Exhibit 2.1
Dated 15 June 1998
J.R. CHARMAN & Others
and
CHARMAN GROUP LIMITED
and
TARQUIN LIMITED
and
ACE LIMITED
AGREEMENT
relating to the sale and purchase
of the issued share capital of Tarquin Limited
LINKLATERS & PAINES
One Silk Street
London EC2Y 8HQ
Tel: (+44) 171 456 2000
Ref: PDSK/KMKL/MYC
Agreement for Purchase of Shares
This Agreement is made on 15 June 1998
Between:
(1) The Several Persons named in Part 1 of Schedule 1 (the Vendors which
expression shall include the legal personal representatives of any such
persons);
(2) Charman Group Limited, incorporated under the laws of England and Wales,
whose registered office is at 7th Floor, 1 Minster Court, Mincing Lane,
London EC3R 7AA ("CGL");
(3) Tarquin Limited, incorporated under the laws of England and Wales, whose
registered office is at 7th Floor, 1 Minster Court, Mincing Lane, London
EC3R 7AA (the Company); and
(4) ACE Limited, incorporated under the laws of the Cayman Islands, whose
address is The ACE Building, 30 Woodbourne Avenue, Hamilton HM08 Bermuda
(the Purchaser).
It is agreed as follows:
1 Interpretation
In this Agreement, including its Schedules, the headings shall not affect its
interpretation and, unless the context otherwise requires, the provisions in
this Clause 1 apply:
1.1 Definitions
agreed terms means in relation to any document such document in the terms agreed
between the parties and signed by or on behalf of the Purchaser's Solicitors and
the Vendors' Solicitors for the purposes of identification on or before the date
of this Agreement;
"A" Ordinary Shares means the 2,658,800 "A" Ordinary Shares of US$1 each in the
Company, being the whole of the issued "A" ordinary share capital of the
"Company".
ACE UK means ACE U.K. Limited whose registered office is at Crosby Court, 38
Bishopsgate, London EC2N 4DL;
"B" Ordinary Shares means the 710,000 "B" Ordinary Shares of US$1 each in the
Company, being the whole of the issued "B" ordinary share capital of the
Company;
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Balance Sheet Date means 31 December 1997;
Bank of Boston Loan Agreement means the agreement dated 28 November 1995 between
the First National Bank of Boston (the "Bank of Boston") and the Company in
relation to the Boston Loan;
Boston Loan means the Loan as defined in the Bank of Boston Loan Agreement;
Business Day means a day on which banks are open for business in England
(excluding Saturdays, Sundays and public holidays);
"C" Ordinary Shares means the 4,202,200 "C" Ordinary Shares of US$1 each in the
Company, being the whole of the issued "C" ordinary share capital of the
Company;
Charman Shareholders Agreement means the Charman Shareholders agreement dated 28
November 1994 between the shareholders of CGL and CTL;
CTL means Charman Trustees Limited whose registered office is at 7th Floor, 1
Minster Court, Mincing Lane, London EC3R 7AA;
Claim means any claim by the Purchaser for breach of any of the Warranties;
Code has the meaning ascribed to it in Clause 8.1.2;
Combined Syndicates means Syndicate 488 and Syndicate 2488;
Company Affiliate Agreement has the meaning ascribed to it in Clause 7.4.;
Company Affiliate Letter has the meaning ascribed to it in Clause 7.4.;
Completion means the completion of the sale and purchase of the Shares pursuant
to Clause 5;
Completion Date means the date on which Completion occurs as set out in Clause
5.1;
Confidentiality Agreement means the confidentiality agreement dated 14 April
1998 between the Purchaser, DLJ and Lehman Brothers;
Consideration Shares means the Purchaser's Ordinary Shares, to be validly issued
credited as fully paid up and non assessable, to the Vendors pursuant to Clause
3 and Consideration Share means any one of them;
Council means the Council of Lloyd's and includes its delegates and persons by
whom it acts;
CUAL means Charman Underwriting Agencies Limited whose registered office is at 1
Minster Court, Mincing Lane, London EC3R 7AA;
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Deferred Shares means the 50,000 Deferred Shares of (Pounds)1 each in the
Company, being the whole of the issued deferred share capital of the Company;
DLJ means Donaldson, Lufkin & Jenrette Securities Corporation of 227 Park
Avenue, New York, NY 10172;
EBCAM Nominees means EBCAM Nominees (Jersey) Limited (re. JRC Children's
Settlement) and EBCAM Nominees Limited (re. the Dragon Trust);
Encumbrance means any claim, charge, mortgage, security, lien, option, equity,
power of sale or hypothecation;
ESOT means the Trust Deed dated 5 February 1993 between CUAL and CTL;
Equitas means Equitas Reinsurance Limited, being the corporate entity into which
the general insurance business liabilities of Lloyd's syndicates allocated to
the 1992 and previous years of account have been reinsured;
Exchange Act means the United States Securities Exchange Act of 1934, as
amended;
Group or Group Companies means the Company and the Subsidiaries and Group
Company means any one of them;
Insurance Partners means Insurance Partners Charman (Bermuda) L.P. and Insurance
Partners Offshore (Bermuda) L.P., details of which are set out in Part I of
Schedule 1;
Lloyd's means the Corporation of Lloyd's;
Lloyd's Acts means the Lloyd's Acts 1871-1982 together with the byelaws and
regulations passed pursuant thereto;
Lloyd's Member means an underwriting member of Lloyd's, whether corporate or
individual;
Losses means all liabilities, losses, damages, claims, fines, penalties, costs
(including reasonable legal costs) and expenses, in each case of any nature
whatsoever;
Managing Agent means an underwriting agent which is listed as a managing agent
on the register of underwriting agents maintained by Lloyd's under the
Underwriting Agents Byelaw (No.4 of 1984) and which is appointed by a Lloyd's
Member to provide the services and perform the duties set out in a Managing
Agent's Agreement;
Managing Agent's Agreement means the standard form agreement between a Lloyd's
Member and a Managing Agent in the form prescribed by the Agency Agreements
Byelaw (No.8 of 1988);
Material Adverse Change means, with respect to any person, any material adverse
change (excluding any such change resulting from general economic conditions,
including without limitation
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changes in interest rates, or from any occurrence or condition affecting the
insurance industry generally, including without limitation any change or
proposed change in insurance laws or regulations in any jurisdiction (but
excluding any loss event giving rise to an insured loss)) in:
(i) the business, results of operations or financial or operating
condition of such person and its subsidiaries, taken as a whole
(without giving effect to the consequences of the transactions
contemplated by this Agreement); or
(ii) the ability of such person (and, to the extent applicable, its
subsidiaries) to perform its obligations under this Agreement or
consummate the transactions contemplated by this Agreement;
Material Adverse Effect means, with respect to any person, any material adverse
effect (excluding any such effect resulting from general economic conditions,
including without limitation changes in interest rates, or from any occurrence
or condition affecting the insurance industry generally, including without
limitation any change or proposed change in insurance laws or regulations in any
jurisdiction (but excluding any loss event giving rise to an insured loss)) on:
(i) the business, results of operations or financial or operating
condition of such person and its subsidiaries, taken as a whole
(without giving effect to the consequences of the transactions
contemplated by this Agreement), or
(ii) the ability of such person (and, to the extent applicable, its
subsidiaries) to perform its obligations under this Agreement or
consummate the transactions contemplated by this Agreement;
Member's Agent means a person who is listed as a members' agent in the register
of underwriting agents maintained by Lloyd's under the Underwriting Agent's
Byelaw (No.4 of 1984);
NewCo means a company incorporated or to be incorporated in England by the
Purchaser being referred to as Newco in Clause 8;
NYSE means the New York Stock Exchange;
Open Years means the 1996, 1997 and 1998 Lloyd's underwriting years of account
and Open Year means any one of them;
OPL means overall premium limit which is the aggregate of the syndicate premium
limits of all the Members of the Combined Syndicates for any one of the 1995,
1996, 1997 and 1998 underwriting years of account;
Ordinary Shares means the "A" Ordinary Shares, the "B" Ordinary Shares and the
"C" Ordinary Shares;
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Payment Account Details means, in relation to any payment to be made under or
pursuant to this Agreement, the name, account number, sort code, account
location and other details specified by the payee and necessary to effect
payment (whether by cheque, banker's draft, telegraphic or other electronic
means of transfer) to the payee;
Phemus means Phemus Corporation details of which are set out in Part I of
Schedule 1;
Property means the property, brief details of which are set out in Schedule 5;
Purchaser's Group means the Purchaser and its subsidiaries from time to time;
Purchaser's Group Audited Accounts means the audited consolidated financial
statements of the Purchaser's Group, for the fiscal year ended on 30 September
1997;
Purchaser's Ordinary Shares means the ordinary shares, par value $0.041666667
per share, of the Purchaser;
Purchaser's Solicitors means Lovell White Durrant of 65 Holborn Viaduct, London
EC1A 2DY and Mayer, Brown & Platt of 190 South LaSalle Street, Chicago, Illinois
60603 USA;
Purchaser's Warranties means the representations and warranties given by the
Purchaser set out in Schedule 4 and Purchaser's Warranty means any one of them;
Related Parties Byelaw means the Related Parties Byelaw (No. 2 of 1986) of
Lloyds;
Remaining Vendors means the Vendors except Insurance Partners and Phemus;
SEC means the United States Securities and Exchange Commission;
Securities Act means the United States Securities Act of 1933 (as amended);
Shareholders Agreement means the agreement dated 30 November 1994 between the
Company, CGL and the Vendors as amended by an agreement dated 28 November 1995;
Shares means the Deferred Shares and the Ordinary Shares;
Subsidiaries means the subsidiaries of the Company details of which are
contained in Part 4 of Schedule 1;
Syndicate 488 means the syndicate designated by that number at Lloyd's managed
by CUAL at the date hereof;
Syndicate 2488 means the syndicate designated by that number at Lloyd's managed
by CUAL at the date hereof;
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Syndicate Accounts means the audited annual report of the Combined Syndicates
together with audited personal accounts of each Lloyd's Member of Syndicate 488
for the 1995 closed year of account;
Syndicate Quarterly Report means the unaudited quarterly report for the Combined
Syndicates drawn up as at 31 March 1998;
Taxation comprises all forms of taxation and statutory, governmental, state,
provincial, local governmental or municipal impositions, duties, contributions
and levies, in each case whether of the United Kingdom or elsewhere in the world
whenever imposed and whether chargeable directly or primarily against or
attributable directly or primarily to a Group Company or any other person and
all penalties, charges, costs and interest relating thereto;
Transaction means any transaction, act, event or omission of whatever nature to
which a Group Company was a party;
TUL means Tarquin Underwriters Limited whose registered office is at 7th Floor,
1 Minster Court, Mincing Lane, London EC3R 7AA;
UK GAAP means generally accepted accounting principles applicable as at the date
of this Agreement in the United Kingdom;
UK GAAP Audited Accounts means the audited consolidated accounts of the Group
for the financial period ended on the Balance Sheet Date prepared in accordance
with UK GAAP;
US GAAP means generally accepted accounting principles applied in the United
States;
US GAAP Audited Accounts means the audited consolidated financial statements of
the Group for the three financial periods ended on the Balance Sheet Date
prepared in accordance with US GAAP;
US and United States means the United States of America;
US$ $ and US Dollars means the lawful currency of the US;
Vendors' Disclosure Letter means the letter of even date with this Agreement
from the Vendors' Solicitors to the Purchaser disclosing:
(i) information constituting exceptions to the Warranties; and
(ii) details of other matters referred to in this Agreement;
Vendors' Representative means JR Charman, whom failing, JJ Lloyd, whom failing,
G A Arnott acting for and on behalf of the Vendors as notified in writing to the
Purchaser by any director of the Company;
Vendors' Solicitors means Linklaters & Paines of One Silk Street, London EC2Y
8HQ;
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Warranties means the warranties and representations set out in Schedule 3 and
Warranty means any one of them.
1.2 Lloyd's
References in this Agreement to requirements of the Council are to any
requirements imposed by any byelaw or regulation made under the Lloyd's Acts and
any conditions or requirements imposed or directions given or codes of practice
made under any such byelaw or regulation or under the Lloyd's Acts, and the
phrase "required by the Council" and similar phrases shall be construed
accordingly;
1.3 Subordinate Legislation
Any reference to a statutory provision shall include any subordinate legislation
made from time to time under that provision;
1.4 Modification etc. of Statutes
Any reference to a statutory provision shall include such provision as from time
to time modified or re-enacted or consolidated whether before or after the date
of this Agreement so far as such modification, re-enactment or consolidation
applies or is capable of applying to any transactions entered into under this
Agreement prior to Completion and (so far as liability thereunder may exist or
can arise) shall include also any past statutory provision (as from time to time
modified, re-enacted or consolidated) which such provision has directly or
indirectly replaced;
1.5 Connected Persons
A person shall be deemed to be connected with another if that person is
connected with such other within the meaning of Section 839 of the Income and
Corporation Taxes Act 1988;
1.6 UK GAAP Audited Accounts
Any reference to UK GAAP Audited Accounts shall include the directors' and
auditors' reports, relevant balance sheets and profit and loss accounts and
related notes together with all documents which are or would be required by law
to be annexed to the accounts of the company concerned to be laid before that
company in general meeting in respect of the accounting reference period in
question;
1.7 Companies Act 1985
The words holding company and subsidiary shall have the same meanings in this
Agreement as their respective definitions in the Companies Act 1985;
1.8 Interpretation Act 1978
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The Interpretation Act 1978 shall apply to this Agreement in the same way as it
applies to an enactment;
1.9 Schedules etc.
References to this Agreement shall include any Schedules to it and references to
Clauses and Schedules are to Clauses of and Schedules to this Agreement;
1.10 Information
Any reference to books, records or other information means books, records or
other information in any form including paper, electronically stored data,
magnetic media, film and microfilm; and
1.11 SSAPs etc.
A reference to a SSAP means a statement of standard accounting practice as
adopted by the Accounting Standards Brand and published by the Institute of
Chartered Accountants of England and Wales.
1.12 Parties
References to parties shall exclude CGL for all purposes of this Agreement other
than Clause 2.5.
2 Agreement to Sell the Shares
2.1 Sale of Shares
Each of the Vendors severally agrees with the Purchaser to sell such of the
Shares specified against his name in Part 1 of Schedule 1 with full title
guarantee, and the Purchaser agrees with the Vendors to purchase such Shares,
free from all Encumbrances and together with all rights and advantages now and
hereafter attaching thereto.
2.2 Waiver of rights of pre-emption
Each of the Vendors severally agrees with the Purchaser to procure that any and
all rights of pre-emption over the Shares conferred on him by the Articles of
Association or other equivalent document of the Company or in any other way are
waived irrevocably by him.
2.3 Simultaneous Completion
The Purchaser shall not be obliged to complete the purchase of any of the Shares
unless the sale to it of all the Shares is completed simultaneously and if such
sale is not completed on Completion then the Purchaser shall be entitled to
rescind this Agreement.
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2.4 U.S. Federal Income Tax Consequences
It is the intention of the parties that the transactions contemplated by this
Agreement qualify as a reorganization as described in Section 368(a)(1)(C) of
the Code; provided that the Purchaser makes no representation as to such
qualification.
2.5 Charman Shareholders Agreement
Each of the Company, the Vendors and, for the purposes of this Clause 2.5 only,
CGL confirms that no notification has been made by them to CTL pursuant to the
Charman Shareholder Agreement to direct CTL to notify the Company to issue any
shares in accordance with Clause 5 of the Shareholders' Agreement prior to the
date of this Agreement and each of the Company, the Vendors and, for the
purposes of this Clause 2.5 only, CGL agrees severally that, prior to Completion
no such notification shall be made and on Completion CTL shall be hereby
released from any obligations or liability whatsoever in respect of such
notification.
3 Consideration
3.1.1 The consideration for the purchase of the Shares shall be a total of
14,328,028 Consideration Shares, subject to adjustment;
Provided that:
(i) if ACP is greater than US$39.196, and less than US$42.266, the
total number of Consideration Shares shall be determined by
reference to the following formula:
N = US$561,596,000
--------------
ACP
OR
(ii) if ACP is equal to or greater than US$42.266, the total number of
Consideration Shares shall be 13,287,181.
