DATED 11 FEBRUARY 1998
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(1) DAVID ANTHONY TOWNEND AND OTHERS
(2) WAM!NET (UK) LIMITED
(3) WAM!NET INC.
________________________________________________________________________________
AGREEMENT
FOR THE SALE AND PURCHASE OF THE
ENTIRE ISSUED SHARE CAPITAL OF
4-SIGHT LIMITED
________________________________________________________________________________
[LOGO APPEARS HERE]
Charles Russell
8-10 New Fetter Lane
London EC4A 1RS
Ref: MACM/26893/1
I N D E X
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PAGE NO.
1. DEFINITIONS......................................................... 1
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2. INTERPRETATION...................................................... 8
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3. SALE OF SHARES...................................................... 10
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4. CONDITIONS.......................................................... 10
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5. INITIAL CONSIDERATION............................................... 11
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6. DEFERRED CONSIDERATION.............................................. 12
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7. COMPLETION.......................................................... 14
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8. WARRANTIES.......................................................... 18
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9. WARRANTORS' LIMITATIONS OF LIABILITY................................ 20
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10. PURCHASER'S REMEDIES................................................ 20
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11. PURCHASER WARRANTIES................................................ 22
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12. PURCHASER'S LIMITATIONS OF LIABILITY................................ 22
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13. VENDORS' REMEDIES................................................... 22
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14. ACTIONS PENDING COMPLETION.......................................... 23
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15. RESTRICTIVE COVENANTS............................................... 25
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16. GUARANTEE........................................................... 27
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17. ANNOUNCEMENTS AND CONFIDENTIALITY................................... 28
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18. REGISTRATION RIGHTS................................................. 29
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19. FURTHER ASSURANCE................................................... 32
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20. WAIVER AND RELEASE.................................................. 32
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21. ENTIRE AGREEMENT AND VARIATIONS..................................... 32
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22. COSTS............................................................... 33
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23. COUNTERPARTS........................................................ 33
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24. ASSIGNMENT.......................................................... 33
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25. MISCELLANEOUS....................................................... 34
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26. NOTICES............................................................. 34
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27. LAWS AND JURISDICTION............................................... 35
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THE FIRST SCHEDULE.................................................. 36
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THE VENDORS......................................................... 36
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THE SECOND SCHEDULE................................................. 38
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PART 1.............................................................. 38
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THE COMPANY......................................................... 38
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PART 2.............................................................. 39
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THE SUBSIDIARIES.................................................... 39
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THE THIRD SCHEDULE.................................................. 43
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INTELLECTUAL PROPERTY RIGHTS........................................ 43
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THE FOURTH SCHEDULE................................................. 44
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THE PENSION SCHEME.................................................. 44
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THE FIFTH SCHEDULE.................................................. 45
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THE PROPERTIES...................................................... 45
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THE SIXTH SCHEDULE.................................................. 46
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THE TAX DEED........................................................ 46
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THE FIRST SCHEDULE.................................................. 60
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THE COVENANTORS..................................................... 60
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THE SECOND SCHEDULE................................................. 61
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THE COMPANIES....................................................... 61
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THE SEVENTH SCHEDULE................................................ 62
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PART I.............................................................. 62
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THE VENDOR WARRANTIES............................................... 62
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PART II............................................................. 102
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THE PURCHASER WARRANTIES............................................ 102
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THE EIGHTH SCHEDULE................................................. 106
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LIMITATIONS OF LIABILITY............................................ 106
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PART I.............................................................. 106
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PART II............................................................. 110
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THIS AGREEMENT is made 1998
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BETWEEN:-
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(1) THE SEVERAL PERSONS whose names and addresses are set out in columns 1 and
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2 respectively of Parts 1 and 2 of the First Schedule ("the Vendors");
(2) WAM!NET (UK) LIMITED (company number 3469851) which is registered in
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England and whose registered office is at 8-10 New Fetter Lane, London EC4A
1RS ("the Purchaser"); and
(3) WAM!NET INC. which is incorporated in the State of Minnesota whose
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principal place of business is at 6100 West 110 Street, Minneapolis,
Minnesota 55438, U.S.A. ("WAM!NET").
WHEREAS:-
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(A) 4-Sight Limited ("the Company") is a private limited company incorporated
in England further information about which is contained in Part 1 of the
Second Schedule.
(B) The Vendors have full title guarantee, or are otherwise able to procure the
transfer, free from all liens, charges and encumbrances, of all the issued
shares in the capital of the Company in the numbers set opposite their
names in column 3 of the First Schedule.
(C) The Vendors have agreed to sell and the Purchaser and WAM!NET have agreed
to purchase all of the issued shares in the capital of the Company subject
to and on the terms and conditions set forth herein.
NOW IT IS HEREBY AGREED as follows:-
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1. DEFINITIONS
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In this Agreement the following expressions shall have the following
meanings unless the context requires otherwise:-
"the Audited Accounts" the audited consolidated balance sheet of the
Company and the Subsidiaries made up as at
the Balance Sheet Date and the audited
consolidated profit and loss account of the
Company and the Subsidiaries for the
financial year ended on that
1
date, and the notes, directors' report and
auditor's report which are annexed thereto (a
true and complete copy of which is attached
to the Disclosure Letter);
"the Balance Sheet Date" 30 September 1997;
"business day" a day other than a Saturday or Sunday or
public holiday in England and Wales or, if a
payment is to be made in US dollars, other
than a day on which banking institutions in
New York are authorised or obliged by law or
executive order to close;
"CAA 1990" the Capital Allowances Act 1990;
"the Companies Acts" statutes for the time being regulating the
activities of companies in the United
Kingdom;
"Completion" completion of the sale and purchase of the
Shares in accordance with the provisions of
Clause 7;
"the Completion Date" the date upon which Completion takes place;
"the Conditions" the conditions referred to in Clause 4;
"the Consideration" the consideration for the sale and purchase
of the Shares as set forth in Clauses 5 and
6;
"Consideration Shares" shares of common stock, par value of U.S.$
0.01 per share, in the capital of WAM!NET
credited as fully paid and non-assessable and
to be issued pursuant to Clauses 5 and 6;
"the Disclosure Letter" a letter of even date herewith from the
Warrantors to the Purchaser
2
disclosing certain exceptions to the
Vendor Warranties;
"Environmental Law" all laws, regulations, directives, treaties,
codes of practice, circulars, notices,
guidance notes and the like (whether of the
United Kingdom or elsewhere) concerning the
protection of or harm to the Environment or
to health of humans, animals or plants;
"Environmental Licence" any permit, licence, authorisation, consent
or other approval required by any
Environmental Law;
"FRS's" financial reporting standards issued or
adopted by the Accounting Standards Board;
"Intellectual Property" all inventions (whether patentable or not),
patents, utility models, designs (both
registered and unregistered and including
rights in semiconductor topographies),
copyright, trade and service marks (both
registered and unregistered) together with
all:-
(a) rights to the grant of and applications
for the same;
(b) corresponding applications, re-issues,
extensions, divisions and continuations
of the aforesaid; and
(c) supplementary protection certificates
in respect of patents;
and all similar or analogous rights
throughout the world for the full term
thereof;
3
"Intellectual Property Rights" rights in all Intellectual Property which is
listed in the Third Schedule;
"Investor Vendors" Geocapital IV LP, 3i Group Plc and Media Tec
Investments Limited;
"the Management Accounts" the unaudited consolidated management
accounts of the Company and the Subsidiaries
for the period from the Balance Sheet Date
to the Management Accounts Date (a true and
complete copy of which is attached to the
Disclosure Letter);
"the Management Accounts
Date" 31 December 1997;
"Material Breach" (i) in relation to the Vendor Warranties, an
event (save where the Purchaser has
consented in writing to any such event),
fact or circumstance having occurred which
renders materially untrue, inaccurate or
misleading any of the Vendor Warranties
given on the date of this Agreement or which
would render materially untrue, inaccurate
or misleading any of the Vendor Warranties
if they were repeated immediately prior to
Completion and which in either case
(assuming for these purposes (but not
otherwise) and if applicable that the Vendor
Warranties were to be repeated on
Completion) would give rise to the Purchaser
being entitled to make a Relevant Claim (if
quantifiable) for an amount in excess of
US$500,000 and, if not quantifiable, is in
respect of a matter which has an adverse
material effect on the value of the Shares
having regard to the Company's and the
Subsidiaries' business and financial
condition, taken as a whole; and
4
(ii) in relation to the Purchaser Warranties,
an event (save where the Vendors have
consented in writing to any such event), fact
or circumstance having occurred which renders
materially untrue, inaccurate or misleading
any of the Purchaser Warranties given on the
date of this Agreement or which would render
materially untrue, inaccurate or misleading
any of the Purchaser Warranties if they were
repeated immediately prior to Completion and
which in either case (assuming for these
purposes (but not otherwise) and if
applicable that the Purchaser Warranties were
to be repeated on Completion) would give rise
to the Vendors being entitled to make a
Relevant Claim (if quantifiable) for an
amount in excess of US$500,000 and, if not
quantifiable, is in respect of a matter which
has an adverse material effect on the value
of the Consideration Shares having regard to
the rights attached to the shares in WAM!NET
which are held by Edward Driscoll III and
Allen Witters;
"Millennium Compliant" the ability to process accurately all date
information (without any change in operations
or in procedures) whether before, during or
after 1st January 2000, including but not
limited to accepting, storing, retrieving and
processing date input, providing accurate
date output and performing accurate
calculations involving dates or portions of
dates in each case in a way which does not
create any ambiguity as to century;
5
"Opinion Letter" a letter to be dated as of Completion in the
agreed terms to the Vendors from Larkin,
Hoffman, Daly & Lindgren Ltd (US counsel to
WAM!NET);
"Options" options to subscribe for ordinary shares in
the capital of the Company, granted to the
Optionholders by the Company pursuant to the
4-Sight plc Executive Share Option Scheme and
the 4-Sight plc Employee Share Option Scheme;
"Option Assignments" deeds of sale and assignment in the agreed
terms under which the Optionholders will sell
and assign the Options to the Purchaser;
"Optionholders" those persons holding Options and listed in
the list in the agreed terms and marked "A";
"Option Payment" the sum of US$944,755;
"the Properties" the properties short particulars of which are
set out in the Fifth Schedule;
"the Purchaser's Disclosure a letter of even date herewith from the
Letter" Purchaser and WAM!NET to the Vendors
disclosing certain exceptions to the
Purchaser Warranties;
"the Purchaser's Group" the Purchaser and/or WAM!NET and/or any
subsidiary of the Purchaser or of WAM!NET;
"the Purchaser's Solicitors" Charles Russell of 8-10 New Fetter Lane,
London EC4A 1RS;
6
"the Purchaser Warranties" the statements contained in Part II of the
Seventh Schedule;
"Relevant Claim" a claim under the Purchaser Warranties or, as
the case may be, the Vendor Warranties and/or
of the Tax Deed;
"the Service Agreements" the service agreements to be entered into
between the Company and each of Andrew Steven
Baird, Lyndon David Stickley, David Anthony
Townend and Yorick Phoenix, such service
agreements to be in the agreed terms and
marked "B";
"the Shares" all of the issued shares in the capital of
the Company;
"SSAP's" statements of standard accounting practice
issued or adopted by the Accounting Standards
Board;
"the Subsidiaries" the companies particulars of which are set
out in Part 2 of the Second Schedule;
"the Tax Deed" the deed in the form set out in the Sixth
Schedule;
"Taxation" all forms of taxation, duties, imposts,
levies and rates whenever imposed and whether
of the United Kingdom or elsewhere and in
particular (but without prejudice to the
generality of the foregoing) including income
tax, withholding taxes, corporation tax,
capital gains tax, capital transfer tax,
inheritance tax, value added tax, customs
duties, excise duties, stamp duty, stamp duty
reserve tax, capital duty, national insurance
contributions, social security or other
similar contributions and generally any
7
other taxes, duties, imposts, levies or other
amounts (whether of a like nature or not) and
any interest, penalty or fine in connection
therewith;
"Tax Authority" any local, municipal, governmental, state,
federal, or other fiscal, revenue, customs or
excise authority, body or official anywhere
in the world entitled to enforce or collect
Taxation, including without limitation, the
UK Inland Revenue and HM Customs and Excise;
"the Taxes Act 1988" the Income and Corporation Taxes Act 1988;
"TCGA 1992" the Taxation of Chargeable Gains Act 1992;
"VATA 1994" the Value Added Tax Act 1994;
"the Vendor Warranties" the statements contained in Part I of the
Seventh Schedule;
"the Vendors' Solicitors" Faegre Benson Hobson Audley, 7 Pilgrim
Street, London EC4V 6DR;
"the Warrantors" Andrew Steven Baird, Lyndon David Stickley,
David Anthony Townend and Yorick Phoenix.
2. INTERPRETATION
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In this Agreement where the context so admits:-
2.1 references to statutory provisions shall be construed as references to
those provisions as amended or re-enacted or as their application is
modified by other provisions (whether before or after the date hereof)
from time to time and shall include references to any provisions of
which they are re-enactments (whether with or without modification)
but shall exclude any new provisions enacted after the date hereof to
the extent that any such provisions alter the law as at the date
hereof;
8
2.2 references to Clauses and Schedules are references to Clauses hereof
and Schedules hereto; references to sub-clauses are, unless otherwise
stated, references to sub-clauses of the Clause in which such
references appear; references to paragraphs, are, unless otherwise
stated, to paragraphs in the Schedule hereto in which such references
appear; references to sub-paragraphs are, unless otherwise stated, to
sub-paragraphs of the paragraph in which such references appear; and
references to this Agreement include the Schedules;
2.3 the plural includes the singular (and vice versa) and the masculine
includes the feminine;
2.4 the headings in this Agreement are for convenience only and shall not
affect the interpretation hereof;
2.5 save as otherwise provided in the first paragraph of paragraph 8 of
Part I of the Seventh Schedule (Taxation Matters), the expression "the
Company" when used in Part I of the Seventh Schedule (other than in
paragraphs 3(1) to 3(5) and 7(8)(d) inclusive of Part I of the Seventh
Schedule) shall be deemed to mean each of the Subsidiaries and the
Company so that the Vendor Warranties (other than the Vendor
Warranties in such paragraphs) shall apply to each of the Subsidiaries
as well as to the Company;
2.6 if any Vendor Warranty is qualified by the expression "so far as the
Vendor Warrantors are aware" or any similar expression, the Vendor
Warrantors shall be deemed to have made reasonable enquiry in respect
of the subject matter of the Vendor Warranty;
2.7 if any Purchaser Warranty is qualified by the expression "so far as
WAM!NET is aware" or any similar expression, WAM!NET shall be deemed
to have made reasonable enquiry in respect of the subject matter of
the Purchaser Warranty;
2.8 the words "subsidiary" and "holding company" shall have the meanings
given to them by the Companies Act 1985 as amended by the Companies
Act 1989;
2.9 the word "Environment" shall have the meaning given to it in s.1(2) of
the Environmental Protection Act 1990;
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2.10 any reference to a document being "in agreed terms" is to a document
in terms which have been agreed by the parties or on their behalf by
their respective Solicitors;
2.11 save as expressly provided to the contrary in this Agreement, all
warranties, covenants, agreements and obligations given or entered
into in this Agreement or in the Tax Deed by more than one person
are given or entered into jointly and severally.
3. SALE OF SHARES
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3.1 The Vendors severally shall sell with full title guarantee and the
Purchaser and WAM!NET shall purchase with effect from the Completion Date
the Shares free from all charges, liens, encumbrances, options, equities
and third party rights of any nature whatsoever and together with all
rights attaching or accruing thereto and in respect of each individual
Vendor the number of Shares set opposite his/its name in column 3 of the
First Schedule.
3.2 The Vendors (for themselves and on behalf of their nominees) hereby
severally waive all rights of pre-emption over any of the Shares conferred
either by the articles of association of the Company or in any other way.
3.3 Neither the Purchaser nor WAM!NET shall be obliged to complete the purchase
of any of the Shares unless the purchase of all the Shares is completed
simultaneously.
4. CONDITIONS
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4.1 This Agreement shall be conditional in all respects upon:-
4.1.1 the Commissioners of Inland Revenue notifying the Vendors to the
effect that they are satisfied that the sale and purchase of the
Shares will be such that no notice under section 703(3) of the Taxes
Act 1988 ought to be given in respect of them in such circumstances
that the provisions of section 707(2) of the Taxes Act 1988 will not
apply to any such notification;
4.1.2 the Commissioners of Inland Revenue notifying the Vendors to the
effect that they are satisfied that the exchange of shares provided
for by this Agreement will be effected for bona fide commercial
reasons and will not form part of any such scheme or arrangements as
are mentioned in section 137(1) TCGA 1992;
4.1.3 there having been no Material Breach of any Vendor Warranty;
10
4.1.4 there having been no Material Breach of any Purchaser Warranty;
4.1.5 the receipt by the Vendors' Solicitors of a certificate signed by a
duly authorised officer of WAM!NET to the effect that WAM!NET has
obtained financing of not less than US$125 million available, inter
alia, for the acquisition of the Shares and operation of the
Company's business after Completion, on terms and conditions
satisfactory to WAM!NET at its sole discretion; and
4.1.6 each of the Optionholders having irrevocably sold and assigned all
his rights under or in connection with the Options to the Purchaser
in accordance with the terms of the Option Assignments and
resolutions of the Optionholders and ordinary resolutions of the
Vendors (in their capacity as shareholders in the Company) in each
case in terms reasonably satisfactory to the Purchaser having been
passed (PROVIDED THAT the Warrantors shall (a) procure that offers
to the Optionholders are made by the Company for such rights and (b)
use their reasonable endeavours to procure that such resolutions and
ordinary resolutions are passed in each case within 3 days after
receipt by the Vendor's Solicitors of the certificate referred to in
sub-clause 4.1.5).
4.2 The Warrantors shall use their reasonable endeavours to procure
satisfaction of the Conditions set out in sub-clauses 4.1.1, 4.1.2, 4.1.3
and 4.1.6.
4.3 The Purchaser and WAM!NET shall use their reasonable endeavours to procure
satisfaction of the Conditions set out in sub-clauses 4.1.4 and 4.1.5.
4.4 In the event that the above Conditions are not satisfied or waived by all
the parties on or before 31 March 1998 this Agreement shall lapse and shall
be null and void and no party shall have liability to any other under this
Agreement (other than pursuant to sub-clauses 4.2, 4.3, 10.2 and Clause
17).
5. INITIAL CONSIDERATION
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5.1 Save as deemed reduced herein, the consideration for the sale and purchase
of the Shares shall be:-
5.1.1 in respect of the Shares to be purchased by the Purchaser, the cash
sum of US$19,055,245;
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5.1.2 in respect of the Shares to be purchased by WAM!NET, the issue by
WAM!NET of 500,000 Consideration Shares (appropriately adjusted to
reflect stock splits, stock dividends, reorganisations,
consolidations and similar changes); and
5.1.3 in respect of the Shares to be purchased by WAM!NET, the further
consideration referred to in Clause 6.
5.2 The cash sum referred to in sub-clause 5.1.1 shall be divisible among the
Vendors as set opposite each Vendor's name in column 4 of the First
Schedule and paid on Completion to the Vendors' Solicitors.
5.3 Each Vendor shall have issued to him by WAM!NET at Completion such number
of Consideration Shares referred to in sub-clause 5.1.2 as are opposite his
name in column 5 of the First Schedule.
5.4 The Vendors' Solicitors are authorised to receive on behalf of the Vendors
the cash sum referred to in sub-clause 5.1.1 and share certificates for the
Consideration Shares to be issued in accordance with sub-clause 5.1.2;
payment of the cash sum referred to in sub-clause 5.1.1 to the Vendors'
Solicitors shall be a good discharge to the Purchaser of its obligations
under sub-clause 5.2 and delivery to the Vendors' Solicitors of share
certificates of such number of Consideration Shares as are set opposite
each Vendor's name in column 5 of Part 1 or Part 2 (as the case may be) of
the First Schedule shall be a good discharge to WAM!NET of its obligations
under sub-clause 5.3.
6. DEFERRED CONSIDERATION
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6.1 The further consideration for the sale and purchase of the Shares shall be
the issue by WAM!NET of 150,000 Consideration Shares (appropriately
adjusted to reflect stock splits, stock dividends, reorganisations,
consolidations and similar changes) subject to and in accordance with the
following provisions of this Clause 6.
6.2 WAM!NET will issue further Consideration Shares to the Vendors (in the
relevant percentages set out in column 6 of the First Schedule) as
follows:-
6.2.1 125,000 Consideration Shares if the cumulative Non-US/Canada
Revenues (as hereinafter defined) in the period of 3 years from the
Completion Date equal or exceed US $50,000,000; and
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6.2.2 a further 25,000 Consideration Shares if the cumulative Non-
US/Canada Revenues in the period of 3 years from the Completion Date
equal or exceed US$70,000,000.
6.3 For the purpose of the foregoing, "Non-US/Canada Revenues" shall mean the
revenues attributable to customer sites located outside the USA and Canada
and receivable by any member of the Purchaser's Group (including after
Completion, the Company and the Subsidiaries).
6.4 Within 20 business days after the end of each three month period (the first
such period to begin on the Completion Date and end on the last day of the
second month after the month in which Completion occurs) during the 3 years
referred to above, WAM!NET shall prepare and deliver to the Vendors a
certificate (signed by an authorised officer of the WAM!NET) setting out
the cumulative Non-US/Canada Revenues as at the end of such 3 month period,
together with reasonable supporting documentation.
6.5 In the event the Vendors shall dispute any certificate delivered by WAM!NET
pursuant to sub-clause 6.4, they shall notify WAM!NET accordingly in
writing within 20 business days after the date of such certificate. In the
event that the Vendors do not dispute the certificate within 20 business
days of the date of such certificate, such certificate shall be deemed
approved.
6.6 In the event that any dispute regarding any such certificate shall not be
resolved within 30 business days after the date of such certificate, the
matter shall be submitted for determination by an independent certified
public accountant (not employed or otherwise connected, within the meaning
of Section 839 of the Taxes Act 1988, to any parties hereto), acting as
expert and not as arbitrator, agreed between WAM!NET and the Vendors
(failing which by the President for the time being of the Minnesota Society
of Certified Public Accountants). Such determination shall be final and
binding on all concerned. The fees of such accountant shall be borne
equally between WAM!NET on the one hand and the Vendors on the other.
6.7 Each of the Purchaser and WAM!NET (on behalf of itself and the Purchaser's
Group) undertakes with the Vendors that it will procure that the businesses
of the Purchaser's Group are conducted in good faith and in a way which is
not calculated or intended adversely to affect the value to the Vendors of
their contingent right to receive the deferred consideration or any part
thereof pursuant to this Clause 6, or the ability of WAM!NET to satisfy the
same and further undertakes to the Vendors,
13
but without prejudice to the generality of the foregoing, that until the
third anniversary of the Completion Date each of them:-
6.7.1 shall not enter into or require or cause or permit any member of the
Purchaser's Group to enter into:
(a) any artificial transaction which reduces or defers the level of
Non US/Canada Revenues; or
(b) any other transaction where either:-
(aa) the principal purpose of entering into that transaction
is to reduce or defer the level of Non-US/Canada
Revenues; or
(bb) the effect of entering into that transaction is to reduce
or defer the level of Non-US/Canada Revenues and such
transaction is not entered into in good faith in the best
interests of the Purchaser's Group; and
6.7.2 shall procure that the business and affairs of the Purchaser's Group
shall continue to be conducted on an arms' length basis for the
purpose of ensuring (so far as it is reasonably possible so to do)
that the level of Non-US/Canada Revenues is not distorted or
reduced.
