EXHIBIT 2.1
DATED 1ST MARCH 2005
(1) INTELEK PROPERTIES LIMITED
AND
(2) XCEL CORPORATION LIMITED
AND
(3) INTELEK PLC
AND
(4) EMRISE CORPORATION
_______________________________________________
AGREEMENT
relating to
the sale and purchase of the whole of the issued share capital
of
Pascall Electronic (Holdings) Limited
________________________________________________
THOMAS
EGGAR
76 Shoe Lane
London
EC1M 3JB
Tel: 0207 842 0000
Fax: 0207 842 3903
CONTENTS
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CLAUSE PAGE
1. Interpretation........................................................1
2. Condition.............................................................5
3. Sale and purchase.....................................................6
4. Purchase price........................................................6
5. Completion............................................................8
6. Warranties............................................................9
7. Limitations on claims................................................11
8. Pension Retention....................................................15
9. Tax covenant.........................................................16
10. Indemnities..........................................................16
11. Restrictions on Vendor...............................................18
12. Confidentiality and announcements....................................20
13. Further assurance....................................................21
14. Assignment...........................................................21
15. Whole agreement......................................................21
16. Variation and waiver.................................................22
17. Costs................................................................22
18. Guarantee Provisions.................................................22
19. Notice...............................................................24
20. Interest on late payment.............................................25
21. Severance............................................................25
22. Agreement survives completion........................................25
23. Third party rights...................................................25
24. Successors...........................................................25
25. Counterparts.........................................................26
26. Governing law and jurisdiction.......................................26
SCHEDULE
SCHEDULE 1 PARTICULARS OF THE COMPANY AND SUBSIDIARY...................27
Part 1. The Company..........................................................27
Part 2. The Subsidiary.......................................................27
SCHEDULE 2....................................................................29
SCHEDULE 3 COMPLETION..................................................30
Part 1. Conduct between Exchange and Completion..............................30
Part 2. What the Vendor shall deliver to the Purchaser at Completion.........31
Part 3. Matters for the board meetings at Completion.........................33
SCHEDULE 4 WARRANTIES..................................................35
Part 1. General Warranties...................................................35
1. Power to sell the company............................................35
2. Shares in the company and Subsidiary.................................35
3. Constitutional and corporate documents...............................36
4. Information..........................................................37
5. Compliance with laws.................................................37
6. Licences and consents................................................37
7. Insurance............................................................37
8. Power of attorney....................................................37
9. Disputes and investigations..........................................38
10. Defective products and services......................................38
11. Customers and suppliers..............................................39
12. Competition..........................................................39
13. Contracts............................................................40
14. Transactions with the vendor.........................................41
15. Finance and guarantees...............................................41
16. Insolvency...........................................................42
17. Assets...............................................................43
18. Deleted intentionally................................................43
19. Environmental........................................................43
20. Intellectual property................................................44
21. Information technology...............................................45
22. Data protection......................................................46
23. Employment...........................................................47
24. Property.............................................................50
25. Accounts.............................................................52
26. Financial and other records..........................................53
27. Changes since accounts date..........................................53
28. Retirement benefits..................................................54
Part 2. Tax Warranties.......................................................55
29. General..............................................................55
30. Chargeable gains.....................................................56
31. Capital allowances...................................................56
32. Distributions........................................................57
33. Loan relationships...................................................57
34. Close companies......................................................57
35. Group relief.........................................................58
36. Groups of companies..................................................58
37. Deleted Intentionally................................................58
38. Company residence and overseas interests.............................58
39. Anti-avoidance.......................................................59
40. Inheritance tax......................................................59
41. VAT..................................................................59
42. Stamp duty and stamp duty land tax...................................60
SCHEDULE 5 TAX COVENANT................................................61
1. Interpretation.......................................................61
2. Covenant.............................................................65
3. Payment date and interest............................................66
4. Exclusions...........................................................67
5. Recovery from third parties..........................................68
6. Over-provisions and corresponding benefit............................69
7. Purchaser's covenant.................................................70
8. Corporation tax returns..............................................70
9. Conduct of tax claims................................................72
10. Grossing up..........................................................74
11. Value added tax groups...............................................75
12. Group Relief.........................................................75
SCHEDULE 6 PARTICULARS OF PROPERTIES...................................77
Part 1. Freehold properties..................................................77
Part 2. Leasehold properties.................................................77
Part 3. Other real property..................................................78
SCHEDULE 7 ACCOUNTING POLICIES TO BE ADOPTED IN THE COMPLETION ACCOUNTS
AND NET ASSETS..............................................79
THIS AGREEMENT is made the 1st day of March 2005
BETWEEN:
(1) INTELEK PROPERTIES LIMITED (a company incorporated and registered in
England and Wales with company number 2487913) whose registered office
is at PO Box 25, South Marston Park, Swindon, Wiltshire SN3 4TR ("THE
VENDOR").
(2) XCEL CORPORATION LIMITED (a company incorporated and registered in
England and Wales with company number 1969006) whose registered office
is at Brunswick Road, Cobbs Wood, Ashford, Kent TN23 1EB ("THE
PURCHASER").
(3) INTELEK PLC (a company incorporated and registered in England and Wales
with company number 464296) whose registered office is at PO Box 25,
South Marston Park, Swindon, Wiltshire SN3 4TR ("INTELEK").
(4) EMRISE CORPORATION whose principal executive office is at 9485 Haven
Avenue, Suite 100, Ranchu Cucamonga CA 91730 ("PURCHASER'S GUARANTOR").
WHEREAS:
(A) Pascall Electronic (Holdings) Limited ("the Company") has an authorised
share capital of (pound)823,080 divided into 300,640 Non-Cumulative
Preference Shares of (pound)1 each, 215,250 Cumulative Redeemable
Preference Shares of (pound)1 each and 307,190 ordinary shares of
(pound)1 each.
(B) Further particulars of the Company and of its Subsidiary at the date of
this agreement are set out in Schedule 1 (Particulars of the Company
and its Subsidiary).
(C) The Vendor is the sole legal and beneficial owner of the entire issued
share capital of the Company.
(D) The Vendor has agreed to sell and the Purchaser has agreed to buy the
Sale Shares subject to the terms and the Condition of this agreement.
(E) The Vendor is part of a Group whose parent company is Intelek (a public
limited company). As a result of the provisions of the Listing Rules,
before any sale and purchase envisaged in this agreement can be
completed, the shareholders of Intelek must first approve in a general
meeting, the terms of this agreement.
NOW IT IS AGREED AS FOLLOWS:
1. INTERPRETATION
1.1 The definitions and rules of interpretation in this clause apply in
this agreement.
ACCOUNTS: the audited financial statements of the Company and PEL as at
and to the Accounts Date, comprising the individual accounts of the
Company and PEL, including in each case the notes thereon and the
auditor's and Directors' reports (copies of which are attached to the
Disclosure Letter).
ACTUARY: Alexander Forbes, Alexander Forbes House, 6 Bevis Marks,
London, EC3A 7AF;
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ACCOUNTS DATE: 31 March 2004.
AGREED FORM: means any document the form of which is agreed by the
parties to this agreement.
BUSINESS: the business of the Company and its Subsidiary carried on at
the Completion Date.
BUSINESS DAY: a day (other than a Saturday, Sunday or public holiday)
when banks in London are open for business.
CAA 2001: the Capital Allowances Act 2001.
CLAIM AND SUBSTANTIATED CLAIM: have the meanings set out respectively
in Clause 7.
COMPANY: Pascall Electronic (Holdings) Limited (a company incorporated
and registered in England and Wales with company number 1756274) whose
registered office is at PO Box 25, South Marston Park, Swindon,
Wiltshire SN3 4TR.
COMPANIES ACTS: the Companies Act 1985 and the Companies Act 1989.
COMPLETION: completion of the sale and purchase of the Sale Shares in
accordance with this agreement.
COMPLETION PAYMENT: the sum of (pound)3,100,000 (being the Purchase
Price before any adjustment is made pursuant to clause 4) payable at
Completion by the Purchaser to the Vendor in accordance with clause 5.4
but subject to the Pension Retention in accordance with clause 8.1.
COMPLETION ACCOUNTS: the balance sheets of the Company and PEL at the
date of Completion and their respective profit and loss accounts for
the period from 1 April 2004 to the Completion Date prepared in
accordance with clause 4.
COMPLETION DATE: has the meaning given in clause 5.2.
CONDITION: the condition set out in clause 2.1.
CONNECTED: in relation to a person, has the meaning contained in
section 839 of the ICTA 1988.
CONTROL: in relation to a body corporate, the power of a person to
secure that the affairs of the body corporate are conducted in
accordance with the wishes of that person:
(a) by means of the holding of shares, or the possession of voting
power, in or in relation to that or any other body corporate;
or
(b) by virtue of any powers conferred by the constitutional or
corporate documents, or any other document, regulating that or
any other body corporate,
and a CHANGE OF CONTROL occurs if a person who controls any body
corporate ceases to do so or if another person acquires control of it.
DIRECTOR: each person who is a director or shadow director of the
Company or its Subsidiary, the names of whom are set out in Schedule 1.
DISCLOSED AND DISCLOSE: fairly disclosed in or under the Disclosure
Letter.
DISCLOSURE LETTER: the letter from the Vendor to the Purchaser with the
same date as this agreement that is described as the Disclosure Letter,
including the bundle of documents attached to it (" THE DISCLOSURE
BUNDLE").
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ENCUMBRANCE: any interest or equity of any person (including any right
to acquire, option or right of pre-emption) or any mortgage, charge,
pledge, lien, assignment, hypothecation, security, interest, title,
retention or any other security agreement or arrangement.
EVENT: has the meaning given in Schedule 5.
FSMA: the Financial Services and Markets Act 2000.
GROUP: in relation to a company (wherever incorporated) that company,
any company of which it is a subsidiary (its holding company) and any
other subsidiary of any such holding company; and each company in a
Group is a member of the Group. Unless the context otherwise requires,
the application of the definition of "Group" to any company at any time
will apply to the company as it is at that time.
ICTA 1988: the Income and Corporation Taxes Act 1988.
IHTA 1984: the Inheritance Tax Act 1984.
INTELEK DEBT: the inter-company indebtedness of the Company and its
Subsidiary to the Vendor at Completion of approximately
(pound)1,600,000 (one million six hundred thousand pounds).
INTELLECTUAL PROPERTY RIGHTS: has the meaning given in paragraph 20.1
of Part 1 of Schedule 4.
LISTING RULES: the listing rules of the London Stock Exchange plc.
LOAN AGREEMENT: the agreement between the Company and the Purchaser to
be entered into at the Completion Date under which the Purchaser agrees
to lend the Company (pound)1,600,000 to enable the Company to repay the
Intelek Debt.
LONG STOP DATE: 6pm on 18th March 2005.
MANAGEMENT ACCOUNTS: the unaudited management accounts of PEL for the
period of ten months ended 31st January 2005 (a copy of which are
attached to the Disclosure Letter).
NET ASSETS: the net assets of PEL as shown in the Completion Accounts
as agreed or determined in accordance with clause 4.
PEL: Pascall Electronics Limited particulars of which are detailed in
Part 2 of Schedule 1.
PENSION RETENTION: the amount of (pound)800,000 to be paid into the
Retention Account by the Purchaser out of the Completion Payment and to
be dealt with in accordance with clause 8.
PENSION SCHEME: the Intelek Pension Scheme which comprises 2 elements
(i) the final salary section closed to new entrants/members from 31st
December 1999 and (ii) a money purchase section which was opened to
entrants/members from 1st January 2000 which scheme is approved under
Chapter 1 of Part XIV of the ICTA 1988.
PREVIOUSLY-OWNED LAND AND BUILDINGS: has the meaning given in paragraph
24.1 of Part 1 of Schedule 4.
PROPERTIES: has the meaning given in paragraph 24.1 of Part 1 of
Schedule 4.
PURCHASE PRICE: the purchase price for the Sale Shares to be paid by
the Purchaser to the Vendor in accordance with clause 4.
PURCHASER'S AUDITORS: Grant Thornton.
PURCHASER'S SOLICITORS: Thomas Eggar, 11th Floor, 76 Shoe Lane, London
EC4A 3JB.
3
RETENTION ACCOUNT: the retention account to be opened and operated by
Hammonds, Solicitors pursuant to clause 8.1 to the order of the
Purchaser's Solicitors and the Vendors' Solicitors.
RMA: the "Return Material Authorisation" being the formal notification
procedure of the Company and PEL used in connection with customer
complaints and returns.
SALE SHARES: the 140,320 Non-Cumulative Preference Shares of (pound)1
each and the 224,391 ordinary shares of (pound)1 each in the Company,
all of which have been issued and are fully paid.
SAXON HOUSE LEASE: the lease relating to the Saxon House Property dated
29 May 1985 between Bass Pensions Limited (1) PEL (2).
SAXON HOUSE LANDLORD: the landlord under the Saxon House Lease.
SAXON HOUSE PROPERTY: the leasehold property situated at Saxon House,
Station Approach, Sunbury on Thames more particularly described in the
Saxon House Lease.
SHARE WARRANTIES: the Warranties in Part 1 of Schedule 4.
SUBSIDIARY: in relation to a company wherever incorporated means a
"subsidiary" as defined in section 736 of the Companies Act 1985 and
any other company which is a subsidiary (as so defined) of a company
which is itself a subsidiary of such holding company.
Unless the context otherwise requires:
(a) the application of the definition of Subsidiary to any company
at any time will apply to the company as it is at that time;
and
(b) references to "the Subsidiary" or "its Subsidiaries" are
references to PEL.
TAX COVENANT: the tax covenant as set out in Schedule 5.
TAX OR TAXATION: has the meaning given in Schedule 5.
TAX CLAIM: has the meaning given in Schedule 5.
TAX WARRANTIES: the Warranties in Part 2 of Schedule 4.
TAXATION AUTHORITY: has the meaning given in Schedule 5.
TAXATION STATUTE: has the meaning given in Schedule 5.
TCGA 1992: the Taxation of Chargeable Gains Act 1992.
TMA 1970: the Taxes Management Act 1970.
TRANSACTION: the transaction contemplated by this agreement or any part
of that transaction.
VATA 1994: the Value Added Tax Act 1994.
VENDOR'S SOLICITORS: DLA Piper Rudnick Gray Cary UK LLP, Victoria
Square House, Victoria Square, Birmingham B2 4DL.
VENDOR'S AUDITORS: RSM Robson Rhodes LLP.
WARRANTIES: the warranties in Schedule 4.
WESTRIDGE LANDLORD: the landlord under the Westridge Property Lease.
WESTRIDGE PROPERTY LEASE: the lease of the Westridge Property dated 29
May 1999 between Westridge Property Developments Limited (1) and PEL
(2).
4
WESTRIDGE PROPERTY: the leasehold property situated at Westridge
Business Park, Ryde, Isle of Wight more particularly described in the
Westridge Property Lease.
1.2 Clause and schedule headings do not affect the interpretation of this
agreement.
1.3 A "PERSON" includes a corporate or unincorporated body.
1.4 Words in the singular include the plural and in the plural include the
singular.
1.5 A reference to one gender includes a reference to any other gender.
1.6 A reference to a statute or statutory provision is a reference to it as
it is in force for the time being taking account of any amendment,
extension, or re-enactment and includes any subordinate legislation for
the time being in force made under it.
1.7 "WRITING" or "WRITTEN" includes faxes but not e-mail.
1.8 Documents expressed to be in "AGREED FORM" are documents in the form
agreed by the parties or on their behalf and initialled by them or on
their behalf for identification.
1.9 References to clauses and Schedules are to the clauses and Schedules of
this agreement; references to paragraphs are to paragraphs of the
relevant Schedule.
2. CONDITION
2.1 Completion of this agreement is conditional on the shareholders of
Intelek in general meeting passing a resolution to approve the terms of
this agreement. If the Condition is not satisfied by the Long Stop Date
(or such later date as may be agreed by the parties) or prior to such
date the Vendor and the Purchaser acknowledge in writing that the
Condition is incapable of being satisfied by such date, this agreement
shall cease to have effect immediately after that date and time except
for:
(a) the provisions set out in clause 2.3; and
(b) any rights or liabilities that have accrued under this
agreement prior to such date and time.
2.2 Intelek undertakes that within 7 days of the date of this agreement it
will issue the applicable notice and circular to its shareholders in
accordance with the Listing Rules in which (subject to complying with
their fiduciary duties) the board of directors of Intelek shall
recommend to its shareholders that they approve the terms of this
agreement in general meeting.
2.3 The following provisions shall continue to have effect,
notwithstanding failure to satisfy the Condition:
(a) clause 1 (Interpretation);
5
(b) clause 2.1 (Condition);
(c) clause 12 (Confidentiality and announcements);
(d) clause 15 (Whole agreement);
(e) clause 16 (Variation and waiver);
(f) clause 17 (Costs);
(g) clause 18 (Notice); and
(h) clause 26 (Governing law and jurisdiction).
2.4 The Purchaser and the Vendor shall co-operate fully in all actions
necessary to procure the satisfaction of the Condition including, but
not limited to, the provision by all parties of all information
reasonably necessary and providing such assistance as may reasonably be
required.
3. SALE AND PURCHASE
3.1 On the terms of this agreement and subject to the Condition, the Vendor
shall sell, and the Purchaser shall buy, the Sale Shares with full
title guarantee free from all Encumbrances and together with all rights
that attach (or may in the future attach) to them including, in
particular, the right to receive all dividends and distributions
declared, made or paid on or after the date of this agreement.
4. PURCHASE PRICE
4.1 The Purchase Price is (subject to adjustment pursuant to the provisions
of clause 4.6) (pound)3,100,000 payable in cash at Completion to the
Vendor's Solicitors.
4.2 The Purchase Price shall be deemed to be reduced by the amount of any
payment made to the Purchaser:
(a) as a result of a Substantiated Claim; or
(b) under clause 10; or
(c) under clause 4.6; or
(d) under the Tax Covenant.
4.3 The Purchaser shall procure that as soon as practicable and in any
event within 6 weeks after Completion the Company and PEL prepare the
Completion Accounts. The Completion Accounts shall (subject to taking
into account the matters contained in Schedule 7) be prepared on an
entirely consistent basis to the Accounts and on the basis of the same
accounting policies, conventions standards and principles as the
Accounts. The Purchaser shall also procure that PEL certifies the
amount of the Net Assets. The cost of the preparation of the Completion
Accounts and certification shall be borne by the Company and PEL as
applicable. To facilitate the preparation of the Completion Accounts
6
the Purchaser shall procure a stock take of PEL is conducted within 10
days of Completion to substantially verify the stock of PEL at
Completion in accordance with normal industry practice and
representatives of both the Vendor and the Purchaser shall be entitled
to attend. Once prepared the Completion Accounts and PEL's
certification of the Net Assets shall be submitted to the Vendor and
Vendor's Auditors.
