DEED OF TAX INDEMNITY
THIS DEED IS made the day of Two Thousand and made between
(1) THE PERSONS WHOSE NAMES AND ADDRESSES ARE SET OUT AS COVENANTORS IN THE
SCHEDULE (together the "Covenantors" which expression will where the context
so admits includes their personal representatives and successors)
(2) STOCKER & YALE A MASSACHUSETTS CORPORATION WITH A PRINCIPAL PLACE OF
BUSINESS LOCATED AT 32 HAMPSHIRE ROAD, SALEM, NEW HAMPSHIRE 03079
(the "Purchaser")
(3) CORKOPT LIMITED A COMPANY ORGANISED UNDER THE LAWS OF IRELAND HAVING
ITS REGISTERED OFFICES AT BIRCHFIELD HOUSE, CARRIGLAINE, CO. CORK (the
"Company").
RECITAL
This Deed is entered into pursuant to an Agreement relating to the sale of the
entire issued share capital of the Company (other than "B" shares issued under
the Business Expansion Scheme) (the "Agreement") made of even date herewith
between the Covenators and the Purchaser.
1. DEFINITION
In this Deed unless the context otherwise requires words and
expressions defined in the Agreement will have the same meaning and any
provisions in the Agreement concerning matters of construction or
interpretation will also apply, and
"CLAIM" includes any notice, demand, assessment, letter or other
document issued or action taken by the Revenue Commissioners or other
governmental authority or official whereby the Company is or may be
placed or sought to be placed under a liability to make a payment or
deprived of Relief otherwise available;
"EVENT" means any payment, transaction, act, omission or occurrence of
whatever nature whether or not the Company or the Purchaser is a party
thereto on or before the date hereof.
"RELIEF" means loss, allowance, credit, relief, deduction, set off,
exemption, right to repayment or credit or other relief of a similar
nature granted by or available in relation to Tax pursuant to any
legislation; and
"TAX" means all forms of taxation, duties, imposts and levies whether
of Ireland or elsewhere including (but without limitation) income tax,
corporation tax, corporation profits tax, advance corporation tax,
capital gains tax, capital acquisitions tax, residential property tax,
wealth tax, value added tax, customs and other import and export
duties, excise duties, stamp duty, capital duty, social insurance,
social welfare or other similar contributions and other amounts
corresponding thereto whether payable in Ireland or elsewhere and any
interest, surcharge, penalty or fine in connection therewith.
2. INTERPRETATION
In this Deed where the context admits:
2.1 References to income or profits or gains earned, accrued, received or
realised as the case may be before a particular date include income or
profits or gains deemed to have been, or treated as, or regarded as
earned, accrued, received or realised as the case may be, before that
date for the purposes of any legislation;
2.2 References to any liability to Tax include:
2.2.1 A liability to make payments of, or in respect of, or in
relation to Tax;
2.2.2 The loss, reduction, disallowance, use or set off against
income, profits or gains earned, accrued or received on or
before Closing of any Relief which is available or would (were
it not for the said loss, reduction, disallowance, use or
set-off) have been available to the Company following Closing
and which has been taken into account in computing any
provision for deferred Tax which is reflected in the Financial
Statements or which was treated as an asset of the Company or
otherwise noted in the Financial Statments.
2.2.3 The use or set off of any Purchaser's Relief in circumstances
where, but for such use or set-off, the Company would have had
a liability to Tax in respect of which the Purchaser would
have been able to make a claim against the Convenantors under
this Deed.
2.3 Reference to an Event occurring on or before the date of this Deed will
include an event deemed pursuant to any Tax statute to occur or to be
treated or regarded as occurring on or before the date of this Deed and
will also include the combined result of two or more Events the first
of which has taken place on or before the date of this Deed; and
2.4 In any case falling within clause 2.2, the amount that is to be treated
for the purposes of this Deed as a liability to Tax of the Company
shall be determined as follows:
2.4.1 In a case which falls within paragraph 2.2.1, the liability
to Tax shall be the amount of the payment made in respect of
or in relation to Tax;
2.4.2 In a case which falls within paragraph 2.2.2 not being the
loss of a right to repayment of Tax, the liability to Tax
shall be the amount of the repayment that would have been
obtained but for the loss or set off mentioned in that
paragraph.
2.4.3 In a case which falls within paragraph 2.2.2 not being the
loss of a right to repayment of Tax, the liability to Tax
shall be the amount of Tax that is paid that would not
otherwise have been paid but for the loss, use or set-off of
the said Relief;
2.4.4 In a case which falls within paragraph 2.2.3, the liability to
Tax shall be the amount of Tax which has been saved in
consequence of the use or set off of the Purchaser's Relief.
