovery of
any insurance claim occurring in the period of 15 days after Completion
(or such shorter period as the Buyer may notify to the Seller from time
to time pursuant to clause 10.1) under the Seller's group insurance
policies (if the policies cover such losses to the Company), provided
that the Buyer shall have responsibility for pursuing and seeking
recovery of any such insurance claim.
10.4 The Buyer undertakes to procure that during the period described in
clause 10.1 the business of the Company shall not include any products
or services which the Company does not have at the date of this
Agreement and the nature of such business shall not otherwise materially
change and that the Company its employees, officers and agents shall not
do anything which would cause such insurance arrangements to become void
or voidable or allow claims made under such arrangements to be avoided
by the insurer and the Buyer agrees that the obligations of the Seller
under clauses 10.1, 10.2 and 10.3 shall terminate immediately upon a
breach of this clause 10.4 occurring.
11. PAYMENTS AND INTEREST
11.1 Payments to be made to the Seller under this Agreement shall be made in
sterling by telegraphic transfer of immediately available funds to the
following account:
Bank: National Westminster Bank plc
City of London Office
PO Box 12258
1 Princes Street
London EC2R 8PA
Sort code: 60-00-01
Account name: Hammond Suddards Edge Client Account
16
Account number: 36259780.
11.2 The Seller:
11.2.1 hereby irrevocably instructs the Buyer to set off the sum of
L1,357,052.93 (which is owed by the Seller to the Buyer pursuant
to the Assignment of Debt) against the aggregate purchase price
payable pursuant to clause 4.5 and to pay the balance, being the
sum of L5,650,000, to the account referred to in clause 11.1;
11.2.2 specifically acknowledges that payment of funds in accordance
with the above instructions discharges the obligations of the
Buyer to pay the sum in question and that party shall not be
concerned to see the application of the monies so paid.
11.3 Payment of any sum to a party's solicitors will discharge the
obligations of the relevant party to pay the sum in question, and that
party shall not be concerned to see the application of the monies so
paid.
11.4 Each payment to be made by the Seller under this Agreement shall be made
free and clear of all deductions, withholdings, counterclaims or set-off
of any kind except for those required by law.
11.5 In the event that:
11.5.1 any deduction or withholding is required by law to be made from
any sum payable by any party to the other pursuant to this
Agreement (save for sums payable pursuant to the Tax Covenant),
the paying party shall be obliged to pay such increased sum as
will, after the deduction or withholding has been made, leave
the receiving party with the same amount as it would have been
entitled to receive in the absence of such requirement to make a
deduction or withholding; and
11.5.2 any sum paid by any party to the other pursuant to this
Agreement (save for sums payable pursuant to the Tax Covenant)
is or will be chargeable to Tax, the paying party shall be
obliged to pay such further sum as will, after payment of the
Tax, leave a sum equal to the amount that would otherwise have
been payable if Tax had not been so chargeable and for these
purposes a sum shall be regarded as chargeable to Tax in
circumstances where it would have been chargeable to Tax but for
some Relief available to the receiving party.
12. BOOKS AND RECORDS
The Seller shall ensure that all records relating to the business of
Company which are owned by the Seller or any Associate of the Seller are
retained for a period of six years starting on the Completion Date and
that the Buyer is promptly provided upon request with access to those
records during normal working hours and on reasonable prior notice and
is permitted at the Buyer's expense to make copies of them.
17
13. ASSIGNMENT
13.1 Except as provided in clause 13.2, no party may assign or otherwise
dispose of any rights under this Agreement, at law or in equity,
including by way of declaration of trust. Any purported assignment in
breach of this clause shall be void and confer no rights on the
purported assignee.
13.2 The Buyer may assign all or any of its rights under this Agreement by
way of security to its bankers providing funding or, from time to time,
providing refinancing of the funding provided for the acquisition of the
Company pursuant to this Agreement, provided that such security is given
solely with respect to such funding and its provision is a condition of
the Buyer's funding or refinancing arrangements.
14. ANNOUNCEMENTS AND CONFIDENTIALITY
14.1 No party may make any press release or other public announcement about
this Agreement or the transactions contemplated by it or disclose any of
the terms of this Agreement except with the consent of the other party.
14.2 Clause 14.1 shall not apply to any disclosure made by a party to its
officers or employees or to an Associate or to its professional advisers
or bankers, or to any announcement or disclosure required by the law of
any relevant jurisdiction or by any competent regulatory or governmental
body or securities exchange in any relevant jurisdiction, provided that
the party required to make such an announcement or disclosure shall
first notify the other party.
14.3 Each party shall ensure that any Associate or professional adviser or
other person to which it discloses information pursuant to clause 14.2
is made aware of the obligations of confidentiality contained in this
clause and complies with this clause as if binding on it directly.
15. COSTS
Each party shall bear its own costs and expenses in connection with the
preparation, negotiation, execution and performance of this Agreement
and the documents referred to in it.
16. NOTICES
16.1 Any notice, consent or other communication given under this Agreement
shall be in writing and in English, and signed by or on behalf of the
party giving it, and shall be sent by hand, by prepaid recorded or
special delivery post (or prepaid international recorded airmail if sent
internationally) or by fax as follows:
TO THE BUYER:
For the attention of: Fiona Begley
Address: 1a Harbour Quay, 100 Prestons Road, London E14 9PH
Facsimile number: +44 20 7712 8001
18
with a copy (which shall not constitute notice) to Fabrizio Carpanini at
the Buyer's Solicitors (ref: AAB/FCP/10043.2); and
TO THE SELLER:
For the attention of: Joseph Halligan
Address: PharmChem, Inc.,
4600 N. Beach Street,
Haltom City,
Texas 76137
USA
Facsimile number: +1 817 605 6434
with a copy (which shall not constitute notice) to Nick Williams at the
Seller's Solicitors and another copy (which shall not constitute notice)
to J A Shelton, Sonnenschein Nath & Rosenthal, 601 So. Figueroa Street,
Suite 1500, Los Angeles, CA 90017, USA.
16.2 Either party may notify the other of any other person, address or fax
number for the receipt of notices or copy notices. Any such change shall
take effect five Business Days after notice of the change is received or
(if later) on the date (if any) specified in the notice as the date on
which the change is to take place.
16.3 Any notice, consent or other communication given in accordance with
clause 16.1 and received after 5.30 p.m. on a Business Day, or on any
day which is not a Business Day, shall for the purposes of this
Agreement be regarded as received on the next Business Day.
16.4 The provisions of clause 16.1 shall not apply in relation to the service
of any process in any proceedings arising out of or in connection with
this Agreement.
17. THIRD PARTY RIGHTS
17.1 The Company may rely upon and enforce the terms of clauses 5.1 and 5.4
(guarantees and loan accounts), 6.5 (waiver of rights in relation to
warranties), 9 (protection of the interests of the Buyer) and the
directors and employees of the Company may rely upon and enforce the
terms of clause 6.5 (waiver of rights in relation to warranties).
17.2 The rights referred to in clause 17.1 may be enforced by the third
parties referred to in that clause only with the prior written consent
of the Buyer.
17.3 Notwithstanding any other provision of this Agreement, the Seller and
the Buyer may by agreement in writing rescind or vary any of the
provisions of this Agreement without the consent of any third party, and
accordingly section 2(1) Contracts (Rights of Third Parties) Act 1999
shall not apply.
17.4 Except as otherwise stated in this clause a person who is not a party to
this Agreement has no right under the Contracts (Rights of Third
Parties) Act 1999 to rely upon or
19
enforce any term of this Agreement. This clause shall not affect any
right or remedy of a third party which exists or is available apart from
that Act.
18. WAIVER
A failure to exercise or delay in exercising a right or remedy provided
by this Agreement or by law does not constitute a waiver of that or any
other right or remedy. A waiver of a breach of any term of this
Agreement shall not constitute a waiver of any other breach of this
Agreement.
19. CUMULATIVE RIGHTS
The rights and remedies provided by this Agreement are cumulative and
(except as otherwise provided in this Agreement) are not exclusive of
any rights or remedies provided by law.
20. FURTHER ASSURANCE
After Completion, the Seller shall at its own expense execute all such
documents and do all such other things as the Buyer may from time to
time reasonably require in order to vest in the Buyer legal title to the
Shares and otherwise to give full effect to this Agreement.
21. NO MERGER
The provisions of this Agreement shall remain in full force and effect
notwithstanding Completion.
22. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
parties to it on separate counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
23. ENTIRE AGREEMENT
23.1 This Agreement, and the documents referred to in it, constitute the
entire agreement and understanding of the parties and supersede any
previous agreement between the parties relating to the subject matter of
this Agreement.
23.2 The Buyer agrees that it has not entered into this Agreement or any
agreement or document entered into pursuant to this Agreement in
reliance upon any representation, statement, covenant, warranty,
agreement or undertaking of any nature whatsoever made or given by or on
behalf of the Seller except as expressly set out in this Agreement or
any agreement or document entered into pursuant to this Agreement.
Nothing in this clause shall exclude any liability on the part of the
Seller for fraud or fraudulent misrepresentation.
20
24. GOVERNING LAW AND JURISDICTION
24.1 This Agreement shall be governed by and construed in accordance with the
law of England and Wales. Each party irrevocably submits to the
exclusive jurisdiction of the courts of England and Wales over any
claim, dispute or matter arising under or in connection with this
Agreement.
24.2 Each party irrevocably waives any objection which it may have now or
later to proceedings being brought in the courts of England and Wales
and any claim that proceedings have been brought in an inconvenient
forum. Each party further irrevocably agrees that a judgment in any
proceedings brought in the courts of England and Wales shall be
conclusive and binding upon each party and may be enforced in the courts
of any other jurisdiction.
24.3 The Seller irrevocably appoints London Law Agency (attention: Kate
Crombie of 84 Temple Chambers, Temple Avenue, London EC4Y 0HP as its
agent to receive on its behalf in England service of any proceedings
arising out of or in connection with this Agreement. Such service shall
be deemed completed on delivery to that agent (whether or not it is
forwarded to and received by the Seller). If for any reason that agent
ceases to be able to act as agent or no longer has an address in
England, the Seller shall immediately appoint a substitute and give
notice to the other party of the new agent's name and address.
24.4 Nothing in this Agreement shall affect the right to serve process in any
manner permitted by law.
AS WITNESS of which this Agreement has been executed by or on behalf of the
parties on the date set out on page 1.
21
SCHEDULE 1
DETAILS OF THE COMPANY
DATE AND PLACE OF INCORPORATION: 15 September 1986, England and Wales
REGISTERED NUMBER: 2055216
REGISTERED OFFICE: 1a Harbour Quay, 100 Prestons Road,
London E14 9PH
SHARE CAPITAL:
Authorised: 1,000,000 ordinary shares of L1 each
Issued: 900,000 ordinary shares of L1 each
OPTIONS/WARRANTS: None
DIRECTORS: Fiona Begley
Joseph Halligan
David Lattanzio
SECRETARY: David Lattanzio
SHAREHOLDERS: PharmChem Inc.
AUDITORS: Gallagher & Co.
ACCOUNTING REFERENCE DATE: 31 December
CHARGES: Debenture dated 10 October 2001 in
favour of Lloyds TSB Bank plc
22
SCHEDULE 2
WARRANTIES
PART 1 - GENERAL
1. SHARES AND OTHER SECURITIES OF THE COMPANY
1.1 The Shares represent the entire issued share capital of the Company.
1.2 The shareholder of the Company listed in schedule 1 is the legal and
beneficial owner of the shares set out against its name.
1.3 The Company has no debenture or any other security in issue.
1.4 No person has the right or has claimed to have a right (whether
exercisable now or at a future date and whether contingent or not) to
subscribe for, or to convert any security into, any shares, debentures
or other securities of the Company, including pursuant to an option or
warrant.
1.5 The Company has not at any time purchased its own shares or redeemed or
forfeited any shares, or agreed to do so, or granted an option whereby
it might become liable to do so.
1.6 There is no Encumbrance over any issued or unissued shares in the
capital of the Company, there is no subsisting agreement to create any
such Encumbrance and no person has claimed to be entitled to any such
Encumbrance.
2. SHADOW DIRECTORS
No person who is not named in schedule 1 is a shadow director (within
the meaning of section 741(2) Companies Act 1985) of the Company.
3. SUBSIDIARIES AND BRANCHES
3.1 The Company has no interest in nor is it under a subsisting obligation
to acquire any interest in any shares, debentures or other securities of
any other body corporate.
3.2 The Company has no agency, branch or other place of business or
permanent establishment outside the United Kingdom.
4. COMMISSION
No person is entitled to receive from the Company any finder's fee or
brokerage or other commission in connection with the sale of the Shares
to the Buyer.
5. ARTICLES OF ASSOCIATION
The copies of the articles of association of the Company annexed to the
Disclosure Letter have embodied in them or annexed to them a copy of all
resolutions or agreements required by the Companies Act 1985 to be so
embodied or annexed.
23
6. MATERIAL INFORMATION
6.1 The information set out in the recitals and schedule 1 is complete and
accurate.
6.2 All written information relating to the Company given by or on behalf of
the Seller or the Seller's Solicitors to the Buyer or the Buyer's
Solicitors dated 15 February 2002, 5 March 2002 and by email on 14 March
2002 was when given, and remains, complete and accurate and not
misleading.
7. INSOLVENCY
7.1 The Company has assets whose value exceeds the amount of its
liabilities.
7.2 No order has been made or shareholder resolution passed, or so far as
the Seller is aware, petition presented or resolution of creditors'
passed for the winding up of the Company and so far as the Seller is
aware no creditors' meeting has been convened to consider any such
resolution; no administration order has been made and so far as the
Seller is aware, no petition has been presented for such an order in
relation to the Company; and no receiver, manager or administrative
receiver has been appointed in respect of the Company.
7.3 So far as the Seller is aware, no meeting of the creditors of the
Company or any class of them has been convened or proposed, and no
moratorium, composition, compromise or arrangement has been proposed
between the Company and its creditors, or any class of them, and the
Company has not made a proposal under Part I of the Insolvency Act 1986
for a composition in satisfaction of its debts or a scheme of
arrangement of its affairs.
7.4 No judgment, decree, order or award notified to the Company remains
unsatisfied, no written demand has been served on the Company pursuant
to section 123(1)(a) Insolvency Act 1986 and, so far as the Seller is
aware, no distress, execution or other process has been levied against
all or any part of the assets of the Company.
7.5 No procedure has been commenced by the registrar of companies with a
view to striking off the Company under section 652 or 652A Companies Act
1985.
8. AUTHORITY AND CAPACITY OF THE SELLER
8.1 The Seller has all necessary power and authority to enter into and
perform its obligations under this Agreement and all agreements to be
entered into by the Seller pursuant to this Agreement.
8.2 The entering into and performance by the Seller of its obligations under
this Agreement and all agreements to be entered into by the Seller
pursuant to this Agreement:
8.2.1 will not result in a breach of any provision of the memorandum
or articles of association or analogous constitutional
documentation of the Seller; or
24
8.2.2 will not result in a breach of, or constitute a default under,
any material agreement under which the Seller enjoys rights or
by which it is bound; or
8.2.3 will not result in a breach of any order, judgment or decree of
any court or governmental, administrative or regulatory body or
agency to which the Seller is party or by which it is bound; or
8.2.4 does not require the consent of any third party.
25
PART 2 - ACCOUNTS, FINANCIAL, BANKING AND CURRENT TRADING
1. THE ACCOUNTS
1.1 The Accounts were prepared under the historical cost convention and in
accordance with applicable Statements of Standard Accounting Practice,
Financial Reporting Standards, statements from the Urgent Issues Task
Force, other generally accepted accounting practices in the United
Kingdom and with the Companies Act 1985.