4.4 The parties shall disclose to the Company and PEL all relevant facts
and information for the purposes of preparing the Completion Accounts
and certifying the Net Assets. The Purchaser shall procure that the
Company and PEL gives to the Vendor and the Vendor's Auditors all
relevant facts information and documentation reasonably requested by
them for the purpose of enabling them to review the draft Completion
Accounts and the draft certification of Net Assets.
4.5 The draft Completion Accounts and the draft certificate of Net Assets
shall be deemed to have been accepted by the Vendor unless the
Purchaser receives notice to the contrary from the Vendor within 25
Business Days of their being delivered to the Vendor pursuant to clause
4.3 specifying (i) the item or items disputed (ii) their reasons and
(iii) how the draft Completion Accounts and certificate of Net Assets
should be adjusted (the "NOTICE"). The Purchaser shall permit the
Vendor to have such access as the Vendor may reasonably request to the
accounts working papers and relevant personnel relating to the
preparation of the draft Completion Accounts and draft certification of
Net Assets so as to enable the Vendor to evaluate the draft Completion
Accounts and the draft certificate of the Net Assets delivered to it.
If the Purchaser and the Vendor resolve the matters raised in the
Notice within 10 working days following receipt by the Purchaser of the
Notice the draft Completion Accounts and certificate of Net Assets
(adjusted as agreed between the Purchaser and the Vendor) will be
deemed to have been accepted by the parties as final. If the Purchaser
and the Vendor are unable to reach agreement in such 10 working day
period the matters in dispute may at the written election of the
Purchaser or Vendor be referred to the decision of an independent
chartered accountant ("Independent Accountant") to be appointed in
default of agreement between the parties within 7 days of the election
being made, by the President for the time being of the Institute of
Chartered Accountants in England and Wales upon the application of
either the Vendor or the Purchaser. The Independent Accountant shall
act as an expert and not as an arbitrator (and neither the Arbitration
Act 1996 or any earlier or later enactments on arbitration shall
apply). The Independent Accountant's decision shall be final and
binding (in the absence of manifest error) on the parties for all
purposes of this agreement. The Completion Accounts and certificate of
Net Assets as adjusted to reflect the Independent Accountant's decision
shall be deemed to be accepted by the parties as final. The costs of
the Independent Accountant shall be apportioned between the parties as
the Independent Accountant shall decide but all parties shall bear
their own costs for presenting their case to the Independent
Accountant.
4.6 If the Net Assets as certified amount to less than (pound)2,520,000 the
Purchase Price for the Sale Shares shall be reduced by the amount of
that shortfall on a pound for pound basis. The amount of any reduction
shall be limited to the Completion Payment. For the purpose of this
clause 4.6 the Vendor and the Purchaser agree that the net assets of
the Company as disclosed by the Completion Accounts of the Company when
consolidated with the Net Assets of PEL should have no effect on the
Net Assets of PEL. If for any reason such consolidation results in the
Net Assets of PEL being reduced then the Net Assets of PEL for the
purposes of this clause 4.6 shall be taken to be the lower figure which
results from such consolidation.
7
4.7 If the Net Assets amount to a sum in excess of (pound)2,520,000 the
Purchase Price shall be increased by the amount of that excess on a
pound for pound basis.
4.8 The Vendor or Purchaser (as the case may be) undertake to pay the
amount of any reduction or increase (as the case may be) in the
Purchase Price to the Vendor or the Purchaser (as the case may be) in
cash within 14 days after the Completion Accounts and certificate of
Net Assets are deemed to be accepted pursuant to this clause 4 and
failing payment in full within the period of 14 days the balance
outstanding from time to time shall bear interest (as well after as
before judgment) from the date of deemed acceptance pursuant to this
clause 4 until actual payment at the rate of 3 per cent per annum above
the base rate of Barclays Bank PLC from time to time.
5. COMPLETION
5.1 Completion shall take place on the Completion Date:
(a) at the offices of the Purchaser's Solicitors; or
(b) at any other place agreed in writing by the Vendor and the
Purchaser.
5.2 "COMPLETION DATE" means 15th March 2005 but if the Condition has not
been satisfied in accordance with clause 2 on or before that date, it
means the second Business Day after it is satisfied provided that this
is on or before the Long Stop Date.
5.3 The Vendor undertakes to the Purchaser:
(a) to use its reasonable endeavours to ensure that the Business
shall be conducted in the manner provided in Part 1 of
Schedule 3 from the date of this agreement until Completion
and gives the Purchaser the undertakings set out in that
Schedule;
(b) that in the period between the date of this agreement and the
Completion Date it will use its reasonable endeavours to
procure that neither the Company nor its Subsidiary
deliberately do or deliberately omit to do anything which
would cause a breach of Warranty or make any Warranty untrue
or misleading were it to be repeated at Completion. The
Purchaser acknowledges that the Vendor will not be liable for
any breach of this clause 5.3(b) that is caused by
circumstances or actions outside of the reasonable control of
the Vendor or the Company or its Subsidiary.
5.4 At Completion the Vendor shall:
(a) deliver the documents and evidence set out in Part 2 of
Schedule 3;
(b) procure that a board meeting of the Company and its Subsidiary
is held at which the matters identified in Part 3 of Schedule
3 are carried out;
(c) deliver any other documents referred to in this agreement as
being required to be delivered by them;
(d) deliver a certified copy of the resolution passed by the
shareholders of Intelek authorising the Transaction;
8
(e) deliver a certified copy of the resolution passed by the board
of directors of the Vendor approving the Transaction and the
execution and delivery by the officers specified in the
resolution of this agreement, and any other documents referred
to in this agreement as being required to be delivered by it;
(f) deliver written confirmation in the agreed form from the
Vendor confirming that upon receipt of the sum of
(pound)1,600,000 to be paid by the Purchaser to the Vendor on
behalf of the Company and its Subsidiary the Vendor shall
accept the same in full and final settlement of the Intelek
Debt; and
(g) deliver a written undertaking from the Vendor's Solicitors in
the agreed form that upon Completion and receipt of the monies
in accordance with clause 5.5(b) they shall forthwith pay the
same to the Vendor in discharge of the Intelek Debt
5.5 At Completion the Purchaser shall:
(a) pay the Completion Payment less the Pension Retention by
telegraphic transfer to the Vendor's Solicitors and shall pay
the amount of the Pension Retention by telegraphic transfer to
the Retention Account to be dealt with in accordance with
Clause 8;
(b) lend to the Company the sum of (pound)1,600,000 in accordance
with the terms of the Loan Agreement which sum shall be
transmitted by telegraphic transfer to the Vendor's Solicitors
and shall, subject to the passing of a resolution of the Board
of the Company in accordance with clause 5.4 (b), be paid to
the Vendor who shall accept the same in full and final
settlement of the Intelek Debt; and
(c) deliver a certified copy of the resolution passed by the board
of directors of the Purchaser authorising the Transaction and
the execution and delivery by the officers specified in the
resolution of this agreement, and any other documents referred
to in this agreement as being required to be delivered by it.
5.6 If the Vendor does not comply with the requirements of clause 5.4 or
the Purchaser does not comply with the requirements of clause 5.5 in
each case in any material respect then the other party may, without
prejudice to any other rights it has:
(a) proceed to Completion; or
(b) rescind this agreement.
5.7 As soon as possible after Completion, the Vendor shall send to the
Purchaser (at the Purchaser's registered office for the time being) all
records, correspondence, documents, files, memoranda and other papers
relating to the Company and its Subsidiary not required to be delivered
at Completion, which are not kept at any of the Properties.
6. WARRANTIES
6.1 The Purchaser is entering into this agreement on the basis of, and in
reliance on, the Warranties.
9
6.2 The Vendor warrants to the Purchaser as at the date of this agreement
in the terms of the Warranties.
6.3 The Purchaser acknowledges that save in the case of fraud or fraudulent
misrepresentation on the part of the Vendor it's sole remedy for breach
of Warranty shall be in damages and the Purchaser shall have no right
to rescind this agreement provided that if at any time before
Completion the Purchaser becomes aware that a Warranty has been
breached (or would have been breached had the Warranties been repeated
at Completion) then the Purchaser may either proceed to Completion (in
which case the Purchaser shall waive its right to bring a Claim in
respect of such matter) or may as its sole remedy by notice in writing
to the Vendor elect to rescind this agreement in which case this
agreement shall cease to have effect immediately after that date and
time except for the provisions set out in clause 2.3.
6.4 If at any time before or at Completion the Vendor becomes aware that a
Warranty has been breached or would be breached had the Warranties been
repeated at Completion it shall as soon as reasonably practicable
notify the Purchaser in such detail in the possession of the Vendor to
enable the Purchaser to make a reasonable assessment of the situation
for the purposes of clause 6.3.
6.5 Warranties stated to be given "so far as the Vendor is aware" or "to
the best of the Vendor's knowledge information and belief" or any
similar such expression are deemed to be given after the Vendor has
made all reasonable enquiries of the directors of the Company and its
Subsidiary (but excluding Dr Brian Mazonas), Nicholas Stillwell, Guy
Newham and Stuart Ellsbury, and the actual (as opposed to deemed or
imputed) knowledge of each of the Vendor's Solicitors and the auditors
of the Company and its Subsidiary (but not further or otherwise).
6.6 Each of the Warranties is separate and, unless otherwise specifically
provided, is not limited by reference to any other Warranty or any
other provision in this agreement.
6.7 Unless specifically stated to the contrary in this agreement the rights
and remedies of the Purchaser in respect of any breach of the
Warranties and the Tax Covenant shall not be affected by Completion, by
any investigation made by it or on its behalf into the affairs of the
Company or its Subsidiary, by its failing to exercise or delaying the
exercise of any right or remedy, or by any other event or matter,
except a specific and duly authorised written waiver or release, and no
single or partial exercise of any right or remedy shall preclude any
further or other exercise.
6.8 With the exception of the matters Disclosed, nothing the Purchaser
knows, or which is a necessary consequence of facts within its
knowledge, shall prevent or prejudice a Claim. Any document contained
in the Disclosure Bundle shall only constitute a disclosure of the
information contained in that document and not of any other matter or
circumstances relating to or conclusion which might be drawn from the
subject matter of that document which might give rise to a breach of
any of the Warranties unless and to the extent that such other matter
circumstances or conclusion is Disclosed expressly in the Disclosure
Letter itself.
6.9 If the Purchaser is liable to pay Tax on any sum paid by the Vendor to
the Purchaser as a result of a Substantiated Claim the amount so
payable by the Vendor shall be increased by such amount as will ensure
that (after payment of such Tax) the net receipt to the Purchaser is
the same as it would have been were the payment by the Vendor not
subject to Tax in the hands of the Purchaser.
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6.10 Clause 6.9 shall not apply to any Tax that the Purchaser is liable to
pay to the extent that such Tax has already been taken into account in
quantifying the liability of the Vendor under the Substantiated Claim.
6.11 If the Purchaser assigns the benefit of this agreement or any part
thereof, the Vendor shall not be liable pursuant to clause 6.9, save to
the extent that the Vendor would have been so liable had no such
assignment occurred.
7. LIMITATIONS ON CLAIMS
7.1 The definitions and rules of interpretation in this clause apply in
this agreement.
CLAIM: a claim under the Warranties;
SHARE WARRANTY CLAIM: a claim under the Share Warranties;
SUBSTANTIATED CLAIM: a Claim in respect of which liability is admitted
by the party against whom such Claim is brought, or which has been
adjudicated on by a Court of competent jurisdiction and no right of
appeal lies in respect of such adjudication, or the parties are
debarred by passage of time or otherwise from making an appeal.
A Claim is CONNECTED with another Claim or Substantiated Claim if they
all arise out of the occurrence of the same event or relate to the same
subject matter.
7.2 This clause limits the liability of the Vendor in relation to any Claim
and any claim under the Tax Covenant.
7.3 The aggregate liability of the Vendor for all Substantiated Claims and
all claims under the Tax Covenant when taken together shall not exceed
the Purchase Price (as adjusted in accordance with Clause 4) plus the
amount of the Intelek Debt.
7.4 The Vendor shall not be liable for a Claim or a claim under the Tax
Covenant unless:
(a) the amount of a Substantiated Claim, or of a series of
connected Substantiated Claims of which that Substantiated
Claim is one, exceeds (pound)5,000;
(b) the amount due in respect of a claim under the Tax Covenant
exceeds (pound)5,000;
(c) the amount of all Substantiated Claims and all claims under
the Tax Covenant that are not excluded under Clause 7.4(a) and
clause 7.4(b) when taken together, exceeds (pound)62,500 in
which case the whole amount (and not just the amount by which
the limit in this clause 7.4(c) is exceeded) is recoverable by
the Purchaser.
11
7.5 The Vendor is not liable for any Claim to the extent that the Claim is
in respect of a breach of Warranty and relates to matters Disclosed as
permitted in this agreement.
7.6 The Vendor is not liable for a Claim or a claim under the Tax Covenant
unless the Purchaser has given the Vendor notice in writing of the
Claim or the claim under the Tax Covenant, specifying in reasonable
detail the nature of the Claim or claim under the Tax Covenant and the
amount claimed:
(a) in the case of a claim made under the Tax Warranties or the
Tax Covenant, within the period of seven years beginning with
the Completion Date; and
(b) in any other case, within the period of two years beginning
with the Completion Date,
and the liability of the Vendor for any Claim or claim under the Tax
Covenant specified in such notice shall absolutely determine and cease
(unless the amount payable in respect of the relevant Claim or claim
under the Tax Covenant has been agreed by the Vendor within three
months of the date of such written notice) if legal proceedings have
not been instituted in respect of such Claim or claim under the Tax
Covenant by the due service of process on the Vendor within twelve
months of such written notice.
7.7 The Vendor shall have no liability whatsoever in respect of any Share
Warranty Claim to the extent that the claim arises or is increased as a
result of any act or omission on the part of the Purchaser, the Company
or its Subsidiary after Completion (otherwise than in the ordinary
course of trading) or would not have arisen but for the passing of or
any change in after the date of this agreement, any law, rule,
regulation, interpretation of the law or administrative practice of any
government, governmental department, agency or regulatory body or
increase in the rates of Taxation or any imposition of new Taxation.
7.8 The Vendor shall have no liability whatsoever for any Claim or claim
under the Tax Covenant to the extent that any loss occasioned to the
Purchaser or the Company or its Subsidiary is covered by a right to
make recovery or claim indemnity or by a policy of insurance in force
on the date of this agreement and payment is made under such indemnity
or policy without any increase in premium or change in terms on any
renewal of such policy in consequence thereof.
7.9 The Vendor shall have no liability for any Share Warranty Claim:
7.9.1 to the extent that provision, reserve or allowance has been
made in the Accounts or the Completion Accounts or was
specifically referred to in the notes to the Accounts or the
Completion Accounts in respect thereof or to the extent that
payment or discharge thereof has been taken into account
therein or in accordance with generally accepted accounting
principles has not been so taken account of, or referred to;
or
7.9.2 to the extent that provision, reserve or allowance made in the
Accounts or the Management Accounts or the Completion Accounts
for any Taxation liability proves to be insufficient by reason
of any increase in the rates of Taxation or variation in the
method of applying, or calculating the rate of Taxation made
after Completion whether or not with retrospective effect; or
12
7.9.3 to the extent that the Purchaser fails to act in accordance
with the reasonable request or directions of the Vendor
pursuant to the provisions of clause 7.15.4 and the amount of
the liability is thereby increased beyond what it would have
been had the Purchaser acted in accordance with such request
or directions, then in respect of the amount of such increase.
7.10 If any potential Claim under the Share Warranties arises by reason of a
liability which is contingent only, then the Vendor will not be under
any obligation to make a payment in respect of such Claim until such
time as the contingent liability ceases to be contingent and becomes
actual however this shall not prevent or delay the Purchaser from
pursuing the Claim in accordance with this agreement.
7.11 The Vendor shall not be liable in respect of any breach of the
Warranties if, and to the extent that, the loss incurred is or has been
included in any claim under the Tax Covenant which has been satisfied
in cleared funds, nor shall the Vendor be liable in respect of a claim
under the Tax Covenant if, and to the extent that, the amount claimed
is or has been included in a breach of the Warranties which has been
satisfied in cleared funds.
7.12 Nothing in this clause 7 applies to a Claim or a claim under the Tax
Covenant that arises or is delayed as a result of dishonesty, fraud,
wilful misconduct or wilful concealment by the Vendor, its agents or
advisers.
7.13 The Vendor shall not plead the Limitation Act 1980 in respect of any
claims made under the Tax Warranties or Tax Covenant up to seven years
after the Completion Date.
7.14 If the Purchaser becomes aware of any event which might give rise to a
Share Warranty Claim, the following provisions shall apply:
7.14.1 the Purchaser shall as soon as reasonably practicable give
notice to the Vendor of the event and shall consult with the
Vendor in respect of the event;
7.14.2 the Purchaser shall provide to the Vendor and to the Vendor's
professional advisers reasonable access to its personnel and
to the relevant assets, documents and records within the
Purchaser's power, possession or control for the purpose of
investigating the event and enabling the Vendor to take such
action as is referred to in clause 7.14.4 below;
7.14.3 the Vendor (at its own expense) shall be entitled to take
copies of any relevant documents or records and photograph any
premises or assets as referred to in clause 7.14.2 above; and
7.14.4 the Purchaser shall:
(a) take such action and institute proceedings and give
such information and assistance as the Vendor may
reasonably request to dispute, resist, appeal,
compromise, defend, remedy or mitigate the event or
enforce against any person any rights of the
Purchaser in relation to the matter;
(b) in connection with any proceedings related to the
event, use professional advisers approved (such
approval not to be unreasonably withheld) by the
Vendor; and
13
(c) take all reasonable steps to inform and consult with
the Vendor in respect of the conduct of those
proceedings and of any negotiations relating to them;
in each case subject to the Vendor indemnifying and securing
the Purchaser to its reasonable satisfaction against any
liability, costs, damages, penalties or expenses which may be
incurred as a result of any request by the Vendor, provided
that nothing in this clause shall require the Purchaser to
take any action which, in the reasonable opinion of the
Purchaser, could damage the commercial interests of the
Purchaser or the Company or its Subsidiary.
For the avoidance of doubt the provisions of clause 7.14.4 do not
apply to the pursuance by the Purchaser of any Claim under the Tax
Warranties or claim under the Tax Covenant against the Vendor.
7.15 If at any time the Purchaser, the Company or its Subsidiary becomes
entitled to recover from some other person (including any Taxation
Authority) any sum in respect of any Share Warranty Claim then the
Purchaser shall or shall procure that the Company or the Subsidiary
shall:
7.15.1 undertake all reasonable steps necessary to enforce such
recovery without being required to initiate litigation; and
7.15.2 promptly supply all information which relates to such recovery
to the Vendor including details of any steps taken to enforce
such recovery and copies of all correspondence and documents
relating to the same.
