EXHIBIT 4.17
DATE 4 July 2003
Conformed Copy
CORDIANT COMMUNICATIONS GROUP PLC
LIGHTHOUSE GLOBAL NETWORK, INC.
3319TH SINGLE MEMBER
SHELF TRADING COMPANY LIMITED
FD MWA HOLDINGS, INC.
SHARE SALE AGREEMENT
relating to the sale of shares in those companies comprising
the Financial Dynamics International network
Macfarlanes
10 Norwich Street
London EC4A 1BD
CONTENTS
Clause Page
1 Definitions, interpretation and third party rights 1
2 Conditions 8
3 Sale and purchase 10
4 Consideration 10
5 Period before Completion 11
6 Completion 14
7 Completion Working Capital 16
8 Vendor's Warranties 17
9 Purchaser's Warranties, covenants and undertakings 19
10 Taxation 20
11 Restrictive Covenants 20
12 Confidentiality and announcements 22
13 Assignment 23
14 General 23
15 Notices 25
16 Governing law and jurisdiction 27
1 The Target Companies
2 The Subsidiaries
3 Apportionment of Consideration.
4 Completion obligations of the Vendor
5 Part 1: Vendor's Warranties
Part 2: Purchaser's Warranties
6 Limitations on Liability
7 The Properties
8 Completion Accounts
9 Tax Covenant
10 Lexington Avenue Lease
11 Table of Encumbrances
List of Agreed Form Documents
A Special Purpose Accounts
B Purchaser's Articles
C Deed of Assignment
D German Merger Filing
E Resolution
F1 to F27 Letters of Resignation
G1 and G2 Vendor's Power of Attorney and Stock Power
H1 to H9 Board Minutes
I Announcement
J1 to J3 Deeds of Release
K Steps Paper
L Deed of Assignment of Benefit of Contracts
M Settlement Agreement
N Letter pursuant to Clause 5.11
SHARE SALE AGREEMENT
DATE 4 July 2003
PARTIES
1 CORDIANT COMMUNICATIONS GROUP PLC (registered in England and Wales under
number 01320869) whose registered office is at 1-5 Midford Place, London
W1T 5BH ("the Vendor")
2 LIGHTHOUSE GLOBAL NETWORK, INC. (a Delaware corporation whose registered
office is at Corporation Trust Center, 1209 Orange Street, Wilmington,
County of New Castle, Delaware, USA)("the Designated Vendor")
3 3319TH SINGLE MEMBER SHELF TRADING COMPANY LIMITED (registered in England
and Wales under number 4730626) whose registered office is at Holborn Gate,
26 Southampton Buildings, London WC2A 1PB ("the Purchaser")
4 FD MWA HOLDINGS, INC. (a Delaware corporation whose registered office is at
1201 Market Street, Suite 1600, Wilmington, Delaware 19801, USA ("the US
Purchaser").
INTRODUCTION
A The Target Companies are private companies limited by shares. Details of
the Target Companies are set out in Schedule 1.
B The Vendor and the Designated Vendor have agreed to sell and the Purchaser
and the US Purchaser have agreed to purchase, the sole legal and beneficial
ownership of the Shares free from all Encumbrances on the terms and subject
to the conditions set out in this Agreement.
AGREEMENT
1 Definitions, interpretation and third party rights
1.1 The Schedules form part of this Agreement and have the same force and
effect as if set out in the body of this Agreement. Any reference to
this Agreement includes the Schedules.
1.2 In this Agreement, the following words and expressions have the
following meanings:-
ABFD: means Ahrens & Behrent Financial Dynamics GmbH;
ABFD Novation Agreement: the agreement entered into between Cordiant
Holdings GmbH (1) FDL (2) and Ahrens & Behrent Agentur fur
Kommunikation GmbH dated 22 May 2003 relating to the transfer of the
share of nominal value (euro)12,500 in ABFD from Cordiant Holdings
GmbH to FDL;
the Accounts: the draft accounts in final form (subject to those
matters set out in the Audit Comfort Letters) of each of FDL, FDHL,
C&FD (Holdings) Limited,
Corporate & Financial Design Limited, FD International Limited,
Financial Dynamics S.A. and FD Ireland for the accounting reference
period which ended on the Accounts Date (comprising in each case a
balance sheet and profit and loss account, related schedules, notes
and directors' report);
the Accounts Date: 31 December 2002;
Acquisition Agreements: shall have the meaning set out in Clause 13.3;
Actual Completion Cash: the amount of the line item Cash At Bank & In
Hand included in the column headed "Include in net debt?" (which, for
the avoidance of doubt, are sums which (a) are not subject to any
Encumbrance at Completion and (b) can lawfully be paid on or
immediately following Completion), as set out in the Annexure to
Schedule 8, as at 31 May 2003 (as adjusted by those actions which have
been undertaken in accordance with the Steps Paper prior to
Completion);
Actual Completion Intra-Group Payables: in relation to each member of
the Target Group, the intra-group non-trading debt owed to any member
of the Remaining Vendor Group as at 31 May 2003 (as adjusted by those
actions which have been undertaken in accordance with the Steps Paper
prior to Completion) as included in the Actual Completion Net
Indebtedness;
Actual Completion Intra-Group Receivables: in relation to each member
of the Target Group, the intra-group non-trading receivables due from
any member of the Remaining Vendor Group as at 31 May 2003 (as
adjusted by those actions which have been undertaken in accordance
with the Steps Paper prior to Completion) as included in the Actual
Completion Net Indebtedness;
Actual Completion Net Indebtedness: as defined in Part 1 of Schedule
8;
Actual External Debt: the aggregate amount of all those line items
included in column headed "Include in net debt?" (other than Cash At
Bank & In Hand, Net Group Dividends, Net Group Loan balances and Net
Group Trading balances), as set out in the Annexure to Schedule 8, as
at 31 May 2003 (as adjusted by those actions which have been
undertaken in accordance with the Steps Paper prior to Completion);
Advent Funds: Global Private Equity IV Limited Partnership, Global
Private Equity IV-- A Limited Partnership, Global Private Equity IV--
B C.V., Global Private Equity IV-- C C.V., Global Private Equity IV--
D Limited Partnership, Global Private Equity IV-- E C.V., Advent
Partners GPE IV Limited Partnership and Advent Partners II Limited
Partnership;
Affiliate: in relation to any party, any connected person of that
party, any subsidiary undertaking or parent undertaking of that party
and any subsidiary undertaking of that parent undertaking;
the Agreed Form: the form agreed between and signed by or on behalf of
the Vendor and the Purchaser;
Asset Marketing SPA: the agreement entered into on 15 May 2003 between
FD International Limited (1) and Garrott Dorland Crawford Holdings
Limited
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("GDCHL") (2) relating to the sale by FD International Limited to
GDCHL of the issued share capital of Asset Marketing Limited;
Audit Comfort Letters: the letters dated on or about the date of this
Agreement from KPMG to each relevant member of the Target Group
relating to matters regarding the signing and auditing of the
Accounts;
the Banks: those banks party to or described in the Facilities
Agreement;
Base Exit Value: the aggregate amount of the equity and debt financing
committed by the Advent Funds at Completion in connection with the
acquisition of the Shares contemplated by this Agreement and including
(i) professional costs and (ii) other reasonable costs relating
directly thereto, in each case incurred by the Advent Funds and such
proportion of professional costs incurred by the Purchaser as
corresponds to the percentage of the equity shares in the Purchaser
held (directly or indirectly) by the Advent Funds immediately
following Completion;
Business Day: any day other than a Saturday, Sunday or any other day
which is a public holiday in England;
Circular: shall have the meaning set out in Clause 2.4;
the Companies Acts: the Companies Act 1985, the Companies
Consolidation (Consequential Provisions) Act 1985, the Companies Act
1989 and Part V of the Criminal Justice Act 1993;
Completion: completion of the sale and purchase of the Shares in
accordance with this Agreement;
Completion Account: the client account of the Vendor's Solicitors at
the Royal Bank of Scotland plc, City Office, 62/63 Threadneedle
Street, London EC2R 8LA (Macfarlanes Client No 1 Account No: 1538876,
Sort Code 15-10-00) marked with the reference EJXH/567520;
the Completion Date: the Business Day following the date on which the
last of the conditions specified in Clause 2 is satisfied or (if
capable of waiver) waived in accordance with this Agreement;
the Completion Statement: the statement of Completion Working Capital
and Actual Completion Net Indebtedness prepared and agreed or
determined in accordance with Clause 7;
Completion Working Capital: as defined in Part 1 of Schedule 8;
Confidential Information: all information not in the public domain,
which the Purchaser shall have received or obtained at any time by
reason of or in connection with the transaction contemplated by this
Agreement, and the documents referred to in it;
connected: has the meaning attributed to it by Section 839 of the ICTA
1988;
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the Consideration: the aggregate of the sums referred to in Clause
4.1, as adjusted pursuant to Clause 4.3 and settled pursuant to Clause
6;
Deed of Assignment: the deed relating to the assignment by the Vendor
to the Purchaser of certain intellectual property, in the Agreed Form
marked "C", to be executed at Completion;
the Deed of Assignment of Benefit of Contracts: the deed relating to
the assignment by the Vendor to the Purchaser of all its rights and
benefits under a Tax Deed dated 23 July 1999 between (1) those
individuals named in Schedule 1 therein, (2) Lighthouse Holdings (UK)
Limited, (3) FDHL and (4) FDL, in the Agreed Form marked "L" to be
executed at Completion;
the Disclosure Letter: the letter dated the date of this Agreement
from the Vendor to the Purchaser making certain disclosures against
the Vendor's Warranties;
Encumbrance: any charge, mortgage, pledge, security interest
(including any guarantee, indemnity, conditional sale agreement or
sale and leaseback arrangement having the effect of creating a
security interest), lien, option, right of pre-emption, equity, power
of sale, right of set-off, hypothecation or other analogous third
party right;
Estimated Completion Cash: a Vendor's estimate of Actual Completion
Cash to be provided in accordance with Clause 5.7;
Estimated Completion Net Indebtedness: the Vendor's estimate of Actual
Completion Net Indebtedness to be provided in accordance with Clause
5.7;
Estimated Completion Intra-Group Payables: the Vendor's estimate of
Actual Completion Intra-Group payables to be provided in accordance
with Clause 5.7;
Estimated Completion Intra-Group Receivables: the Vendor's estimate of
Actual Completion Intra-Group Receivables provided in accordance with
Clause 5.7;
Estimated External Debt: the Vendor's estimate of Actual External Debt
provided in accordance with Clause 5.7;
Exchange Rate: with respect to a particular currency for a particular
date the spot rate of exchange (the closing mid point) for that
currency into Pounds Sterling on such date as published in the London
edition of the Financial Times first published thereafter or where no
such rate is published in respect of that currency for such date at
the rate quoted by HSBC Bank plc as at the close of business in London
as at such date;
Exit: a Full Sale, a Partial Sale or a Listing;
External Debt: the aggregate amount of all those line items included
in the column headed "Include in net debt?" (other than Cash At Bank &
In Hand, Net Group Dividends, Net Group Loan balances and Net Group
Trading balances), as set out in the Annexure to Schedule 8, as at
Completion (as adjusted by those actions which have been undertaken in
accordance with the Steps Paper prior to Completion);
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Facilities Agreement: a facilities agreement dated 4 July, 2000
between the Vendor as the Parent and certain of its subsidiaries as
Borrowers and or Guarantors, The Bank of New York and HSBC Bank Plc as
Arrangers, the banks and financial institutions listed therein as the
Banks, HSBC Bank Plc as Agent, Security Trustee and Common Security
Trustee, The Bank of New York as Swingline Bank and HSBC Bank plc as
Overdraft Bank (each capitalised term as defined therein) as amended,
restated and supplemented from time to time;
the FD Business: the pan-European and North American business
communications network carried on by the Target Group carrying on,
amongst other things, financial and corporate public relations,
investor relations, employee and integration communications, crisis
and issues management, market communication, media and presentation
training, annual report literature production, website design and
corporate reporting;
FDHL: Financial Dynamics Holdings Limited (particulars of which are
set out in Schedule 1);
FDHL Deed of Covenant: the deed of covenant dated 23 July 1999
between, inter alia, Lighthouse (UK) Limited (1), FDHL (2) and FDL
(3);
FD Ireland: Financial Dynamics Ireland Limited (particulars of which
are set out in Schedule 1);
FDL: Financial Dynamics Limited (particulars of which are set out in
Schedule 1);
Full Sale: the sale or transfer to a purchaser or purchasers of any
interest in:
(i) all of the issued equity shares in the Purchaser; or
(ii) all of the undertaking and business of the Purchaser's Group
(whether by way of sale by any member of the Purchaser's Group of
assets and/or liabilities and/or a sale of shares in one or more
members of the Purchaser's Group),
other than a sale to a member of the Purchaser's Group or a sale or
transfer by a nominee of a person to another nominee of the same
person;
German Merger Filing: the application to be submitted to the German
Federal Cartel Office following execution of this Agreement in
accordance with Clause 2.4, in the Agreed Form marked "D";
Group Company: in relation to any company, any body corporate which is
from time to time a holding company of that company, a subsidiary of
that company or a subsidiary of a holding company of that company;
Holborn Landlord: together Holborn Gate (Nominee No.1) Limited and
Holborn Gate (Nominee No.2) Limited;
Holborn Property: the premises comprising the Second Floor, Unit 2,
Holborn Gate, 326-333 High Holborn, London WC1;
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Initial Consideration: the sum referred to in Clause 4.1.1;
Intellectual Property: patents, rights in inventions, registered
designs, design rights, copyright, (including rights in computer
software), word rights, database rights, trade marks, service marks,
logos, trade or business names and domain names, confidential
information, rights in know-how and other intellectual property
rights, in each case whether registered or unregistered and including
applications for the registration or grant of any such rights, and the
rights to apply for the registration thereof and all rights or forms
of protection having equivalent or similar effect anywhere in the
world;
Interest: the rate of eight per cent. per annum, calculated (without
compounding) on a daily basis for the period from the relevant due
date for payment up to and including the date of actual payment;
Intra-Group Receivables: in relation to each member of the Target
Group, the intra-group non-trading receivables due from any member of
the Remaining Vendor Group as at Completion;
Irish Shares: the entire issued share capital of FD Ireland;
Lexington Avenue Lease: the lease dated 14 December 1992 between 122
East 42nd Street, LLC and MWA, as amended by First Amendment of Lease
dated 31 March 1993, Second Amendment of Lease dated 15 September
1993, Third Amendment of Lease dated 2 July 1995, Fourth Amendment of
Lease dated 30 August 1996, Fifth Amendment of Lease dated 14 January
1997, Sixth Amendment of Lease dated 25 June 1999 and Seventh
Amendment of Lease dated 31 May 2002;
Listing: the listing or admission to trading of the Purchaser's, or
any holding company's, entire issued share capital on a recognised
investment exchange in respect of which a recognition order has been
made under the Financial Services and Markets Act 2000, section 290;
Management: Charles Watson, Dana Mulvihill and Declan Kelly, being
members of the existing management of the Financial Dynamics
International network;
MWA: Morgen-Walke Associates, Inc. (particulars of which are set out
in Schedule 1);
Noteholders: holders of US$175,000,000 of guaranteed senior notes of
the Vendor;
Partial Sale: the sale or transfer to a purchaser or purchasers of any
interest in:
(i) issued shares together carrying more than 50% in aggregate of the
voting rights attached to all issued equity shares in the
Purchaser; or
(ii) more than 50% in aggregate of the undertaking and business of the
Purchaser's Group (whether by way of sale by any member of the
Purchaser's Group of assets and/or liabilities and/or a sale of
shares in one or more members of the Purchaser's Group),
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other than a sale to a member of the Purchaser's Group or a sale or
transfer by a nominee of a person to another nominee of the same
person and other than as permitted by Article 13 of the Purchaser's
Articles;
the Parties: the parties to this Agreement;
Performance Bond: the performance bond entered into between HSBC Bank
plc (1), Holborn Gate (Nominee No.1) Limited and Holborn Gate (Nominee
No.2) Limited (2) and FDL (3) relating to the lease regarding the
Holborn Property;
the Properties: the leasehold properties of the Target Companies and
the Subsidiaries, details of which are given in Schedule 7;
the Purchaser's Articles: the articles of association of the
Purchaser's ultimate holding company to be adopted at or prior to
Completion, in the Agreed Form marked "B";
the Purchaser's Group: the Purchaser and its Group Companies from time
to time but excluding, for the avoidance of doubt, the Advent Funds;
the Purchaser's Warranties: the warranties set out in Part 2 of
Schedule 5;
Qualifying Exit: an Exit which occurs, or in respect of which binding
agreements are entered into, on or before the expiry of eighteen
months following Completion;
Qualifying Exit Value: the aggregate cash proceeds received by the
Advent Funds on and as a result of a Qualifying Exit and/or such cash
as may be received at any time by the Advent Funds upon the
realisation (whether by way of sale, conversion, redemption or
otherwise) of any non-cash proceeds received by the Advent Funds on
and as a result of a Qualifying Exit, net of all taxes payable by the
Advent Funds in respect of such proceeds and the reasonable costs
incurred by or on behalf of the Advent Funds in achieving such
Qualifying Exit
PROVIDED THAT, where the proceeds received on and as a result of a
Qualifying Exit comprise both cash and non-cash proceeds or all
non-cash proceeds, the taxes payable and reasonable costs incurred as
referred to above shall (for the purposes of calculating the net
amount) (i) (in the case of a combination of cash and non-cash
proceeds) be divided between such cash and non-cash proceeds in
proportion to the amount of cash and non-cash proceeds received and
such proportion only as relates to the cash proceeds shall be netted
off against such cash proceeds at that time with the proportion
attributable to the non-cash proceeds (or, if relevant, an appropriate
proportionate part thereof) being netted off only at the time at which
such non-cash proceeds (or, if relevant, a proportion thereof) are
realised for cash as contemplated above or (ii) (in the case of the
entire proceeds being in non-cash form) be attributed to such non-cash
proceeds and netted off only at the time at which such non-cash
proceeds are realised for cash as contemplated above (and if such
non-cash proceeds are not realised for cash at one and the same time,
such netting off shall be done on a proportionate basis),
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PROVIDED FURTHER THAT, in the event of any dispute between the
Purchaser and the Vendor as to the amount of the Qualifying Exit
Value, the Vendor and the Purchaser shall procure that the dispute is
referred to an independent firm of chartered accountants as agreed
between the Vendor and the Purchaser (or, in the absence of such
agreement, as appointed by the President for the time being of the
Institute of Chartered Accountants in England and Wales), whose
decision as to the amount of the Qualifying Exit Value (acting as
experts and not arbitrators) shall, save in respect of manifest error,
be final and binding;
Relevant CCG Business: the businesses carried on by the Remaining
Vendor Group other than those set out in Clause 11.1.12;
Relevant Employees: has the meaning given to it in paragraph 14 of
Part 1 of Schedule 5;
the Remaining Vendor Group: the Vendor and each or (as the context so
requires) all Group Companies of the Vendor, other than the Target
Companies and the Subsidiaries;
Resolution: the resolution to be proposed (if necessary) at a meeting
of shareholders of the Vendor in the Agreed Form marked "E";
Rights: shall have the meaning set out in Clause 13.3.1;
Settlement Agreement: the agreements between the Vendor (1), FDHL (2),
FDL (3), EFG Reads Trustees Limited (4) and Nick Bennet and Others,
relating to the settlement of potential employee claims, in the Agreed
Form marked "M" to be entered into in accordance with Clause 5.10;
the Shares: the shares referred to in paragraph 8 of each part of
Schedule 1;
Special Purpose Accounts: the financial statements for the Target
Group as at the Accounts Date in the Agreed Form marked "A";
Steps Paper: the paper setting out the proposed sequence of steps
agreed to be implemented relating to the repayment of inter-company
balances in, and the extraction of cash from, the Target Group, in the
Agreed Form marked "K";
the Subsidiaries: the subsidiaries of the Target Companies, details of
which are set out in Schedule 2;
the Target Companies: FDHL, C&FD (Holdings) Limited, FD International
Limited, MWA and FD Ireland;
the Target Group: the Target Companies and each of the Subsidiaries;
the Tax Covenant: the covenant contained in Schedule 9;
a third party: any person other than the Parties;
UK GAAP: generally accepted accounting principles and practices in the
United Kingdom by reference to all applicable SSAPs and FRSs;
8
UK Shares: the entire issued share capital of each of FDHL, C&FD
Holdings Limited and FD International Limited;
US Shares: the entire issued share capital of MWA;
the Vendor's Solicitors: Macfarlanes of 10 Norwich Street, London,
EC4A 1BD; and
the Vendor's Warranties: the warranties set out in Part 1 of Schedule
5.
1.3 In this Agreement (unless the context requires otherwise):-
1.3.1 words and expressions which are defined in the Companies Acts have the
same meanings as are given to them in the Companies Acts;
1.3.2 any reference to a statute, statutory provision or subordinate
legislation ("legislation") shall (except where the context requires
otherwise) be construed as referring to:-
1.3.2.1 such legislation as amended and in force from time to time
and to any legislation which (either with or without
modification) re-enacts, consolidates or enacts in rewritten
form any such legislation; and
1.3.2.2 any former legislation which it re-enacts, consolidates or
enacts in rewritten form
provided that in the case of those matters which fall within
sub-Clauses 1.3.2.1 and 1.3.2.2 above, as between the Parties, no such
amendment or modification shall apply for the purposes of this
Agreement to the extent that it would impose any new or extended
obligation, liability or restriction on, or otherwise adversely affect
the rights of, any Party;
1.3.3 any reference to an SSAP is to a Statement of Standard Accounting
Practice adopted by the Accounting Standards Board and shall be
construed as including a reference to:-
1.3.3.1 any Financial Reporting Standard issued by the Accounting
Standards Board to amend, withdraw or supersede such SSAP
and any reference to an FRS is to a Financial Reporting
Standard issued by the Accounting Standards Board; and
1.3.3.2 any Urgent Issues Task Force abstracts issued by the
Accounting Standards Board to advise on and clarify the
interpretation of SSAPs and FRSs and any reference to an
UITF abstract is to an Urgent Issues Task Force abstract
issued by the Accounting Standards Board;
1.3.4 any gender includes a reference to the other genders;
9
1.3.5 any reference to a "person" includes a natural person, partnership,
company, body corporate, association, organisation, government, state,
foundation and trust (in each case whether or not having separate
legal personality);
1.3.6 any reference to the Introduction, a Clause or Schedule is to the
Introduction, a Clause or Schedule (as the case may be) of or to this
Agreement;
1.3.7 any reference to any other document is a reference to that other
document as amended, varied, supplemented, or novated (in each case,
other than in breach of the provisions of this Agreement) at any time;
1.3.8 "directly or indirectly" means (without limitation) either alone or
jointly with any other person and whether on his own account or in
partnership with another or others or as the holder of any interest in
or as officer, employee or agent of or consultant to any other person;
1.3.9 any phrase introduced by the terms "including", "include", "in
particular" or any similar expression shall be construed as
illustrative and shall not limit the sense of the words preceding
those terms; and
1.3.10 any reference to any English legal term for any action, remedy, method
of judicial proceeding, legal document, legal status, court, official
or any legal concept or thing shall, in respect of any jurisdiction
other than England, be deemed to include what most nearly approximates
in that jurisdiction to the English legal term.
1.4 The Index and Clause headings in this Agreement are included for
convenience only and do not affect the interpretation of this
Agreement.
1.5 The Parties agree that, subject always to and save as expressly
provided in the provisions of this Clauses 1.5, Clause 9.8 and 13:-
1.5.1 no term of this Agreement shall be enforceable by a third party;
1.5.2 a person who is the permitted successor to or assignee of the rights
of a Party is deemed to be a party to this Agreement and the rights of
such successor or assignee shall, subject to and upon any succession
or assignment permitted by this Agreement, be regulated by the terms
of this Agreement; and
1.5.3 notwithstanding that any term of this Agreement may become enforceable
by a third party, the terms of this Agreement or any of them may be
varied, amended or modified or this Agreement may be suspended,
cancelled, rescinded or terminated by agreement in writing between the
Parties without the consent of any such third party.
1.6 Where it is necessary to determine whether a monetary limit or
threshold set out in Schedule 6 (Limitations on Liability) or
elsewhere in this Agreement has been reached or exceeded (as the case
may be) and the value of any of the relevant claims or the subject
matter of the whole or any part of the relevant claim is expressed in
a currency other than Pounds Sterling, the value of each such claim or
the subject matter of the whole or any part of each such claim shall
be translated into Pounds Sterling at the Exchange Rate on the date of
receipt of written notification in accordance with Schedule 6
(Limitations on Liability) of
10
the existence of such claim or the date of written notification of any
other claims arising pursuant to, or for breach of, this Agreement (or
where such date is not a Business Day at the Exchange Rate on the
first Business Day following such receipt).
2 Conditions
2.1 Completion shall be conditional upon:
2.1.1 the due passing without amendment by the shareholders of the Vendor in
general meeting of the Resolution, to the extent required by the
Listing Rules from time to time in force of the UK Listing Authority;
2.1.2 either the German Federal Cartel Office having cleared the transaction
contemplated by this Agreement pursuant to the applicable provisions
of the German Act against Restraints of Competition, Gesetz Gegen
Wettbewerbeschrankungen ("GWB") or any applicable waiting period
pursuant to the GWB having elapsed;
2.1.3 Management, or (in circumstances in which it lies within the Vendor's
lawful and direct control not to breach) the Vendor, not having
knowingly and willingly caused or procured a breach of any of the
provisions of Clauses 5.1 to 5.3 (and, in the case of any such breach
or breaches which is/are capable of being remedied, the Vendor fails
to remedy, or procure the remedy of, such breach or breaches within 10
days of the relevant breach or breaches) the result of which breach
(and any other such breaches) would reasonably be likely to result in
the Purchaser being entitled to recover damages pursuant to a claim
made under or for breach of this Agreement in an amount
exceeding(pound)5 million (assuming the Purchaser and the US Purchaser
were to complete the purchase of the Shares under this Agreement)
(and, in the event of dispute between the Purchaser and the Vendor as
to the reasonably likely level of damages, the matter may, at the
election of either the Purchaser or the Vendor, be referred to a
Queen's Counsel agreed between them (or, in the absence of such
agreement, to a Queen's Counsel nominated by the President for the
time being of the Law Society), such Queen's Counsel acting as expert
and not arbitrator and whose opinion as to the reasonably likely level
of damages shall, save in respect of manifest error, be final and
binding);
2.1.4 there having been no breach of either Clause 5.3.2 (in so far as it
relates to paragraphs 4.1.1 and 4.1.2 of Part 1 of Schedule 5) or
Clause 5.4 (and, in the case of any such breach or breaches which
is/are capable of being remedied, the Vendor fails to remedy, or
procure the remedy of, such breach or breaches within 10 days of the
relevant breach);
2.1.5 the recapitalisation of Financial Dynamics S.A. so as to rectify its
negative net assets position existing as at the date of this Agreement
in accordance with the Steps Paper.
2.2 The Purchaser may waive any of the conditions specified in Clauses
2.1.2 to 2.1.5 (inclusive) at any time on or before 11.59 pm on 6
August 2003 provided that such waiver is express and is in writing.
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2.3 The Vendor shall use all reasonable endeavours to ensure that the
conditions specified in Clauses 2.1.1 and 2.1.5 are satisfied as soon
as practicable and in any event not later than 11.59 pm on 6 August
2003 and (subject always to the fiduciary duties of its directors)
shall despatch to its shareholders a circular containing the unanimous
recommendation of the directors of the Vendor to vote in favour of the
Resolution as soon as reasonably practicable following the execution
of this Agreement. The Vendor undertakes to convene the Extraordinary
General Meeting referred to in Clause 2.1.1 for a date on or before 6
August 2003 and to use all reasonable endeavours not to take any
action to adjourn such Extraordinary General Meeting.
2.4 The Purchaser undertakes to provide to the Vendor such information and
cooperation as may be reasonably requested by the Vendor to prepare
the circular to be sent to the Vendor's shareholders ("the Circular")
incorporating, inter alia, a notice of extraordinary general meeting
including, inter alia, (and to the extent necessary) the Resolution.
The Vendor shall afford the Purchaser and its professional advisers a
reasonable opportunity prior to publication of the Circular to review
and comment on those portions of the draft Circular which relate to
the Purchaser, the terms of this Agreement and the matters
contemplated by this Agreement and shall endeavour in good faith to
accommodate all reasonable comments made in a timely manner by the
Purchaser or its professional advisers, subject always to the
obligations of the Vendor under the Listing Rules from time to time in
force made by the UK Listing Authority an all applicable laws and
regulations, and to the fiduciary duties of the directors of the
Vendor.
2.5 The Purchaser shall use all reasonable endeavours to ensure that the
condition specified in Clause 2.1.2 is satisfied as soon as
practicable and in any event not later than 11.59 p.m. on 6 August
2003 (save that the Purchaser shall not be obliged to accept any
onerous conditions imposed by the German Federal Cartel Office as a
condition of it giving consent or to undertake to dispose of all or
part of the Target Group or to procure that any other body corporate
in which any of the Advent Funds has invested disposes of all or any
part of its business or undertaking) and shall submit the German
Merger Filing to the German Federal Cartel Office as soon as
reasonably practicable following the execution of this Agreement.
2.6 If each of the conditions set out in Clause 2.1 has not been satisfied
(or, in the case of the conditions referred to at Clauses 2.1.2 to
2.1.5 (inclusive), waived by the Purchaser) by 11.59 pm on 6 August
2003, this Agreement (except for the provisions of this Clause 2 and
of Clauses 1 (Definitions, interpretation and third party rights), 12
(Confidentiality and announcements), 14.4 (Costs), 15 (Notices) and 16
(Governing law and jurisdiction)) shall be null and void and of no
further effect and the Parties shall be released and discharged from
their respective obligations under this Agreement save in respect of
Clauses 2, 1, 12, 14.4, 15 and 16.