1.2 The Accounts give a true and fair view of the state of affairs of the
Company as at the end of the financial year to which they relate and of
its profit or loss for the period ended on that date.
1.3 Except as noted in the Accounts, the profits of the Company disclosed in
the Accounts were not materially affected by any extraordinary or
exceptional items or any other unusual or non-recurring items.
1.4 The annual accounts of the Company for the three financial years ended
on the Accounts Date were prepared applying substantially the same
accounting policies and bases.
1.5 At the Accounts Date the Company had no liability (whether actual,
contingent, unquantified or disputed) or outstanding capital commitment
which was not disclosed, provided for or noted in the Accounts to the
extent required to be so disclosed, provided for or noted in accordance
with generally accepted accounting practices in the United Kingdom.
2. ACCOUNTING RECORDS
The Company's accounting records comply with the requirements of section
221 Companies Act 1985 in all material respects.
3. ACCOUNTING REFERENCE DATE
The Company has not at any time had any accounting reference date
(within the meaning of section 224 Companies Act 1985) other than the
date set out in schedule 1.
4. MANAGEMENT ACCOUNTS
4.1 The Management Accounts:
4.1.1 have been prepared in good faith using accounting policies and
bases consistent with those used in preparing the Accounts;
4.1.2 fairly represent the financial position of the Company,
including, without limitation, the turnover and profits of the
Company, as at the end of the period to which they relate; and
4.1.3 are not misleading.
26
5. DIVIDENDS AND DISTRIBUTIONS
All dividends or distributions declared, made or paid by the Company
since its incorporation have been declared, made or paid in accordance
with its articles of association and the Companies Act 1985.
6. DEBTORS
6.1 There are no debts owing to the Company (whether or not due for payment)
other than trade debts incurred in the ordinary course of business.
6.2 Annexed to the Disclosure Letter is a complete and accurate list of the
trade debtors of the Company unpaid at 60 days after invoice.
6.3 The Seller is not aware of any reason why the trade debtors of the
Company will not realise, in the ordinary course of collection, their
nominal amounts (plus any accrued interest) less any provision for trade
debtors included in the Accounts, the Management Accounts or disclosed
in the Disclosure Letter.
6.4 So far as the Seller is aware none of the trade debtors of the Company
is subject to any counterclaim, deduction or set off.
6.5 The Company has not factored or discounted any debts owing to it, nor
has agreed to do so, nor has engaged in any financing which is not
disclosed in the Accounts.
6.6 The Company has not made or agreed to make any loan or quasi-loan
contrary to the Companies Act 1985.
7. CREDITORS AND LIABILITIES
7.1 The Company has no creditors or any other liabilities (including
contingent liabilities) other than in either case as disclosed in the
Accounts or incurred in the ordinary course of business since the
Accounts Date.
7.2 No sum is owing by the Company to its auditors, solicitors or other
professional advisers, and no accrual ought properly be made by the
Company in respect of any such sum.
7.3 Annexed to the Disclosure Letter is a complete and accurate list of the
trade creditors of the Company unpaid at 60 days after invoice.
7.4 All outstanding indebtedness between the Seller or any Associate of the
Seller and the Company (including any indebtedness to be released,
novated or capitalised on Completion) is listed in the Disclosure
Letter.
8. GOVERNMENT GRANTS
The Company has not applied for, or received, any grant, investment,
subsidy or financial assistance from any government department or agency
or any local or other authority.
27
9. BANK ACCOUNTS
9.1 The Disclosure Letter contains the account details of all current,
deposit and foreign currency accounts maintained by the Company.
9.2 There have been no payments into or out of any account referred to in
the previous paragraph since the date of the bank statements delivered
to the Buyer at Completion except for payments set out in the
reconciliation of those statements to cash book balances also delivered
to the Buyer at Completion.
10. FACILITIES
10.1 The Disclosure Letter contains full details of all financial facilities
available to the Company (together "FACILITIES") and of the limits on
those Facilities. Copies of all documents relating to the Facilities are
annexed to the Disclosure Letter.
10.2 The total amount borrowed by the Company does not exceed, and has never
exceeded, any limitation on its borrowing contained in its articles of
association or in any of the Facilities or other agreement currently
binding on it.
10.3 There has been no contravention by the Company of, or non-compliance by
the Company with, any terms of any of the Facilities.
11. POSITION SINCE THE ACCOUNTS DATE
11.1 Since the Accounts Date, the Company has carried on its business in the
ordinary course, and there has been no material adverse change in the
financial or trading position of the Company.
11.2 Without limiting paragraph 11.1 of this part 2, since the Accounts Date:
11.2.1 no customer or supplier of the Company under a Material
Agreement has ceased to deal, or has indicated an intention to
cease to deal or deal on a smaller scale, with the Company, or
has changed or indicated that it wishes to change the terms (in
a manner which is prejudiced to the Company) on which it deals
with the Company;
11.2.2 the Company has not disposed of or acquired, or agreed to
dispose of or acquire, nor is negotiating to dispose of or
acquire, any business or any shares, debentures or other
securities in a body corporate, or any interest in any business,
shares, debentures or securities, or any other asset or interest
in any other asset with a value in excess of L10,000 other than
in the ordinary course of business;
11.2.3 the Company has not repaid all or part of any debt owed by it in
advance of the due date for repayment, or agreed to do so, nor
has written off or released any debt owing to it in each case in
excess of L1,000;
11.2.4 no agreement or transaction has been entered into by the Company
except on arm's length terms;
28
11.2.5 no management charge has been levied against the Company;
11.2.6 the Company has not entered into, or agreed to enter into, any
capital commitments;
11.2.7 no dividend or distribution of profits or assets (including
without limitation any distribution as defined in Part VI Taxes
Act and extended by section 418 Taxes Act) has been or would be
treated as having been paid or made by the Company;
11.2.8 no payment for group relief has been made and no group relief
has been surrendered by the Company.
12. CUSTOMERS AND SUPPLIERS
12.1 The Disclosure Letter contains details of all customers (or groups of
connected customers) responsible for 2% or more of the turnover of the
Company, and of all suppliers (or groups of connected suppliers) who
supplied 2% or more of the Company's supplies, during the three
financial years ended on the Accounts Date and during the period
starting on the date after the Accounts Date and ending on the date of
this Agreement.
12.2 So far as the Seller is aware (not having enquired with the relevant
customer or supplier), no customer of the Company responsible for 1% or
more of the turnover of the Company or supplier of 2% of more of the
supplies of the Company during any of the three financial years ended on
the Accounts Date is likely to cease to deal with the Company, or to
deal with the Company on a smaller scale or to change the terms on which
it deals with the Company, to the detriment of the Company after the
date of this Agreement or as a result of the proposed acquisition of the
Shares.
29
PART 3 - COMPLIANCE AND LITIGATION
1. LICENCES AND CONSENTS
1.1 The Company holds (and held at all relevant times) all material
licences, authorisations and consents necessary to own and operate its
assets and carry on its business in all jurisdictions in which it now
carries on business, and those licences, authorisations and consents are
all valid and subsisting. Short particulars of each such licence,
authorisation and consent are set out in the Disclosure Letter.
1.2 The Company is not materially in breach of any of the provisions of any
such licence, authorisation or consent as is referred to in the previous
paragraph, and there are no circumstances of which the Seller is aware
which might give rise to any such licence, authorisation or consent
being revoked, terminated, suspended or materially modified or which
might prejudice its renewal.
2. TRADE ASSOCIATIONS AND ACCREDITATIONS
2.1 The Company is a full member of the trade associations, institutions
other unincorporated associations of which details are set out in the
Disclosure Letter and has complied with all rules and regulations
imposed by those associations and institutions, and there are no
circumstances of which the Seller is aware which might give rise to any
such membership being revoked, terminated or suspended.
2.2 Short particulars of each accreditation held by the Company in respect
of its business are set out in the Disclosure Letter. The Company is not
in breach of any of the provisions of any such accreditation and there
are no circumstances which might give rise to any such accreditation
being revoked, terminated, or suspended or which might prejudice its
renewal.
3. COMPETITION LAW
3.1 The Company is not nor has been a party to or concerned in any
agreement, concerted practice or course of conduct which in whole or in
part infringes the competition or anti-trust law of any country in which
it carries on business.
3.2 The Company:
3.2.1 has not given any undertaking or assurance (whether or not
legally binding) to; or
3.2.2 so far as the Seller is aware, is not subject to any order of or
investigation by; or
3.2.3 has not received any process, notice, request for information or
other communication (formal or informal) from,
any court or the European Commission, the EFTA Surveillance Authority,
the Office of Fair Trading, the Competition Commission, the Secretary of
State for Trade and Industry or any other competition or other authority
having jurisdiction in competition
30
or anti-trust matters under any competition or anti-trust legislation in
any country in which the Company has assets or carries on or intends to
carry on business or where its activities may have an effect.
4. UNDERTAKINGS, ETC.
The Company has not given any undertaking or assurance to, or received
any request for information, statement of objections or other
communication (formal or informal) from, any national or supra-national
authority or any court or governmental, administrative or regulatory
body or agency, or, so far as the Seller is aware, is the subject of any
court order, which in any case is still in force.
5. DATA PROTECTION
5.1 The Company has complied with all relevant requirements of:
5.1.1 the Data Protection Act 1984 (and the data protection principles
set out in the schedule to that Act) at all times while that Act
was in force;
5.1.2 the Data Protection Act 1998;
5.1.3 applicable codes of practice and/or guidance issued by or with
the approval of the Information Commissioner.
5.2 So far as the Seller is aware, the Company has complied with all
relevant requirements of data protection laws, regulations,
self-regulatory codes of practice and guidance in other jurisdictions
that are equivalent to those referred to in paragraph 5.1 and that may
apply to any services provided by the Company.
5.3 The Company is either:
(a) duly registered as a data controller under the Data Protection
Act 1998 (or deemed to be so registered by notification
regulations made by virtue of section 19(3) of that Act) for all
purposes for which registration is required in respect of the
processing of personal data by or on behalf of the Company; or
(b) exempt from section 17(1) Data Protection Act 1998 under
paragraph 2 of schedule 14 to that Act and duly registered as a
data user under the Data Protection Act 1984 for all purposes for
which registration is required in respect of the processing of
personal data by or on behalf of the Company.
5.4 The Company has not received a notice (including, without limitation,
any enforcement notice), letter, complaint, notification pursuant to a
request for assessment under section 42 Data Protection Act 1998 or
other communication from the Information Commissioner alleging breach by
it of the Data Protection Act 1984 or the Data Protection Act 1998, and
so far as the Seller is aware there are no circumstances which might
give rise to any such notice, letter, complaint, notification or
communication being served, given or made.
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5.5 No individual has been awarded compensation from the Company (whether
pursuant to court proceedings or not) under the Data Protection Act 1984
or the Data Protection Act 1998, no claim for such compensation is
outstanding and so far as the Seller is aware there are no circumstances
which might lead to any claim for such compensation being made.
5.6 No order has been made against the Company for the rectification,
blocking, erasure or destruction of any data under the Data Protection
Act 1984 or the Data Protection Act 1998, no application for such an
order is outstanding and there are no circumstances which might lead to
any application for such an order being made.
5.7 No warrant has been issued under schedule 4 of the Data Protection Act
1984 or schedule 9 of the Data Protection Act 1998 authorising the
Information Commissioner (or any of his officers or servants) to enter
any of the premises of the Company, and so far as the Seller is aware
there are no circumstances which might lead to any application for such
a warrant being made.
6. DEFECTIVE SERVICES
So far as the Seller is aware the Company has not supplied any services
which are or were defective or which contain any errors or omissions or
which did not comply with any warranty or representation expressly or
impliedly made by the Company or with any applicable regulations,
standards or requirements.
7. BOOKS, RECORDS AND RETURNS
7.1 The register of members, minute books, other statutory books and
registers and all other records (other than accounting records referred
to in paragraph 2 of part 2 of this schedule) required to be kept by the
Company under the Companies Act 1985 or any other legislation are in the
possession and ownership or under the control of the Company, have been
properly kept and contain complete and accurate details in all material
respects of the matters which should be dealt with in those books,
registers and records.
7.2 So far as the Seller is aware no claim has been made that any of the
books, registers and records referred to in paragraph 7.1 of this part 3
is incorrect or should be rectified.
7.3 All returns, particulars, resolutions and other documents required by
the Companies Act 1985 or any other legislation to be given or delivered
by the Company to the registrar of companies or any other governmental,
regulatory or other authority of competent jurisdiction other than a Tax
Authority have in all material respects been correctly made up and duly
given or delivered.
8. LITIGATION
8.1 The Company is not engaged, or has during the period of two years ending
on the date of this Agreement been engaged, in any litigation,
arbitration, mediation, conciliation, expert determination, adjudication
or other formal dispute resolution process, whether as claimant or
defendant or in any other capacity.
32
8.2 So far as the Seller is aware the Company is not subject to any
investigation, inquiry or enforcement proceedings or other process by
any governmental, administrative or regulatory body other than a Tax
Authority or agency nor is the Company in dispute with any such body or
agency.
8.3 There are no dispute resolution processes, proceedings and other
processes or disputes such as are referred to in paragraphs 8.1 and 8.2
of this part 3 in which the Company has been actively involved which are
pending or threatened by or against the Company, and so far as the
Seller is aware, there are no circumstances which might give rise to any
such dispute resolution processes, proceedings and other processes or
disputes.
33
PART 4 - CONTRACTS
1. MATERIAL CONTRACTS
1.1 A copy of each Material Agreement under which the Company enjoys rights
or by which the Company is bound at the date of this Agreement is
annexed to the Disclosure Letter (or, where any such agreement is not in
writing, complete and accurate details of that agreement is contained in
the Disclosure Letter).
1.2 So far as the Seller is aware each Material Agreement is valid, binding
and enforceable in accordance with its terms, and so far at the Seller
is aware no Material Agreement is voidable by any party to it.
1.3 So far as the Seller is aware there has been no breach, whether by the
Company or otherwise, of any of the Material Agreements and the Company
has not received notice alleging any such breach.
1.4 No threat or claim of any default has been made by or against the
Company in relation to any of the Material Agreements, and so far as the
Seller is aware there are no circumstances which might give rise to any
such default or which might otherwise cause any such agreement to be
terminated or rescinded by any party or allow any party to vary its
terms.
1.5 There is no subsisting dispute between the Company and any other person
in relation to any of the Material Agreements, and, so far as the Seller
is aware, there are no circumstances which might give rise to any such
dispute.
1.6 The Company has not given or received notice terminating any of the
Material Agreements.
1.7 The Company is not a party to any agreement, and the Company has not
submitted an offer or tender which is capable of being converted into an
agreement:
1.7.1 which is not in the ordinary course of business or which is not
on arm's length terms;
1.7.2 which involves or may involve obligations, restrictions or
expenditure of an unusual, onerous or exceptional nature, or
which is or is likely to be loss-making;
1.7.3 being a Material Agreement, which cannot be terminated by the
Company on less than 3 months' notice without compensation;
1.7.4 which requires a consideration or other expenditure by the
Company of more than L100,000 in aggregate or L60,000 in any
twelve months' period;
1.7.5 which provides for the Company to receive any sum, right or
other asset, or discharge any liability, whose amount or value
is expressed in or by reference to any currency other than
sterling or under which any right or
34
obligation of the Company may be modified in the event of any
change in currency exchange rates;
1.7.6 which limits the ability of the Company to carry on any business
in any part of the world in such a manner as it thinks fit;
1.7.7 under which any sole or exclusive rights are granted by or to
the Company;
1.7.8 under which the Company is required to supply goods, services or
rights of which the aggregate sales or licence value (exclusive
of VAT, if any) exceeds L100,000 or 1% of the Company's turnover
for the financial year ending on the Accounts Date;
1.7.9 pursuant to which the Company has disposed of any shares or
business and remains subject to any actual or contingent
liability;
1.7.10 which is a finance lease, hire purchase, rental or credit sale
agreement or which otherwise provides for the purchase of any
asset or the right to purchase any asset by way of periodical
payment; or
1.7.11 for the provision of management consultancy or similar services
to the Company.