7.16 If the Vendor pays to the Purchaser an amount in respect of a Share
Warranty Claim and the Purchaser, the Company or its Subsidiary
subsequently recovers from a third party an amount referable to the
event giving rise to such claim then:
7.16.1 if the amount paid by the Vendor in respect of the Share
Warranty Claim is more than the sum recovered, the Purchaser
shall promptly pay the Vendor the sum recovered less the costs
incurred by the Purchaser in recovering the same; and
7.16.2 if the amount paid by the Vendor in respect of the Share
Warranty Claim is less than or equal to the sum recovered
(after deducting the costs incurred by the Purchaser in
recovering the same) the Purchaser shall promptly pay the
Vendor an amount equal to the amount paid by the Vendor.
7.17 If any amount is repaid to the Vendor by the Purchaser pursuant to
clause 7.16.2 above, an amount equal to the amount so repaid shall be
deemed never to have been paid by the Vendor for the purposes of
paragraph 7.4 and accordingly shall not be treated as an amount in
respect of which any liability has been incurred.
7.18 For the purposes of this paragraph the "sum recovered" means an amount
equal to the amount recovered from the third party plus any repayment
supplement in respect of the amount recovered from the third party
under section 825 ICTA plus any interest in respect of the amount
recovered from the third party, less the Purchaser's reasonable costs
and expenses in pursuing such recovery.
7.19 Any payment to the Purchaser shall be deemed to be a reduction of the
Purchase Price.
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7.20 Notwithstanding the terms of any other Warranty, the only Warranties
given by the Vendor to the Purchaser in connection with the Environment
and Environmental Matters (as such terms are defined in paragraph 19 of
Schedule 4) are the Warranties set out in Warranty 19 of Schedule 4. No
other Warranties in this agreement are given or may be interpreted as
being given by the Vendor in connection with the Environment and
Environmental Matters.
7.21 Notwithstanding the terms of any other Warranty, the only Warranties
given by the Vendor to the Purchaser in connection with the Properties
are the Warranties set out in Warranty 24 of Schedule 4. No other
Warranties in this agreement are given or may be interpreted as being
given by the Vendor in connection with the Properties.
7.22 Notwithstanding the terms of any other Warranty, the only Warranties
given by the Vendor to the Purchaser in connection with the Accounts
and the Management Accounts are the Warranties set out in Warranty 25
of Schedule 4. No other Warranties in this agreement are given or may
be interpreted as being given by the Vendor in connection with the
Accounts and the Management Accounts.
7.23 No warranty given by the Vendor to the Purchaser in respect of the
Environment, Environmental Matters, the Properties and/or the Accounts
are given or may be interpreted as being given in respect of the
subject matter of any Warranties set out in Schedule 4 other than the
relevant Warranties at 19, 24 and 25 respectively.
8. PENSION RETENTION
8.1 The Pension Retention shall on Completion be paid into the Retention
Account which shall be opened by Hammonds, solicitors for and to the
order of the Purchaser's Solicitors and the Vendor's Solicitors
(together "the Solicitors") with Barclays Bank PLC at the best rate of
interest then prevailing for such an account.
8.2 The Vendor shall procure that as soon as practicable and in any event
within 30 days after Completion, the Actuary shall be instructed to
certify the exact value of the proportionate amount attributable to PEL
of the statutory shortfall in the Pension Scheme, assessed in
accordance with Section 75 of the Pensions Act 1995 and the
Occupational Pensions Scheme (Deficiency on Winding-up etc) Regulations
1996, being the debt due to the Scheme from PEL at Completion (being
the time at which PEL ceased to be an "Associated Employer" in terms of
Rule 34.1.5 of the Rules of the Pension Scheme) ("the Certificate")
8.3 The Vendor and Intelek shall and the Purchaser shall procure that PEL
shall disclose to the Actuary all relevant facts and information for
the purposes of preparing the Certificate.
8.4 The Vendor shall use its reasonable endeavours to procure delivery to
the Purchaser of a copy of the Certificate as soon as reasonably
practicable following Completion and no later than 90 days following
Completion as provided in clause 8.2 (the Vendor being deemed to have
accepted the Certificate by virtue of procuring the delivery of the
Certificate to the Purchaser).
15
8.5 Upon receipt by the Purchaser of the Certificate the Purchaser and the
Vendor shall forthwith instruct and authorise the Solicitors to
instruct Hammonds to pay to the trustees of the Pension Scheme the sum
specified in the Certificate from the Pension Retention provided that:
(a) in the event that the Pension Retention is insufficient to
meet the amount shown on the Certificate to be due from PEL to
the Pension Scheme the Vendor undertakes to the Purchaser to
pay the amount of any shortfall to the trustees of the Pension
Scheme in cash within 14 days of receipt of the Certificate by
the Purchaser;
(b) if the Certificate discloses that the amount of the debt due
from PEL to the Pension Scheme is less than the amount of the
Pension Retention the Solicitors shall instruct that the
balance of any monies after the payment to the trustees of the
Pension Scheme standing to the credit of the Retention Account
less all bank charges and costs and together with all accrued
interest shall be paid by Hammonds to the Vendor.
9. TAX COVENANT
The provisions of Schedule 5 apply in this agreement.
10. INDEMNITIES
10.1 The Saxon House Property is excluded from the sale and purchase of the
Company and its Subsidiary and has been assigned from the Subsidiary to
Intelek prior to the date of this agreement with the intention that the
Purchaser, the Company and its Subsidiary shall have no liability
whatsoever in respect of the Saxon House Property whether in respect of
any matter which arose prior to or following the date of this
agreement.
10.2 The Vendor undertakes to indemnify, and to keep indemnified, the
Purchaser, the Company and its Subsidiary against all losses or
liabilities (including, without limitation, any direct or indirect
consequential losses, loss of profit , damages, claims, demands,
proceedings, costs, expenses, penalties, legal and other professional
fees and costs) which are suffered or incurred by any of them and which
arise directly or indirectly in connection with the Saxon House
Property.
10.3 The Purchaser undertakes to indemnify and to keep indemnified the
Vendor and each member of the Vendor's Group against all losses or
liabilities (including, without limitation, any direct, or indirect
consequential losses, loss of profit, damages, claims, demands,
proceedings, costs, expenses, penalties, legal and other professional
fees and costs) which are suffered or incurred by any of them and which
arise directly or indirectly in connection with the inability, for any
reason whatsoever of the Vendor and/or Intelek to secure the release of
the guarantee given by Intelek in favour of the Westridge Landlord in
connection with the Westridge Property Lease and the refusal of the
Westridge Landlord to accept the Purchaser's Guarantor as the
substitute guarantor of the Westridge Property Lease.
10.4 The Purchaser and the Purchaser's Guarantor undertake to the Vendor and
to each member of the Vendor's Group to co-operate fully in all actions
reasonably required by the Westridge Landlord to procure the release of
Intelek as guarantor of the Westridge Property Lease provided that for
the avoidance of doubt the Purchaser and the Purchaser's Guarantor
shall not be required to give any rent deposit, bank guarantee or other
such security.
16
10.5 The Vendor, the Purchaser, Intelek, the Company and PEL acknowledge
acceptance by Intelek that, as principal employer of the Pension Scheme
it is, as at the date of this agreement, and will remain, responsible
for the provision of funding to the Pension Scheme in respect of any
liability which PEL may have, either now or in the future, to the
Pension Scheme resulting from PEL's participation in the Pension Scheme
prior to the Completion Date.
10.6 The Purchaser confirms on its own behalf and on behalf of PEL that
(save as may be its duty and obligation in accordance with the law) it
will not at any time procure, provoke, solicit, encourage or in any way
assist with the formulation, origination or pursuit of any claim which
may be brought or threatened against PEL by any person or body in
relation to PEL's participation in the Pension Scheme or the provision,
prior to the Completion Date, of any arrangements for pension or
retirement benefits (whether benefits claimed as a result of actual
pensionable service in the Pension Scheme or otherwise) by PEL.
10.7 In the event of any claim is brought or threatened by any person who,
prior to the Completion Date, was or had been an employee of PEL which
relates or is alleged to relate to PEL's participation in the Pension
Scheme the Purchaser undertakes and confirms that it will (and it will
procure that PEL will):
(a) notify Intelek in writing as soon as reasonably practicable of
the existence of such claim or threatened claim, and any
supporting evidence relating to such claim as has been made
known to the Purchaser or to PEL;
(b) not communicate or correspond (except for acknowledging
receipt and indicating the papers are being passed to Intelek
and the Trustee of the Pension Scheme) with any claimant or
any alleged or threatened claimant, save at such time, in such
manner and in such form as may be determined or expressly
agreed by Intelek (such agreement not to be unreasonably
withheld or delayed), all subject to clause 10.8 hereof;
(c) permit Intelek full conduct of such claim including the power
to compromise or otherwise dispose of such claim without
reference to PEL or to the Purchaser;
(d) communicate as necessary with any body organisation tribunal
or court (hereinafter collectively referred to as the
"Communicator") where the Communicator contacts PEL and/or the
Purchaser and where PEL and the Purchaser are bound to respond
direct PROVIDED that PEL and the Purchaser will inform the
Communicator that the Trustee of the Pension Scheme and
Intelek are the only parties liable to members under the
Pension Scheme from the Completion Date and will, wherever
possible, direct the Communicator's enquiry to the Trustee of
the Pension Scheme and/or Intelek. PEL and the Purchaser will
forward without delay any correspondence from the Communicator
to the Trustees of the Pension Scheme and Intelek and consult
with them prior to taking any action.
10.8 In consideration of and subject to compliance with the undertakings
contained in clause 10.7 by itself and by PEL, Intelek will indemnify
and keep indemnified PEL against all and any claims made by any person
who, prior to the Completion Date, was or had been an employee of PEL
which relate to PEL's liability for the provision of pensions and like
17
benefits via the Pension Scheme and will indemnify PEL and the
Purchaser in respect of any fees charges fines and expenses in excess
of (pound)250 reasonably incurred by PEL and the Purchaser in
corresponding with the Communicator and with any third party who may
directly contact PEL and the Purchaser with regard to the Pension
Scheme.
11. RESTRICTIONS ON VENDOR
11.1 The Vendor covenants with the Purchaser that it shall not and shall
procure that each other member of its Group shall not:
(a) at any time during the period of 3 years beginning with the
Completion Date, in any geographic areas in which any business
of the Company or its Subsidiary was carried on at the
Completion Date, carry on or be engaged in any business which
is in direct competition with any part of the Business as the
Business was carried on at the Completion Date; or
(b) at any time during the period of 4 years beginning with the
Completion Date deal with or canvass, solicit or otherwise
seek the custom of or interfere in the relationship with any
person who at any time during the period of 12 months
immediately preceding the Completion Date, was a client or
customer of the Company or its Subsidiary for any goods or
services in direct competition with any part of the Business
as the Business was carried on at the Completion Date; or
(c) at any time during the period of 3 years beginning with the
Completion Date:
(i) offer employment to, enter into a contract for the
services of, or attempt to entice away from the
Company or its Subsidiary, any individual who is at
the time of the offer or attempt, and was at the
Completion Date, a director, officer or employee
holding an executive or managerial position with the
Company or its Subsidiary; or
(ii) procure or facilitate the making of any such offer or
attempt by any other person; or
(d) at any time after Completion, use in the course of any
business:
(i) the words "Pascall"; or
(ii) anything which is, in the reasonable opinion of the
Purchaser, capable of confusion with such words,
mark, name, design or logo; or
(iii) any trade or service mark, business or domain name,
design or logo which, at Completion, was or had been
used exclusively by the Company or its Subsidiary.
(e) at any time during a period of 3 years beginning with the
Completion Date, solicit or entice away from the Company or
its Subsidiary any supplier to the Company or its Subsidiary
who had supplied goods or services to the Company or its
Subsidiary at any time during the 12 months immediately
preceding the Completion Date, if that solicitation or
enticement causes or would cause such supplier to cease
supplying, or materially reduce its supply of, those goods
and/or services to the Company or its Subsidiary.
11.2 Nothing in this clause 11 shall prevent the Vendor or any member of the
Vendor's Group from:
(a) carrying on or being engaged or economically interested in any
business which at the Completion Date the Vendor or members of
the Vendor's Group carry on or are engaged in;
18
(b) employing any person whose employment with the Company or its
Subsidiary is terminated after Completion by the Company or
its Subsidiary (as applicable) however in the case of Adele
McLachlan this exception shall not apply unless either (i) she
is offered employment by the Vendor or any member of the
Vendor's Group in a business division which is not engaged in
any business which is in direct competition with any part of
the Business or (ii) she is not offered employment until the
earlier of (1) the expiry of twelve months from the
termination of her employment by the Vendor or its Subsidiary
and (2) the expiry of the period in clause 11.1(c);
(c) advertising generally for staff;
(d) acquiring (whether by means of a share or asset purchase) as
part of a larger acquisition any interest in any business
which competes or which may compete with the Business
("Competitive Business"):
provided that:
(i) the acquisition of such Competitive Business is not a
principle reason for such acquisition;
(ii) the Competitive Business shall not thereafter be
carried on under a corporate or trading name
incorporating "Pascall" or any colourable imitation
of "Pascall";
(iii) the Competitive Business does not represent 15 per
cent. or more of the total consolidated turnover of
the business or assets being acquired.
11.3 The covenants in this clause 11 are intended for the benefit of the
Purchaser, the Company and its Subsidiary and apply to actions carried
out by the Vendor or any member of its Group in any capacity and
whether directly or indirectly, on the Vendor's own behalf, on behalf
of any other person or jointly with any other person.
11.4 Nothing in this clause 11 prevents the Vendor or any member of its
Group from holding for investment purposes only:
(a) any units of any authorised unit trust; or
(b) not more than 5% of any class of shares or securities of any
company traded on any regulated stock exchange.
11.5 Each of the covenants in this clause 11 is a separate undertaking and
shall be enforceable by the Purchaser separately and independently of
its right to enforce any one or more of the other covenants contained
in this clause 11. Each of the covenants in this clause 11 is
considered fair and reasonable by the parties, but if any restriction
is found to be unenforceable, but would be valid if any part of it were
deleted or the period or area of application reduced, the restriction
shall apply with such modifications as may be necessary to make it
valid and enforceable.
11.6 The consideration for the undertakings contained in this clause 11 is
included in the Purchase Price.
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12. CONFIDENTIALITY AND ANNOUNCEMENTS
12.1 Save as provided for in this clause 12, the Vendor undertakes to the
Purchaser, and the Purchaser undertakes to the Vendor, to keep
confidential the existence of this agreement and, in the case of the
Vendor, all information which it has acquired about the Purchaser's
Group (as such Group is constituted immediately before Completion) and,
in the case of the Purchaser, all information which it has acquired
about the Vendor , the Vendor's Group and the Company's Group (as such
Group is constituted immediately before Completion), and to use the
information only for the purposes contemplated by this agreement.
12.2 No party is required to keep confidential or to restrict its use of:
(a) information that is or becomes public knowledge other than as
a direct or indirect result of the information being disclosed
in breach of this agreement; or
(b) information that the parties agree in writing is not
confidential; or
(c) information about the Purchaser's Group, the Vendor's Group or
the Company's Group that it receives from a source not
connected with that Group and that it has acquired free from
any obligation of confidence to any other person.
12.3 The Purchaser does not have to keep confidential or restrict its use
of:
(a) information about the Company and its Subsidiary after
Completion; or
(b) information that is known to the Purchaser before the date of
this agreement and that it has acquired free from any
obligation of confidence to any other person.
12.4 Any party may disclose any information that it is otherwise required to
keep confidential under this clause 12:
(a) to such professional advisers, consultants and employees or
officers of its Group as are reasonably necessary to advise on
this agreement, or to facilitate the Transaction, if the
disclosing party procures that the people to whom the
information is disclosed keep it confidential as if they were
that party; or
(b) with the written consent of all the other parties; or
(c) to the extent that the disclosure is required:
(i) by law; or
(ii) by the Listing Rules, the City Code on Takeovers and
Mergers, the rules of the United States Securities
and Exchange Commission or any similar applicable
regulations or similar regulatory body, Taxation
Authority or securities exchange; or
(iii) to make any filing with, or obtain any authorisation
from, a regulatory body, Taxation Authority or
securities exchange; or
(iv) under any arrangements in place under which
negotiations relating to terms and conditions of
employment are conducted; or
(v) to protect the disclosing party's interest in any
legal proceedings,
20
but shall use reasonable endeavours to consult the other parties and to
take into account any reasonable requests they may have in relation to
the disclosure before making it.
12.5 Each party shall supply any other party with any information about
itself, its Group or this agreement as such other party may reasonably
require for the purposes of satisfying the requirements of a law,
regulatory body or securities exchange to which such other party is
subject.
12.6 No party shall make any announcement relating to this agreement or its
subject matter without the prior written approval of all the other
parties except as required by law or by any legal or regulatory
authority.
13. FURTHER ASSURANCE
The Vendor shall (at its expense) promptly execute and deliver all such
documents, and do all such things, as the Purchaser may from time to
time reasonably require for the purpose of giving full effect to the
provisions of this agreement.
14. ASSIGNMENT
14.1 Except as provided otherwise in this agreement, no party may assign, or
grant any Encumbrance or security interest over, any of its rights
under this agreement or any document referred to in it.
14.2 Each party that has rights under this agreement is acting on its own
behalf.
14.3 The Purchaser may assign its rights under this agreement (or any
document referred to in this agreement) but not its obligations to a
member of its Group to whom it transfers the Sale Shares.
14.4 If there is an assignment:
(a) the Vendor may discharge its obligations under this agreement
to the assignor until it receives notice of the assignment;
and
(b) the assignee may enforce this agreement as if it were a party
to it, but the Purchaser shall remain liable for any
obligations under this agreement.
15. WHOLE AGREEMENT
15.1 This agreement, and any documents referred to in it, constitute the
whole agreement between the parties and supersede any arrangements,
understanding or previous agreement between them relating to the
subject matter they cover.
15.2 Nothing in this clause 15 operates to limit or exclude any liability
for fraud.
21
15.3 The Purchaser acknowledges that it has not entered into this agreement
in reliance upon any warranties, representations, covenants,
undertakings, indemnities or other statements whatsoever other than
those expressly set out in this agreement and the documents referred to
herein.
16. VARIATION AND WAIVER
16.1 Any variation of this agreement shall be in writing and signed by or on
behalf of the parties.
16.2 Any waiver of any right under this agreement is only effective if it is
in writing and it applies only to the party to whom the waiver is
addressed and to the circumstances for which it is given and shall not
prevent the party who has given the waiver from subsequently relying on
the provision it has waived.
