EXHIBIT 10.34
DATED August 9, 2001
ISA INTERNATIONAL PLC (1)
and
DAISYTEK INTERNATIONAL CORPORATION (2)
and
DAVID HEAP (3)
and
CHISA LLC (4)
SUBSCRIPTION AND SHAREHOLDERS' AGREEMENT
CONTENTS
1 DEFINITIONS.......................................................... 3
2 INTERPRETATION....................................................... 7
3 CONDITIONS........................................................... 7
4 SUBSCRIPTION......................................................... 9
5 COMPLETION........................................................... 9
6 THE WARRANTIES....................................................... 10
7 INVESTOR PROTECTION.................................................. 13
8 FINANCIAL INFORMATION................................................ 13
9 INVESTOR OBSERVERS................................................... 14
10 PROTECTION OF GOODWILL AND virtual village indemnity................. 14
11 protection of special dividend rights................................ 15
12 EXISTING SHAREHOLDERS' COVENANTS..................................... 17
13 competition or merger notification................................... 17
14 investor approved options............................................ 17
15 NATURE OF THIS AGREEMENT............................................. 17
16 CONFIDENTIALITY...................................................... 18
17 NOTICES.............................................................. 18
18 DURATION............................................................. 19
19 TRANSFERS............................................................ 19
20 GENERAL.............................................................. 19
21 GOVERNING LAW........................................................ 19
SCHEDULE 1.......................................................... 20
WARRANTIES.......................................................... 20
SCHEDULE 2................................................................ 44
SUBSIDIARIES........................................................ 44
SCHEDULE 3.......................................................... 71
THE PROPERTIES...................................................... 71
SCHEDULE 4................................................................ 77
KEY EMPLOYEES............................................................. 77
SCHEDULE 5................................................................ 81
SCHEDULE 5
DEED OF ADHERENCE
AGREED FORM DOCUMENTS
A. PRE-EXCHANGE
1. Warranty Insurance
2. Letter confirming payment of premium for Warranty Insurance
3. Voting Undertakings
4. Deed of Release
B. FOR COMPLETION
5. Articles of the Company
6. Circular
7. Resolution of the Company
8. Service Contract
9. Deed Poll relating to the Warrant
10. Preference Share Certificate with associated Notices
11. Fraud Insurance
SUBSCRIPTION AND SHAREHOLDERS' AGREEMENT DATED AUGUST 2001
PARTIES
(1) ISA INTERNATIONAL PLC (Company Number 192505) whose registered office
is at 66/70 Vicar Lane, Bradford, West Yorkshire BD1 5AG
("the Company")
(2) DAISYTEK INTERNATIONAL CORPORATION a corporation whose principal place
of business is at 1025 Central Expressway South, Suite 200, Allen,
Texas 75013 USA ("Daisytek")
(3) DAVID HEAP of Herne House, Gospel Green, Nr. Chiddingford,
Haslemere, Surrey, GU27 3BH ("Mr Heap")
(4) CHISA LLC a corporation incorporated and operating under the laws of
the State of Maryland, USA, whose principal place of business is at
2300 Blaustein Building, One North Charles Street, Maryland
21201, USA ("Chisa")
INTRODUCTION
(A) This agreement sets out the basis upon which Daisytek, through its
wholly-owned subsidiary, is prepared to invest in the Company by way of
subscription for the Investor Shares, in reliance upon, inter alia, the
warranties and representations contained in this agreement.
(B) This agreement also sets out certain rights, obligations and restrictions
of and upon the parties going forward as shareholders of the Company.
IT IS AGREED THAT:
1 DEFINITIONS
1.1 In this agreement the following words have the meanings set out below.
"ACCOUNTANT'S REPORT" means the report on the Group prepared by Ernst &
Youngin final form at the date of this Agreement (but to be issued and
dated at Completion).
"THE ACT" means the Companies Act 1985 as amended.
"AGREED FORM" means in the form of the draft, a copy of which is annexed
to this agreement initialled by or on behalf of the parties.
"ARTICLES" means the proposed new articles of association of the Company
in the agreed form to be amended pursuant to the Resolutions and, where
the context permits, from time to time in force thereafter.
"ASSOCIATE" means an associate of the Company or the Investor (as
appropriate) as defined in Rule 3.13 of the Listing Rules.
"BOARD" means the board of directors of the Company from time to time.
"BUSINESS DAY" a day (not being a Saturday or Sunday) on which banks
generally are open for business in London and New York.
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"CIRCULAR" means the circular in the agreed form to be posted to the
shareholders of the Company on or as soon as practicable after the date of
this agreement and containing (inter alia) a notice of an Extraordinary
General Meeting of the Company at which the Resolutions will be proposed.
"CLOSING DATE" means a Business Day which is to be not more than five
Business Days immediately following the satisfaction of the Conditions or
the waiver of the same by the Investor in accordance with Clause 3.3
"CODE" means the City Code on Take-overs and Mergers.
"COMPLETION" means completion of this agreement in accordance with the
provisions of clause 5.
"CONDITIONS" means the conditions subject to which this agreement is
exchanged, as set out in clause 3.
"CONNECTED PERSON" has the meaning given to it in section 839 of ICTA.
"CONSTITUTIONAL DOCUMENTS" means the memorandum and articles of
association of a company incorporated in the UK or equivalent documents in
any jurisdiction other than in the UK in the country in which a company is
incorporated.
"DAISYTEK GROUP" means Daisytek and all other companies which from time to
time are its subsidiaries or holding companies or subsidiaries of its
holding companies
"DAISYTEK GROUP COMPANY" means Daisytek and any other company which is for
the time being its subsidiary or holding company or a subsidiary of its
holding company.
"DEED OF ADHERENCE" means the document in the form contained in Schedule
5.
"DEED OF RELEASE" the conditional agreement in the agreed form to release
the guarantee and mortgage debenture dated 9 March 1998 held by National
Westminster Bank plc over the Company's holding of shares in Kaye.
"DIRECTORS" means the directors constituting the Board, and "DIRECTOR"
shall mean any one of them.
"DILUTIVE OPTIONS" has the meaning given to it in clause 14.2.
"DISCLOSURE LETTER" means the letter, delivered by the Company to the
Investor immediately prior to exchange of this agreement, which contains
certain disclosures to the Warranties.
"ENVIRONMENT" means any land, including without limitation surface land
and subsurface strata, sea bed or river bed under any water as defined
below and any natural or man-made structures; water, including without
limitation, coastal and inland waters surface waters, and ground waters
and water in drains and sewers; and air, including without limitation, air
within buildings and other natural or man-made structures above or below
ground;
"ENVIRONMENTAL LAWS" means all or any applicable law (whether civil,
criminal or administrative), common law, statute, statutory instrument,
treaty, regulation, directive, decision, by-law, circular, code, order,
notice, demand, decree, injunction, resolution or
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judgment of any government, quasi-government, supranational federal state
or local government or any other statutory person or body in any
jurisdiction with regard to the pollution or protection of the Environment
or harm to or the protection of health of humans, animals or plants,
including without limitation laws relating to public and workers health
and safety, emissions, discharges or releases of chemicals or any other
pollutants or contaminants or industrial, radioactive, dangerous, toxic or
hazardous substances or wastes (whether in solid or liquid form or in the
form of a gas or vapour and including noise and genetically modified
organisms) into the Environment, or otherwise relating to the manufacture,
processing use, treatment, storage, distribution, disposal, transport or
handling of such substances or waste;
"EXISTING SHAREHOLDERS" means Mr Heap and Chisa.
"EXY" means EXY Group Limited (company number 3801575) whose registered
office is at 2nd Floor, 79 Knightsbridge, London, SW1X 7RB.
"FRAUD INSURANCE" means the insurance policy in the agreed form to be
purchased by the Company from Special Risk Services with the Investor as
the assured to cover any claim for breach of Warranty resulting from fraud
or dishonesty.
"GROUP" or "GROUP COMPANY" means the Company and any company which is for
the time being its subsidiary or holding company or a subsidiary of its
holding company.
"ICTA" means the Income and Corporation Taxes Act 1988.
"INTELLECTUAL PROPERTY RIGHTS" means trade marks, service marks, trade and
business names, rights in designs, patents, copyright, database rights,
moral rights, rights in know-how, rights in software and other
intellectual property rights in each case whether registered or
unregistered and including applications for the grant of any of the
foregoing and all rights or forms of protection having equivalent or
similar effect to any of the foregoing which may subsist anywhere in the
world.
"INVESTOR" means Daisytek or Daisytek acting through or being represented
by any Daisytek Group Company which may be notified by Daisytek to the
Company from time to time.
"INVESTOR DIRECTORS" means the persons nominated or entitled to be
nominated by the holders of Investor Shares to act as directors of the
Company from time to time pursuant to article 3(b) of the Articles.
"INVESTOR SHARES" means the 8,000,000 Convertible Cumulative Redeemable
Preference Shares 2006 of 10 pence each to be subscribed by the Investor
on Completion..
"INVESTOR'S SOLICITORS" means Bird & Bird of 90 Fetter Lane, London, EC4A
1JP.
"KAYE" means Kaye Office Supplies Limited (company number 1698984) whose
registered office is at Hart House, Hartley Wintney, Hampshire, RG27 8PE.
"KEY EMPLOYEE" means those individuals listed in Schedule 4.
"KH" means Kingfield Heath Limited (company number 1204488), a
wholly-owned subsidiary of Kaye.
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"LAST ACCOUNTS" means the audited financial statements of the Group for
the year ended on the Last Accounts Date.
"LAST ACCOUNTS DATE" means 31 December 2000.
"MR MURPHY" means Michael J Murphy of The Gables, Chargrove Lane,
Cheltenham, Gloucestershire, GL51 5XB, a director of the Company.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"ORDINARY SHARES" means ordinary shares of 5p each in the capital of the
Company.
"OBSERVERS" means the observers, of up to two in number, appointed by the
Investor in accordance with the provisions of clause 9.
"PANEL" means the Panel on Take-overs and Mergers.
"PENSION SCHEME" means "The ISA International plc Retirement and Death
Benefit Scheme, an occupational money purchase scheme approved by the
Inland Revenue under Chapter 1, Part 14 of ICTA 1988".
"PLANNING ACTS" means the Town and Country Planning Act 1990, the Planning
(Listed Buildings and Conservation Areas) Act 1990, the Planning
(Hazardous Substances) Act 1990, the Planning (Consequential Provisions)
Act 1990 and the Planning and Compensation Act 1991;
"PROPERTIES" means the freehold and leasehold properties occupied by the
Group.
"QUALIFYING BANK" means either, an authorised institution under the Bank
Act 1987 or a person for the time being specified in Schedule 2 to the
Banking Act 1987, or a person recognised by the United Kingdom Inland
Revenue for the purposes of Section 840A of ICTA.
"RECOGNISED INVESTMENT EXCHANGE" has the meaning given to such phrase in
section 207 of the Financial Services Act 1986.
"RELEVANT PERIOD" means the period commencing on the Closing Date and
ending two years from the date Mr Heap ceases to be a member of the Board.
"RESOLUTION" means the resolution in agreed form set out in the notice
convening an Extraordinary General Meeting of the Company contained in the
Circular.
"RESTRICTED ACTIVITIES" means the electronic office supplies business of
the Group within the United Kingdom and Europe as carried on during the
term of this agreement.
"SERVICE CONTRACT" means the letter of amendment, in agreed form, to the
existing service contract of Mr Murphy to be entered into upon Completion
between the Company (1) and Mr Murphy (2).
"SHAREHOLDERS" means the Investor, Mr Heap, Chisa and any other person who
has executed a Deed of Adherence to be bound by the provisions of this
agreement.
"SHARE OPTION SCHEMES" together, The Saint International plc 1999 Company
Share Option Scheme and The Saint International plc Unapproved Share
Option Scheme.