1.8 The Company is not, or has agreed to become, a member of any
partnership, joint venture or consortium or a party to any other
arrangement for sharing income, profits, losses or expenses.
2. POWERS OF ATTORNEY AND AUTHORITIES
There are no subsisting powers of attorney given by the Company and no
other subsisting written authorities by which any person other than a
Director or the Secretary may execute any document, enter into any
agreement or do or agree to do anything on behalf of the Company.
3. RETENTION OF TITLE
The Company has not purchased any goods (including any plant or
equipment) or materials on terms that property in them does not pass
until full payment is made or all indebtedness discharged.
4. OUTSTANDING OFFERS
No offer or tender which is capable of being converted into an agreement
binding on the Company, whether by acceptance or other act of some other
person or in any other way, is outstanding, except in the ordinary
course of business.
5. GUARANTEES AND INDEMNITIES
The Disclosure Letter contains details of all outstanding guarantees,
indemnities, security agreements or comfort letters given by or for the
benefit of the Company.
35
6. MANAGEMENT REPORTS
Neither the Seller nor the Company has commissioned any report from any
third party management consultants during the period of three years
ending on the date of this Agreement.
7. POSSESSION OF DOCUMENTS
All title deeds of the Company and original counterparts of all written
agreements under which the Company enjoys rights or by which the Company
is bound are in the Company's possession and ownership or under its
control.
8. INSIDER CONTRACTS
8.1 The Company is not a party to, nor have the profits or financial
position of the Company during the period of four years ending on the
Accounts Date been affected by, any agreement which is not on arm's
length terms.
8.2 The Company is not a party to any subsisting agreement in which the
Seller, or any Associate of the Seller, or any director of the Company,
or any Associate of any such director, is a party or is otherwise
interested, directly or indirectly, nor has any such agreement been
entered into at any time during the period of four years ending on the
date of this Agreement.
8.3 The Company has not transferred any asset to or received any asset from
the Seller or any Associate of the Seller other than by way of sale for
market value or by way of lawfully declared dividend.
9. EFFECT OF AGREEMENT
The sale of the Shares to the Buyer and the performance by the parties
of their obligations under this Agreement:
9.1 will not result in a breach of, or constitute a default under, any
agreement under which the Company enjoys rights or by which it is bound;
9.2 will not entitle any party to an agreement under which the Company
enjoys rights or by which it is bound to be released from any of that
party's obligations or to terminate or vary its rights or obligations
under that agreement; and
9.3 will not create or accelerate any obligation of the Company.
36
PART 5 - ASSETS
1. OWNERSHIP AND POSSESSION OF ASSETS
1.1 All assets used by the Company in the course of its business as carried
on at the date of this Agreement other than any asset held under any
finance lease, hire purchase and rental or credit sale agreements, are
legally and beneficially owned by the Company free from Encumbrances.
1.2 All of the material tangible assets owned by the Company, or which the
Company has the right to use, are in the possession and ownership or
under the control of the Company.
2. INSURANCE
2.1 Annexed to the Disclosure Letter are copies of all insurance policies
maintained by the Company.
2.2 The Company maintains, and has at all material times maintained,
insurance in respect of all of its material assets of an insurable
nature against fire, accident, theft and damage in amounts representing
their full replacement or reinstatement values, against third party loss
(including by way of employer's liability and public liability
insurance), loss of profits and all other risks required by applicable
law or regulation to be covered by insurance. The Property is insured in
their full reinstatement values for not less than two years' loss of
rent and against third party and public liabilities to an adequate
extent.
2.3 All premiums due on the subsisting insurance policies of the Company
have been duly paid, all other conditions of those policies have been
performed and observed, and, so far as the Seller is aware, there are no
circumstances which might make any policy void or voidable.
2.4 The Company has not been refused insurance during the period of three
years ending on the date of this Agreement.
2.5 The Disclosure Letter contains complete and accurate details of all
insurance claims made by the Company during the period of two years
ending on the date of this Agreement, and so far as the Seller is aware
there are no circumstances which would or might entitle the Company to
make such a claim or which would or might be required under any of the
policies to be notified to the insurers.
3. CONDITION AND MAINTENANCE OF EQUIPMENT
3.1 All office and other equipment owned or used by the Company:
3.1.1 are in good repair and condition (subject to fair wear and
tear); and
3.1.2 have been regularly maintained to a good technical standard and
in accordance with safety regulations usually observed in
relation to equipment of the relevant type, the provisions of
any applicable finance leases and hire
37
purchase, rental, credit sale and other similar agreements and
all applicable safety laws and regulations currently in force.
3.2 Maintenance contracts are in full force and effect in respect of all
material assets of the Company which it is normal or prudent to have
maintained by independent or specialist contractors and in respect of
all assets which the Company is obliged to maintain or repair under any
finance lease or hire purchase, rental, credit sale or other similar
agreement.
3.3 Copies of all service histories and maintenance contracts relating to
office and other equipment owned or used by the Company are annexed to
the Disclosure Letter.
4. LEASED ASSETS
So far as the Seller is aware, no circumstance has arisen, or is likely
to arise, in relation to any asset held by the Company under a finance
lease or a hire purchase, rental, credit sale or other similar agreement
by which the rental payable has been, or is likely to be, increased.
5. CHARGES
All charges in favour of the Company and which require registration
under the Companies Act 1985 have been duly registered.
38
PART 6 - ENVIRONMENTAL MATTERS
1. DEFINITIONS
In this part 6:
"ENVIRONMENT" means all or any of the following media namely the air
and water and land and the medium of air including
(without limitation) the air within buildings and the
air within other natural or man-made structures above
or below ground;
"ENVIRONMENTAL means all national or local statutes, codes or other
LAWS" laws or legislation concerning health and safety or
matters related to pollution or protection of the
environment and all decisions, rules, regulations,
ordinances, orders, notices and directives of the
European Community and other official bodies having
jurisdiction in respect of those matters;
"HAZARDOUS means any substance whether in solid or liquid form or
SUBSTANCE" in the form of a gas or vapour and whether alone or in
combination with any other substance or organism which
is capable of causing harm to human health or welfare
or the Environment.
2. So far as the Seller is aware the Company has at all times carried on
its business in all material respects in compliance with all relevant
Environmental Laws and holds all necessary, current licences and
authorisations and approvals and consents required by Environmental Laws
to enable it lawfully to carry on its business.
3. So far as the Seller is aware the Company in all material respects has
complied with all licences and authorisations and approvals and consents
including (without limitation) any conditions and limitations and
directions imposed on those licences and authorisations and approvals
and consents and any subsequent amendment, alteration and order relating
to them;
4. So far as the Seller is aware no event has occurred or circumstance
exists which entitles any licence and authorisation and approval and
consent referred to in paragraphs 2 and 3 of this part 6, whether in
part or in whole, to be revoked or suspended or amended or varied or
withdrawn or not renewed or which would prevent compliance with any
terms of any licence or authorisation or approval or consent.
5. So far as the Seller is aware, no application by the Company for the
surrender or transfer or variation of the terms of any licence or
authorisation or approval or consent has been refused for any reason.
6. So far as the Seller is aware, neither the Company nor any other person
on behalf of the Company has conducted any environmental inspection or
investigations or studies or audits or tests or reviews or other
analyses in relation to the Company or the Property or the business
carried on at the Property.
39
7. So far as the Seller is aware, the Company has not received any written
notice of any claim under Environmental Laws howsoever arising nor are
the Sellers on notice of any circumstances which may give rise to any
such claims.
40
PART 7 - PROPERTY
1. TITLE
1.1 The Property comprises all the properties owned, occupied or otherwise
used by the Company and it is occupied solely by the Company under lease
or licence.
1.2 The information contained in schedule 4 is complete and accurate.
1.3 The Company has a good title to the Property against which its name
appears in schedule 4.
2. ENCUMBRANCES
2.1 The Property is free from mortgages, debentures, charges, rent charges,
liens or other encumbrances.
2.2 The Property is not subject to outgoings other than business rates,
water rates and insurance premiums, rent and service charges.
2.3 If any disclosure is made in the Disclosure Letter qualifying any of
paragraphs 2.1 and 2.2 of this part 7, all obligations and liabilities
imposed by or arising in relation to any matter so disclosed have been
performed and discharged and no payments in respect of them are
outstanding.
3. PLANNING MATTERS
3.1 So far as the Seller is aware, building regulation consents have been
obtained and planning permission has been obtained or is deemed to have
been granted for the purposes of the Planning Acts with respect to all
development alterations and improvements (if any) to the Property.
3.2 The Company has not received notice of any breach of planning
permissions, orders, regulations, consents and bye-laws applicable to
the Property which it occupies.
4. STATUTORY OBLIGATIONS
The Company has not received notice of any breach applicable statutory
and bye-law requirements with respect to the Property which it occupies.
5. ADVERSE ORDERS
So far as the Seller is aware, there is no requirement relating to the
Property or its use which although not registered in the Register of
Local Land Charges is capable of registration in that Register.
6. CONDITION OF THE PROPERTY
So far as the Seller is aware none of the facilities necessary for the
enjoyment or use of the Property for its current use is enjoyed on terms
entitling any person to terminate or curtail its use.
41
7. LEASEHOLD PROPERTIES
7.1 The Company has paid the rent and not received notice of any breach of
the covenants on the part of the tenant and the conditions contained in
any Lease (which expression in this paragraph 7 includes underleases).
The last demand for rent (or receipt if issued) in relation to the Lease
was unqualified.
7.2 There are no rent reviews in progress under the Lease.
7.3 There is no obligation to reinstate the Property by removing or
dismantling an alteration made to it by the Company or a predecessor in
title.
7.4 The Company has not entered into an agreement with the landlord of the
Property specifying circumstances in which it would be reasonable for
the landlord to withhold its consent to an assignment in accordance with
section 19(1A) Landlord and Tenant Act 1927.
7.5 Other than the Lease, the Company has no contingent liability (as
original or previous tenant or as guarantor) in respect of any lease
granted prior to 1 January 1996 or following an excluded assignment as
defined in the Landlord and Tenant (Covenants) Act 1995.
42
PART 8 - EMPLOYMENT
References in this part 8 to employees include officers and workers.
1. EMPLOYEES AND TERMS OF EMPLOYMENT
1.1 The Disclosure Letter contains complete and accurate details of the
identities, dates of commencement of employment, engagement or
appointment to office, dates of birth, notice periods and basic annual
salaries or fees of all the individuals employed or engaged by the
Company (whether under a contract of service or otherwise).
1.2 Copies of all employment contracts for all individuals employed by the
Company and having a basic annual salary in excess of L30,000 are
annexed to the Disclosure Letter.
1.3 The Disclosure Letter contains complete and accurate details of any
outstanding offer of employment or engagement made to any person by the
Company, and no person has accepted an offer of employment or engagement
by the Company and has not yet started his employment or engagement.
1.4 There are no agreements between the Company and any trade union or other
body representing employees, nor has the Company done any act which may
be construed as recognition of any a trade union or other body, nor have
any requests for recognition, whether pursuant to Schedule A1 of the
Trade Union and Labour Relations (Consolidation) Act 1992, as amended,
or otherwise, been received by the Company, nor are there any works
councils or staff associations or other employee representatives in
place.
1.5 So far as the Seller is aware, in relation to each of the persons
presently employed or engaged by the Company (and so far as relevant to
each person formerly employed or engaged by the Company) the Company has
complied with all obligations imposed on it contractually, or by
Articles of the Treaty of Rome, European Commission Regulations and
Directives or by any statute, regulation or code of conduct relevant to
the relations between it and any or all of its employees and workers or
it and any recognised trade union.
1.6 The Company has complied with all relevant recommendations made by the
Advisory Conciliation and Arbitration Service and with all relevant
awards and declarations made by the Central Arbitration Committee.
1.7 No person now or previously employed or engaged by the Company has or,
so far as the Seller is aware, may in the 9 months immediately following
the date of this Agreement have a right to return to work (whether for
reasons connected with maternity leave, absence by reason of illness or
incapacity or otherwise) or a right to be reinstated or re-engaged by
the Company.
1.8 Copies of all agreements for the provision of consultancy services of or
to the Company and details of the terms applicable to the secondment to
or from the Company of any person are annexed to or (as the case may be)
contained in the Disclosure Letter.
43
1.9 There are no terms of employment or engagement for any person employed
or engaged by the Company which provide that a change in control of the
Company (however change of control may be defined, if at all) shall
entitle the employee or worker to treat the change of control as
amounting to a breach of contract or entitling him to any payment or
benefit whatsoever or entitling him to treat himself as redundant or
otherwise dismissed or released from any obligation.
1.10 The Company has no obligation to make any payment on redundancy in
excess of the statutory redundancy payment, and the Company has not
operated any discretionary practice of making any such excess payments.
1.11 No employee of the Company is subject to a current disciplinary warning,
proceeding or procedure.
1.12 Save as disclosed there are no schemes which provide for benefits other
than statutory benefits to be provided to any employee of the Company
during any period of sickness or disablement.
2. BONUS, PROFIT SHARING AND SHARE OPTION SCHEMES
2.1 There are no schemes in operation by or in relation to the Company under
which any employee of the Company is entitled to any remuneration
calculated by reference to the whole or part of the turnover, profits or
sales of the Company or to any other form of bonus or commission.
2.2 There are no agents or distributors of the Company and there are no
persons, firms or companies whether in the United Kingdom or elsewhere
with whom formal or informal arrangements exist or have existed
concerning the manufacture, sale, distribution, hire, lease or promotion
of any services connected with the Company, and no such agent or
distributor has any right to any indemnity or compensation whatsoever
upon termination of any arrangement in connection with the Company.
3. CHANGES IN REMUNERATION
3.1 Since the Accounts Date (other than as required by law) no change has
been made in the rate of remuneration or the emoluments or pension
benefits of any officer, ex-officer or senior executive of the Company
(a senior executive being a person in receipt of remuneration in excess
of L30,000 per annum) and no change has been made in the terms of
employment or engagement of any officer or senior executive.
3.2 No amounts due to or in respect of any past or present employee of the
Company (including taxes, National Insurance contributions, pensions
contributions and any other levies) are in arrears or unpaid.
3.3 No negotiations for any increase in the remuneration or benefits of any
employee of the Company are current.
3.4 No proposal, assurance or commitment has been communicated to any
employee of the Company regarding any change to his terms of employment
or engagement or working conditions.
44
4. TERMINATION OF CONTRACTS OF EMPLOYMENT OR ENGAGEMENT
4.1 All subsisting contracts of service and all contracts for services with
any individual to which the Company is a party are determinable on three
months' notice or less without giving rise to a claim for damages or
compensation, other than a statutory redundancy payment or statutory
compensation for unfair dismissal.