2.7 If Completion does not take place as a result of the condition
referred to in Clause 2.1.1 not being satisfied on or before 11.59
p.m. on 6 August 2003, the Vendor shall pay to the Purchaser on 7
August 2003 the sum of(pound)600,000 plus VAT (if any).
12
3 Sale and purchase
3.1 The Vendor shall sell the UK Shares and the Irish Shares and the
Designated Vendor shall sell the US Shares with full title guarantee
in each case free from all Encumbrances and the Purchaser shall
purchase the UK Shares and the Irish Shares and the US Purchaser shall
purchase the US Shares with effect from and including the Completion
Date to the intent that as from that date all rights and advantages
accruing to the Shares, including any dividends or distributions paid
on the Shares after that date (including, without limitation, in
respect of dividends declared but not paid before that date), shall
belong to the Purchaser and the US Purchaser, as appropriate.
3.2 Neither of the Purchaser and the US Purchaser shall be obliged to
complete the purchase of any of the Shares unless the purchase of all
of the Shares is completed simultaneously.
4 Consideration
4.1 The Consideration for the Shares shall be the aggregate of:-
4.1.1 (pound)26,000,000 plus the amount by which Actual Completion Net
Indebtedness is greater than (pound)zero or minus the amount by which
Actual Completion Net Indebtedness is less than (pound)zero, as
adjusted pursuant to Clause 4.3 (with the intention that, in
calculating the Actual Completion Net Indebtedness, amounts owed by
members of the Target Group will be shown as negative numbers and
amounts held by or owed to the members of the Target Group will be
shown as positive numbers); and
4.1.2 the sum (if any) equal to 25% of the amount by which the Qualifying
Exit Value in respect of the first Qualifying Exit to occur following
Completion determined at the relevant time as set out in the
definition of Qualifying Exit Value (when aggregated with any
Qualifying Exit Values previously determined in respect of such
Qualifying Exit) exceeds the Base Exit Value, less any amounts
previously paid pursuant to this Clause 4.1.2.
4.2 The Consideration shall be satisfied in cleared funds as follows:-
4.2.1 as to the Initial Consideration on Completion in accordance with
Clause 6.3.3 and following Completion in accordance with Clause 6.5;
4.2.2 as to the sum referred to in Clause 4.1.2, forthwith following receipt
by the Advent Funds of cash proceeds pursuant to a Qualifying Exit
whether at the date of completion of such Qualifying Exit or
subsequently.
4.3 Within five Business Days after the final agreement or determination
of the Completion Statement in accordance with the provisions of
Clause 7:-
4.3.1 if the Completion Working Capital is less than(pound)3,600,000, then
the Vendor shall pay the Purchaser in cleared funds the amount (if
any) by which the Completion Working Capital is less
than(pound)3,750,000; or
4.3.2 if the Completion Working Capital is greater than(pound)3,900,000 then
the Purchaser shall pay the Vendor in cleared funds the amount (if
any) by which the
13
Completion Working Capital exceeds (pound)3,900,000 PROVIDED THAT in
no circumstances shall the Purchaser be required to pay to the Vendor
more than (pound)300,000 pursuant to this Clause 4.3.2;
in each case together with Interest from Completion to the date of
actual payment.
4.4 The Purchaser and the Vendor agree that the apportionment of the
(pound)26,000,000 of the Initial Consideration (excluding any
adjustments made pursuant to Clause 4.3) shall be as set out in
Schedule 3. Any adjustments to the Initial Consideration made in
accordance with this Agreement shall be made as between the members of
the Target Group, as applicable, in accordance with the amount of
Completion Working Capital and Actual Completion Net Indebtedness
attributable to such members of the Target Group.
4.5 Any amount paid to the Purchaser or the US Purchaser in respect of a
breach of any of the Vendor's Warranties or under clause 8.10,
Schedule 9 or any other provision of this Agreement shall be paid by
way of a reduction in the Consideration.
5 Period before Completion
5.1 Subject to Clause 5.5, the Vendor undertakes to and covenants with the
Purchaser that it will procure that, between the date of this
Agreement and Completion, the Target Group shall be run in the usual
and ordinary course without material interruption (preventable by the
Vendor or any member of the Target Group) or material alteration in
the nature, scope or manner of its business and consistent in all
material respects with past practice.
5.2 Subject to Clause 5.5, the Vendor undertakes to and covenants with the
Purchaser that it will procure that, between the date of this
Agreement and Completion, the Target Group shall not take any action
which may reasonably be expected to have a material adverse effect on
the business conducted by the Target Group and that no member of the
Target Group shall, without the prior written consent of the Purchaser
and save as otherwise contemplated by this Agreement or in the Steps
Paper:-
5.2.1 increase the authorised, allotted or issued share capital of any
member of the Target Group;
5.2.2 offer or grant an option over the whole or any part of its share
capital, whether issued or unissued or issue any obligations which are
convertible into shares in any member of the Target Group;
5.2.3 modify any of the rights attached to any of the Shares or any shares
in any of the Subsidiaries;
5.2.4 capitalise or repay any amount standing to the credit of any reserve
of any of the Target Companies or Subsidiaries;
5.2.5 admit any person (howsoever occurring) as a member of any of the
Target Companies or the Subsidiaries or approve the transfer of any
Shares;
14
5.2.6 adopt any change in the certificate of incorporation, articles of
association, or bylaws of any of the Target Companies or the
Subsidiaries;
5.2.7 pass any resolution of the members of any of the Target Companies or
the Subsidiaries;
5.2.8 create or issue any Encumbrances upon or over any part of the property
or assets or uncalled capital of any member of the Target Group or
create or issue any debenture or debenture stock or obtain any advance
or credit in any form other than normal trade credit;
5.2.9 materially reduce or amend the existing insurance coverage of the
Target Group;
5.2.10 merge or consolidate with any other person or buy, lease, license or
otherwise acquire any shares in any company, any businesses or any
partnership participation from any other person for a consideration
exceeding (pound)50,000 individually or (pound)200,000 in the
aggregate;
5.2.11 give any guarantee or indemnity other than in the ordinary and usual
course of business;
5.2.12 make any capital expenditure exceeding(pound)25,000 individually
or(pound)100,000 in the aggregate;
5.2.13 sell, lease, license, encumber or otherwise dispose of any material
assets or group of assets, other than in the ordinary and usual
course;
5.2.14 borrow any money or accept any financial facility or make or grant any
loan or any financial facility, in each case other than in the
ordinary and usual course of business;
5.2.15 enter into or materially amend or terminate any contract or commitment
which provides (or which following any such amendment would provide)
for annual obligations in excess of (pound)50,000, in each case other
than in the ordinary and usual course of business;
5.2.16 dismiss or give notice of termination to any of the Relevant Employees
unless there is reasonable justification to do so;
5.2.17 employ any person who would, on appointment, become a Relevant
Employee or vary the terms of employment of any employee the result of
which would be that such person becomes a Relevant Employee;
5.2.18 appoint or dismiss any members of the board of directors of any member
of the Target Group (but, for the avoidance of doubt, this Clause
shall not prevent any member of the board of any member of the Target
Group from resigning from any such board prior to the Target Companies
satisfying the requirements in respect of s.l55 of the Companies Act
1985 as a result of the Purchaser's arrangements with its debt
funders);
5.2.19 make or granted any increase in any form of compensation of employees
or amend, adopt or terminate any employee benefit schemes or conclude
any collective bargaining agreement, in each case other than
amendments or
15
agreements relating to adjustments of compensation or employee benefit
schemes made in the ordinary course of business consistent with past
practice;
5.2.20 terminate the lease of any real estate where the relocation costs for
the business situated at such real estate would incur costs in excess
of (euro)100,000;
5.2.21 declare, pay or make any dividend or other distribution;
5.2.22 commence any litigation exceeding individually (pound)25,000 or
(pound)100,000 in aggregate, other than for the collection of debts in
the ordinary and normal course of business; or
5.2.23 agree or commit to do any of the foregoing.
5.3 The Vendor shall procure that, between the date of this Agreement and
Completion:-
5.3.1 reasonable advance notice shall be given to the Purchaser of all
Meetings of the Board of Directors of the Target Companies and the
Subsidiaries and that duly authorised representatives of the Purchaser
(not being more than two in number at any one time) shall be permitted
to attend at such Meetings;
5.3.2 neither the Vendor nor any member of the Target Group shall cause or
permit anything to be done or omitted to be done either before or at
Completion which would constitute a breach of any of the Vendor's
Warranties if given at any time down to and including Completion;
5.3.3 the Purchaser will be kept fully and promptly informed of all material
matters relating to the businesses, assets and affairs of each Target
Group member;
5.3.4 at the request of the Purchaser and subject to being given reasonable
prior written notice, the Purchaser and any person authorised by it
shall be given access to the Properties and employees and to all the
books and records of the Target Companies and the Subsidiaries at
reasonable times during business hours with the right to make copies
(at the Purchaser's cost); and
5.3.5 at the request of the Purchaser and subject to being given reasonable
prior written notice, the Purchaser and/or its professional advisers
(at the Purchaser's costs) shall be supplied with such information
concerning the Target Companies and the Subsidiaries as the Purchaser
or its professional advisers may reasonably require.
5.4 Subject to Clause 5.5, the Vendor covenants with the Purchaser that,
in the period from (and including) 31 May 2003 and save as otherwise
contemplated by this Agreement or the Steps Paper:
5.4.1 no management charges will be charged or demanded (in respect of a
member of the Target Group) by a member of the Remaining Vendor Group
or paid by a member of the Target Group other than management charges
levied in accordance with normal practice in relation to ADP payroll
processing, health insurance, life insurance coverages and 401K
funding obligations currently met by Cordiant US Holdings, Inc. on
behalf of MWA and group insurance re-
16
charges for May and June 2003, totalling (pound)31,165.34, and a daily
rate of (pound)428 from 1 July until Completion;
5.4.2 no asset will be transferred from a member of the Target Group to a
member of the Remaining Vendor Group for a consideration less than the
market value of that asset and no member of the Target Group will
assume or agree to assume a liability to, or obligation of, any member
of the Remaining Vendor Group for a consideration greater than the
market (or face) value of such liability;
5.4.3 no share capital in any Target Company will be purchased or redeemed
by a Target Company;
5.4.4 no amendments will be made to, and no action will be taken to vary,
modify, alter or unwind the transactions effected by, each of the
Settlement Agreement, the ABFD Novation Agreement and the Asset
Marketing SPA; and
5.4.5 no dividend or other distribution will be paid or made in respect of
the share capital of any of the Target Companies.
5.5 Clauses 5.1 to 5.4 shall apply to ABFD only to the extent that the
Vendor is reasonably able to undertake or procure the matters referred
to in those clauses.
5.6 The Vendor covenants with the Purchaser to amend the articles of
association of FDL and FDHL prior to Completion by deleting, in each
case, articles 5.6, 5.7, 9.1.4 and 9.1.5.
5.7 Prior to Completion, the Vendor shall deliver to the Purchaser a
written statement containing the Estimated Completion Net
Indebtedness, including a statement of each of the Estimated External
Debt, the Estimated Completion Cash (together with evidence supporting
the availability of such cash), the Estimated Completion Intra-Group
Payables and the Estimated Completion Intra-Group Receivables.
5.8 The Purchaser acknowledges that the Vendor intends to implement the
reorganisation on the basis set out in the Steps Paper ("the
Reorganisation") as soon as reasonably practicable following the date
of this Agreement and, in any event, prior to Completion with the
intent of repaying, or procuring the repayment of, all inter-company
balances and effecting the payment out of the Target Group of cash
amounting, in aggregate, to (pound)5.5 million and the Purchaser
confirms that the implementation of the Reorganisation on the basis
contemplated by the Steps Paper shall not result in a breach of any of
Clauses 5.1 to 5.4. The Vendor undertakes that, to the extent it
wishes to effect the Reorganisation other than as contemplated by the
Steps Paper, it shall be required to seek the consent of the Purchaser
prior to implementation (such consent not to be unreasonably withheld
or delayed).
5.9 The Vendor shall use its reasonable endeavours to procure that,
between the date of this Agreement and Completion, the Target Group
gives such assistance (at the Purchaser's cost) to the Purchaser as
the Purchaser may reasonably require in order to satisfy any
requirements of the Target Companies in respect of s.155 of the
Companies Act 1985 at or immediately before Completion as a result of
the Purchaser's arrangements with its debt funders PROVIDED that
nothing in this Clause 5.9 shall oblige the Vendor to procure that any
existing director of a
17
Target Company gives a statutory declaration of a type referred to in
s.156 of the Companies Act 1985.
5.10 The Vendor shall procure that, immediately after FDL has satisfied the
requirements of s.155 to 158 of the Companies Act 1985 in respect of
the matters referred to in the Settlement Agreement, FDL shall execute
the Settlement Agreement.
5.11 The Vendor warrants and undertakes to the Purchaser that, save as set
out in the letter from the Vendor to the Purchaser in the Agreed Form
marked "N", any surrender of group relief (including any surrender
amending a prior surrender) by the Vendor or any member of the
Remaining Vendor Group to FDL effected since 6 September 2000 and
prior to Completion has been carried out for a consideration at least
equal to the corporation tax saved by the claimant company as a result
of such surrender and the Vendor further warrants and undertakes that
such consideration has been paid or will, pursuant to Clauses 6.3 or
6.5 or paragraph 13.7 of Schedule 9, be paid.
6 Completion
Completion shall take place on the Completion Date at the offices of
the Purchaser's Solicitors when:-
6.1 the Vendor shall:
6.1.1 deliver to the Purchaser, or procure the delivery to the Purchaser of,
the documents and other items referred to in Schedule 4; and
6.1.2 pay, or procure the payment of, the sum of US$500,000 by way of
transfer of funds for value on the Completion Date to the Lexington
Avenue Lease Account in satisfaction of the obligations set out in
paragraph 7 of Schedule 10;
6.2 the Vendor and the Purchaser shall each to the extent that it is
within their respective power to do so, procure that there shall be
held a Meeting of the Board of Directors of each of the Target
Companies at which there shall be duly passed resolutions set out and
contained in Board Minutes of each of the Target Companies in the
Agreed Form marked "H1" to "H9"; and
6.3 the Purchaser (or the US Purchaser, as applicable) shall:
6.3.1 procure the payment by members of the Target Group to the relevant
member(s) of the Remaining Vendor Group of an aggregate amount equal
to the Estimated Completion Intra-Group Payables and an estimate as at
Completion of the amount payable under clause 6.10;
6.3.2 pay to the relevant member(s) of the Target Group an amount equal to
the Estimated Completion Intra-Group Receivables pursuant to a payment
direction hereby given by the Vendor or the Designated Vendor, which
payment shall satisfy the obligation of the Purchaser or the US
Purchaser in respect of such part of the Initial Consideration and the
obligations (hereby agreed) of the Vendor or the Designated Vendor (as
applicable) to procure payment of the Estimated Completion Intra-Group
Receivables on Completion by the relevant member(s) of the Remaining
Vendor Group to the relevant member(s) of the Target Group;
18
6.3.3 pay (pound)26,000,000 (less an amount equal to the aggregate of the
Estimated Completion Intra-Group Receivables, the Estimated Completion
Intra-Group Payables and the Estimated External Debt plus the amount
of Estimated Completion Cash) to the Vendor and the Designated Vendor
in such proportions referred to in Clause 4.4 (whose receipt shall be
an absolute discharge in respect thereof), by way of transfer of funds
for value on the Completion Date to the Completion Account;
6.3.4 procure the repayment of the Estimated External Debt to the relevant
Banks as the Vendor shall direct; and
6.3.5 deliver to the Vendor a duly executed counterpart of the Deed of
Assignment.
6.4 The obligations of each of the Parties under Clauses 6.1 to 6.3
(inclusive) are interdependent on the satisfaction of the obligations
of the other Party.
6.5 Within five Business Days after the final agreement or determination
of the Completion Statement in accordance with the provisions of
Clause 7:-
6.5.1 to the extent that the amount of Actual Completion Intra-Group
Payables is greater than the amount of Estimated Completion
Intra-Group Payables, the Parties agree that the payment by the
relevant members(s) of the Target Group to the relevant member(s) of
the Remaining Vendor Group pursuant to Clause 6.3.1 shall be increased
by the amount by which Actual Completion Intra-Group Payables is
greater than the amount of Estimated Completion Intra-Group Payables
and the amount paid pursuant to Clause 6.3.3 shall be reduced by the
same amount and the Vendor and the Designated Vendor on behalf of the
relevant member(s) of the Remaining Vendor Group hereby direct the
relevant member(s) of the Target Group to pay the increased amount to
the Purchaser or the US Purchaser (as applicable) in satisfaction of
such obligations, with the result that there shall be no need for any
further cash payment between the Parties as a result of this Clause
6.5.1;
6.5.2 to the extent that the amount of Actual Completion Intra-Group
Payables is less than the amount of Estimated Completion Intra-Group
Payables, the Parties agree that the payment by the relevant
members(s) of the Target Group to the relevant member(s) of the
Remaining Vendor Group pursuant to Clause 6.3.1 shall be reduced by
the amount by which Actual Completion Intra-Group Payables is less
than the amount of Estimated Completion Intra-Group Payables and the
amount paid pursuant to Clause 6.3.3 shall be increased by the same
amount and the Vendor and the Designated Vendor hereby direct the
Purchaser or the US Purchaser (as applicable) to pay the increased
amount to the relevant member(s) of the Target Group in satisfaction
of such obligations, with the result that there shall be no need for
any further cash payment between the Parties as a result of this
Clause 6.5.2;
6.5.3 to the extent that the amount of Actual Completion Intra-Group
Receivables is greater than the amount of Estimated Completion
Intra-Group Receivables, the Parties agree that the provisions of
Clause 6.3.2 shall be construed as if all references to the Estimated
Completion Intra-Group Receivables were to the Actual Completion
Intra-Group Receivables, with the result that there shall be no
19
need for any further cash payment between the Parties as a result of
this Clause 6.5.3;
6.5.4 to the extent that the amount of Actual Completion Intra-Group
Receivables is less than the amount of Estimated Completion
Intra-Group Receivables, the Parties agree that the provisions of
Clause 6.3.2 shall be construed as if all references to the Estimated
Completion Intra-Group Receivables were to the Actual Completion
Intra-Group Receivables, with the result that there shall be no need
for any further cash payment between the Parties as a result of this
Clause 6.5.4;
6.5.5 to the extent that the amount of Actual Completion Cash is less than
the amount of Estimated Completion Cash, the Vendor or the Designated
Vendor shall pay to the Purchaser the amount by which Actual
Completion Cash is less than the amount of Estimated Completion Cash;
6.5.6 to the extent that the amount of Actual Completion Cash is greater
than the amount of Estimated Completion Cash, the Purchaser shall pay
or procure the payment to the Vendor or the Designated Vendor (as
applicable) the amount by which Actual Completion Cash is greater than
the amount of Estimated Completion Cash;
6.5.7 to the extent that the amount of Actual External Debt is greater than
the amount of Estimated External Debt, the Vendor or the Designated
Vendor shall pay to the Purchaser the amount by which Actual External
Debt is greater than the amount of Estimated External Debt; and
6.5.8 to the extent that the amount of Actual External Debt is less than the
amount of Estimated External Debt, the Purchaser shall pay (or, in the
case of External Debt which has at such time been repaid to the
relevant Banks, use all reasonable endeavours to recover the excess
from the relevant Banks and, following any such recovery, to pay) to
the Vendor or the Designated Vendor (as applicable) the amount by
which Actual External Debt is less than the amount of Estimated
External Debt,
in each case in immediately available funds and, in respect of
payments due under Clauses 6.5.5 to 6.5.7 (inclusive) and, save for
excess External Debt which falls to be recovered from the relevant
Banks, Clause 6.5.8, together with Interest from Completion up to (and
including) the date of actual payment.
6.6 The Vendor covenants to the Purchaser that:-
6.6.1 the External Debt shall not exceed the Actual External Debt. The
Vendor undertakes to the Purchaser that if the External Debt is
greater than the Actual External Debt, then it will pay such sum in
immediately available funds to the Purchaser together with Interest
from Completion up to (and including) the date of actual payment; and
6.6.2 the Intra-Group Receivables shall not exceed the Actual Completion
Intra-Group Receivables. The Vendor undertakes to the Purchaser that
if the Intra-Group Receivables as at Completion are greater than the
Actual Completion Intra-Group Receivables, then it will procure
payment of such sum by the relevant member(s) of the Remaining Vendor
Group to the relevant member(s) of the
20
Target Group in immediately available funds together with Interest
from Completion up to (and including) the date of actual payment.
6.7 The Vendor covenants with the Purchaser that, on Completion-
6.7.1 save in respect of the matters referred to in Clause 6.3, neither the
Vendor, nor any other member of the Remaining Vendor Group will have
any claims or rights or causes of action (other than claims, rights or
causes of action arising out of inter-company trading) against a
member of the Target Group and the Vendor hereby waives (and will
procure that each member of the Remaining Vendor Group waives) any
claims or rights or causes of action they may have (other than claims,
rights or causes of action arising out of inter-company trading)
against any Target Group member; and
6.7.2 save in respect of certain finance leases as set out in tabs 5 and 6
of file 34 attached to the Disclosure Letter, none of the Target
Companies or the Subsidiaries will have guaranteed or given any
security in respect of any obligation or liability of the Vendor or
any member of the Remaining Vendor's Group which remains outstanding
following Completion.
6.8 Subject to the Purchaser complying with its undertakings set out in
Clause 6.9 the Vendor undertakes to the Purchaser to honour its
obligations owed to HSBC Bank plc relating to the Performance Bond
whilst the Performance Bond remains in force and effect.
6.9 The Purchaser undertakes to the Vendor as follows:-
6.9.1 to indemnify the Vendor and all members of the Remaining Vendor Group
against all and any loss, liability, claim or expense incurred or
suffered by the Vendor (or any member of the Remaining Vendor Group)
as a result of a breach by FDL of its obligations under the lease
dated 7 April 1999 relating to the Holborn Property on or after
Completion;
6.9.2 to procure that, following the signing and auditing of the statutory
accounts for FDL for the period ended 31 December 2002 in
substantially the form of the Accounts (in respect of which the Vendor
shall use all reasonable endeavours lawfully to assist the Purchaser
in procuring the signing and auditing of the same), notice is sent to
the Holborn Landlord pursuant to the terms of the Performance Bond,
such notice (to the extent possible) satisfying the requirements of
clause 4 of such Performance Bond with the intent that FDL and HSBC
Bank plc shall automatically be released from all their respective
liabilities and obligations under the Performance Bond; and
6.9.3 to the extent lawful, not to account for the (pound)1.3 million
settlement payment pursuant to the Settlement Agreement in such a way
as to render impossible the service of the notice to the Holborn
Landlord referred to in Clause 6.9.2.
6.10 Forthwith on demand, the Purchaser or the US Purchaser shall procure
the payment by each member of the Target Group to the relevant member
of the Remaining Vendor Group of any intra group debt owed by members
of the Target Group to members of the Remaining Vendor Group as at
Completion which arises on or after 1 June 2003 and before Completion.
21
6.12 In respect of the Lexington Avenue Lease, the provisions of Schedule
10 shall have force and effect.
7 Completion Statement
7.1 Either on or as soon as reasonably practicable after Completion, and
in any event within 15 Business Days thereof, the Purchaser shall
prepare and submit to the Vendor a draft of the Completion Statement
("the Draft Statement"), such Draft Statement to be prepared as at 31
May 2003. The Draft Statement shall be prepared in accordance with
Schedule 8 (and in the format of the Annexure thereto) and shall give
a figure for the Completion Working Capital and Actual Completion Net
Indebtedness.
7.2 Within 15 Business Days after receipt of the Draft Statement, the
Vendor shall give written notice to the Purchaser, stating whether or
not it proposes any amendments to the Draft Statement and stating in
reasonable detail the background and reasons for each item of
disagreement and the revised figures believed by the Vendor to be
correct (together "the matters in dispute"). During this 15 Business
Day review period the Purchaser shall give all reasonable assistance
and access to all such information and persons in the Purchaser's
possession or control as the Vendor may reasonably require (with the
right to make copies of any such information) in order to enable it to
reach its decision.
7.3 If the Vendor gives notice that it has no proposed amendments to the
Draft Statement, or if the Vendor fails to give written notice of
disagreement within the time permitted by Clause 7.2, then the Draft
Statement shall constitute the Completion Statement for the purposes
of this Agreement and shall be final and binding on the Parties in the
absence of manifest error. If the Vendor gives written notice of
matters in dispute, the Purchaser and the Vendor shall, within the
period of 15 Business Days after receipt of such notice, seek to agree
the matters in dispute and the proposed amendments.
7.4 If any matter in dispute remains unresolved at the expiry of the
period of 15 Business Days referred to in Clause 7.3 such failure or
dispute shall (at the election of either of the Vendor and the
Purchaser) be referred to an independent firm of chartered accountants
agreed by the Purchaser and the Vendor within 5 Business Days of such
failure or notification of dispute or, in the event of a failure to
agree within 5 Business Days, by an independent firm of chartered
accountants appointed by the President for the time being of the
Institute of Chartered Accountants in England and Wales on the
application of either the Purchaser or the Vendor. Such independent
firm of chartered accountants shall determine the Completion
Statement. The fees of any such firm of independent accountants shall
be paid by the Purchaser and/or the Vendor in the proportions
determined by the independent accountant. The Vendor and the Purchaser
and the Vendor shall procure that such firm of independent accountants
is given all such assistance and access to all such information in the
Purchaser's or (as the case may be) the Vendor's possession or control
as such firm may reasonably require in order to determine the
Completion Statement. Any firm appointed under this Clause shall act
as experts and not as arbitrators and their determination shall be
binding on the Parties in the absence of manifest error.
22
8 Vendor's Warranties
8.1 The Vendor warrants to the Purchaser that each of the Vendor's
Warranties is true and accurate and is not misleading at the date of
this Agreement.
8.2 The liability of the Vendor under any of the Vendor's Warranties shall
not be confined to breaches discovered before Completion nor in any
way be modified or discharged by Completion.
8.3 Subject to Clause 8.5, each of the Vendor's Warranties is separate and
independent and shall not be limited by reference to any other
paragraph or anything in this Agreement or the Schedules.
8.4 Where a Vendor's Warranty is qualified by the knowledge, information,
belief or awareness of the Vendor or is qualified in some other manner
having substantially the same effect, such statement shall mean the
actual knowledge of Andrew Boland, Denise Williams, Charles Watson and
Dana Mulvihill (having made due and reasonable enquiry of Board papers
prepared for and received by such persons in their capacities as
directors of members of the Target Group) and the actual knowledge of
Tony Knox (having made no enquiry) and the knowledge any one of such
persons would have had he or she made all reasonable enquiries of each
of the other persons referred to above prior to the date of this
Agreement in respect of the subject matter of the relevant Vendor's
Warranty.
8.5 The provisions of Schedule 6 shall (where relevant) apply to limit the
liability of the Vendor under the Vendor's Warranties PROVIDED THAT:
8.5.1 none of the provisions in Schedule 6 shall limit the liability of the
Vendor in respect of a breach of the Vendor's Warranties at paragraphs
2 (capacity and Vendor) and 4.1 (Shares) of Part 1 of Schedule 5; and
8.5.2 none of the provisions of Schedule 6 shall apply in the case of the
Vendor's fraud or fraudulent misrepresentation or in the case of
wilful concealment by the Vendor.
8.6 For the purposes of measuring the amount of damages on a common law
basis for breach of the Vendor's Warranties, the Vendor acknowledges
that:-
8.6.1 the Purchaser has valued the Target Group on a debt free basis;
8.6.2 any allocation of the Consideration between members of the Target
Group shall be disregarded; and
8.6.3 (notwithstanding the Completion Working Capital mechanism in Clause
7), the Purchaser has valued the Target Companies on a combination of
valuation bases including a multiple of earnings.
8.7 The Vendor acknowledges that, for the purposes of determining the
state of knowledge of the Purchaser at the date of this Agreement in
respect of the Vendor's Warranties, the knowledge of those members of
the Target Group's existing management who have on or prior to
Completion been appointed to the board of directors of the Purchaser
shall not be attributed to the Purchaser.
23
8.8 The Vendor undertakes to the Purchaser (on behalf of itself and each
member of the Target Group and their respective officers and
employees) not to (and to procure that no member of the Remaining
Vendor Group shall) initiate or pursue proceedings of any kind against
any member of the Target Group or any present or former officer or
employee of any member of the Target Group in respect of any
misrepresentation in or omission from any information or advice
applied or given by them in connection with the Vendor's Warranties,
the Disclosure Letter, this Agreement or the Tax Covenant, or
otherwise in respect of any claim under this Agreement or the Tax
Covenant (except that proceedings for fraud or fraudulent
misrepresentation or wilful concealment or in respect of any breach of
Clauses 5.1 to 5.4 (inclusive) may be pursued (whether pursuant to
contract or under common law or otherwise) against any present or
former officer or employee of any member of the Target Group). Nothing
in this Clause 8.8 shall exclude or limit a claim or liability to the
extent it cannot lawfully be so excluded or limited.