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"SHARES" means any shares from time to time issued by the Company.
"SUBSIDIARIES" means the subsidiaries of the Company as set out in
Schedule 2.
"SPECIAL DIVIDEND" shall have the meaning given to it in article 3(b) of
the Articles.
"TAXATION" means all forms of taxation, charge, duty, impost, withholding,
deduction, rate, levy and governmental charge (whether national or local)
in the nature of tax (including without limitation national insurance,
social security and other similar contributions, stamp duty and stamp duty
reserve tax), whatsoever and whenever created, enacted or imposed, and
whether of the UK or elsewhere, and any amount whatever payable to any
Taxation Authority or any other person as a result of any enactment
relating to taxation, together with all fines, penalties, interest, costs,
charges, surcharges and expenses connected therewith.
"TAXATION AUTHORITY" any statutory or governmental authority or body
(whether in the United Kingdom or elsewhere) involved in the collection or
administration of Taxation including (without limitation) the Inland
Revenue and H.M. Customs and Excise.
"UK" means the United Kingdom.
"VOTING UNDERTAKINGS" means the undertakings in the agreed form by which
the Existing Shareholders have undertaken to the Investor and the Company
that they will exercise or procure the exercise of certain voting rights
within their control in favour of the Resolution.
"WARRANT" means the deed poll in the agreed form constituting the warrant
to subscribe for 15,384,615 Ordinary Shares to be executed by the Company
at Completion, "WARRANTIES" means the warranties contained in Schedule 1.
"WARRANTY INSURANCE" means the insurance policy in the agreed form to be
purchased by the Company from Special Risk Services insuring against
breach of warranty under this agreement by the Company and under which the
Investor is named as loss payee.
2 INTERPRETATION
2.1 Words and phrases defined in the Act have the same meaning in this
agreement.
2.2 Where reference is made to a statutory provision this includes all prior
and subsequent enactments, amendments and modifications relating to that
provision and any regulations made under it.
2.3 References to clauses and schedules are to the clauses and schedules of
this agreement unless stated otherwise.
2.4 References to the masculine gender include the feminine and neuter and
vice versa. Similarly, references to the singular include the plural and
vice versa.
2.5 The headings and table of contents to this agreement are inserted for
convenience only. They are not to affect its interpretation or
construction.
2.6 The various schedules all form part of this agreement.
3 CONDITIONS
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3.1 This agreement is exchanged subject to the following Conditions:
(a) the Resolution being passed on a poll as a special resolution of the
Company by its members in general meeting;
(b) the amendments in the agreed form to the Share Option Schemes being
adopted by the Company;
(c) no government or governmental, quasi-governmental, supranational,
statutory or regulatory body (including any national anti-trust or
merger control authorities), court, trade agency, association,
institution or professional or environmental body or other person or
body in any jurisdiction (each a "Third Party") having decided to
take, instituted, implemented or threatened any action, suit,
reference, proceeding, investigation or enquiry in relation to the
proposed investment by the Investor in the Company;
(d) all necessary or appropriate filings, notifications and applications
(including such filings, notifications and applications to national
merger authorities as may be required or which are reasonably
considered by the Investor to be appropriate in the case of merger
notifications which are not a legal obligation) having been made and
all authorisations, orders, recognitions, grants, consents,
licences, confirmations, clearances, certificates, permissions and
approvals ("Authorisations") necessary or appropriate in relation to
the proposed investment by the Investor in the Company having been
made or obtained in terms and in a form satisfactory to the Investor
from all appropriate Third Parties;
(e) the Panel having agreed (on terms satisfactory to the Investor) to
waive the requirement for the Investor to make a mandatory offer for
the remainder of the share capital of the Company pursuant to Rule 9
of the Code (subject to the passing of the Resolutions) either on
issue of the Investor Shares or on conversion of the Investor Shares
into Ordinary Shares of the Company or on the exercise of the
Warrant;
(f) Mr Murphy having entered into the Service Contract; and
(g) the issue of the Fraud Insurance.
3.2 The Company and the Existing Shareholders will use all reasonable
endeavours to procure the satisfaction of the Conditions on or before the
date of the Extraordinary General Meeting of the Company at which the
Resolution shall be considered (provided that in the case of the Condition
set out in sub-paragraph 3.1(a) above, the obligation of the Company to
use all reasonable endeavours shall be satisfied by its posting the
Circular to the persons entitled to receive it containing a recommendation
from each of the directors of the Company that shareholders vote in favour
of the Resolutions and the obligation of the Existing Shareholders to use
all reasonable endeavours shall be satisfied by their compliance with the
terms of their respective Voting Undertakings). If all of the Conditions
are not satisfied (or otherwise waived by the Investor) at the Closing
Date this agreement will cease to have effect. In such circumstances no
party will have any claim against the others except as regards any prior
breaches or pursuant to clause 16.
3.3 Where any Conditions require the satisfaction of the Investor, this shall
be at the absolute discretion of the Investor and no obligation shall be
implied on the Investor in this regard. Any Condition which has not been
satisfied by the date referred to in clause 3.2 may be
8
waived by the Investor at its absolute discretion provided that the
Company has notified the Investor that it can lawfully complete if such
waiver (or waivers) is given by the Investor.
3.4 If the Company fails or is unable to perform any material obligation
required to be performed by the Company pursuant to clause 3.1 by the
Closing Date, neither the Investor (nor any member of the Daisytek Group)
shall be obliged to subscribe for the Investor Shares and the Investor
may, in its absolute discretion, by written notice by the Investor to the
Company:
(a) rescind this agreement without liability on the part of the
Investor; or
(b) elect to complete this agreement on the Closing Date, to the extent
that the Company is ready, able and willing to do so, and specify a
later date on which the Company shall be obliged to complete the
outstanding obligations of the Company; or
(c) elect to defer completion of this agreement by not more than twenty
(20) Business Days to such other date as it may specify in such
notice, in which event the provisions of this clause 3.4 shall
apply, mutatis mutandis, if the Company fails or is unable to
perform any such obligations on such other date.
3.5 In the event that the Conditions remain unsatisfied and outstanding at 12
noon on 30 September 2001 this agreement shall cease to have effect but
without prejudice to any accrued rights or obligations of any party which
is the subject by then of any written notice of claim or demand by any
party to another and to the extent only of such claim.
4 SUBSCRIPTION
4.1 The Investor agrees to subscribe or to procure that another nominated
member of the Daisytek Group shall subscribe, in cash, for the Investor
Shares (free from any encumbrance) and the Company shall allot and issue
the Warrant and the Investor Shares fully paid to the Investor or other
such nominee at Completion.
4.2 The consideration for the allotment of the Investor Shares and the grant
of the Warrant is the payment by the Investor or another nominated member
of the Daisytek Group to the bank accounts specified in Clause 5.2 of the
aggregate subscription price of L8,000,000 (eight million pounds) in cash
on Completion.
5 COMPLETION
5.1 The Investor will not be bound to complete the subscription for any of the
Investor Shares unless
(a) the Company delivers to the Investor such evidence as the Investor
may reasonably require that the Conditions have been duly satisfied;
(b) all of the Investor Shares are allotted at the same time; and
(c) the Warrant referred to in Clause 5.3 is granted at the same time.
5.2 Subject to clauses 3 and 5.1, this agreement will be completed at the
offices of Hammond Suddards Edge, 7 Devonshire Square, Cutlers Gardens,
London, EC2M 4YH on the Closing Date when the following will occur:
9
(a) The Investor will subscribe or procure that the appropriate
nominated member of the Daisytek Group will subscribe for the
Investor Shares at an aggregate subscription price of L8,000,000 and
pay the aggregate subscription monies in cash to the following bank
accounts in the following proportions:-
(I) L6,000,000 to current account number 41245059 at National
Westminster Bank plc (branch sort code 56-00-36) in the name of ISA
INTERNATIONAL plc;
(II) L1,000,000 to current account number 40902268 (branch sort code
20-76-96) at Barclays Bank plc (Sheffield branch in the name of
Barclays Bank plc;
(III) L1,000,000 to current account number 41245059 at National
Westminster Bank plc (branch sort code 56-00-36) Bradford branch in
the name of National Westminster Bank plc;
on the basis that a request will be made for a formal receipt of
payments (II) and III) above.
(b) The Company and the Existing Shareholders will ensure that a meeting
of the Board is held at which the allotment and issue of the
Investor Shares to the Investor, fully paid, is approved and that
the Investor is registered as the holder of the Investor Shares and
that a share certificate is issued in the agreed form .
5.3 The Company will execute and deliver to the Investor the Warrant (and
complete the warrant certificates attached to the Warrant) in respect of
15,384,615 Ordinary Shares in the agreed form.
5.4 The Company will provide confirmation to the satisfaction of the Investor
that the Warranty Insurance remains in place and is active and that the
Investor remains named as the loss payee under the Warranty Insurance.
5.5 The Company will deliver to the Investor:
(a) one copy of the Service Contract duly executed by Mr Murphy; and
(b) the Fraud Insurance Policy duly issued by Special Risk Services.
5.6 The Company will then deliver to the Registrar of Companies:
(a) notice of the passing of the Resolutions;
(b) a print of the new Articles;
(c) Company Form G123 - Notice of increase in nominal capital; and
(d) Company Form G88(2) - Return of allotments of shares.
5.7 After Completion each of the parties will do all acts and things which may
prove necessary to implement their respective obligations in full under
the terms of this agreement to the extent that they are so able.
6 THE WARRANTIES
6.1 The Company warrants to the Investor in the terms set out in Schedule 1.
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6.2 The Company acknowledges that the Investor is entering into this agreement
in reliance upon the Warranties.
6.3 Each Warranty is given in relation to either the Company or in relation to
each Group Company as specified in Schedule 1.
6.4 The Warranties are given subject to all matters fairly disclosed in the
Disclosure Letter or pursuant to an update of the Disclosure Letter under
clause 6.9 below. No other information of which the Investor has knowledge
(whether actual or constructive) is to prejudice any claim made under the
Warranties or operate to reduce any amount recoverable from the Company.
6.5 The Warranties are separate and independent and are not to be limited by
reference to any other part of this agreement save for this clause 6 and
save for the definitions set out in clause 1.
6.6 All Warranties which are expressed to relate to the Company's awareness,
knowledge, information or belief are deemed to be given by it with the
awareness, knowledge, information or belief which its Board would have had
if its Board had made, or had procured to be made, all due and proper
enquiries in relation to the subject matter of such Warranty of the agents
or advisers of the Company and within the knowledge of any director of any
Group Company incorporated in the UK or of any managing director of any
Group Company incorporated other than in the UK, but not of any customer,
supplier, agent, regulatory authority or other third party.
6.7 The rights and remedies of the Investor in respect of any breach of the
Warranties shall not be affected by Completion of the subscription of the
Investor Shares, the grant of the Warrants, by any investigation made by
or on behalf of the Investor into the affairs of the Group, by its
rescinding or failure to rescind this agreement, by any failure to
exercise or delay in exercising any right or remedy or by any other event
or matter whatsoever, except a specific and duly authorised written waiver
or release expressly referring to such breach.
6.8 The Company further warrants to the Investor that each of the Warranties
will be fulfilled down to, and each of the Warranties shall be deemed to
be repeated in accordance with clause 6.3 immediately prior to, Completion
with reference to the facts and circumstances then existing, subject only
to the limitations and qualifications set out in this clause 6.
6.9 The Company undertakes with the Investor to disclose forthwith in writing
to the Investor any matter or thing which may arise after the date of this
agreement and prior to Completion and which becomes known to the Company
which would cause any of the Warranties to be untrue, incorrect or
misleading in any material respect or in any of the contents of the
Disclosure Letter to be untrue, incorrect or misleading in any material
respect and such disclosure under this clause 6.9 shall be deemed to form
part of the Disclosure Letter (unless the Investor rescinds under clause
6.10) and in the event that the Investor elects not to rescind under
clause 6.10, the Investor shall not be entitled to claim for any breach of
warranty in respect of any matter fairly disclosed pursuant to this clause
6.9.