3.0 COVENANT
Subject as herein after provided the Covenantors hereby jointly
covenant to pay the Purchaser by way of Indemnity an amount equal to:
3.1 any liability to Tax arising in respect of, by reference to or in
consequence of any income, profits or gains which were earned, accrued
or received before
Closing or as a consequence of or by reference to any Event, whether
or not the Company is or may be entitled to claim reimbursement
thereof from any other person or persons;
3.2 Any payment of Tax or deemed payment of Tax (whether before or after
Closing) resulting from the receipt by the Purchaser or the Company of
any payment under the provisions of this Deed; or
3.3 Any reasonable costs or expenses incurred by the Purchaser or the
Company in connection with any such payment or deemed payment of Tax or
non availability of a Relief or in connection with any action taken in
avoiding resisting or settling any such payment or claim for payment.
3.4 Any reasonable costs or liabilities which may be incurred by the
Purchaser in consequence of or as result of income tax relief granted
to shareholders in the Company in accordance with the provisions of
part 16 of the Taxes Consolidation Act, 1997 being withdrawn or
restricted as a result of any event entered into or undertaken by the
Company and such costs or liabilities shall include all sums payable by
the Purchaser to the said shareholders in respect of the loss of income
tax relief including any sum payable so that each shareholder will
after all deductions, withholdings required by law or any other Tax
payable by the shareholders on such sums received be left with the same
sum as they would have been entitled to receive in the absence of any
such requirement to make a deduction or withholding or pay any such
Tax.
PROVIDED HOWEVER that the total amount of the liability of any one of the
Covenators in respect of any breach or non fulfilment of the Warranties and
pursuant to the terms of the Deed of Tax Indemnity shall be limited to and in no
event shall exceed that part of the Purchase Price received by each Covenators
so that for the avoidance of doubt each Covenators liability in respect of any
claim shall not exceed the following percentage of the portion of the Purchase
Price received by the Covenators.
Liam Kelly 85%
Thomas Meade 10%
Gary Duffy 5%
For the purposes of this clause the Purchase Price shall mean $2,450,000.
4.0 EXCEPTION
The Indemnity in clause 3 will not apply to payment or deemed payment
of Tax:
4.1 To the extent to which it does not exceed the provision made for Tax in
the Financial Statements as reduced by amounts previously taken into
account under this clause 4.1 to limit the application of the covenant;
4.2 Which arises as a result of transactions in the ordinary course of
trading since the Statement Date and prior to the Completion Date other
than any interest, surcharge, penalty or fine in connection with Tax.
For the avoidance of doubt and prior to the Completion Date the
following events will not be treated as occurring in the ordinary
course of trading of the Company.
4.2.1 The payment of any dividend or the making of any other
distribution;
4.2.2 The disposal of any capital assets;
4.2.3 The disposal of any property or asset (including trading
stock) in circumstances where the consideration actually
received for such disposal is less than the consideration
deemed to have been received for tax purposes;
4.2.4 The supply of any service or business facility of any kind
(including a loan of money or the letting, hiring, licensing
of any tangible or intangible property) for consideration
which was less then might reasonably have been regarded as the
open market value of such service or business facility.
4.3 Which arises or to the extent that any such Tax is increased as a
result only of increase in rates of Tax made after the date of this
Deed with retrospective effect;
4.4 To the extent that the loss is being recovered pursuant to any claim
under the warranties; or
4.5 In respect of value added tax, PAYE, PRSI or rates which are currently
due and payable from the Statement Date provided that the amounts have
been fully provided for in the Financial Statements;
4.6 Which arises from any matter fully and fairly disclosed in the Exhibit
and Schedules to the Stock Purchase Agreement.
4.7 Which arises as a consequence only of profits or gains earned or
accrued in the ordinary and usual course of trading during the period
from the Statement Date to the Completion Date.
5.0 LIMITATION
Notwithstanding clause 3.0 the Covenantors will not be liable under
this Deed:
5.1 If and to the extent that the amount claimed has been recovered under
the Agreement;
5.2 To the extent the liability unto this Deed is limited or excluded under
the Stock Purchase Agreement including the schedules thereto.
The liability of the Covenantors under this Deed shall cease on the 7th
anniversary of the date of execution of this Deed save as regards any
alleged liability of which notice in writing (containing reasonable
details of the claim) has been given to the Covenators prior to that
date.
But none of the limitations in this clause 5.0 will apply to any claim
which arises as a consequence of or is delayed as a result of fraud,
wilful misconduct or wilful concealment by the Covenantors or any
officer of the or any of the directors of the Company.
6.0 DISPUTES AND CONDUCT OF CLAIMS
6.1 If the Purchaser becomes aware of a claim relevant for the purposes of
this Deed the Purchaser shall within a reasonable time thereafter give
written notice thereof to the Covenantors.
6.2 SUBJECT TO CLAUSE 6.4 BELOW if the Covenantors indemnify and secure the
Company and/or (if the case requires) the Purchaser to their reasonable
satisfaction against all liabilities, costs, damages or expenses which
may be incurred thereby including any additional liabilities for Tax
the Purchaser shall take such action as the Covenantors may reasonably
request by notice in writing to defend, resist, appeal or compromise
any claims for Tax.
6.3 Subject to clause 6.4 below if the Covenantors do not request the
Purchaser to take any action under clause 6.2 or fail to indemnify and
secure the Purchaser and the Company to their reasonable satisfaction
within 15 days of written notice having been given to the Covenantors
the Purchaser or the Company will (without prejudice to their rights
under this Deed) be free to pay or settle the Claims on such terms as
the Purchaser or the Company may in their absolute discretion consider
fit.