6.8 The issue of further Consideration Shares, if any, pursuant to this Clause
6 shall be made within 14 business days of the next meeting of the board of
directors of WAM!NET to be held (and which shall be held as soon as
reasonably practicable) after the determination (pursuant to sub-clause
6.4, 6.5 or 6.6, as appropriate) that the relevant target for Non-US/Canada
Revenue has been met.
7. COMPLETION
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7.1 Completion shall take place at the office of the Vendors' Solicitors on or
before the third business day following the date on which the last
Condition shall have been satisfied or waived or at such other place or on
such other date as may be agreed between the Purchaser and the Vendors'
Solicitors on behalf of the Vendors, whereupon:-
7.1.1 the Warrantors shall severally deliver to the Purchaser:-
14
7.1.1.1 a certificate in the agreed terms duly signed by each
of them confirming that, inter alia, the Vendor
Warranties are, save as therein set out, true, accurate
and complete in all respects as at Completion and the
provisions of Clause 14 have been complied with and
dated as of Completion;
7.1.1.2 duly executed transfers of the Shares by the registered
holders thereof in favour of the Purchaser or its
nominees together with the relative share certificates;
7.1.1.3 the Tax Deed duly executed by the Warrantors as the
parties referred to therein as the Covenantors;
7.1.1.4 the resignation executed as a deed of S J Clearman as
director of the Company in which he shall acknowledge
in agreed terms that he has no claims against the
Company for compensation for loss of office or
otherwise howsoever;
7.1.1.5 all the statutory and other books of the Company and of
the Subsidiaries together with their certificates of
incorporation and common seals;
7.1.1.6 at the Properties, the deeds and documents constituting
title to the Properties insofar as they are in the
possession of or under the control of the Warrantors or
the Company or the Subsidiaries or any of them;
7.1.1.7 irrevocable powers of attorney in agreed terms executed
by each Vendor in favour of the Purchaser to enable the
Purchaser (pending registration of the transfers
referred to in sub-clause 7.1.1.2) to exercise all
voting and other rights attaching to the Shares and to
appoint proxies for this purpose;
7.1.1.8 the Service Agreements duly executed by each of Andrew
Steven Baird, Lyndon David
15
Stickley, David Anthony Townend and Yorick Phoenix (in
the case of the relevant Service Agreement in which the
relevant person is named as a party);
7.1.1.9 a letter in agreed terms from each of the Vendors in
which it or he confirms that there are no monies owed
to it or him by the Company or any of the Subsidiaries
other than, in the case of those Vendors who are
employees of the Company or a Subsidiary, customary
accrued expenses and unpaid salary in respect of the
period from the beginning of the month in which
Completion takes place to the Completion Date;
7.1.1.10 a certified copy of a deed of termination and release
in respect of the Subscription and Shareholders'
Agreement dated 12 March 1997 in the agreed terms duly
executed by or on behalf of each of the parties
thereto;
7.1.1.11 Option Assignments duly executed by or on behalf of
each of the Optionholders with the name of the
Purchaser entered as the Purchaser of the Options; and
7.1.1.12 Letters of Investment Intent (in the agreed terms) duly
executed by each Vendor;
7.1.2 the Warrantors shall procure that a board meeting (in the agreed
terms) of the Company (as the same may be required for effecting the
following) shall be held at which it shall be resolved that:-
7.1.2.1 the transfers in respect of the Shares be approved for
registration and that share certificates in respect thereof
be executed as deeds and delivered to the Purchaser and
WAM!NET subject only to the said transfers being duly
stamped;
7.1.2.2 the resignations of the person whose name is set out in
sub-clause 7.1.1.4 be tabled and approved;
16
7.1.2.3 Edward J. Driscoll III and James R. Clancy shall be
appointed directors of the Company;
7.1.2.4 the Service Agreements be approved;
7.1.3 against compliance with the foregoing provisions, WAM!NET or, as the
case may be, the Purchaser shall:-
7.1.3.1 deliver to the Vendors' Solicitors a certificate in the
agreed terms signed by a duly authorised officer of WAM!NET
confirming that, inter alia, the Purchaser Warranties are,
save as therein set out, true, accurate and complete in all
respects as at Completion and dated as of Completion;
7.1.3.2 deliver to the Vendors' Solicitors certificates for 500,000
Consideration Shares;
7.1.3.3 deliver to the Vendors' Solicitors a certified copy of a
Board Resolution of WAM!NET in the agreed terms
(authorising and issuing to the Vendors the Consideration
Shares referred to in sub-clause 5.1.2 and authorising and
reserving to the Vendors the Consideration Shares referred
to in Clause 6);
7.1.3.4 deliver to the Vendors' Solicitors the Opinion Letter;
7.1.3.5 deliver to the Vendors' Solicitors a counterpart of the Tax
Deed, duly executed by the Purchaser and WAM!NET;
7.1.3.6 deliver to the Vendors' Solicitors counterparts of the
Service Agreements, duly executed by the Company;
7.1.3.7 deliver to the Vendors' Solicitors counterparts of the
Letters of Investment Intent (in the agreed terms) duly
executed by WAM!NET;
7.1.3.8 telegraphically transfer such sum as will ensure that the
net sum of US$20,000,000 (being the cash sum of US
$19,055,245 referred to in sub-clause 5.1.1 and the Option
Payment) is credited to the Vendors' Solicitors account or
accounts (details of which are
17
to be notified to the Purchaser's Solicitors prior to
Completion).
7.2 If in any respect the obligations of the Warrantors under sub-clauses 7.1.1
and 7.1.2 are not complied with on the date set for Completion, the
Purchaser and WAM!NET may:-
7.2.1 defer Completion to a date not more than 28 days after that date (in
which case this sub-clause 7.2, apart from this sub-clause 7.2.1,
will apply in respect of the date to which Completion is deferred);
or
7.2.2 proceed to Completion as far as practicable (but not including
completion of the purchase of some only of the Shares); or
7.2.3 (without prejudice to their rights and remedies in respect of such
non-compliance) rescind this Agreement.
7.3 If in any respect the obligations of the Purchaser and WAM!NET under sub-
clause 7.1.3 are not complied with on the date set for Completion, the
Vendors may:-
7.3.1 defer Completion to a date not more than 28 days after that date (in
which case this sub-clause 7.3, apart from this sub-clause 7.3.1,
will apply in respect of the date to which Completion is deferred);
or
7.3.2 proceed to Completion as far as practicable (but not including
completion of the sale of some only of the Shares); or
7.3.3 (without prejudice to their rights and remedies in respect of such
non-compliance) rescind this Agreement.
8. WARRANTIES
----------
8.1 The Warrantors hereby jointly and severally warrant to the Purchaser and
WAM!NET that subject to Clause 9 and save as fairly disclosed in the
Disclosure Letter the Vendor Warranties are at the date hereof true,
accurate and complete in all respects.
8.2 The Warrantors jointly and severally undertake to forthwith disclose in
writing to the Purchaser any matter or thing which may become known to them
after the date hereof and prior to Completion which is inconsistent with
any of the Vendor Warranties.
18
8.3 Each of the Vendors (but excluding the Investor Vendors as regards sub-
clause 8.3.6) hereby warrants severally to the Purchaser and WAM!NET that:-
8.3.1 he has full power and authority to enter into and perform this
Agreement and each other document to be exercised and delivered by
him at Completion other than the Tax Deed (collectively, "the
Completion Agreements");
8.3.2 the Completion Agreements, when executed, will constitute valid and
binding obligations upon him in accordance with their terms;
8.3.3 the execution and delivery of and performance by him of his
obligations under the Completion Agreements and the transactions
contemplated thereby will not result in a breach of any provision of
the memorandum and articles of association or other constitutional
documents of such Vendor or a breach of any order, judgment or
decree of any court to which he is a party or by which he is bound;
8.3.4 he is entitled to sell and transfer to the Purchaser the Shares set
opposite his name in column 3 of the First Schedule on the terms of
this Agreement with full title guarantee and without the consent of
any third party;
8.3.5 no person has the right (whether exercisable now or in the future
and whether contingent or not but excluding the pre-emption rights
which have been waived by the Vendors under sub-clause 3.2) to call
for the sale or transfer of any of the Shares set opposite his name
in column 3 of the First Schedule under any option or other
agreement (including conversion rights and save as aforementioned
and pre-emption rights) and there are no claims, charges, liens,
equities or encumbrances on such Share(s);
8.3.6 the execution and delivery of and performance by him of his
obligation under the Completion Agreements and the transactions
contemplated thereby will not result in a breach of any provision of
the memorandum and articles of association of the Company.
8.4 It is acknowledged and agreed by each of the parties hereto that the
Warranties contained in sub-clause 8.3 are the only warranties (other than
warranties as to title to their respective holdings in any of the Shares)
given by the Investor Vendors and, for the avoidance of doubt, the Investor
Vendors shall have no liabilities in respect of any of the matters
19
warranted by the Warrantors whether under sub-clause 8.1 or Part 1 of the
Seventh Schedule or otherwise.
8.5 Each of the Warrantors hereby warrants severally to the Purchaser and
WAM!NET that:-
8.5.1 he has full power and authority to enter into and perform the Tax
Deed;
8.5.2 the Tax Deed, when executed, will constitute valid and binding
obligations upon him in accordance with its terms;
8.5.3 the execution and delivery of and performance by him of his
obligations under the Tax Deed and the transactions contemplated
thereby will not result in a breach of any provision of the
memorandum and articles of association or other constitutional
documents of the Company or, if appropriate, such Warrantor or a
breach of any order, judgment or decree of any court to which he is
a party or by which he is bound.
8.6 Any amount payable hereunder by virtue of a breach of any of the warranties
or undertakings in sub-clauses 8.1, 8.2, 8.3, 8.4 or 8.5 shall be deemed to
be a reduction in the amount of the Consideration received by the Investor
Vendors or Warrantors (as the case may be) for the Shares.
9. WARRANTORS' LIMITATIONS OF LIABILITY
------------------------------------
9.1 The provisions of Part I of the Eighth Schedule shall, subject to sub-
clause 9.2, operate to limit the liability of the Warrantors under or in
connection with the Vendor Warranties and under or in connection with the
Tax Deed.
9.2 The provisions of paragraphs 1 to 5 (inclusive) of Part I of the Eighth
Schedule shall not operate to limit the liability of the Warrantors under
or in connection with the Vendor Warranties or under or in connection with
the Tax Deed (and the provisions of such paragraphs shall not apply) where
the liability in question arises as a result of fraud on the part of any of
the Warrantors, or where the liability in question relates to a matter
which has been deliberately concealed or withheld by any of the Warrantors.
10. PURCHASER'S REMEDIES
--------------------
20
10.1 The Warrantors hereby jointly and severally agree with the Purchaser and
WAM!NET that in the event of any breach of the Vendor Warranties and
subject always to sub-clause 9.1 and Part 1 of the Eighth Schedule, they
will pay to the Purchaser or WAM!NET on demand:-
10.1.1 the amount necessary to put the Company and the Subsidiaries into
the position which would have existed if the Vendor Warranties had
not been so breached; and
10.1.2 all reasonable costs and expenses (including legal costs on an
indemnity basis) incurred by the Purchaser, WAM!NET or the Company
or any of the Subsidiaries as a result of such breach.
The rights of the Purchaser and WAM!NET referred to in this sub-clause 10.1
shall not restrict any of the rights of the Purchaser and WAM!NET or the
ability of the Purchaser and WAM!NET to claim damages on any basis
available to them in the event of any breach of the Vendor Warranties.
10.2 The Warrantors hereby jointly and severally agree with the Purchaser and
WAM!NET (and subject always to sub-clause 9.1 and Part 1 of the Eighth
Schedule) to indemnify and keep indemnified each of the Purchaser and
WAM!NET (for themselves and as trustees for the Company and its
Subsidiaries) against any costs, damages, losses and liabilities
(including, without limitation, any liability to Taxation) suffered or
incurred by the Purchaser, WAM!NET, the Company or any Subsidiary by reason
of the implementation of the arrangements contemplated by the Option
Assignments, including without limitation the offers made to the
Optionholders and payments thereto. If any payment hereunder is subject to
Taxation in the hands of the recipient, such further payment shall be made
as is necessary to ensure that the recipient is put in the same position as
if no such Taxation had been due.
10.3 The Purchaser and WAM!NET may at any time prior to Completion (without any
liability on their part) rescind this Agreement by notice in writing to the
Vendors to that effect as soon as reasonably practicable after the
Purchaser or WAM!NET becomes aware of any Material Breach of any Vendor
Warranties.
10.4 The rights, including any such right of rescission conferred on the
Purchaser and WAM!NET by this Clause, shall be in addition to and without
prejudice to all other rights and remedies available to the Purchaser and
WAM!NET.
21
10.5 The Purchaser and WAM!NET may release or compromise the liability of any of
the Warrantors hereunder or grant to any Warrantor time or other indulgence
without affecting the liability of any other Warrantor hereunder.
10.6 No failure to exercise, and no delay in exercising on the part of the
Purchaser and WAM!NET any right or remedy in respect of any Vendor Warranty
shall operate as a waiver of such right, remedy or Vendor Warranty nor
shall a single or partial exercise of such right or remedy preclude the
exercise of such or any other right or remedy.
10.7 The Warrantors hereby agree with the Purchaser and WAM!NET (for themselves
and as trustees of the Company and the Subsidiaries) to waive any right
which they may have in respect of any misrepresentation, inaccuracy or
omission in or from any information or advice supplied or given by the
Company or the Subsidiaries or any of their officers and employees or
professional advisers in enabling the Warrantors to give the Vendor
Warranties and the Warrantors and their professional advisers to prepare
the Disclosure Letter.
11. PURCHASER WARRANTIES
--------------------
11.1 WAM!NET and the Purchaser hereby jointly and severally warrant to the
Vendors that:-
11.1.1 the Purchaser Warranties are at the date hereof true, accurate and
complete in all respects; and
11.1.2 they will forthwith disclose in writing to the Vendors any matter
or thing which may become known to them after the date hereof and
prior to Completion which is inconsistent with any of the Purchaser
Warranties.
12. PURCHASER'S LIMITATIONS OF LIABILITY
------------------------------------
12.1 The provisions of Part II of the Eighth Schedule shall, subject to sub-
clause 12.2 operate to limit the liability of the Purchaser and WAM!NET
under or in connection with the Purchaser Warranties.
12.2 The provisions of paragraphs 1 to 4 (inclusive) of Part II of the Eighth
Schedule shall not operate to limit the liability of the Purchaser (and the
provisions of such paragraphs shall not apply) under or in connection with
any of the Purchaser Warranties where the liability in question arises as a
result of fraud on the part of the Purchaser or WAM!NET or where
22
the liability in question relates to the matter which has been deliberately
concealed or withheld by the Purchaser or WAM!NET.
13. VENDORS' REMEDIES
-----------------
13.1 The Purchaser and WAM!NET hereby jointly and severally agree with the
Vendors that in the event of any breach of the Purchaser Warranties and
subject always to sub-clause 12.1 and Part II of the Eighth Schedule, they
will pay to the Vendors on demand:-
13.1.1 the amount necessary to put the Vendors into the position which
would have existed if the Purchaser Warranties had not been so
breached; and
13.1.2 all reasonable costs and expenses (including legal costs on an
indemnity basis) incurred by the Vendors as a result of such
breach;
The rights of the Vendors referred to in this sub-clause 13.1 shall not
restrict any of the rights of the Vendors or the ability of the Vendors to
claim damages on any basis available to them in the event of any breach of
the Purchaser Warranties.
13.2 The Vendors may at any time prior to Completion (without any liability on
their part) rescind this Agreement by notice in writing to the Purchaser
and WAM!NET to that effect as soon as reasonably practicable after the
Vendors become aware of any Material Breach of any Purchaser Warranties.
13.3 The rights including any such right of rescission conferred on the Vendors
by this Clause shall be in addition to and without prejudice to all other
rights and remedies available to the Vendors.
13.4 The Vendors may release or compromise the liability of the Purchaser or
WAM!NET hereunder or grant to either of them time or other indulgence
without affecting the liability of the other.
13.5 No failure to exercise, and no delay in exercising on the part of the
Vendors any right or remedy in respect of any Purchaser Warranty shall
operate as a waiver or such right, remedy or Purchaser Warranty nor shall a
single or partial exercise of such right or remedy preclude the exercise of
such or any other right or remedy.
14. ACTIONS PENDING COMPLETION
--------------------------
23
The Warrantors undertake to the Purchaser that, in the period from the date
of this Agreement to Completion, the Company and each of the Subsidiaries
shall (except with the prior written consent of the Purchaser) which
consent shall not be unreasonably withheld or delayed:-
14.1 continue its business in the ordinary and usual course and so as to
maintain the same as a going concern;
14.2 not enter into any contract, transaction or arrangements with the Vendors
or any person connected (as such term is defined in section 839 of the
Taxes Act 1988) with the Vendors (other than in respect of the payment of
any remuneration properly accrued due or repayment of business or other
expenses properly incurred);
14.3 save for any increases to which any director or employee is contractually
entitled or which are made pursuant to any review policy currently in force
and which are disclosed in the Disclosure Letter not increase or agree to
increase the remuneration (including, without limitation, pension
contributions, bonuses, commissions and benefits in kind) of its directors
or employees (other than minor increases which the Warrantors shall notify
to the Purchaser as soon as reasonably possible) or provide or agree to
provide any gratuitous payment or benefit in excess of (Pounds)5,000 to any
such person or any of their dependants and no employees (other than casual
employees or employees whose remuneration does not exceed (Pounds)30,000
per annum) shall be engaged or dismissed or have their terms of employment
altered in the case of the Warrantors, in any respect and, in the case of
any other employee, in any material respect;
14.4 not amend or discontinue any of the Pension Schemes or communicate to any
employee any plan, proposal or intention to amend, discontinue or exercise
any discretion in relation to any of the Pension Schemes;
14.5 not acquire or agree to acquire (other than the proposed acquisition of a
new accounting and administration system and the proposed lease of the
"Midland Bank building" in Bournemouth, on the terms details of which are
set out in the Disclosure Letter) or dispose or agree to dispose of any
material asset (other than in the normal course of business) or enter into
any contract or arrangement involving expenditure or liabilities in excess
of (Pounds)50,000;
14.6 not make any payments out of any bank or deposit account exceeding in
aggregate (Pounds)50,000 (except for payments in the normal course of
business);
24
14.7 not create or agree to create any further security over or encumber or
agree to encumber any of its assets or redeem or agree to redeem any
existing security or give or agree to give any guarantees or indemnities;
14.8 not alter or agree to alter the terms of any existing borrowing
facilities or arrange additional borrowing facilities or incur other
indebtedness for borrowed money (other than pursuant to any existing
borrowing facilities);
14.9 not alter or agree to alter or terminate or agree to terminate any
agreement to which it is a party (and which involves expenditure of more
than (Pounds)50,000 in total) or enter into any unusual or abnormal
contract or commitment save for the proposed acquisition of a new
accounting and administration system and the proposed lease of the
"Midland Bank building" in Bournemouth, on the terms details of which are
set out in the Disclosure Letter;
14.10 enter into (save as a defendant, having given prompt written notice
thereof to the Purchaser) any litigation or arbitration proceedings
(other than routine debt collection or as disclosed in the Disclosure
Letter);
14.11 not declare, pay or make any dividend or other distribution of capital
within the meaning of the Taxes Act 1988 nor redeem or purchase any of
its shares;
14.12 not create, allot or issue any share or loan capital or other securities
or acquire any shares or other interest in any other company;
14.13 not pass any resolution in general meeting other than to re-register the
Company as a private limited company;
14.14 continue its insurance policies and do nothing to render such policies
void or voidable;
14.15 make any change in any method or practice of accounting except for any
such change required by reason of law or regulation; and
14.16 give all reasonable co-operation to the Purchaser (where applicable at
the Purchaser's expense) so as to ensure a smooth, orderly and efficient
continuation of management of the Company and the Subsidiaries after
Completion.
15. RESTRICTIVE COVENANTS
---------------------
25
15.1 Each of the Warrantors hereby undertakes severally with the Purchaser that
he will not whether directly or indirectly or whether on his own account or
for the account of any other person, firm or company, or as agent,
director, partner, manager, employee, consultant or shareholder of or in
any other person, firm or company:-
15.1.1 during the period from the date hereof to two years and six months
after the Completion Date carry on or be engaged or concerned or
interested in any business which is directly or indirectly in
competition with any business of the Company or any of the
Subsidiaries carried on at the date of this Agreement in such
countries in which such business is carried on at the date of this
Agreement (any such business being referred in this Clause 15 to as
a "Restricted Business");
15.1.2 during the period from the date hereof to two years and six months
after the Completion Date seek in competition with any Restricted
Business to procure orders from, or do business with, any person
firm or company who has been a customer of the Company or any of
the Subsidiaries at any time during the period of twelve months
prior to the Completion Date; or
15.1.3 during the period from the date hereof to two years and six months
after the Completion Date, solicit or endeavour to entice away from
or discourage from being employed by the Company or any of the
Subsidiaries, any person who is at the date hereof an employee of
the Company or any of the Subsidiaries or whom any of such
companies may at the date hereof have agreed to engage as an
employee; or
15.1.4 during the period from the date hereof to two years and six months
after the Completion Date, attempt to employ or negotiate or
arrange the employment of or engagement by any other person of, any
person who is at the date hereof or, at the Completion Date shall
be an employee of the Company or any of the Subsidiaries or whom
any of such companies may at the date hereof have agreed to engage
as an employee.
15.2 It is agreed by the parties that, whilst the restrictions set out in sub-
clause 15.1 are considered fair and reasonable, if it should be found that
any of the restrictions be void as going beyond what is fair and reasonable
in all the circumstances and if by deleting part of the wording it would
not be
26
void, then such deletions shall be made as shall render sub-clause
15.1 valid and enforceable.
15.3 None of the restrictions in sub-clause 15.1.1 shall be deemed to restrict
or prevent any of the Warrantors from being interested in any business
solely as the owner for investment of securities dealt in on a recognised
stock exchange or the NASDAQ Stock Market and not exceeding 5 per cent in
nominal value of the securities of that class or as the owners of the
Consideration Shares or as officers or employees of the Purchaser's Group.
15.4 The restrictions contained in sub-clause 15.1 shall not take effect until
the day after particulars of this Agreement has been duly furnished to the
Director General of Fair Trading pursuant to Section 24 Restrictive Trade
Practices Act 1976 (unless such restrictions shall take effect without the
need for such furnishing in which case such restrictions shall take effect
from Completion).