OR
(iii) if ACP is less than US$33.054, and more than US$29.984, the total
number of Consideration Shares shall be determined by reference to
the following formula:
N = US$473,604,000
--------------
ACP
OR
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(iv) if ACP is equal to or less than US$29.984, the total number of
Consideration Shares shall be 15,795,224.
where
N = the number of Purchaser's Ordinary Shares (rounded
up to the nearest whole share);
ACP = the average per share closing price of Purchaser's
Ordinary Shares as reported on the NYSE Composite
Transaction Tape for the 10 NYSE trading days
immediately preceding the 3 NYSE trading days prior to
the Completion Date.
3.1.2 The Consideration Shares shall be divisible among the Vendors in
proportion to the number of Shares sold by them (as identified in
Schedule 1) compared to the Consideration Shares.
3.1.3 No fraction of a Purchaser's Ordinary Share shall be issued, but all such
fractional entitlements otherwise so issuable shall be paid in cash by
the Purchaser instead, the amount concerned being calculated by reference
to ACP.
3.2 Schedule 2 shall apply in relation to registration rights applicable to the
Consideration Shares.
3.3 The Consideration Shares shall rank in all respects pari passu with the
existing issued fully paid Purchaser's Ordinary Shares including the right to
receive in full all dividends and other distributions declared, paid or made
with a record date after Completion.
4 Conditions Precedent
4.1 Vendors' Conditions Precedent
Completion of this Agreement is conditional upon satisfaction of the following
conditions in favour of the Vendors, or their satisfaction subject only to
Completion of this Agreement:
4.1.1 clearance having been obtained that the provisions of Section 703 of the
Taxes Act 1988 (cancellation of tax advantages from certain transactions
in securities) will not apply and that Section 137 of the Taxation of
Chargeable Gains Act 1992 ("TCGA") will not apply to prevent the
application of Section 135 TCGA (roll-over relief on exchange of shares);
4.1.2 the Vendors having received from LeBoeuf, Lamb, Greene & MacRae, L.L.P.,
US tax counsel to the Company, an opinion to the effect that the sale of
the Shares should constitute a tax free reorganisation pursuant to
Section 368(a) of the Code;
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4.1.3 the Purchaser's Warranties contained in Schedule 4 that are qualified as
to materiality being true and correct and the Purchaser's Warranties
contained in Schedule 4 that are not so qualified being true and correct
in all material respects, in each case (except to the extent such
warranties speak as of an earlier date) as though made as of and on the
Completion Date, except as otherwise contemplated by this Agreement;
4.1.4 the Consideration Shares having been authorized for listing on the NYSE,
subject to official notice of issuance;
4.1.5 the Purchaser having performed in all material respects each obligation
and covenant to be performed by it pursuant to this Agreement on or prior
to the Completion Date; and
4.1.6 Since 30 September 1997, no Material Adverse Change with respect to the
Purchaser, and no development, event, fact or matter which will or is
likely to give rise to a Material Adverse Change with respect to the
Purchaser, having occurred and being continuing.
4.2 Purchaser's Conditions Precedent
Completion of this Agreement is conditional upon satisfaction of the following
conditions in favour of the Purchaser, or their satisfaction subject only to
Completion of this Agreement:
4.2.1 the Warranties contained in Part 1 of Schedule 3 being true at
Completion;
4.2.2 the Warranties contained in Part 2 of Schedule 3 that are qualified as to
materiality being true and correct and the Warranties contained in Part 2
of Schedule 3 that are not so qualified being true and correct in all
material respects, in each case (except to the extent such Warranties
speak as of an earlier date) as though made as of and on the Completion
Date, except as otherwise contemplated by this Agreement;
4.2.3 the Company and each of the Vendors having performed in all material
respects each obligation and covenant to be performed by it pursuant to
this Agreement on or prior to the Completion Date;
4.2.4 the Purchaser having received from each person who is identified in the
Company Affiliate Letter as an "affiliate" of the Company a Company
Affiliate Agreement, and such Company Affiliate Agreement shall be in
full force and effect;
4.2.5 the employment agreements of JR Charman, JJ Lloyd, JW Gressier, RDH
Brindle, GA Arnott, DG Penney, AP Ryan, and M King and deeds of covenant
by all such persons executed as of the date of this Agreement, being in
full force and effect;
4.2.6 any agreements (other than this Agreement and the ESOT) which relate to
the Shares or in the shares of any of the other Group Companies having
been terminated without any liability of the Company, any other Group
Company or the Purchaser;
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4.2.7 the resignation of all directors of each Group Company in their capacity
as a director of each Group Company (and not employee), being tendered;
and
4.2.8 since the Balance Sheet Date, no Material Adverse Change with respect to
the Company, and no development, event, fact or matter which will or is
likely to give rise to a Material Adverse Change with respect to the
Company, having occurred and being continuing.
4.3 Vendors' and Purchaser's Conditions Precedent
Completion of this Agreement is conditional upon satisfaction of the following
conditions in favour of the Vendors and the Purchaser, or their satisfaction
subject only to Completion of this Agreement:
4.3.1 the Office of Fair Trading indicating, in terms reasonably satisfactory
to the Purchaser, that the Secretary of State for Trade and Industry does
not intend to refer the acquisition or any matter relating thereto to the
Monopolies and Mergers Commission;
4.3.2 all other consents (which for this purpose shall include the expiry of
any period following a notification such that consent is deemed to be
given or no consent is required) of any government or governmental body
or regulatory authority in the territory having appropriate jurisdiction
which are required for the transactions contemplated by this Agreement or
any matters arising therefrom having been obtained;
4.3.3 Lloyd's consents having been obtained, in terms reasonably satisfactory
to the Purchaser and the Vendors, to:
(i) the change of control of CUAL pursuant to Article 13A of the
Underwriting Agents' Byelaw (no. 4 of 1984);
(ii) the change of control of TUL pursuant to Article 14 of the
Membership Byelaw (no. 17 of 1993);
(iii) the appointment of directors of CUAL and TUL as contemplated by
Clause 5.4.1; and
(iv) the Combined Syndicates placing (whether directly or indirectly)
re-insurance with the Purchaser or any other member of the
Purchaser's Group under Article 3 of the Related Parties Byelaw;
4.3.4 Lloyd's not having:
(i) threatened to take any action which would, in the reasonable
opinion of the Purchaser and the Vendors' Representative, have a
material adverse impact on the transactions contemplated by this
Agreement; or
(ii) proposed or enacted any regulation or byelaw which in the
reasonable opinion of the Purchaser and the Vendors' Representative
would prohibit or materially restrict:
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(a) completion of any such transaction; or
(b) the operation of any of the Group Companies after Completion;
4.3.5 no order, statute, rule, regulation, executive order, stay,
decree, judgment, injunction or regulatory action having been
enacted, entered, issued, promulgated or enforced by any
governmental authority which has resulted in a prohibition against
the consummation of the transactions contemplated by this
Agreement; and
4.3.6 the Purchaser and the Vendors' Representative having received
evidence reasonably satisfactory to each of them that all
consents, approvals and filings required for the consummation of
the transactions contemplated by this Agreement have been made or
obtained.
4.4 Responsibility for Satisfaction
The parties undertake to use all reasonable endeavours to ensure the
satisfaction of the conditions set out in Clauses 4.1 to 4.3. Without prejudice
to the foregoing, it is agreed that all requests and enquiries from any
government, governmental, supranational or trade agency, court or regulatory
body shall be dealt with by the Vendors' Representative and the Purchaser in
consultation with each other and the Vendors' Representative and the Purchaser
shall promptly co-operate with and provide all necessary information and
assistance reasonably required by such government, agency, court or body upon
being requested to do so by the other.
4.5 Non-Satisfaction/Waiver
If the conditions in
4.5.1 Clause 4.1 are not satisfied or waived by Insurance Partners,
Phemus and the Vendors' Representative on behalf of the Remaining
Vendors;
4.5.2 Clause 4.2 are not satisfied or waived by the Purchaser; and
4.5.3 Clause 4.3 are not satisfied or waived by both the Purchaser and
Insurance Partners, Phemus and the Vendors' Representative on
behalf of the Remaining Vendors,
on or before 31 December 1998, save as expressly provided, this Agreement
shall lapse and no party shall have any claim against any other under it,
save for any claim arising from breach of the undertaking contained in
Clause 4.4.
5 Completion
5.1 Date and Place
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Subject to Clause 4, Completion shall take place at the offices of the Vendors'
Solicitors at 3.00 pm (London time) 3 Business Days after the last of the
conditions set out in Clauses 4.1 to 4.3 (other than the conditions to be
fulfilled at Completion) are satisfied or waived or at such other place or on
such other date or time as may be agreed between the Purchaser and the Vendors'
Representative.
5.2 Vendors' Obligations on Completion
5.2.1 On or before Completion, the Vendors and the Company (if
appropriate) shall procure that:
(i) all loans due to each Group Company from, and all loans due
from each Group Company to, each of the Vendors and every
other company in the issued share capital of which the
Vendors or any of them or any combination of them have
directly or indirectly a beneficial interest exceeding 3% of
the issued share capital of such company shall be repaid in
full; and
(ii) all loans due to each Group Company from, and all loans due
from each Group Company to, directors or employees of any
Group Company shall be repaid in full, (except season ticket
loans to employees and loans as described in the Vendors'
Disclosure Letter);
5.2.2 On Completion, the Vendors and the Company (if appropriate) shall
deliver or make available to the Purchaser:
(i) duly executed transfers of the Shares in favour of the
Purchaser or as it may direct accompanied by the relative
share certificates;
(ii) the written resignations from their office as directors from
all the directors of the Group Companies to take effect on
the Completion Date with acknowledgments signed by each of
them in a form satisfactory to the Purchaser to the effect
that he has no claim against any Group Company for
compensation for loss of office (whether contractual,
statutory or otherwise) in his capacity as a Director only;
(iii) the written resignations of the auditors of each Group
Company to take effect on the date of Completion, with
acknowledgments signed by each of them in a form
satisfactory to the Purchaser to the effect that they have
no claim against any Group Company and containing the
statement referred to in Section 394 of the Companies Act
1985 to the effect that there are no circumstances connected
with their resignation which they consider should be brought
to the notice of the members or creditors of any Group
Company;
(iv) the certificates of incorporation, corporate seals (if any),
cheque books, if so requested by the Purchaser, and
statutory books of each Group Company (duly written up-to-
date), the share certificates in respect of each of the
Subsidiaries and
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transfers of all shares in the Subsidiaries held by
nominees in favour of the Purchaser or as it may direct;
(v) duly executed deeds of release in the agreed terms
releasing each Group Company from any liability whatsoever
(actual or contingent) (other than arising out of any
service agreement or employment contract, the ESOT and save
as otherwise provided in this Agreement) which may be owing
to any Vendor in such capacity and any person for whom that
Vendor is a trustee or personal representative by each
Group Company;
(vi) the title deeds to the Property together with a statutory
declaration in respect of any missing title deeds, in a
form to be approved by the Purchaser, such approval not to
be unreasonably withheld or delayed;
(vii) deeds of covenant in the agreed terms duly extended by Mr
J. A. Battle, Mr R. A. Strachan and Mr T. W. H. Wood and
the other parties thereto;
(viii) statements of terms and conditions in the agreed terms
executed by each of the Remaining Vendors (other than CTL,
EBCAM Nominees and the persons referred to in 4.2.5);
(ix) a duly executed release in terms to be agreed between the
Vendors' Solicitors and the Purchaser's Solicitors of a
Deed of Subordination dated 28 November 1995 and a
Supplemental Deed of Subordination dated 3 September 1997
both created by the Company and registered by the Registrar
of Companies on 15 December 1995 and 2 September 1997
together with relative declarations of satisfaction (Forms
403a) sworn by a director of the Company; and
(x) a duly executed release and discharge in terms to be agreed
between the Vendors' Solicitors and Purchasers' Solicitors
of the Charman Shareholders' Agreement and the Shareholders
Agreement.
5.3 Purchaser's Obligations on Completion
On Completion, the Purchaser shall deliver or make available to the Vendors'
Solicitors:
5.3.1 a duly certified copy of a resolution of the directors of the
Purchaser:
(i) authorising the purchase of the Shares for the consideration
and upon the terms set out in this Agreement;
(ii) approving the terms of and authorising the signing of this
Agreement; and
(iii) issuing the Consideration Shares referred to in Clause 3.
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5.3.2 Against compliance with the foregoing provisions, the Purchaser
shall deliver to the Vendors' Solicitors share certificates in
respect of the Consideration Shares in the proportions set out in
Part 1 of Schedule 1.
5.4 Board Resolutions of the Group Companies
On Completion, the Vendors shall procure the passing of Board Resolutions of
each Group Company (where appropriate):
5.4.1 accepting the resignations referred to in Clause 5.2.2 (ii) and
appointing directors of certain Group Companies (to be determined
by the Purchaser);
5.4.2 approving the registration of the share transfers referred to in
Clause 5.2.2 subject only to their being duly stamped;
5.4.3 accepting such resignations referred to in Clause 5.2.2(iii) and
appointing auditors to be designated by the Purchaser of each
Group Company;
5.4.4 changing the registered office of each Group Company as determined
by the Purchaser; and
5.4.5 providing the requisite Lloyd's consents have been obtained,
convening an extraordinary general meeting of each Group Company
at which its Articles of Association shall be amended in such a
manner as the Purchaser may require but not such as to have a
retrospective effect;
and shall hand to the Purchaser duly certified copies of such
Resolutions.
5.5 Satisfaction of Consideration
Against compliance with the foregoing provisions, the Purchaser shall satisfy
the purchase consideration in the manner specified in Clause 3.
6 Warranties and Purchaser's Warranties
6.1 Incorporation of Schedule 3
6.1.1 Each of the Vendors severally warrants and represents to the
Purchaser and its successors in title in the terms set out in
Parts 1 and 2 of Schedule 3, subject only to any matter or thing
hereafter done or omitted to be done as required by this Agreement
or otherwise at the request in writing or with the approval in
writing of the Purchaser.
6.1.2 The Vendors severally acknowledge that the Purchaser has entered
into this Agreement in reliance upon the warranties,
representations, covenants and undertakings severally given which
are set out in Parts 1 and 2 of Schedule 3 of this Agreement.
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6.2 Several Liability
Each Vendor shall be severally liable for any loss incurred by the Purchaser as
a result of any Warranty contained in Part 1 of Schedule 3 being untrue as
regards that Vendor or a person connected with him.
6.3 Vendors' Disclosure Letter
The Warranties in Part 2 of Schedule 3 shall be read subject only to:
6.3.1 any matter which is fairly disclosed in the Vendors' Disclosure
Letter and any matter expressly provided for under the terms of
this Agreement; and
6.3.2 any matter or thing now or hereafter done or omitted to be done as
required by this Agreement or otherwise at the request in writing
or with the approval in writing of the Purchaser.
6.4 Incorporation of Purchaser's Warranties
6.4.1 The Purchaser warrants and represents to the Vendors and its
successors in title in the terms as set out in Schedule 4 subject
only to any matter or thing hereafter done or omitted to be done
as required by this Agreement or otherwise at the request in
writing or with the approval in writing of the Vendors'
Representative.
6.4.2 The Purchaser acknowledges that the Vendors have entered into this
Agreement in reliance upon the warranties, representations,
covenants and undertakings given which are set out in Schedule 4.
6.5 Non survival of Warranties
None of the representations and warranties in this Agreement or in any Schedule,
instrument or other document delivered pursuant to this Agreement shall survive
Completion (other than those contained in Part 1 of Schedule 3 and Clause 8 of
Schedule 4).
6.6 Remedies
6.6.1 This Agreement contains the whole agreement between the parties
relating to the subject matter of this Agreement to the exclusion
of any terms implied by law which may be excluded by contract.
Each of the Vendors and the Purchaser acknowledges that it has not
been induced to enter into this Agreement by, and so far as is
permitted by law and except in the case of fraud, waives any
remedy in respect of, any warranties, representations and
undertakings not incorporated into this Agreement.
6.6.2 So far as is permitted by law and except in the case of fraud, the
parties agree and acknowledge that the only right and remedy which
shall be available to the Purchaser in
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connection with or arising out of or related to any of the
statements contained in the Warranties in Part 2 of Schedule 3
shall be as provided in Clause 4.5 and not rescission of this
Agreement, nor damages in tort or under statute (whether under the
Misrepresentation Act 1967 or otherwise), nor any other remedy.