16.3 A party that waives a right in relation to one party, or takes or fails
to take any action against that party, does not affect its rights in
relation to any other party.
16.4 No failure to exercise or delay in exercising any right or remedy
provided under this agreement or by law constitutes a waiver of such
right or remedy or shall prevent any future exercise in whole or in
part thereof.
16.5 No single or partial exercise of any right or remedy under this
agreement shall preclude or restrict the further exercise of any such
right or remedy.
16.6 Unless specifically provided otherwise, rights arising under this
agreement are cumulative and do not exclude rights provided by law.
17. COSTS
17.1 Unless otherwise provided, all costs in connection with the
negotiation, preparation, execution and performance of this agreement,
and any documents referred to in it, shall be borne by the party that
incurred the costs.
18. GUARANTEE PROVISIONS
18.1 In consideration of the Purchaser agreeing to purchase the Sale Shares,
Intelek as primary obligor unconditionally and irrevocably:
(a) guarantees by way of continuing guarantee to the Purchaser the
payment when due of all amounts payable by the Vendor under
this agreement (the "Vendor Financial Obligations"); and
(b) agrees that each time the Vendor fails to pay a Vendor
Financial Obligation to the Purchaser when it is due under
this agreement, Intelek shall on demand (without requiring the
Purchaser first to take steps against the Vendor or any other
person) pay such Vendor Financial Obligation to the Purchaser.
22
18.2 Each payment to be made by Intelek under this guarantee shall be
payable by Intelek free and clear of all deductions or withholdings of
any kind except for those required by law.
18.3 Intelek's obligation to guarantee the Vendor Financial Obligations
shall not be affected by any matter or thing which but for this
provision might operate to affect or prejudice those obligations
including without limitation:
(a) any time or indulgence granted to, or composition with the
Vendor or any other person;
(b) the taking variation renewal or release of, or neglect to
perfect or enforce this agreement against the Vendor;
(c) any claim or purported (or actual) right of set-off by the
Vendor against any member of the Purchaser's Group; or
(d) any unenforceability or invalidity of any obligation of the
Vendor so that this guarantee shall be construed as if there
were no such obligation.
18.4 The Purchaser may appropriate any sum paid by the Vendor, Intelek or
any other person or recovered or received on account of the Vendor
Financial Obligations as the Purchaser sees fit, whether or not towards
those obligations.
18.5 Intelek will reimburse the Purchaser for all legal and other costs
(including VAT) incurred by the Purchaser's Group in connection with
the enforcement of this guarantee.
18.6 In consideration of the Vendor agreeing to sell the Sale Shares, the
Purchaser's Guarantor as primary obligor unconditionally and
irrevocably:
(a) guarantees by way of continuing guarantee to the Vendor
payment when due of all amounts payable by the Purchaser under
clause 10.3 of this agreement (the "Purchaser Financial
Obligations"); and
(b) agrees that each time the Purchaser fails to pay a Purchaser
Financial Obligation to the Vendor when it is due under clause
10.3 of this agreement, the Purchaser's Guarantor shall on
demand (without requiring the Vendor first to take steps
against the Purchaser or any other person) pay such Purchaser
Financial Obligation to the Vendor.
18.7 Each payment to be made by the Purchaser's Guarantor under this
guarantee shall be payable by the Purchaser's Guarantor free and clear
of all deductions or withholdings of any kind except for those required
by law.
18.8 The Purchaser's Guarantor's obligation to guarantee the Purchaser
Financial Obligations shall not be affected by any matter or thing
which but for this provision might operate to affect or prejudice those
obligations including without limitation:
(a) any time or indulgence granted to, or composition with the
Purchaser or any other person;
(b) the taking variation renewal or release of, or neglect to
perfect or enforce this agreement against the Purchaser;
23
(c) any claim or purported (or actual) right of set-off by the
Purchaser against any member of the Vendor's Group; or
(d) any unenforceability or invalidity of any obligation of the
Purchaser so that this guarantee shall be construed as if
there were no such obligation.
18.9 The Vendor may appropriate any sum paid by the Purchaser, the
Purchaser's Guarantor or any other person or recover or received on
account of the Purchaser Financial Obligations as the Vendor sees fit,
whether or not towards those obligations.
18.10 The Purchaser's Guarantor will reimburse the Vendor for all legal and
other costs (including VAT) incurred by the Vendor's Group in
connection with the enforcement of this guarantee.
19. NOTICE
19.1 A notice given under this agreement:
(a) shall be in writing;
(b) shall be sent for the attention of the person, and to the
address, specified in this clause 19 (or such other address as
each party may notify to the others in accordance with the
provisions of this clause 19); and
(c) shall be:
(i) delivered personally; or
(ii) sent by pre-paid first-class post, recorded delivery
or registered post.
19.2 The addresses for service of notice to each party is the address first
above written in this agreement.
19.3 A notice is deemed to have been received:
(a) if delivered personally, at the time of delivery; or
(b) in the case of pre-paid first class post, recorded delivery or
registered post, 48 hours from the date of posting; or
(c) if deemed receipt under the previous paragraphs of this clause
19.3 is not within business hours (meaning 9.00 am to 5.30 pm
Monday to Friday on a day that is not a public holiday in the
place of receipt), when business next starts in the place of
receipt.
19.4 To prove service, it is sufficient to prove that the envelope
containing the notice was properly addressed and posted.
19.5 The provisions of this clause 19 will not apply in the case of service
of process relevant to any proceedings suit or action to the extent
that such provisions are inconsistent with the Civil Procedure Rules.
24
20. INTEREST ON LATE PAYMENT
20.1 Where a sum is required to be paid under this agreement (other than
under the Tax Covenant) but is not paid before or on the date the
parties agreed, the party due to pay the sum shall also pay an amount
equal to interest on that sum for the period beginning with that date
and ending with the date the sum is paid (and the period shall continue
after as well as before judgment).
20.2 The rate of interest shall be 3% per annum above the base lending rate
for the time being of Barclays Bank PLC. Interest shall accrue on a
daily basis and be compounded quarterly.
20.3 This clause 20 is without prejudice to any claim for interest under the
law.
21. SEVERANCE
21.1 If any provision of this agreement (or part of a provision) is found by
any court or administrative body of competent jurisdiction to be
invalid, unenforceable or illegal, the other provisions shall remain in
force.
21.2 If any invalid, unenforceable or illegal provision would be valid,
enforceable or legal if some part of it were deleted, the provision
shall apply with whatever modification is necessary to give effect to
the commercial intention of the parties.
22. AGREEMENT SURVIVES COMPLETION
This agreement (other than obligations that have already been fully
performed) remains in full force after Completion.
23. THIRD PARTY RIGHTS
23.1 Save as provided in clause 14.3 a person who is not a party to this
agreement shall have no right under the Contracts (Rights of Third
Parties) Act 1999 to enforce any term of this agreement but this shall
not affect any right or remedy of a third party which exists or is
available apart from that Act.
23.2 Each of the parties represents to the others that their respective
rights to terminate, or agree any amendment, variation, waiver or
settlement under this agreement are not subject to the consent of any
person that is not a party to this agreement.
24. SUCCESSORS
The rights and obligations of the Vendor and the Purchaser under this
agreement shall continue for the benefit of, and shall be binding on,
their respective successors and assigns.
25
25. COUNTERPARTS
This agreement may be executed in any number of counterparts, each of
which is an original and which together have the same effect as if each
party had signed the same document.
26. GOVERNING LAW AND JURISDICTION
26.1 This agreement and any disputes or claims arising out of or in
connection with its subject matter are governed by and construed in
accordance with the law of England.
26.2 The parties irrevocably agree that the courts of England have exclusive
jurisdiction to settle any dispute or claim that arises out of or in
connection with this agreement.
IN WITNESS whereof the parties hereto have executed this agreement as a deed the
day and year first above written:
26
SCHEDULE 1 PARTICULARS OF THE COMPANY AND SUBSIDIARY
PART 1. THE COMPANY
- -------------------------------------------------- -----------------------------------------------
NAME: Pascall Electronic (Holdings) Limited
- -------------------------------------------------- -----------------------------------------------
COMPANY'S REGISTRATION NUMBER: 1756274
- -------------------------------------------------- -----------------------------------------------
REGISTERED OFFICE: Intelek plc, PO Box 25, Swindon, Wiltshire,
SN3 4TR
- -------------------------------------------------- -----------------------------------------------
AUTHORISED SHARE CAPITAL (pound)823,080 divided into 300,640 Non-Cumulative
AMOUNT: Preference Shares of (pound)1 each, 215,250
DIVIDED INTO: Cumulative Redeemable Preference Shares of (pound)1
each and 307,190 ordinary shares of (pound)1 each.
- -------------------------------------------------- -----------------------------------------------
ISSUED SHARE CAPITAL 140,320 Non-Cumulative Preference Shares of
AMOUNT: (pound)1 each and the 224,391 ordinary shares of
DIVIDED INTO: (pound)1 each
- -------------------------------------------------- -----------------------------------------------
REGISTERED SHAREHOLDERS: Intelek Properties Limited
- -------------------------------------------------- -----------------------------------------------
BENEFICIAL OWNER OF SHARES (IF DIFFERENT): N/A
- -------------------------------------------------- -----------------------------------------------
DIRECTORS AND SHADOW DIRECTORS: Ian Brodie
Leonard Down
Kevin Edwards
- -------------------------------------------------- -----------------------------------------------
SECRETARY: Kevin Edwards
- -------------------------------------------------- -----------------------------------------------
PART 2. THE SUBSIDIARY
- -------------------------------------------------- -----------------------------------------------
NAME: Pascall Electronics Limited
- -------------------------------------------------- -----------------------------------------------
COMPANY'S REGISTRATION NUMBER: 1316674
- -------------------------------------------------- -----------------------------------------------
REGISTERED OFFICE: Intelek plc, PO Box 25 , Swindon, Wiltshire
SN3 4TR
- -------------------------------------------------- -----------------------------------------------
AUTHORISED SHARE CAPITAL
AMOUNT: (pound)100,000
DIVIDED INTO: 100,000 ordinary shares of (pound)1 each
- -------------------------------------------------- -----------------------------------------------
ISSUED SHARE CAPITAL
AMOUNT: (pound)53,822
DIVIDED INTO: 53,822 ordinary shares of (pound)1 each
- -------------------------------------------------- -----------------------------------------------
REGISTERED SHAREHOLDERS: Intelek Plc - 1 Ordinary
Pascall Electronic (Holdings) Ltd - 53,821
Ordinary
- -------------------------------------------------- -----------------------------------------------
BENEFICIAL OWNER OF SALE SHARES (IF DIFFERENT): N/A
- -------------------------------------------------- -----------------------------------------------
27
- -------------------------------------------------- -----------------------------------------------
DIRECTORS AND SHADOW DIRECTORS: Leonard Down
Adele McLachlan
Ian Brodie
Kevin Edwards
Dr Brian Mazonas
- -------------------------------------------------- -----------------------------------------------
SECRETARY: Kevin Edwards
- -------------------------------------------------- -----------------------------------------------
28
SCHEDULE 2
Intentionally Deleted
29
SCHEDULE 3 COMPLETION
PART 1. CONDUCT BETWEEN EXCHANGE AND COMPLETION
1. The Company and its Subsidiary shall carry on business in the normal
course.
2. The Company and its Subsidiary shall not:
(a) dispose of any material fixed assets used or required for the
operation of its business; or
(b) allot or agree to allot any shares or other securities or
options in respect of shares or securities, repurchase, redeem
or agree to repurchase or redeem any of the shares; or
(c) pass any shareholder resolution; or
(d) enter into, modify or agree to terminate any Material Contract
(as defined in paragraph 13 of Part 1 of Schedule 4); or
(e) incur any capital expenditure on any individual item in excess
of (pound)10,000; or
(f) borrow any sum other than amounts borrowed in the ordinary
course of business and available to it at the date of this
agreement; or
(g) enter into any lease, lease hire or hire purchase agreement or
agreement for payment on deferred terms; or
(h) pay any dividend or make any other distribution of its assets;
or
(i) make, or agree to make, material alterations to the terms and
conditions of employment (including benefits) of any of its
directors, officers or employees; or
(j) dismiss any of its senior employees or offer a contract of
employment to any person at an annual salary (including any
bonus package) of more than (pound)20,000; or
(k) create any Encumbrance over any of its assets or its
undertaking; or
(l) institute, settle or agree to settle any legal proceedings
relating to its business, except debt collection in the normal
course of business; or
(m) grant, modify, agree to terminate or permit the lapse of any
Intellectual Property Rights or enter into any agreement
relating to any such rights; or
(n) pay any management charge to the Vendor; or
(o) incur any liability to the Vendor, other than trading
liabilities incurred in the normal course of business; or
(p) enter into any (or modify any subsisting) agreement with any
trade union or any agreement that relates to any works
council; or
(q) vary the terms on which it holds any of the Properties or
settle any rent review; or
30
(r) make any material change to the accounting procedures or
principles by reference to which its accounts are drawn up.
3. The Company or its Subsidiary may do anything falling within paragraph
2 of this Schedule 3 if the Purchaser has given its prior written
consent (which shall not be unreasonably withheld or delayed).
4. The Company and its Subsidiary shall maintain in force insurance
policies:
(a) that have limits of indemnity at least equal to; and
(b) the other terms of which are no less favourable than,
those policies of insurance maintained by the Company or its Subsidiary
on the date of this agreement.
5. The Vendor shall give to the Purchaser as soon as reasonably
practicable reasonable details of any material change in the business,
financial position or assets of the Company or its Subsidiary.
6. The Vendor shall not:
(a) induce, or attempt to induce, any of the employees of the
Company or its Subsidiary, whether directly or indirectly, to
terminate their employment before the Completion Date; or
(b) incur any liabilities to the Company or its Subsidiary, other
than trading liabilities incurred in the normal course of
business.
7. No amendment, other than one made solely to comply with legislative
requirements, shall be made to any agreements or arrangements for the
payment of pensions or other benefits on retirement:
(a) to present or former directors, officers or employees of the
Company or its Subsidiary; or
(b) to the dependants of any of those people.
PART 2. WHAT THE VENDOR SHALL DELIVER TO THE PURCHASER AT COMPLETION
1. At Completion, the Vendor shall deliver to the Purchaser the documents
and evidence set out in this Part 2 of this Schedule 3:
(a) transfers of the Sale Shares executed by the registered
holder(s) in favour of the Purchaser;
(b) the share certificates for the Sale Shares in the name of the
registered holders or an indemnity in the agreed form for any
lost certificates;
31
(c) the waivers, consents and other documents required to enable
the Purchaser to be registered as the holder of the Sale
Shares;
(d) the original of any power of attorney under which any document
to be delivered to the Purchaser under this paragraph 1 has
been executed;
(e) certificates in respect of all issued shares in the capital of
the Company's Subsidiary and transfers, in favour of any
person the Purchaser directs, of all shares in the Subsidiary
held by a nominee for the Company;
(f) in relation to the Company and its Subsidiary, the statutory
registers and minute books (written up to the time of
Completion), the common seal, certificate of incorporation and
any certificates of incorporation on change of name;
(g) the written resignation, executed as a deed in the agreed
form, of the directors and secretaries of the Company and its
Subsidiary from their offices and employment with the Company
or Subsidiary (save in respect of Leonard Down and Adele
McLachlan who are not resigning as directors or employees of
PEL) in each case confirming in writing in the agreed form
that they have no claim against the Company or its Subsidiary
in respect of such resignation;
(h) the written resignation of the auditors of the Company and its
Subsidiary accompanied in each case by:
(i) a statement that there are no circumstances connected
with the auditors' resignation which should be
brought to the notice of the members or creditors of
the Company or, in the case of a Subsidiary, of the
Subsidiary; and
(ii) a written assurance that the resignation and
statement have been, or will be, deposited at the
registered office of the Company or Subsidiary in
accordance with section 394 of the Companies Act
1985;
(i) a certified copy of the minutes of the board meetings held
pursuant to Part 3 of this Schedule 3;
(j) in relation to the Company and its Subsidiary:
(i) statements from each bank at which any of those
companies has an account, giving the balance of each
account at the close of business on the last Business
Day before Completion;
(ii) all cheque books in current use and written
confirmation that no cheques have been written since
those statements were prepared;
(iii) details of their cash book balances; and
(iv) reconciliation statements reconciling the cash book
balances and the cheque books with the bank
statements delivered;
(k) the land certificates, charge certificates, title deeds,
leases and ancillary leasehold documents and other documents
relating to the Properties as listed in the Disclosure Letter;
32
(l) evidence, in agreed form, that any indebtedness or other
liability of the kind described in paragraph 14 of Part 1 of
Schedule 4 has been discharged;
(m) all charges, mortgages, debentures and guarantees to which the
Company or its Subsidiary is a party and, in relation to each
such instrument and any covenants connected with it:
(i) a sealed discharge or release in the agreed form; and
(ii) if applicable, a sworn and completed Form 403a
(declaration that part of the property or undertaking
charged has been released from the charge);
(n) a certified copy of the resolution(s) of the shareholders of
the Intelek authorising and approving the Transaction;
(o) a certified copy of the resolution adopted by the board of
directors of the Vendor authorising and approving the
Transaction;
(p) the original letter dated 1st February 2005 from the trustees
of the Pension Scheme to PEL in connection with the discharge
of PEL's liability under the Pension Scheme;
(q) in relation to the Vendor a Board minute confirming that the
Board has resolved to forgo any dividend in respect of the
non-cumulative preference shares in the Company held by the
Vendor.
(r) a certified copy of the stock transfer and share certificate
evidencing that the 100 shares in Pascall Electronics Inc held
by the Company have prior to Completion been transferred to
the Vendor or a person nominated by it other than the Company
or its Subsidiary.
PART 3. MATTERS FOR THE BOARD MEETINGS AT COMPLETION
1. The Vendor shall cause a board meeting of the Company and its
Subsidiary to be held at Completion, at which the matters set out in
this Part 3 of this Schedule 3 shall take place.
2. A resolution to register the transfer of the Sale Shares shall be
passed at such board meeting of the Company, subject to the transfer(s)
being stamped at the cost of the Purchaser.
3. All directors, secretaries and auditors of the Company and its
Subsidiary shall resign from their offices and employment with the
Company or its Subsidiary with effect from the end of the relevant
board meeting, except for Leonard Down and Adele McLachlan who shall
remain directors and employees of PEL.
4. The people the Purchaser nominates shall be appointed as directors and
secretary of the Company and its Subsidiary (but not exceeding any
maximum number of directors contained in the relevant company's
articles of association). The appointments shall take effect at the end
of the board meeting.
33
5. Grant Thornton shall be appointed as the new auditors of the Company
and its Subsidiary.