8.9 Except where the context otherwise requires, references in Part 1 of
Schedule 5 to the Company or to a Target Company shall be deemed to be
references to each of the Target Companies and each of the
Subsidiaries other than ABFD as if the relevant Vendor's Warranty had
been expressly repeated with respect to each Target Company and each
Subsidiary other than ABFD (save that references to paragraphs 4.1.1
and 4.1.2 in Part 1 of Schedule 5 to the Company or to a Target
Company shall be deemed to be references to each of the Target
Companies and each of the Subsidiaries including ABFD).
8.10 The Vendor undertakes to pay to the Purchaser an amount equal to any
and all losses, costs, actions, proceedings, claims, demands,
obligations and liabilities incurred and suffered by the Purchaser or
the Target Group whether before or after Completion ("Losses") to the
extent that such Losses result from or otherwise primarily connected
with:
8.10.1 any liability of any member of the Target Group pursuant to any
guarantee, suretyship, indemnity or other agreement or commitment of
or in respect of any obligations, liabilities or commitments of any
member of the Remaining Vendor Group;
8.10.2 any liability, obligation or commitment of Asset Marketing Limited;
8.10.3 any liability, obligation or commitment of Morgen-Walke Scior GmbH.
9 Purchaser's Warranties, covenants and undertakings
9.1 The Purchaser warrants to the Vendor that each of the Purchaser's
Warranties is true and accurate and is not misleading at the date of
this Agreement.
9.2 The Purchaser's Warranties shall not in any respect be extinguished or
affected by Completion.
9.3 The Purchaser's Warranties are separate and independent and are not
limited or restricted by reference to or inference from the terms of
any other provision of this Agreement or any other Purchaser's
Warranty.
24
9.4 Without prejudice to the provisions of Clause 14.2.2 and Schedule 6,
the Purchaser acknowledges and agrees that it has no rights against,
and shall not make any claim against any director, officer, employee,
agent or adviser of any member of the Remaining Vendor Group, save in
the case of fraud, fraudulent misrepresentation or wilful concealment,
9.5 For a period of six years from Completion, where required of the
Vendor by law the Purchaser will make all books, records and documents
which relate to any of the Target Companies and any of the
Subsidiaries (insofar as the same record matters occurring on or
before Completion) available for inspection by representatives of the
Vendor at all reasonable times during business hours on reasonable
advance notice being given and at the Vendor's expense. The Purchaser
will allow the Vendor's representatives to take copies of any of such
books, records and documents where required by law.
9.6 The Purchaser agrees with, and undertakes to the Vendor and to each
member of the Remaining Vendor Group:-
9.6.1 to comply with all notification and other requirements arising as a
result of the entry into of this Agreement and the transactions
contemplated by it under any relevant competition or other similar
laws anywhere in the world (except where such requirements are the
sole responsibility of the Vendor or any of its Group Companies under
such laws); and
9.6.2 to consult with, and take into account the views of, the Vendor as to
the mode, content and timing of all communications (whether made
orally or in writing) with any competition or other regulatory
authority to, or in respect of, which notification, filing or other
requirements arise as a result of the entry into of this Agreement and
to give the Vendor and its representatives access at all reasonable
times to all information in the Purchaser's or any Group Company of
the Purchaser's possession or control in relation thereto.
9.7 The Purchaser agrees with, and undertakes to the Vendor, that between
the date of this Agreement and Completion:-
9.7.1 it will not without the Vendor's consent (such consent not to be
unreasonably withheld or delayed) agree to amend the provisions of any
agreement to which the Purchaser is a party which provides for finance
be made available to the Purchaser in order to enable the Purchaser to
complete this Agreement; and
9.7.2 it will exercise its rights in full under any agreements of the type
referred to in Clause 9.7.1 to require the providers of finance to the
Purchaser to make the necessary funds available to it on or before the
Completion Date.
9.8 Any director, officer, employee, agent or adviser as is referred to in
Clause 9.4 and any member of the Remaining Vendor Group as is referred
to in Clause 9.6 may enforce the terms of Clauses 9.4 and 9.6
respectively in accordance with the Contracts (Rights of Third
Parties) Act 1999, provided that as a condition thereto, any such
third party shall obtain the prior written consent of the Vendor.
10 Taxation
The provisions of Schedule 9 shall have effect.
25
11 Restrictive Covenants
11.1 Subject to Clause 11.5, the Vendor covenants with the Purchaser that,
save with the prior written consent of the Purchaser, for the period
of twelve months following the Completion Date it will not and it will
procure that its subsidiaries, for so long as they remain a subsidiary
of the Vendor, will not:-
11.1.1 in competition with the Target Companies or the Subsidiaries, directly
or indirectly carry on or be in any way interested in or connected
with any business which competes with the FD Business as carried on at
the Completion Date provided always that this Clause shall not
prevent:-
11.1.1.1 the Vendor or a member of the Remaining Vendor Group from
being interested as a holder or beneficial owner solely for
investment purposes of less than five per cent. of any
securities of any company whose securities are listed or
quoted on any recognised investment exchange; and
11.1.1.2 the Vendor's subsidiaries IBI, K.K., Corplan, K.K.,
International Business Information, K.K. Clarion
Communications (P.R.) Limited, Clarion Communications
(Corporate P.R.) Limited, Fitch Design Consultants Limited,
Bamber Forsyth Limited and Bates Advertising USA, Inc. from
conducting their business as carried on at the Completion
Date or from conducting business for new clients following
the Completion Date,
and provided further that this Clause shall not prevent the Remaining
Vendor Group from carrying on its business as carried on at the date
hereof.
11.1.2 either:-
11.1.2.1 solicit the services of; or
11.1.2.2 endeavour to entice away from the Target Companies or the
Subsidiaries; or
11.1.2.3 knowingly assist in, or procure, the employment by any other
person of
any officer, consultant or senior or managerial employee of
the Target Companies or the Subsidiaries (whether or not
such person would commit any breach of his contract of
employment or engagement by reason of leaving the service of
such company) for the purposes of providing services the
same as or similar to those he provided to the Target
Companies or the Subsidiaries other than pursuant to a
response to a bona fide recruitment advertisement.
11.2 The Purchaser covenants with the Vendor that, save with the prior
written consent of the Vendor, for the period of twelve months
following the Completion Date it will not and it will procure that no
member of the Purchaser's Group, for so long as it remains a member of
the Purchaser's Group, will:-
26
11.2.1 in competition with the Remaining Vendor Group, directly or indirectly
carry on or be in any way interested in or connected with any business
which competes with the Relevant CCG Business as carried on at the
Completion Date provided always that this Clause shall not prevent the
Purchaser or a member of the Purchaser's Group from being interested
as a holder or beneficial owner solely for investment purposes of less
than five per cent. of any securities of any company whose securities
are listed or quoted on any recognised investment exchange and
provided further that this Clause shall not prevent the Target Group
from carrying on the FD Business as carried on at the date hereof;
11.2.2 either:-
11.2.2.1 solicit the services of; or
11.2.2.2 endeavour to entice away from the Remaining Vendor Group; or
11.2.2.3 knowingly assist in, or procure, the employment by any other
person of
any officer, consultant or senior or managerial employee of
the Remaining Vendor Group (whether or not such person would
commit any breach of his contract of employment or
engagement by reason of leaving the service of such company)
for the purposes of providing services the same as or
similar to those he provided to the Remaining Vendor Group
other than pursuant to a response to a bona fide recruitment
advertisement.
11.3 The Vendor and the Purchaser each agrees that the restrictions
contained in this Clause 11 are reasonable and necessary for the
protection of the legitimate interests of each other and that the
restrictions do not work harshly on it.
11.4 While the restrictions contained in this Clause 11 are considered by
the Parties to be reasonable in all the circumstances, it is
recognised that restrictions of their nature may fail for technical
reasons. Accordingly it is agreed that, if any of such restrictions
shall be found to be invalid or unenforceable as going beyond what is
reasonable in all the circumstances for the protection of the
interests of the Parties or otherwise, but would be valid or
enforceable if part of the wording of the restriction were deleted or
the period for which it applies were reduced or the range of
activities or area dealt with by it were reduced in scope, the
restriction concerned shall apply with such modifications as may be
necessary to make it valid and enforceable.
11.5 In the event of a third party or parties acting in concert (within the
meaning of the City Code on Takeovers and Mergers) acquiring more than
50 per cent. of the voting rights exercisable in general meeting of
the Vendor, the restrictions contained in Clause 11.1.1 shall cease to
be enforceable and shall have no further force or effect save in
respect of an antecedent breach.
12 Confidentiality and announcements
12.1 Subject to the provisions of Clause 12.3 and save as expressly
provided by this Agreement, each of the Parties undertakes with the
other that it:-
27
12.1.1 will not communicate or permit communication of the terms of this
Agreement (including the names of the Parties) to any third party
other than to its professional advisers specifically instructed by it
in connection with the transaction referred to in this Agreement and
to any person providing debt or equity finance to the Purchaser within
six months following the Completion Date or in the case of the Vendor,
to the Banks and the Noteholders; and
12.1.2 will instruct those professional advisers and providers of finance and
the Banks and the Noteholders (as appropriate) not to communicate or
permit communication of the terms of this Agreement (including the
names of the Parties) to any third party.
12.2 Subject to the provisions of Clause 12.3, no Party shall issue any
press release or publish any circular to shareholders or any other
public document in each case relating to this Agreement or the matters
contained in it, without obtaining the prior written approval of the
other Parties to its contents and the manner and extent of its
presentation and publication or disclosure.
12.3 The provisions of Clauses 12.1 and 12.2 do not apply to:-
12.3.1 any communication or announcement relating to or connected with or
arising out of this Agreement required to be made by the Vendor or any
member of the Remaining Vendor Group or by the Purchaser or any member
of the Target Group:-
12.3.1.1 by virtue of the regulations of the UK Listing Authority,
the London Stock Exchange or the Panel on Takeovers and
Mergers; or
12.3.1.2 by any court or governmental or administrative authority
competent to require the same; or
12.3.1.3 on a confidential basis for legitimate corporate purposes;
or
12.3.1.4 by any applicable law or regulation; or
12.3.2 the announcement in the Agreed Form marked "I" which the Parties shall
issue on Completion.
12.4 For the purpose of assuming the full benefit of the business and
goodwill of the Target Companies and in consideration of the Purchaser
and the US Purchaser agreeing to buy the Shares on the terms of this
Agreement, the Vendor agrees, and shall procure that the other members
of the Remaining Vendor Group shall agree, with the Purchaser and its
successors in title as a separate and independent agreement that
(subject to Clauses 12.2 and 12.3) it will not at any time, and it
shall procure that no other members of the Remaining Vendor Group
shall, thereafter divulge any information in relation to the affairs
or business of the Target Group.
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13 Assignment
13.1 Subject to this Clause 13, this Agreement shall be binding upon and
enure for the benefit of the successors and assignees of the Parties.
13.2 Subject to Clauses 13.3 and 13.4, the Purchaser and its successors and
assignees shall not be entitled to (i) assign, (ii) transfer, (iii)
charge (iv) declare or create a trust or other interest over or (v)
deal in any other manner with this Agreement or any of its rights or
obligations under it without the prior written consent of the Vendor.
13.3 Notwithstanding any other provisions in this Agreement or any of the
other agreements entered into by the Vendor and the Purchaser under or
in connection with this Agreement (together the "Acquisition
Agreements"), the Purchaser:
13.3.1 may grant security over or assign by way of security all or any of its
rights under any of the Acquisition Agreements (the "Rights") for the
purposes of or in connection with the financing (whether in whole or
in part) by the Purchaser of:
13.3.1.1 the acquisitions of Shares contemplated by this Agreement;
or
13.3.1.2 any of its, or any member of the Target Group's immediate
working capital or other requirements; and
13.3.2 its liquidator or administrator, or any receiver or other person or
entity appointed to enforce any of such security may enter into any
other assignments or transfers of any of the Rights.
13.4 Notwithstanding any other provisions in this Agreement or any of the
other agreements entered into by the Vendor and the Purchaser under or
in connection with this Agreement, the Purchaser may assign any rights
under this Agreement to any member of the Purchaser's Group, save
that, upon the assignee ceasing to be a member of the Purchaser's
Group, all such assigned rights shall forthwith be assigned to another
member of the Purchaser's Group.
14 General
14.1.1 The Purchaser shall do or procure to be done all such further acts and
things and execute or procure the execution of all such other
documents as the Vendor may from time to time reasonably require for
the purpose of giving the Vendor the full benefit of the provisions of
this Agreement.
14.1.2 The Vendor shall do or procure to be done all such further acts and
things and execute or procure the execution of all such other
documents as the Purchaser may from time to time reasonably require
for the purpose of giving the Purchaser the full benefit of the
provisions of this Agreement.
14.2.1 This Agreement, the documents in the Agreed Form and the other
documents referred to in them constitute the entire agreement between,
and understanding of, the Parties with respect to the subject matter
of this Agreement and such documents supersede any prior written or
oral agreement(s) or arrangement(s) between the Parties in relation
thereto.
29
14.2.2 The Purchaser acknowledges and agrees that in entering into this
Agreement, and the documents referred to in it, it does not rely on,
and shall have no remedy in respect of, any statement, representation,
warranty or understanding (whether negligently or innocently made) of
any person (whether party to this Agreement or not) other than as
expressly set out in this Agreement as a Vendor's Warranty. The only
remedy available to it shall be for breach of contract under the terms
of this Agreement. Nothing in this Clause shall, however, operate to
limit or exclude any liability for fraud.
14.3 In the event of any breach of this Agreement or in any other
circumstances, the Purchaser shall not be entitled to rescind or
otherwise terminate this Agreement.
14.4 Without prejudice to Clause 2.7, each Party shall pay its own costs
and expenses of and incidental to the negotiation, preparation,
execution and implementation by it of this Agreement, of each document
referred to in it and the sale and purchase of the Shares.
14.5 Without prejudice to Clause 14.4, all stamp, registration and other
similar taxes, duties and charges payable in connection with the
transactions contemplated by this Agreement, and the documents
referred to in it, shall be paid by the Purchaser.
14.6.1 The failure or delay of the Vendor at any time or times to require
performance of any provision of this Agreement shall not affect its
right to enforce such provision at a later time.
14.6.2 No waiver by the Vendor of any condition or of the breach of any term,
covenant, representation, warranty or undertaking contained in this
Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of any
other condition or of the breach of any other term, covenant,
representation, warranty or undertaking in this Agreement.
14.6.3 Any liability to the Vendor under this Agreement may in whole or in
part be released, compounded or compromised and time or indulgence may
be given by the Vendor in its absolute discretion as regards any Party
under such liability without in any way prejudicing or affecting its
rights against any other Party under the same or a like liability.
14.7 This Agreement shall, as to any of its provisions remaining to be
performed or capable of having or taking effect following Completion,
remain in full force and effect notwithstanding Completion.
14.8 If any provision of this Agreement shall be found by any court or
administrative body of competent jurisdiction to be invalid or
unenforceable, such invalidity or unenforceability shall not affect
the other provisions of this Agreement which shall remain in full
force and effect.
14.9 This Agreement or any of the documents referred to in it may be
amended, modified, superseded or cancelled and any of its terms,
covenants, representations, warranties, undertakings or conditions may
be waived only by an instrument in writing signed by (or by some
person duly authorised by) each of the Parties or, in the case of a
waiver, by the Party waiving compliance.
30
14.10 This Agreement is drawn up in the English language. If this Agreement
is translated into another language, the English language text shall
in any event prevail. All notices, demands, requests, statements,
certificates or other documents or communications shall be in English
unless otherwise agreed.
14.11 This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be an original, and all the
counterparts together shall constitute one and the same instrument.
14.12 Save as provided in Clauses 1.5, 9.8 and 13, a person who is not a
party to this Agreement shall have no right under the Contracts
(Rights of Third Parties) Act 1999 to enforce any of its terms.
14.13 All amounts due by one Party to another Party under this Agreement
shall be paid in full without any deduction or withholding other than
as required by law and the Purchaser shall not be entitled to assert
any credit, set-off or counterclaim against the Vendor in order to
justify withholding payment of any such amount in whole or in part.
14.14 Any indemnities, covenants, warranties, undertakings or obligations
expressed to be given by the Vendor to the Purchaser in relation to
MWA and its Subsidiaries shall be regarded as given by the Designated
Vendor to the US Purchaser under this Agreement and not by the Vendor
to the Purchaser, provided that (for the avoidance of doubt) the
provisions of Schedule 6 shall apply as if references to the Vendor
therein were to the Designated Vendor.
14.15 The Vendor hereby irrevocably and unconditionally:
14.15.1 guarantees to the Purchaser (on its behalf and on behalf of the
Purchaser's Group) the full, prompt and complete performance by the
Designated Vendor of all its obligations under this Agreement and the
due and punctual payment on demand of all sums due and payable by the
Designated Vendor to the Purchaser (or any members of the Purchaser's
Group) under or pursuant to this Agreement; and
14.15.2 agrees as primary obligor to indemnify the Purchaser (or any members
of the Purchaser's Group) on demand from and against any loss incurred
by the Purchaser (or members of the Purchaser's Group) as a result of
any of the obligations of the Designated Vendor under or pursuant to
this Agreement being or becoming void, voidable, unenforceable or
ineffective as against the Designated Vendor for any reason
whatsoever, whether or not known to the Purchaser (or members of the
Purchaser's Group), the amount of such loss being the amount which the
Purchaser (or members of the Purchaser's Group) would otherwise have
been entitled to recover from the Designated Vendor.
14.16 The guarantee contained in Clause 14.15 is a continuing guarantee and
shall remain in force until all the obligations of the Designated
Vendor under this Agreement have been fully performed and all sums
payable by the Designated Vendor have been fully paid. It is
independent of every other security which the Purchaser (or members of
the Purchaser's Group) may at any time hold for the obligations of the
Designated Vendor under this Agreement.
31
14.17 The obligations of the Vendor under Clause 14.15 shall not be affected
by any act, omission, matter or thing which, but for this provision,
might operate to release or otherwise exonerate the Vendor from its
obligations or affect such obligations, including without limitation
and whether or not known to the Vendor:
14.17.1 any variation of this Agreement or any time, indulgence, waiver or
consent at any time given to the Designated Vendor or any other
person;
14.17.2 any compromise or release of, or abstention from obtaining, perfecting
or enforcing any security or other right or remedy whatsoever from or
against, the Designated Vendor or any other person;
14.17.3 any legal limitation, disability, incapacity or other circumstance
relating to the Designated Vendor or any other person; or
14.17.4 any irregularity, unenforceability or invalidity of any obligations of
the Designated Vendor under this Agreement, or the dissolution,
amalgamation, reconstruction or insolvency of the Designated Vendor.
14.18 The guarantee contained in Clause 14.15 may be enforced by the
Purchaser (for itself or on behalf of any members of the Purchaser's
Group) without the Purchaser first taking any steps or proceedings
against the Designated Vendor.
15 Notices
15.1 Any notice given under this Agreement shall be in writing and shall be
served by delivering it personally or sending it by pre-paid recorded
delivery or registered post or fax to the address and for the
attention of the relevant Party set out in Clause 15.2 (or as
otherwise notified by that Party under this Agreement). Any such
notice shall be deemed to have been received:-
15.1.1 if delivered personally, at the time of delivery;
15.1.2 in the case of pre-paid recorded delivery or registered post, 48 hours
from the date of posting;
15.1.3 in the case of fax, at the time of transmission.
provided that if deemed receipt (but for this proviso) would have
occurred before 9 a.m. on a Business Day the notice shall be deemed to
have been received at 9 a.m. on that day, and if deemed receipt (but
for this proviso) would have occurred after 5 p.m. on a Business Day,
or on a day which is not a Business Day, the notice shall be deemed to
have been received at 9 a.m. on the next Business Day.
15.2 The addresses and fax numbers of the Parties for the purposes of
Clause 15.1 are:-
32
Cordiant Communications Group Plc.
1-5 Midford Place
London
W1Y 5BH
For the attention of: Denise Williams
Fax number: 0207 706 4327
Lighthouse Global Network, Inc.
498 Seventh Avenue,
New York
NY 10018, USA
For the attention of: Michael Kopcsak
Fax number: +1 212 297 7440
3319th Single Member Shelf Trading Company Limited
Holborn Gate, 26 Southampton Buildings, London WC2A 1PB
For the attention of: Charles Watson
Fax number: 0207 242 2705
FD MWA Holdings, Inc.
Holborn Gate, 26 Southampton Buildings, London WC2A 1PB
For the attention of: Charles Watson
Fax number: 0207 242 2705
or such other address or fax number in the United Kingdom as may be
notified in writing from time to time by the relevant Party to the
other Party for the purposes of this Clause.
15.3 In proving such service it shall be sufficient to prove that the
envelope containing such notice was addressed to the address of the
relevant Party set out in Clause 15.2 (or as otherwise notified by
that Party under this Agreement) and delivered either to that address
or into the custody of the postal authorities as a pre-paid recorded
delivery or registered post letter, or that the notice was transmitted
by fax to the fax number of the relevant Party set out in Clause 15.2
(or as otherwise notified by that Party under this Agreement).
15.4 For the avoidance of doubt, notice given under this Agreement shall
not be validly served if sent by e-mail.
16 Governing law and jurisdiction
16.1 This Agreement shall be governed by and construed in accordance with
the laws of England.
16.2 The Parties submit to the exclusive jurisdiction of the courts of
England and Wales as regards any claim, dispute or matter arising out
of or relating to this Agreement or any of the documents to be
executed pursuant to this Agreement.
33
16.3 The US Vendor irrevocably appoints the Vendor as its agent to receive
on its behalf in England service of any proceedings arising out of or
in connection with this Agreement. Such service shall be deemed
completed on delivery to such agent (whether or not it is forwarded to
and received by the US Vendor).
16.4 The US Purchaser irrevocably appoints the Purchaser as its agent to
receive on its behalf in England service of any proceedings arising
out of or in connection with this Agreement. Such service shall be
deemed completed on delivery to such agent (whether or not it is
forwarded to and received by the US Purchaser).
16.5 Each Party irrevocably consents to any process in any legal action or
proceedings arising out of or in connection with this Agreement being
served on it in accordance with the provisions of this Agreement
relating to service of notices. Nothing contained in this Agreement
shall affect the right to serve process in any other manner permitted
by law.
EXECUTED by the Parties on the date set out at the head of this Agreement.
34
SCHEDULE 1
The Target Companies
Part 1
Financial Dynamics Holdings Limited
1 Registered number: 03345319
2 Date of incorporation: 4 April 1997
3 Place of incorporation: Cardiff
4 Registered office address: 121-141 Westbourne Terrace, London
W2 6JR
5 Directors: Andrew Boland
David Lloyd
Dana Mulvihill
Charles Watson
Denise Williams
Stephen Wilson
6 Secretary: Denise Williams
7 Authorised share capital:
(a) Amount: (pound)5,000,000.00
(b) Number and class of shares: 5,000,000 Ordinary Shares of
(pound)1 each
8 Issued share capital:
(a) Amount: (pound)1,066,667
(b) Number and class of shares: 1,066,667 Ordinary Shares of
(pound)1 each
35
SCHEDULE 1
The Target Companies
Part 2
C&FD (Holdings) Limited
1 Registered number: 03560931
2 Date of incorporation: 8 May 1998
3 Place of incorporation: Cardiff
4 Registered office address: 1-5 Midford Place
London
W1T 5BH
5 Directors: Andrew Boland
Adrianne LeMan
Denise Williams
6 Secretary: Denise Williams
7 Authorised share capital:
(a) Amount: (pound)10,000,000
(b) Number and class of shares: 10,000,000 Ordinary Shares of
(pound)1 each
8 Issued share capital:
(a) Amount: (pound)1,001.00
(b) Number and class of shares: 1,001 Ordinary Shares of
(pound)1 each
36
SCHEDULE 1
The Target Companies
Part 3
FD International Limited
1 Registered number: 404831
2 Date of incorporation: 7 August 2000
3 Place of incorporation: England
4 Registered office address: 121-141 Westbourne Terrace
London
W2 6JR
5 Directors: Andrew Boland
Dana Mulvihill
Charles Watson
Denise Williams
Stephen Wilson
6 Secretary: Denise Williams
7 Authorised share capital:
(a) Amount: (pound)1,000
(b) Number and class of shares: 1,000 Ordinary Shares of
(pound)1.00 each
8 Issued share capital:
(a) Amount: (pound)1
(b) Number and class of shares: 1 Ordinary Share
37
SCHEDULE 1
The Target Companies
Part 4
Financial Dynamics Holdings Limited
1 Registered number: EO304946
2 Date of incorporation: 9 April 1999
3 Place of incorporation: Dublin
4 Registered office address: 10 Merrion Square
Dublin
5 Directors: Orla Brannigan
Declan Kelly
Andrew Boland
Angie Kinane
Donal Lawless
Paul McSharry
Charles Watson
6 Secretary: Declan Kelly
7 Authorised share capital:
(a) Amount: (euro)1,270,000.00
(b) Number and class of shares: 1,000,000 Ordinary Euro Shares
of (euro)1.27 each
8 Issued share capital:
(a) Amount: (euro)26,162.00
(b) Number and class of shares: 20,600 Ordinary Euro Shares of
(euro)1.27 each held by Cordiant
Communications Group plc
38
SCHEDULE 1
The Target Companies
Part 5
Morgen-Walke Associates, Inc.
1 Tax identification number: 13-312871
2 Date of incorporation: 10 August 1982
3 Place of incorporation: New York, United States of
America
4 Registered office address: CCG Worldwide, Inc.
498 7th Avenue
New York
NY10018
USA
5 Directors: David Hearn
Michael Kopcsak
6 Secretary Michael Kopcsak
7 Authorised share capital:
(a) Amount: US$20,000.00
(b) Number and class of shares: 10,000 'A' Voting Common Shares
of US$1.00 each
10,000 'B' Non-Voting Common
Shares of US$1.00 each
8 Issued share capital:
(a) Amount: US$2,562
(b) Number and class of shares: 2,562 'A' Voting Common Shares
of US$1.00 each held by
Lighthouse Global Network, Inc.
39
SCHEDULE 2
The Subsidiaries
Part 1
Financial Dynamics Limited
1 Registered number: 01656428
2 Date of incorporation: 4 August 1982
3 Place of incorporation: Cardiff
4 Registered office address: 121-141 Westbourne Terrace,
London W2 6JR
5 Directors: Nicholas Berrett
Andrew Boland
Alex Child-Villiers
Andrew Dowler
Scott Fulton
Stephen Jacobs
David Lloyds
Andrew Lorenz
Dana Mulvihill
Giles Sanderson
Timothy Spratt
Charles Watson
Denise Williams
David Yates
Anton Nicholas
Stephen Wilson
Geoffrey Pelham-Lane
Anthony Knox
6 Secretary: Denise Williams
7 Authorised share capital:
(a) Amount: (pound)100
(b) Number and class of shares: 6,750 Ordinary Shares 3,250
Preference Shares
8 Issued share capital:
(a) Amount: (pound)100
(b) Number and class of shares and
by whom held: 6,750 Ordinary Shares held by
Financial Dynamics Holdings
Limited
3,250 Preference Shares held by
Financial Dynamics Holdings
Limited
40
SCHEDULE 2
The Subsidiaries
Part 2
Financial Dynamics S.A.