6.6.3 So far as is permitted by law and except in the case of fraud, the
parties agree and acknowledge that the only right and remedy which
shall be available to the Vendors in connection with or arising
out of or related to any of the statements contained in the
Purchaser's Warranties in Schedule 4 shall be as provided in
Clause 4.5 and not rescission of this Agreement, nor damages in
tort or under statute (whether under the Misrepresentation Act
1967 or otherwise), nor any other remedy.
6.6.4 Each party to this Agreement confirms it has received independent
legal advice relating to all the matters provided for in this
Agreement, including the provisions of this Clause, and agrees
having considered the terms of this Clause and the Agreement as a
whole, that the provisions of this Clause are fair and reasonable.
6.6.5 In Clauses 6.8.1 to 6.8.4 "this Agreement" includes the Vendors'
Disclosure Letter.
7 Action Pending Completion
7.1 Vendors' General Obligations
The Company and the Vendors shall procure that, pending Completion:
7.1.1 each Group Company will carry on business only in the ordinary
course consistent with past practice, save in so far as agreed in
writing by the Purchaser;
7.1.2 each Group Company will use its reasonable endeavours to keep
available the services of its directors and employees and to
maintain advantageous relationships with those contracting or
dealing with it;
7.1.3 if so requested by the Purchaser, each Group Company will enforce,
or procure to be enforced, to their full extent, the obligations
of employees or directors under their respective employment
contracts and of other employees under their terms of employment
with any Group Company and any confidentiality agreements between
a Group Company and a third party; and declare, set aside or pay
any dividends on, or make any other distributions (whether in
cash, shares or property) in respect of, any issued shares of the
Purchaser;
7.1.4 each Group Company shall afford reasonable access to the Purchaser
and its authorised representatives during normal business hours to
all personnel and offices and to all books
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and records of the relevant Group Company as the Purchaser may
reasonably require, subject to reasonable prior notice being given
to any director of the Company.
7.2 Restrictions on the Vendors
Without prejudice to the generality of Clause 7.1, the Vendors and the Company
shall between the date of this Agreement and Completion procure that each Group
Company, other than in relation to another Group Company, where relevant, shall
not without the prior written consent of the Purchaser in its sole discretion:
7.2.1 save as set out in the Vendors' Disclosure Letter, incur or enter
into any agreement or commitment involving any capital expenditure
in excess of (Pounds)100,000 in aggregate;
7.2.2 enter into any contract or commitment which is outside the
ordinary course of business and which is not capable of being
terminated without compensation at any time with three months'
notice or less or which provides for the acceleration of payment
or performance or other consequence as a result of a change in
control of any Group Company or which involves or may involve
total annual expenditure in excess of (Pounds)100,000;
7.2.3 subject to the provisions of the Vendor's Disclosure Letter, incur
any additional borrowings or incur any other indebtedness
otherwise than in the ordinary course of business;
7.2.4 make any amendment to the terms and conditions of employment
(including, without limitation and subject to the provisions of
the Vendor's Disclosure Letter remuneration, pension entitlements
and other benefits) of any employee, provide or agree to provide
any gratuitous payment or benefit to any such person or any of
their dependants, or dismiss any employee or engage or appoint any
additional employee. For the purposes of this Clause, an employee
is a person paid a salary in excess of (Pounds)40,000 per annum;
or
7.2.5 acquire or agree to acquire or dispose of or agree to dispose of
any asset or stocks or enter into or amend any material contract
or arrangement, in each case, involving consideration, expenditure
or liabilities in excess of (Pounds)100,000 other than in the
ordinary course of business;
7.2.6 make any modification to any of the rights attached to any shares
in any Group Company or the creation or issue of any shares or the
grant or agreement to grant any option over any shares or uncalled
capital of any Group Company or the issue of any obligations
convertible into shares;
7.2.7 capitalise or pay up any amount standing to the credit of any
reserve of any Group Company (other than for the purposes of
complying with any requirements imposed by Lloyd's) or redeem or
purchase any shares or effect any other reorganisation of the
share capital of any Group Company;
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7.2.8 admit any person (howsoever occurring) as a member of any Group
Company or approve the transfer of any shares in any Group
Company;
7.2.9 declare, pay or otherwise make any dividend or other
distribution;
7.2.10 pass any resolution of its members to alter the memorandum or
articles of association of any Group Company;
7.2.11 acquire any shares of any other company or, other than in the
ordinary course of its insurance and re-insurance business,
participate in any partnership, consortium, association or joint
venture;
7.2.12 make or grant any loan;
7.2.13 create or issue or allow to come into being (other than by
operation of law) any mortgage, charge or other security interest
upon or over any part of the property or any assets or uncalled
capital of any Group Company or create or issue any debenture or
debenture stock or obtain any advance or credit in any form,
other than normal trade credit;
7.2.14 appoint any person as a director of any Group Company;
7.2.15 commence any litigation other than in the ordinary course of its
insurance and re-insurance business and for the collection of
debts not exceeding individually (Pounds)10,000 or
(Pounds)100,000 in aggregate;
7.2.16 except as expressly required in this Agreement, pay, discharge or
satisfy any claims, liabilities or obligations, other than the
payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities
reflected or reserved against in the UK GAAP Audited Accounts (or
in the ordinary course of business and consistent with past
practice);
7.2.17 (other than in the ordinary course of business) enter into any
new lines of business, change any existing standard policy forms,
change its investment policies or guidelines or otherwise make
material changes to the operation of its business or change its
loss reserve methodology;
7.2.18 make any elections for the purposes of Taxation or settle or
compromise any material liability to Taxation;
7.2.19 except for the settlement of insurance or reinsurance claims in
the ordinary course of business consistent with past practice,
pay or agree to pay in settlement or compromise of any
proceedings or claims of liability against any Group Company, its
respective directors, officers, employees or agents, more than an
aggregate of (Pounds)100,000 for all such proceedings and claims;
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7.2.20 except as may be required as a result of a change in law or in
accordance with the requirements of any regulatory body, change
any UK GAAP or practices used by it; or
7.2.21 terminate, modify, amend or otherwise alter in an adverse manner
to any Group Company any material terms or provisions of any of
such Group Company's material contracts.
7.3 Restrictions on the Purchaser
Pending the issue of the Consideration Shares, the Purchaser shall not, and
shall not agree or authorise that at a future time it may or will:
7.3.1 make any modification to any of the rights attached to the
Purchaser's Ordinary Shares;
7.3.2 pass any resolution of its members to alter the memorandum or
articles of association of the Purchaser;
7.3.3 other than ordinary quarterly dividends consistent with past
practice, declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, shares or property) in
respect of, any issued shares of the Purchaser; or
7.3.4 split, combine or reclassify any issued shares of the Purchaser or
issue or authorise the issue of any other securities in respect
of, in lieu of or in substitution for issued shares of the
Purchaser.
7.4 Company Affiliate Letter
The Company shall deliver to the Purchaser, as soon as practicable, a letter
(the "Company Affiliate Letter") identifying all persons who are anticipated to
be, at the Completion Date, "affiliates" of the Company for purposes of pooling
of interests accounting treatment for transactions of the type contemplated by
this Agreement (the "Pooling Rules").
The Company shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the Company Affiliate Letter to deliver to the
Purchaser, no less than 5 days prior to the Completion Date, a written agreement
(a "Company Affiliate Agreement"), in the form attached as Schedule 6, in
connection with restrictions on affiliates under pooling of interest accounting
treatment.
7.5 Listing of Consideration Shares
The Purchaser shall use its reasonable best efforts to cause the Consideration
Shares to be issued in the transactions contemplated by this Agreement to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the Completion Date.
7.6 Pricing Influence
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Prior to the Completion Date, neither the Purchaser, the Company nor any or the
Vendors nor any of their respective directors, officers, employees or
subsidiaries shall, directly or indirectly, purchase, otherwise acquire, sell,
or otherwise dispose of any Purchaser's Ordinary Shares or any other security
convertible or exchangeable into or exercisable for Purchaser's Ordinary Shares
or take any other action, except as expressly set forth in this Agreement, which
could reasonably be expected to have any influence on the price of the
Purchaser's Ordinary Shares. The Company shall promptly notify the Purchaser of,
to the extent that the Company has actual knowledge thereof, any action on the
part of any third party to influence the price of the Purchaser's Ordinary
Shares or the intention of any third party to influence the price of the
Purchaser's Ordinary Shares.
7.7 Pooling
The Purchaser, the Vendors and the Company each agrees not to take any action
that would reasonably be expected to adversely affect the ability of the
Purchaser to account for the transactions contemplated by this Agreement as a
pooling of interest under the Pooling Rules.
7.8 Inland Revenue Applications
The Vendors' Representative shall consult with the Purchaser's Solicitors in
relation to applications for clearance referred to in Clause 4.1.1 and shall
take into account any relevant suggestions or comments of the Purchaser.
8 Covenants
8.1 Except as provided in Clause 8.7, for a period of 2 years following the
Completion Date, the Purchaser undertakes to Insurance Partners and Phemus that
it will not sell or otherwise dispose of any of:
8.1.1 the Shares acquired pursuant to this Agreement or any share
capital acquired in connection with the re-registration of the
Company as an unlimited company; or
8.1.2 the Company's assets, except for dispositions made in the ordinary
course of business or described in Section 368(a)(2)(C) of the
Internal Revenue Code of 1986, as amended (the "Code").
8.2 For a period of 2 years following the Completion Date, the Purchaser or the
Company will continue the historic business of the Company or use a significant
portion of the Company's historic business assets in a business.
8.3 The Purchaser will not pay any consideration to the Vendors in respect of
the Shares other than the Purchaser's Consideration Shares.
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8.4 The Purchaser, the Company and the Vendors will pay their respective
expenses, if any, incurred in connection with the transaction, except that the
Purchaser will pay up to US$7.5 million of the Company's and Vendors' expenses
for legal, accounting and investment banking fees.
8.5 On or prior to the Completion Date, the boards of directors of the
Purchaser and the Company will adopt a Plan of Reorganisation in terms to be
agreed.
8.6 The Purchaser agrees that:
8.6.1 on the Completion Date, or, if not practicable, on the next
Business Day, it will cause the Company to be re-registered as
unlimited pursuant to the provisions of Section 49 and 50 of the
Companies Act 1985 and to retain that status for a minimum period
of two years following the Completion Date;
8.6.2 it will make an election pursuant to Section 301.7701-3 of the US
Treasury regulations promulgated under the Code to treat the
Company as an entity disregarded as separate from the Purchaser
and will not make an election under US Treasury regulations
Section 301.7701-3 to treat the Company as an association taxable
as a corporation;
8.6.3 except as provided in Clause 8.7, it will directly own the whole
of the issued share capital of the Company for a minimum period of
2 years following the Completion Date; and
8.6.4 for a period of 2 years following Completion, it will not,
directly or indirectly, make equity contributions (whether or not
in exchange for shares) or loan additional funds to the Company
and will not permit the Company to incur additional indebtedness
(for the purposes of this Clause 8.6.4, if any member of the
Purchaser's Group enables TUL to secure the release of all or any
portion of TUL's funds at Lloyd's through the replacement of such
funds with a letter of credit or similar instrument or otherwise
(the "Securing"), the amount of the funds released as a result of
such Securing, net of any such amounts distributed to the
Company's shareholders promptly following such release by way of a
lawful dividend or reduction or return of capital, shall be
treated as an equity contribution);
Provided that the Purchaser or any other member of the Purchaser's
Group other than the Company may make equity contributions or
loans directly to the Subsidiaries of the Company in exchange for
shares or notes of equivalent value of the recipient Subsidiary,
provided that any such equity contributions or loans of cash or
other liquid assets will be limited to the sum of (a) $10,000,000
and (b) amounts applied for (I) an expansion of the business of
the recipient Subsidiary from the level of business conducted by
such Subsidiary on the Completion Date including without
limitation the purchase by any Subsidiary of additional capacity
at Lloyd's and the provisions of funds at Lloyd's in relation to
any part thereof, (II) funding an acquisition of the shares or
assets of another unrelated company or person by the recipient
Subsidiary, (III) satisfying the requirements of any applicable
regulatory authority, (IV) the repayment of the Boston Loan and
(V) the repayment of up to
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$30,000,000 of any indebtedness incurred by the Company or any
Subsidiary in connection with payment of bonuses to its employees
prior to the Completion Date as described in the Vendors'
Disclosure Letter.
(ca)
8.7 Notwithstanding anything to the contrary above;
8.7.1 the Purchaser may transfer the whole of the issued share capital
of the Company to Newco prior to the expiration of the 2 year
period following the Completion Date only if:
(i) the Purchaser will directly own the whole of the issued
share capital of Newco for a period of 2 years following the
Completion Date; and
(ii) Newco will directly own (or indirectly through a directly
owned subsidiary which elects pursuant to Section 301.7701-3
of the U.S. Treasury Regulations promulgated under the Code
to treat the subsidiary as an entity disregarded as separate
from Newco) the whole of the issued share capital of the
Company throughout the period beginning on the date of the
transfer and ending on the date 2 years from the Completion
Date; and
8.7.2 Newco may transfer the whole of the issued share capital of the
Company to a direct wholly-owned company incorporated in England
(other than a public limited company) ("Newcosub") prior to the
expiration of the two year period following the Completion Date
if:
(i) the provision in Clause 8.7.1(i) is satisfied;
(ii) Newco does not or will not make an election pursuant to
Section 301.7701-3 of US Treasury Regulations to treat
Newcosub as an association taxable as a corporation, and
Newco makes a timely election pursuant to Section 301.7701-3
of US Treasury Regulations to treat Newcosub as an entity
disregarded as separate from Newco effective from the date
of incorporation of Newcosub;
(iii) Newco directly owns or will own the whole of the issued
share capital of Newcosub throughout the period beginning on
the date of the transfer to Newcosub and ending on the date
two years following the Completion Date; and
(iv) Newcosub directly owns or will own the whole of the issued
share capital of the Company throughout the period beginning
on the date of the transfer to Newcosub and ending on the
date two years following the Completion Date.
8.7.3 the Purchaser or Newco may transfer the whole of the issued share
capital of the Company to any person provided that the Purchaser
obtains, prior to such transfer, either a ruling from the U.S.
Internal Revenue Service holding, or an opinion of nationally
recognised US
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tax counsel to the Purchaser, addressed to the Vendors,
concluding, that such transfer will not the cause the Purchaser's
acquisition of the Company to not qualify as a tax-free
reorganisation described in Section 368(a) of the Code.
8.8 Except as expressly provided herein the Purchaser will not take any action
that would adversely affect the characterisation of the transaction as a tax
free reorganization within the meaning of Section 368(a)(1)(C) of the Code.
9 Other Provisions
9.1 Vendors' Liability
Any liability to the Purchaser under this Agreement may in whole or in part be
released, compounded or compromised or time or indulgence given by the Purchaser
in its absolute discretion as regards any of the Vendors under such liability
without in any way prejudicing or affecting its rights against any other or
others of the Vendors under the same or a like liability.
9.2 Announcements
9.2.1 Pending Completion, the Purchaser, the Company, Insurance
Partners, Phemus and the Vendors' Representative on behalf of the
Remaining Vendors shall, subject to the requirements of law or
any regulatory body or the rules and regulations of any
recognised stock exchange, consult together as to the terms of
the timetable for, and manner of publication of, any formal
announcement or circular to shareholders, employees, customers,
suppliers, distributors and sub-contractors and to any recognised
stock exchange or other authorities or to the media or otherwise
which any of them may desire or be obliged to make regarding this
Agreement. Any other communication which the parties may make
concerning the foregoing matters shall, subject to the
requirements of law or any regulatory body or the rules and
regulations of any recognised stock exchange, be consistent with
any such formal announcement or circular as aforesaid.
9.2.2 Subject to Clause 9.2.1, no party shall pending Completion make
or authorise or issue any formal announcement or circular
concerning the subject matter of this Agreement or any other
document or transaction referred to in or contemplated by this
Agreement.