6. All the existing instructions and authorities to bankers shall be
revoked and replaced with new instructions and authorities to those
banks in the form the Purchaser requires.
7. The situation of the registered office of the Company and its
Subsidiary shall be changed to the situation required by the Purchaser.
8. The Company shall resolve to enter into the Loan Agreement with the
Purchaser and to instruct the Purchaser to pay the whole of the sum of
(pound)1,600,000 to be received thereunder by the Vendor as full and
final discharge of the Intelek Debt.
34
SCHEDULE 4 WARRANTIES
PART 1. GENERAL WARRANTIES
1. POWER TO SELL THE COMPANY
1.1 The Vendor has taken all necessary action and has all requisite power
and authority to enter into and perform this agreement and the other
documents referred to in it.
1.2 This agreement and the other applicable agreed form documents referred
to in it constitute (or shall constitute when executed) valid, legal
and binding obligations on the Vendor in the terms of the agreement and
such other documents.
1.3 Compliance with the terms of this agreement and the applicable agreed
form documents referred to in it shall not as far as the Vendor is
aware (save for any Change of Control clauses) breach or constitute a
default under any of the following:
(a) any agreement or instrument to which the Vendor is a party or
by which it is bound; or
(b) any order, judgment, decree or other restriction applicable to
the Vendor.
2. SHARES IN THE COMPANY AND SUBSIDIARY
2.1 The Sale Shares constitute the whole of the allotted and issued share
capital of the Company and are fully paid up.
2.2 The Vendor is the sole legal and beneficial owner of the Sale Shares.
2.3 Part 2 of Schedule 1 lists all the subsidiaries of the Company at the
date of this agreement and sets out particulars of their allotted and
issued share capital.
2.4 The Company is the sole legal and beneficial owner of the whole
allotted and issued share capital of its Subsidiary.
2.5 The issued shares of the Subsidiary are fully paid up.
2.6 The Sale Shares and the shares of the Subsidiary are free from all
Encumbrances.
2.7 No right or option has been granted to any person to require the
Company or the Subsidiary to issue any share capital and no Encumbrance
has been created in favour of any person affecting any unissued shares
or debentures or other unissued securities of the Company or its
Subsidiary.
35
2.8 No commitment has been given to create an Encumbrance affecting the
Sale Shares or the issued shares of the Subsidiary (or any unissued
shares or debentures or other unissued securities of the Company or its
Subsidiary) or for them to issue any share capital and so far as the
Vendor is aware no person has claimed any rights in connection with any
of those things.
2.9 Neither the Company nor its Subsidiary:
(a) holds or beneficially owns, or has agreed to acquire, any
securities of any corporation other than its own Subsidiary;
or
(b) is or has agreed to become a member of any partnership or
other unincorporated association, joint venture or consortium
(other than recognised trade associations); or
(c) has, outside its country of incorporation, any branch or
permanent establishment; or
(d) has allotted or issued any securities that are convertible
into shares.
2.10 Neither the Company nor its Subsidiary has at any time:
(a) purchased, redeemed or repaid any of its own share capital; or
(b) given any financial assistance in connection with any
acquisition of its share capital or the share capital of its
holding company (as that expression is defined in section 736
of the Companies Acts) as it would fall within sections 151 to
158 (inclusive) of the Companies Acts.
2.11 So far as the Vendor is aware all dividends or distributions declared,
made or paid by the Company and its Subsidiary have been declared, made
or paid in accordance with its memorandum, articles of association, the
applicable provisions of the Companies Acts and any agreements or
arrangements made with any third party regulating the payment of
dividends and distributions.
2.12 There are no dividends declared or due in respect of any of the Sale
Shares that have not been paid in full at the date of this agreement
and there are no rights in respect of any of the Sale Shares that have
not been discharged
3. CONSTITUTIONAL AND CORPORATE DOCUMENTS
3.1 The copies of the memorandum and articles of association of the Company
and its Subsidiary Disclosed to the Purchaser or its advisers are true,
accurate and complete in all respects and copies of all the resolutions
and agreements required to be annexed to or incorporated in those
documents by the law applicable are annexed or incorporated.
36
3.2 All statutory books and registers of the Company and its Subsidiary
have been properly kept and no notice or allegation that any of them is
incorrect or should be rectified has as far as the Vendor is aware been
received.
3.3 All returns, particulars, resolutions and other documents which the
Company or any of its Subsidiaries is required by law to file with or
deliver to any authority in any jurisdiction (including, in particular,
the Registrar of Companies in England and Wales) have been correctly
made up and filed or, as the case may be, delivered.
4. INFORMATION
4.1 The particulars relating to the Company and its Subsidiary, set out in
Schedule 1 of this agreement are accurate and not misleading.
5. COMPLIANCE WITH LAWS
Neither the Company nor its Subsidiary has received written notice that
they are in breach of any law or regulation applicable to the conduct
of the Business.
6. LICENCES AND CONSENTS
6.1 So far as the Vendor is aware the Company and its Subsidiary has all
necessary licences, consents, permits and authorities necessary to
carry on its business in the places and in the manner in which its
business is now carried on, all of which are so far as the Vendor is
aware valid and subsisting.
6.2 So far as the Vendor is aware there is no reason why any of those
licences, consents, permits and authorities should be suspended,
cancelled, revoked or not renewed on the same terms.
7. INSURANCE
7.1 Copies of all insurance policies in effect in respect of the Company
and its Subsidiary are set out in the Disclosure Letter.
7.2 There are no material outstanding claims under or in respect of the
validity of any of those policies and so far as the Vendor is aware,
there are no circumstances likely to give rise to any claim under any
of those policies.
7.3 All the insurance policies are in full force and effect, and as far as
the Vendor is aware, nothing has been deliberately done or not done by
the Company or its Subsidiary which could make any of them void or
voidable.
8. POWER OF ATTORNEY
37
8.1 There are no powers of attorney in force given by the Company or its
Subsidiary.
8.2 The Disclosure Letter sets out details of all persons who have
authority to bind the Company and its Subsidiary in the ordinary course
of business.
9. DISPUTES AND INVESTIGATIONS
9.1 Neither the Company nor its Subsidiary nor their respective directors
and as far as the Vendor is aware, any person for whom the Company or
its Subsidiary is vicariously liable:
(a) is engaged in any litigation, administrative, mediation or
arbitration proceedings or other proceedings or hearings
before any statutory or governmental body, department, board
or agency (except for debt collection in the normal course of
business); or
(b) is so far as the Vendor is aware the subject of any
investigation, inquiry or enforcement proceedings by any
governmental, administrative or regulatory body.
9.2 No such proceedings, investigations or inquiries as are mentioned in
paragraph 9.1 of this Schedule 4 have been threatened against the
Company or its Subsidiary or so far as the Vendor is aware are pending
and as far as the Vendor is aware there are no circumstances likely to
give rise to any such proceedings.
9.3 The Company and its Subsidiary are not affected by any existing or so
far as the Vendor is aware pending judgments or rulings and have not
given any undertakings arising from legal proceedings to a court,
governmental agency, regulator or third party.
10. DEFECTIVE PRODUCTS AND SERVICES
In this paragraph 10 "Product" shall mean any product supplied by the Company or
its Subsidiary.
10.1 The Disclosure Letter Discloses:
(a) any notification received by the Company or its Subsidiary
outside of the Company's and its Subsidiary's RMA procedure
from any customer alleging that it has manufactured or
supplied any Product which was at the time it was manufactured
or supplied, faulty, defective, not appropriate for its
intended purpose or has caused bodily injury or damage to any
person or property or does not comply with any warranty or
representation expressly made or implied by or on behalf of
the Company or its Subsidiary or any laws, regulations,
standards and requirements applicable to the Product;
(b) all Product warranty claims which as at the date of this
agreement have not yet been entered into the Company's and its
Subsidiary's RMA procedure either from Rockwell Collins or in
the case of any other Products with a value above
(pound)1,000.
38
10.2 No written notice has been received by the Company or its Subsidiary
that legal proceedings have been started, and so far as the Vendor is
aware no legal proceedings are pending or have been threatened against
the Company or its Subsidiary in which it is claimed that any Products
manufactured or supplied by them are defective, not appropriate for
their intended use or have caused bodily injury or material damage to
any person or property when applied or used as intended.
10.3 No written notice has been received by the Company or its Subsidiary
that legal proceedings have been started and so far as the Vendor is
aware there are no outstanding liabilities or claims pending or
threatened against the Company or its Subsidiary in respect of any
services supplied by the Company or its Subsidiary for which it is
alleged that the Company or its Subsidiary is liable and so far as the
Vendor is aware no dispute exists between the Company or its Subsidiary
and any of their respective customers or clients.
11. CUSTOMERS AND SUPPLIERS
11.1 In the 12 months ending with the date of this agreement, neither the
business of the Company nor of its Subsidiary has other than in the
ordinary course of business been materially affected in an adverse
financial manner as a result of any one or more of the following things
happening to the Company or its Subsidiary:
(a) the loss of any of its material customers or suppliers; or
(b) a material reduction in trade with its customers or in the
extent to which it is supplied by any of its suppliers; or
(c) a material change in the terms on which it trades with or is
supplied by any of its customers or suppliers.
12. COMPETITION
12.1 The definition in this paragraph applies in this agreement.
COMPETITION LAW: the national and directly effective legislation of any
jurisdiction which governs the conduct of companies or individuals in
relation to restrictive or other anti-competitive agreements or
practices (including, but not limited to, cartels, pricing, resale
pricing, market sharing, bid rigging, terms of trading, purchase or
supply and joint ventures), dominant or monopoly market positions
(whether held individually or collectively) and the control of
acquisitions or mergers.
12.2 So far as the Vendor is aware neither the Company nor its Subsidiary is
engaged in any agreement, arrangement, practice or conduct which
amounts to an infringement of the Competition Law of any jurisdiction
in which the Company or its Subsidiary conduct business and so far as
the Vendor is aware no Director is engaged in any activity which would
be an offence or infringement under any such Competition Law.
39
12.3 As far as the Vendor is aware, neither the Company nor its Subsidiary
is the direct subject of any investigation, inquiry or proceedings by
any relevant government body, agency or authority in connection with
any actual or alleged infringement of the Competition Law of any
jurisdiction in which the Company or its Subsidiary conducts business.
12.4 As far as the Vendor is aware, neither the Company nor its Subsidiary
is the direct subject of any existing or pending decisions, judgments,
orders or rulings of any relevant government body, agency or authority
responsible for enforcing the Competition Law of any jurisdiction and
neither the Company nor its Subsidiary have given any undertakings or
commitments to such bodies which affect the conduct of the Business.
12.5 Neither the Company nor its Subsidiary is in receipt of any payment,
guarantee, financial assistance or other aid from the government or any
state body which was not, but should have been, notified to the
European Commission under Article 88 of the EC Treaty for decision
declaring such aid to be compatible with the common market.
13. CONTRACTS
13.1 The definition in this paragraph applies in this agreement.
MATERIAL CONTRACT: any customer, supplier or lease finance agreement,
arrangement or series of arrangements to which the Company or any of
its Subsidiary is a party or is bound which has more than three months
to run from the date of this agreement and which involves an aggregate
consideration payable by or to the Company or its Subsidiary in excess
of (pound)15,000.
13.2 Copies of the Material Contracts are attached to the Disclosure Letter.
13.3 Neither the Company nor its Subsidiary is a party to or subject to any
Material Contract which is not on arm's length terms.
13.4 Each Material Contract is in full force and effect and so far as the
Vendor is aware binding on the parties to it. So far as the Vendor is
aware neither the Company nor its Subsidiary have defaulted under or
breached a Material Contract and;
(a) so far as the Vendor is aware no other party to a Material
Contract has defaulted under or breached such a contract; and
(b) so far as the Vendor is aware no such default or breach by the
Company, its Subsidiary or any other party has been
threatened.
13.5 So far as the Vendor is aware no written notice of termination of any
Material Contract has been received or served by the Company or its
Subsidiary and so far as the Vendor is aware there are no grounds for
determination, rescission, avoidance, repudiation or a material change
in the terms of any Material Contract.
40
14. TRANSACTIONS WITH THE VENDOR
14.1 There is no outstanding indebtedness or other liability (actual or
contingent) and no outstanding contract, commitment or arrangement
between the Company and any of the following, or between the Company's
Subsidiary and any of the following:
(a) the Vendor or any member of the Vendor's Group or person
Connected with the Vendor; or
(b) any director of a member of the Vendor's Group; or
(c) any person Connected with such a member or director.
14.2 As far as the Vendor is aware neither the Vendor nor any person
Connected with the Vendor is entitled to a claim of any nature against
the Company or its Subsidiary or has assigned to any person the benefit
of a claim against the Company or the Subsidiary to which the Vendor or
a Connected person would otherwise be entitled.
15. FINANCE AND GUARANTEES
15.1 The Company and its Subsidiary have no indebtedness in respect of any
borrowings or other financial obligations to any bank or other third
party lender other than to trade creditors in the ordinary course of
their business.
15.2 No guarantee, debenture, mortgage, charge, pledge, lien, assignment or
other security agreement or arrangement has been given by or entered
into by the Company or its Subsidiary or so far as the Vendor is aware
any third party in respect of borrowings or other financial obligations
of the Company or its Subsidiary or any third party.
15.3 Neither the Company nor its Subsidiary has any outstanding loan
capital, or has lent any money that has not been repaid, and there are
no debts owing to the Company or its Subsidiary other than debts that
have arisen in the normal course of business.
15.4 Neither the Company nor its Subsidiary has:
(a) factored any of its debts or discounted any of its debts or
engaged in financing of a type which would not need to be
shown or reflected in the Accounts; or
(b) as far as the Vendor is aware waived any right of set-off it
may have against any third party.
15.5 All debts (less any provision for bad and doubtful debts) owing to the
Company or its Subsidiary reflected in the Accounts and all debts
subsequently recorded in the books of the Company and its Subsidiary
have either prior to the date of this agreement been realised or will,
within six months after the Completion Date, realise their full amount
as included in those Accounts or books in cash.
41
15.6 As far as the Vendor is aware neither the Company nor its Subsidiary
has received any notice whose terms have not been materially complied
with and/or materially carried out from any creditor requiring any
payment to be made and/or intimating the enforcement of any security
which it may hold over the assets of the Company or its Subsidiary.
15.7 Neither the Company nor any of its Subsidiaries is subject to any
arrangement for receipt or repayment of any grant, subsidy or financial
assistance from any government department or other body.
15.8 Particulars of the balances of all the bank accounts of the Company and
its Subsidiaries, showing the position as at the day immediately
preceding the date of this agreement, have been Disclosed and the
Company and its Subsidiaries have no other bank accounts. Since those
particulars were given, there have been no payments out of those
accounts other than routine payments in the ordinary course of
business.
15.9 So far as the Vendor is aware a Change of Control of the Company will
not result in:
(a) termination of or material effect on any financial agreement
or arrangement to which the Company, or any of its
Subsidiaries, is a party or subject; or
(b) any indebtedness of the Company or of any of its Subsidiaries
becoming due, or capable of being declared due and payable,
prior to its stated maturity.
16. INSOLVENCY
16.1 Neither the Company nor its Subsidiary:
(a) is insolvent or unable to pay its debts within the meaning of
the Insolvency Act 1986 or any other insolvency legislation
applicable to the company concerned; and
(b) has stopped paying its debts as they fall due.
16.2 As far as the Vendor is aware no step has been taken to initiate any
process by or under which:
(a) the ability of the creditors of the Company, or of its
Subsidiary, to take any action to enforce their debts is
suspended, restricted or prevented; or
(b) some or all of the creditors of the Company or of its
Subsidiary accept, by agreement or in pursuance of a court
order, an amount less than the sums owing to them in
satisfaction of those sums with a view to preventing the
dissolution of the Company or its Subsidiary; or
(c) a person is appointed to manage the affairs, business and
assets of the Company, or its Subsidiary, on behalf of the
Company's, or its Subsidiary' creditors; or
(d) the holder of a charge over the Company's assets or over its
Subsidiary' assets is appointed to Control the business and
assets of the Company or its Subsidiary.
42
16.3 In relation to the Company and its Subsidiary:
(a) no administrator has been appointed;
(b) so far as the Vendor is aware no documents have been filed
with the court for the appointment of an administrator; and
(c) no notice of an intention to appoint an administrator has been
given by the relevant company, its directors or by a
qualifying floating charge holder (as defined in paragraph 14
of Schedule B1 to the Insolvency Act 1986).
16.4 So far as the Vendor is aware no process has been initiated which could
lead to the Company or its Subsidiary being dissolved and its assets
being distributed among the relevant company's creditors, shareholders
or other contributors.
16.5 No distress, execution or other process has actually been levied on an
asset of the Company or its Subsidiary.
17. ASSETS
17.1 The Company or its Subsidiary is the full legal and beneficial owner of
all the assets included in the Accounts, and any assets acquired since
the Accounts Date, except for those disposed of since the Accounts Date
in the normal course of business.
17.2 None of the assets shown in the Accounts or used by the Company or its
Subsidiary is the subject of any lease, lease hire agreement, hire
purchase agreement or agreement for payment on deferred terms or is the
subject of any licence or factoring arrangement or other Encumbrance.
17.3 The Company or its Subsidiary are in possession and control of all the
assets included in the Accounts and those acquired since the Accounts
Date, except for those Disclosed as being in the possession of a third
party in the normal course of business or disposed of since the
Accounts Date in the normal course of business.
18. DELETED INTENTIONALLY
19. ENVIRONMENTAL
The definitions in this paragraph apply in this agreement.
HAZARDOUS SUBSTANCES: any natural or artificial substance (whether
solid, liquid or gas and whether alone or in combination with any other
substance or radiation), capable of causing harm to any human or other
living organism or the Environment.
ENVIRONMENT: air, water and land, all living organisms and natural or
man-made structures.
ENVIRONMENTAL LAW: any law in so far as it relates to Environmental
Matters.
43
ENVIRONMENTAL MATTERS: the protection of human health, the protection
and condition of the Environment, the condition of the workplace, the
generation, transportation, storage, treatment, emission, deposit and
disposal of any Hazardous Substance or Waste.
WASTE: all waste, including any unwanted or surplus substance
irrespective of whether it is capable of being recycled or recovered or
has any value.
19.1 So far as the Vendor is aware, all permits, consents and licences
required or issued under Environmental Law which are necessary for
carrying on the Business have been obtained.
19.2 So far as the Vendor is aware, there are no Hazardous Substances or
Waste at any of the Properties in circumstances which constitute a
breach of Environmental Law.
19.3 So far as the Vendor is aware no proceeding or action relating to
Environmental Law has been taken, is pending or threatened against the
Company or its Subsidiary, or any employees, directors or officers of
the Company or its Subsidiary by any competent authority or any other
person.