4.2 No employee of or consultant to the Company:
4.2.1 has given or received written notice terminating his employment
or engagement which has not yet expired;
4.2.2 will be entitled to give notice, receive any payment or benefit,
treat himself as redundant or otherwise dismissed, claim for
breach of contract or claim to be released from any obligation
as a result of the sale of the Shares to the Buyer; or
4.2.3 has, so far as the Seller is aware, indicated an intention to
terminate his employment or engagement as a result of the sale
of the Shares to the Buyer.
5. INDUSTRIAL DISPUTES, EMPLOYEE AND OTHER CLAIMS
5.1 There is no outstanding or threatened claim, dispute, legal proceeding
or grievance against the Company by any person who is now or has been
within the six months prior to Completion employed or engaged by, or an
officer of, the Company, or any dispute between the Company and a
material number or class of its employees, and, so far as the Seller is
aware, there are no circumstances which might give rise to any such
claim, dispute, legal proceeding or grievance.
5.2 So far as the Seller is aware no enquiry into or investigation of the
Company is pending or has been made or threatened by the Commission for
Racial Equality, the Equal Opportunities Commission, any health and
safety enforcement body or any other similar authority, and there are no
circumstances which might give rise to any such enquiry or
investigation.
5.3 So far as the Seller is aware during the period of twelve months ending
on the date of this Agreement, the Company has not given or been
required to give notice of any redundancies to the relevant Secretary of
State or started consultations with any trade union or employee
representatives under Chapter II, Part IV of the Trade Union and Labour
Relations (Consolidation) Act 1992 and the Company has not failed to
comply with any obligation under that Act.
5.4 There is no actual or threatened protected disclosure under the Public
Interest Disclosure Act 1998, and the Seller is not aware of any
circumstances which might give rise to any such protected disclosure.
5.5 There is no requirement for a work permit in relation to any employee of
the Company, and the provisions of the Asylum and Immigration Act 1996
have been complied with in respect of every employee of the Company.
45
6. LOANS TO EMPLOYEES OR WORKERS
The Company has not made any loan or advance, or provided any other form
of financial assistance, to any past or present employee which is still
outstanding.
46
PART 9 - PENSIONS
1. DEFINITIONS
In this part 9:
"APPROVED" means approved by the Inland Revenue for the
purposes of Chapter IV of Part XIV of the Taxes
Act and a reference to "APPROVAL" is to be
construed accordingly;
"DISCLOSED SCHEMES" means the Scottish Mutual Stakeholder Scheme and
the National Mutual Group Personal Pension Plan
"EMPLOYEE" means, for the purposes of this part 9, a director
or employee or former employee or former director
of the Company;
"PENSION SCHEME" means any arrangement (including any closed,
funded, unfunded, approved and unapproved
arrangement) which provides Relevant Benefits and
to which the Company is liable to contribute (or
to whom it would be liable to pay contributions
but for the current contributions holiday) or
which is sponsored by the Company;
"PERSONAL PLAN" means the personal pension arrangement in place
for Jenny Lawler, known as the Scottish Equitable
Personal Plan;
"RELEVANT BENEFITS" means any pension, lump sum, gratuity or other
like benefit given or to be given on retirement or
on death or in anticipation of retirement of an
Employee.
2. GENERAL PENSION WARRANTIES
2.1 Save for the Disclosed Schemes and the Personal Plan there is not in
operation, and no proposal has been announced to enter into or
establish, any Pension Scheme, any agreement, arrangement, custom or
practice (whether Approved or not and whether funded or otherwise) for
the payment of, or payment of a contribution towards, any Relevant
Benefits for the benefit of an Employee or an Employee's dependants.
2.2 Save for the Disclosed Schemes and the Personal Plan the Company has not
ever participated in, or contributed to, any other Pension Scheme.
2.3 The Company has complied with its obligations (if any) to facilitate
access to a stakeholder pension scheme in accordance with section 3
Welfare Reform and Pensions Act 1999.
3. OBLIGATIONS TO EMPLOYEES
3.1 All material particulars of the Disclosed Schemes have been disclosed to
the Buyer including complete and accurate copies of:
3.1.1 the current explanatory booklet issued to members of the
Disclosed Schemes;
47
3.1.2 all announcements to members of the Disclosed Schemes other than
announcements which have been fully incorporated into the
document referred to in paragraph 3.1.1 of this part 9.
3.2 No undertaking or assurance has been given to any Employee as to the
continuation of the Disclosed Schemes or any alteration to or exception
from its terms or the increase or improvement of benefits.
3.3 No discretion or power has been exercised (or practice followed) under
the Disclosed Schemes in relation to any of the Employees to:
3.3.1 augment benefits (whether in relation to early retirement,
pension increases or otherwise);
3.3.2 admit to membership an Employee who would not otherwise have
been eligible for admission to membership;
3.3.3 admit to membership an Employee on terms which provided for or
envisaged the payment of a transfer value or a transfer of
assets from another scheme to the Disclosed Schemes in a case in
which the payment or transfer has not been made or has not been
made in full;
3.3.4 pay a contribution which the Company was or is not obliged to
pay under the terms of the Disclosed Schemes.
4. OTHER OBLIGATIONS
4.1 No Employee has been:
4.1.1 excluded from membership of any Disclosed Scheme; or
4.1.2 provided with different benefits under a Disclosed Scheme
because of his or her sex or because he or she is or was employed on a
part-time basis.
4.2 All employer contributions and, so far as the Seller is aware, all
member contributions due to the Disclosed Schemes have been paid to the
trustees of the scheme in accordance with the schedule of contributions
or payments schedule (as required by, and defined in, sections 58 and 87
Pensions Act 1995) and the Company has complied with all its obligations
in relation to the Disclosed Schemes.
4.3 So far as the Seller is aware there is no civil, criminal, arbitration
or other proceeding or dispute (which includes, without limitation,
investigations by OPRA or OPAS or the Pensions Ombudsman) concerning the
Disclosed Schemes by or against the trustees, managers or administrators
of the Disclosed Schemes, the Seller, the Company or any person whom any
of them is or may be liable to indemnify or compensate and, so far as
the Seller is aware, none is pending or threatened, and, so far as the
Seller is aware, there are no circumstances which might give rise to a
proceeding or dispute of that type.
48
5. STATUS OF DISCLOSED SCHEMES
The Disclosed Schemes are Approved and, so far as the Seller is aware,
there is no matter which might give the Inland Revenue reason to
withdraw Approval.
49
PART 10 - INTELLECTUAL PROPERTY
1. DEFINITIONS
In this part 10:
"APPLICATIONS" means applications for Registered Intellectual
Property;
"BUSINESS INTELLECTUAL means the Intellectual Property which is used
PROPERTY" in connection with the business of the
Company;
"INTELLECTUAL means all intellectual property rights,
PROPERTY" including (without limitation) patents,
supplementary protection certificates, petty
patents, utility models, Trade Marks, database
rights, rights in designs, copyrights and
topography rights (whether or not any of these
rights are registered, and including
applications and the right to apply for
registration of any such rights) and all
inventions, know-how, trade secrets,
techniques and confidential information,
customer and supplier lists and other
proprietary knowledge and information, and all
rights and forms of protection of a similar
nature or having equivalent or similar effect
to any of these which may subsist anywhere in
the world, in each case for their full term,
and together with any renewals or extensions;
"LICENCE" means any licence, permission or consent in
respect of the use of any Intellectual
Property (including, without limitation, any
unwritten and/or informal licensing
arrangement) and any arrangement of which any
licence, permission or consent forms part;
"REGISTERED INTELLECTUAL means patents, certificates of addition,
PROPERTY" supplementary certificates of addition,
supplementary protection certificates, petty
patents, utility models, registered
copyrights, registered trade marks, domain
names, registered designs, and all other
registered intellectual or industrial property
rights in any part of the world; and
"TRADE MARKS" business names, domain names,
registered and unregistered trade marks and
applications for registration of any of the
above.
2. OWNERSHIP
2.1 The Company is the sole legal and beneficial owner free from all
Encumbrances of all Business Intellectual Property or (as the case may
be) the Company is validly licensed under a Licence to use any Business
Intellectual Property which it uses.
50
2.2 So far as the Seller is aware, nothing has been done or omitted to be
done which may affect adversely the reputation of the Trade Marks used
by the Company.
2.3 So far as the Seller is aware, all moral rights subsisting in relation
to Business Intellectual Property have been irrevocably and
unconditionally waived.
2.4 All of the Trade Marks and all of the Registered Intellectual Property
and Applications which are owned by the Company or are proceeding in the
name of the Company or in the joint names of the Company and another
party(ies) are listed in the Disclosure Letter. The Company is the sole
legal and beneficial owner of (and of the subject matter of) all
Registered Intellectual Property and Applications so owned or
proceeding, and all associated rights, and of the goodwill symbolised by
the Trade Marks, in each case whether or not so listed.
2.5 All of the Software (as defined in part 11 of this schedule), in which,
or in relation to which the Company holds, owns or exploits any
Intellectual Property is listed in the Disclosure Letter, except where
that Software is freely commercially available at a total cost to the
Company not exceeding L500.
3. MAINTENANCE
3.1 All documents material to the right, title and interest of the Company
to the Business Intellectual Property and to the Licences of Business
Intellectual Property granted to the Company and all documents and
materials necessary for the prosecution or maintenance (as applicable)
of all applications and regulations in relation to the Business
Intellectual Property form part of the records or materials in the
possession and ownership or under the control of the Company.
3.2 So far as the Seller is aware all reasonable steps have been taken for
the diligent maintenance and protection of the Business Intellectual
Property. All application and renewal fees and other costs and charges
in relation to the maintenance of all registrations and the prosecution
of all applications in relation to the Business Intellectual Property
owned by the Company and all other payments due and payable by the
Company in respect of the Business Intellectual Property owned by the
Company have been paid at the due time.
3.3 The Company has not received an adverse opinion, whether from any
registry concerned or from any of its advisers, in relation to any
application for registration of Business Intellectual Property.
4. ADEQUACY OF RIGHTS
4.1 So far as the Seller is aware, there is no Intellectual Property or
Licence, the loss or termination or expiration of which would have a
material adverse effect on the operation of the business of the Company,
and so far as the Seller is aware, no such loss, termination or
expiration is likely to occur during the period of 12 months starting on
the date of this Agreement.
4.2 So far as the Seller is aware the sale of the Shares to the Buyer and
the performance by the parties of their obligations under this Agreement
will not entitle any party to
51
any Licence with the Company to change the terms on which Business
Intellectual Property is used or held by the Company or to terminate or
vary that party's rights under the relevant Licence, and will not create
or accelerate any obligation of the Company or cause or require the
Company to lose or dispose of any Business Intellectual Property or any
interest in any Business Intellectual Property.
5. DEALINGS AND LICENCES
5.1 So far as the Seller is aware, the Company has not authorised or
otherwise permitted, expressly or by implication, any use whatsoever of
Business Intellectual Property nor granted to any third party any right
or interest in respect of the Business Intellectual Property other than
under a Licence, full details of which are contained in the Disclosure
Letter.
5.2 All Licences and other agreements in relation to Intellectual Property
to which the Company is a party or enjoys rights (whether as licensor or
licensee or otherwise) and which are material to the business of the
Company are annexed to the Disclosure Letter or details of them
(including as to term, territory, restriction on scope of rights granted
and on sub-licensing and assignment) are contained in the Disclosure
Letter.
6. INFRINGEMENTS
6.1 The Company has not received, in the period of three years ending on the
date of this agreement, any notice from a third party that activities,
products, services or processes of the Company (or any licensee under
any Licence granted by the Company) or the Business Intellectual
Property infringe any Intellectual Property of a third party or involve
or have involved the unlicensed use of a third party's confidential
information or give or have given rise to liability to pay compensation.
6.2 So far as the Seller is aware in the three years ending on the date of
this agreement no third party has made any unauthorised use or
exploitation of any Business Intellectual Property or has infringed any
Business Intellectual Property or other Intellectual Property in which
the Company has any interest, and, so far as the Seller is aware, no
third party or competent authority has during such three year period
made any claim, challenge or opposition against the Company in relation
to the Business Intellectual Property or other such Intellectual
Property.
7. USE OF NAME
The Company does not trade or carry on business under or use any name or
style other than its corporate name.
8. CONFIDENTIAL INFORMATION AND KNOW-HOW
8.1 So far as the Seller is aware the Company has at all times kept
confidential all confidential information and know-how (whether
technical, financial or commercial, and including, without limitation,
techniques, instruction manuals, formulae, trade secrets and information
in respect of the Company's agents, suppliers and customers and any
other person who has had dealings with it) and any other information
relating
52
to the business or affairs of the Company, the disclosure of which might
cause loss or damage to or adversely affect the Company.
8.2 The Company enforces and operates procedures which maintain the
confidentiality of its confidential information and know-how. So far as
the Seller is aware, such confidentiality has not at any time been
breached.
8.3 So far as the Seller is aware, the Company has not disclosed (except in
the ordinary course of business and subject to a binding confidentiality
agreement, details of which are contained in the Disclosure Letter) any
of its confidential information or know-how.
9. CREATION OF INTELLECTUAL PROPERTY
9.1 All parties (whether individual, partnership or limited company)
retained, commissioned, employed or otherwise engaged by the Company
from time to time and who, in the course of such engagement created,
discovered, conceived or developed work in which Intellectual Property
subsists or arose or might reasonably have been expected to do so are
bound by agreements with the Company whereby all such Intellectual
Property vests in or is licensed to the Company. No such party has made
any claim against the Company for any compensation or remuneration in
relation to such Intellectual Property, whether under section 40 Patents
Act 1977 or equivalent legislation in the world or otherwise.
10. CLAIMS
10.1 No claims, disputes or proceedings in respect of Business Intellectual
Property have been settled in the period of three years ending on the
date of this Agreement or, so far as the Seller is aware, are current,
pending or threatened.
10.2 There are no circumstances known to the Seller which might have a
material adverse effect on the Company's ownership of, or its ability to
use, the Business Intellectual Property.
53
PART 11 - INFORMATION TECHNOLOGY
1. DEFINITIONS
In this part 11:
"HARDWARE" means computer, telecommunications and network equipment,
including without limitation consumables and peripheral
devices;
"SERVICES" means any services relating to the Systems or to any other
aspect of the Company's data processing or data transfer
requirements, including without limitation facilities
management, bureau services, hardware maintenance, software
development or support, consultancy, source code deposit,
recovery and network services;
"SOFTWARE" means computer programs in both source and object code form,
including modules, routines and sub-routines, and source and
other preparatory materials relating to those programs
including without limitation, user requirements, functional
specifications and programming specifications, ideas,
principles, programming languages, algorithms, flow charts,
logic, logic diagrams, orthographic representations, file
structures, coding sheets, coding, and also including any
manuals or other documentation relating to those programs
and computer generated works, in each case as any of them
has been modified or updated from time to time; and
"SYSTEMS" means the Hardware and the Software used by the Company.
2. INFORMATION TECHNOLOGY
2.1 All of the Hardware comprised within the Systems is owned by the Company
or the Company is entitled to use such Hardware.
2.2 No person other than an employee of the Company is entitled to have
access to or operate any Systems other than any person authorised to
support and/or maintain the Systems.
2.3 All Services provided to the Company enable the Company to carry on its
business as carried on at the date of this Agreement. Without
limitation, and so far as the Seller is aware the Services have been and
are provided to the Company by suitably qualified and skilled personnel.
2.4 The Company has full and unrestricted access to and use of the Systems,
and no third party agreements or consents (other than agreements annexed
to the Disclosure Letter) are required to enable the Company to continue
such access and use following the date of this Agreement.
2.5 The Company has not outsourced any of its information technology
operations.