9.3 Confidentiality
If Completion does not take place and subject to and upon the termination of the
Confidentiality Agreement, the Purchaser shall not for a period of 12 months
from the date of this Agreement divert or attempt to divert any business of any
customer of the Group nor employ or attempt to employ or divert an employee of
the Group and shall forthwith hand over, destroy (in which case the Purchaser
shall deliver a certificate of destruction signed by a director of the Purchaser
in such terms as the Vendors' Representative may reasonably request) or procure
the handing over or destruction of all
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accounts, records, documents and papers of or relating to the Vendors and each
Group Company which shall have been made available to it and all copies or other
records derived from such materials, and expunge any information derived from
such materials or otherwise concerning the subject matter of this Agreement from
any computer, wordprocessor or other device containing information. Provided
that this shall not apply:
9.3.1 to information available from public records or information
acquired by the Purchaser otherwise than from the Vendors or their
agents or any Group Company: or
9.3.2 to information which was lawfully in the Purchaser's possession
prior to the disclosure of information disclosed to the Purchaser
and/or its agents pursuant to the Confidentiality Agreement, so
long as the Purchaser can demonstrate by written or other
reasonable evidence that the source of such information was not
known by the Purchaser or its agents, after reasonable
investigation to be bound by a confidentiality agreement or was
subject to other contractual, legal or fiduciary obligation of
confidentiality to the Group with respect to such information, or
9.3.3 to information which became available to the Purchaser on a non-
confidential basis from a source other than the Group or its
agents, provided that such source was not known by the Purchaser
or any of its agents, after reasonable investigation to be bound
by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the Group or their
agents with respect to such information.
9.4 Successors and Assigns
9.4.1 Subject to Clause 9.4.2, this Agreement is personal to the parties
to it. Accordingly, neither the Purchaser nor the Vendors nor the
Company may, without the prior written consent of the others,
assign the benefit of all or any of the others' obligations under
this Agreement, nor any benefit arising under or out of this
Agreement.
9.4.2 Except as otherwise expressly provided in this Agreement, the
Purchaser may, without the consent of the Vendors or the Company,
assign to a connected company the benefit of all or any of the
Vendors' obligations under this Agreement provided that such
assignment shall not be absolute but shall be expressed to have
effect only for so long as the assignee remains a connected
company. For the purposes of this sub-clause a connected company
is a company which is a wholly-owned subsidiary of the party
concerned or which is a holding company of such party or a
subsidiary of such holding company.
9.5 Variation
No variation of this Agreement shall be effective unless in writing and signed
by or on behalf of each of the parties to this Agreement.
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9.6 Time of the Essence
Any time, date or period referred to in any provision of this Agreement may be
extended by mutual agreement between the parties (the Vendors' Representative
acting on behalf of the Remaining Vendors) but as regards any time, date or
period originally fixed or any time, date or period so extended time shall be of
the essence.
9.7 Further Assurance
The Vendors severally agree with the Purchaser that, at any time after the date
of this Agreement, they shall and shall use their reasonable best endeavours to
procure that any necessary third party shall at the cost of the Purchaser
execute such documents and do such acts and things as the Purchaser may
reasonably require for the purpose of giving to the Purchaser the full benefit
of all the provisions of this Agreement.
9.8 Interest
If the Vendors or the Purchaser default in the payment when due of any sum
payable under this Agreement (whether determined by agreement or pursuant to an
order of a court or otherwise) the liability of the Vendors or the Purchaser (as
the case may be) shall be increased to include interest on such sum from the
date when such payment is due until the date of actual payment (as well after as
before judgment) at a rate per annum of 2 per cent. above the base rate from
time to time of Lloyds Bank PLC. Such interest shall accrue from day to day.
9.9 Notices
9.9.1 Any notice or other communication requiring to be given or served
under or in connection with this Agreement shall be in writing and
shall be sufficiently given or served if delivered or sent:
In the case of any of Insurance Partners to:
Cedar House
41 Cedar Avenue
PO BOX HM 1179
Hamilton
Bermuda
Fax: 0 1 - (212) 898 8720
Attention: R. Spass
In the case of Phemus to:
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with copies to:
Harvard Private Capital Group Ropes & Gray
26th Floor 600 Atlantic Avenue 600 Atlantic Avenue
Boston Massachussetts MAUSA 26th Floor
Boston
Fax: 01 (617) 523 1063 Massachussetts
Attention: T. Palmer MA 02210
USA
Fax: 01 (617) 951 7050
Attention: Larry Rowe
In the case of the Company with copies to:
to:
Linklaters & Paines
7th Floor One Silk Street
1 Minster Court London EC2Y 8HQ
Mincing Lane
London EC3R 7AA Fax: 0171 456 2000
Attention: Peter King
Fax: 171 626 6822
Attention: he Secretary and
LeBoeuf, Lamb, Greene & MacRae,
L.L.P.
125 West 55th Street
New York, N.Y. 10019
Fax: 001 (212) 424 8500
Attention: Robert S. Rachofsky
In the case of the Remaining
Vendors to:
JR Charman
7th Floor
1 Minster Court
Mincing Lane
London EC3R 7AA
Fax: 171 626 6822
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In the case of the Purchaser with copies to:
to:
Lovell White Durrant
ACE Limited 65 Holborn Viaduct
The ACE Building London EC1A 2DY
30 Woodbourne Avenue
Hamilton HM 08 Bermuda Fax: 171 248 4212
Attention: Leah Dunlop
Fax: 01 (441) 295 3997
Attention: General Counsel and
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Fax: 01 (312) 701-7711
Attention: Edward S. Best
(but inadvertent failure so to give or
send copies shall not invalidate any
such notice given to the Purchaser)
9.9.2 Any such notice or other communication shall be delivered by hand
or sent by courier or fax. If sent by courier or fax, such notice
or communication shall conclusively be deemed to have been given
or served at the time of despatch, in case of service in the
United Kingdom, or on the following Business Day, in the case of
international service.
9.10 Severance
If any term or provision in this Agreement is held to be illegal or
unenforceable, in whole or in part, under any enactment or rule of law, such
term or provision or part shall to that extent be deemed not to form part of
this Agreement but the enforceability of the remainder of this Agreement shall
not be affected.
9.11 Counterparts
This Agreement may be executed in any number of counterparts each of which shall
be deemed an original, but all the counterparts shall together constitute one
and the same instrument.
9.12 Restrictive Trade Practices Act 1976
Notwithstanding any other provision of this Agreement, no provision of this
Agreement which is of such a nature as to make the Agreement liable to
registration under the Restrictive Trade Practices Act 1976 (the 1976 Act) shall
take effect until the day after that on which particulars thereof have been duly
furnished to the Director General of Fair Trading pursuant to the 1976 Act (the
Particulars) and the
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Particulars shall not be subject to the provisions of the Confidentiality
Agreement Provided that the Purchaser makes an application to the Secretary of
State for such of the Particulars as the Vendors' Representative may reasonably
request to be placed on the special section of the register of agreements
established under the 1976 Act. This Clause shall not apply if this Agreement is
a non-notifiable agreement within the meaning of Section 27A of the 1976 Act.
For the purposes of this Clause 9.12, the term "Agreement" shall include every
other agreement which forms part of the same arrangement.
9.13 Governing Law and Submission to Jurisdiction
This Agreement and the documents to be entered into pursuant to it, save as
expressly referred to therein, shall be governed by and construed in accordance
with English law and all the parties irrevocably agree that the courts of
England are to have exclusive jurisdiction to settle any disputes which may
arise out of or in connection with this Agreement and such documents.
9.14 Appointment of Process Agent
9.14.1 Insurance Partners irrevocably appoints Hackwood Secretaries
Limited of One Silk Street, London EC2Y 8HQ as its agent for the
service of process in England in relation to any matter arising
out of this Agreement, service upon whom shall be deemed
completed whether or not forwarded to or received by Insurance
Partners.
9.14.2 Phemus irrevocably appoints Hackwood Secretaries Limited of One
Silk Street, London EC2Y 8HQ as its agent for the service of
process in England in relation to any matter arising out of this
Agreement, service upon whom shall be deemed completed whether or
not forwarded to or received by Phemus.
9.14.3 The Remaining Vendors (except for EBCAM Nominees) each
irrevocably appoint Hackwood Secretaries Limited of One Silk
Street, London EC2Y 8HQ as his agent for the service of process
in England in relation to any matter arising out of this
Agreement, service upon whom shall be deemed completed whether or
not forwarded to or received by the Remaining Vendors (except for
EBCAM Nominees).
9.14.4 EBCAM Nominees each irrevocably appoints Morley & Scott (Ref: J
Clay) of Lynton House, 7-12 Tavistock Square, London WC1H 9LT as
its agent for the service of process in England in relation to
any matter arising out of this Agreement, service upon whom shall
be deemed completed whether or not forwarded to or received by
EBCAM Nominees.
9.14.5 Each of Insurance Partners, Phemus, EBCAM Nominees and the
Remaining Vendors (except for EBCAM Nominees) shall inform the
Purchaser, in writing, of any change in the address of its
process agent within 28 days.
9.14.6 If such process agents cease to have an address in England, each
of Insurance Partners, Phemus and the Remaining Vendors
irrevocably agree to appoint new process agents
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acceptable to the Purchaser and to deliver to the Purchaser
within 14 days a copy of a written acceptance of appointment by
the process agents.
9.14.7 The Purchaser irrevocably appoints ACE UK of Crosby Court, 38
Bishopsgate, London EC2N 4DL as its agent for the service of
process in England in relation to any matter arising out of this
Agreement, service upon whom shall be deemed completed whether or
not forwarded to or received by the Purchaser.
9.14.8 If such process agents cease to have an address in England, the
Purchaser irrevocably agrees to appoint new process agents
acceptable to the Vendors and to deliver to the Vendors within 14
days a copy of a written acceptance of appointment by the process
agents.
9.14.9 Each party shall inform each of the other parties, in writing, of
any change in the address of its process agent within 28 days.
In witness whereof this Agreement has been executed.
SIGNED by )
J R CHARMAN )
in the presence of: } J R CHARMAN
)
PETER D S KING )
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
SIGNED by J J LLOYD )
in the presence of: )
} J LLOYD
)
PETER D S KING )
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
-32-
SIGNED by )
R D H BRINDLE )
C LANGLEY }
D G PENNEY )
G A ARNOTT
J W GRESSIER
G L LUBEN
I N HOLLAND
J A BATTLE
T W H WOOD
R D MILLS
R A STRACHAN
A P RYAN
R D PATON J R CHARMAN
D J ROUSE as Attorney
P N McCRACKEN
H FRAKE
F J DONALDSON
R M BULLEN
M KING
T M TAYLOR
S J HAYES
K S JONES
C C RANN
D J RAYNER
I CONSTABLE
J J B SKINNER
by their attorney J R CHARMAN
in the presence of:
PETER D S KING
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
-33-
SIGNED by J R CHARMAN for and on )
behalf of }
CHARMAN TRUSTEES ) J R CHARMAN
LIMITED
in the presence of:
PETER D S KING
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
SIGNED by J R CHARMAN )
as attorney for and on behalf of }
EBCAM NOMINEES (JERSEY) ) J R CHARMAN
LIMITED
(re. JRC Children's Settlement)
in the presence of:
PETER D S KING
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
SIGNED by J R CHARMAN )
as attorney for and on behalf of }
EBCAM NOMINEES (JERSEY) ) J R CHARMAN
LIMITED
(re. the Dragon Trust)
in the presence of:
PETER D S KING
-34-
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
SIGNED by J R CHARMAN )
as attorney for and on behalf of }
IPC Genpar (Bermuda) MGP, )
Ltd. in its capacity as general
partner of IPC Genpar J R CHARMAN
(Bermuda) MGP, L.P. in its
capacity as general partner of
IPC Genpar (Bermuda), L.P. for
and on behalf of INSURANCE
PARTNERS CHARMAN
(BERMUDA), L.P.
in the presence of:
PETER D S KING
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
-35-
SIGNED by J R CHARMAN as )
attorney for and on behalf of }
Insurance Genpar (Bermuda) )
MGP, Ltd. in its capacity as
general partner of Insurance
Genpar (Bermuda) MGP, L.P. in J R CHARMAN
its capacity as general partner of
Insurance Genpar (Bermuda),
L.P. for and on behalf of
INSURANCE PARTNERS
OFFSHORE (BERMUDA), L.P.
in the presence of:
PETER D S KING
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
SIGNED by J R CHARMAN )
as attorney for and on behalf of }
PHEMUS CORPORATION ) J R CHARMAN
in the presence of:
PETER D S KING
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
-36-
SIGNED by J R CHARMAN )
for and on behalf of }
TARQUIN LIMITED ) J R CHARMAN
in the presence of:
PETER D S KING
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
SIGNED by J R CHARMAN )
for and on behalf of } J R CHARMAN
CHARMAN GROUP LIMITED )
in the presence of:
PETER D S KING
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
SIGNED by W LOSCHERT ) W J LOSCHERT
for and on behalf of } authorised signatory
ACE LIMITED )
in the presence of: ) EXECUTIVE VICE PRESIDENT
PETER D S KING Title:
PETER KING
One Silk Street
London
EC2Y 8HQ
Solicitor
-37-
Schedule 1 Part 1
Particulars of Vendors, Shares Sold etc.
[Omitted]
-39-
Part 2
Particulars of Directors of the Company
[Omitted]
-41-
Part 3
Particulars of the Company
Registered Number: 2983302
Registered Office: 7th Floor, 1 Minster Court, Mincing Lane, London EC3R
7AA
Date and place of incorporation: 20 October 1994 in England
Secretary: JJ Lloyd
Auditors: Price Waterhouse,
Southwark Towers, 32 London Bridge Street, London SE1
9SY
Solicitors: Linklaters & Paines
One Silk Street
London EC2Y 8HQ
Authorised Share Capital: (Pounds)50,000 divided into 50,000 Deferred Shares of (Pounds)1 each,
and US$7,576,722 divided into 2,658,800 'A' Ordinary
Shares of US$1 each, 5,722 "A" Ordinary Shares of
US$0.01 each, 710,000 "B" Ordinary Shares of US$1 each
and 4,202,200 "C" Ordinary Shares of US$1 each
Issued and fully paid-up Share 50,000 (Pounds)1 Deferred Shares,
Capital: 2,658,800 US$1 "A" Ordinary Shares,
710,000 US$1 "B" Ordinary Shares 4,202,200 US$1 "C"
Ordinary Shares
Shareholders: As set out in Part 1 of Schedule 1
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Part 4
Particulars of the Subsidiaries of the Company
Tarquin Underwriters Limited
Registered Number: 2949447
Registered Office: 7th Floor, 1 Minster Court, Mincing
Lane, London EC3R 7AA
Date and place of incorporation: 15 July 1994 in England and Wales
Directors: JR Charman, JJ Lloyd, SB Gruber,
RA Spass, PH Warren, TR Palmer,
JJB Skinner
Secretary: JJ Lloyd
Auditors: Price Waterhouse,
Southwark Towers, 32 London
Bridge Street, London SE1 9SY
Authorised Share Capital: US$6,725,202 divided into 6,725,202
Ordinary Shares of US$1 each
Issued and fully paid-up Share 6,725,202 Ordinary Shares
Capital:
Shareholders No. of Shares
The Company 6,725,201 Ordinary Shares
Legibus Nominees Ltd 1 Share of US$1
-43-
Charman Group Limited
Registered Number: 2028057
Registered Office: 7th Floor, 1 Minster Court, Mincing
Lane, London EC3R 7AA
Date and place of incorporation: 13 June 1986 in England and Wales
Directors: JR Charman, GA Arnott, RDH
Brindle, JJ Lloyd, TR Palmer, PH
Warren, JJB Skinner
Secretary: JJ Lloyd
Auditors: Coopers & Lybrand
1 Embankment Place, London WC2N
6NN
Authorised Share Capital: (Pounds)101,000 divided into
1,010,000
Ordinary Shares of 10p each
Issued and fully paid-up Share 340,050 Ordinary Shares
Capital:
Shareholders No. of Shares
The Company 340,050 Ordinary Shares
-44-
Charman Underwriting Agencies Limited
Registered Number: 2287773
Registered Office: 7th Floor, 1 Minster Court, Mincing
Lane, London EC3R 7AA
Date and place of incorporation: 17 August 1988 in England and
Wales
Directors: JR Charman, GA Arnott, RDH
Brindle, JJ Lloyd, DG Penney, PH
Warren, TR Palmer
Secretary: JJ Lloyd
Auditors: Coopers & Lybrand
1 Embankment Place, London WC2N
6NN
Solicitors: Linklaters & Paines
One Silk Street
London EC2Y 8HQ
Authorised Share Capital: (Pounds)501,000 divided into 1000 "A"
Management Shares of (Pounds)1 each and
500,000 "B" Ordinary Shares of (Pounds)1
each
Issued and fully paid-up Share 1,000 "A" Management Shares and
Capital: 325,000 "B" Ordinary Shares
Shareholders No. of Shares
CGL 1,000 'A' Management Shares
CGL 325,000 'B' Ordinary Shares
-45-
Charman Trustees Limited
Registered Number: 786590
Registered Office: 7th Floor, 1 Minster Court, Mincing
Lane, London EC3R 7AA
Date and place of incorporation: 2 January 1964 in England and
Wales
Directors: JR Charman, GA Arnott, JJ Lloyd
Secretary: JJ Lloyd
Authorised Share Capital: (Pounds)100 divided into 100
Ordinary
Shares of (Pounds)1 each
Issued and fully paid-up Share 3 Ordinary Shares
Capital:
Shareholders No. of Shares
CUAL 3 Ordinary Shares
-46-
Schedule 2
1. Shelf Registration and Listing
1.1 The Purchaser shall prepare and file with the United States Securities and
Exchange Commission (the "SEC"), as promptly as practicable after the
Completion Date (but in no event later than the date which is 30 calendar
days after the Completion), a registration statement pursuant to Rule 415
under the Securities Act covering all of the Consideration Shares to be
issued pursuant to this Agreement (the "Purchaser Registration Statement".