16. GUARANTEE
---------
16.1 In consideration of the undertaking by the Vendors to pay WAM!NET the sum
of (Pounds)1 upon written request by WAM!NET, WAM!NET irrevocably and
unconditionally guarantees to the Vendors the due and punctual performance
of each obligation of the Purchaser whether to be performed before on or
after Completion contained in this Agreement. WAM!NET shall pay to the
Vendors from time to time on demand any sum of money which the Purchaser is
at any time liable to pay to the Vendors or any of them under or pursuant
to this Agreement and which is then due and had not been paid at the time
the demand is made. WAM!NET's obligations under this sub-clause 16.1 are
primary obligations and not those of a mere surety. If an obligation of
the Purchaser is void, voidable or unenforceable for any reason, WAM!NET's
obligations under sub-clause 16.1 are unaffected and WAM!NET shall perform
the Purchaser's obligations as if it were primarily liable for the
performance.
16.2 WAM!NET's obligations under sub-clause 16.1 are continuing obligations and
are not satisfied, discharged or affected by an intermediate payment or
settlement of account by, or a change in the constitution or control of, or
the insolvency of, or bankruptcy, winding up or analogous proceedings
relating to, the Purchaser.
16.3 WAM!NET's liability under sub-clause 16.1 is not affected by any
arrangements which any of the Vendors may make with the Purchaser or with
another person which (but for sub-clause 16.3) might operate to
27
diminish or discharge the liability of WAM!NET or otherwise provide a
defence to a surety.
16.4 Without affecting the generality of sub-clause 16.3, the Vendors may at
any time as they think fit and without reference to WAM!NET:-
16.4.1 grant a time for payment or grant another indulgence or agree to an
amendment, variation, waiver or release in respect of an obligation of
the Purchaser under this Agreement;
16.4.2 give up, deal with, vary, exchange or abstain from perfecting or
enforcing other securities or guarantees held by any of the Vendors;
16.4.3 discharge a party to other securities or guarantees held by any of the
Vendors and realise all or any of those securities or guarantees; and
16.4.4 compound with, accept compositions from and make other arrangements with
the Purchaser or a person or persons liable on other securities or
guarantees held or to be held by the Vendors.
16.5 WAM!NET's liability under sub-clause 16.1 is not affected by the
avoidance of an assurance, security or payment or a release, settlement
or discharge which is given or made on the faith of an assurance,
security or payment, in either case, under an enactment relating to
bankruptcy or insolvency.
17. ANNOUNCEMENTS AND CONFIDENTIALITY
---------------------------------
17.1 Other than to the extent required by law or by any recognised stock
exchange or regulatory or governmental body having jurisdiction (and
then provided that the announcement or disclosure is only made after
consultation with the other parties), or in furtherance of the funding
proposed by WAM!NET and referred to in sub-clause 4.1.6, no announcement
or disclosure concerning the matters provided for in this Agreement
shall be made or issued by or on behalf of the Vendors or the Purchaser
without the prior written approval of the other (such approval not to be
unreasonably withheld or delayed).
17.2 The Vendors each severally agree to keep secret and confidential and not
to use, disclose or divulge to any third party or to enable or cause any
person to become aware of (except for the purposes of the business of
the Company) any confidential information obtained by such Vendor in
connection with the transaction contemplated by this Agreement and
28
relating to the Purchaser's Group (including after Completion, the
Company and the subsidiaries) including but not limited to lists of
customers, reports, notes, memoranda and all other documentary records
pertaining to the Purchaser's Group (including after Completion, the
Company and the subsidiaries) or their respective business affairs or
products.
17.3 The restrictions in sub-clause 17.2 shall cease to apply to any such
confidential information which:-
17.3.1 at the time of disclosure was in the public domain; or
17.3.2 after disclosure comes into the public domain other than by
breach of the undertakings contained in sub-clause 17.2; or
17.3.3 was proved to be known to the relevant party at the time of
disclosure provided that the source of such information was not
subject to any agreement or other duties relating to
confidentiality in respect thereof.
29
18. REGISTRATION RIGHTS
-------------------
18.1 Registration Rights
-------------------
If WAM!NET, at any time during the period beginning on the date six
months from the date WAM!NET completes a public offering of its equity
securities and ending on the date seven years from Completion, proposes
to register the sale of any of its securities (except debt securities,
including debt securities convertible into equity securities) under the
Securities Act of 1933 ("the Act"), (except by a claim of exemption or
registration statement on a form (i) that does not permit the inclusion
of shares by its security holders, (ii) that relates to an employee
benefit plan or (iii) that relates to a combination, acquisition or
disposition involving one or more other parties), WAM!NET will give
written notice to all registered holders of Consideration Shares of its
intention to do so and, on the written request of any registered holders
of Consideration Shares received by WAM!NET within fifteen (15) days
after delivery by WAM!NET of any such notice, WAM!NET will use its best
efforts to cause all such Consideration Shares, the holder of which
shall have requested the registration or qualification thereof, to be
included in such registration statement proposed to be filed by WAM!NET.
If any such registration shall be underwritten in whole or in part,
WAM!NET may require that the Consideration Shares requested for
inclusion pursuant to this paragraph be included in the underwriting on
the same terms and conditions as the securities otherwise being sold
through the underwriters. In the event that, in the good faith judgment
of the managing underwriter of such public offering, the total number of
securities requested to be included in such registration exceeds the
number which can be sold in an orderly manner in such offering, WAM!NET
need include in such registration only such number of Consideration
Securities and other securities requested to be included in such
registration pro rata among the holders of such Consideration Securities
and other securities on the basis of the number of shares requested to
be included in the registration by each such holder, provided that the
inclusion of Consideration Securities or other shares held by persons
requesting registration shall not reduce the number of WAM!NET
securities being offered in the registration.
18.2 Miscellaneous Registration Rights Provisions
--------------------------------------------
18.2.1 Notwithstanding anything herein to the contrary, WAM!NET may delay
filing a registration statement, and may withhold or terminate efforts
to cause the registration statement to become effective, if WAM!NET
determines in good faith that such registration might adversely affect
WAM!NET.
30
18.2.2 From time to time WAM!NET shall amend or supplement, at WAM!NET's
expense, the prospectus used in connection therewith to the extent
necessary in order to comply with applicable law. If, after the
registration statement becomes effective, WAM!NET advises the holders of
registered Consideration Shares that WAM!NET considers it appropriate
for the registration statement or any prospectus related thereto to be
amended, the holders of such Consideration Shares shall immediately
suspend any further sales of their registered Consideration Shares until
WAM!NET advises them that the registration statement or prospectus has
been amended.
18.2.3 The holder shall furnish in writing to WAM!NET all information as may be
reasonably requested by WAM!NET or required under applicable securities
law in connection with any registration of Consideration Shares,
including but not limited to, the proposed method of sale or other
disposition of the registered Consideration Shares and any compensation
payable in connection therewith. The holder shall comply with the
provisions of applicable securities law in connection with the
registration of Consideration Shares and the disposition thereof.
18.2.4 All expenses incurred in connection with any registration, qualification
or compliance pursuant to this Agreement, including without limitation,
all registration, filing and qualification fees, printing expenses, fees
and disbursements of counsel for WAM!NET, and expenses of any special
audits incidental to or required by such registration, shall be borne by
WAM!NET, provided however, that the person for whose account the
Consideration Shares covered by such registration are sold shall bear
underwriting commissions, discounts or fees relating to Consideration
Shares, fees of holders' legal counsel and fees and expenses of any
registration begun, the request for which has been subsequently
withdrawn by the holders, in which case such expenses shall be borne by
the holders requesting such withdrawal.
18.2.5 In connection with any registration statement in which the holder's
Consideration Shares are included, the holder will indemnify WAM!NET,
its directors and officers and each person who controls WAM!NET, against
any losses, claims, damages, liabilities and expenses resulting from any
untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged
omission of a
31
material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such
untrue statement omission is contained in or should be contained in any
information furnished in writing by the holder.
18.2.6 WAM!NET's obligation to proceed with registration under this Agreement
shall terminate on the date on which, in the opinion of legal counsel to
WAM!NET, all common stock of WAM!NET that could be registered under the
United States Securities Act of 1933, as amended, or applicable United
States state securities laws (including Consideration Shares)
("Registrable Securities") held by a holder may be transferred within a
90-day period, or reissued without restriction, in compliance with the
provisions of Rule 144 or 145 under the Act, or any successor provision.
18.2.7 WAM!NET may, at its discretion and in lieu of registering the
Registrable Securities (including Consideration Shares) as provided
herein, repurchase such Registrable Securities (including Consideration
Shares) at "Fair Market Value", as defined below,at any time after
receiving a request for registration of such Registrable Securities. For
purposes of this sub-clause, "Fair Market Value" shall be determined on
the date WAM!NET receives the request for registration.
18.2.8 "Fair Market Value" means, with respect to WAM!NET's Common Stock, as of
any date: (i) if the Common Stock is listed or admitted to unlisted
trading privileges on any national securities exchange or is not so
listed or admitted but transactions in the Common Stock are reported on
the Nasdaq National Market, the reported closing price of the Common
Stock on such exchange or by the Nasdaq National Market as of such date
(or, if no shares were traded on such day, as of the next preceding day
on which there was such a trade); or (ii) if the Common Stock is not so
listed or admitted to unlisted trading privileges or reported on the
Nasdaq National Market, and bid and asked prices therefor in the over-
the-counter market are reported by Nasdaq or National Quotation Bureau,
Inc. (or any such comparable reporting service), the mean of the closing
bid and asked prices as of such date, as so reported by Nasdaq, or, if
no so reported thereon, as reported by National Quotation Bureau, Inc.
(or such comparable reporting services); or (iii) if the Common Stock is
not so listed, or admitted to unlisted trading privileges, or reported
on the Nasdaq National Market, and such bid and asked prices are not so
reported by Nasdaq or National Quotation Bureau Inc. (or any comparable
reporting service), such price as WAM!NET's Board
32
of Directors determines in good faith in the exercise of its
reasonable discretion.
18.2.9 Upon request of the managing underwriter of any public offering of
WAM!NET's securities, each holder of Consideration Shares agrees to
sign and deliver an appropriate agreement limiting such holder's
right to dispose of the Consideration Shares during the course of,
and for a reasonable time following, such public offering;
provided, however, that such agreement (i) is in customary form
appropriate to such transaction, (ii) is the same form required by
such underwriter from management and other principal shareholders
of WAM!NET, and (iii) has a duration not exceeding 180 days
following the effective date of the registration statement.
19. FURTHER ASSURANCE
-----------------
The Vendors and the Purchaser and WAM!NET shall do and execute, and
shall use their respective best endeavours to procure any other
necessary party to do and execute, all such further acts, things, deeds
and documents as may be necessary to give effect to the terms of this
Agreement.
20. WAIVER AND RELEASE
------------------
20.1 No waiver by any of the parties of any of the requirements hereof or of
any of its rights hereunder shall have effect unless given in writing
and, in the case of a corporate party, signed by a director or other
duly authorised officer of such party.
20.2 The Purchaser may release or compromise the liability of any Vendor
hereunder without affecting the liability of any other Vendor.
21. ENTIRE AGREEMENT AND VARIATIONS
-------------------------------
21.1 This Agreement (together with the documents referred to herein)
constitutes the entire Agreement between the parties with respect to all
matters referred to herein.
21.2 No variations hereof shall be effective unless made in writing and
signed by each of the parties and, in the case of a corporate party, by
a director or other duly authorised officer of such party.
21.3 Each of the Purchaser and WAM!NET hereby acknowledges that it has not
been induced to enter into this Agreement by any representation or
33
warranty other than the Vendor Warranties and the warranties set forth
in Clause 8.
21.4 The Vendors hereby acknowledge that they have not been induced to enter
into this Agreement by any representation or warranty other than the
Purchaser Warranties.
22. COSTS
-----
22.1 Save where otherwise specifically stated, each party to this Agreement
shall pay its own costs of and incidental to this Agreement (and its
preparation and negotiation) and the sale and purchase hereby agreed to
be made.
22.2 The Purchaser shall pay all stamp duty in respect of the transfer of the
Shares.
23. COUNTERPARTS
------------
This Agreement may be entered into in any number of counterparts and by
the parties to it on separate counterparts each of which when so
executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
24. ASSIGNMENT
----------
24.1 This Agreement shall be binding upon and enure for the benefit of the
successors and permitted assigns of the parties but shall not be
assignable save as stated below or otherwise with the agreement of all
the parties. Any assignment in breach of this sub-clause 24.1 shall be
void and of no force or effect.
24.2 The Purchaser (and any permitted assignee) may at any time assign all or
any of its rights and benefits under this Agreement (including the
Vendor Warranties and any cause of action arising from any of them) to
any member of the Purchaser's Group provided that, if any member to whom
such rights and benefits are assigned ceases to be a member of the
Purchaser's Group, it shall re-assign the rights and benefits to the
Purchaser or another member of the Purchaser's Group.
24.3 Any Vendor may at any time assign all or any of its rights to receive
Consideration Shares under Clause 6 to employee(s) of the Company and/or
any of its subsidiaries from time to time and (with the prior written
consent of WAM!NET) to any other person PROVIDED THAT in any event such
assignment shall be conditional on an opinion of Counsel for
34
WAM!NET being received on terms reasonably acceptable to WAM!NET that
such assignment is exempt from registration under the US Securities Act
of 1933, as amended and under any applicable US state securities laws.
24.4 Any Vendor may at any time sell its Consideration Shares and assign the
rights thereto to any other Vendor subject to the condition set out in
the proviso to sub-clause 24.3.
25. MISCELLANEOUS
-------------
25.1 The provisions of this Agreement insofar as the same shall not have been
performed at Completion (including but not limited to the Vendor
Warranties and the Purchaser Warranties) shall remain in full force and
effect notwithstanding Completion.
25.2 Time shall be of the essence of this Agreement, both as regards the
dates and periods mentioned and as regards any dates and periods which
may be substituted for them in accordance with this Agreement or by
agreement in writing between the parties.
25.3 If any provision of this Agreement is held to be invalid or
unenforceable, then such provision shall so far as it is invalid or
unenforceable be given no effect and shall be deemed not to be included
in this Agreement but shall not otherwise render any of the remaining
provisions of this Agreement invalid or unenforceable.
25.4 If any matter referred to in this Agreement requires the approval or
agreement of the Vendors, such approval or agreement shall be deemed to
have been given by all of the Vendors if it has been given in writing by
such number of Vendors who, at the date hereof, hold 75% or more of the
Shares. For the purposes of this Agreement, the approval or agreement of
a deceased Vendor shall be deemed to have been given if given by such
deceased Vendor's personal representatives.
26. NOTICES
-------
26.1 Any notice to be given hereunder shall either be delivered personally
(including by courier) or sent by first class recorded delivery post (if
to an addressee in the same country as the sender) or airmail or fax to
the party to be served at the address set out opposite his name in the
Preamble or in the First Schedule (as the case may be) or relevant fax
number (as the case may be) notified from time to time to the other
parties for this purpose) or such other address or relevant fax number
(as the case may be) as may from time to time be notified to the other
parties
35
hereto for this purpose. A notice shall be deemed to have been served as
follows:-
26.1.1 if personally delivered, at the time of delivery;
26.1.2 if posted by overland mail at the expiration of two business days
after the envelope containing the same was delivered into the
custody of the postal authorities;
26.1.3 if posted by airmail at the expiration of five business days
after the envelope containing the same was delivered into the
custody of the postal authorities;
26.1.4 if sent by fax, at the expiration of one business day after the
same was properly despatched (provided that a copy of the notice
was also sent by first class recorded delivery post or airmail
within 24 hours of the fax transmission).
26.2 In proving such service it shall be sufficient to prove that personal
delivery was made, or that the envelope containing such notice was properly
addressed and delivered into the custody of the postal authority as a pre-
paid first class recorded delivery letter, or airmail letter, or that the
fax was properly addressed and despatched and the sender's machine shall
have indicated that the message has been received at the addressee's
machine, as the case may be.
27. LAWS AND JURISDICTION
---------------------
27.1 The construction, validity and performance of this Agreement (other than
Clause 18) shall be governed by the laws of England. The construction,
validity and performance of Clause 18 shall be governed by US federal law
and the laws of the State of Minnesota.
27.2 In relation to any legal action or proceedings to enforce this Agreement or
arising out of or in connection with this Agreement or the Tax Deed, each
party irrevocably submits to the non-exclusive jurisdiction of the English
courts.
27.3 Geocapital IV L.P. hereby irrevocably appoints the Vendors' Solicitors as
its agent for service of process in England in relation to any disputes or
proceedings arising out of or in connection with this Agreement.
27.4 WAM!NET hereby irrevocably appoints the Purchaser's Solicitors as its agent
for service of process in England in relation to any disputes or
36
proceedings arising out of or in connection with this Agreement or the Tax
Deed.
IN WITNESS this Agreement has been signed by or on behalf of each of the parties
- ----------
hereto the day and year first before written.
37
THE FIRST SCHEDULE
------------------
THE VENDORS
-----------
(1) (2) (3) (4) (5) (6)
NAME ADDRESS NO OF SHARES CASH CONSIDERATION CONSIDERATION SHARES % OF DEFERRED
- ---- ------- ------------ ------------------ -------------------- -------------
CONSIDERATION
-------------
(Ordinary unless
otherwise stated)
David Anthony Townend 3 Marwell Close 31,680,000 $7,991,094 263,460 48.95%
Littledown
Bournemouth
Dorset
Andrew Steven Baird 30 Denbigh Road 9,000,000 $2,270,197 74,846 13.90%
London W13 8NH
Lyndon David Stickley 14 State Street 5,000,000 $1,261,220 41,581 7.72%
Marblehead
Massachusetts
USA
Yorick Phoenix 4,320,000 $1,089,694 35,926 6.67%
6 Princes Road
Poole
Dorset BH12 1BH
38
(1) (2) (3) (4) (5) (6)
NAME ADDRESS NO OF SHARES CASH CONSIDERATION CONSIDERATION SHARES % OF DEFERRED
- ---- ------- ------------ ------------------ -------------------- -------------
CONSIDERATION
-------------
(Ordinary unless
otherwise stated)
Media Tec Unit 18 5,000,000 $1,261,220 41,581 7.72%
Investments Limited Mill Wall
Wickham's Cay
Tortola
British Virgin Island
Geocapital IV L.P. One Bridge Plaza 11,883,178 $4,200,820 34,617 12.22%
Fort Lee Preferred Ordinary
New Jersey Shares
USA
31 Group PLC 91 Waterloo Road 2,742,272 $ 981,000 7,989 2.82%
London SE1 8XP Preferred Ordinary
Shares
39
THE SECOND SCHEDULE
-------------------
PART 1
------
THE COMPANY
-----------
(i) Directors: Antony Gerard Ebel, Anthony Richard Prest,
Andrew Steven Baird, Lyndon David Stickley,
David Anthony Townend, Stephen Joshua
Clearman
(ii) Secretary: Andrew Steven Baird
(iii) Registered Office: Gild House, 64-68 Norwich Avenue West,
Bournemouth BH2 6AW
(iv) Date of Incorporation: 7 April 1993
(v) Country of Incorporation: England and Wales
(vi) Registered Number: 2807473
(vii) Auditors: Ernst & Young
(viii) Accounting Reference Date: 30 September
(ix) Charges: Legal Mortgage dated 13 December 1994 in
favour of National Westminster Bank Plc.
(x) Authorised Share Capital: (Pounds)10,000,000 divided into 985,374,550
ordinary shares of 1 pence each and
14,625,450 convertible redeemable preferred
ordinary shares of 1 pence each
(xi) Issued Share Capital: HOLDER NO. & CLASS OF
------ --------------
SHARES
------
As per columns (1), (2) and (3) of The First
Schedule
40
PART 2
------
THE SUBSIDIARIES
----------------
(A) 4-SIGHT (INTERNATIONAL) LIMITED
(i) Directors: Christopher Holly, Harvey George
Jones, Anthony Richard Prest,
Andrew Steven Baird, Yorick
Phoenix, Lyndon David Stickley,
David Anthony Townend
(ii) Secretary: Andrew Steven Baird
(iii) Registered Office: Gild House, 64-68 Norwich Avenue West,
Bournemouth, Dorset BH2 6AW
(iv) Date of Incorporation: 4 June 1990
(v) Country of Incorporation: England and Wales
(vi) Registered Number: 2508346
(vii) Auditors: Ernst & Young
(viii) Accounting Reference Date: 30 September
(ix) Charges: Mortgage Debenture dated 9 August 1994
in favour of National Westminster
Bank Plc
(x) Authorised Share Capital: (Pounds)100,000 divided into 25,000
redeemable preference shares of(Pounds)1
each, 250 convertible preference shares
of (Pounds)100 each and 50,000 ordinary
shares of (Pounds)1 each
(xi) Issued Share Capital: HOLDER NO. & CLASS OF
------ --------------
SHARES
------
41
the Company 1,139 ordinary shares and
250 convertible preference shares
(xii) Percentage beneficially
owned by the Company: 100%
(B) 4-SIGHT (SOFTWARE) LIMITED
(i) Directors: Andrew Steven Baird, David
Anthony Townend, Anthony Richard
Prest, Christopher Holly
(ii) Secretaries: Andrew Steven Baird, David
Anthony Townend
(iii) Registered Office: Gild House, 64-68 Norwich Avenue
West, Bournemouth, Dorset BH2 6AW
(iv) Date of Incorporation: 15 November 1995
(v) Country of Incorporation: England and Wales
(vi) Registered Number: 3126535
(vii) Auditors: Ernst & Young
(viii) Accounting Reference Date: 30 September
(ix) Charges: None
(x) Authorised Share Capital: 100 (Pounds) divided into 100
ordinary shares of (Pounds)1 each
(xi) Issued Share Capital: HOLDER NO. & CLASS
------ -----------
OF SHARES
---------
the Company 2 ordinary shares
(xii) Percentage beneficially
owned by the Company: 100%
42
(C) 4-SIGHT INC.
(i) Directors: Andrew Titley
(ii) Secretary: Andrew Titley
(iii) Registered Office: 1209 Orange Street, Wilmington,
Delaware 19801, U.S.A.
(iv) Date of Incorporation: 4 August 1994
(v) Country of Incorporation: U.S.A.
(vi) Registered Number: N/A
(vii) Auditors: None
(viii) Accounting Reference Date: 30 September
(ix) Charges: None
(x) Authorised Share Capital: 3,000 shares of common stock, par value
of $1.00 per share
(xi) Issued Share Capital: HOLDER NO. & CLASS
------ -----------
OF SHARES
---------
the Company 1,999 shares of
common stock
(xii) Percentage beneficially
owned by the Company: 100%
(D) 4-SIGHT GMBH
(i) Directors: David Anthony Townend, Andrew Steven
Baird
(ii) Secretary: None
43
(iii) Registered Office: Hamburg, Germany
(iv) Date of Incorporation: 12 September 1995
(v) Country of Incorporation: Germany
(vi) Registered Number: HR B 59 578
(vii) Auditors: None
(viii) Accounting Reference Date: 31 December
(ix) Charges: None
(x) Authorised Share Capital: DM 50,000
(xi) Issued Share Capital: HOLDER NO. & CLASS
------ -----------
OF SHARES
---------
the Company DM 50,000
(xii) Percentage beneficially
owned by the Company: 100%
44
THE THIRD SCHEDULE
------------------
INTELLECTUAL PROPERTY RIGHTS
----------------------------
1. all rights in and to the products listed in attachment 14 of the Previous
Disclosure Letter (as defined in the Disclosure Letter) and the addendum to
that attachment dated 28 January 1998 (both jointly hereinafter referred to
as the "Intellectual Property Report") and all rights in and to all other
products which the Company is developing and has released and/or developed
at any time (all these products jointly hereinafter referred to as the
"Products");
2. all rights in and to all other software programs, files, documentation,
databases, artwork, inventions, trade secrets and other information and
materials created, developed, and/or designed by the Company's past and
present employees whilst in the Company's employ and/or any third parties
on behalf of the Company;
3. all rights, by way of licence, in and to third party programs and libraries
(so described in the Intellectual Property Report) listed in the
Intellectual Property Report and all other third party programs and
libraries which are currently used in the development and/or design of any
of the Products and/or which are incorporated in any of the Products or are
otherwise used by the Company;
4. all rights, by way of a licence agreement, in and to information of a
confidential nature of a third party disclosed to the Company for the
purpose of using such information subject to the terms of the agreement;
5. all registered and unregistered third party trade marks which the Company
features on any of the packaging, instruction manuals and/or any other
documentation and/or artwork designed and/or used in conjunction with the
Company's business and/or in any of the Company's promotional and/or
advertising materials;
6. all registered trade marks and applications for the same listed in the fax
of Mrs Lait of Barker, Brettell & Duncan to Mr Baird of 21 January 1998 and
unregistered trademarks developed by or on behalf of the Company;
7. all rights, by way of licence, in and to the software used by the Company
for accounting, administrative and general office purposes.