1 Registered number: 404 191 025 R.C.S. Paris
1 Date of incorporation: 20 March 1996
2 Place of incorporation: Paris, France
3 Registered office address: 20 Rue des Pyramides
75001 Paris
France
4 Directors: Nina Mitz
Charles Watson
Dana Mulvihill
Gordon McCoun
5 Chairman of the Board of Directors
and General Manager (President-
Directeur General): Nina Mitz
6 Secretary: None
7 Authorised and issued share capital:
(a) Amount: EUR 38,112.25
(b) Number and class of shares: 2,500 Ordinary Shares
(c) Par value: EUR 15.2449
8 Shareholders and number of shares held:
Morgen Walke Associates, Inc: 2,493
Robert Jones: 1
Gordon McCoun: 1
Charles Watson: 1
Dana Mulvihill: 1
Bates Overseas Holdings Ltd: 1
Nina Mitz: 1
Douglas Sherk 1
41
SCHEDULE 2
The Subsidiaries
Part 3
Corporate & Financial Design Limited
1 Registered number: 02693509
2 Date of incorporation: 4 March 1992
3 Place of incorporation: Cardiff
4 Registered office address: 1-5 Midford Place
London
W1T 5BH
5 Directors: Andrew Boland
Kevan Bruce
Gregory Clark
Adrianne LeMan
Christopher Stenning
Denise Williams
Stephen Wilson
6 Secretary: Denise Williams
7 Authorised share capital:
(a) Amount: (pound)100,000
(b) Number and class of shares: 1,000,000 Ordinary Shares
8 Issued share capital:
(a) Amount: (pound)850.10
(b) Number and class of shares
and by whom held: 8,501 Ordinary Shares held by
Corporate & Financial Design
(Holdings) Limited
42
SCHEDULE 2
The Subsidiaries
Part 4
ABFD
1 Registered number:
2 Date of incorporation: 4 September 2001
3 Place of incorporation: Germany
4 Registered office address: Stiftstrasse 8-10
D-60313 Frankfurt am Main
Germany
5 Directors: Dr L Golsch
Michael Reinent
Charles Watson
6 Secretary n/a
7 Authorised share capital:
(a) Amount: (euro)25,000
(b) Number and class of shares: 25,000 shares of (euro)1.00 each
8 Issued share capital:
(a) Amount: (euro)25,000
(b) Number and class of shares
and by whom held: 1 share of nominal value
(euro)12,500 held by FDL
1 share of nominal value
(euro)12,500 held by Ahrens &
Behrent Agentur fur
Kommunikation GmbH
43
SCHEDULE 3
Apportionment of Consideration
Member of Target Group Apportionment of Consideration
- --------------------------------------------------------------------------------
Financial Dynamics Limited (pound)17,400,000 (minus(euro)1)
Corporate & Financial Design Limited (pound)1,000,000
Morgen-Walke Associates, Inc. (pound)5,170,000
Financial Dynamics Ireland Limited (pound)2,000,000
ABFD (pound)430,000
Financial Dynamics S.A. (euro)1
44
SCHEDULE 4
Completion obligations of the Vendor
At Completion, the Vendor shall deliver or procure to be delivered to the
Purchaser or its advisers:-
1 duly executed transfers in favour of the Purchaser in respect of the Shares
(other than the shares in ABFD) together with the certificates for such
Shares or an indemnity in the usual form in relation thereto;
2 a duly executed Ordre de Mouvement and CERFA form no2759 in favour of the
Purchaser or such other person as the Purchaser may nominate in writing to
the Vendor prior to completion in respect of the one share in Financial
Dynamics S.A. held by each of Bates Overseas Holdings Limited and Gordon
McCoun;
3 a copy of any power of attorney under which this Agreement, or any of the
transfers or other documents referred to in the preceding paragraph 1 of
this Schedule, is executed and evidence of the authority of any person
signing on behalf of any corporate entity;
4 at the registered office of each Target Company and each Subsidiary the
common seal (if any) and statutory books (including registers and minutes
books) of that Target Company or Subsidiary (as the case may be);
5 letters of resignation in the Agreed Form marked "F1" to "F27" in each case
acknowledging that the writer has no claim against their respective Target
Companies or any of relevant Subsidiaries for compensation for loss of
office or otherwise;
6 a power of attorney in the Agreed Form marked "G1" duly executed by the
Vendor and a stock power in the Agreed Form marked "G2" duly executed by
the Designated Vendor, in each case as the holder of the relevant Shares
for the purpose of securing the interest of the Purchaser in the Shares
pending their registration into the name of the Purchaser;
7 duly executed deeds of release in the Agreed Form marked "J1" to "J3" of
all mortgages, charges, guarantees and debentures granted or entered into
by or over the shares in the Target Companies and the Subsidiaries (other
than ABFD) including, but not limited to, the charges set out in Schedule
11 together with the relevant declarations of satisfaction (Forms 403(a) or
their equivalent in non-UK jurisdictions) sworn by a director of the
relevant Target Company or Subsidiary respectively and a termination notice
in respect of liens in favour of Chemical Bank in the United States;
8 the Deed of Assignment executed by the Vendor and the relevant members of
the Remaining Vendor Group;
9 the Deed of Assignment of Benefit of Contracts executed by the Vendor;
10 a copy of a letter sent to the Inland Revenue prior to Completion applying
for any Target Company or Subsidiary included in any arrangement under the
Corporation Tax (Simplified Arrangements for Group Relief) Regulations 1999
in respect of which they are, at the date hereof, authorising companies as
defined in regulation 5 thereof, to be excluded from such arrangement from
Completion.
45
46
SCHEDULE 5
Part 1
Vendor's Warranties
1 Information
The facts set out in the Introduction and in Schedules 1, 2 and 7 are
true and accurate in all material respects and there is no matter
which renders any of such information incomplete or misleading.
2 Capacity and Vendor
2.1 The Vendor has power to enter into and perform this Agreement and all
the documents in the Agreed Form to be executed by it and this
Agreement constitutes, and each such Agreed Form document when
executed will constitute, binding obligations of the Vendor in
accordance with its terms.
2.2 The execution and delivery of this Agreement, and any of the Agreed
Form documents to be executed, by the Vendor and the performance of
and compliance with its terms and provisions will not conflict with or
result in a breach of, or constitute a default under, the Memorandum
or Articles of Association of the Vendor or any court order or
judgment that applies to or binds the Vendor or any of its property.
2.3 No member of the Remaining Vendor Group has any interest, direct or
indirect, in any business other than that now carried on by the Target
Companies which is competitive with the business or any proposed
business of the Target Companies.
3 Change of control
3.1 There are no material agreements concerning any of the Target
Companies (other than agreements relating to the provision of services
to clients) which are terminable as a result of a change in the
control in any of the Target Companies.
3.2 So far as the Vendor is aware there are no material agreements entered
into by the Target Companies which relate to the provision of services
to clients which will or may be terminated as a result of a change in
the control in any of the Target Companies.
4 The Shares and the Target Companies
4.1 The Shares
4.1.1 The Shares comprise the whole of the allotted and issued share capital
of each of the Target Companies and all of the Shares are fully paid
or credited as fully paid.
4.1.2 The Shares are legally and beneficially owned by the Vendor or a
Designated Vendor free from all Encumbrances or any agreement,
arrangement or obligation to create any of the same, in favour of any
other person.
47
4.1.3 MWA is duly organised, validly existing and in good standing under the
laws of the State of New York and has the full power and authority to
own and operate its properties and business. MWA is duly qualified to
transact business as a foreign corporation in each United States
jurisdiction where the ownership or operation of its properties and
assets requires such qualification.
4.2 Share and loan capital
4.2.1 Save only as provided in this Agreement, there are no agreements or
arrangements in force which call for the present or future creation,
allotment, issue, transfer, redemption or repayment of, or grant to
any person the right (whether exercisable now or in the future and
whether conditional or not) to call for the creation, allotment,
issue, transfer, redemption or repayment of, any share capital of any
of the Target Companies (including by way of option or under any right
of conversion or pre-emption).
4.2.2 No Target Company has created or agreed to create any Encumbrance or
entered into or agreed to give or enter into any guarantee,
suretyship, indemnity or similar commitment in respect of any of its
Affiliates.
4.3 Subsidiaries and branches
4.3.1 The Target Companies have no subsidiaries or subsidiary undertakings
apart from the Subsidiaries.
4.3.2 No Target Company is the holder or beneficial owner of any shares or
securities of any other person (whether incorporated in the United
Kingdom or elsewhere) other than the Subsidiaries and has not agreed
to acquire any such shares or securities.
4.3.3 No Target Company is or has agreed to become a member of any
partnership, joint venture, consortium or other incorporated or
unincorporated association and no Target Company has any branch,
agency, place of business or establishment outside the United Kingdom.
4.3.4 Morgen-Walke Associates, Inc. and C&FD (Holdings) Limited are the
beneficial owners of the entire issued share capital of each of their
respective Subsidiaries, free from all liens, charges, equities,
encumbrances or interests of any nature whatsoever, or any agreement,
arrangement or obligation to create any of the same, in favour of any
other person.
4.4 The Target Companies' constitutions
4.4.1 Memorandum and Articles of Association: The copy of the Memorandum and
Articles of Association of each of the Target Companies annexed to the
Disclosure Letter is true and complete and sets out in full the rights
and restrictions attaching to each class of each of the Target
Companies' share capital.
4.4.2 Statutory books: The statutory books (including all registers and
minute books) of each of the Target Companies contain in all material
respects an accurate record of the matters which should be dealt with
in them and so far as the Vendor
48
is aware no notice or allegation that any of them is incorrect or
should be rectified has been received.
4.4.3 Returns: All material returns, particulars, resolutions and other
material documents required under the Companies Act 1985 or the Irish
Companies Acts 1963 to 2001 to be delivered on behalf of the Target
Companies to the Registrar of Companies have been made and delivered.
4.5 The Target Companies' solvency
4.5.1 No order has been made and no resolution has been passed for the
winding up of any of the Target Companies and no petition has been
presented to any of the Target Companies and no meeting has been
convened for the purpose of winding up any of the Target Companies.
4.5.2 No administration order has been made and no petition for such an
order has been presented to any of the Target Companies in respect of
any of the Target Companies.
4.5.3 No administrative receiver has been appointed in respect of the Target
Companies.
4.5.4 None of the Target Companies are and have admitted themselves to be
insolvent or unable to pay their debts (or deemed to be unable to do
so within the meaning of Insolvency Act 1986 section 123 or the Irish
Companies Act 1990 section 214).
4.5.5 No voluntary arrangement under Insolvency Act 1986 section 1 in
respect of any of the Target Companies or other compromise or
arrangement for the benefit of any of the Target Companies creditors
generally has been proposed or agreed.
4.5.6 None of the Target Companies has suspended or ceased or threatened to
suspend or cease to carry on all or a material part of their
businesses.
4.6 Acquisitions and Disposals
4.6.1 So far as the Vendor is aware, there are not outstanding any material
liabilities or material commitments of the Target Group arising from
any arrangements for the disposal or acquisition of any shares,
property or other material assets (other than any arrangements entered
into in the ordinary course of business).
4.6.2 A copy of each of the ABFD Novation Agreement and the Asset Marketing
SPA are attached to the Disclosure Letter and represent the entire
agreement in respect of the matters contemplated therein.
4.7 Powers of Attorney
There are in force no powers of attorney given by the Target Companies
and no person is entitled or authorised (whether as agent or
otherwise) to bind or commit the Target Group to any obligations
outside the ordinary course of the Target Group's business.
49
5 The Accounts and accounting records
The Accounts
5.1 The copy of the Accounts annexed to the Disclosure Letter is a true
and complete copy.
5.2 The Accounts of each of the relevant members of the Target Group:-
5.2.1 give a true and fair view of the financial position and state of
affairs of each of the relevant members of the Target Group at the
Accounts Date and of its profit or loss for the period to which they
relate;
5.2.2 have been prepared in accordance with accounting principles, standards
and practices generally accepted in the United Kingdom and (in respect
of FD Ireland only) Ireland and applicable statutes and regulations
and on a basis consistent with the basis applied in the preceding
financial period;
5.2.3 are not adversely affected by any exceptional or non-recurring items
of a material nature unless otherwise expressly stated therein.
5.3 Accounting records
The accounting records of the Target Companies:-
5.3.1 contain accurate records of all matters required by law to be entered
in them; and
5.3.2 contain or reflect no material inaccuracies or discrepancies.
5.4 Management accounts
The management accounts of the Target Companies for the 4 month period
since the Accounts Date, copies of which are annexed to the Disclosure
Letter, have been prepared by the Target Companies with due care and
attention and show a reasonably accurate view of the state of affairs
and profit or loss of the Target Companies as at and for the periods
in respect of which they have been prepared and have been prepared on
a basis consistent with the preparation of management accounts in the
12 months prior to the date of this Agreement, but it is hereby
acknowledged that they are not prepared on a statutory basis.
5.5 The Special Purpose Accounts
The Special Purpose Accounts, copies of which are annexed to the
Disclosure Letter, have been prepared by the Target Companies and
Subsidiaries with due care and attention, and present fairly in all
material respects and in accordance with the basis of preparation set
out therein, the net assets of the Target Group as at 31 December 2001
and 2002 and of the results and cash flows of its operations for the
years then ended and have been correctly extracted from the accounting
records of the companies comprising the Target Group but it is hereby
acknowledged that they are not prepared on a statutory basis.
50
5.6 Off-Balance Sheet
So far as the Vendor is aware, no Target Group member is and no Target
Group member has during the last three years prior to the Accounts
Date been a party to an agreement, arrangement or transaction the
intention of which was to ensure that any Target Group member is or
was entitled to receive a financial advantage or is or was obliged to
incur or bear any costs, liabilities (whether contingent or
otherwise), risks or other expenditure of any nature which would not
be fully reflected in the Accounts or the relevant Target Group
member's accounts for any relevant period by virtue of their being
"off-balance sheet" financing arrangements.
6 Business since the Accounts Date
Since the Accounts Date:-
6.1 the Target Companies have not borrowed or agreed to borrow or lent, or
agreed to lend or raised any money or taken any financial facility in
excess of (pound)15,000 in aggregate;
6.2 the Target Companies have not entered into, or agreed to enter into,
any capital commitment in excess of (pound)20,000 in aggregate nor
disposed of or realised any capital assets in excess of (pound)20,000
in aggregate;
6.3 no share or loan capital has been allotted or issued or agreed to be
allotted or issued by any of the Target Companies;
6.4 no dividend has been declared, made or paid in respect of any share
capital of any of the Target Companies;
6.5 no management charges have been charged, demanded by, or paid to a
member of the Remaining Vendor Group or paid;
6.6 no asset has been transferred from a member of the Target Group to a
member of the Remaining Vendor's Group for a consideration less than
the market value of that asset and no member of the Target Group has
agreed to assume a liability to, or obligation of, any member of the
Remaining Vendor Group for a consideration greater than the market
value of such liability;
6.7 there has been no increase in the rates of remuneration of or bonus or
incentive or other similar payments to any officers, employees or
agents; and
6.8 so far as the Vendor is aware no event matter or circumstance has
occurred which has resulted in any provision made in the Accounts or
the management accounts for the period from 1 January 2003 being
considered by the directors of the Company to be inadequate.
7 Debtors
So far as the Vendor is aware, there is no reason to suppose any of
the Target Companies will have to make a provision for (or write off
or grant a creditor note) a bad debt in respect of any of the debtors
as at the date of this Agreement in excess of (pound)50,000 in
aggregate.
51
8 Financial arrangements
8.1 Borrowings and mortgages
8.1.1 The Target Companies have no borrowings, and have not agreed to create
any borrowings, from their respective bankers or any other source and,
in respect of borrowings disclosed in the Disclosure Letter, the
Target Companies have not exceeded any limitation on their borrowing
contained in their Articles of Association.
8.1.2 No security or encumbrance (other than a lien arising by operation of
law in the ordinary course of business) over or affecting the whole or
any material part of the undertaking or assets of any of the Target
Companies is outstanding and there is no agreement or commitment to
give or create any.
8.2 Sureties
8.2.1 No person apart from the Target Companies has given any guarantee of
or security for any overdraft, loan or loan facility granted to the
Target Companies.
8.2.2 None of the Target Companies has given any guarantee of or security
for any overdraft, loan or loan facility granted to, or any obligation
or liability of, any person (other than a member of the Target Group).
8.3 Grants
So far as the Vendor is aware during the period of six years ending on
the date of this Agreement, Target Companies have not applied for or
received any grant or allowance from any authority or agency.
9 Liabilities and commitments
9.1 Material contracts
So far as the Vendor is aware, the Target Companies are not a party to
or subject to any agreement which:-
9.1.1 is incapable of complete performance in accordance with its terms
within twelve months after the date on which it was entered into or
undertaken;
9.1.2 requires any of the Target Companies to pay any commission, finders'
fee, royalty or the like other than in the ordinary course of business
(and, for the avoidance of doubt, any commission, finder's fee,
royalty or the like payable in respect to an acquisition or disposal
of a significant asset shall not be deemed in the ordinary course of
business);
9.1.3 restricts to a material extent any of the Target Companies' freedom to
carry on its business in such manner as it thinks fit; or
9.1.4 is an agreement or arrangement otherwise than by way of bargain at
arm's length; or
52
9.1.5 is with a member of the Remaining Vendor Group.
9.2 The Disclosure Letter contains details of:-
9.2.1 all long-term contracts or commitments of the Target Companies now
outstanding or which the Vendor is aware will become capable of giving
rise to a contract by an order or acceptance by another party or
parties;
9.2.2 the terms of all contracts with clients which together account for
more than 15% of aggregate turnover of the Target Companies for the
financial year ending on the Accounts Date; and
9.2.3 all agreements which are material to the business of any Target
Company or any Subsidiary.
9.3 So far as the Vendor is aware the Target Companies do not have any
unmatched open positions with respect to forward purchases and or
sales of any commodity, stock or currency and so far as the Vendor is
aware none of such open positions could reasonably be expected to
involve the Target Companies in a loss.
9.4 So far as the Vendor is aware the Target Companies have no agreement
or arrangement with any client on terms which are materially different
from the Target Companies' standard terms of business, a copy of which
is annexed to the Disclosure Letter.
9.5 Tenders
No offer or tender is outstanding which is capable of being converted
into a material obligation of any of the Target Companies by an
acceptance or other act of some other person.
9.6 Litigation
So far as the Vendor is aware, the Target Companies are not involved
in any civil, criminal or arbitration proceedings, save as to the
collection of debts in the ordinary course of their day to day
business not exceeding (pound)100,000 in aggregate. So far as the
Vendor is aware, no such proceedings are threatened by or against any
of the Target Companies.
10 Insurances
10.1 The Schedule of Insurances annexed to the Disclosure Letter contains
details of the insurance policies for Target Companies or in which it
has an interest and all of the Target Companies have paid all premiums
due on such insurance policies.
10.2 So far as the Vendor is aware no claim is outstanding under any of
such insurance policies.
10.3 The insurance policies referred to in paragraph 10.1 above are now and
have at all material times been in full force and effect.
53
11 Assets
11.1 Except for trading stock sold by each of the Target Companies in the
ordinary course of its day to day business or for trading stock
acquired subject to retention or reservation of title by the supplier
or manufacturer of such trading stock as disclosed in the Disclosure
Letter, all the material assets included in the Accounts or acquired
after the Accounts Date:-
11.1.1 are legally and beneficially owned by each of the Target Companies
free from any mortgage, charge, lien or other encumbrance and no
person has the right to call for any payment in respect of such
assets; and
11.1.2 are not held subject to any agreement for lease, hire, hire purchase
or sale on conditional or deferred terms.
11.2 In respect of any of the items referred to in paragraphs 11.1 which
are held under any agreement for lease, hire, hire purchase or sale on
conditional or deferred terms, so far as the Vendor is aware, there
has been no material default by any of the Target Companies in the
performance of any of the material provisions of such agreements.
12 Intellectual Property
12.1 The Intellectual Property listed in the Disclosure Letter ("the Listed
IP") comprises all of the Intellectual Property which is owned by the
Target Group or is necessary for the operation of the Target Group
and:-
12.1.1 the Listed IP is owned by the Target Companies free of all liens,
charges, encumbrances and licences;
12.1.2 the list set out in paragraph 12.1.2 of the Disclosure Letter contains
materially accurate details of all patents, trade marks and registered
designs owned by the Target Companies; and
12.1.3 to the extent that the rights in the Listed LP are registrable, the
same are registered in the names of relevant Target Companies as sole
owner.
12.2 So far as the Vendor is aware no third party has outstanding any
material claim against the Target Companies based on such third
party's Intellectual Property.
12.3 There are attached to the Disclosure Letter copies of all material
licences to which the Target Companies are a party.
13 Properties
13.1 The Properties comprise the only freehold or leasehold or other
immovable property in any part of the world in which the Target
Companies have any interest or which are otherwise occupied or used by
the Target Companies.
13.2 The particulars of each of the Properties set out in Schedule 7 are
true and accurate in all material respects.
54
13.3 The Target Companies are in physical possession and actual occupation
of the whole of each of the Properties (as set out in Schedule 7) on
an exclusive basis none of which are vacant.
13.4 The Target Companies are solely entitled at law and in equity to the
Properties (as set out in Schedule 7).
13.5 Each of the Target Companies has in its physical possession or under
its control free from any lien all of the deeds and documents
necessary to prove the title of each of the Target Companies to the
Properties and the title deeds and documents are complete originals
which have been duly stamped.
13.6 The Properties are not subject to or affected by any mortgage or
charge (whether legal or equitable, fixed or floating), debenture or
security interest including any which secure the payment of money or
relate to any obligation or liability of any third party. None of the
Properties is affected by a subsisting contract for sale.
13.7 So far as the Vendor is aware, the Properties enjoy all public and
private rights necessary for their continued use and enjoyment for
their current purpose without any restrictions as to time or manner of
use.
13.8 So far as the Vendor is aware, the current use of the Properties is
their permitted use under planning legislation.
13.9 So far as the Vendor is aware, all necessary planning permissions and
consents and approvals from all statutory and other competent
authorities in relation to the current use of the Properties and their
development have been obtained and are valid and subsisting.
13.10 The Properties are not affected by any material dispute, claim,
complaint or demand of any kind.
13.11 So far as the Vendor is aware, none of the Target Companies has
received notice of any breach of any statutes, orders or regulations
affecting the Properties and their use and development nor of any
outstanding requirements or recommendations of any competent
authority.
13.12 No difficulty has been experienced in obtaining insurance for any of
the Properties and the current requirements of the insurers of each of
the Properties have been materially complied with.
13.13 In relation to the Properties which are leasehold, the Target
Companies have paid all sums due and have received no notice of any
breach of any of the covenants and obligations on the part of the
tenant and the conditions contained in the leases or the obligations
contained in any licence or other document supplemental to or granted
under any of the leases and have received no notice of any outstanding
consents required in connection with the grant of the leases. So far
as the Vendor is aware, neither the execution nor delivery of this
Agreement nor Completion shall create any breach of any obligation or
covenant of the tenant to be performed under each lease of the
Properties.
55
14 Employees and consultants
For the purposes of this paragraph 14 the expression "Relevant
Employee" means any employee of the Target Companies whose total
annual remuneration as at the date of this Agreement excluding bonuses
exceeds (pound)50,000 as listed in the Schedule of Employees attached
to the Disclosure Letter.
14.1 Directors
The particulars of Directors shown in paragraph 5 of Schedule 1 and in
paragraph 5 of each Part of Schedule 2 are true.
14.2 Particulars of employees
14.2.1 The particulars shown in the Schedule of Employees annexed to the
Disclosure Letter show all remuneration payable and other material
benefits provided or which the Target Companies are bound to provide
to each officer and Relevant Employee of the Target Companies and
include particulars of all material profit sharing, incentive and
bonus arrangements to which the Target Companies are a party.
14.2.2 So far as the Vendor is aware no present officer or Relevant Employee
of any of the Target Companies has given or received notice
terminating his employment, except as expressly contemplated under
this Agreement.
14.2.3 No person whose total annual remuneration (excluding bonuses) exceeds
(pound)50,000 is employed or engaged by the Target Companies (whether
under a contract of service or contract for services) other than the
Relevant Employees.
14.2.4 The total number of employees employed by each of the Target Companies
is shown in the Schedule of Employees annexed to the Disclosure
Letter.
14.3 Service contracts
There is not now outstanding any service contract between any of the
Target Companies and any of its directors, officers or employees which
is not terminable by any of the Target Companies without compensation
(other than statutory compensation) on six month's notice or less
given at any time.
14.4 Trades unions
The Target Companies are not a party to any agreement or arrangement
with or commitment to any trades union or staff association.
14.5 Disputes with employees
There is no outstanding claim against the Target Companies by any
person who is now or has been an officer or employee of the Target
Companies, and there are no circumstances currently known to the
Vendor which may give rise to such a claim.
56
14.6 Ex-gratia payments
Since the Accounts Date, no ex-gratia payments have been made by the
Target Companies to any officer or Relevant Employee or former officer
or Relevant Employee of the Target Companies or to their dependants or
relatives.
15 Pensions
15.1 The Target Companies have no legally enforceable obligation (actual or
contingent) to provide or contribute to the provision of any relevant
benefit (as defined in section of ICTA 1988 but without the exception
of benefits payable solely by reason of accident) or like benefit for
or in respect of any of the employees and officers or former employees
and former officers of any of the Target Companies nor has any
proposal been announced to establish or contribute to any arrangement
providing such benefits.
15.2 The Disclosure Letter sets forth a current, correct and complete list
of all material US Employee Benefit Plans. The US Employee Benefit
Plans have at all times operated in material compliance with their
terms and all applicable laws and regulations.
15.3 Each US Employee Benefit Plan intended to be qualified under Section
401(a) of the Internal Revenue Code and exempt from tax under Section
501(a) of the Code is so qualified and exempt. No material liability
for any excise tax has been incurred with respect to any US Employee
Benefit Plan and, so far as the Vendor is aware, no event has occurred
and no circumstance exists or has existed that could reasonably be
expected to give rise to any such tax.
15.4 Since 6 September 2000 (in respect of MWA) and since 1 February 2001
(in respect of any ERISA Affiliate), neither MWA nor any ER1SA
Affiliate has maintained or contributed to any plan subject to Title
IV of ERISA (including without limitation, any "multiemployer plan"
within the meaning of Section 3(37) of ERISA) nor, so far as the
Vendor is aware, prior to 6 September 2000 (in the case of MWA) or 1
February 2001 (in the case of any ERISA Affiliate) neither MWA nor any
ERISA Affiliate has ever contributed to or had any obligation with
respect to such a multiemployer plan. For the purposes of this
Warranty 15.4 only, the Vendor shall be deemed to have the actual
knowledge of those persons who were officers and employees of the
Vendor's Group on 6 September 2000 (in the case of MWA) and 1 February
2001 (in the case of any ERISA Affiliate) who were directly involved
in the direct or indirect acquisition by a member of the Vendor's
Group of MWA or the relevant ERISA Affiliate (as the case may be).
15.5 There are no pending or, so far as the Vendor is aware, threatened
claims relating to any US Employee Benefit Plan (other than benefit
claims made and expected to be approved in the ordinary course of the
operation of such plans). No US Employee Benefit Plan is the subject
of any pending or, to the knowledge of the Vendor, threatened
investigation or audit by the Internal Revenue Service, the US
Department of Labor, the Pension Benefit Guaranty Corporation or any
other regulatory authority.
15.6 So far as the Vendor is aware, the execution of and performance of the
transaction contemplated by this Agreement will not (either alone or
upon the
57
occurrence of any additional or subsequent events) result in any
"excess parachute payment" (as defined in Section 280G of the Code) to
any current or former employee of a Target Company or Subsidiary.
15.7 Neither MWA nor any ERISA Affiliate maintains, contributes to or has
any obligation with respect to any arrangement providing health care
benefits following termination of employment or retirement other than
as required by Part 6 of Subtitle B of Title I of ERISA and Section
4980B of the Code or other similar state law.
15.8 There has been no amendment to, or change in employee participation or
coverage under, any US Employee Benefit Plan that would materially
increase the expense incurred for providing benefits to employees of
MWA above the expense incurred providing benefits to such employees
for the calendar year immediately prior to the date hereof.
15.9 For purposes of this section:
15.9.1 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended;
15.9.2 "ERISA Affiliate" means (i) a member of any "controlled group" (as
defined in Section 414(b) of the Code) of which any Target Company is
a member, (ii) a trade or business, whether or not incorporated, under
common control (within the meaning of Section 414(c) of the Code) with
any Target Company, or (iii) a member of any affiliated service group
(within the meaning of Section 414(m) of the Code) of which any Target
Company is a member.
15.9.3 "US Employee Benefit Plan" means any pension, retirement,
profit-sharing, deferred compensation, bonus, incentive, performance,
stock option, phantom stock, stock purchase, restricted stock, premium
conversion, medical, hospitalisation, vision, dental or other health
life, disability, severance, termination or other employee benefit
plan, program, arrangement, agreement or policy (whether written or
unwritten) that is subject to the laws of the United States and (i)
that benefits any employee or former employee of a Target Company or
Subsidiary; (ii) to which any Target Company or Subsidiary
contributes, is obligated to contribute to, is a party to or is
otherwise bound; or (iii) with respect to which any Target Company or
Subsidiary has any liability.
16 Compliance with Law
16.1 The Target Companies have conducted their business in all material
respects in accordance with all applicable laws and regulations and so
far as the Vendor is aware there is no order, decree or judgement of
any Court or any governmental agency of the United Kingdom or any
other country outstanding against any member of the Target Group.
16.2 So far as the Vendor is aware, all necessary licences, registrations,
consents, declarations, permits and authorisations (public and
private) material to the operation of the business of the Group as a
whole have been obtained by each member of the Target Group to enable
each member of the Target Group to carry on its business effectively
in the places and in the manner in which such business is now carried
on. No member of the Target Group has received notice of the
58
requirement to have such a licence. So far as the Vendor is aware, all
such licences, registrations, consents, permits and authorisations
which are held by a Target Company are valid and subsisting and, so
far as the Vendor is aware, no notice has been received that any of
them are being suspended, cancelled or revoked.
17 Taxation
17.1 Definitions
17.1.1 Words and expressions defined for the purposes of Schedule 9 (Tax
Covenant) shall have the same meaning for the purposes of this Part of
Schedule 5.
17.1.2 For the purposes of this paragraph 17, the term "Target Companies"
shall include each of the Subsidiaries.
17.2 The Accounts
17.2.1 All liabilities, whether actual or deferred, contingent or disputed,
of the Target Companies for tax measured by reference to income,
profits or gains earned, accrued or received (other than prepayments
received in the ordinary course of business) on or before the Accounts
Date or arising in respect of an event occurring or deemed to occur on
or before the Accounts Date are fully provided for or (as appropriate)
disclosed in the Accounts. All other Warranties relating to specific
tax matters set out in this Schedule are made without prejudice to the
generality of this paragraph.
17.2.2 Full provision has been made in the Accounts for deferred taxation
(calculated according to Financial Reporting Standard 19 or such
similar generally accepted accounting practice as is applicable in a
relevant foreign jurisdiction) and the corresponding U.S. GAAP rules
with respect to MWA.
17.3 Position since Accounts Date
Since the Accounts Date:-
17.3.1 the Target Companies have not been involved in any transaction which
has given or may give rise to a taxation liability on the Target
Companies (or would have given rise or might give rise to such a
liability but for the availability of any relief) other than taxation
in respect of normal trading income or receipts of the Target
Companies arising from transactions entered into by it in the ordinary
course of business;
17.3.2 the level of payments made by the Target Companies which will not be
deductible for the purposes of corporation tax (or any corresponding
tax on profits in any relevant foreign jurisdiction), either in
computing the profits of the Target Companies or in computing the
corporation tax or corresponding tax chargeable on them, does not
materially exceed the average level of such payments which were not
deductible in an equivalent period in the previous three accounting
periods;
17.3.3 the Target Companies have not been involved in any transaction
otherwise than on arm's length terms;
59
17.3.4 no disposal has taken place or other event occurred which has given or
may give rise to a liability to taxation which, if such disposal or
event had been planned or predicted at the Accounts Date, should have
been reflected in the provision for deferred taxation contained in the
Accounts;
17.3.5 no accounting period (as defined in Section 12 Taxes Act 1988) of the
Target Companies has ended as referred to in Section 12(3) of that
Act; and
17.3.6 no taxes will be payable by MWA as a direct result of the Completion.