The Purchaser Registration Statement shall be on Form S-3 or another
appropriate form permitting registration of the Consideration Shares for
resale by the Vendors. The Purchaser shall not permit any securities to be
included in the Purchaser Registration Statement other than the
Consideration Shares to be issued pursuant to this Agreement. The Purchaser
shall use its reasonable best efforts to cause the Purchaser Registration
Statement to be declared effective pursuant to the Securities Act as soon
as practicable after the filing thereof and to keep the Purchaser
Registration Statement continuously effective under the Securities Act
until the earlier of (i) the date which is 24 months following the
Completion Date, (ii) the date that all Consideration Shares covered by the
Purchaser Registration Statement have been sold in the manner set forth and
as contemplated in the Purchaser Registration Statement or (iii) the date
on which each Vendor could sell all of its Consideration Shares issued
pursuant to this Agreement at one time pursuant to Rule 144 (other than
Rule 144(k)) promulgated under the Securities Act (the "Effectiveness
Period"). Each Vendor shall notify Purchaser in writing of the date that
all of its Consideration Shares have been sold in the manner set forth and
as contemplated in the Purchaser Registration Statement.
1.2 The Purchaser shall use its reasonable best efforts to keep the Purchaser
Registration Statement continuously effective during the Effectiveness
Period by supplementing and amending the Purchaser Registration Statement
if required by the rules, regulations or instructions applicable to the
registration form used for such Purchaser Registration Statement. In the
event of an issuance of any stop order suspending the effectiveness of the
Purchaser Registration Statement, or any order suspending or preventing the
use of any related prospectus or suspending the qualification of the
Consideration Shares included in such Purchaser Registration Statement for
sale in any jurisdiction, the Purchaser will use its reasonable best
efforts promptly to obtain the withdrawal of such order. In the event of
the issuance of any such stop order, the Effectiveness Period (if
calculated under Section 1.1(i)) will be extended by the number of days
such stop order is in effect.
1.3 The Purchaser may suspend sales under the Purchaser Registration Statement
or defer the updating of the Purchaser Registration Statement and suspend
sales thereunder for a reasonable period of time (not exceeding 60 days) if
the Purchaser furnishes the Vendors (with such notice to be sent to the
Vendors Representative in the case of the Remaining Vendors) with a notice
signed by an executive officer of the Purchaser (a "Suspension Notice")
stating that, in its good faith judgment, the Purchaser has determined that
maintaining the effectiveness of the Purchaser Registration Statement and
permitting offers and sales thereunder would require the Purchaser to make
public disclosure of information not otherwise required to be publicly
disclosed at such time, the public disclosure of which would have Material
Adverse Effect upon the Purchaser or would adversely affect the ability of
the Purchaser to consummate a material financing, acquisition, disposition
of assets or stock, merger or other comparable transaction. Upon the
receipt of any such notice from the Purchaser, each Vendor agrees to
discontinue disposition of Consideration Shares pursuant to the Purchaser
Registration Statement (a "Black Out") until the earlier of (i) such time
as such Vendor receives copies of a supplemental or amended prospectus,
(ii) such time as such Vendor receives notification from the Purchaser that
such suspension is no longer required or (iii) 60 days, provided, that the
Purchaser may not suspend sales for more than aggregate of 90 days in any
twelve-month period.
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In the event the Purchaser shall give a Suspension Notice, the
Effectiveness Period will be extended by the number of days during the time
period from and including the date of the giving of such Suspension Notice
to and including the date when the Black-Out shall have terminated in
accordance with the immediately preceding paragraph.
2. Registration Procedures.
In any offering hereunder, the Purchaser shall:
2.1 Before filing the Purchaser Registration Statement, any prospectus
supplement or any pre- or post-effective amendment to the Purchaser
Registration Statement in connection with the offering of Consideration
Shares, the Purchaser will furnish to the Vendors Representative copies of
all such documents proposed to be filed and a reasonable opportunity to
comment thereon.
2.2 Subject to Section 2.1 above, prepare and file such post-effective
amendments to the Purchaser Registration Statement as may be necessary to
keep it continuously effective for the Effective Period (including any
extensions thereof in accordance with Section 1.3); cause the related
prospectus to be supplemented by any required prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Securities Act; and comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by the Purchaser Registration Statement during the applicable
period in accordance with the intended methods of disposition by the
sellers thereof set forth in such prospectus as so supplemented.
2.3 Notify the selling holders promptly, and (if required by any such person)
confirm such notice in writing, (i) when the Purchaser Registration
Statement has been filed and when the same has become effective, (ii) of
the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Purchaser
Registration Statement or the initiation of any proceedings for that
purpose, and (iii) of the occurrence of any event which makes any statement
made in the Purchaser Registration Statement or related prospectus or
prospectus supplement, or any document incorporated or deemed to be
incorporated therein by reference, untrue in any material respect or which
requires the making of any changes in the Purchaser Registration Statement,
prospectus, any prospectus supplement or any such document so that, in the
case of the Purchaser Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and, in the case of the prospectus or prospectus supplement,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
2.4 If requested by the holders holding a majority of the Consideration Shares
being registered, (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as such holders agree should be
included therein and (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable after
the Purchaser has received notification of the matters to be incorporated
in such prospectus supplement or post-effective amendment; provided,
however, that the Purchaser will not be required to take any actions under
this Section 2.4 that are not, in the opinion of independent counsel
retained by the Purchaser, in compliance with applicable law.
-48-
2.5 Deliver to each selling holder, without charge, as many copies of the
prospectus or prospectuses relating to such Consideration Shares (including
each preliminary prospectus) and any amendment or supplement thereto as
such persons may reasonably request; and the Purchaser hereby consents to
the use of such Prospectus or each amendment or supplement thereto by each
of the selling holders in connection with the offering and sale of the
Consideration Shares covered by such prospectus or any amendment or
supplement thereto.
2.6 To register or qualify or cooperate with the selling holders in connection
with the registration or qualification (or exemption from such registration
or qualification) of such Consideration Shares for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States
as any seller reasonably requests in writing; use all reasonable efforts to
keep such registration or qualification (or exemption therefrom) effective
during the period the Purchaser Registration Statement is required to be
kept effective and do any and all other acts or things necessary or
advisable to enable the disposition in each such jurisdiction of the
Consideration Shares covered by the Purchaser Registration Statement;
provided, however, that the Purchaser will not be required to (i) qualify
to do business in any jurisdiction in which it is not then so qualified or
(ii) take any action that would subject it to service of process in any
such jurisdiction in which it is not then so subject.
2.7 Upon the occurrence of any event contemplated by Section 2.3(iii) hereof,
prepare and file a supplement or post-effective amendment to the Purchaser
Registration Statement or a supplement to the related prospectus or any
document incorporated therein by reference or any other required document
so that, as thereafter delivered to the purchasers of the Consideration
Shares being sold thereunder, such prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
2.8 The Purchaser may require each seller of Consideration Shares as to which
any registration is being effected to furnish to the Purchaser such
information regarding the distribution of such Consideration Shares as the
Purchaser may, from time to time, reasonably request in writing in order to
provide adequate disclosure in the Purchaser Registration Statement and the
Purchaser may exclude from such registration the Consideration Shares of
any seller who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
3. Registration Expenses.
All fees and expenses incident to the performance of or compliance with the
terms of this Schedule 2 by the Purchaser will be borne by the Purchaser.
Such fees and expenses will include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and
expenses for compliance with securities or "blue sky" laws), (ii) printing
expenses (including, without limitation, expenses of printing certificates
of Consideration Shares in a form eligible for deposit with The Depository
Trust Company and of printing a reasonable number of prospectuses and
prospectus supplements if the printing thereof is requested by the holders
of a majority of the Consideration Shares participating in the offering),
(iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Purchaser, (v) fees and disbursements of
all independent certified public accountants of Purchaser and (vi) fees and
expenses of all other persons retained by the Purchaser. In addition, the
Purchaser will pay its internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit, the fees and expenses
incurred in connection with the listing of the securities to be registered
on any securities exchange on which similar securities issued by the
Purchaser are then listed and the fees and expenses of any person,
including special experts, retained by the Purchaser. In no event, however,
will the Purchaser be responsible for any selling commission with respect
to any sale of Consideration Shares pursuant to this Agreement, and the
holders shall be responsible on a pro rata basis for any taxes of any kind
(including, without limitation, transfer taxes) with respect to any
disposition, sale or transfer of Consideration Shares and for any legal,
accounting and other expenses incurred by them in connection with any
offering of Consideration Shares hereunder.
4. Indemnification.
4.1 Indemnification by the Purchaser. The Purchaser will indemnify and hold
harmless each holder of Consideration Shares registered pursuant to this
Agreement, the officers, directors, agents and employees of each of them,
each person who controls such a holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of any such controlling person, from and
against all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable attorneys' fees and expenses, and the costs incurred
in connection with defending any investigation) and expenses (collectively,
"Losses"), arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in the Purchaser Registration
Statement, prospectus or form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are based solely upon
information furnished in writing to the Purchaser by such holder expressly
for use therein.
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4.2 Indemnification by Holders. In connection with the offering in which a
holder is participating, such holder will furnish to the Purchaser in
writing such information as the Purchaser may reasonably request for use in
connection with the Purchaser Registration Statement, prospectus or any
amendment or supplement thereto or preliminary prospectus and will
indemnify, to the fullest extent permitted by law, the Purchaser, its
respective directors and officers, agents and employees, each person who
controls the Purchaser (within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act), and the directors, officers,
agents or employees of such controlling persons, from and against all
Losses arising out of or based upon any untrue statement of a material fact
contained in any Registration Statement, prospectus or any amendment or
supplement thereto or preliminary prospectus or arising out of or based
upon any omission of material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in
any information so furnished in writing by such holder to the Purchaser
expressly for use in such Registration Statement, prospectus or any
amendment or supplement thereto or preliminary prospectus.
4.3 Conduct of Indemnification Proceedings. If any person shall become entitled
to indemnity hereunder (an "Indemnified Party"), such Indemnified Party
shall give prompt notice to the party from which such indemnity is sought
(the "Indemnifying Party") of any claim or of the commencement of any
action or proceeding with respect to which such Indemnified Party seeks
indemnification or contribution pursuant hereto; provided, however, that
the failure to so notify the Indemnifying Party will not relieve the
Indemnifying Party from any obligation or liability except to the extent
that the Indemnifying Party has been prejudiced materially by such failure.
In case any such action is brought against an Indemnified Party, unless in
such Indemnified Party's reasonable judgment a conflict of interest between
such Indemnified and Indemnifying Parties may exist in respect of such
claim, the Indemnifying Party will be entitled to participate in and,
jointly with any other Indemnifying Party similarly notified, to assume the
defense thereof, to the extent that it may wish, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the
Indemnifying Party to such Indemnified Party of its election so to assume
the defense thereof, the Indemnifying Party will not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof, unless in such
Indemnified Party's reasonable judgment a conflict of interest between such
Indemnified and Indemnifying Parties arises in respect of such claim after
the assumption of the defense thereof, and the Indemnifying Party will not
be subject to any liability for any settlement made without its consent
(which consent shall not be unreasonably withheld). The Indemnifying Party
will not consent to entry of any judgment or enter into any settlement or
otherwise seek to terminate any action or proceeding in which any
Indemnified Party is or could be a party and as to which indemnification or
contribution could be sought by such Indemnified Party under this Section
4, unless such judgment, settlement or other termination includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release, in form and substance satisfactory to the
Indemnified Party, from all liability in respect of such claim or
litigation for which such Indemnified Party would be entitled to
indemnification hereunder. An Indemnifying Party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel in any single jurisdiction
for all parties indemnified by such Indemnifying Party with respect to such
claim, unless in the reasonable judgment of any Indemnified Party a
conflict of interest may exist between such Indemnified Party and any other
of such Indemnified Parties with respect to such claim, in which event the
Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel or counsels as may be reasonably necessary.
Notwithstanding anything else to the contrary herein, and without limiting
the rights set forth above, in any event any party will have the right to
retain, at its own expense, counsel with respect to the defense of a claim.
4.4 Contribution. If the indemnification provided for in this Section 4 is
unavailable to an Indemnified Party in respect of any Losses or is
insufficient to hold such Indemnified Party harmless, then each applicable
Indemnifying Party, in lieu of indemnifying such Indemnified Party, will,
severally but not jointly, contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party or
Indemnifying Parties, on the one hand, and such Indemnified Party, on the
other hand, in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party or
Indemnifying Parties, on the one hand, and such Indemnified Party, on the
other hand, will be determined by reference to, among other things, whether
any action in question, including any untrue or alleged untrue statement of
a material fact or omission or alleged omission of a material fact, has
been taken or made by, or related to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties'
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relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses will be deemed to include any
legal or other fees or expenses incurred by such party in connection with
any action or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.4 were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Notwithstanding the provisions of this Section 4, an Indemnifying Party
that is a selling holder will not be required to pay any amount in respect
of indemnity hereunder or contribute any amount hereunder in excess of the
amount by which the total price at which the Consideration Shares sold by
such Indemnifying Party were offered to the public exceeds the amount of
any damages which such Indemnifying Party has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or
alleged omission.
The indemnity, contribution and expense reimbursement obligations of the
Purchaser hereunder will be in addition to any liability the Purchaser may
otherwise have hereunder or otherwise. The provisions of this Section 4
will survive so long as Consideration Shares remain outstanding,
notwithstanding any permitted transfer of the Consideration Shares by any
holder thereof or any termination of this Agreement.
5. Transfer of Rights
5.1 In connection with a transfer of Purchaser's Ordinary Shares other than
pursuant to the Purchaser Registration Statement or Rule 144, the rights of
each holder of Consideration Shares under this Schedule 2 may be assigned
by each holder (i) if the holder is a corporation (other than a publicly-
held corporation), to a shareholder or shareholders of such holder, (ii) if
the holder is a partnership (other than a publicly-held partnership), to a
partner or partners of that partnership, (iii) if the holder is an
individual, to a family member of that holder, (iv) upon the death of the
holder, to the heirs of the holder by virtue of the holder's will or the
laws of descent and distribution, (v) if the holder is a corporation or a
partnership, to any person into or with which the holder is merged or
consolidated or to which the holder sells all or substantially all of its
assets, (vi) in connection with a bona fide pledge of Consideration Shares,
to the pledgee or (vii) to an entity controlled by or under common control
with the holder. No such assignment of rights shall be effective until
Purchaser shall receive written notice thereof in the manner specified in
the Agreement. In the event of any such permitted assignment, the assignee
shall be entitled to further assign as permitted under this Section 5.
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Schedule 3 Part 1
Warranties given by the Vendors under Clause 6
1 Authority and Capacity of the Vendors
1.1 Each of the Vendors has the legal right and full power and authority (or,
in the case of each Vendor which is not a natural person, full corporate or
partnership power and authority) to enter into and perform this Agreement and
any other documents to be executed by the relevant Vendor pursuant to or in
connection with this Agreement which when executed will constitute valid and
binding obligations on each Vendor, in accordance with their respective terms.