45
THE FOURTH SCHEDULE
-------------------
THE PENSION SCHEME
------------------
U.S.
----
4-SIGHT, L.C. 401(k) PLAN
U.K.
----
The Equitable Personal Pension Plan with the Equitable Life Assurance
Society (dormant)
46
THE FIFTH SCHEDULE
------------------
THE PROPERTIES
--------------
DATE PREMISES ORIGINAL PARTIES TERM
- ---- -------- ---------------- ----
13.12.94 Units 4, 5 and 6 Graybird Properties 999 years commencing
(Numbers 64-68) Limited (Landlord) commencing
Norwich Avenue West 4-Sight (Software)
Bournemouth Limited (Tenant) (2)
Dorset
20.11.96 70 Norwich Avenue West Peter John Ruckwood Period commencing
Bournemouth (Landlord) (1) 01.01.97 and expiring
Dorset 4-Sight plc (2) 30.04.99
16.10.97 Oserbekstrasse COH City Office Period commencing
90A-C Hamburg 22083 Hamburg GmBH (1) 01.12.97 and
Germany 4-Sight GmBH (2) terminable thereafter,
but no earlier than
31.12.98, on any
calendar quarter on 6
months' notice
29.02.96 Suites 3600 and 3700 Cummings Property 29.02.96 to 30.08.99
800 West Cummings Park Management Inc (1)
Woburn 4-Sight LC (2)
Massachusetts
U.S.A
01.07.97 Suite 3800 Cummings Property 01.07.97 to 30.07.2001
800 West Cummings Park Management Inc (1)
Woburn 4-Sight LC (2)
Massachussets
U.S.A
Undated 1824 Industrial Circle John E Spencer Snr (1) Rolling yearly renewal
West Des Moines CE Software Inc (2) period 15 August to 14
Polk, Iowa, USA August
47
THE SIXTH SCHEDULE
------------------
THE TAX DEED
------------
THIS DEED is made this day of 1998
- ---------
BETWEEN:-
- -------
(1) THE SEVERAL PERSONS whose names and addresses are set out in columns 1 and
-------------------
2 respectively of the First Schedule hereto ("the Covenantors"); and
(2) WAM!NET (UK) LIMITED (company number 3969851) whose registered office is at
--------------------
8-10 New Fetter Lane, London EC4A 1RS and WAM!NET INC. whose principal
------------
place of business is at 6100 West 110 Street, Minneapolis, Minnesota 55438,
U.S.A (collectively "the Purchaser").
WHEREAS by an Agreement ("the Agreement") between, amongst others, the
- -------
Covenantors and the Purchaser, the Covenantors, amongst others, agreed to sell
the entire issued share capital of 4-Sight Limited to the Purchaser and by
virtue of the Agreement the Covenantors agreed to enter into this Deed.
NOW THIS DEED WITNESSETH as follows:-
- ------------------------
1. DEFINITIONS
-----------
In this Deed:-
1.1 "Claim" includes any assessment, notice, demand or other document
issued or action taken by or on behalf of a Tax Authority whereby the
Company is or is sought to be made liable to make a payment of
Taxation or a Relief is denied or is sought to be denied;
1.2 "Event" means any event, act, transaction or omission, whether or not
the Company is a party thereto, and includes (without limitation) a
receipt or accrual of income or gains, distribution, deemed
distribution, failure to distribute, acquisition, disposal, transfer,
payment, loan, advance, Completion and any combination of two or more
such occurrences;
1.3 "Company" means each and every company listed in the Second Schedule
hereto or any one of them as the context requires;
48
1.4 "Relief" means any loss, relief, allowance, exemption, set off,
credit, rebate, refund, right to repayment or deduction in respect of
any Taxation or any set off or deduction in computing, or against,
profits, income or gains of any description or source for the purposes
of any Taxation;
1.5 reference to income or profits or gains earned, accrued or received,
shall include income or profits or gains deemed to have been or
treated as or regarded as earned, accrued or received for the purposes
of any legislation relating to Taxation;
1.6 reference to the loss of Relief or of a right to repayment of Taxation
shall include the loss, reduction, modification, cancellation,
nullification, withdrawal, counteracting or clawback of any Relief or
right to repayment of Taxation;
1.7 reference to any liability to Taxation shall include not only any
liability to make any actual payment of Taxation (whether made before
or after the date hereof and whether satisfied or unsatisfied at the
date hereof) but also:-
1.7.1 the loss of any Relief which has been shown as an asset in the
Audited Accounts or has been taken into account in computing
(and reducing) a provision (for deferred tax or otherwise)
which appears in the Audited Accounts or which has resulted in
no such provision being made in the Audited Accounts; or
1.7.2 the amount of any Relief which has either:-
(a) been treated as an asset in the Audited Accounts or has
been taken into account in computing (and reducing) a
provision (for deferred tax or otherwise) which appears
in the Audited Accounts or which has resulted in no such
provision being made in the Audited Accounts; or
(b) arises in consequence of an Event occurring or is
otherwise attributable to a period after Completion;
which in each case is used to relieve income, profits or gains
or which has been set against any liability to make an actual
payment of Taxation in circumstances where (but
49
for such utilisation or set off) the Purchaser would have been
entitled to make a claim against the Covenantors pursuant to
Clause 2 of this Deed (subject always to the provisions of
Clause 3 of this Deed);
1.8 In any case mentioned in Clause 1.7 above there shall be treated as an
amount of Taxation for which a liability has arisen:-
1.8.1 in a case which falls within Clause 1.7.1 or Clause 1.7.2,
where the Relief which was subject to the loss or utilisation
was a deduction from or offset against Taxation, the amount of
the Relief;
1.8.2 in a case which falls within Clause 1.7.1 or 1.7.2, where the
Relief which was lost or utilised was a deduction from or
offset against income or profits or gains:-
(a) if the Relief is lost, the amount of Taxation which
would, on the basis of the rates of Taxation current at
Completion, have been saved had such Relief been
available, on the assumption that income, profits or
gains in respect of the earliest period for which such
Relief is available are such that the Relief (and all
other Reliefs available to the Company) could have been
utilised in full (and so that for this purpose any actual
liability to Taxation as a result of the loss of the
Relief shall be disregarded);
(b) if the Relief is the subject of such set off, the amount
of Taxation which has been saved in consequence of such
setting off;
1.9 reference to the result of Events on or before the date hereof shall
include the combined result of two or more Events the first of which
shall have taken place on or before the date hereof;
1.10 "Taxation" means all forms of taxation, duties, imposts, levies and
rates whenever imposed and whether of the United Kingdom or elsewhere
and in particular (but without prejudice to the generality of the
foregoing) includes income tax, withholding taxes, corporation tax,
capital gains tax, capital transfer tax, inheritance tax, value added
tax, customs duties, excise duties, development land tax, stamp duty,
stamp duty reserve tax, capital
50
duty, national insurance contributions, social security or other
similar contributions and generally any other taxes, duties, imposts,
levies or other amounts (whether of a like nature or not) and any
interest, penalty or fine in connection therewith;
1.11 "Tax Authority" means any local, municipal, governmental, state,
federal or other fiscal, revenue, customs or excise authority body or
official anywhere in the world, entitled to enforce or collect
Taxation including, without limitation, the UK Inland Revenue and HM
Customs and Excise; and
1.12 unless the context otherwise requires words and expressions defined in
the Agreement have the same meaning in this Deed as in the Agreement.
2. COVENANT
--------
2.1 Subject as hereinafter provided the Covenantors hereby jointly and
severally covenant with the Purchaser to pay to the Purchaser or to pay, as
directed by the Purchaser, to the Purchaser or to the Company an amount
equal to:-
2.1.1 any liability to Taxation of the Company which arises as a result of
or by reference to any income, profits, or gains earned, accrued or
received on or before Completion or as a result of or in connection
with any Event occurring on or before Completion and whether alone
or in conjunction with other circumstances and whether or not any
such Taxation is primarily chargeable against or attributable to any
other person, firm or company;
and without limitation of the foregoing,
2.1.2 any liability to Taxation of the Company which arises as a result of
the making of a direction by HM Customs and Excise in respect of any
supply made before Completion between companies which either form
part of the same group of companies for the purposes of Value Added
Tax or which at the time of that supply are capable of forming such
a group;
2.1.3 any Inheritance Tax for which the Company is or may become liable
which:-
51
(a) is at Completion a charge on any of the shares or assets of the
Company or gives rise to a power to sell, mortgage or charge
any of the shares or assets of the Company; or
(b) after Completion becomes a charge on or gives rise to a power
to sell, mortgage or charge any of the shares or assets of the
Company being a liability in respect of additional Inheritance
Tax payable as a result of the death of any person within seven
years after a transfer of value (or 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 of such death had not been paid, have
existed at Completion; or
(c) arises as a result of a transfer of value by or to the Company
occurring on or before Completion,
and in determining 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 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
and the provisions of Section 213 of the Inheritance Tax Act 1984
shall not apply thereto;
2.1.4 any liability to Taxation for which the Company is or may become
liable in respect of or arising from any Event after Completion
outside the ordinary course of business of the Company as carried on
at Completion occurring in pursuance of a legally binding obligation
incurred or arrangement entered into by the Company on or before
Completion and which has not been disclosed in writing to the
Purchaser;
2.1.5 the reasonable costs and expenses incurred or payable by the
Purchaser and/or the Company in connection with or in consequence of
any Claim for Taxation or liability to Taxation or otherwise in
respect of any matter for which the Covenantors are liable under the
foregoing paragraphs of this Clause 2.1.
52
2.2 Any amount payable hereunder by virtue of the covenant contained in Clause
2.1 above shall so far as possible be deemed to be a reduction in the
consideration for the Shares agreed to be sold under the Agreement.
3. EXCLUSIONS
----------
3.1 The covenant given by the Covenantors under Clause 2 above shall not cover
any liability to Taxation:-
3.1.1 to the extent that the liability was specifically taken into account
in making any provision or reserve in respect of such liability to
Taxation in the Audited Accounts or to the extent that payment or
discharge of such liability has been taken into account in the
Audited Accounts; or
3.1.2 to the extent that any provision or reserve made in the audited
accounts of the Company is insufficient only by reason of any
increase in the rates of Taxation introduced after Completion with
retrospective effect; or
3.1.3 to the extent that the liability to Taxation arises or is increased
as a result of any change in the law relating to Taxation or as a
result of any withdrawal, replacement or amendment of any published
statement of practice or extra-statutory concession announced or
made after Completion with retrospective effect; or
3.1.4 to the extent that the liability to Taxation arises wholly in
consequence of a voluntary act or omission after Completion (which
could reasonably have been avoided) carried out by the Purchaser or
the Company or any member of the Purchaser's Group otherwise than in
the ordinary course of business of the Company and which the
Purchaser was or ought reasonably to have been aware could give rise
to the liability to Taxation in question but so that this exclusion
shall not extend to any voluntary act or omission carried out (a)
pursuant to a legally binding obligation (whether pursuant to
contract or by virtue of any law or regulation) existing on or
before Completion; or (b) with the prior written consent of the
Covenantors; or
3.1.5 to the extent that the loss occasioned has been recovered pursuant
to any claim under the Vendor Warranties or recovered from any third
party; or
53
3.1.6 to the extent that such liability to Taxation was discharged prior
to Completion (net of any cost to the Purchasers' Group in making
such discharge); or
3.1.7 to the extent that any Relief which has not been utilised in the
Audited Accounts or which is not shown as an asset in the Audited
Accounts arises in respect of or as a consequence of any Event
occurring before the Balance Sheet Date is available to the Company
to set against or otherwise mitigate the liability to Taxation
giving rise to the claim; or
3.1.8 to the extent and insofar that it arises or is increased as a
consequence of any failure to or delay by the Purchaser or the
Company in complying with any of their obligations under this Deed;
or
3.1.9 to the extent that it arises in the ordinary course of business of
the Company either as a result of or in respect of any Event which
occurred after the Balance Sheet Date or in respect of or by
reference to any income profits or gains actually earned, accrued
or received after the Balance Sheet Date; or
3.1.10 to the extent that it arises in respect of or by reference to any
income profits or gains earned, accrued or received after the
Balance Sheet Date to the extent that the consideration actually
earned, accrued, received or receivable in relation thereto is not
less than the consideration deemed to have earned, accrued or
received for Taxation purposes;
3.1.11 to the extent that it is a liability in respect of value added tax
relating to supplies made by the Company before Completion in
respect of which value added tax has been properly charged and the
tax invoice issued but which value added tax is not yet due and
payable to HM Customs & Excise unless and to the extent that such
value added tax is not actually received by the Company; or
3.1.12 to the extent that the liability arises by reason of a voluntary
disclaimer by the Company after Completion of the whole or any part
of any allowance to which it is entitled under Part II CAA 1990 or
by reason of the revocation by the Company after Completion of any
claim for a Relief made (whether provisionally or otherwise) by it
prior to
54
Completion in each case where the allowance or Relief was
taken into account in the Audited Accounts; or
3.1.13 to the extent that the liability has been made good by
insurers or otherwise compensated without cost to the
Purchaser or the Company.
3.2 The provisions of Part I of the Eighth Schedule to the Agreement shall
operate to limit the liability of the Covenantors under this Deed save in
the circumstances referred to in Clause 9.2 of the Agreement (in which case
the provisions of paragraphs 1 to 5 (inclusive) of Part I of the Eighth
Schedule to the Agreement shall not apply to limit the liability of the
Covenantors under this Deed).
3.3 In calculating the liability of the Covenantors in respect of any Claim
credit will be given to the Covenantors to the extent of any provision or
reserve in respect of Taxation made in the audited accounts of the Company
which proves and is certified by the Company's auditors to be an over-
provision or over-reserve PROVIDED THAT in computing any such over-
provision or over-reserve no account shall be taken of any change in law or
the practice of any Tax Authority introduced or announced after the Balance
Sheet Date or any Relief arising after the Balance Sheet Date.
4. CONDUCT OF NEGOTIATIONS AND PROCEEDINGS
---------------------------------------
4.1 If any matter or circumstance which may give rise to a Claim relevant for
the purposes of this Deed comes to the attention of the Purchaser, it
shall:-
4.1.1 forthwith give written notice thereof to the Covenantors indicating
in reasonable detail the nature of the Claim and further shall
procure that the Company shall promptly supply the Covenantors with
full details of the Claim as soon as the Purchaser becomes aware of
them including a reasonable estimate of the amount and details of
the date on which payment in respect of the Claim is due; and
4.1.2 if the Covenantors indemnify the Purchaser and the Company to their
reasonable satisfaction against all losses, costs, damages and
expenses (including any interest or penalty on overdue Taxation and
any additional Taxation) which may be incurred thereby (and provide
security for costs reasonably satisfactory to them in respect of
such indemnity) take such steps as the Covenantors
55
may reasonably request to avoid, dispute, resist, appeal, compromise
or defend the Claim and provide the Covenantors with such
information, books, records and correspondence as are in the control
of the Purchaser or the Company and which the Covenantors shall
reasonably require for the purpose of contesting such Claim and
shall give the Covenantors such assistance and reasonable co-
operation for the purposes of taking such action as the Covenantors
may reasonably request.
4.2 Neither the Purchaser nor the Company shall be obliged to appeal against
any Taxation assessment raised on it if:-
4.2.1 having given the Covenantors written notice of the receipt of the
Taxation assessment in accordance with provisions of Clause 4.1.1,
it has not within 15 business days received instructions in writing
from the Covenantors in accordance with the provisions of Clause
4.1.2 to make that appeal;
4.2.2 any period prescribed by the relevant legislation relating to
Taxation for making of an appeal against the liability for Taxation
which is the subject of the claim has expired before any request is
made by the Covenantors in accordance with Clause 4.1.2;
4.2.3 this will involve contesting any Taxation assessment beyond the
first appellate body (excluding the Tax Authority demanding the
Taxation in question) in the jurisdiction concerned, unless the
Covenantors furnish the Purchaser with the written opinion of tax
counsel of at least 10 years standing to the effect that an appeal
against the assessment in question will, on the balance of
probabilities, succeed.
4.3 Subject to compliance of the Purchaser with its obligations under Clause
4.1.1 the Purchaser and the Company shall be entitled without reference to
the Covenantors to admit, compromise, settle, discharge or otherwise deal
with any Taxation assessment after whichever is the earliest of:-
4.3.1 the Purchaser or the Company being notified by any of the
Covenantors that they consider that the assessment should no longer
be resisted;
4.3.2 the expiry of a period of 20 business days following the service of
a notice by the Purchaser or the Company on the Covenantors, or on
any of them, requiring the Covenantors to clarify or explain the
terms of any request made under Clause 4.1.2, during which
56
period no such clarification or explanation has been received by the
Purchaser or the Company; and
4.3.3 the expiry of any period prescribed by applicable legislation for
the making of an appeal against either the Taxation assessment or
the decision of any court or tribunal in respect of any such
assessment, as the case may be.
4.4 Neither the Purchaser nor the Company shall be required to take any action
which in its reasonable opinion is likely to materially prejudice its
business or result in the Purchaser or the Company or any company which
forms part of the Purchaser's Group incurring a liability to Taxation or an
increased liability to Taxation which would not otherwise have arisen.
4.5 The Purchaser shall make no settlement or compromise of any liability to
Taxation for which a claim has been made under this Deed and in respect of
which the Covenantors have made any such request as is referred to in
Clause 4.1.2 above, nor agree any matter in the course of disputing the
said claim likely to affect the amount thereof without the prior written
approval of the Covenantors of the terms of the proposed settlement or
agreement (such approval not to be unreasonably withheld or delayed) and
upon settlement or final adjudication of the said claim the Covenantors
shall forthwith discharge any liability to Taxation arising from the said
claim in accordance with Clause 6 below.
4.6 Clause 4.1.2 shall not apply in respect of a Claim if the Covenantors or
the Company have committed an act or are responsible for an omission in
relation to the Claim which the Purchaser or the Company reasonably
considers constitutes fraudulent or negligent conduct.
5. TAX RETURNS
-----------
5.1 The Covenantors or their duly authorised agents (at the expense of the
Covenantors) shall at their option be responsible for and have the conduct
and control of preparing, submitting to and agreeing with the relevant Tax
Authority all Tax returns and computations of the Company for all
accounting periods ended on or before the Completion, provided that such
Tax returns and computations shall be prepared on a basis consistent with
that upon which such returns and computations have been prepared by the
Covenantors (or their duly authorised agent) previously, save to the extent
that any change in such basis is required in order to comply with any
change in generally accepted accounting principles or any change in
legislation, law or published practice of, or any requirement of,
57
any Tax Authority or to take account of any change in any interpretation
thereof.
5.2 The Purchaser and the Covenantors shall each respectively provide (or
procure the provision to) the other or their duly authorised agents of such
information and assistance which may reasonably be required to prepare,
submit and agree all such outstanding Tax computations and returns,
including, without limitation, the causing of any computations, returns,
notices, claims, elections and agreements to be authorised signed and
returned by the Company to the Covenantors or their duly authorised
representatives for submission to the appropriate Tax Authority provided
that the Purchaser shall not be obliged to and shall not be obliged to
procure that the Company take any such action as is mentioned in this sub-
clause in relation to any Tax return or other document that is not full,
true and accurate in all material respects.
5.3 The Covenantors shall ensure that all such Tax returns and computations,
together with any related correspondence, are delivered to the Purchaser
before submission to the Tax Authority concerned, and the Covenantors shall
consult the Purchaser and consider the Purchaser's comments concerning the
same.
6. DATE FOR PAYMENT
----------------
6.1 Where the Covenantors are liable to make a payment pursuant to this Deed,
the due date for making such payment which shall be made in cleared funds
shall be :-
6.1.1 in a case which involves the making of an actual payment of Taxation
by the Company, the date that is three business days immediately
before the last date on which the Company would have had to pay to
the relevant Tax Authority the Taxation that has given rise to the
Covenantors' liability under this Deed in order to avoid incurring a
liability to interest or a charge or penalty in respect of that
liability to Taxation; or
6.1.2 in respect of a liability to Taxation falling within Clause 1.7.1
within five business days after the date on which the Covenantors
are notified by the Purchaser or the Company that the Covenantors
have a liability for a determinable amount;
6.1.3 in respect of a liability to Taxation falling within Clause 1.7.2
the date that is one business day before the last date upon which
the Company would have had to make an actual payment of Taxation
58
but for the utilisation or set off of the Relief, as the case may
be, in order to avoid incurring a liability to pay interest or a
charge or a penalty;
6.1.4 in any other case, within five business days after the date when the
Covenantors have been notified by the Company or the Purchaser that
the Covenantors have a liability for a determinable amount, such
notice to be accompanied by reasonable evidence of the liability in
question having been incurred.
6.2 If any sum due and payable by the Covenantors under this Deed is not paid
on the due date for payment as ascertained in accordance with the
provisions of this Deed, the Covenantors shall in addition to that sum, pay
interest on the amount for the time being unpaid from the due date for
payment of the sum to and including the day of actual payment of the sum
(or the next business day if the day of actual payment is not a business
day). The interest shall accrue from day to day (before as well as after
judgment) at the rate of 2% per annum above the base lending rate for the
time being of Lloyds Bank plc and shall be compounded quarterly on the
usual quarter days.
7. GROSSING UP
-----------
7.1 Any payment by the Covenantors to the Purchaser or to the Company hereunder
shall be paid free and clear of all deductions, withholdings, set offs or
counterclaims whatsoever, save as may be required by law. If any
deductions or withholdings shall be required by law, the Covenantors shall
be obliged to pay to the Purchaser or to the Company such sum as will,
after such deduction or withholding has been made, leave the Purchaser or
the Company 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.
7.2 If any payment by the Covenantors to the Purchaser or the Company hereunder
shall be subject to Taxation in the hands of the recipient then the sum
payable shall be increased by such amount as will ensure that, after
payment of Taxation, the Purchaser or the Company receives a net sum equal
to the sum which it would otherwise have received under this Deed had the
payment not been subject to Taxation provided always that if any payment is
initially made on the basis that the amount due is taxable in the hands of
the recipient and it is subsequently determined that is not, the Purchaser
shall promptly refund to the Covenantors the excess amount paid.