6.10 If at any time before Completion:
(a) it shall be found or disclosed pursuant to clause 6.9 that any of the
Warranties is untrue, incorrect or misleading in any material respect the
Investor shall be entitled (in addition to and without prejudice to any
other right or remedy available to it, including any right to
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claim damages) to rescind this agreement without liability on the part of
the Investor forthwith by notice in writing to the Company PROVIDED THAT
any failure to exercise this right followed by Completion shall constitute
a waiver by the Investor of all rights which the Investor may have arising
out of such matter under the Warranties or otherwise but shall not
constitute a waiver of any other matter not so found or disclosed and
which would give rise to a breach of Warranties; or
(b) any event shall occur (other than an event which constitutes or gives rise
to a breach of any of the Warranties) which affects or is likely to affect
to a material degree the financial or trading position or prospects of the
Group, the Investor shall be entitled to rescind this agreement without
liability on the part of the Investor forthwith by notice in writing to
the Company PROVIDED THAT neither any such recission nor Completion shall
give rise to any right to damages or compensation in favour of any party
from another.
6.11 Save for claims for breach of Warranty which arise as a result of fraud or
negligent conduct on the part of the Company:
(a) no claim shall lie against the Company under the Warranties unless notice
of the claim shall have been served on the Company no later than 2 years
after the date of Completion except in respect of the Warranties in
paragraph 8 of Schedule 1 (Taxation) in respect of which notice of claim
shall have been served on the Company no later than 7 years from the date
of Completion. In respect of claims notified in accordance with this
sub-clause, they shall be deemed to have been waived by the Investor
unless court proceedings in respect thereof have been issued and served on
the Company within 6 months of the date of such notification;
(b) subject to (d) below, no liability shall attach to the Company by reason
of any single breach of the Warranties until the aggregate amount of
claims thereunder exceeds L100,000 in value when the Investor shall be
entitled to claim the whole amount and not merely the excess over that
amount from the Company.
(c) the aggregate liability of the Company for any breaches of the Warranties
and liability arising under clause 6.13 below shall not exceed L8,500,000
during such period as the Warrant remains unexercised or L8,500,000 and
any amount subscribed under the Warrant up to a maximum amount of
L10,500,000; and
(d) there shall be disregarded for all purposes any breach of this agreement
unless the amount of damages to which the Investor would otherwise be
entitled is an amount in excess of L5,000 for a claim for breach of the
Warranties relating to any company incorporated within the UK and L25,000
for any breach of the Warranties relating to a company incorporated
outside the UK.
6.12 The Investor shall not be entitled to make any claim under or pursuant to
the Warranties in relation to:
(a) any matter which was specifically reserved, provided for or noted in the
Last Accounts or in the unaudited management accounts of the Company for
periods ended prior to the date of this Agreement but since the Last
Accounts Date;
(b) any matter where the claim arises as a result of, or would not have arisen
but for, or a liability is increased as a result of, legislation not in
force at the date of this agreement, or any change in legislation with
retrospective effect after the date of this agreement (including without
limitation any increase in rates or scope or calculation of Taxation, new
Taxation, or changes in legislation relating to Taxation with
retrospective effect);
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(c) any claim which would not have arisen but for or as a direct consequence
of a voluntary act or omission performed or allowed to occur by the
Investor after Completion otherwise than in the ordinary course of
business; and
(d) any matter or thing done or omitted to be done on or after the date of
this agreement at the request or with the approval of the Investor.
6.13 Subject to Clause 6.11 above the Company shall indemnify the Investor
against all reasonable out of pocket costs and expenses (including
reasonable legal expenses) incurred by the Investor in connection with any
successful claim brought by the Investor for breach of Warranty
7 INVESTOR PROTECTION
7.1 The Company undertakes to the Investor (and the Existing Shareholders
undertake to procure so far as they are able) that it will conduct its
affairs in accordance with the provisions of the Articles and of this
agreement.
7.2 The Company, and the Existing Shareholders shall use all reasonable
endeavours to procure that all the Ordinary Shares arising from the
exercise of the Warrants, the conversion of the Investor Shares and from
any subsequent issue of any bonus shares arising under article 3(b) of the
Articles are admitted to trading on the Alternative Investment Market and
are admitted to listing or the equivalent or any other stock exchange or
securities market on which all or any part of the Company's Ordinary
Shares are for the time being listed or traded. For the avoidance of doubt
the Company's and the Existing Shareholders', obligations under this
Clause 7.2 shall include but shall not be limited to the preparation and
filing of listing particulars (or equivalent documentation) as may be
required by the Alternative Investment Market (or equivalent body in any
jurisdiction where the Ordinary Shares are to be admitted to listing or
trading).
8 FINANCIAL INFORMATION
8.1 The Company shall supply the following information to the Investor at the
same time as it is circulated to the Directors:
(a) the unaudited preliminary results of the Group for each financial year
within 4 months of the end of each accounting period and audited
consolidated accounts of the Group as soon as practicable thereafter;
(b) monthly management accounts consisting of a balance sheet, profit and loss
account and cashflow statement on a consolidated basis for the Group
showing updated available distributable reserves in accordance with
article 3(b)(xi) of the Articles, as soon as reasonably practicable after
and in any event within 30 days of the end of each calendar month; and
(c) the Company's annual budgets and strategic plans promptly and in any event
at the same time as they are circulated to the Board.
8.2 In the event that the Company fails to fulfil its obligations pursuant to
clause 8.1 within the specified time limits, then the Investor shall be
entitled to instruct a firm of chartered accountants at the cost of the
Company, to prepare and deliver to the Investor, such information as
should have been provided by the Company pursuant to clause 8.1. The
Company shall procure that each member of the Group shall give all access
required by the firm of chartered accountants, both to the premises of the
Group and its businesses
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and financial records, and the Company shall procure that the Group shall
give all reasonable co-operation and assistance as such firm of chartered
accountants may reasonably request in connection with this clause 8.2.
8.3 The Investor may pass any information received from the Group to any
advisor of the Investor on a confidential basis.
8.4 The Company undertakes that it will procure that all members of the Group
dividend up to the Company in a timely manner all distributable profits
available to such companies as may be required to:
(a) enable the Company to pay a fixed cumulative preferential dividend on the
Investor Shares and (if called) the Special Dividend; and/or
(b) to enable the Company to redeem the Investor Shares.
in each case in accordance with the terms and conditions of the Investor
Shares as contained in the Articles.
9 INVESTOR OBSERVERS
9.1 For so long as no Investor Directors have been appointed the Investor will
have the right to have two Observers to attend and observe the meetings of
the Board.
9.2 The appointment or removal of an Observer may be made by notice served on
the Company by or on behalf of the Investor. Each appointment or removal
will take effect immediately upon service of the notice.
9.3 Immediately upon the appointment of one or more Director Investors the
Company shall notify the Investor and the Investor shall forthwith upon
receipt of such notification forfeit the right to have such number of
Observers as there are Investor Directors appointed.
9.4 The Observers shall have all such rights and entitlements to attend and
speak at meetings of the Board, and to receive notices, board papers and
minutes of meetings as the Directors but the Observers shall not have the
right to vote at any meeting of the Board.
10 PROTECTION OF GOODWILL AND VIRTUAL VILLAGE INDEMNITY
10.1 Mr Heap recognises the paramount importance of the goodwill of the Group
to the Investor, which is reflected in the subscription price paid for the
Investor Shares. Accordingly, he is prepared to the commitments contained
in this clause 10.1 to the Investor and to the Company, which he
acknowledges are reasonable (after having taken legal advice) with regard
to the legitimate protectable interests of the Company and the Investor,
to ensure that these interests are properly protected.
10.2 During the Relevant Period Mr Heap will not, and will procure that his
Connected Persons will not, without the Investor's prior written consent:
(a) carry on or be engaged, concerned or interested directly or indirectly in
any of the Restricted Activities within the United Kingdom;
(b) solicit or knowingly accept any orders, enquiries or business in respect
of any of the Restricted Activities from any Customer;
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(c) divert away from the Group any orders, enquiries or business in respect of
the Restricted Activities from any Customer;
(d) procure or induce, or endeavour to procure or induce, any of the employees
of the Group engaged in a senior or managerial position or who have had
direct contact with Customers in the course of their duties to cease
working for the Group; or
(e) seek to interfere with the ongoing relationships between the Group and its
professional and business contacts.
10.3 Save as specified in clause 10.4, the commitments set out in clause 10.2
are to prevent Mr Heap and/or his Connected Persons from carrying out any
of the prohibited activities on his own behalf or jointly with or as
servant, agent, manager, employee, consultant, director or shareholder of
any other person, firm, company or body.
10.4 Nothing in this clause is to prevent Mr Heap and/or his Connected Persons
from holding up to 5% of the issued share capital of a company whose
shares are dealt in or quoted on a recognised investment exchange.
10.5 Each of the commitments contained in this clause 10 gives rise to a
separate obligation independent of the others.
10.6 The parties consider the commitments contained in this clause to be
reasonable as between themselves and the public interest. If, however, any
of them are found by a court to be unreasonable and unenforceable but
would be reasonable and enforceable if certain words were deleted, then
the commitments will apply with those words deleted.
10.7 The Investor may, by written notice to Mr Heap, vary by one or more stages
the terms of any part of this clause as it may apply to him by reducing
(but not increasing):
(a) the period during or activities to which the commitments are to apply;
and/or
(b) the geographical area to which the commitments relate.
10.8 Mr Heap hereby undertakes with the Company to indemnify and keep
indemnified the Company from and against any liability in respect of any
claim against the Company for any claim for outstanding PAYE or National
Insurance due, owing and payable on any fees or other sums paid to or
payable by the Company to Virtual Village Limited and/or Mr Heap for
services rendered by Mr Heap to the Company, and any costs, charges,
expenses, interest and penalties in connection with such liabilities which
are assessed on or recoverable from the Company.
11 PROTECTION OF SPECIAL DIVIDEND RIGHTS
11.1 Until such time as the Investor Shares have been converted or redeemed in
full in accordance with the Articles the Company undertakes to the
Investor, in consideration of the obligations of the Investor in this
Agreement, that in the event of any sale or other realisation of any or
all of the shares or other rights in the capital of Kaye which the Company
now owns or may from time to time own or be entitled to, it will procure
that to the extent that the sale or realisation proceeds thereof exceed
the aggregate costs of investment in the capital of Kaye by the Company
after the date of Completion (whether by way of subscription, acquisition
or otherwise), such excess ("the Proceeds") will be placed at the cost of
the Company immediately upon the Proceeds coming into being on trust with
National Westminster Bank plc (the "Trustee") to be held on the terms of
the
15
trust set out in this Clause (the "Trust"). Pending payment or transfer to
the Trustee, the Company shall hold the Proceeds on the terms of the
Trust. The terms of the Trust shall be:
(a) subject to Clause 11.1(d)., to hold the Proceeds for the holder(s)
of the Investor Shares as beneficiaries to satisfy any Special
Dividend to be distributed in accordance with the Articles or for
the Company if the holder(s) of the Investor Shares have converted
the Investor Shares into Ordinary Shares;
(b) to pay any income generated by the Proceeds to the Company unless
the Investor shall have notified the Trustee in writing that there
are outstanding accrued arrears of dividends on the Investor Shares
and, in the event of such notification of arrears, the income so
generated shall be applied in reducing those arrears;
(c) provided that the income so generated shall be paid to the holder(s)
of the Investor Shares with effect from the date of service of a
Special Dividend notice in accordance with Article 3(b) of the
Articles;
(d) provided further that the Proceeds shall at all times continue to be
held by the Company and the Trustee subject to the security granted
to National Westminster Bank plc as Security Trustee (the "Security
Trustee") pursuant to a Composite Guarantee and Mortgage Debenture
granted by the Company and others to National Westminster Bank Plc
as Security Trustee dated 9 March 1998 ("the Banks' Security"). In
the event of the service of a Special Dividend notice the Banks'
Security shall be released by the Security Trustee in accordance
with the provisions of the Deed of Release; and
(e) provided further that, in the event that the Security Trustee is, in
accordance with Clause 5.2 of the Deed of Release, released from all
of its obligations under the Deed of Release, the Trust shall be
terminated forthwith and the Proceeds and any income generated by
the Proceeds shall be released and paid to the Security Trustee who
shall be entitled to deal with such Proceeds and income free and
clear of the Trust
11.2 Any Proceeds held in cash shall be placed in a bank account in the name of
the Trustee (the "Account") and the terms of the Account shall be as
follows:
(a) it shall bear interest at a commercial rate for deposits of a size
equivalent to the Proceeds;
(b) it shall be designated the "Kaye Share Proceeds Trust Account";
(c) it shall be with National Westminster Bank plc which shall not hold
any security from the Company or any member of the Company's Group
in respect of the Proceeds save for the Banks' Security;
(d) it shall not be encumbered in any way and not be subject to any
right of set-off, counterclaim or withholding of any kind from
National Westminster Bank plc except as provided for in the Banks'
Security; and
(e) it shall be held in the name of the Trustee for the time being.