1.2 The execution and delivery of, and the performance by the relevant Vendor
of his obligations under, this Agreement and any other documents to be executed
by such Vendor pursuant to or in connection with this Agreement will not:
1.2.1 result in a breach of any provision of the memorandum or articles
of association or equivalent constitutional document of that
Vendor; or
1.2.2 result in a material breach of or give any third party a right to
terminate or modify, or result in the creation of any material
Encumbrance under any agreement, licence or other instrument or
result in a material breach of any order, judgment or decree of
any Court, governmental agency or regulatory body to which that
Vendor is a party or by which that Vendor or any of that Vendor's
respective assets is bound.
1.3 Each of the Vendors is entitled to sell and transfer to the Purchaser the
full legal and beneficial ownership of the Shares set opposite its name in Part
1 of Schedule 1 on the terms of this Agreement (except in the case of Shares
held by CTL, EBCAM Nominees (Jersey) Limited re JRC Children's Settlement and
EBCAM Nominees (Jersey) Limited re the Dragon Trust, who are each entitled to
sell and transfer as trustee).
Part 2
2 Due Incorporation and Share Capital
2.1 The Group Companies are companies duly incorporated and validly existing
under the laws of England and Wales.
2.2 The Shares comprise the whole of the allotted and issued share capital of
the Company and have been validly allotted and issued and are each fully paid.
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2.3 No person has the right (whether exercisable now or in the future and
whether contingent or not) to call for the allotment, conversion, issue, sale or
transfer of any share or loan capital or any other security giving rise to a
right over the capital of any Group Company under any option or other agreement
(including conversion rights and rights of pre-emption) and there are no
Encumbrances on the shares of any Group Company or any arrangements or
obligations to create any Encumbrances.
3 Accuracy and Adequacy of Information Disclosed to the Purchaser
3.1 All information contained in Schedules 1 and 5 of this Agreement is true,
accurate and complete in all respects.
3.2 There are no subsidiaries of the Company other than those listed in Part 4
of Schedule 1.
4 Accounts and Records
4.1 Latest Accounts
4.1.1 The UK GAAP Audited Accounts have been prepared in accordance with
applicable law and in accordance with UK GAAP, standards and
practices generally accepted in the United Kingdom so as to give a
true and fair view of the state of affairs of the Company and of
the Group at the Balance Sheet Date and of the profits and cash
flows of the Group for the year then ended.
4.1.2 The consolidated financial statements of the Company comprising
the US GAAP Audited Accounts which are attached to the Vendors'
Disclosure Letter have been prepared in accordance with US GAAP
applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present in
all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows
for the periods then ended.
4.2 Syndicate Accounts
4.2.1 The Syndicate Accounts have been prepared in accordance with the
Lloyd's syndicate accounting rules.
4.2.2 The audited annual report of Syndicate 488 and the audited annual
report of Syndicate 2488 as at the Balance Sheet Date gives a true
and fair view of the 1995 closed year of account profit.
4.3 Lloyds Member's Personal Account
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The net result shown in each Lloyd's member's personal account in respect of the
1995 year of account of Syndicate 488 has been calculated in accordance with the
applicable agency agreements.
4.4 Syndicate Quarterly Report
The Syndicate Quarterly Report has been prepared in accordance with the Lloyd's
syndicate accounting rules.
4.5 Accounting and other Records
The statutory books, books of account and other records of whatsoever kind of
each Group Company are up-to-date and maintained in accordance with all
applicable legal requirements on a proper and consistent basis and contain
complete and accurate records of all matters required to be dealt with in such
books and all such books and records and all other documents (including
documents of title and copies of all subsisting agreements to which any Group
Company is a party) which are the property of each Group Company or ought to be
in its possession are in its possession (or under its control) and no notice or
allegation that any is incorrect or should be rectified has been received. All
accounts, documents and returns required by law to be delivered or made to the
Registrar of Companies or any other authority have been duly and correctly
delivered or made.
4.6 Changes since Balance Sheet Date
4.6.1 Since the Balance Sheet Date, there has been no Material Adverse
Change with respect to the Company, and no development, event,
fact or matter has occurred which will or is likely to give rise
to any such Material Adverse Change; and
4.6.2 Since the Balance Sheet Date, as regards each Group Company:
(i) its business has been carried on in the ordinary course,
without any interruption or alteration in its nature, scope
or manner, and so as to maintain the same as a going
concern;
(ii) it has not entered into any transaction or assumed or
incurred any material liabilities (including contingent
liabilities) or made any payment not provided for in the UK
GAAP Audited Accounts otherwise than in the ordinary course
of carrying on its business;
(iii) its profits have not been affected to a material extent by
changes or inconsistencies in accounting treatment, by any
non-recurring items of income or expenditure, by
transactions of an abnormal or unusual nature or entered
into otherwise than on normal commercial terms or by any
other factors rendering such profits exceptionally high or
low;
(iv) no dividend or other distribution has been declared, made or
paid to its members except as provided for in the relevant
balance sheet;
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(v) no share or loan capital or any other security giving rise
to a right over the capital has been allotted or issued or
agreed to be allotted or issued;
(vi) it has not redeemed or purchased or agreed to redeem or
purchase any of its share capital; and
(vii) it has not made or received any surrender relating to group
relief or the benefit of advance corporation tax.
5 Legal Matters
5.1 Compliance with Laws
Each of the Group Companies has carried on and is carrying on its business and
operations in all respects so that there have been no breaches of applicable
laws (including the requirements of the Council, as relevant), in each country
in which they are carried on, except where any of the foregoing, individually or
in the aggregate, would not have a Material Adverse Effect.
There have not been and are not any breaches by any Group Company of its
constitutional documents.
There has not since 10 June, 1996 been and there is no investigation or enquiry
by, or order, decree, decision or judgment of, any court, tribunal, arbitrator,
governmental agency or regulatory body (including Lloyd's) outstanding or
anticipated against any Group Company or any person for whose acts or defaults
they may be vicariously liable which has had or may have a Material Adverse
Effect; nor any written notice or other communication (official or otherwise)
from any court, tribunal, arbitrator, governmental agency or regulatory body
(including Lloyd's) with respect to an alleged actual or potential violation
and/or failure to comply with any such applicable law, regulation, byelaw or
constitutional document, or requiring it/them to take or omit any action nor is
any such notice or communication anticipated, in each case, except where any of
the foregoing would not, individually or in the aggregate, have a Material
Adverse Effect.
5.2 Licences, Consents etc.
All licences, consents, authorisations, orders, warrants, confirmations,
permissions, certificates, approvals and authorities (in this paragraph 5.2
(other than licences of intellectual property) Licences) necessary or desirable
for the carrying on of the businesses and operations of each of the Group
Companies and the Combined Syndicates have been obtained, are in full force and
effect and have been and are being complied with. There is no investigation,
enquiry or proceeding outstanding or threatened in writing which is likely to
result in the suspension, cancellation, modification or revocation of any of
such Licences. None of such Licences has been breached or is likely to be
suspended, cancelled, refused, modified or revoked (whether as a result of the
entry into or completion of this Agreement or otherwise).
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5.3 Litigation
5.3.1 No Group Company nor Syndicate 488 nor Syndicate 2488 (other than
in the normal course of carrying on insurance or reinsurance
business) is involved whether as plaintiff or defendant or other
party in any claim, legal action, proceeding, suit, litigation,
prosecution, investigation, enquiry or arbitration (other than as
plaintiff in the collection of debts arising in the ordinary
course of its business none of which exceeds (Pounds)10,000) and
no such claim, legal action, proceeding, suit, litigation,
prosecution, investigation, enquiry or arbitration of material
importance is pending or has been threatened in writing by or
against any Group Company or Syndicate 488 nor Syndicate 2488.
5.3.2 There are no investigations, disciplinary proceedings or other
circumstances which are likely to lead to any such claim or legal
action, proceeding, suit, litigation, prosecution, investigation,
enquiry or arbitration, which would individually or in the
aggregate have a Material Adverse Effect.
5.4 Insolvency etc.
5.4.1 No order has been made, petition presented, resolution passed or
meeting convened for the winding up (or other process whereby the
business is terminated and the assets of the company concerned are
distributed amongst the creditors and/or shareholders or other
contributories) of any Group Company and there are no cases or
proceedings under any applicable insolvency, reorganisation, or
similar laws in any jurisdiction concerning any Group Company and
no events have occurred which, under applicable laws, would
justify any such cases or proceedings.
5.4.2 No petition has been presented or other proceedings have been
commenced for an administration order to be made (or any other
order to be made by which during the period it is in force, the
affairs, business and assets of the company concerned are managed
by a person appointed for the purpose by a Court, governmental
agency or similar body) in relation to any Group Company, nor has
any such order been made.
5.4.3 No receiver (including an administrative receiver), liquidator,
trustee, administrator, custodian or similar official has been
appointed in any jurisdiction in respect of the whole or any part
of the business or assets of any Group Company and no step has
been taken for or with a view to the appointment of such a person.
5.4.4 No Group Company is insolvent or unable to pay its debts as they
fall due.
6 Trading and Contractual Arrangements
6.1 Capital Commitments
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Since the last Balance Sheet Date there have been no material capital
commitments entered into or proposed by any of the Group Companies. For these
purposes, a material capital commitment is one involving capital expenditure of
over (Pounds)10,000 per item or (Pounds)100,000 in the aggregate.
6.2 Authority and Capacity of the Company
The execution and delivery of, and the performance by the Company of its
obligations under, this Agreement and any other documents to be executed by the
Company pursuant to or in connection with this Agreement will not:
6.2.1 result in a breach of any provision of the memorandum or articles
of association; or
6.2.2 result in a material breach of or give any third party right to
terminate or modify, or result in the creation of any material
Encumbrance under any agreement, licence or other instrument or
result in a material breach of any order, judgment or decree of
any Court, governmental agency or regulatory body to which the
Company is a party or by which the Company or any of its assets is
bound.
6.3 Arrangements with Connected Persons etc.
6.3.1 There is no indebtedness (actual or contingent) nor any indemnity,
guarantee or security arrangement between any Group Company or any
Vendor and any current or former employee, current or former
director or any current or former consultant of any Group Company
or any person connected with any of such persons.
6.3.2 No Group Company is a party to any contract, arrangement or
understanding with any current or former employee, current or
former director or any current or former consultant of any Group
Company or any person connected with any of such persons, or in
which any such person as aforesaid is interested (whether directly
or indirectly), other than on normal commercial terms in the
ordinary course of business.
6.3.3 With the exception of the contracts and arrangements details of
which are set out in the Vendors' Disclosure Letter, there are no
existing contracts or arrangements between or involving any Group
Company and any of the Vendors and/or any director of any Group
Company and/or any person connected with any of them other than on
normal commercial terms in the ordinary course of business.
6.4 Contracts
No Group Company is party to any long-term commitments, contracts or
arrangements or any such not wholly on an arm's length basis in the ordinary
course of business. For these purposes, a long-term contract, commitment or
arrangement is one which is unlikely to have been fully performed in accordance
with its terms more than six months after the date it was entered into or
undertaken or is incapable of termination by the relevant Group Company on six
months notice or less.
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6.5 Compliance with Agreements
All the contracts and all leases, tenancies, licences (other than licences of
intellectual property), concessions and agreements of whatsoever nature to which
any of the Group Companies is a party which are material to the business and
operations of the Group Companies as a whole are valid, binding and enforceable
obligations of the parties thereto and the terms thereof have been complied with
by the relevant Group Company and by all the other parties thereto and there are
no grounds for rescission, avoidance or repudiation of any of the contracts or
such leases, tenancies, licences, concessions or agreements and no written
notice of termination or of intention to terminate has been received in respect
of any thereof.
6.6 Guarantees etc.
Save as disclosed in the US GAAP Audited Accounts and the UK GAAP Audited
Accounts, there is not outstanding any guarantee, indemnity, suretyship or
comfort (whether or not legally binding) given by or for the benefit of any
Group Company.
6.7 Loans
The only loan outstanding at the date of this Agreement is the Boston Loan.
7 Employees etc.
7.1 Employees and Terms of Employment
7.1.1 There are no employees employed in the Group Companies other than
those whose details are set out in the Vendors' Disclosure Letter.
7.1.2 There is not in existence any written contract of employment with
any director or employee of any Group Company, nor any consultancy
agreements with any Group Company, which cannot be terminated by
three months' notice or less without giving rise to any claim for
damages or compensation (other than a statutory redundancy payment
or statutory compensation for unfair dismissal).
7.1.3 The Vendors' Disclosure Letter contains full details, in relation
to each Group Company, of:
(i) the total number of employees (including those who are on
maternity or paternity leave or absent on the grounds of
disability or other long-term leave of absence, and have or
may have a statutory or contractual right to return to work
in a Group Company);
(ii) the name, date of commencement of employment, period of
continuous employment, location, salary and other benefits,
grade and age of each employee;
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(iii) where any employee is continuously absent from work for a
period in excess of one month, the reason for the absence;
(iv) the terms of the contract of employment of each employee
entitled to salary at a rate, or an average annual rate over
the last three financial years, in excess of (Pounds)40,000
a year; and
(v) the terms of all consultancy agreements.
7.1.4 Except as contemplated by this Agreement, there are no proposals
to terminate the employment or consultancy of any employees or
consultants of any Group Company or to vary or amend their terms
of employment or consultancy (whether to their detriment or
benefit).
7.1.5 There are no terms of employment for employees at any Group
Company or consultancy agreements with any Group Company or terms
of appointment for directors of any Group Company which provide
that a change in control of any Group Company (however change in
control may be defined in the said document, if at all) shall
entitle the said employee, consultant or director to treat the
change in control as amounting to a breach of the contract or
entitling him to any payment or benefit whatsoever or entitling
him to treat himself as redundant or dismissed or released from
any obligation.
7.2 Payments on Termination
Except as disclosed in the US GAAP Audited Accounts and the UK GAAP Audited
Accounts:
7.2.1 no liability has been or may be incurred by any Group Company for
breach of any contract of employment or consultancy with any
employee, former employee or consultant including, without
limitation, redundancy payments, protective awards, compensation
for wrongful dismissal or unfair dismissal or for failure to
comply with any order for the reinstatement or re-engagement of
any employee; and
7.2.2 no Group Company has made or agreed to make any payment or
provided or agreed to provide any benefit to any employee or
former employee of any Group Company or any dependant of any such
employees or former employee in connection with the proposed
termination or suspension of employment or variation of any
contract of employment of any such employee or former employee.
7.3 Trade Disputes
No Group Company is involved in any industrial or trade dispute or any dispute
or negotiation regarding a claim of material importance with any trade union or
other body.
7.4 Incentive Schemes
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There is not in existence nor is it proposed to introduce any share incentive,
share option, profit sharing, bonus or other incentive, arrangements for or
affecting any employees or former employees.
7.5 Pensions
7.5.1 Definitions
For the purposes of the Warranties in paragraphs 7.5 to 7.9:
Approved means approved by the Board of Inland Revenue for the
purposes of Chapter I of Part XIV of the Taxes Act and references
to Approval shall be construed accordingly;
Disclosed Scheme means the Final Salary Scheme and the Money
Purchase Plan;
Employee means any director, former director, employee or former
employee of any Group Company;
Executive Pension Plan means the pension scheme with Scottish Life
to which the Company contributes in respect of benefits for Mr
John Charman;
Final Salary Scheme means the Charman Underwriting Agencies
Limited Retirement Benefits Scheme; and
Money Purchase Plan means the CGL Retirement Benefits Scheme; and
Schemes means the Disclosed Schemes and the Executive Pension
Plan.
7.5.2 Schemes - general
Other than the Disclosed Scheme and the Executive Pension Plan
there is not in operation, and no proposal has been announced to
enter into or establish, any agreement, arrangement, custom or
practice (whether legally enforceable or not or whether or not
Approved) to which the Company or other employer contributes (or
promises to provide on an unfunded basis) for the payment of, any
pensions, lump sums or other like benefits on retirement, death,
termination of employment (whether voluntary or not) or during
periods of sickness or disablement, for the benefit of any
Employee or for the benefit of the dependants of any Employee.