59
8. REFUNDS
-------
If the Covenantors have made a payment under Clause 2 of this Deed and the
Purchaser or the Company subsequently receives from any other person (other
than the Company or the Purchaser) any sum in respect of the Taxation
concerned (otherwise than by reason of any Relief arising in consequence of
an Event occurring after Completion), the Purchaser or the Company shall
forthwith repay or procure the repayment to the Covenantors of the amount
received (including any interest or repayment supplement paid by the Tax
Authority relating to the period after receipt of the relevant payment from
the Covenantors on or in respect thereof, less any costs reasonably and
properly incurred in recovering such amount and any Taxation on such
amount) not exceeding the payment by the Covenantors hereunder.
9. CORRESPONDING SAVINGS
---------------------
9.1 If any payment is made by the Covenantors under this Deed in respect of a
liability to Taxation and the Company or the Purchaser receives a Relief in
respect of the liability to Taxation in question, the Purchaser shall pay
to the Covenantors the lower of the amount of Taxation that the Purchaser,
the Company or any member of the Purchaser's Group actually saves by virtue
of the relief (less any reasonable costs of obtaining or recovering such
relief and any Taxation suffered thereon) and the aggregate payments
previously made by the Covenantors under this Deed.
9.2 Any payment to be made by the Purchaser pursuant to Clause 9.1 shall be
made 5 business days after the date on which Taxation would have been
recoverable by a Taxation Authority but for the use of the Relief.
10. GENERAL
-------
10.1 Any liability of the Covenantors to the Purchaser or to the Companies under
the provisions of this Deed may in whole or in part be released, varied,
compounded or compromised by the Purchaser and by the Companies in their
absolute discretion without in any way prejudicing or affecting their
rights against the Covenantors hereunder. A waiver by the Purchaser and/or
by the Company of any breach by the Covenantors of the covenants and
undertakings contained in this Deed or the acquiescence of the Purchaser
and/or the Company in the act, whether of commission or omission, which but
for such acquiescence would be a breach as aforesaid, shall not constitute
a general waiver of such covenant or undertaking or of any subsequent act
contrary thereto.
60
10.2 The provisions of Clauses 20.2, 21.2, 22, 23, 24.1, 24.2, 25.2, 25.3, 25.4,
26 and 27 of the Agreement shall apply as if repeated herein with
references to the Vendors in such provisions being deemed to be references
herein to the Covenantors and references therein to this Agreement being
deemed to be references herein to this Deed.
11. SECONDARY LIABILITIES
---------------------
11.1 WAM!NET (UK) Limited and WAM!NET Inc hereby jointly and severally covenant
with the Covenantors to pay to the Covenantors an amount equivalent to any
liability to Taxation of the Company for which the Covenantors are assessed
under Section 767A Taxes Act together with any reasonable costs and
expenses properly incurred by the Covenantors in connection with such
Taxation or a claim under this Clause.
11.2 The covenant contained in Clause 11.1 shall:
11.2.1 not apply to any Taxation to the extent that the Purchaser could
claim payment in respect of it under Clause 2.1 of this Deed;
11.2.2 not apply to Taxation which has been recovered under Section
767B(2) Taxes Act (and the Covenantors shall procure that no such
recovery is sought to the extent that payment is made hereunder).
IN WITNESS whereof this Deed has been executed by the Covenantors and the
- ----------
Purchaser and delivered the day and year first above written.
61
THE FIRST SCHEDULE
------------------
THE COVENANTORS
---------------
(1) (2)
NAME ADDRESS
- ---- -------
Andrew Steven Baird 30 Denbigh Road
London W13 8NH
Lyndon David Stickley 14 State Street
Marblehead
Massachusetts
USA
David Anthony Townend 3 Marwell Close
Littledown
Bournemouth
Dorset
Yorick Phoenix
6 Princes Road
Poole
Dorset BH12 1BH
62
THE SECOND SCHEDULE
-------------------
THE COMPANIES
-------------
(1) (2) (3)
NAME NUMBER REGISTERED OFFICE
- ---- ------ ------------------
4-Sight PLC 2807473 64-68 Norwich Avenue, West
Bournemouth, BH2 6AW, England
4-Sight (International) 2508436 " "
Limited
4-Sight Software Limited 3126535 " "
4-Sight Inc N/A 1209 Orange Street, Wilmington,
Delaware 19801 U.S.A.
4-Sight GmbH HR B59 578 Hamburg, Germany
63
THE SEVENTH SCHEDULE
--------------------
PART I
------
THE VENDOR WARRANTIES
---------------------
1. THE SHARES
----------
No person has the right (whether exercisable now or in the future and
whether contingent or not) to call for the allotment or issue of any shares
or loan capital of the Company (under any option or other agreement
(including conversion rights and rights of pre-emption)).
2. SUPPLY OF INFORMATION
---------------------
(1) ACCURACY AND ADEQUACY OF INFORMATION DISCLOSED TO THE PURCHASER
---------------------------------------------------------------
All information contained in the Recitals and Schedules to this Agreement
and the Disclosure Letter (including the documents listed therein) is true
and accurate in all respects and none of the Warrantors is aware of any
fact or matter or circumstances not disclosed in writing to the Purchaser
which renders any such information untrue, inaccurate or misleading.
(2) COPIES OF AUDITED ACCOUNTS, THE MANAGEMENT ACCOUNTS AND MEMORANDUM AND
----------------------------------------------------------------------
ARTICLES OF ASSOCIATION
-----------------------
The copies of the Audited Accounts, the Management Accounts and the
memorandum and articles of association of the Company delivered to the
Purchaser are complete and accurate copies of the originals thereof and, in
the case of the memorandum and articles of association, contain full
details of the rights and restrictions attaching to the share capital of
the Company and have attached to them copies of all such resolutions and
agreements as are required by law to be delivered to the Registrar of
Companies for registration and all other resolutions passed by the Company
or any class of members, other than resolutions relating to ordinary
business at any annual general meeting of the Company.
(3) STATUS OF 4-SIGHT LIMITED
-------------------------
The criteria set out in paragraph 4(a)(i)-(iv) of the Introduction to the
City Code on Take Overs and Mergers do not apply to 4-Sight Limited.
64
3. ACCOUNTS AND RECORDS
--------------------
(1) AUDITED ACCOUNTS
----------------
(a) The bases and policies of accounting adopted for the purpose of
preparing the Audited Accounts are the same as those adopted in
preparing the audited consolidated accounts of the Company in respect
of the two accounting periods of the Company last preceding the
Balance Sheet Date.
(b) The Audited Accounts give a true and fair view of the Company and of
the Company and the Subsidiaries as a whole at the Balance Sheet Date
and of the state of affairs of the Company and of the Company and the
Subsidiaries at the Balance Sheet Date and of the profits and losses
of the Company and of the Company and the Subsidiaries for the
financial period ended on the Balance Sheet Date.
(c) The Audited Accounts comply with the requirements of the Companies
Acts and were prepared in accordance with current FRS's and SSAP's
applicable to a United Kingdom company.
(d) The Audited Accounts:-
(i) disclose, to the full extent required by applicable accounting
standards, all the assets of the Company and of the Company and
the Subsidiaries, as at the Balance Sheet Date;
(ii) make adequate provision to the full extent required by
applicable accounting standards for all actual liabilities of
the Company and the Subsidiaries as at the Balance Sheet Date;
(iii) make proper provision to the full extent required by applicable
accounting standards (or note in accordance with good accounting
practice) for all contingent liabilities of the Company and of
the Company and the Subsidiaries as at the Balance Sheet Date;
(iv) make provisions reasonably regarded as adequate for all bad and
doubtful debts of the Company and the Subsidiaries as at the
Balance Sheet Date.
65
(2) VALUATION OF STOCK AND WORK-IN-PROGRESS
---------------------------------------
The stock and work-in-progress were included in the Audited Accounts at
figures not exceeding the amounts which could in the circumstances existing
at the Balance Sheet Date reasonably be expected to be realised in the
normal course of carrying on the business of the Company.
(3) TAXATION
--------
(a) Full provision or reserve has been made in the Audited Accounts for
all Taxation liable to be assessed on the Company or for which it is
or may become accountable in respect of:-
(i) profits, gains or income (as computed for Taxation purposes)
arising or accruing or deemed to arise or accrue on or before
the Balance Sheet Date;
(ii) any transactions effected or deemed to be effected on or before
the Balance Sheet Date or provided for in the Audited Accounts;
and
(iii) distributions made or deemed to be made on or before the
Balance Sheet Date or provided for in the Audited Accounts.
(b) Proper provision or reserve for deferred taxation in accordance with
accounting principles and standards generally accepted in the United
Kingdom at the Balance Sheet Date has been made in the Audited
Accounts.
(c) Except as disclosed by the Audited Accounts and save in so far as full
provision is made in them in a deferred taxation account for Taxation
in respect of any chargeable gains or balancing charges which would
arise or accrue in respect of any asset or machinery and plant on
disposal thereof at the values at which they are included in them, no
asset with a book value in excess of (Pounds)5,000 is included in the
Audited Accounts at such value that if it were obtained on the
disposal or deemed disposal of the asset a chargeable gain or
balancing charge would arise or accrue.
(4) EXCEPTIONAL ITEMS
-----------------
The profits of the Company for the three years ended on the Balance Sheet
Date as shown by the Audited Accounts and by the audited
66
accounts of the Company for previous periods delivered to the Purchaser and
the trend of profits thereby shown have not (except as disclosed in such
accounts) been affected by inconsistencies in accounting practices or by
the inclusion of non-recurring items of income or expenditure or by
transactions entered into otherwise than on normal commercial terms.
(5) BOOK DEBTS
----------
None of the book debts of a value in excess of (Pounds)3,000 in respect of
any debt which were included in the Audited Accounts or which have
subsequently arisen, have been outstanding for more than three months from
their due dates for payment or have been released on terms that the debtor
has paid less than the full value of his debt and, so far as the Warrantors
are aware all such debts have realised or will realise in the normal course
of collection their full value as indicated in the Audited Accounts or in
the books of the Company after taking into account the provision for bad
and doubtful debts made in the Audited Accounts. For the avoidance of
doubt, a debt shall not be regarded as realising its full value to the
extent that it is paid, received or otherwise recovered in circumstances in
which such payment, receipt or recovery is void, voidable or otherwise
liable to be reclaimed or set aside.
(6) ACCOUNTING AND OTHER RECORDS
----------------------------
The statutory books, books of account and other records of whatsoever kind
of the Company are in all material respects up-to-date and maintained in
accordance with all applicable legal requirements on a proper and
consistent basis and contain accurate records in all material respects of
all matters required to be dealt with in such books and all such books and
records and all other material documents (including documents of title and
copies of all subsisting agreements to which the Company is a party) which
are the property of the Company or ought to be in its possession are in its
possession or under its control and no notice or allegation that any is
incorrect or should be rectified has been received. All accounts,
documents and returns required by law to be delivered or made to the
Registrar of Companies or any other authority have been duly and correctly
delivered or made.
(7) THE MANAGEMENT ACCOUNTS
-----------------------
The Management Accounts:-
(a) have been prepared in good faith and with due diligence and on bases
and principles which are consistent with those used in the
67
preparation of the unaudited management accounts of the Company and
the Subsidiaries for the financial year ended on the Balance Sheet
Date; and
(b) so far as the Warrantors are aware, give a fair and not misleading
view in all material respects of the financial state of affairs of the
Company and the Subsidiaries and their results for the period from the
Balance Sheet Date to the Management Accounts Date.
(8) CHANGES SINCE THE BALANCE SHEET DATE
------------------------------------
Since the Balance Sheet Date:-
(a) there has been no material adverse change in the financial position or
turnover of the Company;
(b) the Company's business has been carried on in the ordinary course,
without any material interruption or alteration in its nature, scope
or manner, and so as to maintain the same as a going concern;
(c) the Company has not entered into any transaction or assumed or, so far
as the Warrantors are aware, incurred any liabilities (including
contingent liabilities) or made any payment not provided for in the
Audited Accounts otherwise than in the ordinary course of carrying on
its business;
(d) the Company's profits have not been adversely affected by
inconsistencies in accounting practices, by the inclusion of non-
recurring items of income or expenditure, by transactions entered into
otherwise than on normal commercial terms;
(e) the Company has not entered into any unusual, long term or onerous
commitments or contracts;
(f) the Company's business has not been materially and adversely affected
by the loss of any important customer or source of supply or by an
abnormal factor not affecting similar businesses to a like extent and
none of the Warrantors is aware of any facts which are likely to give
rise to any such effects;
(g) no dividend or other distribution has been declared, made or paid to
the Company's members and no loan capital or share capital of
68
the Company has been repaid in whole or in part or has become liable
to be repaid;
(h) the Company has not allotted or issued or agreed to issue any share or
loan capital or other securities convertible into shares or loan
capital;
(i) the Company has not made or received any surrender relating to group
relief or the benefit of advance corporation tax; and
(j) there has been no unusual increase or decrease in the level of the
Company's stock.
4. FINANCE
-------
(1) BORROWINGS
----------
(a) The amounts borrowed by the Company (as determined in accordance with
the provisions of the relevant instrument) do not exceed any
limitation on its borrowing contained in its Articles of Association
or in any debenture or other deed or document binding upon it.
(b) The Company does not have outstanding any loan capital, and has not
currently or within the 3 years preceding the date of this Agreement,
factored any of its debts or engaged in financing of a type which is
not required to be shown or reflected in audited accounts or borrowed
any money which it has not repaid nor otherwise has it the benefit of
any overdraft, loan or other financial facilities, save as disclosed
in the Disclosure Letter.
(c) A statement of all the bank accounts of the Company and of the credit
or debit balances on such accounts as at a date not more than seven
days before the date hereof is annexed to the Disclosure Letter. The
Company has no other bank or deposit accounts (whether in credit or
overdrawn) and since such statement there have been no payments out of
any such accounts except for routine payments and the balance on
current account are not now substantially different from the balances
shown on such statements.
(2) INSURANCE
---------
69
(a) Particulars of the insurances of the Company are contained in the
Disclosure Letter to which copies of the policies are attached.
(b) All the assets of the Company which are of an insurable nature have
been and are at the date of this Agreement insured to the full
replacement value thereof against fire and other risks normally
insured against by companies carrying on similar businesses or owning
property of a similar nature and the Company has been and is at the
date of this Agreement adequately covered against accident, third
party injury, damage and other risks normally covered by insurance by
such companies.
(c) In respect of all such insurances:-
(i) all premiums have been duly paid to date;
(ii) all the policies are in force and, so far as the Warrantors are
aware, are not voidable on account of any act, omission or non-
disclosure on the part of the insured party;
(iii) there are no special or unusual terms or restrictions, the
premiums payable are not materially in excess of the normal
rates and neither the Company nor any Subsidiary has been given
notice of any circumstances in existence which are likely to
give rise to any increase in premiums; and
(iv) no claim is outstanding and neither the Company nor any
Subsidiary has been given notice of any circumstances which are
likely to give rise to any claim.
(4) GRANTS
------
Particulars of all investment or other grants, loan subsidies or financial
assistance received by virtue of any statute by the Company during the
previous six years are contained in the Disclosure Letter and, so far as
the Warrantors are aware, and act or transaction has been effected in
consequence of which the Company is or may be held liable to forfeit or
refund in whole or in part any such grant or loan or any for which
application has been made.
(5) WORKING CAPITAL
---------------
70
Having regard to existing bank and other facilities, the Company has or
will have sufficient working capital for the purposes of continuing to
carry on its business in its present form and at its present level of
turnover for a period of 12 months after Completion and for the purposes of
executing, carrying out and fulfilling in accordance with their terms, all
projects and contractual obligations which remain outstanding.
5. TRADING AND CONTRACTUAL ARRANGEMENTS
------------------------------------
(1) CAPITAL COMMITMENTS
-------------------
The Company does not have any outstanding capital commitments in excess of
an aggregate of (Pounds)50,000.
(2) CONTRACTS
---------
The Company is not now a party to or subject to any contract, obligation or
liability which involves or may reasonably be expected to involve a
liability on the Company of in excess of (Pounds)50,000 and which:-
(a) is of an unusual or abnormal nature or not wholly on an arm's length
basis in the ordinary and usual course of business;
(b) is of a long-term nature (that is, unlikely to have been fully
performed, in accordance with its terms, more than 12 months after the
date on which is was entered into or undertaken);
(c) is incapable of termination in accordance with its terms, by the
Company, on 60 days' notice or less;
(d) is of a loss-making nature (that is to say, known to be likely to
result in a loss on completion of performance);
(e) cannot readily be fulfilled or performed on time without undue, or
unusual, expenditure of money or effort;
(f) invoices payment by reference to fluctuations in the index of retail
prices, or any other index, or in the rate of exchange for any
currency.
(3) GUARANTEES ETC
--------------
71
Save as disclosed in the Audited Accounts or the Disclosure Letter, there
is not outstanding any guarantee, indemnity or suretyship given by or for
the benefit of the Company.
(4) DEBTS, CONTRACTS AND ARRANGEMENTS WITH CONNECTED PERSONS ETC
------------------------------------------------------------
(a) With the exception of the loans, debts and securities particulars of
which are contained in the Disclosure Letter and which will have been
discharged prior to Completion, there are:-
(i) no loans made by the Company to the Vendors and/or any director
of the Company and/or any person connected with any of them (as
such expression is defined in Section 839 of the Taxes Act 1988)
and the Company has not been a party to any transaction to which
any of the provisions of s.320 (substantial property
transactions involving directors, etc), s.322 (liabilities
arising from contravention of s.320) or s.330 (general
restrictions on loans etc to directors and persons connected
with them) Companies Act 1985 may apply;
(ii) no debts owing to the Company by any of the Vendors and/or any
director of the Company and/or any person connected (as defined
in paragraph (i) above) with any of them;
(iii) no debts owing by the Company other than debts which have arisen
in the ordinary course of business; and
(iv) no securities for any such loans or debts.
(b) With the exception of the contracts and arrangements particulars of
which are contained in the Disclosure Letter, there are no existing
contracts or arrangements to which the Company is a party and in which
any of the Vendors and/or any director of the Company and/or any
person connected with any of them are interested whether directly or
indirectly (other than by reason of their shareholdings in the
Company).
(c) There are not outstanding, nor during the past three years have been,
any arrangements or understandings (whether legally binding or not)
between the Company and any person who is a shareholder, or the
beneficial owner of any interest, in the Company or in any Subsidiary
or any person connected (as such
72
expression is defined in Section 839 of the Taxes Act 1988) with any
such person, relating to the management of the Company's business, or
the appointment or removal of directors of the Company, or the
ownership or the letting of any of the assets of the Company, or the
provision, supply or purchase of finance, goods, services or other
facilities to, by or from the Company, or otherwise howsoever relating
to its affairs.
(d) None of the Warrantors have any material right or interest, direct or
indirect, in any business other than that now carried on by the
Company which is or, so far as the Warrantors are aware, will become
competitive with the business of the Company.
(5) EFFECT OF SALE OF THE SHARES
----------------------------
(a) Compliance with this Agreement does not and will not conflict with or
result in the breach of or constitute a default under any agreement or
instrument to which the Company is now a party or relieve any other
party to a contract with the Company of its obligations under such
contract or entitle such party to terminate such contract, whether
summarily or by notice.
(b) So far as the Warrantors are aware (but without having made specific
enquiry of any third party), neither entering into nor completing this
Agreement will or is likely to cause the Company to lose the benefit
of any right or privilege it presently enjoys or any person who
normally does business with or gives credit to the Company not to
continue to do so on the same basis or any officer or senior employee
of the Company to leave its employment.
(6) DEPENDENCE ON INDIVIDUAL SUPPLIERS OR CUSTOMERS
-----------------------------------------------
Neither more than 10 per cent of the aggregate amount of all the purchases,
nor more than 10 per cent of the aggregate amount of all the sales, of the
Company in each case during the 12 month period preceding the date hereof
are obtained or made from or to the same supplier or customer (including
any person, firm or company in any way connected with such supplier or
customer) nor, so far as the Warrantors are aware, is any material source
of supply to the Company, or any material outlet for the sales of the
Company, in jeopardy or likely to be in jeopardy.
(7) COMMISSIONS AND FINDER'S FEES
-----------------------------
73
No one is entitled to receive from the Company any finder's fee, brokerage
or other commission in connection with the purchase of the Shares.
(8) JOINT VENTURE, PARTNERSHIPS ETC
-------------------------------
The Company is not and has not agreed to become, a member of any joint
venture, consortium, partnership or other unincorporated association and
the Company is not and has not agreed to become a party to any agreement or
arrangement for participating with others in any business sharing
commissions or other income.
(9) AGENCY AGREEMENTS AND AGREEMENTS RESTRICTING BUSINESS
-----------------------------------------------------
The Company is not a party to any agency, distributorship, marketing,
purchasing, manufacturing or licensing agreement (excluding "off the shelf"
software licences) or arrangement or other agreement or arrangement which
is material to the Company's business and which is exclusive or restricts
its freedom to carry on its business in any part of the world in such
manner as it thinks fit.
(10) STOCK AND WORK-IN-PROGRESS
--------------------------
The stock-in-trade currently held is not excessive but is adequate in
relation to the current trading requirements of the business of the
Company, is in good, undamaged and merchantable condition, is not obsolete
or slow-moving and is capable of being sold by the Company in the ordinary
course of its business in accordance with its current price list, without
rebate or allowance to a purchaser (or to the extent that this is not the
case, adequate provision or reserve has been made therefor in the Audited
Accounts or Management Accounts).
(11) SUFFICIENCY OF ASSETS
---------------------
The assets owned or leased by the Company and the facilities and services
to which the Company has a contractual right comprise all the assets,
facilities and services necessary for the carrying on of the business of
the Company in the manner in which it is presently conducted.
6. LEGAL MATTERS
-------------
(1) COMPLIANCE WITH LAWS
--------------------
74
The Company is carrying on its business in accordance with applicable laws,
regulations and byelaws in the United Kingdom and in any relevant foreign
country and so far as the Warrantors are aware there is no investigation or
enquiry by, or order, decree or judgment of, any court or any governmental
agency or regulatory body outstanding or anticipated against the Company or
which might reasonably be expected to have a material adverse effect upon
its assets or business.
(2) LICENCES AND CONSENTS
---------------------
All material statutory, municipal and other licences, consents, permits and
authorities necessary for the carrying on of the business of the Company as
now carried on have been obtained and are valid and subsisting and all
conditions applicable to any such licence, consent (including planning
consent), permit or authority have been complied with and none of the
Warrantors is aware of any breach of them or of any intended or likely
suspension, cancellation, refusal or revocation of any of them.
(3) COMPLIANCE WITH AGREEMENTS
--------------------------
The terms of all material leases, tenancies, licences, concessions and
agreements of whatsoever nature to which the Company is a party have in all
material respects been duly complied with by all the parties thereto and so
far as the Warrantors are aware there are no circumstances likely to give
rise to any breach of such terms.
(4) LITIGATION
----------
(a) Since the Balance Sheet Date the Company has not received notice of
any claim for damages or seeking any other relief against the Company.