17.4 Continuing obligations
All sums of a revenue nature (including without limitation rents,
interest, management charges and annual payments) payable by the
Target Companies pursuant to an obligation incurred by the Target
Companies before Completion and which will continue to bind the Target
Companies after Completion have been and will continue to be fully
deductible for the purposes of corporation tax (or any corresponding
tax on profits in any relevant foreign jurisdiction), either in
computing the profits of the Target Companies or in computing the
corporation tax or corresponding tax chargeable on them.
17.5 Administrative matters
17.5.1 The Target Companies have not at any time been, nor do they expect to
be, involved in any dispute with, or the subject of any enquiry by any
taxation authority (whether of the UK or elsewhere) other than routine
enquiries of a minor nature following the submission of computations
and returns.
17.5.2 The Target Companies have duly, and within any appropriate time
limits, made all returns, given all notices, supplied all information
and maintained all such records as are required to be made, given,
supplied or maintained by them; all such returns, notices and
information were complete and accurate in all material respects and
were made or provided on the proper basis.
17.5.3 The Target Companies have duly paid all taxation which they have
become liable to pay and have not been notified of any liability to
pay any penalty, interest, supplement, fine, default surcharge or
other payment in connection with any claim for taxation. Each of the
Target Companies has withheld and paid all taxes required to have been
withheld and paid in connection with any amounts paid or owing to any
employee, independent contractor, creditor, shareholder, or other
third party.
17.5.4 The Target Companies are not required by The Corporation Tax
(Instalment Payments) Regulations 1998 (SI 1998/3175) to pay
corporation tax by instalments. None of the Vendors expects any US
taxation authority to assess any additional taxes for any period for
which tax returns have been filed. No foreign, US federal, state or
local tax audits or administrative or judicial tax proceedings are
pending or being conducted with respect to the Target Companies. None
of the Target Companies has received from any foreign, US federal
state or local taxation authority any written notice indicating an
intent to open an audit or other review, request for information
related to tax matters, or notice of deficiency or proposed adjustment
for any amount of tax proposed, asserted or assessed by any taxation
authority against the Target Companies.
60
17.5.5 All claims, disclaimers, elections, appeals or applications by the
Target Companies the making of which has been taken into account in
the Accounts have been made and were and remain valid and the Target
Companies have retained all such records and information as may be
requisite to evidence any such claim as being a correct and complete
claim and to enable any future such claim to be made as a correct and
complete claim.
17.5.6 No claim for foreign tax credit has been made by the Target Companies
in connection with which a notice under Section 806(3) Taxes Act 1988
is required to be, but has not yet been, given (notice of foreign tax
adjustment).
17.5.7 No transaction in respect of which any consent or clearance from any
taxation authority was required or sought has been entered into or
carried out by the Target Companies without such consent or clearance
having been properly obtained. Any transaction for which such consent
or clearance was obtained has been carried out in accordance with the
terms of such consent or clearance and the application in respect of
which such consent or clearance was based and at a time when such
consent or clearance was valid and effective.
17.5.8 No taxation authority has operated or agreed to operate any special
arrangement or practice (being one not based on relevant legislation
or published practice) in relation to the affairs of the Target
Companies.
17.5.9 In relation to the Target Companies, the Disclosure Letter gives full
details of:-
17.5.9.1 any company tax return which has not become final at the
date of this Agreement; and
17.5.9.2 in relation to any such tax return, any amendment by the
Inland Revenue, any Inland Revenue enquiry, discovery,
assessment or discovery determination any notice of
deficiency, proposed notice of deficiency issued by the US
Internal Revenue Service or any US state or local department
of revenue; and
17.5.9.3 in relation to any accounting period of the Target Companies
ending before 1 July 1999, any assessments to tax,
determinations or directions made by any tax authority which
are subject to appeal or have otherwise not become final at
the date of this Agreement.
17.5.10 MWA:
17.5.10.1 files a US federal consolidated tax return with its
affiliated group, the common parent of which is Cordiant US
Holdings, Inc. Cordiant US Holdings, Inc has filed a
consolidated federal income tax return with MWA and its
subsidiaries for the taxable year immediately preceding the
current taxable year and is eligible to make an election
under Section 338(h)(10)of the Internal Revenue Code of
1986, as amended.
17.5.10.2 is not a US real property holding company as defined by
Section 897 o f the U.S. Internal Revenue Code of 1986 as
amended;
61
17.5.10.3 has not made any election to be bound by the provisions of
US Treasury regulations section 1.1503-2(g)(2);
17.5.10.4 has no branch, agency, place of business or permanent
establishment outside the United States.
17.6 Company residence
17.6.1 The Target Companies are, and have at all times been, resident for
taxation purposes in the United Kingdom and are not, and have not at
any time been, treated as resident in any other jurisdiction for any
taxation purposes (including pursuant to any double taxation
arrangement). They have no branch, agency, place of business or
permanent establishment outside the United Kingdom.
17.6.2 For the purposes of Schedule 28 Finance Act 2000 (recovery of
corporation tax payable by non-resident company):
(a) the Target Companies are not and have not been a member of the
same group of companies as any company which is not resident in
the United Kingdom but carries on a trade in the United Kingdom
(b) the Target Companies are not and have not been a member of a
consortium which owns or at that time owned any company which is
not resident in the United Kingdom but carries on a trade in the
United Kingdom
(c) the Target Companies are not and have not been a member of the
same group of companies as a company which at that time was a
member of a consortium owning a company which is not resident in
the United Kingdom but carries on a trade in the United Kingdom.
17.7 Distributions and payments
17.7.1 The Target Companies have not in the last six years:-
17.7.1.1 made any distribution or deemed distributions within the
meaning of Sections 209 or 210 Taxes Act 1988 (distributions
and deemed distributions) except as provided for in its
audited accounts;
17.7.1.2 issued any share capital as paid up otherwise than by the
receipt of new consideration (within the meaning of Section
254 Taxes Act 1988); or
17.7.1.3 redeemed, repaid or purchased, or agreed to redeem, repay or
purchase, any of their own shares.
17.7.2 No securities (within the meaning of Section 254(1) Taxes Act 1988)
issued by the Target Companies and remaining in issue at the date of
this Agreement were issued in circumstances such that the interest or
any other amount payable on those securities falls to be treated as a
distribution.
62
17.7.3 The Target Companies have not within the period of six years preceding
Completion made or received any distribution which is an exempt
distribution within Sections 213 to 218(1) (inclusive) Taxes Act 1988
(demergers).
17.7.4 The Target Companies have not elected under Sections 246A and 246B
Taxes Act 1988 for any dividend paid or to be paid by them to be
treated as a foreign income dividend for the purposes of Chapter VA
Taxes Act 1988, and no payment or other distribution by the Target
Companies fell to be so treated pursuant to Schedule 7 Finance Act
1997.
17.7.5 As at 6 April 1999, the Target Companies had no unrelieved surplus
advance corporation tax, as defined in The Corporation Tax (Treatment
of Unrelieved Surplus Advance Corporation Tax) Regulations 1999 (SI
1999/358) (the "Shadow ACT Regulations").
17.7.6 The Target Companies have not at any time on or after 6 April 1999
been a member of any group (for the purposes of the Shadow ACT
Regulations) that had another member which had unrelieved surplus
advance corporation tax (as defined in such Regulations) as at 6 April
1999.
17.8 Groups, tax consolidation etc.
17.8.1 The Disclosure Letter gives full details of any surrender or claim by
the Target Companies, or any agreement by the Target Companies to
surrender or claim
17.8.1.1 any amount by way of group relief under the provisions of
Sections 402 to 413 (inclusive) Taxes Act 1988 (group
relief);
17.8.1.2 any taxation refund under the provisions of Section 102
Finance Act 1989 (company tax refund);
17.8.1.3 any advance corporation tax under the provisions of Section
240 Taxes Act 1988 (surrender of advance corporation tax);
or
17.8.1.4 any amount of eligible unrelieved foreign tax under The
Double Taxation Relief (Surrender of Relievable Tax Within a
Group) Regulations 2001
including any receipt or payment (or any entitlement to receive or
obligation to make a payment) in respect of any such surrender or
claim, where such surrender or claim has not become final and
determined for any reason.
17.8.2 The Target Companies have received all payments due to them in respect
of any surrender or claim of group relief, company tax refund, advance
corporation tax or eligible unrelieved foreign tax and no such payment
is liable to be refunded in whole or in part.
17.8.3 Each claim for group relief by the Target Companies or payment for
surrender of group relief by the Target Companies reflected in the
Accounts is a claim for surrender in respect of an accounting period
of the Target Companies which exactly coincides with that of the other
company for the purpose of Section 408 Taxes Act 1988 and during the
entirety of which both companies were members of the same group for
the purposes of Chapter IV, Part X Taxes Act 1988 (group relief).
63
17.8.4 The Disclosure Letter contains full and accurate details of any group
income election made pursuant to Section 247 Taxes Act 1988 to which
the Target Companies have at any time been a party. The Target
Companies have not paid any dividend or charge on income outside any
such an election for the time being in force (other than to a person
who did not join in the election).
17.8.5 The Target Companies are not and have never been a party to a group
payment arrangement with the Inland Revenue under section 36 Finance
Act 1998.
17.9 Capital gains
17.9.1 No liability to taxation would arise on the disposal by the Target
Companies of any asset other than trading stock acquired since the
Accounts Date for a consideration equal to the consideration actually
given for the acquisition.
17.9.2 Each Target Company's membership of a group for the purposes of
section 170 TCGA 1992 (capital gains grouping) does not depend on the
disapplication of section 170(3)(b) pursuant to paragraph 46(5) or
paragraph 47(6) Schedule 29 Finance Act 2000 and there has been no
occasion when the Target Companies would have been treated as ceasing
to be a member of a group for the purposes of section 179 TCGA 1992
but for paragraph 47(2) Schedule 29 Finance Act 2000 applying.
17.9.3 The Target Companies have not at any time acquired any assets from
another company which is or was at the time of the acquisition a
member of the same group of companies (as defined in Section 170 TCGA
1992) as that of which the relevant Target Company is a member.
17.9.4 The Target Companies have neither elected nor undertaken to elect with
any other company pursuant to section 171A TCGA 1992 for Section
171(1) TCGA 1992 to apply to any asset disposed of on or after 1 April
2000 by either company to such election (notional transfer within a
group).
17.9.5 The Target Companies have neither elected nor undertaken to elect with
any other company for any chargeable gain or allowable loss which
arises under section 179 TCGA 1992 to be treated as accruing to the
relevant Target Company instead of to that other company or vice
versa.
17.9.6 The majority of the value in the share capital of Financial Dynamics
(Ireland) Limited does not derive from land situated in Ireland.
17.10 Capital losses
17.10.1 No loss which might accrue on the disposal by the Target Companies of
any asset is liable to be reduced or eliminated and no chargeable gain
is liable to be created or increased by virtue of any depreciatory
transaction or any reduction in value of that or any related asset for
the purposes of corporation tax on chargeable gains or any
corresponding tax of any relevant foreign jurisdiction.
17.10.2 The Disclosure Letter gives details of any loss which has accrued to
the Target Companies in respect of which notice pursuant to Section
16(2A) TCGA 1992 needs to be, but has not at the time of Completion
been, given to an officer of the
64
Board of the Inland Revenue in order to be an allowable loss for the
purposes of the TCGA 1992.
17.11 Capital expenditure - capital allowances
17.11.1 All capital expenditure to which the provisions of Schedule 29,
Finance Act 2002 (gains and losses of a company from intangible
assets) do not apply, other than expenditure on land and buildings
which is not capable of qualifying for industrial buildings
allowances, incurred by the Target Companies or which may be incurred
by them under any continuing obligation has qualified or will qualify
for capital allowances for each relevant period at the highest rate
applicable to expenditure incurred at the time in question and the
Disclosure Letter gives details of allowances claimed in each of the
last six years.
17.11.2 The Target Companies have not since the Accounts Date done or omitted
to do, or agreed to do, or permitted to be done, any act as a result
of which there may be made a balancing charge or any disposal value
may be brought into account or any deemed trading receipt may arise
under or by virtue of any provision of CAA 2001 (or any corresponding
legislation outside the UK) or there may be a withdrawal or refusal of
allowances or a recovery of excess relief under any such provision
other than in the ordinary course of business.
17.11.3 The Target Companies have not made any election pursuant to Section 83
CAA 2001 (election for assets to be treated as short life assets) nor
are taken to have made such an election by reason of section 89(4) CAA
2001 (disposal to connected person). The Target Companies have not
incurred any expenditure on machinery or plant which is a long life
asset to which CAA 2001 Part 2 Chapter 10 applies.
17.12 Intangible fixed assets
17.12.1 The Disclosure Letter identifies each intangible fixed asset of the
Target Companies to which the provisions of Schedule 29, Finance Act
2002 apply (Gains and losses of a company from intangible fixed
assets) and gives details of relevant expenditure and receipts and of
all debits and credits brought into account by the Target Companies
for tax purposes pursuant to the said Schedule 29.
17.12.2 The Target Companies have never elected nor undertaken to elect with
any other company for any chargeable realisation gain under paragraph
58 or 60 Schedule 29 Finance Act 2002 (intangible fixed assets) to be
treated as accruing to the Target Companies instead of to that other
company or vice versa.
17.13 Loan relationships
17.13.1 The Target Companies are not party to any loan relationship as defined
in Chapter II, Part IV Finance Act 1996 which may give rise to any
debits or credits for the purposes of that Chapter other than in
relation to interest, charges or expenses.
17.13.2 The Target Companies are not a party to any loan relationship (other
than one subsisting between Target Companies):-
65
17.13.2.1 where there is a connection between the parties as defined
by Section 87 Finance Act 1996;
17.13.2.2 which is a creditor relationship of a Target Company in
respect of which there is no connection as defined by
Section 87 Finance Act 1996 but in respect of which there
was previously a connection between that Target Company and
any person standing in the position of a debtor as respects
the debt;
17.13.2.3 where there has been a release of the amounts payable under
the relationship;
17.13.2.4 to which the transitional provisions of Schedule 15 Finance
Act 1996 apply;
17.13.2.5 to which paragraph 11, Schedule 9 Finance Act 1996 applies
(transactions not at arm's length);
17.13.2.6 to which Sections 92 (convertible securities etc.), 93
(relationships linked to the value of chargeable assets),
Section 93A (relationships linked to the value of chargeable
assets: guaranteed returns) or 94 (indexed gilt-edged
securities) Finance Act 1996 apply;
17.13.2.7 in relation to which (taking account only of the particular
loan relationship and disregarding any other asset or
liability) an exchange gain or loss might arise to the
relevant Target Company;
17.13.2.8 to which section 93B has applied;
17.13.2.9 which is a creditor relationship of the relevant Target
Company in respect of which the debtor company is a
consortium company as defined in paragraph 5A(19) Schedule
9, Finance Act 1996 or as subsidiary or holding company (as
defined in the said paragraph 5A(19)) of a consortium
company.
17.13.3 The Target Companies account for all their loan relationships (as
defined in Section 81 Finance Act 1996) on an authorised accruals
basis for accounting periods ending on or before the Accounts Date.
17.13.4 The Target Companies are not the debtors pursuant to any loan
relationship:-
17.13.4.1 to which the provisions of paragraph 2, Schedule 9 Finance
Act 1996 (late interest) have applied; or
17.13.4.2 which has an unallowable purpose within the meaning of
paragraph 13 Schedule 9 Finance Act 1996 (loan relationships
for unallowable purposes).
17.13.5 The Target Companies have not issued any relevant discounted
securities (as defined in Schedule 13 Finance Act 1996).
66
17.13.6 The Target Companies have not ceased to be a party to a loan
relationship in relation to which credits or debits will be required
pursuant to Section 103(6) Finance Act 1996 to be brought into account
in any post-cessation period (as therein defined) of the relevant
Target Company commencing after Completion.
17.14 Controlled foreign companies
No circumstances exist which have or could require there to be
apportioned to a Target Company any amount of the profits of a
controlled foreign company (as defined in section 747(2) Taxes Act
1988).
17.15 Foreign tax credits
The application of the formula in section 799(1A) Taxes Act 1988
(computation of underlying tax - "mixer cap") has not in any previous
accounting period been, and will not in the current accounting period
be, applied to restrict the credit which the Target Companies are
allowed against United Kingdom taxes for foreign tax.
17.16 Foreign exchange and financial instruments
The Target Companies have no:-
17.16.1 qualifying assets, qualifying liabilities or currency contracts to
which the provisions of Chapter II, Part II Finance Act 1993 apply or
will or may apply;
17.16.2 interest rate or currency contracts or options to which the provisions
of Chapter II, Part IV Finance Act 1994 apply or will or may apply.
17.17 Derivative contracts
The Target Companies do not have derivatives contracts within Section
83 and Schedule 26 Finance Act 2002.
17.18 Transfer pricing
The Target Companies have not been, and are not, required by paragraph
1 of Schedule 28AA, Taxes Act 1988 to compute their profits or losses
as if an arm's length provision had been made instead of any actual
provision. The Target Companies have not been and are not required to
reallocate profits and losses pursuant to Section 482 of the US
Internal Revenue Code of 1986, as amended.
17.19 Withholdings
17.19.1 The Target Companies have made all deductions and retentions of or on
account of taxation as they were or are obliged or entitled to make
and have made all such payments of or on account of taxation as should
have been made to any taxation authority in respect of such deductions
or retentions.
17.19.2 Each payment made by the Target Companies after 1 April 2001 without
deduction of tax on the basis that section 349A(1) or Section 349E(1)
Taxes Act 1988 disapplied the requirement to make a deduction was made
after due and proper enquiry. No direction has been made by the Board
of the Inland Revenue
67
that the said section 349A(1) or Section 349E(1) (as the case may be)
is not to apply to any payment by the Target Companies.
17.20 Employees etc.
17.20.1 The Target Companies have not made any payment to, or provided any
benefit for or on behalf of, any officer or employee or ex-officer or
ex-employee of the Target Companies which is not allowable as a
deduction in calculating the profits of the Target Companies for
taxation purposes.
17.20.2 The Target Companies have made all payments, deductions, withholdings
or reductions as they should have made in respect of any remuneration
or benefits of any kind paid or provided to employees, sub-contractors
or workers supplied by agencies in respect of taxation, national
insurance or social security contributions, and all sums payable by
the Target Companies to any taxation authority in respect of such
amounts have been, or will before Completion be, paid to the relevant
authority within the prescribed time limits.
17.20.3 The Target Companies have kept proper books and records relating to
the same.
17.20.4 The Disclosure Letter contains full details of all share schemes which
the Target Companies operate or in which employees are entitled to
participate, together with copies of any approvals issued by the
taxation authorities in respect of such schemes and nothing has been
done to prejudice the approved status of any such schemes.
17.21 Value added tax
17.21.1 The Target Companies are registered for the purposes of value added
tax . The Target Companies are not members of a group of companies for
UK or foreign value added tax purposes and have not applied for such
treatment.
17.21.2 The Target Companies have not been required by the Commissioners of
Customs and Excise or equivalent foreign authorities to give security
and no steps have been taken for distress to be levied on any asset of
the Target Companies.
17.21.3 The Target Companies are not in arrears with any payment or returns in
respect of value added tax. The Target Companies have not been subject
to any penalty, fine or surcharge in respect of value added tax and
have not received any notice of any such penalty, fine or surcharge.
The Disclosure Letter contains details of any amount of consideration
required to be paid by the Target Company in order to avoid the denial
of an input tax credit pursuant to Section 26A Value Added Tax Act
1994.
17.21.4 The Target Companies have complied with and observed in all material
respects the terms of all enactments relating to value added tax or
any equivalent tax in any jurisdiction and all regulations, orders,
notices, provisions and conditions made under those enactments ("VAT
legislation").
17.21.5 The Target Companies have maintained and obtained complete, correct
and up-to-date records, invoices and other documents (as the case may
be) appropriate or requisite for the purposes of VAT legislation and
have preserved such records,
68
invoices and other documents in such form and for such periods as are
required by VAT legislation.
17.21.6 The Target Companies have not in the ten years preceding Completion
incurred any expenditure on capital items such that the provisions of
Part XV The Value Added Tax Regulations 1995 (capital goods scheme)
may apply to the Target Companies.
17.21.7 The Target Companies obtain credit for all input tax paid or suffered
by them save in relation to input tax which is generally disallowable
such as (without limitation) client entertainment, gifts and motor
cars.
17.22 Close companies
17.22.1 The Target Companies are not, nor at any time within the past six
years have they been, close companies as defined in Section 414 Taxes
Act 1988.
17.22.2 The Target Companies have not made any transfers of value within
Section 94 Inheritance Tax Act 1984 (charge on participators).
17.22.3 The Target Companies have not since 5 April 1965 done anything so as
to give rise to an assessment or any charge to tax under Section 419
(as extended by Section 422) Taxes Act 1988 (loans to participators).
17.22.4 The Target Companies have not since 5 April 1965 made a distribution
within Section 418 Taxes Act 1988 (incurring of certain expenses).
17.23 Inheritance tax
No shares in or assets of the Target Companies are subject to any
Inland Revenue charge or to any such power of sale, charge or mortgage
as is mentioned in Section 212 Inheritance Tax Act 1984 and there are
no circumstances which might lead to such a charge or power arising.
17.24 Anti-avoidance
The Target Companies have not at any time been a party to or otherwise
involved in a transaction or series of transactions in relation to
which advisers considered that there was a risk that the Target
Companies could be liable to taxation under the provisions of Part
XVII Taxes Act 1988 or as a result of the principles in W.T. Ramsay
Limited v IRC (54 TC 101) or Furniss v Dawson (55 TC 324), as
developed in subsequent cases.
17.25 Secondary liability
The Target Companies are not, nor will they become, liable to pay, or
make reimbursement or indemnity in respect of, any taxation (or any
amount corresponding to taxation) in consequence of the failure by any
other person to discharge that taxation or amount within any specified
period or otherwise, where the taxation or amount relates to a profit,
income or gain, transaction, event, omission or circumstances arising,
occurring or deemed to arise or occur (whether wholly or partly)
before Completion.
-69-
17.26 Payments equivalent to taxation
17.26.1 The Target Companies have not entered into any indemnity, guarantee or
covenant under which the Target Companies have agreed or can be
procured to meet or pay a sum equivalent to or by reference to another
person's liability to taxation.
17.26.2 The Target Companies are not liable, nor has any event or omission
occurred in consequence of which the Target Companies could at any
time become liable, to make a payment to any person as a result of the
discharge by that person of any liability of the Target Companies to
taxation incurred on or before Completion.
17.27 Stamp duty etc.
17.27.1 All documents to which the Target Companies are a party and under
which the Target Companies have any rights or which form part of the
Target Companies' title to any asset owned by them have been duly
stamped with the correct amount of stamp duty and any applicable stamp
or other duty in respect of such documents has been accounted for and
paid and no stamp duty remains to be paid in respect of any such
documents which are outside the United Kingdom and have yet to be
brought into the United Kingdom. No circumstances exist or might exist
which would require the Target Companies to re-present for stamping
any document which has already been stamped.
17.27.2 The Target Companies have complied in all respects with the provisions
of Part IV Finance Act 1986 (stamp duty reserve tax) and with any
regulations made under it and neither they nor any nominee for them is
a party to any agreement which falls within the terms of Section 87(1)
of that Act (principal charge) and in relation to which the conditions
referred to in Section 92(1) of that Act (repayment or cancellation of
tax) have not been fulfilled.
17.27.3 The Target Companies do not hold any estate or interest in land that
was transferred, granted or surrendered to them by an instrument
executed within the period of two years preceding this Agreement which
has been stamped on the basis that relief under Finance Act 1930
section 42 or Finance Act (Northern Ireland) 1954 section 11 (transfer
of property between associated bodies corporate) applies, and does not
hold any estate or interest in land that is derived from an estate or
interest that was so transferred, granted or surrendered.
17.27.4 The Target Companies do not hold any estate or interest in land that
was transferred, granted or surrendered to it by an instrument
executed within the period of two years preceding this Agreement which
has been stamped on the basis that relief under Finance Act 1986
section 76 applies.
17.27.5 The Target Companies have not been involved in any transaction
involving any instrument in relation to which a claim for exemption
from stamp duty was made in accordance with sections 79 and 90 of the
Irish Stamp Duties Consolidation Act 1999. The Target Companies have
complied in all respects (where applicable) with their obligation to
account for and pay all amounts due in respect of capital duty.
70
SCHEDULE 5
Part 2
Purchaser's Warranties
1 The Purchaser
1.1 The Purchaser has full power to enter into and perform this Agreement
and all the documents in the Agreed Form to be executed by it and this
Agreement constitutes, and each such Agreed Form document when
executed will constitute, binding obligations of the Purchaser in
accordance with its terms.
1.2 The execution and delivery of this Agreement, and any of the Agreed
Form documents to be executed, by the Purchaser and the performance of
and compliance with its terms and provisions will not conflict with or
result in a breach of, or constitute a default under, the Memorandum
or Articles of Association of the Purchaser or any order or judgment
that applies to or binds the Purchaser or any of its property.
1.3 Except for merger, anti-trust or regulatory consents or approvals, no
consent, action, approval or authorisation of, and no registration,
declaration, notification or filing with or to, any court or
governmental or administrative authority is required to be obtained,
or made, by the Purchaser to authorise the execution or performance of
this Agreement by the Purchaser.
1.4 At Completion the Purchaser will have immediately available on an
unconditional basis (subject only to Completion) the necessary cash
resources to meet obligation to pay the Initial Consideration under
this Agreement or any of the documents referred to in this Agreement
at Completion.
2 Information provided
The Purchaser has not entered into this agreement in reliance upon any
statement, representation, warranty or understanding of any kind other
than the Vendor's Warranties.
3 Other interests
The Purchaser is purchasing the Shares for itself beneficially and not
wholly or partly as agent for any other person.
71
SCHEDULE 6
Limitations on liability
1 The terms of this Schedule 6 are subject to Clauses 8.5 and 14.4.
2 The Purchaser acknowledges to and agrees with the Vendor that any
claim by the Purchaser in respect of any breach of the Vendor's
Warranties ("a Vendor's Warranty Claim") and, where provided for in
this Schedule, under the Tax Covenant, shall be dealt with in
accordance with the following provisions of this Schedule. The
Vendor's Warranties shall accordingly have effect subject to and as
qualified by the terms of this Schedule.
3 The liability of the Vendor in respect of any breach of the Vendor's
Warranties shall be limited as follows:-
3.1 there shall be disregarded for all purposes (including, for the
avoidance of doubt, the application of paragraph 3.2) any breach of
any of the Vendor's Warranties in respect of which the amount which
the Purchaser would otherwise (but for the provisions of this
paragraph 3.1) be entitled to recover would be less than (pound)15,000
(and, for these purposes, a number of claims under the Vendor's
Warranties arising out of the same facts, matters or circumstances
shall be treated as a single claim);
3.2 subject to paragraph 3.1, the Purchaser shall not be entitled to
recover any amount in respect of a breach of the Vendor's Warranties
unless the amount recoverable, when aggregated with all other amounts
recoverable for breach of the Vendor's Warranties exceeds
(pound)200,000, in which event only the whole amount and not merely
the excess over such sum shall be recoverable;
3.3 the aggregate liability of the Vendor in respect of all and any
Vendor's Warranty Claims and any claim under the Tax Covenant
(excluding claims under paragraph 2.1.5 and associated costs under
paragraph 2.1.6 of the Tax Covenant) shall be limited to and shall in
no event exceed (pound)15,000,000; and
3.4 the aggregate liability of the Vendor in respect of paragraph 2.1.5
and associated costs under paragraph 2.1.6 of the Tax Covenant shall,
in circumstances where the primary liability is not a liability of a
member of the Remaining Vendor Group or a company previously connected
with any such member, be limited to the Initial Consideration plus the
amount by which the Actual Completion Net Indebtedness is less than
(pound)zero less any amounts recovered from the Vendor in respect of
claims under Schedule 9 or for breach of a Vendor's Warranty other
than amounts recovered in respect of claims for secondary liabilities
under paragraph 2.1.5 of the Tax Covenant where the primary liability
is a liability of a member of the Remaining Vendor Group or a company
previously connected with any such member and associated costs under
paragraph 2.1.6 thereof.
4 Subject to paragraph 5 of this Schedule, the Vendor shall cease to
have any liability:-
4.1 for breach of any of the Vendor's Warranties (apart from the Vendor's
Warranties relating to taxation), on the expiry of twenty-four months
following Completion; and
72
4.2 for breach of the Vendor's Warranties relating to taxation and under
the Tax Covenant on the seventh anniversary of Completion or, if
longer, the applicable statutory limitation period applicable in a
jurisdiction other than the United Kingdom where the subject matter of
the tax claim concerns that other jurisdiction;
but the liability of the Vendor in respect of any Vendor's Warranty
Claim shall terminate absolutely if proceedings in respect of it shall
not have been commenced by being both issued and served on the Vendor
within the period of twelve months from the date on which the
Purchaser gives notice to the Vendor in accordance with paragraph 6.1
of this Schedule or, if later, the date on which a contingent
liability (the subject of a Vendor's Warranty Claim) becomes an actual
liability.
5 The Vendor shall not be liable under the Vendor's Warranties in
respect of any claim based upon a liability which is contingent only
unless and until such contingent liability becomes an actual
liability, provided that this paragraph shall not operate to avoid a
claim made in respect of a contingent liability within the applicable
time limit specified in paragraph 4.