54
2.6 All data processed using the Systems and the Services has been regularly
backed up in accordance with good industry practice.
2.7 So far as the Seller is aware, the Systems are able to process all
functions and transactions denominated in each currency in which the
Company does business including, without limitation, the euro and
sterling.
55
PART 12 -- TAXATION
1. GENERAL
1.1 All returns, computations, information, accounts and notices which are
or have been required to be made or given by the Company for any
Taxation purpose:
1.1.1 have been made or given within the requisite periods and on a
proper basis and were when made and so far as the Seller is
aware remain true and accurate; and
1.1.2 none of them is, or, so far as the Seller is aware, is likely to
be, the subject of any disputes with the Inland Revenue, Customs
& Excise or other Taxation Authority.
1.2 The Company is not, and has never been, involved in any dispute with or
investigation, audit or discovery (other than routine enquiries or
questions) by any Taxation Authority and, so far as the Seller is aware,
no such dispute, investigation, audit or discovery is pending, planned,
or threatened.
1.3 No accounting period of the Company for corporation tax purposes has
ended, and the Company has not made any distribution, since the Accounts
Date.
1.4 The Company:
1.4.1 has duly paid all Taxation which it has become liable to pay
within the appropriate time limits for doing so;
1.4.2 has duly deducted and accounted for all Taxation due to have
been deducted and accounted for by it; and
1.4.3 is not and has not in the two years prior to Completion been
liable to pay interest on or penalties in respect of any unpaid
Taxation or default in respect of any Taxation matter.
1.5 The Company is not nor so far as the Seller is aware is it likely to
become liable to pay, or make reimbursement or indemnity in respect of,
any Taxation (or amounts corresponding to Taxation) in consequence of
the failure by any other person to discharge that Taxation within any
specified period (including without limitation liability under sections
767A, 767AA and 777 (8) ICTA 1988, sections 189 and 190 TCGA, where that
Taxation relates to a profit, income or gain, transaction, event,
omission or circumstance arising, occurring or deemed to arise or occur
(whether wholly or partly) before the date of Completion.
1.6 No Taxation Authority has agreed to operate any special arrangement
(being an arrangement not based on a strict and detailed application of
the relevant legislation) in relation to the Taxation affairs of the
Company; the Company has not taken any action which so far as the Seller
is aware would or might alter, prejudice or in any way disturb any such
arrangement or agreement which it has negotiated with any
56
Taxation Authority nor will the sale of the Shares by the Seller
pursuant to this Agreement have such an effect.
2. EMPLOYMENT
2.1 The Company has complied with all applicable regulations made for the
purposes of PAYE and national insurance contributions which it is liable
to comply with in accordance with Taxation legislation and without
limitation:
2.1.1 has deducted Taxation as required by law from all payments made
to its employees or former employees for which the Company is
liable to account;
2.1.2 has accounted to the appropriate Taxation Authorities for all
Taxation so deducted and for all Taxation chargeable in respect
of benefits provided for its employees or former employees for
which the Company is liable to account; and
2.1.3 has kept and used complete, accurate and up-to-date records and
other documents as appropriate or required for those purposes.
2.2 The Company is not under an obligation to pay nor has it agreed to pay
any compensation for loss of office or any gratuitous payment not fully
deductible in computing its income for the purposes of corporation tax.
2.3 The Company does not participate in or operate any give as you earn
scheme under section 202 ICTA 1988 or any profit-related pay scheme.
2.4 The Disclosure Letter sets out with express reference to this warranty
full details of all current dispensations and notices granted by the
Inland Revenue relating to the Company under sections 144 and 166 ICTA
1988 and full details of any annual settlement arrangements.
2.5 The Disclosure Letter sets out with express reference to this warranty
full details of any share option or share incentive schemes operated by
the Company (or the Seller or any company under the control of the
Seller in respect of the Company's employees), any such schemes have
been operated in accordance with their rules and all applicable
statutory requirements have been complied with in respect of any Inland
Revenue approved scheme.
3. VAT
3.1 The Company is a taxable person and is registered for the purposes of
VAT and its registration is not subject to any conditions imposed by or
agreed with Customs & Excise. The Company is not (nor are there
circumstances by virtue of which it may become) under a duty to make
monthly payments on account under the Value Added Tax (Payments on
Account) Order 1993.
3.2 The Company has complied at all times with the statutory requirements,
regulations, notices, orders, directions or conditions relating to VAT,
including the terms of any agreement made with HM Customs & Excise. The
Company has obtained,
57
maintained and preserved complete, accurate and up to date records as
required for the purposes of VAT legislation.
3.3 The Company is not, nor has it ever been, liable to any penalty or
surcharge, or to the operation of any penal provision under any
enactment relating to VAT. The Company has not been required by the
Commissioners of Customs & Excise to give security under Schedule 11
VATA or otherwise.
3.4 The Company is not nor has it been treated for VAT purposes as a member
of any group of companies and there has been no transfer of a business
as a going concern in respect of which the Company could become, or has
at any time been, liable under section 44 VATA 1994 or any supply of
goods or services by any company in respect of which section 43 (1) VATA
1994 is disapplied by sub-section (1AA) of that section.
3.5 No transaction or arrangement has been effected as a result of which the
Company is or may be liable for any VAT chargeable against, or as agent
for, any other person.
3.6 The Company has not made a claim for bad debt relief under section 36
VATA, and so far as the Seller is aware no circumstances exist whereby
such a claim could be made as at Completion.
3.7 All supplies made by the Company in the current prescribed accounting
period for VAT purposes are taxable and not exempt supplies.
3.8 The Company has no outstanding entitlement to make any claim for
repayment supplement or recovery of overpaid VAT under sections 78 to 80
VATA 1994.
3.9 The Disclosure Letter contains full particulars of all elections to
waive exemption made or agreed to be made under Schedule 10 VATA 1994 by
(i) the Company or (ii) any person in relation to which the Company is a
relevant associate as defined in paragraph 3 (7) of that Schedule and in
respect of each election made:
3.9.1 all things necessary for the election to have effect have been
done and in particular any necessary notification has been given
within the applicable time limit under paragraph 3 (6) of that
Schedule and any necessary permission under paragraph 3 (9) of
that Schedule has been properly obtained;
3.9.2 a copy of the notification and of any permission and of any
other relevant correspondence with HM Customs & Excise in
connection with the election are annexed to the Disclosure
Letter; and
3.9.3 the land in relation to which the election has effect was
accurately described in the notification of the election,
and in no case has the Company charged VAT which is not properly
chargeable because the Company has not made an election to waive
exemption having effect in relation to the relevant supply.
58
3.10 There is no land or building in which the Company has an interest and in
relation to which any exempt supply has been made or agreed to be made
by it such that it could be required to obtain permission under
paragraph 3 (9) of Schedule 10 to VATA before making an election to
waive exemption and so far as the Seller is aware there is no land or
building in which the Company has an interest where any election to
waive exemption is or may become ineffective by virtue of paragraph 2
(3AA) of that Schedule.
3.11 The Company is not bound and has not agreed to become bound by any
lease, tenancy or licence in the case of which under its terms or by
statute the Company is or could become liable to pay VAT as a result of
the making of an election to waive exemption under Schedule 10 to VATA.
3.12 The Company does not have any interest in any new building or civil
engineering work which would be excluded from exemption by item 1 of
group 1 Schedule 9 VATA, nor has it engaged in any transaction which
could be the subject of a self supply charge to VAT.
3.13 The Company has no interest in any assets treated as capital items under
Part XV of the Value Added Tax Regulations 1995.
3.14 No transactions or arrangements involving the Company have taken place
or are in existence which are such that a direction has been or could be
made under paragraph 1 of Schedule 6 or paragraph 1 of Schedule 7 VATA
(supplies between connected parties).
4. REAL PROPERTY
4.1 The Company has not at any time acquired any leasehold property upon
such terms that the grantor of the lease could be deemed to have
foregone any premium or additional premium, nor taken any assignment of
a lease granted upon such terms.
4.2 The Company has not entered into any transactions to which the
provisions of sections 34, 35, 36, 779 or 780 ICTA 1988 (premiums and
leaseback or re-conveyance of land) have been or could be applied.
4.3 The Company has not been a party to or otherwise involved in any
transaction to which the provisions of section 776 and/or section 777
ICTA 1988 have been or could be applied, or has acquired any land or any
property deriving its value from land with the sole or main object of
realising a gain on the disposal of the land.
5. CHARGEABLE GAINS
5.1 The book value of each of the capital assets of the Company in or
adopted for the purposes of the Accounts of the Company does not exceed
the amount deductible under section 38 TCGA (excluding any indexation
allowance), and the Company has all necessary records to calculate any
liability to corporation tax on capital gains in respect of each such
capital asset pursuant to a hypothetical disposal of each such capital
asset at Completion.
59
5.2 No asset owned or agreed to be acquired by the Company (other than plant
and machinery in respect of which it is entitled to capital allowances)
is a wasting asset within section 44 TCGA.
5.3 The Company has not made any claims or elections under sections 23, 24,
152 to 158, 161, 162, 165, 175 or 247 TCGA which would affect the amount
of the chargeable gain or allowable loss which would but for such claim
arise on a disposal of any of its assets.
5.4 No chargeable gain will accrue to the Company on the disposal of any
debt owed to it.
5.5 The Company is not entitled to any capital loss to which the provisions
of section 18 (3) TCGA (connected persons) are applicable.
5.6 The Company has never disposed of or acquired any asset in circumstances
such that the provisions of sections 17 or 19 TCGA could apply to that
disposal or acquisition (transactions not at arm's length).
5.7 There has not accrued, nor so far as the Seller is aware are there
circumstances which could give rise to, any gain in respect of which the
Company may be liable to corporation tax on chargeable gains by virtue
of the provisions of sections 13 or 87 TCGA (non-resident companies or
trusts).
5.8 The Company has not been a party to or otherwise involved in any
transaction to which sections 29 to 34 TCGA have been or could be
applied (value shifting).
5.9 The Company has not issued any share capital to which the provisions of
section 249 ICTA 1988 or section 142 TCGA (stock dividends) have been or
could be applied, nor does it own any such share capital.
5.10 The Company has not been a party to any transaction to which the
provisions of sections 176 or 177 TCGA (depreciatory transactions) 125
TCGA (transfers at an undervalue) or 282 TCGA (gifts) have been or could
be applied.
5.11 The Company has not been a party to or otherwise involved in any
transaction to which sections 135 to 138 TCGA have been or could be
applied.
6. GROUPS
6.1 The Company is not and has not at any time been a member of a group of
companies for the purposes of corporation tax, including corporation tax
on chargeable gains.
6.2 Neither this Agreement nor Completion will result in any profit or gain
being deemed to accrue to the Company for Taxation purposes, pursuant to
section 179 TCGA.
7. CLOSE COMPANIES
7.1 The Company is and has at all times been a close company as defined in
section 414 ICTA 1988 but is not and has never been a close
investment-holding company as defined in section 13A ICTA 1988.
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7.2 No distribution within section 418 ICTA 1988 (payments etc to
participators and associates) has been made by the Company.
7.3 No loan or advance or debt within section 419 ICTA 1988 (loans to
participators etc) or section 422 ICTA 1988 (extension of Section 419 to
loans by controlled companies) has been incurred, made or agreed to be
made by the Company, and the Company has not since the Accounts Date
released or written off the whole or part of the debt in respect of any
such loan or advance.
8. CAPITAL ALLOWANCES
8.1 No balancing charge under the Capital Allowances Act 2001 ("CAA") (or
other legislation relating to any capital allowances) would be made on
the Company on the disposal of any pool of assets (that is to say all
those assets expenditure relating to which would be taken into account
in computing whether a balancing charge would arise on a disposal of any
other of those assets) or of any asset not in such a pool, on the
assumption that the disposals were made for a consideration equal to the
book value shown in or adopted for the purpose of the Accounts for the
assets in the pool or (as the case may be) for the asset.
8.2 The Disclosure Letter gives full details of all disclaimers of capital
allowances and writing down allowances on plant and machinery and of any
reduction in initial allowances on industrial or agricultural buildings.
8.3 Since incorporation, the Company has not done, omitted to do, agreed to
do or permitted to be done, any act as a result of which there may be
made a balancing charge, or any disposal value may fall to be brought
into account or there may be any recovery of excess relief under the CAA
(or any other legislation relating to any capital allowances).
8.4 Sections 196-199 CAA do not apply to any fixtures acquired by the
Company for a capital sum so as to determine the disposal value of the
seller of the fixture.
8.5 No asset, expenditure on which the Company has qualified for a capital
allowance under Part 3 CAA, has at any time since that expenditure was
incurred, been used otherwise than as an industrial building or
structure.
9. FOREIGN
9.1 The Company:
9.1.1 has never been resident for Tax purposes in any jurisdiction
other than the United Kingdom;
9.1.2 is not, nor has it within the past six years been, a dual
resident company within the meaning of section 404 (4) ICTA
1988.
9.2 The Company has not been a party to any transaction to which the
provisions of sections 135 to 138 Finance Act 1993 (exchange gains and
losses) have been or could be applied.
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9.3 The Company has not received or become entitled to any income which is
"unremittable income" within the meaning of section 584 ICTA 1988 , nor
has any gain accrued to the Company to which the provisions of section
279 TCGA could apply and the Company has made no transfer to which
section 723 ICTA 1988 could apply.
9.4 The Company has not entered into any transaction or agreed to carry out
any transaction which is, or would be, unlawful under sections 765 to
767 ICTA 1988. Details of any special consents granted under section 765
are contained in the Disclosure Letter, all conditions attached to such
consents have been complied with and such transactions were carried out
as described in the application for such consent.
9.5 No circumstances have occurred which could give rise to a liability on
the Company under section 132 Finance Act 1988 or sections 185 TCGA nor
has the Company been party to any election under section 187 TCGA
(deferral of gains tax on emigration of subsidiary).
9.6 The Company has not ceased to be resident in the United Kingdom without
previously satisfying the requirements of section 130(2) and (3) Finance
Act 1988 (full particulars of the satisfaction of those requirements
being contained in the Disclosure Letter) and there are no circumstances
by reason of which the Company could be liable to a penalty under
section 131 Finance Act 1988 or be presumed by virtue of subsection (4)
of that section to be so liable.
9.7 The Company is not liable to account for income tax under section 78
Taxes Management Act 1970, section 126 FA 1995, section 42A ICTA 1988 or
Part IV Chapter VIIA ICTA 1988 (method of charging non-residents) nor
has it in the last six years received any such assessment or incurred
any such liability.
9.8 The Company has not received, nor is it entitled to receive, foreign
loan interest on which double taxation relief will or may be restricted
under the provisions of section 798 ICTA 1988.
9.9 No transactions or arrangements involving the Company have taken place
or are in existence which are such that the provisions of section 770,
770A or Schedule 28 AA ICTA 1988 have been or could be applied thereto.
The Company is not nor has it been, involved in any other enquiry in any
jurisdiction in relation to the adjustment of profits of associated
enterprises for Taxation purposes.
9.10 The Company does not have, and has at no time within the last six years
had, an interest in a controlled foreign company as defined in Chapter
IV Part XVII ICTA 1988 or a material interest in an offshore fund as
defined in section 759 ICTA 1988.
10. TAX AVOIDANCE
10.1 The Company has not entered into any arrangement to which the provisions
of sections 399, 729 to 746 or 774 to 787 ICTA 1988 have been or could
be applied.