19.4 So far as the Vendor is aware neither the Company nor any of its
Subsidiaries has or will have any actual or potential liability under
any Environmental Law by reason of it having owned, occupied or used
any Previously-owned Land and Buildings.
20. INTELLECTUAL PROPERTY
20.1 The definition in this paragraph applies in this agreement.
INTELLECTUAL PROPERTY RIGHTS: patents, utility models, copyright, trade
marks, service marks, trade, business and domain names, rights in trade
dress or get-up, rights in goodwill or to sue for passing off, unfair
competition rights, rights in designs, rights in computer software,
database rights, topography rights, moral rights, rights in
confidential information (including know-how and trade secrets) and any
other intellectual property rights, in each case whether registered or
unregistered and including all applications for and renewals or
extensions of such rights, and all similar or equivalent rights or
forms of protection in any part of the world.
20.2 Neither the Company nor its Subsidiary have registered any Intellectual
Property Rights.
20.3 Particulars have been Disclosed of all licences and agreements under
which:
(a) the Company or its Subsidiary uses Intellectual Property
Rights owned by any third party; or
(b) the Company or its Subsidiary has licensed or agreed to
license Intellectual Property Rights to, or otherwise
permitted the use of any Intellectual Property Rights by, any
third party.
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20.4 As far as the Vendor is aware the Company and its Subsidiaries do not
require any other Intellectual Property Rights other than those
Disclosed in order to carry on their respective activities.
20.5 So far as the Vendor is aware no trade mark, trade name or domain name
identical or similar to any used by the Company or its Subsidiary has
been registered, or is being used by any person in the same or a
similar business to that of the Company or its Subsidiary in any
country in which the Company or its Subsidiary is using its mark, trade
name or domain name and there are and have been no claims, disputes or
proceedings, pending or threatened in writing in relation to the
ownership or use of such rights.
20.6 The agreements and licences Disclosed pursuant 20.3 above are so far as
the Vendor is aware:
(a) valid and binding;
(b) have not been the subject of any breach or default by any
party or of any event which, with the giving of notice or
lapse of time, would constitute a default;
(c) are not the subject of any claim, dispute or proceeding,
pending or threatened.
20.7 So far as the Vendor is aware the activities of the Company and its
Subsidiary and of any licensee of Intellectual Property Rights granted
by the Company or its Subsidiary have not infringed the Intellectual
Property Rights of any third party.
21. INFORMATION TECHNOLOGY
21.1 The definitions in this paragraph apply in this agreement.
IT SYSTEM: all computer hardware (including network and
telecommunications equipment) and software (including associated
preparatory materials, user manuals and other related documentation)
owned, used, leased or licensed by or to the Company or its Subsidiary.
IT CONTRACTS: all arrangements and agreements under which any third
party (including without limitation source code deposit agents)
provides any element of, or services relating to, the IT System,
including leasing, hire purchase, licensing, maintenance and services
agreements.
21.2 Particulars of the IT System and all IT Contracts have been Disclosed.
21.3 The Company and its Subsidiary are the owners of the IT System free
from Encumbrances and the Company and its Subsidiary have all necessary
rights to enable them to make unrestricted use of the IT System.
21.4 The IT Contracts are so far as the Vendor is aware valid and binding
and so far as the Vendor is aware no act or omission has occurred which
would, if necessary with the giving of notice or lapse of time,
constitute a breach of any such contract.
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21.5 There are, and so far as the Vendor is aware there have been no claims,
disputes or proceedings arising or threatened under any IT Contracts in
the past two years.
21.6 The Company and its Subsidiary have possession or control of the source
code of all non-off-the-shelf software in the IT System, or have the
right to gain access to such code under the terms of source code
deposit agreements with the owners of the rights in the relevant
software and reputable deposit agents.
21.7 So far as the Vendor is aware the elements of the IT System have not
been materially defective or materially failed to function during the
twelve months preceding the date of this agreement.
21.8 The Company and its Subsidiary have implemented procedures, including
in relation to off-site working where applicable, for ensuring the
security of the IT System and the confidentiality and integrity of all
data stored in it.
21.9 The Company and its Subsidiary have in place a disaster recovery plan
to enable the business of the Company and its Subsidiary to continue if
there were significant damage to or destruction of some or all of the
IT System. A copy of the plan is attached to the Disclosure Letter.
21.10 The performance and functionality of the IT System (and any other
equipment and systems owned or used by the Company or its Subsidiaries
which depend on date-programmed control devices) has so far as the
Vendor is aware been unaffected by any changes in dates (past, present
or future). In particular:
(a) no value for a current date has caused any interruption in
operation;
(b) date-based functionality has behaved consistently for all
dates;
(c) in all interfaces and data storage, the century in any date is
specified either explicitly or by unambiguous algorithms or
inferencing rules; and
(d) all leap years are recognised as such.
21.11 The IT System is capable of:
(a) performing its functions in multiple currencies, including the
euro;
(b) displaying and printing the generally accepted symbols for the
euro and any other currency; and
(c) processing the generally accepted codes for the euro and any
other currency.
22. DATA PROTECTION
22.1 The Company and its Subsidiary have:
46
(a) complied in all material respects with the Data Protection Act
1984 and the Data Protection Act 1998; and
(b) satisfied any requests for access to personal data subject to
paragraph 22.1(a) of this Schedule 4.
22.2 So far as the Vendor is aware neither the Company nor its Subsidiary
has received any:
(a) notice or complaint under the Data Protection Act 1998
alleging non-compliance with the Act (including any
information or enforcement notice, or any transfer prohibition
notice); or
(b) claim for compensation for loss or unauthorised disclosure of
data; or
(c) notification of an application for rectification or erasure of
personal data.
23. EMPLOYMENT
23.1 The definitions in this paragraph apply in this agreement.
EMPLOYMENT LEGISLATION: legislation applying in England and Wales
affecting contractual and other relations between employers and
employees, including but not limited to the following legislation and
any amendment, extension or re-enactment of such legislation; the
Employment Rights Act 1996; the Equal Pay Act 1970; the Sex
Discrimination Act 1975; the Race Relations Act 1976; the Disability
Discrimination Act 1995; the Gender Reassignment Regulations 1999; the
Transfer of Undertakings (Protection of Employment) Regulations 1981;
the Employment Rights Act 1996; the Trade Union and Labour Relations
(Consolidation) Act 1992; Section 3 of the Protection from Harassment
Act 1997; the Working Time Regulations 1998; the National Minimum Wage
Act 1998; the Employment Relations Act 1999; the Part-Time Workers
(Prevention of Less Favourable Treatment) Regulations 2000; the
Fixed-Term Employees (Prevention of Less Favourable Treatment)
Regulations 2002; the Employment Act 2002; the Employment Equality
(Religion or Belief) Regulations 2003; the Employment Equality (Sexual
Orientation) Regulations 2003 and any claim arising under European
treaty provisions or directives enforceable against the Company or its
Subsidiary by any Employee or Worker.
EMPLOYEE: any person employed by the Company or its Subsidiary under a
contract of employment (whether written or oral).
WORKER: any person who personally performs work for the Company or its
Subsidiary but who is not an Employee or in business on their own
account or is in a client/customer relationship with the Company or its
Subsidiary.
23.2 The name of each person who is a Director is set out in Schedule 1.
23.3 The Disclosure Letter lists all Employees and Workers, the particulars
of each Employee and Worker and the principal terms of their contract
being:
(a) their name;
47
(b) their current remuneration (including any material benefits
provided or which the Company or its Subsidiary is bound to
provide);
(c) the commencement date of their contract and, if an Employee,
the date on which their continuous service began;
(d) the length of notice necessary to terminate the contract, or
if a fixed term, the expiry date of the fixed term and details
of any previous renewals;
(e) the type of contract (whether full or part-time or other);
(f) their date of birth;
(g) the country in which the Employee or Worker works or performs
services and/or is paid, if the Employee or Worker works or is
paid outside England and Wales; and
(h) the law governing the contract, if the Employee or Worker
works or is paid outside England and Wales.
23.4 The Disclosure Letter lists all persons who are not Workers and who are
providing services to the Company or its Subsidiary under an agreement
which is not a contract of employment with the Company or its
Subsidiary (including, in particular, where the individual acts as a
consultant or is on secondment from a company which is not a member of
the Company's Group) and the material terms on which the individual
provides those services, being:
(a) the individual's name;
(b) the remuneration of the individual (including any material
benefits provided or which the Company or its Subsidiary is
bound to provide);
(c) the length of notice necessary to terminate the agreement;
(d) the term of the agreement;
(e) the country in which the individual provides services, if the
individual provides services wholly or mainly outside England
and Wales; and
(f) the law governing the agreement, if the individual provides
services wholly or mainly outside England and Wales.
23.5 The Disclosure Letter lists all Employees and Workers who are on
secondment, maternity, paternity, adoption or other statutory leave or
absent due to ill-health or for any other reason at the date of this
agreement.
23.6 No notice to terminate the contract of employment of any Employee or
Worker (whether given by the relevant employer or by the Employee or
Worker) is pending, outstanding or threatened and so far as the Vendor
is aware no dispute under any Employment Legislation or otherwise is
outstanding at the date of this agreement between:
(a) the Company or its Subsidiary and any of its or their current
or former Employees relating to their employment, its
termination and any reference given by the Company or its
Subsidiary regarding them; or
48
(b) the Company or its Subsidiary and any of its or their current
or former Workers relating to their contract, its termination
and any reference given by the Company or its Subsidiary
regarding them.
23.7 So far as the Vendor is aware no questionnaire has been served on the
Company or its Subsidiary by an Employee or Worker under any Employment
Legislation which remains unanswered in full or in part.
23.8 So far as the Vendor is aware every Employee or Worker of the Company
and its Subsidiary who requires a work permit to work in the United
Kingdom has a current work permit or other necessary permission to work
and remain in the United Kingdom.
23.9 No offer of a contract of employment has been made by the Company or by
its Subsidiary to any individual that has not yet been accepted, or
which has been accepted but where the individual's employment has not
yet started.
23.10 The acquisition of the Sale Shares by the Purchaser and compliance with
the terms of this agreement will not enable any Directors or senior
Employees of the Company or its Subsidiary to terminate their
employment or receive any payment or other benefit.
23.11 All contracts between the Company and its Employees and Workers and
between its Subsidiary and its Employees and Workers are terminable on
three months' notice or less without compensation (other than statutory
redundancy pay and pay for the period of notice).
23.12 All contracts between the Company or its Subsidiary and their
Directors, Employees or Workers comply with any relevant requirements
of section 319 of the Companies Act 1985.
23.13 Neither the Company nor its Subsidiary is a party to, bound by or
proposing to introduce in respect of any of its Directors or Employees
any redundancy payment scheme in addition to statutory redundancy pay,
nor is there any agreed procedure for redundancy selection.
23.14 Neither the Company nor its Subsidiary is a party to, bound by or
proposing to introduce in respect of any of its Directors, Employees or
Workers any share option, profit sharing, bonus, commission or any
other scheme relating to the profit or sales of the Company or its
Subsidiary.
23.15 So far as the Vendor is aware neither the Company nor its Subsidiary
has incurred any actual or contingent liability in connection with any
termination of employment of its Employees (including redundancy
payments) or for failure to comply with any order for the reinstatement
or re-engagement of any Employee.
23.16 So far as the Vendor is aware neither the Company nor its Subsidiary
has made or agreed to make a payment or provided or agreed to provide a
benefit to a Director, Employee or Worker or to the dependants of any
of those people in connection with the actual or proposed termination
or suspension of employment or variation of an employment contract.
49
23.17 So far as the Vendor is aware the Company and its Subsidiary have
maintained in all material respects current, adequate and suitable
records regarding the service of each of its Employees and Workers.
23.18 Insofar as they apply to its Employees or Workers, and so far as the
Vendor is aware the Company and its Subsidiary has complied in all
material respects with any:
(a) legal obligations;
(b) codes of conduct or practice; and
(c) workforce or collective agreements, customs and practice,
whether or not legally binding on it or in respect of which it would be
expected to comply by any regulatory or self regulatory body to which
it is subject.
23.19 Neither the Company nor its Subsidiary is involved in any material
industrial or trade dispute or negotiation regarding a claim with any
trade union or other group or organisation representing Employees or
Workers and so far as the Vendor is aware there is nothing likely to
give rise to such a dispute or claim.
23.20 The material terms of all workforce agreements reached under any
Employment Legislation and all collective bargaining or procedural or
other agreements or arrangements with any trade union, group or
organisation representing employees that relate to any Employees are
contained in the Disclosure Letter.
24. PROPERTY
24.1 The definitions in this paragraph apply in this agreement.
PREVIOUSLY-OWNED LAND AND BUILDINGS: land and buildings that has or
have, at any time before the date of this agreement, been owned (under
whatever tenure) and/or occupied and/or used by the Company or its
Subsidiary, but which are either no longer owned, occupied or used by
the Company or its Subsidiary.
PROPERTIES: the land and buildings, short particulars of which are set
out in Schedule 8 and PROPERTY means each and every one of them and any
part or parts of them.
INVESTMENT LEASE: a lease, underlease or occupational licence
identified in Part 2 of Schedule 6 as being one to which a Property is
subject and all documents which are supplemental or collateral to such
lease, underlease or occupational licence.
INVESTMENT PROPERTY: a Property identified in Schedule 6 as being
subject to an Investment Lease.
TENANT: a tenant in whom an Investment Lease is currently vested.
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24.2 The Properties are the only land and buildings owned, used or occupied
by the Company and its Subsidiary.
24.3 Neither the Company nor its Subsidiary has any right of ownership,
right of use, option, right of first refusal or contractual obligation
to purchase or any other legal or equitable right affecting any land
and buildings other than the Properties.
24.4 Neither the Company, nor any company that is or has at any time been a
Subsidiary of the Company has any actual or contingent liability in
respect of Previously-owned Land and Buildings.
24.5 Neither the Company nor its Subsidiary has given any guarantee or
indemnity for any liability relating to any of the Properties.
24.6 The information contained in Schedule 6 is complete and accurate and
includes all the information needed to identify:
(a) the Properties;
(b) all Investment Leases;
(c) all Tenants; and
(d) the present use of the Properties.
24.7 The Company, or the Subsidiary identified as the proprietor in Schedule
6, is the legal and beneficial owner of each Property.
24.8 The Properties are each exclusively occupied either by the Company or
by the Subsidiary identified as the occupier in Schedule 6 or, in the
case of any Investment Property, by the Tenant identified as the
occupier in Schedule 6.
24.9 Except for the Investment Leases, the Properties are free from claims,
liabilities, third party rights, private rights to restrict the use of
any Property (other than any right to restrict use in accordance with
the terms of any lease under which a Property is held, or in respect of
the title to such Property), rights of occupation, options, rights to
acquire, rights of first refusal, security interests, and so far as the
Vendor is aware there are no outstanding actions, claims or demands in
respect of any of the Properties.
24.10 So far as the Vendor is aware each of the Investment Leases is
subsisting and is not subject to any agreement or right in favour of
the Tenant to terminate or renew.
24.11 All material ancillary documents to each Investment Lease have been
Disclosed and the documents relating to the Properties and the
Investment Leases Disclosed were complete and accurate in all material
respects.
51
24.12 So far as the Vendor is aware there are no outstanding notices or
claims relating to any breach of any obligation under any such lease.
There is no outstanding application for any consent under any such
lease. There is no pending rent review under any such lease.
24.13 Neither the Company nor its Subsidiary have received or are aware of
any notice, order or proposal which would adversely affect the value,
use or enjoyment of any of the Properties or access to or from any of
them.
24.14 So far as the Vendor is aware there are no outstanding disputes
relating to or affecting any of the Properties.
24.15 No written notice of any breach of any applicable law or regulation in
respect of any of the Properties has been received.
24.16 All written replies given by or on behalf of the Vendor, the Company or
its Subsidiary in response to any written enquiries by or on behalf of
the Purchaser in relation to the Properties were complete and accurate
at the date they were given and would still be complete and accurate if
the replies were given as at the date of this agreement.
25. ACCOUNTS
25.1 The Accounts have been prepared in accordance with the Companies Acts
and with accounting standards, policies, principles and practices
generally accepted in the UK and in accordance with the law of that
jurisdiction.
25.2 The Accounts have been audited by an auditor or firm of accountants
qualified to act as auditors in the UK and the auditors' report(s)
required to be annexed to the Accounts is unqualified.
25.3 The Accounts show a true and fair view of the assets and liabilities of
the Company and its Subsidiary as at the Accounts Date, and the profits
of the Company and its Subsidiary for the accounting period ended on,
the Accounts Date.
25.4 The Accounts have been filed and laid before the Company in general
meeting in accordance with the requirements of the Companies Acts.
25.5 The Accounts have been prepared on a basis consistent with the audited
accounts of, as the case may be, the Company or its Subsidiary for the
two prior accounting periods without any change in accounting policies
used.
25.6 The Management Accounts have been prepared on a basis which is
consistent with the management accounts of the Company and its
Subsidiary for the previous twelve months.
52
26. FINANCIAL AND OTHER RECORDS
26.1 So far as the Vendor is aware all financial and other records of the
Company and its Subsidiary:
(a) have been properly prepared and maintained;
(b) constitute an accurate record of all matters required by law
to appear in them;
(c) do not contain any material inaccuracies or discrepancies; and
(d) are in the possession of the Company or the Subsidiary.
26.2 So far as the Vendor is aware no notice has been received or allegation
made that any of those records are incorrect or should be rectified.
26.3 So far as the Vendor is aware all statutory records, including
accounting records, required to be kept or filed by the Company or its
Subsidiary have been properly kept or filed and comply with the
requirements of the Companies Acts.
26.4 So far as the Vendor is aware all deeds and documents belonging to the
Company are in the possession of the Company and those belonging to its
Subsidiary are in the possession of the Subsidiary to which they
belong.
27. CHANGES SINCE ACCOUNTS DATE
Since the Accounts Date:
(a) the Company and its Subsidiary has conducted its business in
the normal course and as a going concern;
(b) so far as the Vendor is aware there has been no material
adverse change in the turnover, or financial position of the
Company or its Subsidiary;
(c) neither the Company nor its Subsidiary has issued or agreed to
issue any share or loan capital;
(d) no dividend or other distribution of profits or assets has
been, or agreed to be, declared, made or paid by the Company
or its Subsidiary;
(e) neither the Company nor its Subsidiary has borrowed or raised
any money or taken any form of financial security and no
capital expenditure has been incurred on any individual item
by the Company or its Subsidiary in excess of (pound)25,000
and neither the Company nor its Subsidiary has acquired,
invested or disposed of (or agreed to acquire, invest or
dispose of) any individual item by the Company or its
Subsidiary in excess of (pound)25,000;
(f) no shareholder resolutions of the Company or any of its
Subsidiaries have been passed other than as routine business
at the annual general meeting;
(g) there has been no abnormal increase or reduction of stock in
trade;
53
(h) none of the stock in trade reflected in the Accounts has
realised an amount less than the value placed in it in the
Accounts;
(i) neither the Company nor its Subsidiary has offered price
reductions or discounts or allowances on sales of stock in
trade, or sold stock in trade at less than cost price;
(j) neither the Company nor its Subsidiary has sold any products
at below cost price and all material sales of products have
been at normal historic margins.