6 The Vendor shall have no liability in respect of any Vendor's Warranty
Claim:-
6.1 to the extent that specific provision or reserve in respect of the
liability or other matter giving rise to the claim in question was
made in the Completion Statement (or, other than where liability in
respect of the Vendor's Warranty Claim in question is assessed on an
indemnity basis, if such a provision or reserve was made in the last
management accounts disclosed to the Purchaser prior to the date of
this Agreement, to the extent of any increase in such provision or
reserve in the Completion Statement);
6.2 to the extent that the claim in question arises, or is increased,
wholly or partly as a result of any change in any enactment, law,
regulation, directive or practice of any government, government
department or agency or any regulatory body (including extra statutory
concessions of the Inland Revenue) not announced prior to the date of
this Agreement and made after the date of this Agreement whether or
not having retrospective effect;
6.3 to the extent that the claim in question would not have arisen but for
a voluntary act or transaction otherwise than in the ordinary course
of business, which could reasonably have been avoided, carried out by
the Purchaser or any of its Group Companies (including the Target
Companies or any of the Subsidiaries) after the date of this Agreement
and which the Purchaser or (as the case may be) such Group Company
ought reasonably to have been aware might give rise to that claim
except any act to comply with law or a regulatory requirement or to
comply with an undertaking or commitment in existence prior to the
date of this Agreement;
6.4 to the extent that the Target Companies or any of the Subsidiaries are
insured, (and recover under such insurances) against any loss or
damage suffered by the Target Companies or any of the Subsidiaries
forming the basis of the claim in question under the terms of any
insurance policy of the Target Companies or any of the Subsidiaries
for the time being in force (or would have been so insured had any
insurance cover in force immediately following Completion been
maintained
73
in force, or had the insurance cover recommended to the Purchaser by
its insurance advisers at Completion been implemented immediately
following Completion and maintained in force). In the circumstances
referred to above, the Purchaser undertakes to procure that the Target
Group seeks full recovery under any such insurance;
6.5 to the extent that the liability or other matter giving rise to the
claim under the Vendor's Warranties in question is fairly disclosed by
the Disclosure Letter.
7 If any matter comes to the notice of the Purchaser, any of the Target
Companies or any of the Subsidiaries which may give rise to a
liability under the Vendor's Warranties, the Purchaser shall (and
shall procure that the Target Companies and the Subsidiaries shall):-
7.1 as soon as reasonably practicable give written notice of that matter
to the Vendor, specifying in reasonable detail the nature of the
potential liability and, so far as is practicable, the amount likely
to be claimed in respect of it;
7.2 not make any admission of liability, agreement or compromise with any
person, body or authority in relation to that matter without the prior
written consent of the Vendor;
7.3 give the Vendor and its professional advisers (subject to appropriate
confidentiality and hold harmless undertakings being given by the
Vendor and its professional advisers) reasonable access to the
personnel of the Purchaser and/or the Target Companies or any of the
Subsidiaries (as the case may be) and to any relevant chattels,
accounts, documents and records within the power or control of the
Purchaser and/or the Target Companies or any of the Subsidiaries so as
to enable the Vendor and its professional advisers to examine such
premises, chattels, accounts, documents and records and to take copies
at their own expense;
7.4 subject to the Vendor indemnifying the Purchaser and/or the Target
Companies and the Subsidiaries to the Purchaser's reasonable
satisfaction against the full amount of any liability, costs, damages
or expenses which may be reasonably incurred, take such action as the
Vendor may reasonably request to avoid, dispute, resist, compromise or
defend any claim arising out of the matter in question PROVIDED THAT
the Vendor shall not be entitled to require the Purchaser or any of
its Affiliates to take any course of action which would be materially
prejudicial to the best interests of that member of the Target Group
or the Target Group as a whole or which is unlawful.
7.5 Failure to comply with the provisions of this paragraph 7 shall not
limit or restrict the liability of the Vendor for breach of a Vendor's
Warranty except to the extent that the Vendor's liability has
increased by such failure.
8 If the Purchaser and/or any of the Target Companies or any of the
Subsidiaries is or may be entitled to recover from some other person
any sum in respect of any matter giving rise to a Vendor's Warranty
Claim, the Purchaser shall procure that all reasonable steps are taken
to enforce recovery and, if any sum is so recovered, then either the
amount payable by the Vendor in respect of that Vendor's Warranty
Claim shall be reduced by an amount equal to the sum recovered or (if
any amount shall already have been paid by the Vendor in respect of
that
74
Vendor's Warranty Claim) there shall be repaid to the Vendor an amount
equal to the amount recovered or (if less) the amount of such payment
(in either case with any interest paid by such other person but less
any tax chargeable on the Purchaser or any of the Target Companies or
any of the Subsidiaries in respect of such interest).
9 If any loss or damage giving rise to a Vendor's Warranty Claim gives
rise to a reduction in the tax liability of the Purchaser or any
Target Company or Subsidiary which would not otherwise have arisen,
then the Purchaser shall procure that full details of such reduction
are given to the Vendor as soon as reasonably practicable and the
Purchaser shall, on or as soon as reasonably practicable after the
date when the Purchaser or the Target Companies or Subsidiaries would
have been under an obligation to pay an amount equal to the taxation
liability so reduced, make a payment to the Vendor of an amount equal
to the reduction in the tax liability.
10 For the avoidance of doubt:-
10.1 nothing in this Schedule shall limit the Purchaser's obligation to
mitigate its loss in respect of any Vendor's Warranty Claim; and
10.2 neither the Purchaser nor the Target Companies or any of the
Subsidiaries shall be entitled to recover damages in respect of any
Vendor's Warranty Claim or claim under the Tax Covenant or otherwise
obtain reimbursement or restitution more than once in respect of the
same loss.
11 This Schedule 6 shall remain in full force and effect notwithstanding
Completion and in particular shall not be discharged in whole or in
part by any breach of any of the Vendor's Warranties or any Vendor's
Warranty Claim or any claim under the Tax Covenant.
75
SCHEDULE 7
The Properties
Property Date of Parties to Lease
Lease
1 2nd Floor 07/04/99 Staple Inn Holborn Limited (1)
Holborn Gate, Marchday General Partner (2)
326-333 High Holborn, London Financial Dynamics Limited (3)
2 Part Ground Floor and part basement, 07/04/99 Staple Inn Holborn Limited (1)
Holborn Gate, Marchday General Partner (2)
326-333 High Holborn, London Financial Dynamics Limited (3)
3 The Old Carpenter's Storage Room Holborn Gate (Nominee No 1)
Holborn Gate, Limited and Holborn Gate
326-333 High Holborn, London (Nominee No 2) Limited (1)
Financial Dynamics Limited (2)
4 Sub-basement Storage Room No. 1 Holborn Gate (Nominee No 1)
Holborn Gate, Limited and Holborn Gate
326-333 High Holborn, London (Nominee No 2) Limited (1)
Financial Dynamics Limited (2)
5 Sub-basement Storage Room No. 4 08/08/99 Holborn Gate (Nominee No 1)
Holborn Gate, Limited and Holborn Gate
326-333 High Holborn, London (Nominee No 2) Limited (1)
Financial Dynamics Limited (2)
6 380 Lexington Avenue, NY 14/12/92 Lexington Avenue & 42nd Street
(50th Floor) Corporation (1) Morgen-Walke
Associates, Inc. (2)
7 380 Lexington Avenue, NY 31/03/93 Lexington Avenue & 42nd Street
(51st Floors) Corporation (1) Morgen-Walke
Associates, Inc. (2)
8 380 Lexington Avenue, NY (49th Floor) 30/08/96 Lexington Avenue & 42nd Street
Corporation (1) Morgen-Walke
Associates, Inc. (2)
9 380 Lexington Avenue, NY (48th Floor) 02/06/95 Lexington Avenue & 42nd Street
Corporation (1) Morgen-Walke
Associates, Inc. (2)
10 380 Lexington Avenue, NY (43rd Floor) 25/06/99 Lexington Avenue & 42nd Street
Corporation (1) Morgen-Walke
Associates, Inc. (2)
11 380 Lexington Avenue, NY (11th Floor) 15/09/93 Lexington Avenue & 42nd Street
Corporation (1) Morgen-Walke
Associates, Inc. 2)
12 445 Park Avenue, NY 26/05/99 Morrow & Company, Inc (1)
76
Property Date of Parties to Lease
Lease
Morgen-Walke Associates, Inc.(2)
13 99 Summer Street, Suite 350 Boston, 27/06/01 Carlyle/Paradigm 99 Summer,
MA LLC (1)
Morgen-Walke Associates, Inc. (2)
14 44 Montgomery Street, Suite 1500, SF, 09/04/97 State Street Bank and Trust
SA 94104 Company of California, N.A. as
Trustee for Telephone Real Estate
Equity Trust (1)
and Morgen-Walke Associates,
Inc. (2)
15 10 Merrion Sq, Dublin 22/02/01 Yakuzza Company (1) and
Gallagher & Kelly Public Relation
Limited (2)
16 Lower Ground Floor and Ground Floor 31/01/00 St Pancras Housing Association (1)
12 Dorrington Street Corporate & Financial Design
London EC1 Limited (2)
17 20 rue des Pyramides 20/02/97 Chartier et Cie (1)
75001 Paris Morgen-Walke Europe S.A. (2)
France
18 2nd Floor Ahrens & Behrent Agentur fur
Stiftstr. 8-10 Kommunikation GmbH (1)
60313 Frankfurt am Main ABFD (2)
Germany
19 2 Aheon and 40 Loukianou 03/02/03 FDL (1)
Athens Cleverbank Communications
Greece Management S.A. (2)
77
SCHEDULE 8
Completion Accounts
Part 1
Definitions
1 In this Agreement:-
1.1 "Completion Working Capital" shall mean the aggregate amount of the
line items marked "Yes" in the column headed "Include in working
capital?" in the Annexure to this Schedule 8, such line items being
determined as at 31 May 2003;
1.2 "Actual Completion Net Indebtedness" shall mean the aggregate amount
of the line items marked "Yes" in the column headed "Include in net
debt?" in the Annexure to this Schedule 8 as at 31 May 2003 (and, for
the avoidance of doubt, this may result in a negative figure and be
less than zero for the purposes of Clause 4.1.1); and
1.3 "FDL Accounting Policies" shall mean the accounting policies and
principles applied in the preparation of FDL's financial statements
for the year ended 31 December 2002.
Part 2
Completion Statement
2 The Completion Working Capital and Completion Net Indebtedness shall
be calculated applying the following policies, principles, bases and
methodologies;
2.1 the specific provisions set out in clause 3 of this Part 2 of Schedule
8;
2.2 the FDL Accounting Policies to be applied on a basis and methodology
consistent with their application in the individual companies'
financial reporting packages for the year ended 31 December 2002 as
used to compile the Special Purpose Accounts in so far as such
application would be consistent with UK GAAP; and
2.3 UK GAAP, as at 31 May 2003.
In the event of any conflict between the application of clauses 2.1 to
2.3 above, the application of clause 2.1 shall take precedence over
that in clauses 2.2 and 2.3, and the application of clause 2.2 shall
take precedence over that in clause 2.3.
3 The following specific provisions governing the preparation of the
Completion Working Capital shall apply:-
78
3.1 the exchange rate between Pounds Sterling ((pound)) and Euros ((euro))
and Pounds Sterling ((pound)) and US Dollars (US$) shall, in each
case, be the relevant closing rate as specified by the Bank of England
at 31 May 2003;
3.2 the net assets of ABFD will be included in the Completion Statement by
way of proportional consolidation;
3.3 the amount of the security deposit (together with interest accrued
thereon) in respect of MWA's obligations under the Lexington Avenue
Lease shall be excluded for all purposes;
3.4 the Completion Statement will be prepared such that only events taking
place up until and information available at the time when the
Purchaser submits the first draft of the Completion Statement to the
Vendor shall be relevant to the preparation and contents thereof;
3.5 the Completion Statement shall contain no general accruals;
3.6 revenue, including rechargeable expenses, will be included in the
Completion Statement using the accounting polices, accounting
principles and accounting bases that were used in the financial
reporting packages that were used to compile the special purpose
accounts for the year ended 31 December 2002;
3.7 no general provisions for bad debts will be made. All bad debt
provisions included in the Completion Statement must be specific and
the need for the provision justified with appropriate evidence.
4 For the avoidance of doubt and notwithstanding any other provision of
this Agreement, the following principles shall apply in relation to
taxation on income, profits and gains:
4.1 no amounts payable to or receivable from a taxation authority in
respect of taxation on income, profits or gains shall be included in
the Actual Completion Net Indebtedness as creditor or debtor amounts
(as applicable);
4.2 amounts equal to the consideration payable for all surrenders of group
relief made prior to the date hereof or as referred to in paragraph
13.1.4 of Schedule 9 shall be included as creditor amounts in the
Actual Completion Net Indebtedness and shall also be included as
Actual Completion Intra-Group Payables save to the extent that any
such surrender will give rise to a repayment of taxation from a
taxation authority which is not included in the Actual Completion Net
Indebtedness, in which case no consideration payable for such group
relief shall be reflected in the Actual Completion Net Indebtedness or
included as Actual Completion Intra-Group Payables and paragraph 13.7
of Schedule 9 of the Tax Covenant shall apply. For these purposes,
terms defined in the Tax Covenant shall have the same meanings in this
paragraph 4.
79
- --------------- ----------------------------- --------- -------------- ---------- ------------- -------------- ----------------
Include Include in Aggregated Components Aggregated Components of
in net debt? December of May 2003 working capital
working 2002 working Balance at 31 May 2003
capital? Balance capital Sheet
Sheet at 31
December
2002
(pound)'000 (pound)'000 (pound)'000 (pound)'000
FIXED ASSETS
5010 Goodwill No No 6,536 0
5030 Research & Development Costs No No 0 0
5050 Tangible Fixed Assets No No 3,036 0
5160 Investments-- Group No No 11 0
5205 Investments - Associates No No 44 0
5240.0005 Investments - Joint Ventures No No 0 0
5300 Investments - Long term No No 0 0
Investments, unlisted
companies
---------- ------------- -------------- ----------------
Total Fixed Assets 9,627 0 0 0
---------- ------------- -------------- ----------------
CURRENT ASSETS
6005 Work In Progress Yes No 312 312 0
6045.0005 Debtors - due within one year See below See below 6,949 6,949 0 0
6045.0010 Debtors - due after one year See below See below 482 482 0 0
5550 Current Investments Yes No 26 26 0
6200 Cash At Bank & In Hand No Yes 6,663 0
---------- ------------- -------------- ----------------
62201005 Total Current Assets 14,431 7,765 0 0
---------- ------------- -------------- ----------------
6300.0005 Creditors due within one
year See below See below -9,884 -4,303 0 0
---------- ------------- -------------- ----------------
---------- ------------- -------------- ----------------
62251005 Net Current 4,547 3,462 0 0
Assets/(Liabilities)
---------- ------------- -------------- ----------------
---------- ------------- -------------- ----------------
62301005 Total Assets Less Current 14,174 3,462 0 0
Liabilities
---------- ------------- -------------- ----------------
6300.0010 Creditors due after more See below See below -13 -13 0 0
than one year
80
6520 Provisions for Liabilities No No -186 0
& Charges
6580 Deferred Tax No No 459 0
(liability)/asset
5240.0010 Provision for Joint Venture No No 0 0
Deficit
6600 Net Group Dividends No Yes 0 0
receivable/(payable)
6620 Net Group Loan balances No Yes 0 0
6640 Net Group Trading balances No Yes -1,279 0
---------- ------------- -------------- ----------------
68001005 Total Net Assets 13,155 3,449 0 0
---------- ------------- -------------- ----------------
CAPITAL AND RESERVES
7010 Called-up Share Capital No No 1,202 0
7015 Share Premium No No 5,180 0
7020 Merger Reserve No No 0 0
7025 Shares to be issued No No 0 0
7030 Special Reserve No No 0 0
7035 Warrant Reserve No No 0 0
7040 Unrealised Gains (for No No 0 0
Cordiant only)
7045 Other Reserve (for Cordiant No No 0 0
only)
7050 Revaluation Reserve No No 0 0
7055 Reserve 1 (for Cordiant No No 0 0
only)
7060 Profit and Loss account No No 6,771 0
---------- ------------- -------------- ----------------
7075 Total Shareholder's Funds 13,154 0 0 0
7080 Minority Interest No No 0 0
---------- ------------- -------------- ----------------
7005 Total Capital & Reserves 13,154 0 0 0
---------- ------------- -------------- ----------------
Working capital balance 3,449 0
============= ================
FD : Debtors
81
Amounts due within one year
6050 Trade Debtors Yes No 5,987 5,987 0
6065.0005 Amounts due from associated Yes No 0 0 0
and JV companies
6070.0005 Loans to Employees Yes No 0 0 0
6075.0005 Loans - Empl. Share Scheme Yes No 0 0 0
6080.0005 Other Loans Yes No 6 6 0
6085.0005 Other Debtors See below No 228 228 0 0
6090.0005 Corporation Tax Recoverable No No 4 0
6100.0005 Prepayments & Accrued income See below No 724 724 0 0
---------- ------------- -------------- ----------------
6045.0005 Total Debtors less than one 6,949 6,945 0 0
year
---------- ------------- -------------- ----------------
Amounts due more than one
year
6065.0010 Amounts due from associated Yes No 0 0 0
and JV companies
6070.0010 Loans to Employees Yes No 0 0 0
6075.0010 Loans - Empl. Share Scheme Yes No 0 0 0
6080.0010 Other Loans Yes No 0 0 0
6085.0010 Other Debtors See below No 312 312 0 0
6090.0010 Corporation Tax Recoverable No No 0 0
6100.0010 Prepayments & Accrued income See below No 170 170 0 0
---------- ------------- -------------- ----------------
6045.0010 Total Debtors more than one 482 482 0 0
year
---------- ------------- -------------- ----------------
Other Debtors Due within
one Year
6085.0005.0005 Other Debtors 1 Yes No 98 98 0
6085.0005.0010 Other Debtors 2 Yes No 11 11 0
6085.0005.0015 Other Debtors 3 Yes No 104 104 0
6085.0005.0020 Other Debtors 4 Yes No 16 16 0
6085.0005.0025 Other Debtors 5 Yes No 0 0 0
6085.0005.0030 Other Debtors 6 Yes No 0 0 0
6085.0005.0035 Balance <(pound)50,000 Yes No 0 0 0
82
---------- ------------- -------------- ----------------
6085.0005 Total Other Debtors Due 228 228 0 0
within one Year
---------- ------------- -------------- ----------------
Prepayments within one year
6100.0005.0005 Rent Prepaid Yes No 165 165 0
6100.0005.0010 Local Taxes (Sales, etc) Yes No 0 0 0
6100.0005.0015 Media Rebates/Prepaids Yes No 0 0 0
6100.0005.0020 Accrued External Interest Yes No 9 9 0
Receivable <1yr
6100.0005.0025 Insurance Prepaid Yes No 90 90 0
6100.0005.0030 External interest - Bank Yes No 0 0 0
fees (Corporate Companies
only)
6100.0005.0035 Prepayments 1 Yes No 201 201 0
6100.0005.0040 Prepayments 2 Yes No 109 109 0
6100.0005.0045 Prepayments 3 Yes No 96 96 0
6100.0005.0050 Prepayments 4 Yes No 0 0 0
6100.0005.0065 Prepayments 5 Yes No 0 0 0
6100.0005.0070 Balance <(pound)50,000 Yes No 54 54 0
---------- ------------- -------------- ----------------
6100.0005 Total Prepayments & Accrued 724 724 0 0
Income Due within one Year
---------- ------------- -------------- ----------------
Other Debtors Due after
more than one Year
6085.0010.0005 Other Debtors 1 Yes No 312 312 0
6085.0010.0010 Other Debtors 2 Yes No 0 0 0
6085.0010.0015 Other Debtors 3 Yes No 0 0 0
6085.0010.0020 Other Debtors 4 Yes No 0 0 0
6085.0010.0025 Other Debtors 5 Yes No 0 0 0
6085.0010.0030 Other Debtors 6 Yes No 0 0 0
6085.0010.0035 Balance <(pound)50,000 Yes No 0 0 0
---------- ------------- -------------- ----------------
6085.0010 Total Other Debtors Due 312 312 0 0
after more than one Year
---------- ------------- -------------- ----------------
Prepayments after more than
one year
6100.0010.0005 Rent Prepaid Yes No 170 170 0
83
6100.0010.0010 Local Taxes (Sales, etc) Yes No 0 0 0
6100.0010.0015 Media Rebates/Prepaids Yes No 0 0 0
6100.0010.0020 Accrued External Interest Yes No 0 0 0
Receivable > 1yr
6100.0010.0025 Insurance Prepaid* Yes No 0 0 0
6100.0010.0030 External interest - Bank Yes No 0 0 0
fees (Corporate Companies
only)
6100.0010.0035 Prepayments 1 Yes No 0 0 0
6100.0010.0040 Prepayments 2 Yes No 0 0 0
6100.0010.0045 Prepayments 3 Yes No 0 0 0
6100.0010.0050 Prepayments 4 Yes No 0 0 0
6100.0010.0065 Prepayments 5 Yes No 0 0 0
6100.0010.0070 Balance <(pound)50,000 Yes No 0 0 0
---------- ------------- -------------- ----------------
6100.0010 Total Prepayments & Accrued 170 170 0 0
Income Due after one Year
---------- ------------- -------------- ----------------
FD : Creditors
Amounts due within one year
6305.0005 Bank Overdrafts No Yes 15 0
6310.0005 Banks Loans No Yes 0 0
6315.0005 Other loans Yes No 0 0 0
6320.0005 Trade Creditors Yes No 1,037 1,037 0
6325.0005 Amounts due to associated Yes No 0 0 0
and JV undertakings
6330.0005 Financial Leases and Hire No Yes 18 0
Purchases
6335.0005 Taxation on Profits No No 4,507 0
6340.0005 Other Tax & Social Security Yes No 475 475 0
6345.0005 Accruals and Deferred Income See below No 2,759 1,719 0 0
6350.0005 External Dividends Payable No No 0 0
6355.0005 Other Creditors See below No 1,072 1,072 0 0
---------- ------------- -------------- ----------------
6300.0005 Total Creditors 9,884 4,303 0 0
---------- ------------- -------------- ----------------
Amounts due more than one
year
-84-
6305.0010 Bank Overdrafts No Yes 0 0
6310.0010 Banks Loans No Yes 0 0
6315.0010 Other loans Yes No 0 0 0
6320.0010 Trade Creditors Yes No 3 3 0
6325.0010 Amounts due to associated Yes No 0 0 0
and JV undertakings
6330.0010 Financial Leases and Hire No Yes 0 0
Purchases
6335.0010 Taxation on Profits No No 0 0
6340.0010 Other Tax & Social Security Yes No 0 0 0
6345.0010 Accruals and Deferred Income See below No 0 0 0
6350.0010 External Dividends Payable No No 0 0 0
6355.0010 Other Creditors See below No 11 11 0 0
---------- ------------- -------------- ----------------
6300.0010 Total Creditors 13 13 0 0
---------- ------------- -------------- ----------------
Secured Creditors
6360.0005 Secured Creditors 1 No Yes 0 0
6360.0010 Secured Creditors 2 No Yes 0 0
6360.0015 Secured Creditors 3 No Yes 0 0
6360.0020 Secured Creditors 4 No Yes 0 0
6360.0025 Secured Creditors 5 No Yes 0 0
---------- ------------- -------------- ----------------
6360 Total Secured Creditors due 0 0 0 0
within and after more than
one year ---------- ------------- -------------- ----------------
Accruals due within one year
6345.0005.0005 Holiday Pay Yes No 14 14 0
6345.0005.0010 Acquisition cost accruals Yes No 0 0 0
(per goodwill and group
investment schedules)
6345.0005.0015 Bonus & Profit Shares No No 1,041 0
6345.0005.0020 Ex-Gratia/Redundancy/Severence Yes No 310 310 0
6345.0005.0025 WIP prebillings Yes No 52 52 0
6345.0005.0030 External Interest payable - Yes No 0 0 0
(non FRS 4)
85
6345.0005.0035 External Interest - FRS 4 Yes No 0 0 0
Amortisation (Corporate
Companies only)
6345.0005.0075 External interest - Bank Yes No 0 0 0
fees (Corporate Companies
only)
6345.0005.0040 Audit, Legal & Professional Yes No 65 65 0
Fees
6345.0005.0045 EPP Accruals Yes No 0 0 0
6345.0005.0050 ESOS Accruals Yes No 0 0 0
6345.0005.0055 Accruals 1 Yes No 823 823 0
6345.0005.0060 Accruals 2 Yes No 357 357 0
6345.0005.0065 Accruals 3 Yes No 0 0 0
6345.0005.0070 Accruals 4 Yes No 0 0 0
6345.0005.0080 Balance < (pound)50,000 Yes No 97 97 0
---------- ------------- -------------- ----------------
6345.0005 Total accruals due within 2,759 1,719 0 0
one year
---------- ------------- -------------- ----------------
Accruals due after more
than one year
6345.0010.0005 Holiday Pay Yes No 0 0 0
6345.0010.0010 Acquisition cost accruals Yes No 0 0 0
(per goodwill and group
investment schedules)
6345.0010.0015 Bonus & Profit Shares No No 0 0
6345.0010.0020 Ex-Gratia/Redundancy/Severence Yes No 0 0 0
6345.0010.0025 WIP prebillings Yes No 0 0 0
6345.0010.0030 External Interest payable Yes No 0 0 0
(non FRS4)
6345.0010.0035 External Interest - FRS 4 Yes No 0 0 0
Amortisation (Corporate
Companies only)
6345.0010.0075 External interest - Bank Yes No 0 0 0
fees (Corporate Companies
only)
6345.0010.0040 Audit, Legal & Professional Yes No 0 0 0
Fees
6345.0010.0045 EPP Accruals Yes No 0 0 0
6345.0010.0050 ESOS Accruals Yes No 0 0 0
6345.0010.0055 Accruals 1 Yes No 0 0 0
6345.0010.0060 Accruals 2 Yes No 0 0 0
86
6345.0010.0065 Accruals 3 Yes No 0 0 0
6345.0010.0070 Accruals 4 Yes No 0 0 0
6345.0010.0080 Balance <(pound)50,000 Yes No 0 0 0
---------- ------------- -------------- ----------------
6345.0010 Total accruals due after 0 0 0 0
more than one year
---------- ------------- -------------- ----------------
Other creditors due within
one year
6355.0005.0005 Other creditors 1 Yes No 0 0 0
6355.0005.0010 Other creditors 2 Yes No 816 816 0
6355.0005.0015 Other creditors 3 Yes No 203 203 0
6355.0005.0020 Other creditors 4 Yes No 53 53 0
6355.0005.0025 Other creditors 5 Yes No 0 0 0
6355.0005.0030 Other creditors 6 Yes No 0 0 0
6355.0005.0035 Balance <(pound)50,000 Yes No 0 0 0
---------- ------------- -------------- ----------------
6355.0005 Total other creditors due 1,072 1,072 0 0
within one year
---------- ------------- -------------- ----------------
Other creditors due after
more than one year
6355.0010.0005 Other creditors 1 Yes No 11 11 0
6355.0010.0010 Other creditors 2 Yes No 0 0 0
6355.0010.0015 Other creditors 3 Yes No 0 0 0
6355.0010.0020 Other creditors 4 Yes No 0 0 0
6355.0010.0025 Other creditors 5 Yes No 0 0 0
6355.0010.0030 Other creditors 6 Yes No 0 0 0
6355.0010.0035 Balance <(pound)50,000 Yes No 0 0 0
---------- ------------- -------------- ----------------
6355.0005 Total other creditors due 11 11 0 0
after more than one year
---------- ------------- -------------- ----------------
87
SCHEDULE 9
Tax Covenant
1 Definitions
In this Schedule, unless the context requires otherwise, the following
words and expressions have the following meanings and in the event of
conflict the definitions in this Schedule shall prevail over the
definitions in Clause 1 of this Agreement:-
1.1 Accounts relief: any relief which appears as an asset in the Completion
Statement or has been taken into account in reducing or eliminating any
provision for deferred tax which appears in the Completion Statement (or
which, but for the presumed availability of such relief, would have
appeared in the Completion Statement);
1.2 Covenantor: the Designated Vendor in relation to MWA and its
Subsidiaries and the Vendor in relation to the other Target Companies
and Subsidiaries;
1.3 event: any event, act, omission or transaction (whether or not the
Company or any Subsidiary is a party to such act, omission or
transaction) and for the avoidance of doubt includes (without
limitation) any change in the residence of any person and the death,
winding up or dissolution of any person and any reference to an event
occurring on or before a particular date shall include a reference to
any event which for tax purposes is deemed to have, or is treated or
regarded as having, occurred on or before that date;
1.4 group relief:
1.4.1 relief surrendered or claimed pursuant to Chapter IV of Part X Taxes Act
1988;
1.4.2 advance corporation tax surrendered or claimed pursuant to Section 240
Taxes Act 1988;
1.4.3 any taxation refund surrendered or claimed pursuant to Section 102
Finance Act 1989; and
1.4.4 eligible unrelieved foreign tax surrendered or claimed pursuant to The
Double Taxation Relief (Surrender of Relievable Tax Within a Group)
Regulations 2001;
1.5 post-Completion relief: any relief which arises as a consequence of, or
by reference to, an event occurring or deemed to occur after Completion;
1.6 Purchaser: the US Purchaser in relation to MWA and its Subsidiaries and
the Purchaser as defined in Clause 1 of this Agreement in relation to
the other Target Companies and Subsidiaries;
1.7 Purchaser's Group: the Purchaser, the Target Companies and the
Subsidiaries;
1.8 relief: includes any relief, loss, allowance, exemption, set-off,
deduction or credit in respect of any taxation or relevant to the
computation of any income, profits or gains for the purposes of any
taxation, and any right to a repayment of taxation;
88
1.9 taxation or tax: means any and all forms of taxes, levies, imposts,
contributions, duties and charges in the nature of taxation and all
withholdings or deductions in respect thereof of whatever nature
whenever imposed whether of the United Kingdom or elsewhere (including,
for the avoidance of doubt, US federal income tax, state, local or
foreign tax, National Insurance contribution liabilities in the United
Kingdom and corresponding or similar obligations in jurisdictions other
than the United Kingdom) and whether directly or primarily chargeable
against, recoverable from or attributable to the Target Companies or any
Subsidiary or any other person including all fines, penalties, charges,
additions and interest relating to the same;
1.10 taxation authority: any taxing or other authority (whether within or
outside the United Kingdom) competent to impose any taxation liability;
1.11 taxation claim: the issue of any notice, demand, assessment, letter or
other document by or on behalf of any taxation authority or the
imposition (or any document referring to the possible imposition) of any
withholding of or on account of taxation, or the delivery of a return,
from which it appears that a taxation liability will be imposed on any
of the Target Companies or any Subsidiary;
1.12 taxation liability: includes:-
1.12.1 any liability of any of the Target Companies or any Subsidiary to make
or suffer an actual payment of taxation (or amount in respect of
taxation), in which case the amount of the taxation liability shall be
the amount of the liability;
1.12.2 the setting-off against taxation, income, profits or gains of any
Accounts relief or any post-Completion relief or any refund of taxation
to the extent that it results in a payment under paragraph 13.7
("Relevant Refund") where, but for such setting-off, any of the Target
Companies or any Subsidiary would have been subject to a taxation
liability in respect of which the Purchaser would have been entitled to
make a claim against the Covenantor under this Schedule (or would have
been so entitled in the absence of any financial restrictions on such
obligation) in which case the amount of the taxation liability shall be
the amount of such claim or, where the relevant relief was a right to a
repayment of taxation, the amount of the repayment; for these purposes
if it would be practicable to use a relief other than an Accounts relief
or post-Completion relief or Relevant Refund to offset any such actual
liability to taxation, such other relief shall be deemed to have been
used, and if it cannot be determined whether an Accounts relief or
post-Completion relief or Relevant Refund on the one hand or such other
relief on the other hand is so used, it shall be assumed that another
relief is used in priority to any Accounts relief or post-Completion
relief or Relevant Refund;
1.12.3 the denial or loss of an Accounts relief.