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10.2 The Company has not been a party to any transaction, scheme or
arrangement to which the provisions of sections 139, 140A to 140C TCGA
or sections 703 to 709 ICTA 1988 could apply, other than transactions in
respect of which all necessary clearances have been obtained on the
basis of full and accurate disclosure to the Inland Revenue of all
material facts and considerations material to be known to the Inland
Revenue.
10.3 Any such consent or clearance as is mentioned in paragraph 10.2 above is
valid and effective and any transaction for which such consent or
clearance has previously been obtained has been carried into effect (if
at all) only in accordance with the terms of the relative application
and consent or clearance.
10.4 The Company has not entered into any transaction or series of
transactions, scheme or arrangement containing artificial steps or
stages having no commercial purpose of which the main purpose, or one of
the main purposes, was the avoidance of a Taxation liability.
11. INHERITANCE TAX
11.1 The Company is not liable, and there are no circumstances in existence
as a result of which it may become liable, to be assessed to inheritance
tax as donor or donee of any gift, or transferor or transferee of value
and there are no other circumstances by reason of which any liability in
respect of inheritance tax has arisen or could arise, so far as the
Seller is aware, in the Company.
11.2 No circumstances exist under which any power within section 212
Inheritance Tax Act 1984 could be exercised in relation to, and there is
no Inland Revenue charge within the meaning of section 237 Inheritance
Tax Act 1984 attaching to or over, any shares or securities in or assets
of the Company and so far as the Seller is aware no circumstances exist
which could lead to any such charge arising in the future.
12. STAMP TAXES
12.1 There are no circumstances or transactions to which the Company is, or
has been, a party which may result in the Company becoming liable to or
accountable for stamp duty reserve tax or any penalty in respect of such
stamp duty reserve tax.
12.2 All documents to which the Company is a party immediately prior to
Completion and which would be required to be stamped in order to prove,
in a court in England and Wales, the title of the Company to any asset
owned or possessed by it are in the United Kingdom and have been duly
stamped.
12.3 The Company has not made any claim for relief or exemption under section
42 Finance Act 1930 or under section 151 FA 1995 in the past six years.
13. LOANS, INTEREST AND MISCELLANEOUS
13.1 No securities or equity notes (within the meaning of section 254 (1) and
section 209 (9) respectively ICTA 1988 ) issued by the Company and
remaining in issue at the date of this Agreement were issued in such
circumstances that the interest payable on
63
them falls or has at any time fallen to be treated as a distribution
under section 209 ICTA 1988.
13.2 No rents, interest, annual payments, or other sums of an income nature,
paid or payable by the Company, or which the Company is under an
obligation to pay in the future, are or may be wholly or partially
disallowable as deductions or charges in computing profits or against
profits for the purposes of corporation tax by reason of the provisions
of sections 74, 79, 79A, 125, 338, 339, 577, 577A, 779 to 784 or 787
ICTA 1988, Chapter II Part IV Finance Act 1996 or otherwise.
13.3 The Company has not at any time issued relevant discounted securities
within Schedule 13 Finance Act 1996 or any deep discount securities,
deep gain securities, qualifying corporate bonds or convertible
securities within Schedules 4 and 11 ICTA 1988, section 117 TCGA and
section 56 of and Schedule 10 to the Finance Act 1990 respectively.
13.4 All interest, discounts and premiums payable by the Company in respect
of its loan relationships within the meaning of Chapter II of Part IV of
the Finance Act 1996 are capable of being brought into account by the
Company as a debit for the purposes of that Chapter as and to the extent
that they are from time to time recognised in the Company's accounts
(assuming that the accounting policies and methods adopted for the
purpose of the Accounts continue to be so adopted).
13.5 No claims for relief from income tax have been made in respect of shares
in the capital of the Company under the Enterprise Investment Scheme or
the Business Expansion Scheme.
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SCHEDULE 3
TAX COVENANT
1. DEFINITIONS AND INTERPRETATION
1.1 In this schedule the following words and expressions shall have the
following meanings unless the context requires otherwise:
"EVENT" includes any act, omission, arrangement,
transaction (including the entering into this
agreement), Completion, the Company ceasing or
having ceased to be a member of any group or
associated with any other person for any Tax
purposes, any change in the residence of any
person, the winding up or dissolution of any
person and the death of any individual;
"RELIEF" includes any loss, relief, exemption,
allowance, deduction, credit or set-off in
respect of Tax or relevant to the computation
of Tax and any right to repayment of Tax and:
any reference to the "use" or "set-off" of
Relief shall be construed accordingly;
any reference to the "loss" of Relief includes
the absence, non-existence, reduction or
cancellation of any such Relief or such Relief
being wholly or partly unavailable; and
any reference to a "right to repayment of Tax"
includes any right to repayment supplement or
interest or other similar payment in respect
of Tax;
"SELLER'S TAX LIABILITY" means a liability of the Seller to make a
payment pursuant to paragraph 2 of this
Schedule or pursuant to a breach of any of the
Tax Warranties;
"TAXATION" OR "TAX" includes all forms of taxation and all duties,
levies, withholdings, deductions, charges in
the nature of taxation and imposts in the
nature of taxation imposed in the United
Kingdom or elsewhere including, but not
limited to:
(a) in the United Kingdom, corporation tax,
income tax (including income tax to which
the Pay as You Earn System applies),
advance corporation tax, any liability
arising under section 419 or 601 ICTA
65
1988, national insurances contributions,
value added tax and input tax within the
meaning of section 25 VATA; and
(b) all penalties, surcharges, fines and
interest relating to any of the above or
to the making of any return or the
failure to make or the making of any
incomplete or incorrect return in
respect of any of the above; and
(c) any payment by way of settlement or
compromise with any Tax Authority in
accordance with the provisions of
paragraph 9 (Conduct of Tax Litigation) of
any claim in respect of any of the above;
"TAX AUTHORITY" means the Inland Revenue, H M Customs & Excise
and any other authority, body or official
(whether in the United Kingdom or elsewhere)
competent to assess, demand, impose,
administer or collect Tax or make any decision
or ruling on any matter relating to Tax and
also includes:
(a) in the case of inheritance tax and capital
transfer tax any person holding any power
of sale over any property for the purpose
of raising the amount of such tax;
(b) in the case of an obligation to repay (in
whole or in part) any payment for group
relief or the surrender of advance
corporation tax or a transferred tax
refund any person to whom such repayment
is required to be made; and
(c) in the case of any statutory indemnity or
right to recovery any person having the
benefit of the indemnity or right to
recovery;
"TAX DEMAND" includes any notice, demand, assessment,
letter or other document issued or other
action taken by or on behalf of any Tax
Authority (including the imposition of any
withholding of or on account of Tax)
indicating that:
(a) the Company has or may have a liability to
make a payment of or in respect of Tax; or
66
(b) any Relief of the kind referred to in
paragraph 1.2.1 is, may be or has been (in
whole or in part) lost; or
(c) any of the assets of the Company or the
Shares are subject to any charge or any
power of sale, mortgage or charge
resulting from or in consequence of any
liability to Tax
and in respect of which a claim may be made
against the Seller pursuant to this schedule
or pursuant to a claim for breach of any of
the Tax Warranties;
"TAX LIABILITY" has the meaning ascribed to it in
sub-paragraph 1.2; and
"TAX WARRANTIES" means the Warranties contained in part 12 of
schedule 2.
1.2 In this schedule reference to a "Tax Liability" includes not only a
liability to make any payment or increased payment of or in respect of
Tax (whether or not such liability is a primary liability and whether or
not the person so liable has or may have any right of indemnity or
reimbursement (statutory or otherwise) against any other person) but
also:
1.2.1 the loss of any Relief which has been taken into account in
computing, or in obviating the need for, any provision for Tax
or deferred tax in the Accounts;
1.2.2 the use or set off of any Relief which has been taken into
account in computing, or obviating the need for, any provision
for Tax or deferred tax in the Accounts where the use or set off
of that Relief has the effect of reducing or eliminating any
liability of the Company to make an actual payment of Tax which
would otherwise have given rise to a claim for which the Seller
would have been liable under this schedule;
1.2.3 the use or set off of any Relief which arises as a result of an
Event occurring after Completion where the use or set off of
that Relief has the effect of reducing or eliminating any
liability of the Company to make an actual payment of Tax which
would otherwise have given rise to a claim for which the Seller
would have been liable under this schedule;
1.2.4 any payment by the Company for group relief or for the surrender
of advance corporation tax or for a transferred tax refund or
any repayment by the Company of a payment for group relief or
for the surrender of advance corporation tax or for a
transferred tax refund pursuant to an agreement or arrangement
(in either case) entered into by the Company on or before
Completion; and
67
1.2.5 the enforcement or exercise of any mortgage or charge or power
of sale over any of the Shares or of the assets of the Company
in connection with the payment of any amount of Tax.
PROVIDED THAT:
1.2.6 in any case falling within sub paragraphs 1.2.1, 1.2.2 or 1.2.3
where the Relief lost, used or set off would have operated as a
deduction from gross income, profits or gains, the Tax Liability
shall be treated as being equal to the amount of the Relief, to
the extent that it is lost, used or set off, multiplied by the
rate of corporation tax in force at the date of Completion
(where the Relief has been lost) or at the date or when it is
used or set off;
1.2.7 in any case falling within paragraphs 1.2.1, 1.2.2 or 1.2.3
where the Relief is a right to a repayment of Tax, the Tax
Liability shall be treated as being equal to the amount of the
Relief lost, used or set off;
1.2.8 in any case falling within paragraph 1.2.4, the Tax Liability
shall be treated as being equal to the amount of the payment
required to be paid or repaid;
1.2.9 in any case falling within sub paragraph 1.2.5, the Tax
Liability shall be treated as being equal to the amount of Tax
which is or is liable to be paid out of the proceeds of
enforcement or exercise of the mortgage, charge or power of sale
together with the amount of any reasonable costs or expenses
properly incurred by the Company in connection with such
enforcement or exercise which are liable to be paid out of those
proceeds.
1.3 In interpreting and applying this schedule:
1.3.1 any reference to any Event occurring includes any Event which is
deemed to occur for Tax purposes;
1.3.2 any reference to an Event occurring on or before Completion
includes a series or combination of Events one or more of which
occur on or occurred before Completion outside of the ordinary
course of the Company's normal business PROVIDED THAT any such
Event after Completion occurs in the ordinary course of the
Company's normal business as carried on at Completion or
pursuant to a legal obligation entered into before Completion;
1.3.3 any reference to income, profits or gains earned, accrued or
received or having arisen includes income, profits or gains
deemed to be or treated as being earned, accrued or received or
as having arisen for any Tax purposes;
1.3.4 any reference to an Event occurring in the ordinary course of
the Company's normal business shall not include:
1.3.4.1 any transaction or arrangement or series of transactions
or arrangements which relate to or involve the
acquisition or disposal of an asset or the supply of
services (including the lending of money, or the hiring
or licensing of tangible or
68
intangible property) which is not entered into at arm's
length and on arm's length terms;
1.3.4.2 any transaction or arrangement or series of transactions
or arrangements which relate to or involve any company
becoming or ceasing to be treated as a member of a group
of companies or as becoming or ceasing to be associated
or connected with any other person for Tax purposes;
1.3.4.3 anything which involves, or leads directly or indirectly
to, the receipt by the Company of a Tax Demand in
respect of any liability to Tax of, or properly
attributable to, another person, firm or company (other
than the Company);
1.3.4.4 anything which relates to or involves the making of a
distribution for Tax purposes, the creation,
cancellation or reorganisation of share or loan capital,
the creation, cancellation or repayment of any
intra-group debt;
1.3.4.5 any transaction or arrangement or series of transactions
or arrangements which include any artificial step or
steps having no commercial or business purpose apart
from the avoidance of a Tax Liability; or
1.3.4.6 any transaction or arrangement or series of transactions
or arrangements which give rise to a liability under
Part VIII of the Taxes Management Act 1970 (charges on
non-residents) or under Part XVIII of ICTA 1988 (tax
avoidance);
1.3.5 any unpaid stamp duty on any document executed prior to
Completion which is required to be stamped in order to establish
the title of the Company to any asset shall be deemed, together
with any interest or penalties relating to such stamp duty, to
be a liability of the Company to make an actual payment of Tax;
1.3.6 any reference to a statute or a statutory provision includes a
reference to that statute or statutory provision as amended,
extended, consolidated or replaced from time to time (whether
before or after the date of this agreement) and any orders,
regulations, instruments or sub-ordinate legislation under the
relevant statute or statutory provision;
1.3.7 except where otherwise stated any reference to a paragraph, is a
reference to the relevant paragraph of this schedule; and
1.3.8 the paragraph headings are for ease of reference only and shall
not in any way affect the interpretation of this schedule.
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2. COVENANT TO PAY
2.1 Subject as provided in this schedule, the Seller covenants with the
Buyer to pay to the Buyer an amount equal to any Tax Liability of the
Company arising in consequence of any of the following:
2.1.1 any Event which occurred on or before Completion;
2.1.2 any income, profits or gains earned, accrued, received or which
arose on or before Completion;
2.1.3 any Taxation for which the Company is or becomes liable in
consequence of the failure by:
2.1.3.1 any other company which has been a member of a group (as
defined for any relevant Tax purposes) of which the
Company has at any time prior to Completion been a
member;
2.1.3.2 with respect to liabilities to make payments in respect
of VAT only, any other company which has at any time
(whether before or after Completion ) been a member of a
VAT group (as contemplated by s.43 VATA) of which the
Company has at any time prior to Completion been a
member;
2.1.3.3 any person which had control of the Company before
Completion or any company which was under the control of
that same person (whether before or after Completion);
to discharge Taxation within a specified period or otherwise.
2.2 Subject as provided in this schedule, the Seller covenants with the
Buyer to pay to the Buyer an amount equal to any Tax Liability of the
Company or the Buyer arising in consequence of any depletion in or
reduction in value of the assets or increase in the liabilities of the
Company as a result of any inheritance tax which:
2.2.1 is at Completion a charge on any of the Shares or on the assets
of the Company or gives rise to a power to sell, mortgage or
charge any of the Shares or any of the assets of the Company as
a result of an Event occurring on or before Completion; or
2.2.2 after Completion becomes a charge on or gives rise to a power to
sell, mortgage or charge any of the Shares or any of the assets
of the Company being a liability in respect of inheritance tax
payable as a result of the death of any person within seven
years after a transfer of value (or a deemed transfer of value)
if a charge on or power to sell, mortgage or charge any such
Shares or assets existed at Completion or would, if the death
had occurred immediately before Completion and the inheritance
tax payable as a result thereof had not been paid, have existed
at Completion;
70
2.3 Subject as provided in this schedule, the Seller covenants with the
Buyer to pay to the Buyer an amount equal to any Tax Liability of the
Company arising directly or indirectly in consequence of any of the
following:
2.3.1 any loan made by the Company to the Seller during 2000, 2001 or
2002 but prior to Completion;
2.3.2 the L900,000 5 year loan made by the Seller to the Company in
1997;
2.3.3 any management charges due or paid by the Company to the Seller
at any time prior to Completion;
2.3.4 first year capital allowances having been claimed by the Company
in circumstances when such allowances were not in fact
available;
2.3.5 the Company, at any time prior to Completion, treating (for
income tax, PAYE and national insurance contributions purposes)
Neville Dunnett and John Ramsay as consultants to the Company
rather than as employees of the Company;
2.3.6 the Company failing to complete EC Sales Lists (form VAT 101);
2.3.7 the Company not being permitted, for Tax purposes, to deduct
from its profits chargeable to corporation tax interest of
L11,693 paid or accrued prior to Completion in respect of loans
made by Lloyds TSB Bank plc to the Company,
and, for the avoidance of any doubt, the limitation of liability in
paragraph 2.1 of schedule 5 (financial limits) shall not serve to reduce
the Seller's liability pursuant to this paragraph 2.3 and any liability
of the Seller arising pursuant to this paragraph 2.3 shall (to the
extent possible) be treated as a repayment of the purchase price of
Shares.