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11.3 Subject to clause 11.1(e) in the event of either the conversion of the
Investor Shares into ordinary shares of the Company, or the redemption of
all of the Investor Shares, or the Company declaring the payment of the
Special Dividend and such dividend becoming payable, the Investor and the
Company shall as soon as reasonably practicable procure that the Proceeds
and any interest accruing thereon are paid out of the Account in
accordance with the provisions set out above.
11.4 The perpetuity period for the trusts created by this clause shall be 80
years.
11.5 Nothing in this Agreement or in the Articles and no actions taken pursuant
to this Agreement or the Articles shall vest in the Investor or in any
third party any right or interest of whatsoever nature in the share
capital of Kaye or any interests derived therefrom and nothing effected
pursuant to this Agreement or the Articles shall amount to any transfer or
disposition of any such right or interest.
12 EXISTING SHAREHOLDERS' COVENANTS
12.1 The Existing Shareholders severally undertake to the Investor that at any
time whilst the Investor remains registered as the holder of any of the
Investor Shares they will procure that any director nominated by them to
the Board of the Company will exercise his vote at Board meetings, and
that they will exercise the votes attaching to their Shares, in a manner
calculated to ensure that all Group Companies comply with the terms of
this agreement.
13 COMPETITION OR MERGER NOTIFICATION
13.1 If the Investor considers that the exercise of any of its rights as a
holder of the Investor Shares as set forth in article 3(b) of the Articles
and/or in the Warrant is an event or are events which require a prior
notification to be made under the merger laws or competition laws of any
country, then all the parties shall co-operate, to such extent as they may
be required by the Investor to do so, in providing all necessary
information and assistance to enable such notification to be made and
clearance to be obtained as soon as is reasonably practicable.
14 INVESTOR APPROVED OPTIONS
14.1 The Investor confirms for the purposes of article 3(b) of the Articles
that it has granted its consent to the cancellation of certain options
granted under the existing share option schemes operated by the Company
and that the Investor consents to the issue of 3,864,000 new share options
to such persons. Details of such arrangements are set out in the document
entitled "Dilutive Options" annexed to the Disclosure Letter.
14.2 The Investor confirms and acknowledges that all such share options issued
with its consent pursuant to clause 14. 1 above shall be Dilutive Options
as referred to in the Articles and any other options granted by the
Company with the prior written approval of the Investor after the date
hereof shall also be Dilutive Options.
15 NATURE OF THIS AGREEMENT
15.1 The Articles will be deemed to be incorporated into the terms of this
agreement. If, however, there is any conflict between the provisions of
the Articles and the provisions of this agreement, then the provisions of
this agreement will prevail.
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15.2 Nothing in this agreement will be deemed to constitute a partnership
between the parties or any of them.
16 CONFIDENTIALITY
16.1 Save as required by law or by the Panel, the London Stock Exchange, NASDAQ
or any other regulatory body, no party will at any time hereafter make any
announcement concerning the terms of this agreement to any person without
the prior written consent of all of the others.
16.2 It is acknowledged by the parties that the Investor Directors and/or the
Observers are appointed to ensure that the interests of the Investor in
the Company are properly protected. Accordingly, the Investor Directors
and/or the Observers are authorised to disclose to the Investor any
confidential or other information relating to the Group which may come
into their possession whether as directors of the Company or otherwise.
16.3 The Investor acknowledges and undertakes that all information that the
Investor shall receive through its Observers, Investor Directors,
representatives or otherwise, whether in relation to any Group Company,
Kaye, KH or EXY, will remain confidential and will not be used for any
other purpose other than for monitoring the Investor's investment pursuant
to this agreement or the Warrant and the Investor shall take all
reasonable steps to ensure that no such information shall be used for any
other purpose or reaches any third parties save for information which is
in or comes into the public domain other than through any act or omission
of any member of the Daisytek Group or such people described above or
otherwise with the prior written consent of the Company..
17 NOTICES
17.1 Any notice given under this agreement is to be in writing and signed by or
on behalf of the party giving it. The notice may be served by leaving it
at or sending it by facsimile transmission, recorded delivery or
registered post:
(a) in the case of the Existing Shareholders to their addresses set out in
this agreement or such other addresses as they may notify to the Investor
for that purpose from time to time;
(b) in the case of the Company, to its registered office for the time being;
or
(c) in the case of the Investor and/or the Sub, to the address of Daisytek as
set out in this agreement, and to the address of the Sub as set out in
this agreement or such other address as either of the Investor or Sub may
notify to the Company for that purpose from time to time.
17.2 Any notice so served is deemed to have been received:
(a) in the case of personal service, upon delivery;
(b) in the case of facsimile transmission, 1 hour after the time of despatch
provided that the facsimile is despatched on a Business Day and otherwise
at 9.00 am the next Business Day; and
(c) in the case of recorded delivery or registered post, 48 hours from the
date of posting.
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17.3 In proving service by hand delivery or courier, it shall be sufficient to
prove that the notice was properly addressed and delivered or posted, as
the case may be, and in proving service by facsimile it shall be
sufficient to prove that the correct confirmed answer back was received.
18 DURATION
18.1 The rights and obligations granted to and imposed upon the various parties
to this agreement under clause 8 (Investor Protection) and clause 9
(Investor Observers) will cease to be enforceable immediately upon the
Investor ceasing to hold 10% of the Investor Shares and/or 10% of the
issued Ordinary Shares.
19 TRANSFERS
19.1 Subject to 19.2 the Investor Shares shall be freely transferable to any
person subject to that person executing and delivering to the Company a
Deed of Adherence at the time of such transfer.
19.2 A transfer of the Investor Shares shall be subject to the approval of the
Board (such approval not to be unreasonably withheld) if the proposed
transferee is not a Daisytek Group Company and if the transfer would
result in Daisytek Group Companies holding less than 50% of the Investor
Shares.
19.3 Each of the Existing Shareholders hereby authorise the Company to execute
any such Deed of Adherence as may be required pursuant to Clause 19.1 in
its/his name and as its/his behalf.
20 GENERAL
20.1 This agreement is binding upon and will enure for the benefit of the
successors-in-title and personal representatives of the parties. This
includes any successor to any Investor Shares transferred by the Investor
to any person which is a party to this agreement by virtue of a Deed of
Adherence.
20.2 This agreement (together with the various documents referred to in it)
constitutes the entire agreement between the parties. No variations will
be effective unless made in writing signed by or on behalf of all of the
parties.
20.3 All provisions of this agreement which have not been performed in full at
Completion are to remain in full force and effect notwithstanding
Completion.
20.4 This agreement may be executed in any number of parts all of which taken
together shall constitute one and the same agreement and any of the
parties may execute this agreement by signing such a part.
21 GOVERNING LAW
21.1 This agreement is governed by English law. The parties agree to submit to
the non-exclusive jurisdiction of the English courts.
IN WITNESS of which the parties have signed this agreement on the date set out
above.
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SCHEDULE 1
WARRANTIES
1 CORPORATE MATTERS
AUTHORITY AND CAPACITY
(a) The Company has full power and authority to enter into and perform
this agreement and any agreement or document to be entered into by
the Company pursuant to or referred to in this agreement and each
such agreement or document constitutes, or when executed will
constitute, valid and binding obligations on the Company which are
enforceable in accordance with their respective terms.
(b) The Company has taken all corporate and other action necessary to
enable it to enter into this agreement and any agreement or document
to be entered into pursuant to or referred to in this agreement and
has obtained all approvals and consents required by it for the
performance by it of the transactions contemplated by this agreement
and any agreement or document to be entered into pursuant to or
referred to in this agreement.
(c) The execution and delivery of, and the performance by the Company of
its obligations under, this agreement and any agreement or document
entered into pursuant to or referred to in this agreement will not:
(i) result in a breach of any provision of the Constitutional
Documents of any Group Company; or
(ii) result in a breach of any order, judgment or decree of any
court or governmental agency to which any Group Company is a
party or by which a Group Company or any of its assets is
bound.
(d) Following the passing of the Resolutions, the Company has full power
and authority to
(i) allot and issue the Preference Shares to the Investor and to
redeem the Preference Shares or convert the Preference Shares
into Ordinary Shares in each case in accordance with the terms
and conditions of the Preference Shares as set out in the
Articles; and
(ii) issue the Warrant
(e) The share capital of the Company and the shareholdings in the
Company of the Existing Shareholders together with their Connected
Persons as notified to the Company are as described in the Circular.
(f) All consents, approvals, authorisations, orders, registrations,
clearances and qualifications of or with any court or government
agency or body having jurisdiction over any Group Company or any of
their properties or any stock exchange authorities required for the
execution and delivery by the Company of this agreement to be duly
and validly authorised have been obtained or made and are in full
force and effect.
20
CHANGES IN SHARE CAPITAL
Since the Last Accounts Date:
(g) no share or loan capital has been issued or allotted, or agreed to
be issued or allotted, by the Company; and
(h) the Company has not redeemed or purchased or agreed to redeem or
purchase any of its share capital.
SUBSIDIARIES AND OTHER INTERESTS
(i) Save for the nominee shareholders set out in Schedule 2 a Group
Company is the sole legal and beneficial owner of the whole of the
issued share capital of each of the Subsidiaries.
(j) The whole of the issued share capital of each of the Subsidiaries
has been validly allotted and issued and is fully paid or properly
credited as fully paid.
(k) There is no encumbrance on, over or affecting any of the share
capital of any of the Subsidiaries and there is no agreement or
arrangement to give or create any such encumbrance. No claim has
been or will be made by any person to be entitled to any such
encumbrance.
(l) Apart from the Subsidiaries and its shareholding in Kaye and EXY,
the Company does not own or have any interest of any nature
whatsoever in any shares, debentures or other securities of any body
corporate, whether incorporated in any part of the United Kingdom or
elsewhere.
(m) Except as disclosed in the Circular, no Group Company is a party to
any contract or arrangement under which any person is entitled, or
could become entitled, to have allotted or issued to him any shares
or other securities in any Group Company.
DIRECTORS
(n) No person is a shadow director of the Company within the meaning of
section 741 of the Act.
(o) The Company has not been a party to any transaction to which any of
the provisions of sections 320, 322A or 330 of the Act may apply.
CORPORATE COMPLIANCE
(p) Each Group Company has at all times carried on business and
conducted their affairs in all material respects in accordance with
its Constitutional Documents for the time being in force.