(b) Neither the Company nor in relation to any notice for which the
Company is vicariously responsible, any director or (so far as the
Warrantors are aware) employee is engaged whether as plaintiff or
defendant or otherwise in any legal action, proceedings or arbitration
(other than as plaintiff in the collection of debts arising in the
ordinary course of its business) nor is being prosecuted for any
criminal offence and, so far as the Warrantors are aware, there are no
such proceedings or prosecutions pending or threatened.
75
(c) So far as the Warrantors are aware, there are no investigations,
disciplinary proceedings or other circumstances likely to lead to any
such claim or legal action, proceedings or arbitration (other than as
aforesaid) or prosecution in which the Company may become involved.
(5) INSOLVENCY ETC
--------------
(a) No order has been made, petition presented, resolution passed or
meeting convened for the winding up of the Company.
(b) No petition has been presented for an administration order to be made
in relation to the Company, nor has any such order been made.
(c) No receiver and/or manager (including an administrative receiver) has
been appointed of the whole or any part of any of the property, assets
and/or undertaking of the Company.
(d) No composition in satisfaction of the debts of the Company, or scheme
or arrangements of its affairs, or compromise or arrangement between
it and its creditors and/or members or any class of its creditors
and/or members, has been proposed, sanctioned or approved.
(e) No distress, distraint, charging order, garnishee order, execution or
other process has been levied or, so far as the Warrantors are aware,
applied for in respect of the whole or any part of any of the
property, assets and/or undertaking of the Company.
(f) So far as the Warrantors are aware, no event has occurred causing, or
which upon intervention or notice by any third party may cause, any
floating charge created by the Company to crystallise or any charge
created by it to become enforceable, nor, so far as the Warrantors are
aware, has any such crystallisation occurred or is such enforcement in
process.
(g) In relation to any property or assets held by the Company under hire
purchase, conditional sale, chattel leasing or retention of title
agreement or otherwise belonging to a third party which are material
to the carrying on of the Company's business, no event has occurred
which entitles, or which upon intervention or notice by the third
party may entitle, the third party to repossess the
76
property or assets concerned or terminate the agreement or any licence
in respect of the same.
(h) The Company is not unable to pay its debts within the meaning of s.123
Insolvency Act 1986.
(i) The Company has not been party to any transaction with any third party
or parties which, in the event of any such third party going into
liquidation or an administration order or a bankruptcy order being
made in relation to it or him, would constitute (in whole or in part)
a transaction at an undervalue, a preference, an invalid floating
charge or an extortionate credit transaction or a transaction
defrauding creditors under ss. 238 to 245 (inclusive) or ss. 339 to
344 (inclusive) or s.423 Insolvency Act 1986.
(j) None of the persons who at present is, or who at any time within the
last three years was, a director or officer of the Company is or at
any material time was subject to any disqualification order under the
Companies Acts.
(k) No steps have been taken or are contemplated by the Warrantors or any
of them or by the Company or any third party, and so far as the
Warrantors are aware, no circumstances exist, which may at any time
hereafter lead to a result which renders any of the warranties
contained in sub-paragraphs (a) to (j) (inclusive) above to be no
longer true or accurate and no events or circumstances analogous to
any of those referred to in sub-paragraphs (a) to (j) (inclusive)
above have occurred, subsist or are contemplated in any jurisdiction
other than England.
(6) COMPETITION AND RESTRICTIVE PRACTICES
-------------------------------------
(a) The Company (so far as the Warrantors are aware) is not a party to
any agreement, arrangement or concerted practice and is not carrying
on any practice which in whole or in part:-
(i) is or requires to be registered under the Restrictive Trade
Practices Acts;
(ii) contravenes Articles 85(1) or 86 of the Treaty of Rome or which
has been notified to the Commission of the European Communities
for negative clearance, exemption or other administrative
measure;
77
(iii) contravenes the provisions of the Consumer Credit Act 1974;
(iv) contravenes or is invalidated by the provisions of the Resale
Prices Act 1976;
(v) constitutes an anti-competitive practice as defined in the
Competition Act 1980; or
(vi) contravenes or is invalidated by any anti-trust legislation in
any other jurisdiction where the Company has assets or carries
on business.
(b) The Company has not received any financial or other benefit that
requires to be notified to the Commission of European Communities as a
state aid pursuant to Article 93 of the Treaty of Rome.
(c) The Company has not, within the preceding six years prior to the date
of this Agreement Completion, received any notification that
proceedings under any applicable anti-trust law have been initiated
nor are any such proceedings contemplated by any of the Vendors or any
of the directors of the Company nor within such period has it received
notice of any claim having been made or threatened alleging any anti-
trust law contravention.
(7) DEFECTIVE PRODUCTS
------------------
The Company has not been given notice that it has manufactured, sold or
supplied products which are, or were, or will become, in any material
respect, faulty or defective, or which do not comply with any warranties or
representations expressly or impliedly made by the Company, or with all
applicable regulations, standards and requirements.
(8) POWERS OF ATTORNEY
------------------
The Company has not given a power of attorney or any other authority
(express, implied or ostensible) which is still outstanding or effective to
any person to enter into any contract or commitment or do anything on its
behalf, other than any authority to employees to enter into routine trading
contracts in the normal course of their duties.
(9) FILING OF DOCUMENTS
-------------------
78
All charges in favour of the Company have (if appropriate) been registered
in accordance with the provisions of s. 395 and s.398 Companies Act 1985.
(10) NO QUESTIONABLE PAYMENTS
------------------------
None of the directors, nor, so far as the Warrantors are aware, officers,
agents, employees or other persons acting on behalf of the Company has been
party to the use of any assets of the Company for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political
activity or to the making of any direct or indirect unlawful payment to
government officials or employees from such assets or to the establishment
or maintenance of any unlawful or unrecorded fund of group monies or other
assets or to the making of any deliberately false or fictitious entries on
the books or records of the Company or to the making of any unlawful
payment.
(11) WARRANTIES AND INDEMNITIES
--------------------------
The Company has not sold or otherwise disposed of any shares or assets in
circumstances such that it is, or may reasonably be expected to be, still
subject to any liability (whether contingent or otherwise) under any
representation, warranty or indemnity given or agreed to be given on or in
connection with such sale or disposal but excluding any representation
implied by law or given or agreed to be given in the ordinary course of
trading.
7. EMPLOYEES ETC
-------------
(1) EMPLOYEES AND TERMS OF EMPLOYMENT
---------------------------------
(a) Particulars are contained in the Disclosure Letter of all existing
contracts of service with directors or employees of the Company
carrying remuneration (including benefits) at a rate in excess of
(Pounds)25,000 per annum and of all consultancy agreements with the
Company.
(b) There are not in existence any contracts of service with directors or
employees of the Company, nor any consultancy agreements with the
Company, which cannot be terminated by three months' notice or less
without giving rise to any claim for damages or compensation (other
than a statutory redundancy payment or statutory compensation for
unfair dismissal).
79
(c) No changes to the contracts or agreements with the directors of the
Company or contracts or agreements referred to in sub-paragraph (a)
above have been made or proposed whether by the Company or any
director, employee or consultant since the Balance Sheet Date.
(2) LIABILITIES TO AND FOR EMPLOYEES
--------------------------------
(a) There are no amounts owing to any present or former directors or
employees of the Company other than remuneration accrued due or for
reimbursement of business expenses, and no directors or senior
employees (being for this purpose employees with a remuneration
package (including benefits) in excess of (Pounds)25,000 p.a.) of the
Company have given or been given notice terminating their contracts of
employment.
(b) Save to the extent (if any) to which provision or allowance has been
made in the Audited Accounts, the Company has not made or agreed to
make any payment to or provided or agreed to provide any benefit for
any present or former director or employee which is not allowable as a
deduction for the purposes of Taxation.
(c) The Company is not liable to pay any industrial training levy and does
not have outstanding any undischarged liability to pay to any
governmental or regulatory authority in any jurisdiction any
contribution, taxation or other impost arising in connection with the
employment or engagement of employees or directors by it.
(d) Save to the extent (if any) to which provision or allowance has been
made in the Audited Accounts or Management Accounts or (if applicable)
in the audited accounts of the Company for the financial periods
preceding the Balance Sheet Date (true and accurate copies of which
are annexed to the Disclosure Letter):-
(i) no liability has been incurred by the Company in the 3 years
preceding the date of this Agreement for breach of any contract
of service or for services, for redundancy payments (including
protective awards) or for compensation for wrongful dismissal or
unfair dismissal or for failure to comply with any order for the
reinstatement or re-engagement of any employee or for race, sex
or disability discrimination; and
80
(ii) no gratuitous payment has been made or promised by the Company in
the 3 years preceding the date of this Agreement in connection
with the actual or proposed termination or suspension of
employment or variation of any contract of employment of any
present or former director or employee.
(e) The Company has not received notice of any claims pending or
threatened against the Company and the Warrantors are not aware of any
circumstances likely to give rise to such a claim:-
(i) by an employee or workman or third party, in respect of an
accident or injury which is not fully covered by insurance; or
(ii) by an employee or director in relation to his terms and
conditions of employment or appointment.
(3) COMPLIANCE WITH STATUTES
------------------------
The Company has in relation to each of its employees (and so far as
relevant to each of its former employees) complied in all material respects
with:-
(a) all obligations imposed on it by Article 119 of the Treaty of Rome and
all statutes, regulations and codes of conduct and practice relevant
to the relations between it and its employees or any trade union and
has maintained current adequate and suitable records regarding the
service of each of its employees;
(b) all collective agreements and customs and practices for the time being
dealing with such relations or the conditions of service of its
employees; and
(c) all relevant orders and awards made under any relevant statutes,
regulation or code of conduct and practice affecting the conditions of
service of its employees.
(4) REDUNDANCIES
------------
Within a period of one year preceding the date of this Agreement the
Company has not given notice of any redundancies to the relevant Secretary
of State or started consultations with any independent trade union or
unions under the provisions of s.188 Trade Union and Labour
81
Relations (Consolidation) Act 1992 or Regulation 10 of the Transfer of
Undertakings (Protection of Employment) Regulations 1981 and the Company
has not failed to comply with any such obligations under the said s.188 or
Regulation 10 of the said Regulations.
(5) INDUSTRIAL DISPUTES AND NEGOTIATIONS
------------------------------------
(a) The Company has (if applicable) complied with all recommendations made
by the Advisory Conciliation and Arbitration Service and with all
awards and declarations made by the Central Arbitration Committee.
(b) The Company is not involved in any industrial or trade dispute or any
dispute or negotiation regarding a claim of material importance with
any trade union or association of trade unions or organisation or body
of employees and there are no facts known, or which would on
reasonable enquiry be known to the Warrantors which might indicate
that there may be any such dispute.
(6) SHARE INCENTIVE, BONUS SCHEMES ETC
----------------------------------
The Company does not have in existence and is not proposing to introduce
any share incentive scheme, share option scheme or profit sharing scheme
for all or any part of its directors or employees.
(7) INDUSTRIAL AGREEMENTS
---------------------
The Company has not within the preceding 3 years prior to the date of this
Agreement entered into any union membership, security of employment,
recognition or other collective agreement (whether legally binding or not)
with a trade union and has not within such period done any act which might
be construed as recognition.
(8) PENSIONS
--------
(a) No agreement or arrangement (other than the Pension Schemes) exists
for the provision by the Company of any relevant benefits (as defined
in s. 612(1) Taxes Act 1988, being a retirement benefits scheme
defined in s. 630 Taxes Act 1988) for any person employed or formerly
employed by the Company of for any dependant of any such person.
82
(b) The Company is not providing any ex gratia pensions or other like
payments for any person employed or formerly employed by the Company
or any dependant of any such person.
(c) No undertaking or assurance has been given to all or any of the
persons employed or formerly employed by the Company as to the
continuance, introduction, increase or improvement of any retirement
death or disability benefits (whether or not there is a legal
obligation to do so).
(d)
(1) List of Plans - Part I of the Fourth Schedule to this Agreement
-------------
contains an accurate and complete list of all 4-Sight, Inc. employee
benefit plans ("Employee Benefit Plans"), within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), including any deferred compensation, separation,
retention, severance or similar plan or agreement, whether or not any
such Employee Benefit Plan is otherwise exempt from the provisions of
ERISA, established, maintained or contributed to by 4-Sight, Inc.
(2) Status of Plans - 4-Sight, Inc. does not maintain or contribute to any
---------------
Employee Benefit Plan subject to ERISA that is not in substantial
compliance with ERISA. None of the Employee Benefit Plans is a "multi
employer plan," as defined in ERISA Section 4001(a)(3), or is a
defined benefit pension plan subject to Title IV or ERISA. 4-Sight,
Inc. is not delinquent in any obligation to make contributions to any
multiemployer plan or to any Employee Benefit Plan subject to Internal
Revenue Code ("Code") Section 412 or Title IV of ERISA and has not
terminated or withdrawn from participation in any such plan.
(3) Contributions - Full payment has been made of all amounts which 4-
-------------
Sight, Inc. is required, under applicable law or under any Employee
Benefit Plan or any agreement relating to any Employee Benefit Plan to
which 4-Sight, Inc. is a party, to have paid as contributions thereto
as of the last day of the most recent fiscal year of such Employee
Benefit Plan ended prior to the date hereof. 4-Sight, Inc. has made
adequate provision for reserves to meet contributions that have not
been made because they are not yet due under the terms of any Employee
Benefit Plan or related agreements. Benefits under all Employee
Benefit Plans are as represented and have not been increased
subsequent to the date as
83
of which documents evidencing Employee Benefit Plans have been
provided to the Purchaser.
(4) Tax Qualification - Each Employee Benefit Plan intended to be
-----------------
qualified under Section 401(a) of the Code has been determined to be
so qualified by the Internal Revenue Service and nothing has occurred
since the date of the last such determination which resulted or is
likely to result in the revocation of such determination.
(5) Transactions - 4-Sight, Inc. has not engaged in any action or
------------
transaction with respect to an Employee Benefit Plan or any
participant or beneficiary under an Employee Benefit Plan which would
subject it to a tax, penalty, damages or liability under ERISA or the
Code, nor have any of 4-Sight, Inc.'s directors, officers or employees
to the extent they or any of them are fiduciaries with respect to such
plans, breached in any material respect any of their responsibilities
or obligations imposed upon fiduciaries under Title I of ERISA which
would result in any claim being made under, by or on behalf of any
such plans by any party.
(6) Audits or Suits - So far as the Warrantors are aware, there are no
---------------
pending or threatened audits, investigations, claims, suits,
grievances or other proceedings involving any Employee Benefit Plan,
or any rights or benefits thereunder, other than the ordinary and
usual claims for benefits by participants, dependents or
beneficiaries.
(7) Plan Amendment or Termination - Neither 4-Sight, Inc. nor any
-----------------------------
successor is restricted or prohibited from amending, merging, or
terminating any Employee Benefit Plan in accordance with the terms of
any such plan and applicable law.
(8) Documents - The Warrantors have delivered or caused to be delivered to
---------
the Purchaser true and complete copies of (i) all Employee Benefit
Plans as in effect, together with all amendments thereto which will
become effective at a later date, as well as the latest Internal
Revenue Service determination letter obtained with respect to any such
Employee Benefit Plan qualified under Section 401 or 501 of the Code,
and (ii) Form 5500 for the most recent completed fiscal year for each
Employee Benefit Plan required to file such form.
84
8. TAXATION MATTERS
----------------
For the purposes of this paragraph 8, "Company" means all or any of the Company
and the Subsidiaries and "UK Company" means the Company and any Subsidiary which
is resident in the United Kingdom for the purposes of Taxation.
(1) GENERAL TAXATION MATTERS
------------------------
(a) RESIDENCE
---------
No Company is treated as resident for Taxation purposes in any
jurisdiction other than or in addition to the jurisdiction of its
incorporation.
(b) TAX PROVISIONS
--------------
Full provision or reserve has been made in the Audited Accounts for
all Taxation liable to be assessed on any Company or for which it is
accountable in respect of income, profits or gains earned, accrued or
received on or before the Balance Sheet Date or any event on or before
the Balance Sheet Date, including distributions made down to such date
or provided for in the Audited Accounts, and full provisions has been
made in the Audited Accounts for deferred Taxation in accordance with
generally accepted accounting principles.
(c) ADMINISTRATION
--------------
(i) Each Company has properly and punctually made all returns,
notices and claims relating to Taxation and provided all such
information and maintained all such records on a proper basis in
relation to Taxation as are required to be provided or maintained
by it and all such returns, notices, claims and information given
to the Inland Revenue or other relevant Tax Authority were, when
given, in all material respects, true and accurate and none of
such returns is disputed nor so far as the Warrantors are aware
likely to be disputed by, or is yet to be determined by, or is
subject to agreement with, the Inland Revenue or any other Tax
Authority concerned (in the United Kingdom or elsewhere).
85
(ii) Since the Balance Sheet Date, no accounting period of any
Company has ended.
(iii) Each Company has duly made all claims, disclaimers and
elections assumed to have been made for the purposes of the
Audited Accounts.
(iv) No transaction has been effected by any Company in respect of
which any consent or clearance from the Inland Revenue or other
Tax Authority was required without such consent or clearance
having been validly obtained before the transaction was
effected on the basis of a full and accurate disclosure to the
Inland Revenue or other Tax Authority of all relevant material
facts, circumstances and considerations, and all such
transactions have been carried into effect only in accordance
with the terms of the relevant consent or clearance.
(v) No Company has taken any action which has had, nor so far as
the Warrantors are aware will have, the result of altering,
prejudicing or in any way disturbing any arrangement or
agreement which it has previously had with the Commissioners of
Inland Revenue, or the Commissioners of Customs and Excise, or
other Tax Authority.
(vi) The Disclosure Letter sets out full particulars of any
agreement arrangement or dispensation between any Company and
the Inland Revenue or other Tax Authority which is currently
effective.
(d) PAYMENT OF TAX
--------------
Each Company has duly and punctually paid all Taxation whether of the
United Kingdom or elsewhere which it has become liable to pay and
neither the Company nor any director or officer of any Company has
paid, or is or has become liable to pay, any fine, penalty, surcharge
or interest in connection with any claim for Taxation under the Taxes
Management Act 1970 or the VATA 1994 or any other statutory provision
relating to Taxation.
(e) DISTRIBUTIONS
-------------
86
(i) No UK Company has made a distribution within the meaning of
s.210 (bonus issue following repayment of share capital) Taxes
Act 1988 or issued any share capital as paid up otherwise than
by receipt of new consideration within the meaning of Part VI
Taxes Act 1988.
(ii) No Company is bound to make any distribution except any
dividend disclosed in its audited statutory accounts.
(iii) No Company has repaid or agreed to repay or redeemed or agreed
to redeem or purchased or agreed to purchase any of its share
capital or capitalised or agreed to capitalise in the form of
debentures or redeemable shares, any profits or reserves or any
class or description.
(f) FOREIGN INCOME DIVIDENDS
------------------------
(i) No UK Company has, prior to the date hereof, made any elections
under s.246A Taxes Act 1988.
(ii) No UK Company has not made any distribution which is deemed to
be a foreign income dividend by virtue of Schedule 7 Finance
Act 1997.
(g) PAYMENTS UNDER DEDUCTION
------------------------
All payments by any Company to any person which ought to have been
made under deduction of tax have been so made and the Company has (if
required bylaw to do so) provided certificates of deduction in the
required form to such person and accounted to the Inland Revenue or
other relevant Tax Authority for the Tax so deducted.
(h) PAYMENTS AND DISALLOWANCES
--------------------------
No rents, interest, annual payments or other sums of an income nature
paid or payable by any Company or which any Company is under an
obligation to pay in the future are wholly or partially disallowable
as deductions, loan relationship debits or charges in computing the
profits of the Company for the purposes of Taxation.
87
(i) LOAN RELATIONSHIPS
------------------
(i) Each UK Company applies an authorised accruals method of
accounting (as that term is defined in s.85 Finance Act 1996)
in respect of all loan relationships (as that term is defined
in s.81 Finance Act 1996) to which it is a party.
(ii) The Disclosure Letter contains full and accurate particulars of
any loan relationship to which any UK Company is a party,
whether as a debtor or as a creditor, where any other party to
that loan relationship is connected with that Company for the
purposes of Chapter II Part IV Finance Act 1996.
(iii) No UK Company has entered into any loan relationship to which
paragraph 11(1) Schedule 9 Finance Act 1996 applies.
(iv) No Company has been nor is entitled to be released from any
liability arising under a debtor relationship of the Company.
(v) No UK Company is a party to any loan relationship which is
subject to the provisions of s.92 (convertible securities) or
s.93 (loan relationships linked to the value of chargeable
assets) Finance Act 1996.
(j) CARRY FORWARD OF LOSSES ETC.
----------------------------
Nothing has been done and no event or series of events has occurred or
will as a result of any contract, agreement or arrangement entered
into before Completion occur which might, when taken together with the
entry into or Completion of this Agreement, cause or contribute to the
disallowance of the carry forward of any losses or excess charges on
income or surplus advance corporation tax under the provisions of
s.245 (calculation etc. of ACT on change of ownership of company),
s.245A (restriction on application of s240 in certain circumstances),
s.393 (losses other than terminal losses) or s.768 or s.768 A, B or C
(change of ownership of company: disallowance of trading losses,
expenses of management and other charges) Taxes Act 1988.
88
(k) GROUP INCOME
------------
The Disclosure Letter contains particulars of all elections made by
any UK Company under s.247 Taxes Act 1988 (dividends etc. paid by one
member of a group to another) and all such elections are now in force.
(l) GROUP RELIEF ETC
----------------
(i) The Disclosure Letter contains full details of all surrenders,
claims, notices, arrangements and agreements for surrenders or
claims or giving of notices to which any UK Company is or has
been a party in the last six accounting periods ending on or
before Completion for:-
(aa) any amounts by way of group relief under the provisions
of Chapter IV of Part X Taxes Act 1988;
(bb) any amount of surplus advance corporation tax under s.240
Taxes Act 1988;
(cc) any amounts of tax refund to be dealt with under s.102
Finance Act 1989.
(ii) The Company has received all payments due to it and made all
payments due from it under any such arrangement or agreement as
is referred to in (i) above for any group relief, advance
corporation tax or tax refund under those provisions.
(iii) No Company (other than a UK Company) has at any time within the
last six accounting periods ending on or before Completion had
its tax affairs dealt with on a consolidated basis nor has any
Company entered into a tax sharing arrangement with any other
company (including without limitation any arrangement whereby
tax losses or tax reliefs are surrendered or claimed or profits
transferred).
(2) CLOSE COMPANIES
---------------
(a) CLOSE COMPANY
-------------
89
The Company is a close company within the meaning of s.414 Taxes Act
1988.
(b) DISTRIBUTIONS
-------------
No distribution within s. 418 Taxes Act 1988 (certain expenses of
close companies included as distributions) has been made by the
Company within six years of the date hereof and no such distribution
will be made before Completion.
(c) LOANS TO PARTICIPATORS
----------------------
The Company has not made (and will not be deemed to have made) within
six years of the date hereof any loan or advance to a participator or
an associate of a participator so as to become liable to make any
payment under s.419 Taxes Act 1988 (loans to participators etc.).
(d) TRADING COMPANY
---------------
The Company is not and has never been a "close investment holding
company" within the meaning of s.13A Taxes Act 1988.