1.13 Taxes Act or ICTA: the Income and Corporation Taxes Act 1988;
1.14 TCGA: the Taxation of Chargeable Gains Act 1992.
89
1.15 References to income, profits or gains earned, accrued or received
include income, profits or gains deemed to have been or treated or
regarded as earned, accrued or received for tax purposes.
1.16 Any reference to a person being connected with another person shall be
construed in accordance with Section 839 Taxes Act 1988 (connected
persons).
1.17 References to income or profits or gains shall include any other measure
by reference to which tax is computed.
1.18 References to the occurrence of events on or before a particular date
(including, without limitation, Completion) or in respect of a
particular period shall include events which are for the purposes of any
tax treated as having occurred or existed at or before that date or in
respect of that period.
1.19 References to the occurrence of any event on or before Completion shall
include the combined result of two or more events the first of which
shall have occurred (or pursuant to this paragraph shall be treated as
having occurred) on or before Completion outside the ordinary course of
the normal business of the relevant Target Company or Subsidiary and the
second or subsequent one or more of which occurs after Completion (i) in
the ordinary course of the normal business of the relevant Target
Company or Subsidiary or (ii) pursuant to a legally binding obligation
of the relevant Target Company or Subsidiary incurred prior to
Completion or (iii) pursuant to an obligation imposed by any law or (iv)
with the agreement or at the request of the Covenantor or any member of
the Remaining Vendor Group.
1.20 Any reference in this Schedule to a paragraph is to a paragraph of this
Schedule.
2 Covenant
2.1 The Covenantor covenants to pay to the Purchaser so far as possible by
way of an adjustment to the Consideration a sum equal to:-
2.1.1 any taxation liability of the Target Companies or any Subsidiary arising
within paragraph 1.12.1 in respect of, by reference to or in consequence
of:-
2.1.1.1 any income or profits earned, accrued or received on or before
Completion or any gains earned or received on or before
Completion; or
2.1.1.2 any event occurring on or before Completion; and
2.1.2 any taxation liability falling within paragraph 1.12.2 or 1.12.3;
2.1.3 any liability of the Target Companies or Subsidiaries pursuant to any
agreement or arrangement entered into on or before Completion (but not
including this Agreement) to pay for group relief, or to repay the whole
or part of any payment received for group relief, in respect of
accounting periods ending on or before Completion, but only insofar as
such payment or such repayment (as applicable) is not taken into account
as a liability in the Completion Statement, and in the case of a payment
for group relief, the corresponding saving of corporation tax is taken
into account in the Completion Statement;
90
2.1.4 the loss of the right to receive any payment for group relief (other
than an amount to be paid between any of the Target Companies or
Subsidiaries) to the extent that such right to payment is provided for
as an asset in the Completion Statement;
2.1.5 any tax liability of any Target Company or Subsidiary in respect of tax
for which the relevant Target Company or Subsidiary is not primarily
chargeable, which arises in consequence of the failure to discharge such
liability on the part of any company which has at any time (whether
before or after Completion) been a member of a group (as defined from
time to time for any tax purposes) of which any Target Company or
Subsidiary has at any time prior to Completion been a member and,
including, without limitation, any tax liability arising to the relevant
company pursuant to section 767A or 767AA Taxes Act, section 190 of the
TCGA or section 132 of the Finance Act 1988, Sections 626 and 629 of the
Irish Taxes Consolidation Act 1997 and US Treasury Regulation Section
1.1502-6 promulgated pursuant to Section 1502 of the US Internal Revenue
Code of 1986 or any analogous or similar state or local law or
regulation;
2.1.6 reasonable costs and expenses properly incurred by the Purchaser's Group
in connection with a successful claim made under this Schedule or in
successfully defending any action under this Schedule.
3 Limitations
3.1 The provisions of paragraph 3 (limits on amounts of recovery) and
paragraph 4 (limitation periods) of Schedule 6 shall apply to claims
under this Schedule as if the same were set out mutatis mutandis in this
Schedule.
3.2 The covenant in paragraph 2 shall not apply to any taxation liability to
the extent that:-
3.2.1 provision or reserve in respect of that taxation liability has been made
in the Completion Statement or that taxation liability was taken into
account as a liability in the preparation of the Completion Statement;
or
3.2.2 an amount equal to the taxation liability has been paid by, or on behalf
of, the relevant Target Company or relevant Subsidiary before Completion
pursuant to The Corporation Tax (Instalment Payments) Regulations 1998
as an instalment in respect of any accounting period of the relevant
Target Company or relevant Subsidiary commencing after the Accounts
Date, to the extent that such amount has not already been taken into
account for the purposes of this paragraph 3.2.2. For the purposes of
this paragraph 3.2.2 an amount shall be treated as paid on behalf of the
Target Company or Subsidiary concerned as an instalment if an
apportionment has been made to such Target Company or such Subsidiary
under a group payment arrangement pursuant to Finance Act 1998 section
36 and such Target Company or such Subsidiary has paid the amount of
such apportionment to a member of the Remaining Vendor Group;
3.2.3 the taxation liability is a liability for interest or penalty under The
Corporation Tax (Instalment Payments) Regulations 1998 referable to any
instalment payment due before Completion which would not have arisen but
for factors relevant to the calculation of "total liability" for the
purposes of such Regulations
91
for any accounting period ending after Completion not known to the
Covenantor, the Target Company or the Subsidiary concerned at the time
of the due payment;
3.2.4 the taxation liability would not have arisen but for an act, omission or
transaction not being pursuant to a legally binding commitment created
on or before Completion on the part of or carried out by the Purchaser,
a Target Company or a Subsidiary after Completion which the Purchaser
knew or ought reasonably to have known would give rise to the tax
liability and which could reasonably have been avoided, unless such act
was carried out:
3.2.4.1 in compliance with any law, regulation or binding ruling of any
taxation authority; or
3.2.4.2 with the agreement or at the request of the Vendor; or
3.2.4.3 in the ordinary course of business of any Target Company or any
Subsidiary or the Purchaser;
3.2.5 the Purchaser has made or makes recovery in respect of such taxation
liability under any other provision of this Agreement;
3.2.6 the taxation liability arises, or is increased, as a result of any
increase in rates of taxation or any change in the law, regulation,
directive or requirement, or practice of a taxation authority, occurring
after the date of this Agreement;
3.2.7 the taxation liability arises as a result of a change after Completion
in any accounting policy, any tax reporting practice, or the length of
any accounting period for tax purposes, of any Target Company or any
Subsidiary save where such change was made to comply with generally
accepted accounting policy or published practice; or
3.2.8 the taxation liability arises or is increased as a result of any Target
Company or any Subsidiary failing to submit the returns and computations
required to be made by them or not submitting such returns and
computations within the appropriate time limits or submitting such
returns and computations otherwise than on a proper basis, in each case
after Completion except where such failure is a result of a breach by
the Vendor of its obligations under paragraph 11; or
3.2.9 any relief arising in respect of an event occurring or period ending on
or prior to Completion (other than an Accounts relief or a
post-Completion relief or any refund of taxation to the extent that it
results in a payment under paragraph 13.7) is available to any Target
Company or any of the Subsidiaries to set against or otherwise mitigate
the taxation liability, or could be made so available (including under
section 402 to 413 of the Taxes Act 1988) by a Target Company or
Subsidiary (including Financial Dynamics International Limited) in
circumstances which would not give rise to a liability under this
Schedule or the Tax Warranties (ignoring for these purposes paragraph 3
of Schedule 6 (limits on amounts of recovery)) and would not contravene
paragraph 13 of this Schedule, (and so that any relief that is so
available in relation to more than one taxation liability to which this
Schedule applies shall be deemed, so far as possible, to be used in such
a way as to reduce to the maximum extent possible the Covenantor's total
liability hereunder); or
92
3.2.10 group relief is surrendered pursuant to paragraph 13 below to any
Target Company or any of the Subsidiaries to set against or otherwise
mitigate the taxation liability; or
3.2.11 the taxation liability would not have arisen but for:
3.2.11.1 the making of a claim, election, surrender or disclaimer,
the giving of a notice or consent, the amendment of any of
the foregoing, or the doing of any other thing under the
provisions of any enactment or regulation relating to tax,
after Completion by the Purchaser, any Target Company, any
Subsidiary or any person connected with any of them and
otherwise than at the direction of the Covenantor pursuant
to paragraph 11 or assumed to be made in the Completion
Statement; or
3.2.11.2 the failure or omission on the part of any Target Company or
any Subsidiary otherwise than at the direction of the
Covenantor pursuant to paragraph 11 to make any such valid
claim, election, surrender or disclaimer, or to give any
such notice or consent or to do any other such thing, either
as the Covenantor may require in respect of periods or
matters for which the Covenantor has conduct under paragraph
11 or, in respect of periods or matters for which the
Covenantor does not have conduct, in circumstances where the
making, giving or doing of which was taken into account in
the preparation of the Completion Statement and was notified
to the Purchaser in writing in sufficient time; or
3.2.12 the taxation liability arises in respect of a prepayment received in
the ordinary course of business; or
3.2.13 the taxation liability relates to recovery made in respect of a debt
which was written off in the Completion Statement; or
3.2.14 the taxation liability arises under regulations 107 or 108 or Part XV
of the Value Added Tax Regulations 1995 by reason of any event or
change in circumstances occurring after Completion; or
3.2.15 to the extent that any Target Company or any of the Subsidiaries is
insured against any loss or damage suffered by the Target Company or
any of the Subsidiaries forming the basis of the taxation liability in
question under the terms of any insurance policy of any Target Company
or any of the Subsidiaries for the time being in force (or would have
been so insured had any insurance cover current at Completion been
maintained in force).
4 Overprovisions and corresponding savings
4.1 If the auditors for the time being of any Target Company or a
Subsidiary (at the request and expense of the Covenantor) certify that
a Relevant Amount exists for the purposes of this paragraph, paragraph
4.3 shall apply except to the extent to which credit has been given
for the Relevant Amount in relation to any claim under the Warranties.
93
4.2 A Relevant Amount shall be determined for the purposes of this paragraph
as follows:-
4.2.1 if a provision for taxation in the Completion Statement (excluding any
provision for deferred tax) is an over-provision (except to the extent
that such over-provision results from the utilisation of an Accounts
relief or a Post-Completion relief), the amount of such over-provision
shall be a Relevant Amount;
4.2.2 if a taxation liability to which paragraph 2 applies gives rise to a
relief which reduces or eliminates an actual taxation liability of any
Target Company or a Subsidiary whenever arising (other than one to which
paragraph 2 applies or would apply in the absence of any financial
limits), the amount of the actual taxation liability which is eliminated
or the amount by which it is reduced shall be a Relevant Amount;
4.2.3 if any taxation liability of any Target Company or a Subsidiary in
respect of which the Covenantor has made a payment to the Purchaser
under this Schedule relates to income, profit or gain not received by
the relevant Target Company or relevant Subsidiary and the Target
Company or Subsidiary subsequently receives the income, profit or gain
and it is not subject to taxation, the amount of taxation which would
otherwise have been payable shall be a Relevant Amount;
4.2.4 if a taxation liability of a Target Company, a Subsidiary or the
Purchaser in an accounting period ending after Completion is reduced or
eliminated by a relief (other than an Accounts relief) which comprises a
deduction or allowance for any expenditure, reserve or provision which
was recognised in the Completion Statement but was not, in preparing the
Completion Statement, treated as deductible or allowable for taxation
purposes, the amount of the taxation liability which is eliminated or
the amount by which it is reduced shall be a Relevant Amount.
4.2.5 if an instalment payment of tax pursuant to The Corporation Tax
(Instalment Payments) Regulations 1998 (SI 1998/3175) before Completion
is greater than it needed to have been, the amount of the overpayment
shall be a Relevant Amount.
4.3 Where, pursuant to paragraph 4.1, this paragraph 4.3 applies to a
Relevant Amount:-
4.3.1 the Relevant Amount shall first be set-off against any payment then due
from the Covenantor under this Schedule;
4.3.2 to the extent that there is an excess, a refund shall be made to the
Covenantor of any previous payment or payments made by it under this
Schedule and not previously refunded under this sub-paragraph up to the
amount of such excess; and
4.3.3 to the extent that the excess referred to in paragraph 4.3.2 is not
exhausted under that sub-paragraph, the remainder of that excess shall
be carried forward and set-off against any future payments which become
due from the Covenantor under this Schedule.
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5 ABFD
In respect of ABFD, the Covenantor covenants to pay only 50% of any sum
payable under paragraph 2.1 except in relation to any costs and expenses
of the Purchaser under paragraph 2.1.6.
6 Conduct of taxation claims
6.1 If the Purchaser, a Target Company or any Subsidiary becomes aware of a
taxation claim relevant for the purposes of this Schedule, the Purchaser
shall promptly give the Covenantor written notice of that taxation claim
and shall, subject to the Covenantor indemnifying and securing the
Purchaser, the Target Company or the Subsidiary concerned to the
Purchaser's reasonable satisfaction against any liability, costs,
damages or expenses which may properly be incurred, take, or cause the
relevant Target Company or the relevant Subsidiary to take, such action
as the Covenantor may reasonably request to avoid, resist, appeal or
compromise the taxation claim and in connection with any action so
requested by the Covenantor:
6.1.1 the appointment of solicitors and other professional advisers to the
relevant Target Company or the relevant Subsidiary shall be subject to
the prior written approval of the Purchaser, such approval not to be
unreasonably withheld or delayed;
6.1.2 the Covenantor shall ensure that no correspondence, pleading or other
document is sent, transmitted, issued, entered into or in any way
published in connection with the relevant taxation claim by the
Covenantor or its advisers (other than to the Covenantor or its
advisers) without the prior approval of the Purchaser, such approval not
to be unreasonably withheld or delayed;
6.1.3 the Covenantor shall submit no computations or returns, nor make any
settlement or compromise of the subject matter of the taxation claim,
nor agree any matter in the conduct of any dispute in relation thereto
which is likely to affect the amount of the taxation claim, or the
future liability of the Purchaser's Group to tax, without the prior
written approval of the Purchaser, such approval not to be unreasonably
withheld or delayed;
6.1.4 if any dispute arises between the Purchaser and the Covenantor as to
whether any taxation claim should at any time be settled in full, or
contested in whole or in part, such dispute shall be referred for
determination to a barrister, of at least 10 years' call at the English
Bar with relevant experience, appointed by agreement between the
Purchaser and the Covenantor or (if they do not agree) upon the
application by either party to the President for the time being of The
Law Society, whose determination shall be final. The barrister so
appointed shall be asked to advise whether, in his opinion (acting as an
expert and not as an arbitrator), an appeal against the taxation claim
would, on the balance of probabilities, be likely to succeed and shall
be instructed, if the dispute relates to a taxation claim issued by a
taxation authority outside the United Kingdom, to obtain such advice
from professional advisers of the relevant jurisdiction as he thinks
necessary in order to arrive at his opinion, and also to determine how
the costs of obtaining his opinion should be allocated between the
parties hereto. If, but only if, such opinion is in the affirmative
shall an appeal be made and that taxation claim not then settled. Any
further dispute arising between the parties
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as to whether any further appeal should be pursued following
determination of an earlier appeal (whether or not in favour of the
relevant Target Company or the relevant Subsidiary) shall be resolved in
a similar manner; and
6.1.5 save as otherwise expressly provided herein, the Purchaser shall procure
that the relevant Target Company or the relevant Subsidiary shall give
the Covenantor all reasonable co-operation and assistance for the
purposes of taking such action as aforesaid.
6.2 If the Covenantor does not request the Purchaser to take any action
within 30 days of the Purchaser's notice under paragraph 6.1 (or such
lesser period as is necessary to enable the Purchaser to comply with any
relevant time limit), or the Purchaser or the relevant Target Company or
Subsidiary concerned shall not be indemnified at any time and secured as
provided in paragraph 6.1 or Counsel shall advise (on the balance of
probabilities) that an appeal against the relevant taxation claim is not
likely to succeed, or the Covenantor otherwise fails to fulfil its
obligations hereunder, the Purchaser and the relevant Target Company or
Subsidiary shall be free to take such action in relation to the taxation
claim as it or they may in its or their absolute discretion think fit.
7 Payment
7.1 Where a claim under this Schedule relates to a liability of a Target
Company or any Subsidiary falling within paragraph 1.12.1 (actual
payment of taxation), the Covenantor shall pay the Purchaser any amount
which is required to be paid by it within five Business Days following
the date on which the Purchaser notifies the Covenantor of its liability
to make such payment or, if later, five Business Days before the last
date on which the taxation in question would have to be paid to the
appropriate taxation authority in order to avoid incurring a liability
to interest or a charge or penalty in respect of that taxation
liability.
7.2 Where a claim under this Schedule relates to a liability of a Target
Company or any Subsidiary falling within paragraph 1.12.2, 1.12.3 or
paragraphs 2.1.3-2.1.6 the Covenantor shall pay the Purchaser any amount
which is required to be paid by it within five Business Days of the date
on which the Purchaser notifies the Covenantor of its liability to make
such payment or (in the case of paragraph 1.12.2), if later, five
Business Days before the day on which the Target Company or the
Subsidiary concerned would have been due to pay any taxation which, but
for such set-off, it would have been liable to pay.
8 Recovery
8.1 Where the Covenantor has paid any amount in discharge of a liability
under paragraph 2 in respect of any taxation liability and a Target
Company or a Subsidiary is entitled to recover or recovers from any
person (other than the Purchaser or any other member of the Purchaser's
Group or any person connected with any of them) any sum in respect of
such taxation liability, the Purchaser shall notify the Covenantor of
such entitlement or recovery and, where recovery has not been effected
at the date of notification, shall (if requested by and at the expense
of the Covenantor and upon the Covenantor indemnifying and securing the
relevant Target Company, the relevant Subsidiary or the Purchaser to the
Purchaser's reasonable satisfaction against all reasonable costs or
expenses which may thereby be incurred) take, or cause the relevant
Target Company or
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relevant Subsidiary to take, such action as the Covenantor shall
reasonably request to enforce such recovery against the person in
question (keeping the Covenantor fully informed of the progress of any
action taken) provided that the Covenantor shall not be entitled to
require the Purchaser or any of its Affiliates to take any course of
action which would be materially prejudicial to the best interest of
that member of the Target Group or the Target Group as a whole or
which is unlawful.
8.2 The Purchaser, the relevant Target Company or the relevant Subsidiary
shall (to the extent that the recovery is not thereby prejudiced)
account to the Covenantor for any sum so recovered (including any
interest paid by such person) up to an amount not exceeding the amount
paid by the Covenantor under paragraph 2 in respect of the taxation
liability in question (but less any tax payable by the Target Company
or Subsidiary in respect of the sum recovered or in respect of such
interest and less the amount of all reasonable costs and expenses in
obtaining such payment).
8.3 Where a payment is made, or is to be made, by the Covenantor to the
Purchaser under paragraph 2 above in respect of only part of a
taxation liability and that taxation liability gives rise to a
recovery under paragraph 8.1, the amount recovered shall be attributed
for the purposes of paragraph 8.1 on a pro rata basis to the part of
the taxation liability giving rise to the Purchaser's claim and any
other part.
8.4 To the extent that the Purchaser can recover an amount in respect of
the same taxation liability under this Schedule or the Tax Warranties
and under the FDHL Deed of Covenant (the "Overlapping Amount"), the
parties agree that the Purchaser shall either:
8.4.1 use all reasonable endeavours first to recover the Overlapping Amount
under the FDHL Deed of Covenant and only then shall it be entitled to
recover the Overlapping Amount pursuant to any claim against the
Covenantor under this Schedule and/or the Tax Warranties, provided
always that:
8.4.1.1 for the avoidance of doubt, to the extent that the amount
recoverable under this Schedule and/or the Tax Warranties
exceeds the amount recoverable in respect of any taxation
liability under the FDHL Deed of Covenant (in each case
including associated costs and expenses but after deducting
any taxation which would be payable on the amount recovered)
the Purchaser shall be entitled to recover such excess
pursuant to a claim under this Schedule and/or the Tax
Warranties at such time as is provided in this Agreement
disregarding this paragraph 8.4; and
8.4.1.2 the Covenantor shall indemnify and secure the Purchaser, the
Target Companies and the Subsidiaries against any additional
liability, costs, damages or expenses which may be properly
incurred as a result of pursuing the claim under the FDHL
Deed of Covenant and which it would be reasonable to expect
would have been incurred by the Covenantor if the rights
under the FDHL Deed of Covenant had not been assigned to the
Purchaser pursuant to the Deed of Assignment of Benefit of
Contracts and
97
the Covenantor had brought the claim provided that such
amounts shall be repaid to the Covenantor to the extent that
they are recovered under the FDHL Deed of Covenant; or
8.4.2 assign the FDHL Deed of Covenant to the Covenantor on terms equivalent
to those on which it was assigned to the Purchaser pursuant to the
Deed of Assignment of Benefit of Contracts in which case the Purchaser
shall be entitled to recover the Overlapping Amount from the
Covenantor pursuant to a claim under this Schedule and/or Tax
Warranties at such time as is provided in this Agreement disregarding
this paragraph 8.4.
9 Value added tax - Company sold out of VAT group
The Covenantor shall notify Customs & Excise within five days after
Completion that Financial Dynamics Holdings Limited, Financial
Dynamics Limited and FD International Limited ("the FD VAT Companies")
are required to be excluded from the value added tax group of which
Bates UK Limited is the representative member, and the Covenantor and
the Purchaser shall co-operate to ensure that the registration of the
FD VAT Companies for value added tax purposes or their inclusion in
the Purchaser's value added tax group is simultaneous with their
exclusion from the Bates UK Limited value added tax group.
10 Purchaser covenants
10.1 The Purchaser covenants to pay to the Covenantor an amount equal to:-
10.1.1 any amount of value added tax (including connected interest, fines and
penalties which do not arise as a result of the negligence or wilful
default of any member of Bates UK Limited's value added tax group
other than the FD VAT Companies post-Completion) for which Bates UK
Limited as representative member of the relevant value added tax group
is liable to account and accounts on any supply of goods or services
or any acquisition or importation made by the FD VAT Companies on or
before Completion and taken into account in the Completion Statement.
In determining the amount of the VAT liability, due deduction or
credit shall be made or given in respect of input tax on supplies to,
or importations or acquisitions by, the FD VAT group member. The
Purchaser shall account for such sums of value added tax on the later
of three working days prior to the date on which Bates UK Limited is
required to pay the VAT liability and three working days from the date
Bates UK Limited notifies the Purchaser of the amount payable. The
Covenantor shall procure that there is paid to the relevant Target
Company or Subsidiary an amount equivalent to such proportion of any
repayment of value added tax received by Bates UK Limited from HM
Customs & Excise or of any credit obtained by reference to an excess
of deductible input tax over output tax that is properly attributable
to supplies made to and by that Target Company or Subsidiary (ignoring
Section 43 of the Value Added Tax Act 1994) and taken into account in
the Completion Statement, three Business Days after its receipt by, or
offset against a liability of, Bates UK Limited as representative
member of the Bates UK Limited value added tax group;
10.1.2 any liability to taxation of the Covenantor or any person connected
with the Covenantor which is a primary liability of a Target Company
and which is payable by the Covenantor or such connected person by
reason of (i) the Target
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Company failing to discharge such taxation liability or (ii) the
Covenantor or such connected person being at any time before
Completion a member of the same group as such Target Company or
otherwise connected with or related to such Target Company for
taxation purposes (including without limitation being at any time
before Completion a party to a group payment arrangement under Section
36 Finance Act 1998).
10.2 The covenants contained in paragraph 10.1 shall:-
10.2.1 extend to any reasonable costs properly incurred by the Covenantor or
such other person in connection with a successful claim under
paragraph 10.1 or in successfully defending any action under this
Schedule; but
10.2.2 not apply to taxation to the extent that the Purchaser could claim
payment in respect of it under this Schedule (or would have been able
to but for any financial limits); and
10.2.3 not apply to a taxation liability to the extent that the Purchaser or
a connected person has been indemnified by the Target Company in
respect of such liability under any statutory provision relating to
taxation.
10.3 The Purchaser shall pay any amount which is required to be paid by it
pursuant to paragraph 10.1 on or before the fifth Business Day before
the date on which the taxation in question has to be paid to the
appropriate taxation authority in order to avoid incurring a liability
to interest or a charge or penalty in respect of that taxation or, if
later, not more than five Business Days following the date on which
the Covenantor notifies the Purchaser of its liability to make such
payment.
10.4 The provisions of paragraph 6 of this Schedule (Conduct of Claims)
shall apply in respect of any claim made by the Covenantor under this
paragraph 10 as if references to the "Covenantor" read "Purchaser" and
references to "Purchaser", "Target Company" or "Subsidiary" read
"Covenantor" or "any member of the Remaining Vendor Group" (as
appropriate).
11 Pre-Completion tax affairs
11.1 Subject to and in accordance with the provisions of this paragraph 11,
the Covenantor or its duly authorised agents shall be responsible for
the taxation affairs of the Target Companies and the Subsidiaries for
all accounting periods ending on or before Completion ("pre-Completion
tax affairs"), and accordingly in respect of such periods the
Covenantor or its duly authorized agents shall, at the Covenantor's
cost:-
11.1.1 prepare and submit the tax returns of the Target Companies and
Subsidiaries, but not including PAYE or P11D filings;
11.1.2 prepare and submit on behalf of the Target Companies and Subsidiaries
all claims, elections, disclaimers, notices and consents for the
purposes of taxation;
11.1.3 deal with all matters relating to taxation which concern or affect the
Target Companies or Subsidiaries, including the conduct of all
negotiations and correspondence and the reaching of all related
agreements.
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11.2 The Covenantor shall procure that:-
11.2.1 the Purchaser is kept fully informed of the progress of all matters
relating to the pre-Completion tax affairs;
11.2.2 the Purchaser promptly receives copies of all material written
correspondence with any taxation authority insofar as it is relevant
to the pre-Completion tax affairs;
11.2.3 no claim, election, disclaimer, notice or consent in respect of any
relief is made by or on behalf of a Target Company or any Subsidiary
without the written consent of the Purchaser (such consent not to be
unreasonably withheld) except where the claim, election, disclaimer
notice or consent has been taken into account in the preparation of
the Completion Statement;
11.2.4 the Purchaser is afforded a reasonable opportunity to comment on all
returns, claims, notices or other documents relating to taxation ("tax
document") or other non-routine correspondence before its submission
to the relevant taxation authority and that its reasonable comments
are taken into account (provided that, if the Purchaser fails to
comment within fifteen Business Days of receipt, the Covenantor or its
duly authorized agents shall be entitled to submit the relevant tax
document or correspondence to the relevant taxation authority without
further reference to the Purchaser);
11.2.5 no tax document is submitted to any taxation authority which is not
true and accurate in all material respects;
11.2.6 The US federal consolidated tax return of which MWA is a member shall
be prepared using a "closing of the books" method with respect to the
inclusion of MWA for the period through Completion, to the extent
permitted by law.
11.3 The Covenantor shall devote reasonable resources to dealing with
pre-Completion tax affairs, and shall use reasonable endeavours to
ensure that they are finalised as soon as reasonably practicable.