(q) Each Group Company is empowered and duly qualified to carry on
business in all jurisdictions in which it now carries on business.
(r) Due compliance has been made with all relevant other legal
requirements in connection with the allotment or issue of any of the
shares, debentures and other securities of each Group Company and
the payment of dividends.
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CONSTITUTIONAL DOCUMENTS
(s) The copy of the Constitutional Documents of each Group Company which
is attached to the Disclosure Letter is true, accurate and complete
in all respects and has embodied in it or annexed to it a copy of
every such resolution as is referred to in section 380 of the Act
(or as may be required by similar legislation or regulations in any
other jurisdiction).
DOCUMENTS FILED
(t) All returns, particulars, resolutions and documents required by the
Act or any other legislation to be filed with the Registrar of
Companies in England and Wales, or any other authority, in respect
of the Company have been duly filed within the relevant time limits
and were true, accurate and correct.
(u) All mortgages and charges in favour of the Company have (where
necessary in order to secure their enforceability) been duly
registered in accordance with the Act.
POSSESSION OF DOCUMENTS
(v) All documents of title relating to the assets of any Group Company
(including, without limitation, all title deeds relating to the
Properties, an executed copy of all agreements to which such Group
Company is a party and an original executed copy of every document
or instrument creating or evidencing a charge over any of its
assets, property or undertaking are in its possession or control.
DISCLOSURE LETTER
(w) The information contained in the Disclosure Letter and any documents
annexed to it:
(i) is true and accurate in all material respects; and
(ii) does not omit anything which would make this information
untrue, incorrect or misleading in any material respect; and
(iii) fairly discloses every matter to which it relates.
COMMISSIONS
(x) No one is entitled to receive from any Group Company any finder's
fee, brokerage or other commission in connection with the
subscription of the Investor Shares under this agreement.
KAYE, KH AND EXY
(y) No member of the Board is actually aware of any matter or
circumstance, and no document in respect of Kaye, KH and EXY
provided to the Board since the Last Accounts Date discloses any
matter or circumstance, which would or might constitute a breach of
the other paragraphs of this Schedule 1 if each of those paragraphs
were to be repeated in relation to each of Kaye, KH and EXY.
22
2 ACCOUNTS
THE LAST ACCOUNTS
(a) The Last Accounts were prepared in accordance with the historical
cost convention. The bases and policies of accounting adopted for
the purposes of preparing the Last Accounts are the same as those
adopted in preparing the audited accounts of the Company in respect
of the last 3 preceding accounting periods.
(b) The Last Accounts:
(i) give a true and fair view of the assets and liabilities and
state of affairs of the Company, as the case may be, as at the
Last Accounts Date and of its profits or losses for the
financial period ended on that date;
(ii) comply with all applicable requirements of the Act and other
relevant statutes;
(iii) have been prepared in accordance with UK Generally Accepted
Accounting Principles as applicable to a United Kingdom
company as at the Last Accounts Date (or equivalent accounting
principles in any other relevant jurisdiction);
(iv) make full provision or reserve for all material actual
liabilities of the Company outstanding as at the Last Accounts
Date;
(v) make proper provision (or note in accordance with good
accountancy practice) for all contingent liabilities which
would normally be provided for or noted;
(vi) make provision reasonably regarded as adequate for all bad and
doubtful debts;
(vii) make full provision or reserve for all Taxation liable to be
assessed on the Company or for which it may be accountable in
respect of the period ended on the Last Accounts Date; and
(viii) are not affected by any extraordinary, exceptional or
non-recurring item.
(c) No amount included in the Last Accounts in respect of any asset,
whether fixed or current, exceeds its purchase price or production
cost (within the meaning of Schedule 4 of the Act) or (in the case
of current assets) its net realisable value on the Last Accounts
Date.
(d) Except as stated in the Last Accounts, no changes in its accounting
policies were made by the Company in respect of any of its latest 3
financial years ended on the Last Accounts Date.
(e) The unaudited management accounts of the Company for all periods
ended after the Last Accounts Date were prepared in a manner
consistent with that adopted in the preparation of the management
accounts of the Company for all periods ended during the twelve
months prior to the Last Accounts Date.
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(f) Having regard for the purpose for which such unaudited management
accounts were prepared and so far as the Company is actually aware,
they do not materially over-state the value of the assets nor
materially under-state the liabilities of the Company as at the
dates to which they were drawn up and do not materially over-state
the profits of the Company in respect of the periods to which they
relate.
BOOKS AND RECORDS
(g) All the accounts, books, ledgers, financial and other records, of
whatsoever kind, of each Group Company are in its possession or
under its control or in the possession or control of the relevant
Group Company, are up-to-date and have been maintained in accordance
with all applicable laws and generally accepted accounting practices
on a proper and consistent basis and comprise complete and accurate
records of all information required to be recorded therein.
(h) All the accounting records and systems (including, without
limitation, computerised accounting systems) of each Group Company
are recorded, stored, maintained or operated or otherwise held by a
Group Company and are not wholly or partly dependent on any
facilities or systems which are not under the exclusive ownership or
control of a Group Company.
(i) The register of members and other statutory books of each Group
Company are in its possession or under its control, or in the
possession or control of the Company, are up-to-date and have been
maintained in accordance with all applicable laws and comprise a
complete and accurate record of all information required to be
recorded therein. No Group Company has received any written notice
that any information contained in any of the statutory books is
incorrect or should be rectified.
ACCOUNTING REFERENCE DATE
The accounting reference date of the Company for the purposes of section
224 of the Act has been 31 December for at least the last three completed
accounting reference periods.
3 FINANCE
CAPITAL COMMITMENTS
(a) As at the Last Accounts Date, no Group Company had any outstanding
capital commitments except as disclosed in the Last Accounts.
(b) Since the Last Accounts Date, no Group Company has made or agreed to
make any capital expenditure or incurred or agreed to incur any
capital commitments, in any case in excess of L25,000 per item, nor
has it disposed of or realised any capital assets or any interest
therein.
DIVIDENDS AND DISTRIBUTIONS
(c) Since the Last Accounts Date, no dividend or other distribution (as
defined in ICTA) has been or is treated as having been declared,
made or paid by the Company.
24
(d) All dividends or distributions declared, made or paid by the Company
have been declared, made or paid in accordance with its
Constitutional Documents and the applicable provisions of the Act
(or equivalent legislation in any other relevant jurisdiction) and
in accordance with any agreements or arrangements between the
relevant Group Company and any third party regulating the payment of
dividends and distributions.
LOANS BY THE COMPANY
(e) Save for any intra-Group loans no Group Company has lent any money
in excess of L1,000 which has not been repaid to it nor has it made
any loan or quasi-loan contrary to the Act (or equivalent
legislation in any other jurisdiction) for which there is any
outstanding liability on the part of any Group Company.
LIABILITIES
(f) There are no liabilities (including contingent liabilities) which
are outstanding on the part of the Company other than :-
(i) those liabilities disclosed in the Last Accounts;
(ii) contingent liabilities which were not required by UK GAAP to
be disclosed or noted in the Last Accounts; or
(iii) those liabilities which have been incurred in the ordinary and
proper course of trading since the Last Accounts Date.
(g) During the last 5 years no claim has been made against any Group
Company in respect of any leasehold property where any Group Company
has been the tenant of, or a guarantor in respect of, any leasehold
property (other than the Properties) which is still outstanding.
BANK AND OTHER BORROWINGS
(h) Full details of all limits on each Group Company's bank overdraft
facilities are accurately set out in the Disclosure Letter.
(i) The total amount borrowed by any Group Company from each of its
bankers does not exceed its respective overdraft facilities.
(j) The total amount borrowed by any Group Company (as determined in
accordance with the provisions of the relevant instruments) does not
exceed any limitations on its borrowing powers contained in its
Constitutional Documents or in any debenture or other deed or
document binding upon it.
(k) No Group Company has outstanding loan capital, nor has it agreed to
create or issue any such loan capital.
(l) No Group Company has factored any of its debts, or engaged in
financing of a type which would not require to be shown or reflected
in the Last Accounts, or borrowed any money which it has not repaid,
save for borrowings not exceeding the amounts shown in the Last
Accounts.
25
(m) Since the Last Accounts Date, no Group Company has repaid or become
liable to repay any loan or indebtedness in advance of its stated
maturity.
(n) No Group Company has received written notice which is still
outstanding from any lenders of money to it, requiring repayment or
intimating the enforcement of any security the lender may hold over
any of its assets and so far as the Company is aware there are no
circumstances which are likely to give rise to any such notice.
CONTINUATION OF FACILITIES
(o) In relation to all debentures, acceptance credits, overdrafts, loans
and other financial facilities outstanding or available to any Group
Company (referred to in this paragraph as "FACILITIES"):
(i) the Disclosure Letter sets out full details and there are attached to it
accurate copies of all documents relating to the facilities;
(ii) there has been no contravention of or non-compliance with any provision or
any of those documents;
(iii) no steps for the early repayment of any indebtedness have been taken or
threatened;
(iv) there are no circumstances known to any Group Company whereby the Company
knows or believes that the continuation of any of the facilities might be
prejudiced or made subject to the alterations of any terms or conditions
(v) none of the facilities is dependent on the guarantee or indemnity of or
any security provided by a third party; and
(vi) no Group Company has any knowledge, information or belief that, as a
result of the acquisition of the Investor Shares by the Investor or any
other thing contemplated in this agreement, any of the facilities might be
terminated or mature prior to its stated maturity.
4 TRADING
CHANGES SINCE LAST ACCOUNTS DATE
Since the Last Accounts Date:
(a) the business of each Group Company has been carried on in the
ordinary and normal course so as to maintain the same as a going
concern;
(b) there have been no significant changes in (or any developments
involving a probable significant prospective change in) or affecting
the condition (financial or otherwise), prospects, turnover,
financial or trading position, business affairs, management or
properties of each Group Company whether or not arising in the
ordinary course of business;
(c) no resolution of the members of any Group Company has been passed,
whether in general meeting or otherwise (other than any resolutions
relating to the routine business of an annual general meeting);
26
(d) no Group Company has entered into any material contract outside the
ordinary and normal course of business or any arrangement of an
onerous or long-term nature;
(e) no Group Company has assumed or incurred any material liability
(including any contingent liability) which is not fully provided for
in the Last Accounts otherwise than in the ordinary and normal
course of business;
(f) no Group Company has by doing or omitting to do anything prejudiced
its goodwill to any material extent;
(g) no part of the business of any Group Company has been affected by
any abnormal factor not affecting similar businesses to a like
extent.
JOINT VENTURES AND PARTNERSHIPS
(h) No Group Company is, nor has it agreed to become, a member of any
joint venture, consortium, partnership or other unincorporated
association.
(i) No Group Company is not, nor has it agreed to become, a party to any
agreement or arrangement for sharing commissions or other income.
AGENCY AGREEMENTS
(j) No Group Company is a party to any agency, distributorship,
marketing, purchasing, manufacturing or licensing agreement or
arrangement other than in the ordinary course of business.
(k) There is not now outstanding any agreement or arrangement allowing
any third party to act or trade as agent of any Group Company other
than in the ordinary course of business.
POWERS OF ATTORNEY AND AUTHORITY
(l) No power of attorney given by any Group Company is in force.
(m) There are not outstanding any authorities (express or implied) by
which any person (other than a director of any Group Company) may
enter into any contract or commitment to do anything on behalf of
any Group Company.
GUARANTEES AND INDEMNITIES
(n) No Group Company has entered into any guarantee or agreement for
indemnity or for suretyship in respect of any debt, liability or
obligation of any third party other than another member of the
Group.
(o) There are no intra-Group guarantees given other than by any Group
Company nor has any other third party entered into or provided any
guarantee or agreement for indemnity or for suretyship or
performance bond or other security in respect of any debt, liability
or obligation of a Group Company.