7.6 Schemes - disclosed
7.6.1 Full details of each Disclosed Scheme have been given to the
Purchaser in the form of:
(i) copies of all deeds and rules governing the Disclosed Scheme;
(ii) copies of the explanatory literature issued to employees who
are or may become members of the Disclosed Scheme and copies
of any announcement issued to any
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employees who are members of the Disclosed Scheme in respect
of benefit improvements or other amendments not yet
incorporated into the documentation of the Disclosed Scheme;
(iii) a copy of the report of the most recent actuarial valuation
or funding review of the Final Salary Scheme which has been
received (in draft or final form) before the date of this
Agreement together with copies of any written supplementary
actuarial advice relating to the funding of that Scheme;
(iv) a copy of the audited accounts of the Disclosed Scheme for
the last scheme year; and
(v) a list of each Disclosed Scheme's active members, pensioners
and deferred pensioners with all particulars of them
relevant to their membership of the Disclosed Scheme and
necessary to establish their entitlements to benefits.
7.6.2 All material benefits (other than refunds of contributions)
payable under each Disclosed Scheme on the death of a member of
the Disclosed Scheme or during periods of sickness or disability
of the member are at the date of this Agreement fully insured
under a policy effected with Legal & General and all material
insurance premiums payable have been paid.
7.6.3 No payment or repayment of any of the assets of any Disclosed
Scheme has been made to any Group Company or to any other employer
participating in the Disclosed Scheme since the date of the most
recent actuarial valuation or funding review disclosed to the
Purchaser.
7.6.4 No person holds, as an asset of any Disclosed Scheme, any
securities issued by, properties leased to or occupied or
previously owned by, and no loans have been made out of the assets
of the Disclosed Scheme which are, at the date of this Agreement,
outstanding to the shareholders or any Group Company.
7.6.5 There are no actions, suits or claims (other than routine claims
for benefits) outstanding, pending or threatened against the
trustees or administrator of any Disclosed Scheme or the Executive
Pension Plan in respect of any act, event, omission or other
matter arising out of or in connection with the Disclosed Scheme
or the Executive Pension Plan and none of the Vendors is aware of
any circumstances which may give rise to any such claim.
7.7 Funding of the Disclosed Scheme
7.7.1 Except in the ordinary course, there is not at the date of this
Agreement any contribution to any Disclosed Scheme which has
fallen due but is unpaid.
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7.7.2 The Final Salary Scheme is sufficiently and effectively funded on
an on-going basis using the actuarial assumptions which were used
for the valuation as at 1 January 1995 to secure all benefits
currently, prospectively and contingently payable under the Final
Salary Scheme at least to the extent to which they have accrued at
the date of this Agreement.
7.7.3 There is set out in or annexed to the Vendors' Disclosure Letter a
statement of the basis on which each Group Company has undertaken
to contribute to the Money Purchase Scheme.
7.7.4 No assurance, promise or guarantee (whether oral or written) has
been made or given to any member of the Money Purchase Scheme of
any particular level or amount of benefits (other than insured
lump sum death in service benefits referred to in paragraph 7.6.2)
to be provided for or in respect of him under the Money Purchase
Scheme on retirement, death or leaving service and each Group
Company may terminate any obligation it may have to contribute to
such Money Purchase Scheme without incurring any liability under
any agreement or arrangement with the member.
7.7.5 No power or discretion to augment benefits under any of the
Schemes has been exercised in favour of an Employee in the last 5
years as there is no obligation in respect of any employee to do
so.
7.8 Disclosed Schemes - compliance
7.8.1 The Schemes are Approved and none of the Vendors is aware of any
circumstances which might give the Board of Inland Revenue reason
to withdraw Approval.
7.8.2 The Schemes are contracted-out schemes for the purposes of the
Pension Schemes Act 1993 and have been administered in accordance
with the contracting-out requirements of Part III of that Act.
7.8.3 The Disclosed Schemes and the Executive Pension Plan have at all
times been operated in accordance with their governing
documentation and in accordance with all applicable laws and
regulatory requirements including, without limitation, the
requirements of Article 119 of the Treaty of Rome relating to
equal benefits and admission to membership (except insofar as it
relates to GMPs) and the requirements of the Pensions Act 1995.
7.9 Executive Pension Plan
The rules of and a current benefit statement for the Executive Pension Plan have
been disclosed to the Purchaser. The Executive Pension Plan is a defined
contribution scheme, of which John Charman is the only member. No person is
principal employer of the Executive Pension Plan other than CUAL, and no person
is a participating employer in the Executive Pension Plan other than CUAL. There
are no circumstances in which the liability (whether actual or contingent) of
CUAL (or any other Group Company) to the Executive Pension Plan could (in
aggregate) exceed 40 per cent. of the basic
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annual salary of John Charman. Other than in the ordinary course of business,
there are no contributions to the Executive Pension Plan which have fallen due
but are unpaid.
8 Taxation Matters
8.1 Returns, Information and Clearances
8.1.1 All returns, computations, notices and information which are or
have been required to be made or given by each Group Company for
any Taxation purpose (i) have been made or given within the
requisite periods and on a proper basis and are up-to-date and
correct and (ii) none of them is, or is likely to be, the subject
of any dispute with the Inland Revenue or other Taxation
authorities.
8.1.2 Each Group Company is in possession of sufficient information to
enable it to compute its liability to Taxation insofar as it
depends on any Transaction occurring on or before Completion.
8.2 Taxation Claims, Liabilities and Reliefs
8.2.1 There are set out in the Vendors' Disclosure Letter, with express
reference to this paragraph, details of all matters relating to
Taxation in respect of which each Group Company (either alone or
jointly with any other person) has, or at Completion will have, an
outstanding entitlement to make: any claim (including a
supplementary claim) for relief; any election, including an
election for one type of relief, or one basis, system or method of
Taxation, as opposed to another; any appeal or further appeal
against an assessment to Taxation; any application for the
postponement of, or payment by instalments of, Taxation; or to
disclaim or require the postponement of any allowance or relief.
Such details are reasonably sufficient to enable the Purchaser to
procure that any time limit to such entitlement expiring within
six months after Completion can be met.
8.2.2 No relief (whether by way of deduction, reduction, set-off,
exemption, postponement, roll-over, hold-over, repayment or
allowance or otherwise) from, against or in respect of any
Taxation has been claimed and/or given to any Group Company which
could or might be effectively withdrawn, postponed, restricted,
clawed back or otherwise lost as a result of any act, omission,
event or circumstance arising or occurring in the ordinary course
of business at or at any time after Completion.
8.3 Close Companies
No Group Company is, nor has ever been, a close company.
8.4 Company Residence
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Each Group Company has been resident for tax purposes in the United Kingdom and
nowhere else at all times since its incorporation and will be so resident at
Completion.
8.5 Acquisitions from Members of the same Group
The entry into or Completion of this Agreement will not result in any profit or
gain being deemed to accrue to any Group Company for Taxation purposes, whether
pursuant to Section 179 of the Taxation of Chargeable Gains Act 1992 (TCGA) or
otherwise.
8.6 Replacement of Business Assets
No claim has been made under Section 152, 153, 154 or 175 TCGA or any other
section which would affect the amount of any gain accruing or being treated as
accruing on a disposal of an asset of any Group Company.
8.7 Base Values and Costs of Acquisition
If each of the assets (other than trading stock) or the plant and machinery
taken as a whole of each Group Company was disposed of for a consideration equal
to the book value of that asset or, as appropriate, plant and machinery in, or
adopted for the purpose of, the Audited Accounts, no liability to corporation
tax on chargeable gains or balancing charge under the Capital Allowances Act
1990 not fully provided for in the Audited Accounts would arise; and, for the
purpose of determining corporation tax on chargeable gains, there shall be
disregarded any relief and allowances available to the Group Company concerned
other than amounts falling to be deducted under Section 38 TCGA.
8.8 Rebasing
No Group Company has made a disposal to which Section 35 TCGA applies.
8.9 PAYE and National Insurance
Each Group Company has properly operated the PAYE and National Insurance
contributions systems by making such deductions as are required by law from all
payments made or deemed to be or treated as made by it or on its behalf, and by
duly accounting to the Inland Revenue for all sums so deducted and for all other
amounts for which it is required to account under the PAYE and National
Insurance contributions systems.
8.10 Depreciatory Transactions and Value Shifting
No asset owned by any Group Company has at any time since its acquisition by
that or any other Group Company or any company which has at any time been a
member of a group (as defined from time to time for any Taxation purpose) of
which the Group Company has at any time been a member
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been subjected to a reduction in value such that any allowable loss arising on
its disposal is likely to be reduced or eliminated or any chargeable gain
arising on its disposal is likely to be increased.
8.11 Value Added Tax (VAT)
8.11.1 Each Group Company has complied fully with all statutory
requirements, orders, provisions, directions or conditions
relating to VAT, including (for the avoidance of doubt) the terms
of any agreement reached with the Commissioners of Customs &
Excise.
8.11.2 No Group Company is a "developer" as defined in paragraph 5
Schedule 10 Value Added Tax Act 1994 in relation to any building
or work within paragraph 5(2) of that Schedule or any
reconstructions, enlargements or extensions within paragraph 5(8)
of that Schedule either currently being constructed,
reconstructed, enlarged or extended or whose construction,
reconstruction, enlargement or extension was completed within a
ten-year period prior to Completion.
9 Assets
9.1 Subsidiaries, Associates and Branches
No Group Company:
9.1.1 is the holder or beneficial owner of, or has agreed to acquire,
any share or loan capital of any other company (whether
incorporated in the United Kingdom or elsewhere) other than the
Subsidiaries set out in Part 4 of Schedule 1;
9.1.2 has any branch, division, establishment or operations outside the
jurisdiction in which it is incorporated; or
9.1.3 has any associated company (that is to say, a company which falls
to be treated as such for the purposes of SSAP1).
9.2 Title to Assets
All assets of each Group Company (including all debts due to each Group Company)
which are included in the Audited Accounts or have otherwise been represented as
being the property of or due to such Group Company as at the Balance Sheet Date
used or held for the purposes of its business were at the Balance Sheet Date the
absolute property of such Group Company and (save for those subsequently
disposed of or realised in the ordinary course of trading) all such assets and
all assets and debts which have subsequently been acquired or arisen are the
absolute property of such Group Company and none is the subject of any
assignment or Encumbrance (excepting only liens arising by operation of law in
the normal course of trading) or the subject of any factoring arrangement, hire-
purchase, conditional sale or credit sale agreement.
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9.3 Insurance
9.3.1 Full particulars of the insurances of the Group Companies (other
than direct insurance, inwards reinsurance and outwards
reinsurance written by any of the Group Companies) are contained
in the Vendors' Disclosure Letter to which copies of the policies
are attached.
9.3.2 In respect of all such insurances:
(i) all premiums have been duly paid to date;
(ii) all the policies are in full force and effect and no act,
omission, misrepresentation or non-disclosure by or on
behalf of any Group Company has occurred which makes any of
these policies voidable, nor have any circumstances arisen
which would render any of these policies void or
unenforceable for illegality or otherwise, nor has there
been any breach of the terms, conditions and warranties of
any of the policies that would entitle insurers to decline
to pay all or any part of any claim made under the policies;
(iii) details of all claims known to each of the Vendors made
during the period of three years in excess of (Pounds)10,000
per claim preceding the date of this Agreement are contained
in the Vendors' Disclosure Letter; and
(iv) save as disclosed in the Vendors' Disclosure Letter, no
claim is outstanding in excess of (Pounds)10,000 per claim
arising out of motor vehicles and no circumstances exist
which are likely to give rise to any claim in excess of
(Pounds)10,000 per claim.
10 Property
10.1 The Property
The Property shown in Schedule 5 comprises all of the premises and land owned,
leased, occupied or used in connection with the businesses of the Group
Companies.
10.2 Title
In relation to the Property, CUAL jointly with CGL has a good and marketable
leasehold title to the Property and has performed and observed in all respects
all its obligations under a lease of the Property.
10.3 Outstanding property liabilities
Except in relation to the Property, no Group Company has a liability (actual or
contingent) arising out of a conveyance, transfer, lease, tenancy, licence,
agreement or other document relating to land, premises or an interest in land or
premises (other than any liability arising under any agreement for insurance or
reinsurance).
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11 Lloyd's
11.1 CUAL is registered as a Managing Agent at Lloyd's. Its registration as a
Managing Agent has not at any stage since its first registration been withdrawn,
and no notice has been given by Lloyd's to the effect that (and no circumstances
exist such that) registration will or is likely to be withdrawn or reviewed and
no conditions, obligations or undertakings have been imposed on CUAL's
registration.
11.2 TUL is registered as a Corporate Member at Lloyd's. Its registration as a
Corporate Member has not been withdrawn since its first registration and no
notice has been given by Lloyd's to the effect that (and no circumstances exist
such that) the registration will or is likely to be withdrawn or reviewed.
11.3 The Combined Syndicates are the only Lloyd's syndicates for which CUAL is
a Managing Agent. CUAL has not given or received notice to terminate any of its
Managing Agents' Agreements.
11.4 All years of account ending on or before 31 December 1995 for Syndicate
488 and on 31 December 1995 for Syndicate 2488 have been closed and each of the
Vendors has no reason to believe that any subsequent years of account will not
close in the normal way.
11.5 There has been no breach of trust in respect of any trust established and
maintained pursuant to the requirements of the Council.
11.6 CUAL has at all times complied with its fiduciary obligations in relation
to funds coming into its hands and required to be treated as trust assets.
11.7 All accounts, reports, statements and other information and documentation
required by the Council have in all respects been accurately kept and completed.
11.8 All accounts, reports, returns, particulars, resolutions and other
documents in respect of CUAL required by the Council (including, without
limitation, any requirements contained in the current edition of the Lloyd's
guidance manual known as the Underwriting Agents' Manual published by Lloyd's)
to be filed, deposited or submitted have been duly filed, deposited or
submitted, and CUAL and TUL has paid all subscriptions determined by the Council
in respect of its business.
11.9 The Combined Syndicates are registered for insurance premium tax and have
at all times funded the US tax liabilities of their corporate members in
accordance with the requirements of the Council.
11.10 Neither CUAL nor TUL have committed any material breach of any
requirements of the Council (including, without limitation, any requirements for
the time being contained in the said Underwriting Agents' Manual and any of the
regulations and byelaws of Lloyd's and any provision of the Lloyd's Acts and any
directions of the Council or Regulatory Board of Lloyd's).
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11.11 CUAL and each of its officers and employees has, at all times, had all
necessary licences and consents to carry on business in accordance with the
requirements of the Council and has at all times complied in all respects with
all requirements of the Council.
11.12 Each officer and employee of CUAL required to register with Lloyd's
under the Individual Registration Byelaw (No. 13 of 1996) has complied with that
byelaw and all information supplied to Lloyd's by each of the relevant officers
or employees of CUAL in connection with such registration was when given and is
complete and accurate in all respects.
11.13 Since the 1995 underwriting year of account, TUL has complied in all
material respects with the terms of the membership and underwriting requirements
for a corporate member as prescribed under the Membership Byelaw (No. 17 of
1993).
11.14 CUAL has at all times satisfied the Lloyd's capital requirements in
accordance with the requirements of the Council and at the date of Completion
CUAL has minimum fixed capital of (Pounds)326,000. TUL has, and has always
maintained, legally enforceable funds at Lloyd's sufficient to provide security
for its OPL.
11.15 CUAL has not entered into any Managing Agent's Agreement or any other
agreement required by Lloyd's other than in Lloyd's standard form.
11.16 The consent of Lloyd's (where required) has been obtained at the
appropriate time in respect of each of the following events in relation to CUAL
and TUL:
11.16.1 any changes in the constitution;
11.16.2 any reduction in the amount of prescribed financial resources;
11.16.3 the appointment of all directors and compliance officers;
11.16.4 any reduction of, or payment out of, the capital;
11.16.5 the ownership by CUAL, its directors or partners of an interest
in an insurance company;
11.16.6 any other material matter requiring the consent of Lloyd's; and
11.16.7 any change of controller.
11.17 No outward reinsurer has refused to pay any actual or potential claim in
excess of (Pounds)50,000 in relation to the business of underwriting on the
Combined Syndicates for any year of account subsequent to 1992.
11.18 Neither CUAL nor the Combined Syndicates have been involved or connected
since the 1994 year of account with reinsuring the general business insurance
liabilities of syndicates allocated to the 1992 and prior years of account in
breach of the requirements of the Council.