28. RETIREMENT BENEFITS
28.1 The Pension Scheme is the only arrangement under which the Company or
its Subsidiary has or may have any obligation (whether or not legally
binding) to provide or contribute towards pension, lump sum or death
benefits in respect of its past or present officers and employees
(PENSIONABLE EMPLOYEES) and no proposal or announcement has been made
to any Employee or officer of the Company or its Subsidiary about the
introduction, continuance, increase or improvement of, or the payment
of a contribution towards, any other pension, lump sum, death,
ill-health, disability or accident benefit.
28.2 Details of the Pension Scheme are set out in the Disclosure Letter,
including (but without limitation):
(a) copies of all relevant documentation governing the Pension
Scheme and of any announcements and explanatory booklets
relating to it; and
(b) a list of all Pensionable Employees who are members of the
Pension Scheme.
28.3 All contributions, insurance premiums, Tax and expenses due prior to
Completion from PEL to and in respect of the Pension Scheme have been
duly paid and there are no such liabilities outstanding in respect of
the Pension Scheme at the date of this agreement.
28.4 The Pension Scheme is approved by the Board of the Inland Revenue for
the purposes of Chapter I of Part XIV of the ICTA 1988 and there is no
reason so far as the Vendor is aware why such approval may be
withdrawn.
28.5 If the Pension Scheme is a contracted-out scheme within the meaning of
the Pension Schemes Act 1993, there is in force a contracting-out
certificate covering PEL in relation to its period of participation in
the Pension Scheme.
28.6 No proposal or announcement has been made to any Employee or to any
officer of the Company or PEL about the introduction, continuance,
increase or improvement of any ill-health, disability or accident
benefit nor have there been any ex gratia payments of such benefits to
any Employees (or person claiming through an Employee) made by PEL.
28.7 PEL has complied in all material respects with its obligations under
and in respect of the Pension Scheme.
54
28.8 The Company and PEL have complied with the requirements of Section 3 of
the Welfare Reform and Pensions Act 1999.
28.9 No illegal discrimination is, or has at any stage been, made in the
provision of pension, lump sum, death, ill-health, disability or
accident benefits by the Company or PEL in relation to any of the
Pensionable Employees.
28.10 No claims or complaints have been made or are expected or threatened in
relation to the Pension Scheme or in respect of the provision of (or
failure to provide) pension, lump sum or death benefits by the Company
or PEL in relation to any of the Pensionable Employees and there is no
fact or circumstance so far as the Vendor is aware which would give
rise to such claims or complaints.
28.11 The Company and PEL operate ill-health, disability and accident
benefits schemes for employees and full details of these schemes have
been disclosed to the Purchaser. A list of all employees of PEL who are
in receipt of any benefit under these schemes have been Disclosed to
the Purchaser. The Disclosure Letter also Discloses full details of any
employee of PEL whose application and entitlement to benefits under
these schemes is under consideration.
PART 2. TAX WARRANTIES
29. GENERAL
29.1 All notices, returns (including any land transaction returns),
accounts, computations, statements, assessments and registrations and
any other necessary information submitted by the Company or its
Subsidiary to any Taxation Authority for the purposes of Taxation were
punctually submitted, were accurate and complete when submitted and so
far as the Vendor is aware remain accurate and complete in all material
respects and none of the above is the subject of any material dispute
with any Taxation Authority.
29.2 All Taxation (whether of the United Kingdom or elsewhere) for which the
Company or its Subsidiary is or has been liable or is liable to pay
before Completion has been duly paid (insofar as such Taxation ought to
have been paid).
29.3 Neither the Company nor its Subsidiary has made any payments
representing instalments of corporation tax pursuant to the Corporation
Tax (Instalment Payments) Regulations 1998 in respect of any current or
preceding accounting periods and is not under any obligation to do so.
29.4 Neither the Company nor its Subsidiary has paid within the past six
years ending on the date of this agreement or is liable to pay any
penalty, fine or interest charged by virtue of the provisions of the
TMA 1970 or any other Taxation Statute.
55
29.5 Neither the Company nor its Subsidiary has within the past 12 months
been subject to any non-routine visit, audit, investigation, discovery
or access order by any Taxation Authority.
29.6 The amount of Taxation chargeable on the Company or its Subsidiary
during any accounting period ending on or within the six years before
Completion has not, to any material extent, depended on any agreements
or other formal or informal arrangement with any Taxation Authority.
29.7 All transactions in respect of which any clearance or consent was
required from any Tax Authority have been entered into by the Company
or its Subsidiary after such consent or clearance has been properly
obtained, any application for such clearance or consent has been made
on the basis of full and accurate disclosure of all relevant material
facts and considerations, and all such transactions have been carried
into effect only in accordance with the terms of the relevant clearance
or consent.
29.8 The Company and its Subsidiary have duly submitted all claims,
disclaimers and elections due to be submitted before Completion the
making of which has been assumed for the purposes of the Accounts.
29.9 DELETED INTENTIONALLY.
29.10 So far as the Vendor is aware neither the Company nor its Subsidiary is
liable to make to any person (including any Taxation Authority) any
payment in respect of any liability to Taxation of any other person
where that other person has failed to discharge a liability to Taxation
to which he is primarily liable.
29.11 The Company and its Subsidiary have sufficient records to determine the
tax consequence which would arise on any disposal of any asset owned by
the Company or its Subsidiary at the Accounts Date or acquired since
that date but prior to Completion.
30. CHARGEABLE GAINS
Save to the extent provided for in the deferred tax provision in the
Accounts or the Completion Accounts the book value shown or adopted for
the purposes of the Accounts as the value of each of the assets of the
Company or its Subsidiary on the disposal of which a chargeable gain or
allowable loss could arise does not exceed the amount which on a
disposal of such asset at the date of this agreement would be
deductible under section 38 of TCGA 1992.
31. CAPITAL ALLOWANCES
31.1 Save to the extent provided for in the deferred tax provision in the
Accounts or the Completion Accounts no balancing charge under the CAA
2001 would be made on the Company or its Subsidiary on the disposal of
any pool of assets (that is, all those assets whose expenditure would
56
be taken into account in computing whether a balancing charge would
arise on a disposal of any other of those assets) or of any asset not
in such a pool, on the assumption that the disposals are made for a
consideration equal to the book value shown in or adopted for the
purpose of the Accounts for the assets in the pool or (as the case may
be) for the asset.
31.2 So far as the Vendor is aware no event has occurred since the Accounts
Date (otherwise than in the ordinary course of business) whereby any
balancing charge may fall to be made against, or any disposal value may
fall to be brought into account by the Company or its Subsidiary under
the CAA 2001.
32. DISTRIBUTIONS
32.1 No distribution or deemed distribution within the meaning of sections
209, 210 or 211 of ICTA 1988 has been made (or so far as the Vendor is
aware deemed to have been made) by the Company or its Subsidiary after
5 April 1965 except dividends shown in their audited accounts and
neither the Company nor its Subsidiary is bound to make any such
distribution.
32.2 No rents, interest, annual payments or other sums of an income nature
paid by the Company or its Subsidiary or which the Company or its
Subsidiary are under an existing obligation to pay in the future are or
so far as the Vendor is aware may be wholly or partially disallowable
as deductions, management expenses or charges in computing profits for
the purposes of corporation tax.
32.3 Neither the Company nor its Subsidiary has within the period of six
years preceding Completion been engaged in, nor been a party to, any of
the transactions set out in sections 213 to 218 (inclusive) of ICTA
1988, nor has it made or received a chargeable payment as defined in
section 218(1) of ICTA 1988.
33. LOAN RELATIONSHIPS
All interests, discounts and premiums payable by the Company or its
Subsidiary in respect of its loan relationships (within the meaning of
section 81 of the Finance Act 1996) are eligible to be brought into
account by the Company or its Subsidiary as a debit for the purposes of
Chapter II of Part IV of the Finance Act 1996 at the time and to the
extent that such debits are recognised in the statutory accounts of the
Company or its Subsidiary.
34. CLOSE COMPANIES
34.1 Neither the Company nor its Subsidiary has in any accounting period
beginning after 31 March 1989 been a close investment-holding company
as defined in section 13A of ICTA 1988.
57
34.2 No distribution within section 418 of ICTA 1988 has been made by the
Company or its Subsidiary during the last six years ending at the
Accounts Date, nor have such distributions been made between the
Accounts Date and Completion.
34.3 Neither the Company nor its Subsidiary has within the period of six
years preceding Completion made any loans or advances within sections
419 and 420 or 422 of ICTA 1988 and neither the Company nor its
Subsidiary has released or written off or agreed to release or write
off the whole or any part of any such loans or advances.
35. GROUP RELIEF
Except as provided in the Accounts, neither the Company nor its
Subsidiary is obliged to make or entitled to receive any payment for
group relief as defined in section 402(6) of ICTA 1988 in respect of
any period ending on or before the Accounts Date.
36. GROUPS OF COMPANIES
36.1 Neither the Company nor its Subsidiary has entered or agreed to enter
into an election pursuant to section 171A of TCGA 1992 or paragraph 66
of Schedule 29 to the Finance Act 2002.
36.2 So far as the Vendor is aware the execution or completion of this
agreement will not result in any chargeable asset being deemed to have
been disposed of and re-acquired by the Company or its Subsidiary for
Taxation purposes pursuant to section 179 of TCGA 1992, paragraphs 58
or 60 of Schedule 29 to the Finance Act 2002.
36.3 Neither the Company nor its Subsidiary has ever been party to any
arrangements pursuant to section 36 of the Finance Act 1998 (group
payment arrangements).
36.4 Neither the Company nor its Subsidiary has been, and is not, required
by Schedule 28AA of ICTA 1988 to compute its profits or losses as if an
arm's length provision had been made instead of any actual provision.
37. DELETED INTENTIONALLY
38. COMPANY RESIDENCE AND OVERSEAS INTERESTS
38.1 The Company and its Subsidiary have within the past seven years been
resident in the United Kingdom for corporation tax purposes and have
not at any time in the past seven years been treated for the purposes
of any double taxation arrangements having effect by virtue of section
249 of the Finance Act 1994, section 788 of ICTA 1988 or for any other
tax purpose as resident in any other jurisdiction.
58
38.2 Neither the Company nor its Subsidiary has without the prior written
consent of HM Treasury caused or entered into any of the transactions
specified in section 765 of ICTA 1988 (migration of companies).
38.3 Neither the Company nor its Subsidiary holds shares in a company which
is not resident in the United Kingdom and which would be a close
company if it were resident in the United Kingdom in circumstances such
that a chargeable gain accruing to the company not resident in the
United Kingdom could be apportioned to the Company and/or its
Subsidiary pursuant to section 13 of TCGA 1992.
38.4 Neither the Company nor its Subsidiary is holding or has held in the
past seven years any interest in a controlled foreign company within
section 747 of ICTA 1988, and neither of them has any material interest
in an offshore fund as defined in section 759 of ICTA 1988.
38.5 Neither the Company nor its Subsidiary has a permanent establishment
outside the UK.
39. ANTI-AVOIDANCE
39.1 Neither the Company nor its Subsidiary has at any time been a party to
a transaction or series of transactions which has or have included any
steps or step having no commercial or business purpose apart from the
avoidance of a liability to pay Tax..
40. INHERITANCE TAX
40.1 Neither the Company nor its Subsidiary has made any transfer of value
within sections 94 and 202 of the IHTA 1984, nor has it received any
value such that liability might arise under section 199 of the IHTA
1984, nor has it been a party to associated operations in relation to a
transfer of value as defined by section 268 of the IHTA 1984.
40.2 There is no unsatisfied liability to inheritance tax attached to or
attributable to the Sale Shares or any asset of the Company or its
Subsidiary and none of them are subject to any Inland Revenue charge as
mentioned in section 237 and 238 of the IHTA 1984.
40.3 So far as the Vendor is aware no asset owned by the Company or its
Subsidiary, nor the Sale Shares are liable to be subject to any sale,
mortgage or charge by virtue of section 212(1) of the IHTA 1984.
41. VAT
41.1 The Company and its Subsidiary are each taxable persons and are duly
registered for the purposes of VAT with quarterly prescribed accounting
periods and neither the Company nor its Subsidiary is under a duty to
make monthly payments on account under the Value Added Tax (Payments on
Account) Order 1993.
59
41.2 The Company and its Subsidiary have complied with all statutory
provisions, rules, regulations, orders and directions in respect of
VAT.
41.3 All supplies for VAT purposes made by the Company or its Subsidiary are
taxable supplies and neither the Company nor its Subsidiary has been
denied full credit for all input tax incurred by the Company or its
Subsidiary (as appropriate) by reason of the operation of sections 25
and 26 of the VATA 1994 and regulations made thereunder.
41.4 Neither the Company nor its Subsidiary is or has been for VAT purposes
a member of any group of companies (other than the group comprising the
Company and its Subsidiary, Pascall Electronic Systems Limited and
Pascall Microwave Limited) and so far as the Vendor is aware no
direction has been given by HM Customs & Excise under Schedule 9A to
the VATA 1994 as a result of which the Company or its Subsidiary would
be treated for the purposes of VAT as a member of a group other than
the group comprising only the Company, its Subsidiary, Pascall
Electronic Systems Limited and Pascall Microwave Limited.
41.5 Neither the Company nor its Subsidiary owns any assets which are
capital items subject to the capital goods scheme under Part XV of the
VAT Regulations 1995.
41.6 Neither the Company nor its Subsidiary has made any claim for bad debt
relief under section 36 of the VATA 1994 and there are no existing
circumstances by virtue of which any refund of VAT obtained or claimed
may be required to be repaid or there could be a claw back of input VAT
from any Company or its Subsidiary under section 36(4) of the VATA
1994.
42. STAMP DUTY AND STAMP DUTY LAND TAX
42.1 Any document on which the Company or its Subsidiary relies as purchaser
or lessee is duly stamped for stamp duty purposes.
42.2 Neither the Company nor its Subsidiary hold any interest in any real
property which was granted or transferred to it in the three years
ending on the date of this agreement where such grant or transfer was
the subject of an application for relief from stamp duty under Section
42 Finance Act 1930, Section 151 Finance Act 1995 or Section 76 Finance
Act 1986.
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SCHEDULE 5 TAX COVENANT
1. INTERPRETATION
1.1 The definitions and rules of interpretation in this paragraph apply in
this Tax Covenant:
PURCHASER'S RELIEF: means:
o any Accounts Relief (as defined in paragraph (a) of the definition of
Liability for Taxation) or Repayment Relief (as defined in paragraph
(b) of the definition of Liability for Taxation);
o any Post-Completion Relief of the Company or its Subsidiary (as defined
in paragraph (c) of the definition of Liability for Taxation); and
o any Relief, whenever arising, of the Purchaser or any member of the
Purchaser's Tax Group other than the Company or its Subsidiary.
PURCHASER'S TAX GROUP: the Purchaser and any other company or companies
which either are or become after Completion, or have within the seven
years ending at Completion been, treated as members of the same group
as, or otherwise connected or associated in any way with, the Purchaser
for any Tax purpose.
DEGROUPING CHARGE: any Liability for Taxation of the Company or its
Subsidiary as a result of the Company or its Subsidiary ceasing to be,
or ceasing to be treated as, a member of a group of companies for Tax
purposes as a result of Completion or of entering into this agreement,
or of the satisfaction of any condition in this agreement.
EVENT: means the expiry of a period of time, the Company or its
Subsidiary becoming or ceasing to be associated with any other person
for any Tax purpose or ceasing to be or becoming resident in any
country for any Tax purpose, the death or the winding up or dissolution
of any person, and any transaction (including the execution of this
agreement), event, act or omission whatsoever, and any reference to an
Event occurring on or before a particular date shall include Events
which for Tax purposes are deemed to have, or are treated or regarded
as having, occurred on or before that date.
FA: Finance Act
GROUP RELIEF: any amount eligible for relief under Section 402-413 of
ICTA 1988, advance corporation tax which is capable of being
surrendered under Section 240 of ICTA 1988, any tax refund which is
capable of being surrendered under Section 102 of the Finance Act 1989,
any relievable tax which is capable of being surrendered pursuant to
regulations made under Section 806H of ICTA 1988 or utilisation of any
losses pursuant to an election under Section 171A of the TCGA 1992.
61
LIABILITY FOR TAXATION: any liability of the Company or its Subsidiary
to make a payment of Tax whether or not the same is primarily payable
by the Company or its Subsidiary and whether or not the Company or its
Subsidiary has or may have any right of reimbursement against any other
person or persons and:
o (a) the Loss of any Relief where such Relief has been taken into
account in computing and so reducing or eliminating any provision for
deferred Tax which appears in the Completion Accounts (or which but for
such Relief would have appeared in the Completion Accounts) or where
such Relief was treated as an asset of the Company or the Subsidiary in
the Completion Accounts (ACCOUNTS RELIEF) (LOSS OF AN ACCOUNTS RELIEF),
in which case the amount of the Liability for Taxation will be the
amount of Tax which would (on the basis of Tax rates current at the
date of this agreement) have been saved but for such Loss;
o (b) the Loss of any right to repayment of Tax (including any repayment
supplement) which was treated as an asset in the Completion Accounts
(REPAYMENT RELIEF) (LOSS OF A REPAYMENT RELIEF), in which case the
amount of the Liability for Taxation will be the amount of the loss of
the right to repayment and any related repayment supplement;
o (c) the set off or use against income, profits or gains earned, accrued
or received or against any Tax chargeable in respect of an Event
occurring on or before Completion of any Relief or right to repayment
of Tax (including any repayment supplement) (in each case) which is not
available before Completion but arises by reference to an Event
occurring after Completion in circumstances where, but for such set off
or use, the Company or its Subsidiary would have had a liability to
make a payment of Tax for which the Purchaser would have been able to
make a claim against the Vendor under this Tax Covenant
(POST-COMPLETION RELIEF) (LOSS OF A POST-COMPLETION RELIEF), in which
case, the amount of the Liability for Taxation shall be the amount of
Tax saved by the Company or its Subsidiary as a result of such set off
or use.
o (d) any liability of the Company or its Subsidiary to make any payment
(other than to the Company or its Subsidiary) for the surrender of
Group Relief to the Company or its Subsidiary pursuant to any
arrangement or agreement entered into on or before Completion (save to
the extent that such payment is reflected in the Completion Accounts or
the benefit of the Group Relief is not reflected in the Completion
Accounts), in which case the amount of the Liability for Taxation shall
be the amount of such liability (disregarding any set off).
o (e) the loss in whole or in part of the right of the Company or its
Subsidiary to receive any payment (other than from the Company or its
Subsidiary) for Group Relief pursuant to any arrangement or agreement
entered into on or before Completion where such payment was taken into
account in the Completion Accounts, in which case the amount of the
Liability for Taxation shall be the amount taken into account in the
Completion Accounts or any liability to repay such a payment where such
liability has not been reflected or taken into account in the
Completion Accounts in which case the amount of the Liability for
Taxation shall be the amount of the repayment.