2.4 Subject as provided in this schedule, the Seller covenants with the
Buyer to pay to the Buyer an amount equal to all reasonable costs and
expenses properly incurred or payable by the Buyer or the Company in
connection with any Tax Liability or amount payable under paragraph 2.1,
2.2, 2.3 or this 2.4 for which the Seller is liable under this schedule.
2.5 In determining for the purposes of this schedule whether a charge on or
power to sell, mortgage or charge any of the Shares or assets of the
Company exists at any time the fact that any inheritance tax is not yet
payable or may be paid by instalments shall be disregarded and such
inheritance tax shall be treated as becoming due and a charge or power
to sell, mortgage or charge as arising on the date of the transfer of
value or other date or event on or in respect of which it becomes
payable or arises.
2.6 The provisions of section 213 of the Inheritance Tax Act 1984 shall not
apply to any payments falling to be made under this schedule.
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2.7 Any payment made by the Seller to the Buyer pursuant to this schedule
shall be a reduction in or refund of the consideration payable or paid
by the Buyer to the Seller pursuant to the agreement.
3. EXCLUSIONS AND LIMITATIONS
3.1 The Seller shall be under no liability for a Seller's Tax Liability to
the extent that:
3.1.1 provision or reserve for such liability giving rise to a
Seller's Tax Liability is made in the Accounts or referred to in
the notes thereto; or
3.1.2 it would not have arisen but for any Event which occurred in the
ordinary course of normal business of the Company after the
Accounts Date and on or before Completion; or
3.1.3 it was discharged on or before the Accounts Date and the
discharge of such liability giving rise to a Seller's Tax
Liability was recognised in the Accounts or otherwise reflected
in the Accounts; or
3.1.4 payment has already been made in respect of such liability
giving rise to a Seller's Tax Liability whether pursuant to
paragraph 2 of this schedule or pursuant to a claim for breach
of any of the Tax Warranties; or
3.1.5 it would not have arisen but for a disclaimer by the Company
made after Completion of capital allowances or any other Relief
available to and claimed by the Company before Completion in
respect of any period on or before the Accounts Date; or
3.1.6 it would not have arisen but for a failure or omission by the
Company or the Buyer to make any claim, election, surrender or
disclaimer or give any notice or consent or do any other thing
after Completion the making, giving or doing of which was both
taken into account in computing the provision for Taxation or
deferred tax in the Accounts and notified to the Buyer in
writing in the Disclosure Letter (such notice to include
reasonable details of the action to be taken and the time by
which such action should be taken); or
3.1.7 any relief of the Company other than a Relief of the kind
referred to in any of paragraphs 1.2.1, 1.2.2 or 1.2.3 is
available to reduce such Tax Liability; or
3.1.8 it would not have arisen but for any change after Completion in
the bases upon which the accounts of the Company are prepared
and/or in the policies or practices adopted in the preparation
of such accounts including, for the avoidance of doubt, but
without limitation a change in the accounting reference date of
the Company or the basis upon which the Company values its
assets save where such change is required by law in force at
Completion or required to comply with generally accepted
accounting practice in force at Completion; or
3.1.9 it would not have arisen but for (or is increased as a result
of) the failure of the Buyer to comply with its obligations
under this Agreement; or
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3.1.10 it would not have arisen but for a major change in the nature or
conduct of any trade of the Company after Completion;
3.1.11 it arises or is increased as a result of any increase in the
rates of Tax announced and coming into force with retrospective
effect after the date of Completion; or
3.1.12 it arises or is increased as a result of any imposition of new
Tax or the introduction of or change in any legislation or
applicable law or the change in the published practice of any
Tax Authority announced and taking effect with retrospective
effect after the date of Completion; or
3.1.13 it would not have arisen but for a transaction entered into or
other voluntary act or wilful omission on the part of the
Company or the Buyer after Completion which:
(a) is not in the ordinary course of the normal business of
the Company as carried on at the date of the agreement and
is not pursuant to a legally binding obligation of the
Company entered into before Completion; and
(b) the Buyer or the Company ought reasonably to have been
aware would give rise to the liability giving rise to a
Seller's Tax Liability; or
3.1.14 such liability giving rise to a Seller's Tax Liability arises or
is increased as a result of any income, profits or gains
actually received by the Company before the Accounts Date which
were not reflected in the Accounts (in circumstances whereby
such income, profits or gains were not removed from the Company
prior to Completion whether by distribution or otherwise).
4. CORRESPONDING BENEFIT
4.1 Where:
4.1.1 a Tax Liability of the Company has been discharged and has
resulted in a Relief for the Company which would not otherwise
have arisen (a "RELEVANT RELIEF "); and
4.1.2 the Seller has made a payment to the Buyer in respect of such
Tax Liability either pursuant to this schedule or pursuant to a
claim for breach of the Tax Warranties,
the Buyer shall upon the Company utilising the Relevant Relief repay to
the Seller an amount equivalent to the lesser of:
(a) the amount of Tax which the Company would have been liable to pay
but for the utilisation of the Relevant Relief (less an amount
equal to the reasonable costs and expenses properly incurred by
the Buyer or the Company in obtaining the Relevant Relief); and
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(b) the amount paid by the Seller in respect of the Tax Liability
giving rise to the Relevant Relief.
4.2 For the purposes of paragraph 4.1, the Company shall not be regarded as
utilising a Relevant Relief until the last date upon which it would have
been obliged to make an actual payment of Tax (which it would otherwise
have had to have paid but for the Relevant Relief) in order to avoid
incurring any fine, penalty or interest in respect of unpaid Tax or, in
the case or a Relevant Relief consisting of a right to repayment of Tax,
the date on which the Company receives cleared funds in respect of such
repayment.
4.3 Nothing in this paragraph 4 shall oblige the Company to utilise a
Relevant Relief in priority to any other Relief then available to it
but, subject to the above, the Company shall use its reasonable
endeavours to utilise the Relevant Relief.
4.4 A payment pursuant to this paragraph 4 shall be made three Business Days
before the date on which the Company would have been liable to make the
payment of Tax but for the Relevant Relief.
4.5 The Seller shall be entitled to require, and the Buyer shall procure,
that the Company's auditors shall (at the Seller's cost) certify the
amount of any payment due under this paragraph 4.
5. THIRD PARTY RECOVERY
5.1 If the Seller has paid an amount to the Buyer in respect of a Tax
Liability (pursuant either to the Tax Covenant or pursuant to a claim
for breach of any of the Tax Warranties) and the Company or the Buyer
has received a payment or obtained a reimbursement, refund, credit or
set-off from any person (other than the Buyer or the Company) in respect
of the Tax Liability or has (whether by operation of law, contract or
otherwise) a right of reimbursement or refund against any other person
or persons (other than the Buyer or the Company) in respect of the Tax
Liability, the Buyer shall (i) notify the Seller and (ii) in the case of
a right or reimbursement or refund, if requested by the Seller and if
indemnified and secured to the Buyer's reasonable satisfaction against
all reasonable and proper costs and expenses and any additional Tax
Liability of the Buyer or the Company arising as a result of any action
taken pursuant to this paragraph or otherwise, procure that the Company
shall take reasonable steps to enforce the right, keeping the Seller
fully informed of any progress. Where the Buyer or the Company receives
an amount from a third party pursuant to, or as referred to in, this
paragraph, an amount equal to the lesser of:
5.1.1 the amount paid by the Seller (under this schedule or pursuant
to a claim for breach of any of the Tax Warranties) in respect
of the Tax Liability in question save to the extent that such
amount constitutes a reimbursement of the reasonable costs
and/or expenses properly incurred by the Buyer or the Company in
obtaining such amount from the Seller; and
5.1.2 the amount received by the Buyer or the Company from any third
party pursuant to this paragraph less:
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5.1.2.1 any reasonable costs and/or expenses properly incurred
by the Buyer or Company in obtaining such amount from
such third party; and
5.1.2.2 any Tax which the Company or the Buyer reasonably
anticipates will be payable (to the extent that such Tax
actually becomes payable) in respect of such receipt (or
any Tax which it is reasonably anticipated would have
been payable in respect thereof but for the availability
of a Relief of the Company falling within any of
paragraphs 1.2.1, 1.2.2 or 1.2.3).
shall firstly be set off against any payment then due from the Seller
pursuant to the Warranties or the Tax Covenant and secondly, to the
extent that there is an excess, be refunded to the Seller forthwith.
6. OVER-PROVISIONS
6.1 If any provision for Taxation in the Accounts (other than any provision
for deferred tax) proves to be an over-provision then an amount equal to
such over-provision (as determined and certified (in their opinion) by
the auditors for the time being of the Company at the request and cost
of the Seller) shall be dealt with in accordance with paragraph 6.2.
6.2 Where pursuant to paragraph 6.1 any amount ("Relevant Amount") is to be
dealt with in accordance with this paragraph:
6.2.1 the Relevant Amount shall be first set-off against any payment
then due from the Seller for a Seller's Tax Liability;
6.2.2 to the extent that there is an excess, a refund shall be made to
the Seller of any previous payment or payments made by the
Seller for a Seller's Tax Liability and not previously refunded
under this paragraph, up to the amount of such excess; and
6.2.3 to the extent that the excess referred to in paragraph 6.2.2 is
not exhausted, the remainder of that excess shall be carried
forward and set-off against any future Seller's Tax Liabilities.
6.3 The Buyer shall promptly inform the Seller of any event giving rise to a
Relevant Amount but shall not require the said auditors to certify (in
their opinion) such Relevant Amount unless and until instructed to do so
by the Seller.
7. BUYER'S COVENANT
7.1 The Buyer hereby covenants with the Seller to pay the Seller an amount
equal to any Tax for which the Seller (or any company other than the
Company of which the Seller has control) is assessed (provided that the
Seller, or relevant company, ultimately pays that Tax to the appropriate
Tax Authority) as a result of the application of section 767A or section
767AA ICTA (change in company ownership: corporation tax) where the
taxpayer company or the transferred company (as defined in section
767A(1)(a)
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and section 767AA(1)(a) respectively) is the Company together with any
reasonable costs and expenses properly incurred by the Seller in
connection with taking any action under this paragraph but only in
circumstances where the Tax is directly or primarily chargeable against
or attributable to the Company and arises:
7.1.1 in respect of income profits or gains earned, accrued or
received in respect of any period after Completion; or
7.1.2 as a result of the failure of the Buyer or the Company to apply
an amount provided for in the Accounts or an amount paid by the
Seller to the Buyer under this schedule to discharge a liability
to which the amount relates.
7.2 A payment to be made by the Buyer under this paragraph shall be paid
five Business Days after written demand for such payment.
7.3 Where the Buyer fails to make a payment in satisfaction of a liability
under this paragraph by the due date for payment, the liability of the
Buyer shall be increased to include interest on such sum from the date
on which the Buyer becomes liable to make payment to the date of actual
payment at a rate per annum being 2% above the base rate from time to
time of the Barclays Bank plc, compounded monthly (such interest to
accrue after as well as before judgment).
7.4 Paragraph 8 below shall apply to any payments under this clause except
that for the purposes of its application to this paragraph 8 any
references to "the Buyer" shall read as references to "the Seller" and
any references to "the Seller" shall read as references to "the Buyer".
8. GROSSING-UP OF PAYMENTS
8.1 Any sum payable by the Seller to the Buyer pursuant to this schedule
shall be paid free and clear of all deductions or withholdings
whatsoever, save only as may be required by any applicable law.
8.2 If any deduction or withholding is required by law to be made from any
sum payable pursuant to this schedule, the Seller shall be obliged to
pay to the Buyer such sum as will, after the deduction or withholding
has been made, leave the Buyer with the same amount as it would have
been entitled to receive in the absence of any such requirement to make
a deduction or withholding.
8.3 In the event that any sum paid to the Buyer pursuant to this schedule is
or will be chargeable to Tax the Seller shall be obliged to pay such sum
as will, after payment of the Tax, leave a sum equal to the amount that
would otherwise have been payable if Tax had not been so chargeable.
9. DUE DATE FOR PAYMENT
9.1 Where the Seller becomes liable to make any payment pursuant to this
schedule, the due date for the making of the payment shall be:
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9.1.1 where the payment relates to a liability on the part of the
Company to make an actual payment of Tax, the later of three
Business Days prior to the date on which that amount must be
paid to the Tax Authority concerned in order to avoid incurring
a liability (contingent or otherwise) to interest or penalty in
respect of such Tax and five Business Days after service of
notice of the Tax Demand on the Seller;
9.1.2 where the payment relates to the use or set off of a Relief, the
later of three Business Days prior to the date on which the
Company would have been liable to make a payment of Tax to the
Tax Authority concerned but for such use or set off in order to
avoid incurring a liability (contingent or otherwise) to
interest or penalty in respect of such Tax and five Business
Days after service of notice of the Tax Demand on the Seller by
the Buyer; and
9.1.3 in any other case, the date falling five Business Days after the
date of service of the notice of the Tax Demand on the Seller by
the Buyer that the Seller has a liability for a determinable
amount pursuant to this schedule.
9.2 If any payment required to be made by the Seller pursuant to this
schedule is not made by the due date then interest shall be payable on
the amount payable on a daily basis compounded quarterly from the due
date until the date when payment is actually made at the rate of 2%
above the base rate from time to time of the Company's bankers from time
to time.
10. CONDUCT OF TAX LITIGATION
10.1 If any Tax Demand is received by or comes to the notice of the Buyer or
the Company the Buyer shall, as soon as reasonably practicable (and,
using all reasonable endeavours, not later than 14 days prior to the
expiry of any time for appeal) give, or procure to be given to the
Seller written notice of the Tax Demand (setting out reasonable
particulars of the demand) PROVIDED ALWAYS that failure by the Buyer to
notify, or procure notification of, the Seller within the time frame
outlined above shall not release the Seller from liability save that in
circumstances where the Buyer has failed to give such notice to the
Seller, and as a result of such failure, the Company sustains any
supplemental penalty, charge, interest or default surcharge or other
loss, damage or liability which it would not have incurred or sustained
but for the Buyer's failure to give such notice to the Seller, the
Seller shall not be liable under this Schedule for such supplemental
penalty, charge, interest, fine or default surcharge or other loss,
damage or liability. If any Tax Demand is received by or comes to the
notice of the Seller, the Seller shall, as soon as reasonably
practicable (and, using all reasonable endeavours, not later than 14
days prior to the expiry of any time for appeal) give the Buyer notice
of the Tax Demand.
10.2 If so requested in writing by the Seller and if the Seller shall
indemnify and secure the Company and the Buyer, to the Buyer's
reasonable satisfaction, against all reasonable costs and expenses which
they may properly incur, the Buyer shall take, or shall procure that the
Company takes, such action and give such information and assistance in
connection with the affairs of the Company as the Seller may reasonably
request to dispute, resist, appeal or compromise the Tax Liability or
Tax Demand PROVIDED THAT:
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10.2.1 the Buyer shall not be required to make or procure the making of
a formal appeal to any tribunal, court, appellate body or
judicial authority unless the Seller, at its own expense, and
after disclosure of all relevant information and documents
obtains and delivers to the Buyer an opinion from appropriate
counsel who has specialised in relevant Tax matters for a
minimum of 10 years that making the appeal is a reasonable cause
of action to take having regard to the circumstances of the Tax
Liability or Tax Demand in question;
10.2.2 the Seller shall keep the Buyer and the Company fully informed
as to the progress and consequences of such action and shall
consult with the Buyer and the Company as to the action to be
taken;
10.2.3 the Seller shall make no settlement or compromise of the
relevant Tax Liability which is likely to affect materially the
future Tax of the Company or of the Buyer without the prior
approval of the Company or the Buyer (as may be appropriate)
such approval not to be unreasonably withheld or delayed; and
10.2.4 no material communication (written or otherwise) pertaining to
the Tax Demand shall be sent to the relevant Tax Authority
without having first been approved by the Buyer (such approval
not to be unreasonably withheld or delayed)
and, subject to the foregoing, the Seller shall be entitled to take over
the conduct of all proceedings relating to the Tax Demand in question.