(3) ANTI-AVOIDANCE
--------------
(a) ANTI-AVOIDANCE
--------------
(i) No Company has at any time entered into or been a party to a
transaction or series of transactions containing steps inserted
which the Company was aware had no commercial or business
purpose other than the avoidance or deferral of Taxation; or
(ii) No UK Company has at any time entered into or been party to a
transaction or series of transactions being transactions to
which any of the provisions of Part XVII Taxes Act 1988 could
apply without, in the appropriate cases, having received
clearance in respect thereof from the Inland Revenue.
(iii) No transactions or arrangements involving any Company have
taken place or are in existence which are such that any
provisions relating to transfer pricing have or could be
applied to them (including for the avoidance of doubt, in
90
the case of any UK Company, any of the provisions of Sections
770-773 Taxes Act 1988) and no Company is or has been involved in
any other enquiry in any jurisdiction in relation to the
adjustment of profits of associated enterprises for Taxation
purposes.
(b) CONTROLLED FOREIGN COMPANIES
----------------------------
No notice of the making of a direction under s.747 Taxes Act 1988
(imputation of chargeable profits and creditable tax of controlled
foreign companies) has been received by any UK Company and no
circumstances exist which would entitle the Inland Revenue to make
such a direction and to apportion any profits of a controlled foreign
company to any UK Company pursuant to s.752 Taxes Act 1988
(apportionment of chargeable profits and creditable tax.
(5) CAPITAL ASSETS
--------------
(a) BASE VALUES
-----------
(i) On the disposal of any capital asset of a UK Company for a
consideration equal to the book value of that asset in or
adopted for the purpose of the Audited Accounts no liability to
corporation tax on chargeable gains under the TCGA 1992 would
arise (disregarding any right to claim reliefs or allowances
other than amounts falling to be deducted from the consideration
receivable under s.38 TCGA 1992).
(ii) On the disposal by any Company (other than a UK Company) of any
asset for a consideration equal to the value attributed to that
asset in the Audited Accounts no charge to tax will arise.
(b) ROLL-OVER RELIEF
----------------
No UK Company has made a claim under ss. 152 to 156 (inclusive), s.158
or ss.242 to 244 (inclusive) or s.247 TCGA 1992 and no such claim or
other claim has been made by any other person (in particular pursuant
to s.165 or s.175 TCGA 1992) which affects or could affect the amount
or value of the consideration for the acquisition of any asset by the
Company
91
taken into account in calculating liability to corporation tax on
chargeable gains on a subsequent disposal.
(c) CAPITAL ALLOWANCES
------------------
(i) The book value used in preparing the Audited Accounts of each
asset or class of assets in respect of which separate
computations for capital allowances are required to be made (as a
result of an election or otherwise) is such that, on a disposal
of each such asset, or (as the case may be) all the assets in
such class, for a consideration equal to the value so used (and
disregarding any statutory right to claim any allowance or
relief), no balancing charge would arise.
(ii) No claim has been made for the depreciation of any asset of a
Company (other than a UK Company) for Taxation purposes in
circumstances where the claim is likely to be disallowed.
(d) TRANSACTIONS SINCE THE BALANCE SHEET DATE
-----------------------------------------
(i) No liability to Taxation would arise on the disposal by any
Company of any asset acquired since the Balance Sheet Date for
a consideration equal to the consideration actually given for
the acquisition.
(ii) Since the Balance Sheet Date, no Company has entered into or
been party to any transaction which will or so far as the
Warrantors are aware may give rise to a liability to Taxation
other than transactions undertaken in the ordinary course of
trade of that Company (which, for the avoidance of doubt, shall
not include the disposal of a capital asset).
(iii) Since the Balance Sheet Date, no event has occurred as a result
of which a balancing charge may fall to be made under the CAA
1990 against, or any disposal value may fall to be brought into
account under s.24 CAA 1990 by, any UK Company or there may be
a recovery of excess relief within s.46 or s.47 CAA 1990 (or
other legislation relating to capital allowances).
(e) INTRA GROUP TRANSFERS
---------------------
92
Neither s.178 nor s.179 TCGA 1992 will have effect in relation to any
asset or property of any UK Company by virtue or in consequence of the
entering into or performance of the Agreement or any other Event since
the Balance Sheet Date.
(6) TAXATION OF EMPLOYEES
---------------------
(a) P.A.Y.E.
--------
(i) Each UK Company has properly operated the Pay As You Earn
System deducting tax as required by law from all payments to or
treated as made to employees and ex-employees of the Company
and punctually accounted to the Inland Revenue for all tax so
deducted.
(ii) Each UK Company has paid all national insurance and graduated
pension contributions for which it is liable and has kept
proper books and records relating to the same.
(iii) No UK Company has suffered any Pay As You Earn or national
insurance audit nor has been notified that any such audit is
expected to be made.
(iv) Each Company (other than a UK Company) has properly accounted
for all payroll, wage and other taxes, including without
limitation, all social security charges for which it is liable.
(b) BENEFITS FOR EMPLOYEES
----------------------
No Company has made any payment to or provided any benefit for any
officer or employee or ex-officer or ex-employee of the Company which
is not allowable as a deduction in calculating the profits of the
Company for Taxation purposes.
(7) STAMP DUTY
----------
(a) All documents which confer any right upon a Company which it may have
an interest in enforcing and all documents which form part of a
Company's title to any asset owned or possessed by it or which the
Company may need to enforce or produce in evidence in any court have
been duly stamped and the Company is not liable to any penalty in
respect of any such duty and there are no circumstances which may give
rise to such a penalty.
93
(b) Each Company (other than a UK Company) has duly paid all capital
duties for which it has at any time been liable.
(c) No UK Company has an unsatisfied liability to stamp duty reserve tax.
(8) VALUE ADDED TAX
---------------
For the purposes of this paragraph (8) where the context so requires,
"value added tax" means value added tax which is charged in the United
Kingdom under VATA 1994 and any similar or like tax charged on the supply
of goods or services in any other jurisdiction.
(a) GENERAL
-------
(i) Each Company is registered for the purposes of value added tax
and has been so registered at all times and in all
jurisdictions in which it has been required to be registered by
the relevant legislation.
(ii) Each Company has complied fully with all statutory
requirements, orders, provisions, directions or conditions
relating to value added tax including (for the avoidance of
doubt) the terms of any agreements reached with the
Commissioners of Customs and Excise or other relevant Tax
Authority.
(iii) Each Company maintains and has at all times maintained
complete, correct and up-to-date records for the purposes of
any value added tax legislation and has preserved such records
in such form and for such periods as are required by the
relevant legislation.
(iv) No Company is in arrears with any payment or returns, or liable
to any abnormal or non-routine payment, or any forfeiture or
penalty, or to the operation of any penal provision.
(v) No Company has been required by a Taxation Authority (including
the Commissioners of Customs and Excise) to give security.
94
(vi) No Company is, nor has it agreed to become, an agent, manager,
or factor for the purposes of accounting for value added tax
on behalf of any other person other than another Company.
(vii) No Company is or has been treated for value added tax purposes
as a member of a group of companies.
(viii) No Company has made exempt supplies such or of such amount
that it is unable to obtain credit for all input tax paid or
suffered by it.
(xii) There is no asset in respect of which a Company may at any
time be required to make any payment to a Tax Authority by way
of adjustment to input value added tax deductible on the asset
under arrangements giving effect to or comparable with Article
20(2)-(5) EC Sixth Directive (77/388/EC) (capital goods
scheme).
(b) VAT: PROPERTY TRANSACTIONS
--------------------------
The Disclosure Letter contains full details of all properties and
interests in land in which any UK Company is or may be interested
where any supply by it or to it or in relation thereto is or may be
subject to value added tax and all related undertakings, covenants and
agreements relating to the exercise or non-exercise of the election to
waive exemption from value added tax under paragraph 2 Schedule 10
VATA 1994.
(10) INHERITANCE TAX AND GIFTS
-------------------------
(a) POWERS OF SALE FOR INHERITANCE TAX PURPOSES
-------------------------------------------
There are not in existence any circumstances whereby any such power as
is mentioned in s.212 Inheritance Act 1984 could be exercised in
relation to any share in, securities of, or assets of, a Company.
(b) GIFTS
-----
(i) No Company is liable to be assessed to corporation tax on
chargeable gains or to inheritance tax as donor or donee of any
gift or transferor or transferee of value.
95
(ii) No Company has been a party to associated operations in
relation to a transfer of value within the meaning of s.268
Inheritance Tax Act 1984.
(iii) No Inland Revenue charge (as defined in s.237 Inheritance Tax
Act 1984) is outstanding over any asset of any Company or in
relation to any shares in the capital of any Company.
(iv) No Company has received any asset as mentioned in s.282 TCGA
1992.
(11) PENSION SCHEMES
---------------
(a) The Company has not received any payment to which s.601(1) Taxes Act
1988 (payments to employers) could apply.
(b) The Pension Schemes are not such, or in such a condition, that the
administration thereof may be obliged to submit proposals to the
Inland Revenue under schedule 22 Taxes Act 1988 (reduction of pension
scheme surpluses).
(12) SHARE SCHEMES
-------------
The Company is not a participating company in any scheme approved under
schedule 9 Taxes Act 1988 (approved share option schemes and profit sharing
schemes).
9. ASSETS (OTHER THAN THE PROPERTIES)
----------------------------------
(1) OWNERSHIP OF THE SUBSIDIARIES
-----------------------------
The Company is the sole beneficial owner of all the issued or allotted
shares of the Subsidiaries free from all liens, claims, charges, equities
and encumbrances and all such shares are fully paid or credited as fully
paid.
(2) SUBSIDIARIES, ASSOCIATES AND BRANCHES
-------------------------------------
The Company:-
(a) is not the holder or beneficial owner of, and has not agreed to,
acquire any share or loan capital of any other company (whether
incorporated in the United Kingdom or elsewhere) other than the
Subsidiaries; and
96
(b) does not have outside the United Kingdom any branch, agency or place
of business, or any permanent establishment (as that expression is
defined in the relevant double taxation relief orders current at the
date of this Agreement).
(3) TITLE TO ASSETS
---------------
All assets of the Company (other than the Properties) and all debts due to
it which are included in the Audited Accounts or have otherwise been
represented as being the property of or due to the Company were at the
Balance Sheet Date used or held for the purposes of its business, were at
the Balance Sheet Date the absolute property of the Company and (save for
those subsequently disposed of or realised in the ordinary course of
trading) all such assets and all assets and debts which have subsequently
been acquired or arisen are now the absolute property of the Company and
none is the subject of any option, right to acquire, assignment, mortgage,
charge, lien or hypothecation or other encumbrance whatsoever (excepting
other liens arising by operation of law in the normal course of trading) or
the subject of any factoring arrangement, hire-purchase, conditional sale
or credit sale agreement.
(4) PLANT AND MACHINERY
-------------------
(a) The plant, machinery, vehicles and all other equipment used in
connection with the business of the Company:-
(i) is in all material respects in a reasonable state of repair and
condition and satisfactory working order (fair wear and tear
excepted) and has been regularly and properly maintained;
(ii) (except computer equipment) is not surplus to requirements and
is in the possession and control of the Company and is not
expected to require replacements or additions at a cost in
excess of, in aggregate, (Pounds)10,000 within 12 months from
the date of this Agreement; and
(iii) is capable of doing the work for which it was designed or
purchased.
(b) Maintenance contracts are in full force and effect in respect of all
assets of the Company (except computer equipment) which it is normal
or prudent to have maintained by independent or specialist
97
contractors and in respect of all assets which the Company is obliged
to maintain or repair under any agreement (other than assets
maintained by the Company itself) and all such assets have been
maintained regularly to a reasonable technical standard and in
accordance with safety regulations usually observed in relation
thereto and in accordance with the terms of any leasing or other
agreement.
(5) INTELLECTUAL PROPERTY
---------------------
(a) The Company is the sole legal and beneficial owner of or has the
right to use, free and clear of all material liens, claims or
restrictions all Intellectual Property Rights.
(b) All the Intellectual Property Rights are valid and enforceable and are
in full force and effect.
(c) The details of the Intellectual Property Rights which are set out in
the Third Schedule are true, complete and accurate in all material
respects.
(d) All Intellectual Property Rights which are capable of registration
have been registered.
(e) The Company has not granted, or purported to grant, to any third party
any licences (whether express or implied) of the Intellectual Property
Rights nor has the Company created any equitable interest in,
licensed, charged or mortgaged or otherwise encumbered the
Intellectual Property Rights.
(f) All licences to the Company of Intellectual Property which are
disclosed in the Disclosure Letter are in full force and effect, are
valid and are not subject to any notice of termination, nor (so far as
the Warrantors are aware) are there any grounds for termination of any
such licence (including but not limited to termination as a result of
any of the transactions contemplated in this Agreement), nor, as far
as the Warrantors are aware, is the Company in breach of the terms of
any such licence, nor is the Company liable to make any payment (or
provide other consideration) contingent or otherwise to any third
party in respect of the use of any Intellectual Property.
(g) As far as the Warrantors are aware, nothing has been done or omitted
to be done and no circumstances exist which could lead to
98
any Intellectual Property Rights ceasing to be valid and enforceable
or whereby:-
(i) any person is able to seek cancellation, rectification or
revocation or any modification of any Intellectual Property
Rights; or
(ii) any applications for registered Intellectual Property Rights
might not proceed to grant or might not proceed to grant in
their current form; or
(iii) any Intellectual Property Rights could lapse or where fines
could become payable for late payment due to failure to pay
fees to any regulatory or governmental authority or any third
party prior to or within six months of the date of this
Agreement.
(h) The Warrantors are not aware of any proceedings, actions or claims
which are pending or threatened:-
(i) impugning the title, validity or enforceability (in whole or in
part) of any of the Intellectual Property Rights; or
(ii) in respect of employee rights to compensation as the inventor
or author of any Intellectual Property Right; or
(iii) with the intention that any third party be permitted to use any
of the Intellectual Property Rights, and in particular by way
of compulsory licence or crown use (or a similar or analogous
right in another jurisdiction).
(i) The carrying on of the business of the Company does not infringe and
has not infringed any Intellectual Property of any third party and, so
far as the Warrantors are aware, the Company does not need to obtain
rights under any Intellectual Property other than the Intellectual
Property Rights in order to continue its business as presently
constituted or in accordance with its current business plan.
(j) All trade secrets, know-how and other confidential information
relating to the business carried on by the Company which were created
by the Company including but not limited to lists of customers and
suppliers, sales targets, sales statistics, prices, market research
reports, business development and planning:-
99
(i) were lawfully created by the Company and were not obtained from
a third party;
(ii) have not been disclosed to any person (save for employees who
were under a duty of confidence) without in each case first
obtaining a written undertaking from the person in question to
keep the same confidential and the Company has disclosed to the
Purchaser the names and identities of all persons who have
given such undertakings; and
(iii) the Company is not under any obligation to disclose the same to
any person.
(k) The Company is not using any get up or trading style which is the same
as or similar to that of a third party who carries on a similar
business to the Company in the countries where the Company conducts
its business.
(l) So far as the Warrantors are aware the Company is not engaged in any
activity which could lead to a third party bringing a claim against
the Company for passing off or (in other jurisdictions) for unfair
competition and so far as the Warrantors are aware the Company does
not have (and never has had) grounds to bring an action against a
third party for passing off or for unfair competition.
(m) The Company has complied at all times with all applicable
requirements of the Data Protection Act 1984.
(n) All software held and/or used by the Company is and will remain
Millennium Compliant.
(o) The Company is not liable to make any payment (or provide other
consideration), contingent or otherwise, to any third party in respect
of any third party licences, relating to any of the Intellectual
Property, which have expired or been terminated and no proceedings,
actions or claims are pending or threatened in respect of third party
rights in and to such Intellectual Property which is the subject of
expired or terminated third party licences.
10. FREEHOLD AND LEASEHOLD PROPERTY
-------------------------------
(1) THE PROPERTIES
--------------
100
The Properties comprise all of the premises and land now owned or occupied
by or at any time used in connection with the businesses of the Company.
(2) TITLE
-----
In relation to each Property which is situated in the U.K.:-
(a) the Company or the Subsidiary named in the Fifth Schedule as owner of
the Property is the legal owner of and beneficially entitled to the
whole of the proceeds of sale of and has a good title to the whole of
the Property;
(b) if the title to the Property is registered then the Company is
registered with Absolute Title and if not so registered then the title
of the Company commences with the lease of the relevant Property to
the Company and the Company has in its possession all original
documents and other documents and papers relating to the Company's
title to the Property;
(c) there are no mortgages, charges or debentures, rent charges, liens,
annuities or other unusual outgoings, or trusts affecting the Property
or the proceeds of sale of it;
(d) save as contained or referred to in the lease of the relevant
Property, the Property is not subject to any adverse estate, right,
interest, covenant, restriction, stipulation, easement, option, right
of pre-emption, wayleave, profit a prendre, licence or other right or
informal arrangement in favour of any third party nor is there any
agreement or commitment to create any of the foregoing and where the
Property is subject to any such arrangement the Company has not
received notice of any breach of it and is not aware of any material
breach likely to cause such a notice to be received;
(e) the Property has access and egress over Norwich Avenue West which is
adopted by the appropriate highway authority and are maintainable at
the public expense. The Property drains into a public sewer and is
served by water and electricity utilities. Either the conducting media
serving the Property connect directly to the mains without passing
through land in the occupation or ownership of a third party or, if
they do not, the rights necessary for the enjoyment and present use of
the Property are enjoyed on
101
terms which are set out in the lease relating to the relevant
Property;
(f) where the title of the Property or any part of it is unregistered but
situated in an area of compulsory registration no event has occurred
in consequence of which registration of the Company's title to the
relevant Property should have been effected; and
(g) there are no material outstanding disputes, claims or demands between
the Company and any third party affecting the Property of which the
Warrantors are aware.
(3) TOWN AND COUNTRY PLANNING
-------------------------
In relation to each Property which is situated in the U.K.:-
(a) no development at the Property or use of the Property has been
undertaken by the Company in breach of the Town and Country Planning
legislation;
(b) the planning consents and permissions affecting the Property are
either unconditional or are subject only to conditions which are
neither unusual, personal nor temporary and which have been satisfied
or fully observed and performed up to the date of this Agreement;
(c) there is no resolution, proposal, scheme or order, whether formally
adopted or not, for the compulsory acquisition of the whole or any
part of the Property or any access or egress;
(d) there is no outstanding statutory or other notice relating to the
Property, any business carried on there or the use of the Property;
(e) there is no outstanding monetary claim or liability, contingent or
otherwise, in respect of the Property;
(f) none of the buildings or structures on the Property has been listed
under s.54 Town and Country Planning Act 1971 or s.1 Planning (Listed
Buildings and Conservation Areas) Act 1990, nor has the local
authority authorised the service of any building preservation notice
under s.58 Town and County Planning Act 1971 or s.3 Planning (Listed
Buildings and Conservation Areas) Act 1990 or any repairs notice under
s.115 Town and Country Planning Act 1971 or s.48 Planning (Listed
Buildings and Conservation Areas)
102
Act 1990 in respect of the Property or any building or structure
thereon, nor has the local authority made or resolved to make any
noise abatement zone order under s. 63 Control of Pollution Act 1974
for any area which includes the Property;
(g) the Property is not in an urban development area, an improvement area
or an enterprise zone; and
(h) there are no onerous Local Land Charges registered in respect of the
Property.
(4) STATUTORY REQUIREMENTS
----------------------
In relation to each Property which is situated in the U.K.:-
(a) a Fire Certificate has been issued in respect of the Property and
there has been no breach of the provisions or conditions contained in
it;
(b) so far as the Warrantors are aware the Property complies with the
requirements of the Shops Act 1950, the Factories Acts, the Offices,
Shops and Railway Premises Act 1963 (as modified), the Fire
Precautions Act 1971, the Health and Safety at Work etc., Act 1974 and
any similar legislation, bye-laws and regulations made thereunder; and
(c) so far as the Warrantors are aware there is no actual or potential
liability arising under the Control of Pollution Act 1974 or any other
public health legislation which could give rise to any costs,
liabilities or other obligations binding upon either the Vendors or
the Purchaser.
(5) STATE AND CONDITION OF THE PROPERTIES
-------------------------------------
The Property is fit for the purposes for which it is used.
(6) LEASEHOLD PROPERTIES
--------------------
Where the interest of the Company in any Property is leasehold the details
of the date, parties, premises and term have been completed in the Fifth
Schedule and:-
103
(a) The Company has paid the rent and the last demands for rent (or
receipts if issued) were unqualified.
(b) So far as the Warrantors are aware, there are no material subsisting
breaches of any covenant or condition contained in the Lease on the
part of either the relevant landlord or the Company and no landlord
has refused to accept rent or made any complaint or objection;
(c) (UK Property only) no structural alterations have been made to the
exterior of the Property at the expense of the Company without
landlord's consents and approvals and all other alterations to the
Property have been made in accordance with the terms of the relevant
Lease and with all necessary consents and approvals and do not have to
be reinstated at the expiry of the term.
(d) (UK Property only) all steps in rent reviews have been duly taken and
no rent reviews are or should be currently under negotiation or the
subject of a reference to any expert or arbitrator of the Courts;
(e) (UK Property only) the Lease does not contain a covenant which
requires the tenant to offer to surrender the same before or as a pre-
condition of an assignment or underletting nor does it contain
requirements to be satisfied on a change of ownership of the share
capital or control of the tenant;
(f) (US Property only) a full and complete lease together with all
amendments thereto and any related documents have been supplied to the
Purchaser and WAM!NET.
(7) PROPERTIES SUBJECT TO LEASES AND LICENCES
-----------------------------------------
No Property is the subject of any Lease or Licence for the benefit of any
person other than the Company.
(8) CONTINGENT LIABILITIES
----------------------
There is no actual or contingent liability on the part of the Company
arising directly or indirectly out of any lease, agreement for lease,
conveyance or licence or other deed previously held by the Company as an
original lessee or underlessee or otherwise in respect of any Property
situated in the U.K.
104
(9) REPLIES BEFORE CONTRACT
-----------------------
Any replies given by or on behalf of the Vendor to Enquiries Before
Contract raised by or on behalf of the Purchaser relating in any way to the
Property are true and accurate in all respects.
11. ENVIRONMENTAL ISSUES
--------------------
In respect of such of the Properties which are situated in the U.K.:
(a) So far as the Warrantors are aware the Company has obtained all
necessary Environmental Licences and complied with the terms and
conditions of such Environmental Licences and all other applicable
Environmental Law.
(b) Neither the Company nor (so far as the Warrantors are aware) any of
its directors, officers or employees nor any person for whose acts or
defaults the Company may be vicariously liable is involved (in
relation to any matter for which the Company is vicariously liable) in
any legal, administrative, civil, criminal, arbitration or other
proceedings or investigations in relation to any Environmental Law or
any Environmental Licence or concerned with the pollution or
protection of the Environment or the protection of or harm to the
health of humans, animals or plants in any jurisdiction and, so far as
the Warrantors are aware, none such are pending or threatened by or
against the Company or any such person and, so far as the Warrantors
are aware, there are no facts or circumstances that may give rise to
any such proceedings arbitration or investigations.