11.4 The Purchaser shall procure that:-
11.4.1 the Covenantor and its duly authorised agents are afforded such
information and assistance as it or they reasonably require to enable
the Covenantor to fulfil its obligations under this paragraph 11;
11.4.2 the Covenantor and its duly authorised agents are afforded such
information and assistance as it or they reasonably require to enable
the Covenantor and its group companies to meet its or their tax
compliance obligations and to deal with queries from its or their tax
authorities. Such information and assistance shall include, but not be
limited to, providing evidence of taxes paid in the Republic of
Ireland in order to support claims in the UK for double tax relief and
assistance with compliance with CFC regulations;
11.4.3 the Covenantor and its duly authorised agents are provided with full
details of the input tax, output tax and all other information
relevant for value added tax purposes for all value added tax
accounting periods up to the date of Completion
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in relation to the FD VAT Companies, to enable Bates UK Limited to
complete its group value added tax return on a timely basis in respect
of the VAT group of which it is the representative member and of which
they were members;
11.4.4 the Covenantor and its duly authorised agents are afforded such
information and assistance as it or they reasonably require in
relation to MWA, including (without limitation) its financial results
up to the date of Completion, to enable Cordiant US Holdings Inc to
complete its consolidated federal tax return and any relevant state
tax returns. On each occasion on which Cordiant US Holdings Inc as the
person responsible for such tax returns accounts for an amount of tax
for which, if there were no consolidated tax return, MWA would be
liable, the Purchaser shall procure that MWA shall pay to Cordiant US
Holdings Inc a sum equal to such tax to the extent reflected in the
Completion Statement. MWA shall account for such sums on the later of
three working days prior to the date Cordiant US Holdings Inc is
required to pay such tax and three working days from the date Cordiant
US Holdings Inc or the Covenantor notifies MWA or the Purchaser of the
amount payable. Cordiant US Holdings Inc shall procure that there is
paid to MWA an amount equivalent to such proportion of any repayment
of tax received by Cordiant US Holdings Limited from any relevant
taxation authority that is properly attributable to MWA (to the extent
reflected in the Completion Statement) promptly after its receipt by,
or offset against a liability of, Cordiant US Holdings Inc.;
11.4.5 all business records of the Target Companies and the Subsidiaries are
preserved for a minimum of six years from the end of the accounting
period to which they relate or for such longer period as they may
reasonably be required for tax purposes and, without prejudice to the
generality of the foregoing, all business records of MWA shall be
preserved for fifteen years after the date of this Agreement;
11.4.6 the Covenantor is promptly sent a copy of any communication from any
taxation authority insofar as it relates to pre-Completion tax
affairs;
11.4.7 subject to paragraph 11.5, the relevant Target Company or relevant
Subsidiary authorises and signs all tax documents relating to
pre-Completion tax affairs required to be signed by any of them;
11.5 The Purchaser shall be under no obligation to procure the
authorisation or signing of any tax document delivered which it
considers in its reasonable opinion to be false, misleading,
incomplete or inaccurate in any respect, but, for the avoidance of
doubt, shall be under no obligation to make any enquiries as to their
completeness or accuracy and shall be entitled to rely entirely on the
Covenantor and its agents.
11.6 For the avoidance of doubt:-
11.6.1 where any matter relating to taxation gives rise to a taxation claim,
the provisions of paragraph 6 (conduct of taxation claims) shall apply
to the effect that, in relation to that matter, the provisions of
paragraph 6 shall take precedence over the provisions of this
paragraph 11;
11.6.2 the provisions of this paragraph 11 shall not prejudice the rights of
the Purchaser to make a claim under this Schedule in respect of any
taxation liability; and
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11.6.3 The Purchaser shall not be entitled to amend, and shall procure that
no Target Company or Subsidiary shall amend, any return relating to
pre-Completion tax affairs without the consent of the Covenantor (such
consent not to be unreasonably withheld or delayed), unless it is
required to do so by law.
11.7 All of the above provisions of this paragraph 11 are subject to
paragraph 13. To the extent that there is any inconsistency between
this paragraph and paragraph 13, paragraph 13 shall prevail.
12 No Withholdings
12.1 All sums payable under this Schedule shall be paid free of and without
any rights of counterclaim or set off, and without deduction or
withholding on any ground whatsoever, save only as may be required by
law. If any such deduction or withholding is required by law, the
payer shall be obliged to pay to the payee such amount as will ensure
that, after any such deduction or withholding has been made, the payee
shall have received a sum equal to the amount that the payee would
otherwise have received in the absence of any such deduction or
withholding, as reduced by any credit to which the payee may be
entitled on account of such deduction or withholding.
12.2 If any taxation authority charges to tax any sum paid (the "original
payment") to the payee under this Schedule the payer shall be obliged
to pay to the payee such additional amount (the "additional payment")
as will ensure that, after the payment of the tax so charged on the
original payment and any tax chargeable on the additional payment,
there shall remain a net sum equal to the amount of the original
payment, such additional payment to be paid five business days after
the payee has served notice that tax on the original payment has
become due and payable, or would have become due and payable but for
the availability of a relief.
13 Pre-Completion group relief
13.1 Notwithstanding the provisions of paragraph 11 above, for all
accounting periods and partial accounting periods ending on or before
Completion, the Covenantor agrees:
13.1.1 not to amend or withdraw, or procure the amendment or withdrawal, of
any claim for group relief made by a Target Company or Subsidiary
prior to the date hereof or as referred to in paragraph 13.1.4 without
the prior written consent of the Purchaser (not to be unreasonably
withheld or delayed) provided always that, for these purposes, the
Purchaser shall only be regarded as unreasonably withholding or
delaying its consent if it does not give its consent in a timely
manner in circumstances where:
13.1.1.1 the Covenantor has provided evidence to the Purchaser's
satisfaction (acting reasonably) that such amendment or
withdrawal could not give rise to a claim under this
Schedule or the Tax Warranties (ignoring for these purposes
paragraph 3 of Schedule 6 (limits on amounts of recovery));
or
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13.1.1.2 the reason for the amendment or withdrawal is to enable the
Covenantor to comply with its obligations in paragraph
13.1.3 below; or
13.1.1.3 the amount of group relief available for surrender is
reduced in consequence of an over-estimation of the losses
or other amounts comprised in such group relief in
circumstances where, as a result, the consent of the
relevant Target Company or Subsidiary to the amendment or
withdrawal is not required under the relevant law relating
to taxation;
13.1.2 not to make or procure the making of any surrender of group relief by
a Target Company or Subsidiary to the Covenantor, any member of the
Remaining Vendor Group or any other person not being a Target Company
or Subsidiary (excluding, for the avoidance of doubt, any such
surrenders made prior to the date hereof and specifically disclosed to
the Purchaser in the Disclosure Letter);
13.1.3 to surrender, or procure the surrender by any member of the Remaining
Vendor Group, to any Target Company or Subsidiary for nil
consideration such amounts of group relief as are necessary to reduce
by the maximum amount possible any taxation liability of the Target
Company or any Subsidiary for which the Covenantor is liable under
this Schedule (or would be liable but for paragraph 3.2.10 above) save
that, to the extent possible and provided that it would not give rise
to a liability under this Schedule or the Tax Warranties (ignoring
paragraph 3 of Schedule 6 (limits on amounts of recovery)) and would
not contravene paragraph 13, the Purchaser shall procure that the
relevant Target Company or Subsidiary first receives group relief from
Financial Dynamics International Limited and the taxation liability
for which the Covenantor is liable is thereby reduced. To the extent
that amounts eligible for group relief could be or have been
surrendered to, or could be or have otherwise been utilised by, any
member of the Remaining Vendor Group or any other person not being a
Target Company or Subsidiary, the Covenantor shall procure, to the
extent possible under the law relating to taxation, that such amounts
are surrendered to the Target Company or Subsidiary (as applicable)
rather than any other person (including where this involves an
amendment or withdrawal of a surrender of group relief to any member
of the Remaining Vendor Group or any other person or the amendment or
withdrawal of any other claim or election) up to the maximum amount
required to fulfil the Covenantor's obligation under the foregoing
provisions of this sub-paragraph 13.1.3;
13.1.4 to provide to, or to procure the provision by one or more members of
the Remaining Vendor Group to, the Purchaser at Completion a notice in
writing to the officer of the Board of Inland Revenue to whom the
surrendering company makes its company tax returns of consents to
claims for group relief in the 2002 accounting period of an aggregate
value of (pound)3,311,581 and in the 2003 accounting period of an
aggregate value of (pound)1,248,943;
13.1.5 not to enter into any arrangement after the date hereof pursuant to
the Corporation Tax (Simplified Arrangements for Group Relief)
Regulations 1999 in respect of which any of the Target Companies or
Subsidiaries are authorising companies as defined in regulation 5
thereof.
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13.2 The Purchaser agrees to procure that each Target Company and
Subsidiary to which the Covenantor or any member of the Remaining
Vendor Group is obliged to surrender any amount of group relief under
paragraph 13.1.3 above shall claim such group relief and make all
necessary returns, consents and notifications required to be made to
give effect to such surrender and claim;
13.3 The Purchaser agrees to procure that no Target Company or Subsidiary
shall make any adjustment or withdrawal of any claim for group relief
made by any Target Company or any Subsidiary for any accounting period
or partial accounting period ending on or before Completion which
would give rise to a claim under this Schedule without the
Covenantor's written consent.
13.4 The Purchaser agrees to procure that the relevant Target Company or
relevant Subsidiary shall co-operate with the Covenantor in relation
to such adjustments or withdrawals permitted by this paragraph 13 and
make all necessary returns, claims, consents and notifications
required to be made in respect of such adjustments or withdrawals.
13.5 If the Covenantor or any member of the Remaining Vendor Group notifies
the Purchaser that it wishes to surrender to any Target Company or any
Subsidiary any amount of group relief for any accounting period or
partial accounting period ending on or before Completion in respect of
(and up to the amount of) any taxation liability (whether or not
already paid) of the Target Company or any Subsidiary for which the
Covenantor is not liable under this Schedule or the Tax Warranties
(ignoring for these purposes paragraph 3 of Schedule 6 (limits on
amounts of recovery)), the Purchaser shall procure that the relevant
Target Company or the relevant Subsidiary shall claim such group
relief and make all necessary returns, consents and notifications
required to be made to give effect to such surrender and claim;
13.6.1 To the extent that any Target Company or any Subsidiary receives or
has received a surrender of group relief under paragraph 13.5 above,
the Purchaser shall procure that the relevant Target Company or the
relevant Subsidiary shall (to the extent that it has not already done
so and is not to be done through payment of the Actual Completion
Intra Group Payables or the Estimated Completion Intra Group Payables)
pay for such surrender an amount in cash equal to the corporation tax
saved by the relevant Target Company or the relevant Subsidiary as a
result of the surrender. If the corporation tax saved has not already
been paid, payment shall be made at such time as the relevant tax
returns of the relevant Target Company or Subsidiary (as applicable)
are finally agreed with the relevant taxing authority; otherwise, if
the corporation tax saved has already been paid, payment shall be made
within three days of the related corporation tax refund being received
(including by way of offset against other taxes) or at such time as
the relevant tax returns of the relevant Target Company or Subsidiary
(as applicable) are finally agreed with the relevant taxing authority
(if later).
13.6.2 For the avoidance of doubt, neither the Purchaser, the Target Company
nor a Subsidiary shall be liable to pay for any group relief
surrendered by any member of the Remaining Vendor Group save as
provided in paragraph 13.6.1 above or in paragraph 13.7 below or in
clause 6.3 or 6.5 of this Agreement to the extent that the liability
to pay is an Actual Completion Intra Group Payable.
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13.7 The Purchaser shall procure that if and to the extent that any Target
Company or any Subsidiary receives any refund of taxes (including by
way of offset against other taxes) which refund is not reflected in
the Completion Statement whether as cash or a debtor or otherwise from
the Inland Revenue for any accounting period or partial accounting
period ending on or before Completion in consequence of the surrender
of group relief to it by the Covenantor or any member of the Remaining
Vendor Group, the relevant Target Company or the relevant Subsidiary
shall make a payment for such group relief up to the amount of the
refund to the surrendering company within three days of such refund
being received (including by way of offset against other taxes) or, if
later, at such time as the relevant tax returns of the relevant Target
Company or Subsidiary (as applicable) are finally agreed with the
relevant taxation authority.
13.8 The Covenantor agrees to pay or procure the payment of (pound)77,500
("the Sum") on Completion into a bank account ("the Trust Account") in
the name of the Purchaser. The Sum (plus interest less any bank
charges and taxation on the interest) will be held on trust for the
sole purpose of satisfying pro tanto any liability of the Covenantor
under this Schedule or the Tax Warranties relating to a taxation
liability of FDL in respect of accounting periods ending on 31
December 1997 and 31 December 1998 and resulting from a disallowance
for corporation tax purposes of contributions by FDL to the Financial
Dynamics Employee Benefit and Share Trust ("the Covenantor's EBT
Related Liability") provided always that if the UK corporation tax
returns of FDL for such periods are finally agreed with the Inland
Revenue on terms that the Covenantor's EBT Related Liability (after
any group relief surrenders pursuant to paragraph 13.1.3 above) is
less than the amount in the Trust Account (including interest less any
bank charges and taxation on interest payable by any person other than
the Covenantor) the difference shall be promptly returned to the
Covenantor.
14 Base cost
The Covenantor undertakes to provide, and to procure that any relevant
member of the Remaining Vendor Group provides, to the Purchaser such
reasonable assistance as the Purchaser may require to determine the
base cost of the assets of the Target Companies and Subsidiaries.
15 Tax sharing
Any tax sharing agreement between any of Cordiant US Holdings, Inc.,
Lighthouse Global Network, Inc. and MWA is terminated as of Completion
and there shall be no continuing obligation to make any payments under
any such agreement.
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SCHEDULE 10
Lexington Avenue Lease
Warranty
1 The Vendor hereby confirms that the document appended to the
Disclosure Letter at tab 11 of file 39 of the Agreed Bundle is a true
copy of the termination notice ("Termination Notice") which was sent
by MWA by certified mail on 25 April 2003 to the landlord under the
Lexington Avenue Lease ("the NY Landlord") and the manner and timing
of such delivery was in accordance with the terms of the Lexington
Avenue Lease. The Vendor further confirms that MWA has satisfied all
of the conditions to the Termination Option (as defined in the
Lexington Avenue Lease) as of the date of this Agreement and that the
form of the Termination Notice was in accordance with the terms of the
Lexington Avenue Lease and MWA has received no communication from the
NY Landlord indicating otherwise. The Vendor further confirms that the
Renewal Option (as defined in the Lexington Avenue Lease) has not been
exercised.
Termination Notice Undertaking
2 The Vendor and the Designated Vendor undertake to the US Purchaser
that the Designated Vendor shall not, and the Vendor shall procure
that MWA shall not, seek to withdraw the Termination Notice or
exercise the Renewal Option at any time between the date of this
Agreement and the Completion Date.
Assignment, Release and Sublease
3 Commencing on the date of this Agreement, the Vendor and the
Designated Vendor shall, and the Vendor shall procure that MWA prior
to Completion shall, use all reasonable endeavours (including
negotiating in good faith an agreement for the Assignment, Release and
Sublease (as defined below) but without being obliged to make payment
of a fee to the NY Landlord in respect of the grant of such
Assignment, Release and Sublease) to seek the consent of the NY
Landlord to:
3.1 the assignment by MWA of all of its rights, title and interest
(subject to the assumption by the Designated Vendor of all of MWA's
obligations and liabilities) under the Lexington Avenue Lease to the
Designated Vendor, in accordance with the provisions of the Lexington
Avenue Lease ("Assignment");
3.2 the release of MWA from all obligations and liabilities under the
Lexington Avenue Lease ("Release"); and
3.3 the grant of a sublease to MWA (on terms and in a form reasonably
satisfactory to the US Purchaser but, in any event, being on terms (as
to rent) the same as and (as to other terms) no more onerous to MWA
than are set out in the Lexington Avenue Lease) of all or any part of
the Major Premises for a term of up to six months with the right for
MWA to terminate the sublease on one month's prior written notice
("Sublease").
4 If the consent to the Assignment, Release and Sublease is granted by
the NY Landlord (whether prior to or following Completion), the Vendor
and the
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Designated Vendor and the US Purchaser (as appropriate) shall procure
that MWA and the Designated Vendor enter into an agreement providing
for the Assignment, Release and Sublease. If only the consent to the
Assignment and Sublease is granted by the NY Landlord (whether prior
to or following Completion), the Vendor and the Designated Vendor and
the US Purchaser (as appropriate) shall procure that MWA and the
Designated Vendor enter into an agreement providing for the Assignment
and Sublease.
Payments to the NY Landlord
5 From the Completion Date and until the Fixed Expiration Date (as
defined in the Lexington Avenue Lease) the Vendor and the Designated
Vendor shall pay (or procure the payment) to the NY Landlord:
5.1 the monthly instalments of Fixed Rent and Additional Rent (as defined
in the Lexington Avenue Lease) (each instalment being together a
"Monthly Rental Payment") required to be paid under the terms of the
Lexington Avenue Lease (together with any amount of service charge,
late charge, default interest, enforcement cost or other costs and
expenses payable to the NY Landlord under the Lexington Avenue
Lease):-
5.1.1 on or before 30 April 2004 five Business Days prior to the day on
which payment to the NY Landlord is due under the Lexington Avenue
Lease; and
5.1.2 after 30 April 2004 on the day on which payment to the NY Landlord is
due under the Lexington Avenue Lease; and
5.2 each of the two tranches of the Termination Amount (as defined in the
Lexington Avenue Lease) five Business Days prior to the dates and in
the amounts set forth in Article 57.B of the Lexington Avenue Lease,
and, in respect of each such payment, the Vendor and Designated Vendor
undertake to the US Purchaser to deliver to MWA on the same day as
each such payment is made a copy of any covering letter sent by the
Vendor and Designated Vendor to the NY Landlord enclosing such
payment.
The Lexington Avenue Lease Account
6 Before the Completion Date, the US Purchaser shall open an insured,
interest-bearing designated escrow account (the "Lexington Avenue
Lease Account") with Fleet National Bank ("Escrow Agent"). The
instructions given to the bank at which the Lexington Avenue Lease
Account is opened shall include an irrevocable instruction that no
amounts may be released from the Lexington Avenue Lease Account unless
such payment is made in accordance with the provisions of paragraphs 9
to 13 (inclusive) of this Schedule. The Vendor and Designated Vendor
hereby agree that the Escrow Agent shall have the unfettered
discretion to release monies from the Lexington Avenue Lease Account
upon delivery of a written certification from the US Purchaser in
respect of a release due in accordance with the provisions of
paragraphs 9 to 13 (inclusive) of this Schedule.
Payments into the Lexington Avenue Lease Account
107
7 On Completion, the Vendor and the Designated Vendor shall pay (or
procure the payment) into the Lexington Avenue Lease Account of
US$500,000 in accordance with Clause 6.1.2
8 The US Purchaser shall, or shall procure that MWA shall, pay into the
Lexington Avenue Lease Account an amount equal to each Monthly Rental
Payment for the period during which MWA remains in actual occupation
of the Major Premises on the day on which each such Monthly Rental
Payment is due to the NY Landlord under the Lexington Avenue Lease.
Payments out of the Lexington Avenue Lease Account to the NY Landlord
9 If:
9.1 the Vendor and the Designated Vendor fail to make a Monthly Rental
Payment on the day on which payment to the NY Landlord is due under
the Lexington Avenue Lease; or
9.2 the Vendor and the Designated Vendor fail to pay to the NY Landlord
the Termination Amount on the dates and in the amounts set forth in
Article 57.B of the Lexington Avenue Lease,
an amount equal to such unpaid Monthly Rental Payment or Termination
Amount (as applicable) (each an "Unpaid Amount") shall be released
from the Lexington Avenue Lease Account and paid to the NY Landlord in
satisfaction of such Unpaid Amount.
10 Forthwith upon an Unpaid Amount being released from the Lexington
Avenue Lease Account pursuant to the provisions of paragraph 9 of this
Schedule, the Vendor and the Designated Vendor shall pay into the
Lexington Avenue Lease Account an amount equal to such Unpaid Amount.
Release of the Lexington Avenue Lease Account to the Designated Vendor
11 The amount standing to the credit of the Lexington Avenue Lease
Account shall be released to an account specified by the Designated
Vendor ("the Designated Account") upon the earliest to occur of:
11.1 the termination of the Lexington Avenue Lease subject to the NY
Landlord confirming in writing to MWA that there is no outstanding
liability in respect of the Lexington Avenue Lease; or
11.2 the execution and unconditional delivery of a written agreement
providing for the Assignment, Release and Sublease by all of the
parties thereto; or
11.3 if a person or persons acting in concert (as such term is defined in
the City Code on Takeovers and Mergers) acquires more than 50% of the
voting rights exercisable at a general meeting of the Vendor or such
person or persons (not being a member of the Remaining Vendor Group)
acquire more than 50% of the voting rights exercisable at a general
meeting of the Designated Vendor and in the reasonable opinion of the
US Purchaser such person or persons are of sufficient financial
strength to ensure that the Vendor and the Designated Vendor
108
shall be able to fulfil the obligations of the Vendor and the
Designated Vendor under paragraph 14 of this Schedule.
12 If at any time there is standing to the credit of the Lexington Avenue
Lease Account an amount that exceeds the total outstanding liability
of MWA in respect of the Lexington Avenue Lease up to and including
the Fixed Expiration Date (such excess being the "Excess Amount") then
an amount equal to the Excess Amount shall be released to the
Designated Account PROVIDED THAT forthwith after the payment by the
Vendor and Designated Vendor of the Termination Amount in full in
accordance with the provisions of paragraph 5.2 of this Schedule there
shall be released from the Lexington Avenue Lease Account to the
Designated Account a one-off payment of an amount equal to the amount
by which the amount standing to the credit of the Lexington Avenue
Lease Account is in excess of US$500,000.
Release of the Lexington Avenue Lease Account to MWA
13 The amount standing to the credit of the Lexington Avenue Lease
Account shall be immediately released to MWA on the occurrence of the
liquidation, dissolution, voluntary or involuntary bankruptcy or
winding up (or any analogous event) of the Vendor or the Designated
Vendor or the appointment of a receiver or trustee for any substantial
part of the assets of the Vendor or the Designated Vendor.
Indemnity
14 The Vendor and the Designated Vendor shall pay to the US Purchaser an
amount equal to any and all losses, costs, actions, proceedings,
claims, demands, obligations and liabilities incurred and suffered by
MWA (other than as a result of any action or omission of MWA or the US
Purchaser following Completion PROVIDED THAT MWA's reliance upon the
Vendor and Designated Vendor to make the payments specified in this
Agreement shall not constitute such an action or omission) whether
before or after the Completion Date in respect of any obligation or
liability of MWA in respect of the Lexington Avenue Lease ("Lexington
Losses") to the extent such Lexington Losses are not satisfied by the
release of monies from the Lexington Avenue Lease Account.
Rent Deposit
15 Forthwith after the Fixed Expiration Date and upon receipt from the NY
Landlord, the US Purchaser shall procure the payment to the Designated
Vendor of the full amount of the rent deposit in respect of the
Lexington Avenue Lease together with interest accrued thereon in
accordance with the terms of the Lexington Avenue Lease PROVIDED THAT
such payment shall not be made to the Designated Vendor and shall be
retained by MWA in the event of:
15.1 the liquidation, dissolution, voluntary or involuntary bankruptcy or
winding up (or any analogous event) of the Vendor or the Designated
Vendor or, on the Fixed Expiration Date a receiver or trustee for any
substantial part of the assets of the Vendor or the Designated Vendor
has been appointed and such appointment is still subsisting; or
109
15.2 if on the Fixed Expiration Date the Vendor or Designated Vendor have
not complied with the provisions of paragraph 10 of this Schedule and
such breach remains outstanding.
Joint and Several Liability
16 The obligations of the Vendor and the Designated Vendor to the US
Purchaser under this paragraphs 1 to 15 of this Schedule are joint and
several. As between the Vendor and the Designated Vendor it is
acknowledged and agreed that responsibility for payment and
performance of such obligations lies with the Designated Vendor.
Definitions
17 "Major Premises" all of the space in the Building (as defined in the
Termination Notice) covered by the termination Option (as defined in
the Termination Notice).
110
SCHEDULE 11
Table of Encumbrances
Company Description In Favour of Created Description
- ----------- ----------------------- ---------------- ------------------ -------------- ---------------
1. Financial Bridge HSBC 04/04/02 Fixed and
Dynamics Composite Investment Floating Charges
Holdings Guarantee and Bank Plc
Limited Debenture
---------------- ------------------ -------------- ---------------
Composite HSBC 19/04/02 Fixed and
Guarantee and Investment Floating Charges
Debenture Bank Plc
---------------- ------------------ -------------- ---------------
Guarantee HSBC 30/08/00 Guarantee
Investment
Bank Plc
- ----------- ----------------------- ---------------- ------------------ -------------- ---------------
2. Financial Bridge HSBC 04/04/02 Fixed and
Dynamics Composite Investment Floating Charges
Limited Guarantee and Bank Plc
Debenture
---------------- ------------------ -------------- ---------------
Composite HSBC 19/04/02 Fixed and
Guarantee and Investment Floating Charges
Debenture Bank Plc
---------------- ------------------ -------------- ---------------
Guarantee HSBC 30/08/00 Guarantee
Investment
Bank Plc
- ----------- ----------------------- ---------------- ------------------ -------------- ---------------
3. C&FD Bridge HSBC 04/04/02 Fixed and
(Holdings) Composite Investment Floating Charges
Limited Guarantee and Bank Plc
Debenture
---------------- ------------------ -------------- ---------------
Composite HSBC 19/04/02 Fixed and
Guarantee and Investment Floating Charges
Debenture Bank Plc
---------------- ------------------ -------------- ---------------
Guarantee HSBC 30/08/00 Guarantee
Investment
Bank Plc
- ----------- ----------------------- ---------------- ------------------ -------------- ---------------
4. Corporate & Bridge HSBC 04/04/02 Fixed and
Financial Composite Investment Floating Charges
Design Guarantee and Bank Plc
Limited Debenture
---------------- ------------------ -------------- ---------------
Composite HSBC 19/04/02 Fixed and
Guarantee and Investment Floating Charges
Debenture Bank Plc
---------------- ------------------ -------------- ---------------
Guarantee HSBC 30/08/00 Guarantee
Investment
Bank Plc
- ----------- ----------------------- ---------------- ------------------ -------------- ---------------
111
Company Description In Favour of Created Description
- ----------- ----------------------- ---------------- ------------------ -------------- ---------------
5. FD Bridge HSBC 04/04/02 Fixed and
International Composite Investment Floating Charges
Limited Guarantee and Bank Plc
Debenture
---------------- ------------------ -------------- ---------------
Composite HSBC 19/04/02 Fixed and
Guarantee and Investment Floating Charges
Debenture Bank Plc
---------------- ------------------ -------------- ---------------
Guarantee HSBC 30/08/00 Guarantee
Investment
Bank Plc
- ----------- ----------------------- ---------------- ------------------ -------------- ---------------
6. Morgen- (a) Guarantee HSBC 03/10/00 Guarantee
Walke Investment
Associates, Bank Plc
Inc. ---------------- ------------------ -------------- ---------------
(b) Guarantee HSBC 03/11/00 Guarantee
Investment
Bank Plc
---------------- ------------------ -------------- ---------------
(c) Composite HSBC 19/04/02 Guarantee
Guarantee Investment
Bank Plc
---------------- ------------------ -------------- ---------------
(d) Guarantee Holders (as 05/04/01 Guarantee
Agreement defined
therein)
- ----------- ----------------------- ---------------- ------------------ -------------- ---------------
7. Cordiant (a) Composite HSBC 04/04/02 Share Pledge
Communica- Guarantee and Investment
tions Group Debenture Bank Plc
plc. ---------------- ------------------ -------------- ---------------
(b) Composite HSBC 19/04/02 Share Pledge
Guarantee and Investment
Debenture Bank Plc
- ----------- ----------------------- ---------------- ------------------ -------------- ---------------
8. Lighthouse Pledge HSBC 19/04/02 Share Pledge
Global Agreement Investment
Network, Bank Plc
Inc.
- ----------- ----------------------- ---------------- ------------------ -------------- ---------------
112
SIGNED by ANDY BOLAND )
for and on behalf of CORDIANT ) /s/ Andy Boland
COMMUNICATIONS GROUP PLC )
in the presence of:- )
Witness
Signature: /s/ Nathan Runnicles
Name: Nathan Runnicles
Address: 56 Bucharest Road
Earlsfield
London
Occupation: Accountant
SIGNED by ANDY BOLAND )
for and on behalf of LIGHTHOUSE ) /s/ Andy Boland
GLOBAL NETWORK, INC. )
in the presence of:- )
Witness
Signature: /s/ Nathan Runnicles
Name: Nathan Runnicles
Address: 56 Bucharest Rd
Earlsfield
London
Occupation: Accountant
113
SIGNED by DEREK BAIRD )
for and on behalf of 3319th SINGLE ) /s/ Derek Baird
MEMBER SHELF TRADING )
COMPANY LIMITED )
in the presence of:- )
Witness
Signature: /s/ Trudy Cooke
Name: Trudy Cooke
Address: Atlantic House
Holborn Viaduct
London
Occupation: Solicitor
SIGNED by DEREK BAIRD )
for and on behalf of FD MWA ) /s/ Derek Baird
HOLDINGS, INC. )
in the presence of:- )
Witness
Signature: /s/ Trudy Cooke
Name: Trudy Cooke
Address: Atlantic House
Holborn Viaduct
London
Occupation: Solicitor
114