INSIDER CONTRACTS AND ARRANGEMENTS
(p) There is not now outstanding and there has not at any time during
the 3 years prior to the date of this agreement been any contract or
arrangement between
27
any Group Company on the one hand and the Existing Shareholders
and/or any Connected Person of the Existing Shareholders and/or any
director of the Company.
(q) no Group Company depends to any material extent upon the use of any
assets owned by, or facilities or services provided by, any Existing
Shareholder and/or any Connected Person of any of the Existing
Shareholders.
(r) There is not now outstanding any debt, liability or obligation of
any Group Company to any Existing Shareholder and/or any Connected
Person of any of the Existing Shareholders other than normal trade
indebtedness arising in the ordinary course of business.
(s) There are no agreements, arrangements or understandings (whether
legally enforceable or not) between a Group Company and any Existing
Shareholder and/or any Connected Person of any Existing Shareholder
relating to the management of a Group Company's business, or the
appointment or removal of directors of a Group Company, or the
ownership or transfer of ownership of any shares or other securities
in a Group Company or the letting of any of the assets of a Group
Company, or the provision, supply or purchase of finance, goods,
services or other facilities to, by or from a Group Company, or in
any other respect relating to its business or affairs.
(t) No Existing Shareholder nor any Connected Person of any Existing
Shareholder has any rights or interests, whether directly or
indirectly, in any business other than that now carried on by any
Group Company which are or are likely to be or become competitive
with the business of a Group Company except as the registered holder
or beneficial owner for investment purposes only of not more than
10% of the equity share capital of any company listed on the
Official List of the London Stock Exchange or on the Alternative
Investment Market or any other recognised investment exchange.
DEFAULTS
(u) Save for circumstances which are outside of the Company's knowledge
and belief, no event has occurred or is subsisting which constitutes
or would with the giving of notice and/or lapse of time constitute a
material default, or result in the acceleration by reason of
default, of any obligation, under any agreement, undertaking,
instrument or arrangement to which any Group Company is a party or
by which it or any of its properties, revenues or assets are bound
or in the infringement by a Group Company of any material rights
held by third parties and to the best of the Company's knowledge,
there are no facts, matters or circumstances which are likely to
give rise to any such default.
(v) Save for circumstances which are outside of the Company's knowledge
and belief, no Group Company is nor will it with the lapse of time
become:
(i) in default under any obligations existing by reason of
membership of any association or body; or
(ii) materially liable in respect of any representation or warranty
(whether express or implied) or any matter giving rise to a
duty of care on its part.
28
VALIDITY OF AGREEMENTS
(w) To the best of the Company's knowledge and belief, there are no
grounds for rescission, avoidance or repudiation of any material
agreement or, other material transaction to which a Group Company is
a party, none of such agreements or other transactions are invalid
and no Group Company has received written notice of any intention to
terminate any such agreement or repudiate or disclaim any such
transaction.
(x) No party with whom the Company has entered into any material
agreement has given written notice to terminate or rescind or has
sought to repudiate or disclaim any such agreement or, to the best
of the Company's knowledge, and belief verbally indicated its
intention to do so.
LICENCES AND CONSENTS
(y) To the best of the Company's knowledge and belief, each Group
Company has obtained all material licences, permissions,
authorisations and consents from any person, authority or body which
are necessary for the proper carrying on of its business in the
places and in the manner in which such business is now carried on.
(z) So far as the Company is aware, all such licences, permissions,
authorisations and consents are in full force and effect, are not
limited in duration or subject to any unusual or onerous condition.
(aa) So far as it is aware, no Group Company is in breach of any of the
terms or conditions of any such licence, permission, authorisation
or consent and, to the best of the knowledge, information and belief
of the Company there are no facts, matters or circumstances which
might in any way prejudice the continuation or renewal of any such
licence, permission, authorisation or consent.
(bb) So far as the Company is aware, no party is or will be entitled to
terminate or revoke any such licence, permission, authorisation or
consent as a result of the entry into or performance of this
agreement or any of the transactions contemplated by this agreement
(including, for the avoidance of doubt, the conversion of the
Investor Shares into Ordinary Shares.)
LITIGATION
(cc) Except as plaintiff in relation to the collection of unpaid debts
arising in the ordinary course of business, no Group Company nor any
person for whose acts or defaults a Group Company may be vicariously
liable is involved in any legal or administrative or arbitration
proceedings (whether as plaintiff or defendant or otherwise) and no
such proceedings are pending or threatened and, so far as the
Company is aware, there are no facts, matters or circumstances which
are likely to give rise to any such proceedings.
(dd) In sub-paragraph (cc) "proceedings" includes any civil or criminal
proceedings, any form of arbitration, and any action or
investigation by (or by any person appointed by) any governmental,
statutory, public or regulatory authority or organisation of or in
any country (including any investment exchange and any authority or
body which regulates investment business or which is concerned with
29
mergers or tax) or by the European Commission or any other agency of
the European Union.
(ee) So far as the Company is aware, there is no unfulfilled or
unsatisfied judgment or court order outstanding against a Group
Company.
INVESTIGATIONS AND DISPUTES
(ff) No Group Company has received written notification of any
governmental or official investigation or inquiry concerning any
Group Company or any of its directors or employees is in progress or
pending and, so far as the Company is aware, there are no facts,
matters or circumstances which are likely to give rise to any such
investigation or inquiry.
(gg) There is no dispute with any government or any agency or body acting
on behalf of such government or any other body or authority in the
United Kingdom or elsewhere in relation to the affairs of a Group
Company and, so far as the Company is aware, there are no facts,
matters or circumstances which are likely to give rise to any such
dispute.
(hh) No Group Company is party to any undertaking or assurance given to
any court or government or governmental agency or regulatory body
given or enforced in the last five years and which is still in
force.
COMPLIANCE WITH LAWS
(ii) Each Group Company has conducted and is conducting its business in
all material respects in accordance with all applicable laws and
regulations whether of the United Kingdom or elsewhere.
(jj) No Group Company is in breach of any order, decree or judgment of
any court or any governmental or regulatory authority (whether of
the United Kingdom or elsewhere) issued to or enforced upon such
Group Company within the last 5 years.
(kk) No Group Company carries on (and has not, at any time when not an
authorised person under Chapter III Financial Services Act 1986 or
section 98(a) Friendly Societies Act 1992 carried on or under any
equivalent legislation in any other jurisdiction) investment
business, in any jurisdiction, and in the United Kingdom within the
meaning of section 1 Financial Services Act 1986.
INSOLVENCY
(ll) No Group Company is unable to pay its debts within the meaning of
section 123 of the Insolvency Act 1986 (or any equivalent
legislation in any other relevant jurisdiction).
(mm) No order has been made or petition presented or meeting convened for
the purpose of considering a resolution for the winding up of any
Group Company nor has any such resolution been passed. No petition
has been presented for an administration order to be made in
relation to a Group Company and no receiver (including any
administrative receiver) has been appointed in respect of the whole
or any part of any of the property, assets or undertaking of any
Group Company.
30
(nn) No composition in satisfaction of the debts of any Group Company
or scheme of arrangement of its affairs or compromise or
arrangement between it and its creditors and/or members or any
class of its creditors and/or members has been proposed,
sanctioned or approved.
(oo) No distress, execution or other process been levied or applied for
in respect of the whole or any part of any of the property, assets
or undertaking of any Group Company.
(pp) No Group Company has been a party to any transaction with any
third party which it is aware, in the event of such third party
going into liquidation or being the subject of an administration
order or a bankruptcy order, is likely to constitute (whether in
whole or in part) a transaction at an undervalue, a preference, an
invalid floating charge or an extortionate credit transaction or
part of a general assignment of debts pursuant to the Insolvency
Act 1986.
(qq) Save for circumstances outside of the knowledge and belief of the
Company, no action has been taken by any Group Company and no
matter has occurred which is equivalent or similar in any
jurisdiction to any of the actions on matters referred to in
sub-paragraphs (ll) to (pp)
COMPETITION AND TRADE
(rr) No Group Company has committed or omitted to do any act or thing
which could give rise to any fine or penalty under any of the
following legislation; nor is any Group Company a party to any
agreement, practice or arrangement which in whole or in part:
(i) contravenes the provisions of the Trade Descriptions Act
1968 and the Consumer Protection Act 1987 (or equivalent
jurisdiction in which the Group Company carries on
business);
(ii) would or might result in an investigation by the Office of
Fair Trading and/or the Competition Commission under the
Fair Trading Act 1973 (or equivalent jurisdiction in which
the Group Company carries on business);
(iii) contravenes the provisions of the Consumer Credit Act 1974
(or equivalent jurisdiction in which the Group Company
carries on business);
(iv) contravenes or is invalidated by the provisions of the
Resale Prices Act 1976 (or equivalent jurisdiction in which
the Group Company carries on business);
(v) contravened or is invalidated (in whole or in part) by or
was subject to registration under the Restrictive Trade
Practices Acts 1976 and 1977 (or equivalent jurisdiction in
which the Group Company carries on business);
(vi) contravenes or is invalidated by the Competition Act 1998
(or equivalent jurisdiction in which the Group Company
carries on business);
(vii) contravenes Articles 81 or 82 (formerly Articles 85 and 86
respectively) of the EC Treaty or any other provisions of
the EC Treaty or which has been notified to the European
Commission for a negative clearance or exemption; or
31
(viii) contravenes any other anti-trust, anti-monopoly,
anti-cartel legislation, fair trading, consumer protection
or similar legislation or regulations in any other
jurisdiction where the Group Company carries on business or
has any assets.
(ss) The Company is not, and has not during the last 5 years been, the
subject of any investigation by the Office of Fair Trading, the
Competition Commission, the European Commission or any other
anti-trust regulatory body and has not contravened any
undertakings given to any such body during the last 5 years.
(tt) None of the businesses or activities of any Group Company as
currently conducted could give rise to the imposition of any
anti-dumping duty or other sanction under any trade regulation
legislation in respect of any products manufactured by a Group
Company or in which a Group Company trades.
(uu) No anti-dumping duty regime or other sanction under any trade
regulation legislation is currently applicable to any product
which any Group Company manufactures, trades or sells.
(vv) No undertaking has been given by any Group Company to any
governmental authority (including, without limitation, the
authorities of the European Community) under any anti-dumping or
other trade regulation.
DATA PROTECTION
(ww) Each Group Company has complied in all material respects with all
relevant requirements of the Data Protection Act 1984 and/or the
Data Protection Act 1998 (or equivalent legislation in any other
jurisdiction) including compliance with the following:
(i) the data protection principles established in that Act;
(ii) requests from data subjects for access to data held by it;
and
(iii) the requirements relating to the registration of data
users.
(xx) No Group Company has received a notice or allegation from either
the data protection registrar or a data subject alleging
non-compliance with the Data Protection Act 1984, the Data
Protection Act 1998 (or any equivalent jurisdiction in which the
relevant company carries on business) or any of the data
protection principles or prohibiting the transfer of data to a
place outside the United Kingdom. No individual has claimed, or
has the right to claim, compensation from a Group Company under
the Data Protection Act 1998 (or equivalent legislation in any
other jurisdiction) for loss or unauthorised disclosure of data.
QUESTIONABLE PAYMENTS
(yy) None of the directors, officers, employees, agents or other
persons acting on behalf of any Group Company or any of the
Existing Shareholders has been party to:
(i) the use of any assets of any Group Company for unlawful
contributions, gifts, entertainment or other unlawful
expenses relating to political activity
32
or to the making of any direct or indirect unlawful payment to
government officials or employees from such asset; or
(ii) the establishment or maintenance of any unlawful or unrecorded
fund of monies or other assets; or
(iii) the making of any false or fictitious entries in the books or
records of the Company;
(iv) the making of any unlawful payment.