(c) So far as the Warrantor are aware, the Company does not own use or
occupy and has not owned used or occupied any land, water supply,
plant or equipment, whether or not in or at the Properties, which
contains or has contained a hazardous substance or article, waste or
other pollutant or contaminant or which is or has been used for the
deposit, storage, treatment or disposal of waste or sewage or been
affected by any pollution, noise or nuisance from any other land or
activity thereon or use thereof and, so far as the Warrantors are
aware, no land or water supply adjoining any land or water supply
owned, used or occupied by the Company has contained or contains any
such hazardous substance, waste or other pollutant or contaminant.
105
(d) So far as the Warrantors are aware the Company has not discharged or
emitted into or on, so far as the Warrantors are aware, to the
Environment any hazardous substance or article, pollutant or
contaminant in breach of the terms and conditions of any Environmental
Licence.
(e) The Company has not received or given any notice or other
communications alleging breach of any Environmental Law or
Environmental Licence and, so far as the Warrantors are aware, there
are no facts or circumstances that may give rise to the giving or
receipt of any such notice or communication.
(f) There is and has been no governmental or other investigation, enquiry
or disciplinary proceeding relating to the pollution or protection of
the Environment concerning the Company or the Properties and, so far
as the Warrantors are aware, none is pending or threatened and no
facts or circumstances exist which might give rise to any such
investigations, enquiries or proceedings.
12. MEDIA TEC INVESTMENTS LIMITED
-----------------------------
None of the Warrantors have any interest whatsoever in Media Tec
Investments Limited.
13. NO BROKERS OR FINDERS
---------------------
No person, firm or corporation has or will have, as a result of any act or
omission of any of the Vendors, any right, interest or valid claim against
or upon the Purchaser or WAM!NET for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in
connection with the transactions contemplated by this Agreement.
106
PART II
-------
THE PURCHASER WARRANTIES
------------------------
1. CORPORATE STATUS
----------------
Each of WAM!NET and the Purchaser is a corporation duly organised, validly
existing and (if appropriate) in good standing under respectively the laws
of the State of Minnesota and England with full corporate power and
authority to own its properties and carry on its business as now conducted.
2. AUTHORITY FOR AGREEMENTS
------------------------
Each of WAM!NET and the Purchaser has the power and authority to execute
and deliver this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance by each of WAM!NET and the Purchaser of
this Agreement and the consummation of the transactions contemplated
therein have been duly authorised by all necessary corporate action on the
part of each. This Agreement has been duly executed and delivered by
WAM!NET and the Purchaser and constitutes the valid and legally binding
obligations of WAM!NET and the Purchaser respectively enforceable against
each such company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganisation and similar laws of general application relating to or
affecting the rights and remedies of creditors.
3. NO CONFLICTS
------------
The execution, delivery and performance of this Agreement and the
consummation of all of the transactions contemplated hereby, except where
the failure to obtain a consent or waiver of any third party will not have
a material adverse effect on WAM!NET and the Purchaser or impair the
ability of WAM!NET or the Purchaser to consummate the transactions thereby
contemplated (i) do not and will not, so far as the Purchaser or WAM!NET is
concerned, require the consent, waiver, approval, license, designation or
authorisation of, or declaration with, any person or public authority; (ii)
do not and will not with or without the giving of notice or the passage of
time or both, violate or conflict with or result in a breach or termination
of any provision of, or constitute a default under, or accelerate or permit
the acceleration of the performance required by the terms of, or result in
the creation of any mortgage,
107
security interest, claim, lien, charge or other encumbrance upon any of the
assets of WAM!NET or the Purchaser or pursuant to, or otherwise give rise
to any liability or obligation under the articles or bylaws (or similar
organisational documents) of WAM!NET or the Purchaser under any agreement,
mortgage, deed of trust, indenture, licence, permit or any other agreement
or instrument or any order, judgment, decree, statute, regulation or any
other restriction of any kind or description to which WAM!NET or the
Purchaser is a party or by which WAM!NET or the Purchaser may be bound; and
(iii) will not terminate or result in the termination of any such agreement
or instrument, or in any way affect or violate the terms and conditions of,
or result in the cancellation, modification, revocation or suspension of,
any rights of WAM!NET or the Purchaser.
4. ORGANISATIONAL DOCUMENTS; SUBSIDIARIES
--------------------------------------
The copies of the articles of incorporation and bylaws or memorandum and
articles of association (or similar organisational documents) of WAM!NET
and the Purchaser delivered to the Vendors or their agents prior to the
execution of this Agreement are true and complete copies of the duly and
legally adopted articles of incorporation and bylaws or memorandum and
articles of association (or similar organisational documents) of WAM!NET
and the Purchaser in effect as of the date of this Agreement.
5. QUALIFICATION
-------------
Each of WAM!NET and the Purchaser is duly qualified or licensed to do
business and in good standing as a foreign corporation in each jurisdiction
wherein the nature of its activities or of its properties owned or leased
makes such qualification or licensing necessary and failure to be so
qualified or licensed or in good standing would have a material adverse
impact on its business.
6. FINANCIAL STATEMENTS
--------------------
WAM!NET has heretofore delivered to each of the Vendors a consolidated
balance sheet of WAM!NET and the WAM!NET Subsidiaries at 31 December 1997
(the "Audited Balance Sheet"), together with consolidated statements of
operations, stockholders' equity and cash flow of WAM!NET and the
subsidiaries of WAM!NET ("WAM!NET Subsidiaries") for the fiscal year then
ended, and the report thereon of Ernst & Young, certified public
accountants. Such financial statements present fairly the consolidated
financial condition of
108
WAM!NET and the WAM!NET Subsidiaries at the relevant balance sheet date and
the consolidated results of operations of WAM!NET and the WAM!NET
Subsidiaries for the period therein specified, and have been prepared in
accordance with U.S. generally accepted accounting principles applied on a
basis consistent with prior accounting periods.
7. LITIGATION
----------
(a) Since 31 December 1997 neither WAM!NET nor any WAM!NET Subsidiary has
received notice of any claim for damages or seeking any other relief
against WAM!NET or any WAM!NET Subsidiary.
(b) Neither WAM!NET nor any WAM!NET Subsidiary is engaged whether as
plaintiff or defendant or otherwise in any legal action, proceedings
or arbitration (other than as plaintiff in the collection of debts
arising in the ordinary course of its business) nor is WAM!NET nor any
WAM!NET Subsidiary being prosecuted for any criminal offence and, so
far as WAM!NET is aware, there are no such proceedings or prosecutions
pending or threatened.
(c) So far as WAM!NET is are aware, there are no investigations,
disciplinary proceedings or other circumstances likely to lead to any
such claim or legal action, proceedings or arbitration (other than as
aforesaid) or prosecution in which WAM!NET or any WAM!NET Subsidiary
may become involved.
8. CONSIDERATION SHARES
--------------------
The Consideration Shares referred to in sub-clause 5.1.2 are duly
authorised and, when issued at Completion pursuant to the terms of this
Agreement, will be validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions (except restrictions on transfer thereof other than in
compliance with federal and state securities laws). The Consideration
Shares referred to in Clause 6 are duly authorised and reserved to the
Vendors and, when issued pursuant to the terms of this Agreement, will be
validly issued and outstanding, fully paid, nonassessable and free and
clear of all pledges, liens, encumbrances and restrictions (except
restrictions on transfer thereof other than in compliance with federal and
state securities laws). The certificates representing the Consideration
Shares to be delivered by WAM!NET under this Agreement will be genuine, and
WAM!NET has no knowledge of any facts which would impair the validity
thereof.
109
9. CAPITAL STOCK
-------------
The authorized capital stock of WAM!NET consists of (a) 90,000,000 shares
of Common Stock, par value U.S. $0.01 per share, of which 1,339,948 shares
of Common Stock are issued and outstanding, and (b) 100,000 shares of Class
A Preferred Stock, par value U.S. $10.00 per share, of which 100,000 shares
are issued and outstanding and (c) 9,900,000 shares of undesignated capital
stock, none of which are issued and outstanding.
All of the outstanding shares of capital stock of each of WAM!NET and the
WAM!NET Subsidiaries were duly authorized and validly issued and are fully
paid and nonassessable.
No holder of any security of WAM!NET is entitled to any preemptive or
similar rights to purchase securities from WAM!NET. All outstanding
securities of WAM!NET and the WAM!NET Subsidiaries have been issued in full
compliance with an exemption or exemptions from the registration and
prospectus delivery requirements of the Securities Act and from the
registration and qualification requirements of all applicable state
securities laws.
10. NO BROKERS OR FINDERS
---------------------
No person, firm or corporation has or will have, as a result of any act or
omission of any of WAM!NET or the WAM!NET Subsidiaries, any right, interest
or valid claim against or upon the Vendors for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in
connection with the transactions contemplated by this Agreement.
11. REGISTRATION RIGHTS
-------------------
Other than under Clause 18 WAM!NET has not agreed to register any of its
authorized or outstanding securities under the Securities Act.
110
THE EIGHTH SCHEDULE
-------------------
LIMITATIONS OF LIABILITY
------------------------
PART I
------
1. No liability shall arise in respect of a Relevant Claim unless the
aggregate amount of all Relevant Claims exceeds (Pounds)300,000 but if the
aggregate of all Relevant Claims exceeds such sum as aforesaid then
(subject to the other provisions hereof), the Warrantors shall be liable
for the whole of such liabilities and not merely for the excess. The
foregoing shall not apply to a Relevant Claim which relates to a liability
to Taxation (as defined in the Tax Deed) arising as a result of any
adjustment of the profits of the Company or any Subsidiary for the purposes
of Taxation in connection with a marketing rebate of approximately
(Pounds)180,000 from the Company to 4-Sight Inc nor, for the avoidance of
doubt, any liability arising pursuant to the indemnity contained in Clause
10.2.
2. (a) The aggregate amount of liabilities of the Warrantors under or in
connection with all Relevant Claims shall not exceed the amount of the
Consideration actually received by the Warrantors. The aggregate
amount of liability of each Warrantor under or in connection with all
Relevant Claims shall not exceed the aggregate amount of the
Consideration actually received by such Warrantor for his Shares
including the Consideration Shares. For the purposes of this paragraph
the Consideration Shares shall be deemed to have a value per Share
equal to the net proceeds of sale not exceeding US$40 per
Consideration Share sold (less Taxation thereon) at arms' length of
such Consideration Shares as are required to meet the Warrantors'
liability for any Relevant Claim (in excess of the cash consideration
received by him) PROVIDED THAT to the extent that prior to the date of
the Relevant Claim, any of such Consideration Shares shall have been
disposed of by way of sale at arms' length, the net proceeds of sale
(less Taxation thereon) shall be substituted pro rata for such value.
(b) The amount of Taxation taken into account in determining the value per
Share for the purposes of sub-paragraph 2(a) above shall be reduced by
the amount of any credit in respect of Taxation given to the Warrantor
as a result of an adjustment of the Consideration which is
attributable to a payment made in respect of a Relevant Claim.
111
(c) The Warrantors undertake that, to the extent required, they will
dispose of the Consideration Shares held by them by way of arms length
sale in order to meet any Relevant Claim.
(d) The US dollar value of any net proceeds of sale of any Consideration
Shares shall, for the purposes of this paragraph 2 be converted into
sterling at the spot rate (at which dollars are bought with sterling)
on the date on which the net proceeds are received.
3. All Relevant Claims against the Warrantors under or in connection with the
Vendor Warranties shall be wholly barred and unenforceable unless written
particulars thereof (giving reasonable details of the specific matter or
claim in respect of which a claim is made to the extent known to the
Purchaser) shall have been given to the Warrantors by no later than the
second anniversary of Completion or, in the case of any claim by reason of
a breach of a Warranty contained in paragraph 8 of the Seventh Schedule,
within a period of six years from the end of the current accounting
reference period of the Company.
4. All Relevant Claims against the Warrantors under or in connection with the
Tax Deed shall be wholly barred and unenforceable unless written
particulars thereof (giving reasonable details of the specific matter or
claim in respect of which a claim is made to the extent known to the
Purchaser) shall have been given to the Warrantors within a period of six
years from the end of the current accounting reference period of the
Company.
5. Where notice of a Relevant Claim has been duly given, such claim shall be
wholly barred and unenforceable unless proceedings in respect of such claim
shall have been issued and served upon the Warrantors within 12 months
after notice of such claim shall be deemed to have been served (or, if part
of such claim relates to a liability which is contingent, then in respect
of such part only, within 12 months after such liability becomes an actual
liability).
6. Where notice of a Relevant Claim has been duly given and part of such claim
relates to a liability which is contingent, the Warrantors shall not be
under any obligation to make any payment to the Purchaser or (if
applicable) the Company in respect of such liability until such time as it
becomes an actual liability.
112
7. In the event that the Purchaser or the Company or any of the Subsidiaries
recovers any sum (whether by payment, discount, credit or otherwise) from
any third party which relates to the subject matter of a Relevant Claim the
Purchaser shall offset (after deducting any applicable tax and the
reasonable expenses incurred by the Purchaser or the Company or any of the
Subsidiaries in the recovery thereof) such sum against the amount of the
related claim payable by the Warrantors or, if the Warrantors have already
paid such Relevant Claim, the Purchaser shall pay promptly or procure that
the Company or the Subsidiaries (as the case may be) shall pay promptly
such portion of such sum to the Warrantors, but only to the extent of the
net payment received by the Purchaser from the Warrantors in respect of
such Relevant Claim.
8. In respect of any Relevant Claim paid in full by the Warrantors, the
Warrantors shall be entitled to full subrogation to the rights of the
Company, the Subsidiaries and the Purchaser against the third party to the
extent that the Warrantors have so paid and the Purchaser shall and shall
procure that the Company and the Subsidiaries shall co-operate with all
reasonable requests to aid the Warrantors to collect from the third party,
PROVIDED THAT all reasonable out-of-pocket expenses and all costs, claims,
actions and demands made on the Purchaser or the Company or any of the
Subsidiaries as a result of any action required to be taken by the
Warrantors shall be paid for by the Warrantors.
9. In respect of any Relevant Claim not first paid in full by the Warrantors,
the Purchaser will take such action as the Warrantors may reasonably
require to avoid, resist, contest or compromise any Relevant Claim or
matter which gives or may give rise to a Relevant Claim, and where required
by the Warrantors, give control of the conduct of any Relevant Claim or
matter which may give rise to a Relevant Claim to the Warrantors (provided
that such action or control shall not be required by the Warrantors in
relation to any matters which is likely or might reasonably be expected
directly or indirectly adversely to affect relations with customers or
suppliers of the Company and/or any of the Subsidiaries or may otherwise
adversely affect the business or financial position of the Company and/or
any of the Subsidiaries), and subject in each such case to being
indemnified and secured first to the Purchaser's reasonable satisfaction by
the Warrantors against all reasonable costs in so doing.
10. The Warrantors shall not be liable in respect of a Relevant Claim under or
in connection with the Vendor Warranties if and to the extent that the loss
is or has been included and satisfied in any Relevant Claim under the Tax
Deed nor shall they be liable in respect of a Relevant Claim under or
113
in connection with the Tax Deed if and to the extent that the loss is or
has been included and satisfied in any Relevant Claim under the Warranties.
To the extent that the Relevant Claim arises under the Vendor Warranties
and also under the Tax Deed, such claim shall first be satisfied under the
Warranties.
11. The Purchaser shall not be entitled to make any Relevant Claim under or in
connection with the Vendor Warranties to the extent that the matter giving
rise to the Relevant Claim has been fairly disclosed in the Disclosure
Letter.
12. The Purchaser shall not be entitled to make any Relevant Claim (and the
Warrantors shall not be liable in respect of any such claim):-
(a) to the extent that the subject matter of the claim is specifically
reserved or provided for or included as a liability in the Audited
Accounts or the Management Accounts;
(b) to the extent that such liability would not have arisen but for a
voluntary act or omission by the Company or any Subsidiary which was
provided for in or carried out to comply with the terms of or give
effect to this Agreement or which is outside the ordinary course of
business after Completion and which could reasonably have been avoided
and which the Purchaser was aware or ought reasonably to have been
aware might give rise to a Relevant Claim (save where such act or
omission is a result of a legally binding obligation of the Company or
the Subsidiary entered into before Completion or is done with the
prior written approval of the Warrantors);
(c) to the extent that liability in respect of such claim arises or is
increased as a result of any increase in the rates of Taxation made or
imposed after Completion with retrospective effect to any period
ending on or before Completion;
(d) to the extent that liability in respect of such claim arises or is
increased as a result of the retrospective imposition of Taxation as a
consequence of any change in the law enacted or in the published
Inland Revenue practice thereof or otherwise made after the date
hereof;
(e) to the extent that such liability arises wholly or partly out of or
the amount thereof is increased as a result of any change in the
accounting principles or practices of the Purchaser or WAM!NET
114
or the Company or any of the Subsidiaries introduced or having effect
after the date hereof unless the same is introduced to bring such
accounting principles and practices into line with generally accepted
accounting principles and practices in relation to a business of the
type carried on by the Company and the Subsidiaries.
13. In this Part I of this Schedule, any reference to the Purchaser shall be
construed as meaning the Purchaser and/or WAM!NET.
115
PART II
-------
1. No liability shall arise in respect of a Relevant Claim unless the
aggregate amount of all Relevant Claims exceeds (Pounds)300,000 but if the
aggregate of all Relevant Claims exceeds such sum as aforesaid then
(subject to the other provisions hereof), the Purchaser and WAM!NET shall
be liable for the whole of such liabilities and not merely for the excess.
2. The aggregate amount of liabilities of the Purchaser and WAM!NET under or
in connection with all Relevant Claims shall not exceed US$12,612,204 .
3. All Relevant Claims against the Purchaser and WAM!NET under or in
connection with the Purchaser Warranties shall be wholly barred and
unenforceable unless written particulars thereof (giving reasonable details
of the specific matter or claim in respect of which a claim is made to the
extent known to the Vendors) shall have been given to the Purchaser and
WAM!NET by no later than the second anniversary of Completion.
4. Where notice of a Relevant Claim has been duly given, such claim shall be
wholly barred and unenforceable unless proceedings in respect of such claim
shall have been issued and served upon the Purchaser and WAM!NET within 12
months after notice of such claim shall be deemed to have been served (or,
if part of such claim relates to a liability which is contingent, then in
respect of such part only, within 12 months after such liability becomes an
actual liability).
5. Where notice of a Relevant Claim has been duly given and part of such claim
relates to a liability which is contingent, the Purchaser and WAM!NET shall
not be under any obligation to make any payment to the Vendors in respect
of such liability until such time as it becomes an actual liability.
6. In the event that the Vendors or the Company or any of the Subsidiaries
recovers any sum (whether by payment, discount, credit or otherwise) from
any third party which relates to the subject matter of a Relevant Claim the
Vendors shall offset (after deducting any applicable tax and the reasonable
expenses incurred by the Vendors or the Company or any of the Subsidiaries
in the recovery thereof) such sum against the amount of the related claim
payable by the Purchaser and WAM!NET or, if the
116
Purchaser and WAM!NET have already paid such Relevant Claim, the Vendors
shall pay promptly such portion of such sum to the Purchaser and WAM!NET,
but only to the extent of the net payment received by the Vendors from the
Purchaser and WAM!NET in respect of such Relevant Claim.
7. In respect of any Relevant Claim paid in full by the Purchaser and WAM!NET,
the Purchaser and WAM!NET shall be entitled to full subrogation to the
rights of the Company and the Subsidiaries and the Vendor against the third
party to the extent that the Purchaser and/or WAM!NET have so paid and the
Vendors shall and shall procure that the Company and the Subsidiaries shall
co-operate with all reasonable requests to aid the Purchaser and/or WAM!NET
to collect from the third party, PROVIDED THAT all reasonable out-of-pocket
expenses and all costs, claims, actions and demands made on the Vendors or
the Company or any of the Subsidiaries as a result of any action required
to be taken by the Purchaser and WAM!NET shall be paid for by the Purchaser
and WAM!NET.
8. In respect of any Relevant Claim not first paid in full by the Purchaser
and/or WAM!NET, the Vendors will take such action as the Purchaser and
WAM!NET may reasonably require to avoid, resist, contest or compromise any
relevant claim or matter which gives or may give rise to a Relevant Claim,
and where required by the Purchaser and WAM!NET, give control of the
conduct of any Relevant Claim or matter which may give rise to a Relevant
Claim to the Purchaser and WAM!NET (provided that such action or control
shall not be required by the Purchaser and WAM!NET in relation to any
matters which are likely or might reasonably be expected directly or
indirectly adversely to affect relations with customers or suppliers of the
Company and/or any of the Subsidiaries or may otherwise adversely affect
the business or financial position of the Company and/or any of the
Subsidiaries), and subject in each such case to being indemnified and
secured first to the Vendors' reasonable satisfaction by the Purchaser and
WAM!NET against all reasonable costs in so doing.
9. The Vendors shall not be entitled to make any Relevant Claim under or in
connection with the Purchaser Warranties to the extent that the matter
giving rise to the Relevant Claim has been fairly disclosed in the
Purchaser's Disclosure Letter.
10. The Vendors shall not be entitled to make any Relevant Claim (and the
Purchaser and WAM!NET shall not be liable in respect of any such claim):-
117
(a) to the extent that the subject matter of the claim is specifically
reserved or provided for or included as a liability in the Audited
Balance Sheet referred to in paragraph 6 of the Seventh Schedule;
(b) to the extent that liability in respect of such claim arises or is
increased as a result of any increase in the rates of Taxation made or
imposed after Completion with retrospective effect to any period
ending on or before Completion;
(c) to the extent that liability in respect of such claim arises or is
increased as a result of the retrospective imposition of Taxation as a
consequence of any change in the law enacted or in the published
Inland Revenue or other Tax Authority practice thereof or otherwise
made after the date hereof.
118
SIGNED by )
- ------
DAVID ANTHONY TOWNEND ) /s/ David Townend
- ---------------------
in the presence of:- )
/s/ A.R. Prest
SIGNED by )
- ------
LYNDON DAVID STICKLEY ) /s/ Lyndon David Stickley
- ---------------------
in the presence of:- )
/s/ Peter Basius
SIGNED by )
- ------
ANDREW STEVEN BAIRD ) /s/ Andrew S. Baird
- -------------------
in the presence of:- )
/s/ Clair Baird
SIGNED by )
- ------
YORICK PHOENIX ) /s/ Yorick Phoenix
- --------------
in the presence of:- )
/s/ A.R. Prest
SIGNED by Frank Dearie )
- ------
for and on behalf of ) /s/ Frank Dearie
MEDIA TEC INVESTMENTS )
- ---------------------
LIMITED in the presence of:- )
- -------
/s/ Karen B. Smith
SIGNED by )
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for and on behalf of ) /s/
GEOCAPITAL IV L.P. )
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in the presence of:- )
119
SIGNED by )
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for and on behalf of )
Catherine C. Clarke
3i GROUP PLC ) /s/ Catherine C. Clarke
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in the presence of:- )
SIGNED by )
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for and on behalf of )
WAM!NET (UK) LIMITED ) /s/ Michael Borman
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in the presence of:- )
/s/ Edward J. Driscoll, Jr.
SIGNED by )
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for and on behalf of )
WAM!NET INC. ) /s/ Edward J. Driscoll III
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in the presence of:- )
/s/ Michael O'Donnell
120