10.3 The Buyer or the Company shall, without reference to the Seller, be
entitled to admit, compromise, settle, discharge or otherwise deal with
a Tax Demand on such reasonable terms as it may, in its absolute
discretion, think fit and without prejudice to any right or remedy under
this schedule or the agreement:
10.3.1 if the Seller has not made the request and provided the
indemnity and security referred to in paragraph 10.2 by the
earlier of the following dates:
10.3.1.1 the date being ten Business Days after the date on
which notice of that Tax Demand was given pursuant to
paragraph 10.1 or notice of the Tax Demand came to the
attention of the Seller; and
10.3.1.2 the date being five Business Days prior to the last
date on which an appeal may be made against the Tax
Liability to which the Tax Demand relates PROVIDED THAT
the Seller has had at least five Business Days' notice
of the Tax Demand;
10.3.2 if written notice is served on the Company or the Buyer by the
Seller to the effect that it considers the Tax Demand should no
longer be resisted;
10.3.3 if within the period of 10 Business Days following the service
of a written notice by the Buyer on the Seller requiring the
Seller to clarify or explain the terms of any request made under
paragraph 10.2, no written clarification or explanation is
received by the Buyer within that period;
78
10.3.4 upon the expiry of any period prescribed by applicable
legislation for the making of an appeal against either the Tax
Demand in question or the decision of any court or tribunal in
respect of any such Tax Demand, as the case may be PROVIDED THAT
the Seller has had at least five Business Days' notice of the
Tax Demand; or
10.3.5 if a Tax Authority alleges that while the Company was under the
control of the Seller there was any act or failure to act by the
Company or the Seller in connection with the Tax Liability which
constitutes fraud.
11. FILING OF TAX RETURNS
The Company (or its duly authorised agents) shall at its own expense
prepare the Company's Taxation returns for accounting periods ended
prior to Completion or the accounting period in which Completion occurs
and shall deal with all matters and correspondence relating thereto. All
such returns so far as they relate to the Taxation affairs of the
Company arising on or before Completion shall be submitted in draft form
to the Seller or its duly authorised agents for comment. The Seller or
its duly authorised agents shall comment within 14 days of such
submission and the Buyer shall not unreasonably refuse to adopt such
reasonable comments. The Buyer shall procure that the Company shall
afford the Seller (or its duly authorised agents) such access to their
books, accounts and records so far as they relate to the Taxation
affairs of the Company arising on or before Completion as they may
reasonably require for the purposes of this paragraph.
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SCHEDULE 4
PROPERTY
LEASE
LEASEHOLD PROPERTY WITH UNREGISTERED TITLES
Present lessee Short
(owner) Date of lease Parties Term Current rental description
- -------------- ------------- -------------- ------------- -------------- -----------
Medscreen 6 December Standard 1 December L2,770 Underlease
Limited 1993 Commercial 1993 to 29 plus service
Property March 2009 charge
Securities
Limited (1)
Medscreen
Limited (2)
and Pharmchem
Laboratories
Inc. (as
surety)(3)
- -------------- ------------- -------------- ------------- -------------- -----------
Medscreen 1 December Mr and Mrs G C 31 March Will be Reversionary
Limited 1993 H Lawson (1) 2009 to 30 determined
Medscreen November 2015 by reference
Limited (2) to the rent
Pharmchem payable
Laboratories under the
Inc (as Underlease
surety)(3) at the
expiry of
its term
- -------------- ------------- -------------- ------------- -------------- -----------
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SCHEDULE 5
LIMITATIONS ON SELLER'S LIABILITY
1. GENERAL
1.1 In this schedule, reference to:
a "CLAIM" is a reference to any claim by the Buyer for breach of the
Non-Tax Warranties or the Tax Warranties or a claim under the Tax
Covenant;
the "NON-TAX WARRANTIES" is a reference to those Warranties which are
not Tax Warranties;
a "NON-TAX CLAIM" is a reference to any Claim other than a Tax Claim;
a "TAX CLAIM" is a reference to a claim under the Tax Covenant or for
breach of the Tax Warranties;
the "TAX WARRANTIES" is a reference to the Warranties contained in part
12 of schedule 2; and
a "WARRANTY CLAIM" is a reference to any claim by the Buyer for breach
of the Non-Tax Warranties or the Tax Warranties.
1.2 No provision of this schedule shall apply to limit, qualify or exclude
the liability of the Seller arising out of any fraudulent act or
omission by or on behalf of the Seller.
2. FINANCIAL LIMITS
2.1 The Seller shall not be liable under this agreement in respect of any
Claim:
2.1.1 unless the amount of the liability of the Seller for such Claim
exceeds L10,000; and
2.1.2 unless the aggregate amount of the liability of the Seller for
all such Claims (other than those excluded by paragraph 2.1.1)
exceeds L160,000 (in which event the Seller shall be liable for
all such Claims and not only the excess over such amount).
2.2 Notwithstanding any other provision of this Agreement, the aggregate
liability of the Seller for all Claims shall not exceed L6,250,000.
3. TIME LIMITS
3.1 The Seller shall not be liable in respect of any Claim unless written
notice of that Claim is given to the Seller as soon as reasonably
practicable after the Buyer becomes actually aware that any fact or
matter of which it is actually aware is reasonably likely to give rise
to a claim, and in any event:
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3.1.1 in the case of a Tax Claim, on or before the seventh anniversary
of the Completion Date; and
3.1.2 in the case of any Non-Tax Claim, on or before the date falling
25 months after the Completion Date.
3.2 Any Non-Tax Claim shall (if not previously satisfied, withdrawn or
settled) be deemed to have been withdrawn and waived by the Buyer unless
legal proceedings in respect of such Non-Tax Claim have been commenced
within 6 months of the notification of such Non-Tax Claim to the Seller
pursuant to paragraph 3.1 above.
4. NO DOUBLE COUNTING
4.1 The Buyer shall not be entitled to recover damages in respect of any
Claim or otherwise obtain reimbursement or restitution more than once in
respect of any one Claim arising out of or in connection with the same
circumstances.
4.2 The Seller shall not be liable in respect of any Warranty Claim if and
to the extent that the loss occasioned thereby has been recovered under
the Tax Covenant.
4.3 The Seller shall not be liable under the Tax Covenant to the extent that
the loss occasioned thereby has been recovered pursuant to a Warranty
Claim.
5. THIRD PARTY RECOVERIES
5.1 The liability of the Seller in respect of any Non-Tax Claim shall be
reduced or eliminated to the extent that any recoveries have actually
been made by the Buyer and/or the Company:
5.1.1 from any third party responsible for the act, matter or
circumstances giving rise to such breach or claim or otherwise
involved in the making of the claim; or
5.1.2 from any insurance monies received in respect thereof.
5.2 If any recovery is made after the Seller has made payment to the Buyer
in respect of a Non-Tax Claim, the Buyer shall promptly following such
recovery refund or procure that there is refunded to the Seller the
lesser of:
5.2.1 the amount of such payment by the Seller; and
5.2.2 the amount of such recovery,
in each case after deducting all reasonable costs, charges, expenses and
Tax incurred by the Buyer or the Company in obtaining such recovery and
any Tax which the Company or the Buyer reasonably anticipates will be
payable in respect of such receipt (or any Tax which it is reasonably
anticipated would have been payable in respect thereof but for the
availability of a Relief of the Company) provided that the Buyer shall
also account to the Seller for any repayment, supplement, interest or
other similar amount received from any Tax Authority in respect of the
relevant liability.
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5.3 If the Seller pays at any time to the Buyer a sum pursuant to a Non-Tax
Claim and the Buyer is or subsequently becomes entitled to recover from
some other person any sum in respect of any matter giving rise to such
Non-Tax Claim, the Buyer shall notify the Seller as soon as reasonably
practicable of such fact and if indemnified and secured to the Buyer's
reasonable satisfaction against all reasonable costs and expenses, the
Buyer shall at the cost of the Seller, take reasonable steps to enforce
such recovery, and shall make payment promptly to the Seller in
accordance with paragraph 5.2.
6. ACTS OF THE BUYER
6.1 The Seller shall not be liable under this Agreement in respect of any
Non-Tax Claim:
6.1.1 to the extent that such Non-Tax Claim arises or is increased as
a result of any breach by the Buyer of any of its obligations
under this Agreement, or any agreement or document entered into
pursuant to this Agreement;
6.1.2 to the extent that such Non-Tax Claim would not have arisen but
for any transaction, arrangement, act or omission (or any
combination of the same) carried out or effected at any time
after Completion by the Buyer or any member of the Buyer's
Group;
6.1.3 to the extent that such claim is attributable to, or is
increased by, any voluntary act, omission, transaction or
arrangement carried out by, or by a person other than the Seller
or its officers or employees at the request of, Sagitta Asset
Management Limited on or after 14 January 2002;
6.1.4 to the extent that such claim is attributable to or is increased
by any admission of liability by or on behalf of the Buyer or a
member of the Buyer's Group on or after Completion which is in
breach of clause 10.1, provided that the Seller has complied
with its obligations under that clause with respect to the claim
in respect of which such liability does or may arise.
7. ACCOUNTING
7.1 The Seller shall not be liable under the Warranties in respect of any
Non-Tax Claim:
7.1.1 to the extent that specific provision, reserve or allowance for
the matter giving rise to the Non-Tax Claim has been made in the
Accounts; or
7.1.2 to the extent that the Non-Tax Claim would not have arisen but
for any changes in accounting policy or practice of or affecting
the Company where such changes are introduced after Completion
with retrospective effect; or
7.1.3 to the extent any liability of the Company included in the
Accounts has been discharged or satisfied below the amount
attributed to it in the Accounts; or
7.1.4 to the extent that any contingency or other matter provided for
in the Accounts has been over-provided for.
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8. GENERAL LIMITATIONS
8.1 The Seller shall not be liable under this Agreement in respect of any
Non-Tax Claim:
8.1.1 which is based upon a liability which, at the time such Non-Tax
Claim is notified to the Seller, is contingent only or otherwise
not capable of being quantified unless and until such liability
ceases to be contingent or becomes capable of being quantified.
Subject to such Non-Tax Claim being notified to the Seller
within the time limits specified in paragraph 3.1, the time
limit for issuing and serving proceedings for the purposes of
paragraph 3.2 shall begin on the date on which such liability
ceases to be contingent or becomes capable of being quantified;
8.1.2 to the extent that the matter giving rise to the Non-Tax Claim
falls to be effected in implementing this Agreement or any
document or agreement to be entered into pursuant thereto in
each case in accordance with their terms;
8.1.3 which arises as a result of, or would not have arisen but for,
or a liability is increased as a result of, legislation not in
force at the date of this agreement or any change in legislation
with retrospective effect after the date of this Agreement;
8.1.4 which is capable of remedy, unless and until the Buyer has given
the Seller not less than 20 Business Days' following the date of
the notice of the Non-Tax Claim within which to remedy the
breach complained of in a reasonable fashion provided that such
remedy is without cost to the Buyer, and the Seller has failed
to do so within such period.
9. MITIGATION BY THE BUYER
The Buyer shall take all steps to mitigate any loss, liability or damage
which could give rise to a Warranty Claim under this Agreement,
including (without limitation) steps to prevent any contingent liability
becoming an actual liability. Nothing in this agreement shall relieve
the Buyer of any common law or other duty to mitigate any loss,
liability or damage suffered or incurred by it.
10. CONDUCT OF CLAIMS
10.1 If:
10.1.1 any claim is made against the Buyer or any member of the Buyer's
Group; or
10.1.2 any matter or circumstance comes to the attention of the Buyer;
in either case for which it appears to the Buyer that the Seller may be
liable under the Non-Tax Warranties, and the Seller acknowledges that,
subject to the alleged facts being demonstrated to be true, it has a
liability to the Buyer (but not necessarily the quantum of the
liability), the Buyer shall not make (and shall procure that no member
of the Buyer's Group makes), except as may be required to protect its
(or their) legal position, any admission of liability, conclude any
agreement in relation to such
84
liability or make any compromise with any person, body or authority in
relation thereto without the consent of the Seller, which consent shall
not be unreasonably delayed or withheld.
10.2 If the Seller acknowledges that, subject to the alleged facts being
demonstrated to be true, it has a liability to the Buyer (but not
necessarily the quantum of the liability) in respect of any Non-Tax
Claim or claim referred to in paragraph 10.1 (including legal costs and
expenses) the Buyer shall or shall procure that the relevant member of
the Buyer's Group shall at the Seller's cost:
10.2.1 give, or procure that the relevant member of the Buyer's Group
gives, the Seller's professional advisers copies of such
correspondence and other documents of material significance
relating to the claim referred to in paragraph 10.1 provided
that correspondence and other documents of material significance
having legal privilege shall not be subject to this requirement;
10.2.2 take such action as the Seller may reasonably request to avoid,
dispute, resist, appeal, compromise or defend any claim which
may result in a breach of a Non-Tax Warranty;
10.2.3 take such action as the Seller may reasonably request to conduct
negotiations with the insurers in respect of any matter which
may give rise to a Non-Tax Claim and to commence proceedings
against such insurers; and
10.2.4 take such action as the Seller may reasonably request (subject
to the agreement of the insurers of the relevant member of the
Buyer's Group, where appropriate) to commence and/or conduct any
action, negotiations or proceedings in the name of the relevant
member of the Buyer's Group.
10.3 The Seller may not exercise any right under this paragraph 10 if the
matters alleged would, if proven, be reasonably likely to have a
material adverse effect on the bona fide commercial interests or
goodwill of the Buyer.
11. LIMITATION OF SCOPE OF WARRANTIES
11.1 The only Warranties which shall apply in relation to Intellectual
Property are the Warranties set out at part 10 of schedule 2 and
paragraph 1 of part 4 of schedule 2.
11.2 The only Warranties which shall apply in relation to the Environment are
the Warranties set out at part 6 of schedule 2.
12. OTHER
12.1 The Seller shall not be liable under this Agreement in respect of any
Warranty Claim to the extent that, at the time this Agreement is entered
into, the Management Team is actually aware of the facts or
circumstances giving rise to that Warranty Claim and the Management Team
could reasonably have concluded at the date of this Agreement that those
facts or circumstances would give rise to the Warranty Claim.
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12.2 Save in respect of the specific indemnities in paragraph 2.3 of the Tax
Covenant, the Buyer undertakes to the Seller that it has no present
intention of bringing a Claim and that it has no knowledge of any matter
which it is actually aware at the date of this Agreement is reasonably
likely to give rise to a Claim.
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SIGNED by /S/ JOSEPH W. HALLIGAN )
------------------------------ )
duly authorised on behalf of )
PHARMCHEM, INC. )
SIGNED by /S/ FIONA BEGLEY )
------------------------------ )
duly authorised on behalf of )
NEWINCCO 140 LIMITED )
87