PARTICULARS OF EMPLOYEES
(zz) Schedule 4 contains full and accurate particulars of all
remuneration payable and other benefits provided or which all Group
Companies are bound to provide (whether now or in the future) to the
Key Employees. The Disclosure Letter also contains accurate and
complete particulars of employment including, without limitation,
all contracts of employment, offer letters, handbook, policies and
procedures, dates of birth and date of commencement of continuous
employment in respect of each employee of the Key Employees.
(aaa) All subsisting contracts of employment or service agreements with
Key Employees to which any Group Company has entered into or become
bound by are terminable by it on three months' notice or less
without giving rise to any claims for damages or compensation (other
than in accordance with the Employment Rights Act 1996 or other
similar legislation in other jurisdictions).
(bbb) No Key Employee has been given notice of the termination of his
employment and no Group Company has received any notice of
termination from any of the Key Employees in respect of their
contracts of employment since the Last Accounts Date and no Key
Employee has indicated his or her intention of leaving the Group.
(ccc) None of the Key Employees have ever expressed opposition to the
Investor acquiring the Investor Shares or have ever offered to
purchase any of the Investor Shares and none of the Key Employees
are entitled to receive any payment on a change in the Group's
shareholding structure.
SALARY COSTS
(ddd) Since the Last Accounts Date, no change has been made (or agreed) in
the rate of remuneration or the emoluments or pension benefits of
any director or officer of any Group Company and no change has been
made (or agreed) in the terms of the engagement (including as to the
level of fees) of any director of the Company.
(eee) As at the date of this agreement, Key Employees of every Group
Company have been paid all sums and have received all benefits to
which they are entitled.
(fff) No Group Company has in existence or participates in any share
incentive scheme or share option scheme nor is it proposing to
introduce or participate in any such scheme.
33
(ggg) There are no schemes (whether contractual or discretionary) in
operation by, or in relation to any Group Company under which any
director or senior manager of a Group Company is entitled to any
bonus, profit-share, commission or other incentive scheme (whether
calculated by reference to the whole or part of the turnover,
profits/losses or sales of a Group Company, the Group as a whole or
otherwise).
(hhh) No Group Company has registered a profit-related pay scheme under
the provisions of Part V Chapter III of ICTA (or under similar
legislation in another jurisdiction).
(iii) No Group Company is bound nor accustomed to pay any monies (other
than in respect of contractual remuneration or emoluments of
employment or pension benefits) to or for the benefit of any
director or employee of a Group Company.
(jjj) There are no existing redundancy schemes of the Group Company under
which payments greater than the statutory minimum payments are
payable and there are no anticipated redundancy programmes or plans.
LIABILITIES TO EMPLOYEES
(kkk) So far as the Company is aware no outstanding liability has been
incurred by any Group Company for breach of any contract of
employment or contract for services or redundancy payments,
protective awards, compensation for wrongful dismissal or unfair
dismissal or for sex, race or disability discrimination or for
failure to comply with any order for the reinstatement or
re-engagement of any employee or in respect of any other liability
arising out of their employment, or the variation or termination of
any contract of employment or contract for services.
COMPLIANCE
(lll) In relation to its employees so far as the Company is aware each
Group Company has complied in all material respects with all
statutes, regulations, codes of conduct, collective agreements,
terms and conditions of employment, orders and awards relevant to
their conditions of service or to the relations between it and its
employees, former employees or any recognised trade union.
(mmm) All National Insurance and sums payable by any Group Company to the
Inland Revenue under the PAYE system (or to the revenue office of
any country other than the UK under such similar legislation as may
be applicable in such jurisdiction) have been duly and properly
paid. Each Group Company has maintained proper records in respect of
all such matters. Each Group Company has deducted all tax required
by law to be deducted from all other payments to (or treated as made
to) employees and ex-employees of the relevant Group Company. Each
Group Company has accounted to the Inland Revenue (or the revenue
office in any other country outside of the UK) for all tax so
deducted together with all tax chargeable on benefits provided for
its employees and ex-employees.
(nnn) Each Group Company has taken every reasonable step to ensure that
records held in respect of its employees comply with the
requirements of the Data Protection Act 1998 in respect of the
United Kingdom and in respect of any other jurisdiction any laws
relating to the use, control and dissemination of information and
records relating to employees.
34
(ooo) During the period of 6 years preceding the date of this agreement,
no Group Company incorporated in the UK has been a party to any
"relevant transfer" (as defined in the Transfer of Undertakings
(Protection of Employment) Regulations 1981, as amended) or failed
to comply with any duty to inform and consult with appropriate
representatives of any affected employees under Regulation 10 of the
Transfer of Undertakings (Protection of Employment) Regulations
1981, as amended.
(ppp) Each Group Company has complied in all material respects with its
obligations under the Working Time Regulations 1998 (or such similar
legislation as may be applicable in another jurisdiction), in
particular, as to the hours worked by its employees and as to its
record-keeping obligations.
EMPLOYMENT CLAIMS
(qqq) There are no legal or other proceedings between a Group Company on
the one hand and any director or employee of the Company or
consultant or former director or employee of any Group Company on
the other hand nor are any such proceedings pending or threatened
and no enquiry or investigation has been made or threatened by the
Commission (or such similar body or organisation properly
constituted and recognised in any other jurisdiction) for Racial
Equality or the Equal Opportunities Commission in respect of any
act, event, omission or other matter arising out of or in connection
with:
(i) any application for employment by any person;
(ii) the employment or termination of employment of any person; or
(iii) any retirement/death/disability benefit or any other benefit
of whatever type.
(rrr) There are no claims pending or threatened or capable of arising
against any Group Company by an employee, independent contractor or
any other third party, in respect of any accident, disease, illness
or injury, which are not fully covered by insurance.
(sss) In the 12 months preceding this agreement, no improvement or
prohibition notice has been served on any Group Company in
connection with the conduct of its business by any body responsible
for health and safety.
INDUSTRIAL DISPUTES
(ttt) Neither a Group Company nor its directors or employees is involved
in any actual or threatened trade dispute as defined by section 218
Trade Union and Labour Relations (Consolidation) Act 1992 (or
similar legislation in any other jurisdiction in which the Group
Company carried on business).
(uuu) No dispute has arisen during the 6 years preceding the date of this
agreement between a Group Company and any material number or
category of its employees (or any trade union or other body
representing all or any of such employees) and, so far as the
Company is aware, there are no facts, matters or circumstances which
may give rise to any such dispute.
35
PENSIONS
(vvv) No Group Company is under any material legal liability or voluntary
commitment to pay or make any contribution in respect of any pension
or other retirement, death or disability benefit to any person
except in accordance with the Pension Scheme.
(www) The Pension Scheme has been operated in accordance with all
applicable rules and laws and in particular all contributions
payable by a Group Company have been paid.
(xxx) All sums payable in respect of the Pension Scheme (whether payable
by a Group Company, the members or the trustees) have been paid and
no services have been rendered or requested for which an account has
not been rendered.
(yyy) The Pension Scheme provides only money purchase benefits (as defined
in Section 84 of the Social Security Act 1986) for the beneficiaries
of the Pension Scheme and no Group Company has given any promises or
assurances (oral or written) to any beneficiary that his or her
benefits under the Pension Scheme will be calculated wholly or
partly by reference to any person's remuneration or equate
(approximately or exactly) to any particular amount.
5 PRE-COMPLETION EVENTS
Since the Last Accounts Date, and other than as disclosed in the Last
Accounts or as contemplated by this agreement or as publicly announced to
the Company Announcements Office of the London Stock Exchange by the
Company prior to the execution of this agreement:
(a) no member of the Group has declared, paid or made or proposed the
declaration, paying or making of, any dividend or other distribution
whether payable in cash or otherwise other than distributions by any
Group Company payable to other Group Companies except in accordance
with the Group's normal group financing;
(b) no member of the Group has made, authorised or proposed or announced
its intention to propose any change in its share or loan capital
except in respect of shares or loan capital held by another Group
Company;
(c) no member of the Group has, save as between Group Companies or upon
exercise of rights to convert or subscribe for Ordinary Shares
pursuant to the exercise of options under the Company's existing
share option schemes issued, or authorised or proposed the issue or
grant of, additional shares of any class or securities convertible
into or rights, warrants or options to subscribe for or acquire any
such shares or convertible securities or redeemed, purchased, repaid
or reduced any part of its share capital;
(d) no member of the Group has authorised, issued or proposed the issue
of any debentures or (save in the ordinary course of business)
incurred or increased any indebtedness or contingent liability or
amended the terms of any such indebtedness or contingent liability
and all indebtedness or contingent liability has been discharged
only in accordance with existing debt repayment schedules;
(e) there has been no material adverse change or deterioration of the
businesses or the financial or trading position or profits or
prospects of the Group.
36
(f) save for transactions between Group Companies, no member of the
Group has merged with or demerged from any body corporate or
acquired, disposed or (in either case otherwise than in the ordinary
course of trading) transferred any assets or any right, title or
interest to any asset (including shares in subsidiaries, associates
and trade investments) or authorised or proposed or announced any
intention to propose any merger, de-merger, acquisition, disposal or
transfer as aforesaid;
(g) no litigation or arbitration proceedings, prosecution or other legal
proceedings has been instituted or threatened or remain outstanding
to which any member of the Group is a party in each case which is
material in the context of the relevant member of the Group;
(h) no member of the Group has entered into any contract, transaction,
arrangement or commitment (whether in respect of capital expenditure
or otherwise) which is not in the ordinary course of business or is
of a long-term or unusual nature or which will result in the
material restriction of the scope of business or which involves or
could reasonably be expected to involve an obligation of a nature or
magnitude which is material;
(i) no member of the Group has entered into or varied the terms of any
service agreement with any of the senior executives or directors of
the Company or any connected persons of any such persons (within the
meaning of Section 346 of the Companies Act);
(j) no member of the Group has taken any corporate action for or made
any proposal for its winding-up, dissolution or reorganisation or
for the appointment of a receiver, administrator, administrative
receiver or similar officer or had any such person appointed;
(k) no member of the Group has made any amendment to its Constitutional
Documents; and
(l) no member of the Group has proposed or entered into any agreement,
arrangement or commitment with respect to any of the transactions or
events referred to in (a) to (k) above.
6 ASSETS
OWNERSHIP OF ASSETS
(a) A Group Company is the legal and beneficial owner and has good and
marketable title to all assets included in the Last Accounts or
acquired by it since the Last Accounts Date (except for any current
assets sold or realised in the ordinary and normal course of
business since the Last Accounts Date the value of which does not
exceed in aggregate L100,000) and none of such assets is the subject
of any encumbrance, equity, option, right of pre-emption or royalty
except for:
(i) any hire or lease agreement entered into in the ordinary
course of business;
(ii) retention of title provisions in respect of goods and
materials supplied to a Group Company in the ordinary course
of business; or
37
(iii) liens arising in the ordinary course of business by operation
of law.
(b) There is no dispute, directly or indirectly, between any Group
Company and any person relating to any of the assets of a Group
Company which is material in the context of the Group as a whole.
(c) All of the material assets owned by a Group Company or which a Group
Company has a right to use are in its possession or under its
control.
INSURANCE
(d) All the assets of the Group of an insurable nature have at all
material times and are as at the date of this agreement insured in
amounts reasonably regarded as adequate (with no provision for
deduction or excess) against fire and other risks normally insured
against by persons carrying on the same type of business as that
carried on by the Group.
(e) The Group is now and has at all material times been adequately
insured against accident, damage, injury, third party loss
(including, without limitation, product liability), loss of profits
and other risks normally insured against by persons carrying on the
same type of business as that carried on by the Group.
(f) All policies of insurance effected by or for the benefit of the
Group are currently in full force and effect and nothing has been
done or omitted to be done which could make any such policy of
insurance void or voidable or which is likely to result in an
increase in premium.