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11.19 There have been no enquiries or correspondence by or with Lloyd's
concerning any investigation or possible disciplinary action and Lloyd's have
not initiated disciplinary proceedings against CUAL or TUL or any of its
officers or employees and so far as each of the Vendors is aware there are no
potential grounds (and Lloyd's have not provided any notice indicating any
potential grounds) for any such proceedings.
11.20 No consents approvals or conditions have been granted by Lloyd's to any
of the Group Companies under the Related Parties Byelaw (No. 2) of 1986.
11.21 Each of the Group Companies, where applicable, has complied with the
terms of any General Review Department report and Syndicate and Underwriting
Review Department Reports.
11.22 There is no major planned or expected changes in respect of the managing
agency business of CUAL.
11.23 As appropriate each Group Company has complied with the Underwriting
Agents' Qualifications Byelaw.
11.24 Each of the Group Companies where appropriate has complied with the
Price Sensitive Information Byelaw (No. 13) of 1996 (including, without
limitation, regarding employment contracts).
11.25 TUL has not engaged in any business or commercial activity except for
acting as a corporate member of Lloyd's or for the purposes or raising any funds
required to enable it to do so.
11.26 CUAL has entered into all necessary agreements and trust deeds to enable
it to underwrite American policies.
11.27 Since the 1995 underwriting year of account, TUL has filed declarations
of compliance and supporting legal opinions with Lloyd's for each year of
account.
11.28 The Vendors' Disclosure Letter sets out details of all guarantees and
undertakings given to Lloyd's by CUAL and TUL or any director or controller in
connection with registration and all conditions imposed by Lloyd's which survive
and which are not of general application to Managing Agents at Lloyd's and
Lloyd's Corporate Members.
11.29 CUAL has not given any guarantee, warranty, indemnity or undertaking of
any kind re services supplied to an underwriting member of the Combined
Syndicates under any Managing Agents' agreement nor agreed to pay the funds to
provide (if applicable) or procure finance for the cash calls or losses of any
such underwriting member or to waive or not to claim or seek payment of any
right to any salary, fees or profit commission or indemnity that have accrued or
arise at the date hereof under any Managing Agent's Agreement.
11.30 CUAL has not received any written communication that a Managing Agent's
Agreement is or maybe liable to avoidance, cancellation or termination on any
grounds whatsoever other than by its terms.
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11.31 No underwriting member is in dispute with CUAL.
11.32 Other than as disclosed in the Syndicate Accounts, CUAL has not
delegated any of its duties, obligations or functions under any of the Managing
Agent's Agreements nor has it entered into any arrangement to share with any
person in any profit commissions, salary, fees or winding up fees to which CUAL
is or may become entitled.
11.33 The Vendors' Disclosure Letter contains complete and accurate details of
all agreements and arrangements with any insurance broker (including without
limitation any Lloyd's broker) other than agreements entered into the ordinary
course, on an arms length basis and on commercial terms.
11.34 No agreement or arrangement (whether formal or informal) exists between
CUAL and any third party to make underwriting capacity available to any
underwriting member other than in accordance with the byelaws of Lloyd's.
11.35 All syndicates in run-off formerly managed by CUAL, including without
limitation, syndicates 764, 254 and 469, have been transferred from CUAL.
12 Information Technology
12.1 All material software licences and other material licences of Intellectual
Property Rights (as defined in Clause 13.2 of Part 2 of Schedule 3) used in the
Group Companies' business are in full force and effect, on terms that allow the
Group Companies to carry on their business as carried on immediately prior to
Completion. No notice has been given on either side to terminate them, the
material obligations of all parties have been fully complied with, no material
disputes have arisen in respect of those licences which have not been resolved
and so far as the Group Companies are aware, no grounds for any such dispute
exist.
12.2 The appropriate Group Company is the only owner, or has a valid lease in
respect of all computer hardware used in the business of the Group Companies,
free of any inconsistent rights of any third party.
12.3 In the case of all computer hardware used in the business of the Group
Companies, there are no material rights of any third party which have accrued at
Completion and which will entitle that third party to disrupt the quiet
enjoyment of the hardware by the Group Companies as at that date.
12.4 The Group Companies and the Vendors believe that the hardware used in the
business of the Group Companies is reasonably adequate for the needs of the
Group Companies as they currently exist.
12.5 Each Group Company is registered in accordance with the Data Protection
Act 1984 and has, at all times, complied in all material respects with its
obligations thereunder, including the Data Protection Principles.
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12.6 In this Warranty the expression "Year 2000 Problems" means errors of
impaired performance in data processing, in the output of data or in the
operation of any equipment or software which are connected with or relate to the
failure of any computer system, software or other processing equipment used to
give due chronological recognition to calendar dates before, on or after 1
January 2000 when processing data.
12.7 The Group Companies are in the process of exercising reasonable due
diligence in investigating the possibility of the occurrence of Year 2000
Problems.
12.8 None of the material computer systems, software or other processing
equipment used by any or all of the Group Companies is liable to suffer Year
2000 Problems to a material extent at any time except where such problems are
caused solely by the transmission to the Group Companies of data over whose
format or contents it has no control.
12.9 The material computer systems, software or other processing equipment used
by the Group Companies will by no later than April 1999 incorporate all material
facilities necessary for the Group Companies to take full advantage of European
Monetary Union, including without limitation:
12.9.1 the facility to provide full dual currency accounting and
reporting in both the Euro and Sterling (or such other currency
as the appropriate Group Company may designate); and
12.9.2 the facility to consolidate accounts from two or more businesses
or companies using either the Euro or Sterling (or such other
currency as the appropriate Group Company may designate) as the
denominating currency; and will in all material respects comply
with any conversion parameters necessitated thereby.
13 Intellectual Property Rights
13.1 In this Schedule the expression "Trade Marks" means the trade marks and
service marks, whether registered, unregistered or the subject of an application
for registration, business or trade names and logos and get-up owned or used by
any or all of the Group Companies.
13.2 The appropriate Group Company is the legal and beneficial owner of or has
the right to use the rights in databases, Trade Marks, designs, copyright,
confidential information, know-how and trade secrets used in the business of the
Group Companies ("Intellectual Property Rights") and is the registered owner of
such of the material Intellectual Property Rights as are capable of registration
and should properly be registered in any jurisdiction in which the Group
Companies do business.
13.3 The Intellectual Property Rights of a Group Company which are material to
its business and operations are valid, subsisting and enforceable and no written
claims have been received by a Group Company challenging their use or such
validity, subsistence or enforceability.
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13.4 There is and has been no infringement or threatened infringement of any
material Intellectual Property Rights by any third party which has come to the
actual notice of any Group Company or the Vendors and no written claim
concerning such infringement has been made by any Group Company or the Vendors.
13.5 The carrying on of the business of the Group Companies does not infringe
any patent, design, copyright, rights in database rights, trademarks k, or right
in a trade name, logo or right in any confidential information, know-how or
trade secret of a third party in any material respect.
13.6 All documents material to the title to the Intellectual Property Rights of
a Group Company form part of the records and assets of the Group Companies'
business.
13.7 All the know-how comprised in the Intellectual Property Rights and any
other know-how which is material to the business is adequately documented and no
part of the know-how has been disclosed to any third party in circumstances
which would have a Material Adverse Effect on a Group Company.
14 U.S. Assets
The Company and its Subsidiaries, taken as a whole, do not hold assets located
in the United States having an aggregate book value of $15 million or more,
other than investment assets, voting securities and non-voting securities of
another person. For the purpose of this representation, investment assets means
cash, deposits in financial institutions, or other money market instruments and
instruments evidencing government obligations.
15 Pooling Matters
The Company has provided to Purchaser and its independent accountants all
information concerning actions taken or agreed to be taken by the Company or any
of its Subsidiaries on or before the date of this Agreement that would, to the
Company's knowledge, reasonably be expected to affect the ability of Purchaser
to account for the transaction contemplated hereby as a pooling of interests.
The Company has made true and correct disclosure to Price Waterhouse of all
facts underlying the representations and warranties made in the Company's letter
of even date addressing compliance with pooling of interest criteria addressed
to Price Waterhouse as of the date of such letter; Provided that no
representation and warranty is hereby made with respect to facts with respect to
Purchaser.
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Schedule 4
Purchaser's Warranties
1 Authority and Capacity of the Purchaser
1.1 The Purchaser has the legal right and full corporate power and authority to
enter into and perform this Agreement, including the issue of the Consideration
Shares, and any other documents to be executed by the Purchaser pursuant to or
in connection with this Agreement which when executed will constitute valid and
binding obligations on the Purchaser, in accordance with their respective terms.
1.2 The execution and delivery of, and the performance by, the Purchaser of its
obligations under this Agreement and any other documents to be executed by the
Purchaser pursuant to or in connection with this Agreement will not:
1.2.1 result in a breach of any provision of the memorandum or articles
of association or equivalent constitutional document of the
Purchaser; or
1.2.2 result in a material breach of or give any third party a right to
terminate or modify, or result in the creation of any material
Encumbrance under any agreement, licence or other instrument or
result in a material breach of any order, judgment or decree of
any Court, governmental agency or regulatory body to which the
Purchaser is a party or by which the Purchaser or any of the
Purchaser's respective assets is bound.
2 Due Incorporation and Share Capital
2.1 The Purchaser and each of its consolidated subsidiaries are companies duly
incorporated or formed, as applicable, and validly existing under the laws of
the jurisdiction in which they are incorporated and have the requisite corporate
power and authority to carry on their businesses as now being conducted.
2.2 The Purchaser and each of its consolidated subsidiaries is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary.
2.3 The authorised share capital of the Purchaser consists of:
(i) 300,000,000 ordinary shares with a par value of US$0.041666667 per
share; and
(ii) 10,000,000 "other shares" with a par value of US$1.00 per share.
At the date of this Agreement, 179,175,809 ordinary shares have been validly
allotted and issued and are each fully paid, validly issued and non assessable.
Except as set out above, at the date of this Agreement, no other shares in the
share capital of the Purchaser or other equity securities of
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the Purchaser were in issue, reserved for issue (save in respect of employee and
director benefit plans) or outstanding.
2.4 Save in respect of employee and director benefit plans, no person has the
right (whether exercisable now or in the future and whether contingent or not)
to call for the allotment, conversion, issue, sale or transfer of any share or
loan capital or any other security giving rise to a right over the capital of
the Purchaser under any option or other agreement (including conversion rights
and rights of pre-emption).
2.5 When issued, the Consideration Shares will be validly issued, credited as
fully paid, to the Vendors in accordance with the provisions of the law of the
Cayman Islands and in accordance with the Memorandum and Articles of Association
of the Purchaser and will be non-assessable. No consents or authorisations are
required in connection with the issue thereof.The Consideration Shares are being
issued pursuant to an exemption under the Securities Act.
3 SEC Documents; Financial Statements
3.1 The Purchaser has filed all reports, schedules, forms, statements and other
documents required under the Exchange Act with the SEC since 1 October 1996 (as
such documents have been amended since the time of their filing, collectively,
the "SEC Documents"). As of their respective dates or, if amended, as of the
date of the last such amendment, the SEC Documents:
(i) complied in all material respects with the applicable requirements
of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents; and
(ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
The consolidated financial statements of the Purchaser included in the SEC
Documents complied when filed as to form in all material respects with the
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with US GAAP
(except, in the case of unaudited consolidated quarterly statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of the
Purchaser and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited quarterly statements, to normal year-
end adjustments).
3.2 Except as set forth in the filed SEC Documents neither the Purchaser nor
any of its subsidiaries has any liabilities or obligations of any nature that is
required by US GAAP to be set
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forth on a consolidated balance sheet of the Purchaser and its subsidiaries or
in the notes thereto, (except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since 30 September
1997 and other liabilities and obligations which would not in the aggregate have
a Material Adverse Effect on the Purchaser).
4 Legal Matters
4.1 Compliance with Laws
The Purchaser and each of its subsidiaries has carried on and is carrying on its
business and operations in all respects so that there have been no breaches of
applicable laws (including the requirements of the Council, as relevant), in
each country in which they are carried on, except where, individually or in
aggregate, any of the foregoing would not have a Material Adverse Effect, and
there have not been and are not any breaches by the Purchaser or any of its
subsidiaries of its constitutional documents. There has not since 10 June 1996
been and there is no investigation or enquiry by, or order, decree, decision or
judgment of, any court, tribunal, arbitrator, governmental agency or regulatory
body (including Lloyd's) outstanding or anticipated against the Purchaser or any
of its subsidiaries or any person for whose acts or defaults they may be
vicariously liable which has had or may have a Material Adverse Effect, nor any
written notice or other communication (official or otherwise) from any court,
tribunal, arbitrator, governmental agency or regulatory body (including Lloyd's)
with respect to an alleged actual or potential violation and/or failure to
comply with any such applicable law, regulation, byelaw or constitutional
document, or requiring it/them to take or omit any action nor is any such notice
or communication anticipated, in each case, except where any of the foregoing
would not, individually or in the aggregate, have a Material Adverse Effect.
4.2 Licences, Consents etc.
All licences, consents, authorisations, orders, warrants, confirmations,
permissions, certificates, approvals and authorities (Licences) necessary or
desirable for the carrying on of the businesses and operations of the Purchaser
and each of its subsidiaries have been obtained, are in full force and effect
and have been and are being complied with. There is no investigation, enquiry or
proceeding outstanding or threatened in writing which is likely to result in the
suspension, cancellation, modification or revocation of any of such Licences.
None of such Licences has been breached or is likely to be suspended, cancelled,
refused, modified or revoked (whether as a result of the entry into or
completion of this Agreement or otherwise).
4.3 Litigation
4.3.1 There are no actions, suits, claims, proceedings or investigations
(or any basis for any person to assert any claim reasonably likely
to result in liability or any other adverse determination) pending
against, threatened against or affecting, the Purchaser or any of
its properties or properties of its affiliates before any court,
arbitrator, tribunal or
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governmental authority or otherwise which (i) are required to be
described in any SEC Documents filed prior to the date of this
Agreement and which are not so described; (ii) in any manner
challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated hereby; or (iii) alleges criminal action
or inaction.
4.3.2 There are no investigations, disciplinary proceedings or other
circumstances known to the Purchaser which are likely to lead to
any such claim or legal action, proceeding, suit, litigation,
prosecution, investigation, enquiry or arbitration, which would,
individually or in the aggregate, have a Material Adverse Effect.
5 Accounts
Since 30 September 1997, there has been no Material Adverse Change with respect
to the Purchaser and no development, event, fact or matter has occurred which
will or is likely to give rise to any such Material Adverse Change.
6 Approvals and Permits
The Purchaser has no reason to believe that it will not be able to obtain as
promptly as practicable all necessary approvals, authorisations and consents
required to be obtained to consummate the transactions contemplated by this
Agreement.
7 Brokers
No broker, investment banker (other than Merrill Lynch & Co.), financial adviser
or other similar person the fees and expenses of which will be paid by the
Purchaser, is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Purchaser.
8 U.S. Tax Matters
8.1 The Purchaser has no plan or intention to reacquire any of the
Consideration Shares issued in the transaction.
8.2 The Purchaser is not an investment company as defined in Section
368(e)(2)(F)(iii) and (iv) of the Code.
8.3 The Purchaser does not own, directly or indirectly, any shares in the
capital of the Company.
8.4 As of the Completion Date, the Purchaser does not plan or intend to sell or
otherwise dispose of any of:
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8.4.1 the Shares acquired pursuant to this Agreement or any share
capital acquired in connection with the re-registration of the
Company as an unlimited company (other than through a contribution
of such Shares or share capital to NewCo); or
8.4.2 the Company assets, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C)
of the Code or except as specifically permitted under Clause 8.6.4
of the Agreement.
8.5 As of the Completion Date, the Purchaser plans and intends to continue the
historic business of the Company and to use a significant portion of the
Company's historic business assets in a business.
8.6 As of the Completion Date, the Purchaser does not plan or intend to
contribute or loan additional funds to the Company and will not permit the
Company to incur additional indebtedness except as specifically permitted under
Clause 8.6.4 of the Agreement.
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Schedule 5
Particulars of the Property
Name of Group Company Address of Property
leasing the Property
CUAL jointly with CGL 7th Floor
1 Minster Court,
Mincing Lane
London
EC3R 7AA
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