6.4 Provided Mr. Kelly is at that time an employee of the Company, the
conduct of the dispute shall be delegated to him under such terms as
may be agreed from time to time Purchaser and the Covenantors; provided
that unless the Purchaser and Covenantors specifically agreed otherwise
in writing the following terms will be ipso facto be incorporated into
any such Agreement:
6.4.1 that the Company and the Purchaser shall be kept fully
informed of all matters and will be entitled to seek copies
of all correspondence and notes or other written records of
telephone conversations or meetings contained pertaining
thereto;
6.4.2 that the appointment of solicitors or other professional
advisors will be subject to the approval of the Purchaser,
such approval not to be unreasonably withheld;
6.4.3 that all written communications pertaining to the dispute
which are to be transmitted to the Revenue Commissioners or
any other governmental authority or body whatsoever shall be
first submitted to the Purchaser for approval and shall only
be finally transmitted if such approval is given (which is
not to be unreasonably withheld); and
6.4.4 that the Covenantors shall make no settlement or compromise
of the dispute or agree any matter in the conduct of this
dispute which is likely to effect the amount thereof or the
future liability to Tax of the Company or of the Purchaser
without the prior approval of the Company and the Purchaser
(as may be appropriate);
6.5 Neither the Purchaser nor the Company will be subject to any Claim by
or any liability to any of the Covenantors for non compliance with any
of the foregoing provisions of this clause 6.0 if the Purchaser or the
Company has bona fide acted in accordance with the instructions of any
one or more of the Covenantors.
7.0 WAIVER
Any liability to the Purchaser under the provisions of this Deed may be
in whole or in part released, varied, compounded or comprised by the
Purchaser in its absolute discretion as regards any of the Covenantors
or other party under such liability without in any way prejudicing or
effecting their rights against any other party under the same or a like
liability whether joined or several or otherwise.
8.0 PAYMENT
Where the covenanters are liable to the Company or the Purchaser
pursuant to the indemnity contained in clause 3.0 the following
provisions will apply in determining when a payment in respect of such
Tax shall be made:
8.1 (In any case which involves, and to the extent that it involves, an
actual payment of Tax by the Company which Tax has not already been
paid) that the Covenantors shall pay sums due unto this Deed in cleared
funds without any deduction whatsoever by way of set off or
counterclaim or otherwise 3
business days prior to the date on which the Tax in question would
have to have been paid in order to prevent a liability to interest or
a fine, charge or penalty arising in respect of the Tax in question or
as the case may be 3 business days prior to the date in which the Tax
in question must be paid in order to entitled the Company or the
Purchaser to make an appeal against an assessment tax;
8.2 (In any other case) that the Covenantors shall make payment on the date
falling 7 days after the date when there has been served on the
Covenantors notice in writing from the Purchaser or the Company that
the Covenantors are liable under clause 3.0 in an amount specified in
or determinable from the contents of such notice;
8.3 (In any case) that any sums not paid by the Covenantors on the date
specified in this Deed or otherwise for payment of the same (the due
date) will bear interest (which will accrue from day to day after as
well as before any judgement for the same) at the rate of 2% per annum
over the base rate for the time being of the Company's bankers from the
day following the due date up to and including the day of actual
payment of such sums such interest to be compounded quarterly and
8.4 Any payment hereunder made by the Covenantors will constitute a
reduction in the consideration for the acquisition and disposal of the
shares.
9.0 NOTICES
Notice under this Agreement shall be in writing and shall be effective
when actually delivered. If mailed notice shall be deemed effective 48
hours after mailing by express mail, directed to the other party at the
address set forth below or such other address as the party may indicate
by written notice to the other. Address to the Purchaser at:
32 Hampshire Road,
Salem,
New Hampshire,
03079
Addressed to the Vendor at:
Unit 12 Penrose Wharf,
Cork,
Ireland.
Address to the Selling Stockholders at the address set forth in the
schedule.
10.0 GOVERNING LAW
This Deed and all relationships created by it will in all respects be
governed by and construed in accordance with Irish Law.
11.0 JURISDICTION
It is irrevocably agreed that the Irish Courts are to have exclusive
jurisdiction to settle any disputes which may arise out of or in
connection with this Deed or its performance and accordingly that any
suit, action or proceedings so arising may be brought in such courts.
IN WITNESS whereof the parties hereto have caused this Deed to be executed the
day and year first above written.
SCHEDULE
COVENANTERS
William M. Kelly
Tom Meade
Gary Duffy
SIGNED SEALED and DELIVERED
by LIAM KELLY
in the presence of:
SIGNED SEALED and DELIVERED
by THOMAS MEADE
in the presence of:
SIGNED SEALED and DELIVERED
by GARY DUFFY
in the presence of:
MARK W. BLODGETT
Given under the COMMON SEAL
Of STOCKER & YALE, INC.
Given under the COMMON SEAL
Of CORKOPT LIMITED