(g) So far as the Company is aware no Group Company has done or omitted
to do anything which renders such insurances voidable
(h) There is no material insurance claim made by any Group Company
pending or threatened (save for circumstances outside of the
knowledge and belief of the Company) or outstanding, and all
premiums in respect of all insurances have been duly paid.
INTELLECTUAL PROPERTY RIGHTS
(i) The Group is the legal and beneficial owner of its Intellectual
Property Rights, free from any and all encumbrances, options and
third party rights and the Group has a valid and subsisting licence
to use all Intellectual Property Rights of any third party which it
may be using.
(j) No Group Company is obliged to grant any licence, sub-licence,
security interest, option, lien, or assignment of or in respect of
any of the Intellectual Property Rights.
(k) No Group Company has received any notice (whether written or
otherwise) of any fact or matter (including any acts or omissions of
a Group Company) which might make any of the Intellectual Property
Rights, either in whole or in part, invalid and/or unenforceable.
(l) No Group Company has received any notice (whether written or
otherwise) that any of the Intellectual Property Rights:
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(i) are being infringed; or
(ii) are the subject of any pending or threatened proceedings for
opposition, cancellation, revocation, rectification, licence
of right or relating to title or proceedings similar to any of
the aforementioned anywhere in the world.
(m) No Group Company has received any notice (whether written or
otherwise) that the carrying on of the business of the Group in the
manner in which it was carried on immediately before the date of
this agreement infringes or conflicts with any Intellectual Property
Rights of any third party.
7 PROPERTIES
(a) The Properties are the only properties, owned, controlled, used or
occupied by the Group Companies and all deeds and documents
necessary to prove title to each Property are in the possession of
the relevant Group Company or are the subject of acknowledgements.
(b) Where the relevant Group Company is the legal and beneficial owner
in possession of a Property, it is in exclusive occupation of it and
has a good and marketable title to it.
(c) In relation to each Property as is of leasehold tenure the relevant
Group Company has paid the rent and observed and performed the
covenants on the part of the lessee and the conditions contained in
any leases (which expression includes underleases) under which the
Properties are held and the last demands for rent (or receipts if
issued) were unqualified and all such leases are valid and in full
force.
(d) There are no disputes regarding boundaries, easements, covenants or
other matters relating to any Property or its use.
(e) The Properties are not subject to any tenancies (which expression
includes subtenancies) in favour of any third party.
(f) All covenants (whether affecting the freehold or leasehold titles to
the Properties) have been properly performed and observed and
neither any Seller nor a Group Company has received notice of any
outstanding breach of covenant as regards any Property.
(g) The information contained in Schedule 3 is complete and accurate in
all respects.
(h) No Group Company has been a guarantor of a tenant's covenants in any
lease during the last 5 years.
(i) No Group Company has surrendered the lease of any leasehold property
to the reversioner without first investigating the reversioner's
title and without receiving from the reversioner an absolute release
from the tenant's covenants in the relevant lease and from all
liability arising under that lease.
(j) No Group Company has assigned any leasehold property of which it was
the original tenant in respect of which it entered into a covenant
with the landlord to observe and perform the tenant's covenants
under that lease without receiving a full and effective indemnity in
respect of its liability under that lease.
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PLANNING MATTERS
(k) The use of each of the Properties is the lawful use for the purposes
of the Planning Acts (or such similar legislation as may be in force
in another jurisdiction).
(l) Compliance has been made in all material respects with all
applicable statutory and bye-law requirements with respect to the
Properties and in particular (but without limitation) with the
requirements as to fire precautions and under the Office, Shops and
Railway Premises Act 1963, the Public Health Acts 1936 to 1961, the
Factories Act 1961, the Building (Inner London) Regulations 1985,
the Food Premises (Registration) Regulations 1981 and the Food
Safety Act 1990 or similar legislation in other jurisdictions in
which the Properties are situated.
(m) There are no closing, demolition or clearance orders, enforcement
notices or stop notices affecting the Properties.
(n) All premiums payable in respect of insurance policies with respect
to the Properties which have become due have been duly paid and no
circumstances have arisen which would vitiate or permit the insurers
to avoid such policies.
(o) The Group has paid the rent and all other sums payable under the
lease on the due dates for payment and the last demand for rent was
unqualified and the Group has materially observed and performed the
covenants on the part of the tenant and the conditions contained in
any lease.
(p) There is no obligation to reinstate the Properties by removing or
dismantling any alteration or improvements made to them by any Group
Company or any predecessor in title to the Group.
(q) There are no circumstances which would entitle any landlord to
exercise any powers of entry or to take possession, whether by way
of forceable re-entry or proceedings, or which would otherwise
restrict the continued possession and enjoyment of the Properties.
ENVIRONMENTAL MATTERS
(r) The Properties :
(i) do not have or contain any storage tanks or any dangerous,
radioactive, toxic or hazardous substance or article or any
waste or other pollutant or contaminant (whether above or
below ground);
(ii) are not nor have they in the past been used for the deposit,
storage, treatment or disposal of waste or sewage; and
(iii) are not referred to or listed in any register of polluted or
contaminated land or contaminative uses kept pursuant to any
Environmental Laws nor are there are any facts or
circumstances which would or might give rise to an entry in
any such register whether such register is now in existence or
is required to be established in the future.
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8 TAXATION
(a) The Last Accounts reserve or provide for all Taxation in
accordance with accounting standards generally accepted in the
UK (whether actual or contingent) of any nature whatsoever or
other sums imposed, charged, assessed, levied or payable under
the Taxation Statutes for which the Company was at the Last
Accounts Date liable or able to be made liable.
(b) The amount of the provision for deferred Taxation in respect
of the Company contained in the Last Accounts was, at the Last
Account Date in accordance with accountancy practices
generally accepted in the United Kingdom and commonly adopted
by companies carrying on businesses similar to those carried
on by the Company and, in particular, was in accordance with
Statement of Standard Accounting Practice 15.
(c) If all facts and circumstances which are now known to the
Company had been known at the time the Last Accounts were
drawn up, the provision for deferred Taxation that would be
contained in the Last Accounts would be no greater than the
provision which was so contained.
(d) Each Group Company has duly and punctually paid all Taxation
which it has become liable to pay or for which it has become
liable to account and is under no liability (and has not
within the 6 years prior to the date hereof been liable) to
pay any penalty, fine, surcharge or interest in connection
with any Taxation.
(e) All payments by any Group Company to any person which ought to
have been made under deduction of Taxation have been so made
and the Company has if required by law to do so accounted to
the relevant Taxation Authority for the Taxation so deducted
and the Company has not received any notice from any Taxation
Authority which will or may require the Company to withhold
Taxation from any payment made since the Last Accounts Date or
which may be made after the date of this agreement.
(f) Each Group Company has operated the Pay As You Earn system (or
such similar system as may be operated in another
jurisdiction) correctly in all material respects and has
complied with all its reporting obligations to the Inland
Revenue and the Contributions Agency (or such similar
organisation in another jurisdiction) in connection with
benefits provided for employees and former employees of that
Group Company
(g) All necessary information, notices, computations and returns
which should have been submitted by the Company to the Inland
Revenue, H M Customs and Excise and any other relevant tax or
excise authority, whether in the United Kingdom or elsewhere,
have been submitted within the prescribed time limits
including for the avoidance of doubt all claims, disclaimers
and elections which on or before the date of this agreement
are required by law to have been made, given or delivered for
tax purposes. All such information, notices, computations and
returns submitted to the Inland Revenue, H M Customs and
Excise and such other authorities were and remain correct and
complete in all material respects, were made on a proper basis
and the computations and returns have been agreed with or are
the subject of a determination by the relevant Taxation
Authority and the Company has provided all information
required to be provided under the Taxation Statutes or
pursuant to any notice served thereunder.
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(h) There is no dispute or disagreement outstanding nor is any
contemplated at the date of this agreement with any Taxation
Authority regarding liability or potential liability to any
tax or duty (including in each case penalties or interest)
recoverable from the Company or regarding the availability of
any relief from tax or duty to the Company and there are no
circumstances which make it likely that any such dispute or
disagreement will arise.
(i) Each Group Company has duly submitted all claims and
disclaimers which have been assumed to have been made for the
purposes of the Last Accounts. Each Group Company has
sufficient records relating to past events including any
elections made, to calculate the tax liability or relief which
would arise on any disposal or on the realisation of any asset
owned at the Last Accounts Date by Each Group Company or
acquired by a Group Company since that date.
(j) No Group Company has not participated in or operated scheme as
defined in section 202 ICTA or any scheme approved, or for
which approval has been or is to be sought, under Chapter III
of Part V ICTA (profit related pay) or such similar scheme as
may be operated in another jurisdiction.
(k) All statements and disclosures made to any authority in
connection with any provision of the Taxation Statutes
whatsoever were when made and remain complete and accurate in
all material respects.
(l) No transaction has been effected since by any Group Company
during the last 6 years in respect of which any consent or
clearance from a Taxation Authority was required or was or
could have been sought:
(i) without such consent or clearance having been validly
obtained before the transaction was effected; and
(ii) otherwise than in accordance with the terms of and so
as to satisfy any conditions attached to such consent
or clearance; and
(iii) otherwise than at a time when and in circumstances
and in which such consent or clearance was valid and
effective.
TAX EVENTS SINCE THE LAST ACCOUNTS DATE
Since the Last Accounts Date:
(m) No accounting period of any Group Company has ended;
(n) There has been no disposal of any asset (including trading
stock) or supply of any service or business facility of any
kind (including a loan of money or the letting, hiring or
licensing of any property whether tangible or intangible) in
circumstances where the consideration actually received or
receivable for such disposal or supply was less than the
consideration which could be deemed to have been received for
any Taxation purposes;
(o) No event has occurred which will give rise to Taxation payable
by a Group Company calculated by reference to deemed (as
opposed to actual) income, profits or gains or which will
result in any Group Company becoming liable to pay or bear any
Taxation directly or primarily chargeable against or
attributable to another person, firm or company; and
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(p) Except for certain reasonable business entertainment expenses
no Group Company has made any payment or incurred any
obligation to make a payment which will not be deductible in
computing trading profits for the purposes of corporation tax,
or be deductible as a management expense of an investment
company.
VALUE ADDED TAX
(q) Each Group Company is, where registered in a jurisdiction
where value added tax is applicable duly registered for the
purposes of value added tax and the no such Group Company is
partially exempt for the purposes of value added tax.
(r) No Group Company has been required in the last three years to
give security to H M Customs and Excise (or such similar
organisation in another jurisdiction) and has paid in full all
value added tax and all excise duties which are or may become
payable in respect of any assets (including trading stock)
imported or owned, or services received from abroad, by the
Company.
STAMP DUTY
(s) All documents in the possession or under the control of any
Group Company or to the production of which a Group Company is
entitled which establish or are necessary to establish the
title of a Group Company to any material asset have been duly
stamped and any applicable stamp duties or charges in respect
of such documents have been duly accounted for and paid, and
no such document which is outside the United Kingdom would
attract stamp duty if it were brought into the United Kingdom.
All documents in the possession or under the control of any
Group Company or to the production of which a Group Company is
entitled which establish or are necessary must be stamped to
establish title to such asset to establish the title of a
Group Company to any material asset and have been duly stamped
and any applicable stamp duties or charges in respect of such
documents have been duly accounted for and paid.
9 ACCOUNTANT'S REPORT
(a) All information requested by Ernst & Young from the Company
for the purposes of the Accountants' Report has been supplied
and, as far as the Company is aware, the statements of fact
within Accountant's Report are true and accurate in all
material respects;
(b) there is no statement either of fact or opinion in the
Accountant's Report which presents a view of the Group or its
businesses or circumstances which is materially inaccurate or
misleading; and
(c) The opinions attributed to the Directors in the Accountant's
Report are fair and reasonable, are honestly held by the
Directors and, in the Director's reasonable opinion, can be
properly supported.
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