62
o (f) any liability of the Company or its Subsidiary to make a payment
pursuant to an indemnity, guarantee or covenant entered into before
Completion under which the Company or its Subsidiary has agreed to meet
or pay a sum equivalent to another person's liability to pay Tax, in
which case the Liability for Taxation shall be equal to the amount of
the liability to make a payment pursuant to the indemnity, guarantee or
covenant.
LOSS: any reduction, loss, nullification, disallowance or claw-back for
whatever reason.
RELIEF: any loss, relief, allowance, credit, exemption or set off (in
each case) in respect of Tax or any deduction in computing income,
profits or gains (in each case) for the purposes of Tax and any right
to a repayment of Tax.
RETAINED GROUP: the Vendor and any other company or companies (other
than the Company or its Subsidiary) which either are or become after
Completion, or have within the seven years ending at Completion been,
treated as members of the same group, or otherwise connected or
associated in any way with the Vendor for Tax purposes.
TAX: all forms of taxation and statutory, governmental, state, federal,
provincial, local, government or municipal charges, duties, imposts,
contributions, levies, withholdings or liabilities (in each case in the
nature of taxation) wherever chargeable and whether of the UK or any
other jurisdiction; and any penalty, fine, surcharge or interest
relating thereto, but excluding the Uniform Business Rate, Council Tax,
water rates and other local authority rates or charges and TAXATION
shall have the same meaning.
TAX CLAIM: any assessment (including self-assessment), notice, demand,
letter or other document issued or action taken by or on behalf of any
person (including the Company and/or its Subsidiary) and any Taxation
Authority from which it appears that the Company and/or its Subsidiary
is or may be subject to a Liability for Taxation or other liability in
respect of which the Vendor is or may be liable under this Tax Covenant
or under any Tax Warranty.
TAXATION AUTHORITY: the Inland Revenue, HM Customs & Excise, the
Department of Social Security and any other governmental or other
authority whatsoever competent to impose any Tax whether in the United
Kingdom or elsewhere.
TAXATION STATUTE: any directive, statute, enactment, law or regulation
wheresoever enacted or issued, coming into force or entered into
providing for or imposing any Tax and shall include orders,
regulations, instruments, bye-laws or other subordinate legislation
made under the relevant statute or statutory provision and any
directive, statute, enactment, law, order, regulation or provision
which amends, extends, consolidates or replaces the same or which has
been amended, extended, consolidated or replaced by the same.
63
1.2 References to "GROSS RECEIPTS", "INCOME", "PROFITS" or "GAINS" earned,
accrued or received shall include any gross receipts, income, profits
or gains deemed pursuant to the relevant Taxation Statute to have been
or treated or regarded as earned, accrued or received.
1.3 References to a "REPAYMENT OF TAX" shall include any repayment
supplement or interest in respect of it.
1.4 A reference to an "EVENT OCCURRING ON OR BEFORE COMPLETION" includes a
series or combination of Events, all of which occurred on or before
Completion.
1.5 A reference to an Event occurring on or before Completion includes a
series or combination of Events all of which were or the first of which
was an Event occurring on or before Completion or which commenced on or
before Completion, provided that for the purposes of this paragraph a
series or combination of Events shall only be taken into account if the
Event or Events occurring on or before Completion occur outside of the
ordinary course of business of the Company or its Subsidiary and the
Event or Events occurring after Completion occur inside of the ordinary
course of business of the Company or its Subsidiary.
1.6 Any reference to an Event occurring in the ordinary course of business
shall, without prejudice to the generality thereof, be deemed not to
include:
o any Event which leads directly or indirectly to any liability of the
Company or its Subsidiary to pay Tax that is the primary liability of,
or properly attributable to, or due from another person (other than a
member of the Purchaser's Tax Group); or
o any acquisition or disposal of an asset or the supply of services
(including the lending of money, or the hiring or licensing of tangible
or intangible property) in a transaction which is not entered into on
arm's length terms; or
o any distribution for Tax purposes, the creation, cancellation or
re-organisation of share or loan capital, the creation, cancellation or
repayment of any intra-group debt or the Company or its Subsidiary
becoming or ceasing to be or being treated as ceasing to be a member of
a group of companies or becoming or ceasing to be associated or
connected with any other company (in each case) for any Tax purposes;
or
o any transaction or arrangement which includes, or a series of
transactions or arrangements which include, any step or steps having no
commercial or business purpose apart from the reduction, avoidance or
deferral of a Liability for Taxation; or
o any Event which gives rise to a Liability for Taxation on deemed (as
opposed to actual) profits or to the extent that it gives rise to a
Liability for Taxation on an amount of profits greater than the
difference between the sale proceeds of an asset and the amount
attributable to that asset in the Accounts or, in the case of an asset
acquired since the Accounts Date, the cost of that asset; or
64
o any change of residence of the Company or the Subsidiary for Tax purposes.
1.7 Unless the contrary intention appears, words and expressions defined in
this agreement have the same meaning in this Tax Covenant and any
provisions in this agreement concerning matters of construction or
interpretation also apply in this Tax Covenant.
1.8 For the avoidance of doubt, references to any Liability for Taxation of
the Company or its Subsidiary which results from any gains earned or
received on or before Completion or any Event on or before Completion
include a reference to any Liability for Taxation of the Company or its
Subsidiary resulting from the sale of the Sale Shares pursuant to this
agreement (including, without limitation, any liability arising under
section 179 of TCGA 1992).
2. COVENANT
The Vendor covenants with the Purchaser that, subject to the provisions
of this Schedule 5, the Vendor shall pay to the Purchaser, to the
extent possible, but not so as to limit the amount payable where not
wholly possible, by way of repayment of the Purchase Price for the Sale
Shares, an amount equal to any:
o Liability for Taxation resulting from any Event occurring on or before
Completion or in respect of any gross receipts, income, profits or
gains earned, accrued or received by the Company or its Subsidiary on
or before Completion;
o Liability for Taxation which arises under or by reference to section
767A or 767AA of the ICTA 1988, section 190 of the TCGA 1992 or section
132 of the FA 1988, paragraph 68 of schedule 29 to the FA 2002,
paragraph 8 of schedule 34 to the FA 2002, paragraph 9 of schedule 35
to the FA 2002, or paragraphs 1 or 2 of schedule 39 to the FA 2002 in
circumstances where such Liability for Taxation arises by reference to
the non-payment of Tax by any member of the Retained Group;
o payment of interest or penalties for which the Company or its
Subsidiary is liable as a result of the Company or its Subsidiary
failing to make any instalment payment under the Corporation Tax
(Instalment Payments) Regulations 1998 on or before Completion of an
amount sufficient to avoid such interest or penalties, save to the
extent that (i) any instalment payments due prior to Completion have
been paid on or before the due dates or (ii) no instalment payments
have been made prior to Completion, in each case based on reasonable
forecasts of the profits of the Company and its Subsidiary at the due
dates of such instalments;
65
o Liability for Taxation falling within paragraph (b) to paragraph (f) of
the definition of Liability for Taxation;
o Liability for Tax resulting from an Event occurring on or before
Completion in connection with or as a result of the Inland Revenue
enquiry commenced on 7 December 2004 in respect of the corporation tax
return for the year ended 31 March 2003 of PEL; and
o the reasonable costs and expenses incurred by the Purchaser, the
Company or the Subsidiary in connection with a successful claim under
the Tax Covenant and the Liability for Taxation giving rise to such a
claim.
3. PAYMENT DATE AND INTEREST
3.1 Where the Vendor is liable to make any payment under paragraph 2, the
due date for the making of that payment (DUE DATE) shall be the later
of the date falling ten Business Days after the Purchaser has served a
notice on the Vendor demanding that payment and in a case:
o that involves an actual payment of Tax by the Company or its
Subsidiary, the date on which the Tax in question would have had to
have been paid to the relevant Taxation Authority in order to prevent a
liability to interest or a fine, surcharge or penalty from arising in
respect of the Liability for Taxation in question; or
o that involves a Liability for Taxation that falls within paragraph (a)
of the definition of Liability to Taxation, the last date upon which
the Tax is or would have been required to be paid to the relevant
Taxation Authority in respect of the period in which the Loss of the
Relief occurs; or
o that involves a Liability for Taxation that falls within paragraph (b)
of the definition of Liability to Taxation, the date upon which the
repayment was due from the relevant Taxation Authority; or
o that involves a Liability for Taxation that falls within paragraph (c)
of the definition of Liability to Taxation, the date upon which the Tax
saved by the Company or its Subsidiary is or would have been required
to be paid to the relevant Taxation Authority; or
o that involves a Liability for Taxation that falls within paragraphs (d)
to (f) of the definition of Liability for Taxation, not later than the
fifth day before the day on which the Company or its Subsidiary is due
to make or receive the payment.
3.2 If any sums required to be paid under this schedule are not paid on the
Due Date (or other due date for the payment of such sums), then, except
to the extent that the Vendor's liability under paragraph 2 compensates
the Purchaser for the late payment by virtue of it extending to
interest and penalties, such sums shall bear interest (which shall
66
accrue from day to day after as well as before any judgment for the
same) at the rate of 2% per annum over the base rate from time to time
of Barclays Bank PLC or (in the absence thereof) at such similar rate
as the recipient shall select from the day following the Due Date (or
other due date for the payment of such sums) up to and including the
day of actual payment of such sums.
4. EXCLUSIONS
4.1 The Vendor shall not be liable under any Tax Warranty or any claim
under the covenant contained in paragraph 2 in respect of any liability
to the extent that:
o a provision, allowance or reserve in respect thereof has been made in
or its payment or discharge is reflected in, or taken into account in
the Completion Accounts; or
o the liability arises or is increased by reason of any increase in the
rates of Tax or variation in the method of applying or calculating the
rate of Tax made after the Completion Date whether or not with
retrospective effect; or
o the liability arises or is increased as a result of any change in the
law or accounting practice or principle or the published practice of a
Taxation Authority announced and coming into force after Completion
(whether relating to rates of Tax or otherwise) or the withdrawal after
Completion of any extra-statutory concession previously made by a
Taxation Authority (whether or not the change purports to be effective
retrospectively in whole or in part); or
o the liability would not have arisen or would not have been increased
but for a change after Completion in the bases, methods or policies of
accounting of the Company or its Subsidiary or upon which the Company
or its Subsidiary values its assets (other than a change made in order
to comply with UK GAAP in force at Completion); or
o the Purchaser is compensated for any such matter under any other
provision of this agreement; or
o the liability would not have arisen or would not have been increased
but for a voluntary act, transaction or omission of the Purchaser, the
Company or its Subsidiary after Completion being an act, transaction or
omission which:
(i) is not in the ordinary course of business of the Company or its
Subsidiary; or
(ii) the Company or its Subsidiary was not legally committed to do
under a commitment that existed on or before Completion; or
67
o the Liability for Taxation is a De-grouping Charge which, whether by
election or otherwise, is treated as accruing not to the Company or its
Subsidiary but to the Vendor or any member of the Retained Group; or
o the liability would not have arisen or would have been reduced or
eliminated but for a failure or omission after Completion, on the part
of the Company, its Subsidiary or the Purchaser, to make any claim,
election, surrender or disclaimer or to give any notice or consent or
to do any other thing under any enactment or regulation relating to Tax
the making, giving or doing of which was taken into account in
computing the provision for Tax in the Completion Accounts; or
o the liability arises or is increased as a result of either the Company,
the Subsidiary or the Purchaser failing to act in accordance with the
provisions of paragraph 9 of this schedule; or
o such liability arises as a result of: (i) any voluntary disclaimer by
the Company or the Subsidiary after Completion of the whole or part of
any capital allowances claimed before Completion or the entitlement to
which was taken into account in preparing the Completion Accounts, or
(ii) the voluntary revocation or revision by the Company or the
Subsidiary after Completion of any Relief claimed or the entitlement to
which was taken into account in preparation of the Completion Accounts;
or
o any Relief, other than a Purchaser's Relief is available to the Company
or its Subsidiary (including by way of group relief from another
company) to relieve or mitigate that liability.
5. RECOVERY FROM THIRD PARTIES
5.1 Where the Purchaser, the Company or its Subsidiary is or becomes
entitled to recover from some other person (including for the avoidance
of doubt a Taxation Authority) not being the Purchaser, the Company or
its Subsidiary or any other company within the Purchaser's Tax Group,
any amount in respect of a Liability for Taxation, which has resulted
in a payment being made by the Vendor under the Tax Warranties or the
Tax Covenant, the Purchaser shall or shall procure that the Company or
its Subsidiary shall:
o notify the Vendor of its entitlement as soon as reasonably practicable;
and
o if required by the Vendor and, subject to the Purchaser, the Company or
its Subsidiary being indemnified by the Vendor against any Tax that may
be suffered on receipt of that amount and any costs and expenses
incurred in recovering that amount, take or procure that the Company or
its Subsidiary takes all reasonable steps to enforce that recovery
against the person in question (keeping the Vendor fully informed of
the progress of any action taken) save where in the Purchaser's
reasonable opinion, to do so is likely to harm its or the Company's or
its Subsidiary's commercial relationship with that or any other person
to an extent as great or greater than the amount which is sought to be
recovered.
68
5.2 If the Purchaser, the Company or its Subsidiary recovers any amount
referred to in paragraph 5.1, whether after taking any action requested
by the Vendor or otherwise the Purchaser shall as soon as reasonably
practicable account to the Vendor for the lesser of:
o any amount recovered (including any related interest or related
repayment supplement) less any Tax suffered in respect of that amount
and any costs and expenses incurred in recovering that amount (save to
the extent that that amount has already been made good by the Vendor);
and
o the amount paid by the Vendor under paragraph 2 or under any Tax
Warranty in respect of the Liability for Taxation in question.
6. OVER-PROVISIONS AND CORRESPONDING BENEFIT
6.1 If, before the seventh anniversary of the date of this agreement:
(a) any provision for Tax in the Completion Accounts proves to be
an over-provision;
(b) the amount by which any right to repayment of Tax which has
been treated (or, in accordance with generally accepted
accounting principles, could have been treated) as an asset in
the Completion Accounts proves to have been under-stated;
(c) a payment by the Vendor in respect of any Liability for
Taxation under the Tax Covenant or the Tax Warranties, or the
matter giving rise to such Liability for Taxation results in
the Company, the Subsidiary or the Purchaser receiving or
becoming entitled to any Relief (other than an Accounts
Relief) which they utilise (including by way of repayment of
Tax) (CORRESPONDING RELIEF),
then an amount equal to such over-provision, under-stated right to
repayment of Tax, or the Tax saved by the Corresponding Relief at
the date such Corresponding Relief is utilised (RELEVANT AMOUNT),
shall be dealt with in accordance with paragraph 6.2.
6.2 The Relevant Amount:
(a) shall first be set off against any payment then due from the
Vendor under the Tax Covenant or the Tax Warranties;
(b) to the extent there is an excess of the Relevant Amount after
any application of the same under paragraph 6.2 (a), a refund
shall be made to the Vendor of any previous payment or
payments made by the Vendor under the Tax Covenant or the Tax
Warranties and not previously refunded under this paragraph
6.2 (b) up to the amount of such excess; and
(c) to the extent that the excess referred to in paragraph 6.2 (b)
is not exhausted under that paragraph, the remainder of that
excess shall be carried forward and set off against any future
payment or payments which become due from the Vendor under the
Tax Covenant or the Tax Warranties.
69
6.3 If the Purchaser, the Company or its Subsidiary becomes aware of any
circumstances which shall or may give rise to the application of
paragraph 6.1, the Purchaser shall or shall procure that the Company or
its Subsidiary (as appropriate) shall as soon as reasonably practicable
give written notice of the same to the Vendor.
6.4 The Vendor may require (at the Vendor's cost) the auditors for the time
being of the Company or its Subsidiary to certify the existence and
quantum of any Relevant Amount and the date on which the Corresponding
Relief is utilised and, in the absence of manifest error, their
decision shall be final and binding.
7. PURCHASER'S COVENANT
7.1 The Purchaser covenants to pay to the Vendor an amount equal to:
(a) any liability or increased liability to Tax of the Vendor or
any person connected with the Vendor arising under or by
reference to section 767A or section 767AA of the ICTA 1988,
section 190 of the TCGA 1992 or section 132 of the FA 1988,
paragraph 68 of schedule 29 to the FA 2002, paragraph 8 of
schedule 34 to the FA 2002, paragraph 9 of schedule 35 to the
FA 2002, paragraphs 1 or 2 of schedule 39 to the FA 2002 or
Section 43 of the VATA 1994 by virtue of the non-payment of
Tax by the Company or the Subsidiary save that this paragraph
7.1 (a) shall not apply in respect of any Tax for which the
Vendor is liable to make (but has not yet made) payment to the
Purchaser under the Tax Covenant; and
(b) the reasonable costs and expenses of the Vendor or any person
connected to the Vendor in connection with any liability
referred to or in taking any action under this paragraph.
7.2 For the purposes of this paragraph, any reference to a liability to Tax
shall include any liability to make a payment of Tax which would have
arisen but for the utilisation of any Relief.
7.3 Paragraph 3 of this schedule shall apply to this paragraph 7 (with all
necessary changes).
8. CORPORATION TAX RETURNS
8.1 The Vendor or its duly authorised agent shall at the Vendor's cost and
expense prepare the corporation tax returns and computations of the
Company and its Subsidiary for all accounting periods ended on or prior
to the Accounts Date, to the extent that the same have not been
prepared before Completion, and submit them to the Purchaser.
8.2 The Purchaser shall procure that the returns and computations referred
to in paragraph 8.1 shall be authorised, signed and submitted to the
relevant Taxation Authority without amendment or with such amendments
as the Purchaser reasonably considers to be necessary and shall give
the Vendor or its agent all such assistance as may reasonably be
70
required (at the Vendor's cost and expense) to prepare and agree those
returns and computations with the relevant Taxation Authority provided
that the Purchaser shall not be obliged to take any such action as is
mentioned in this paragraph 8.2 in relation to any return that is not
complete, true and accurate in all material respects.
8.3 The Vendor or its duly authorised agent shall at the Vendor's cost and
expense prepare all documentation and shall have conduct of all matters
(including correspondence) relating to the corporation tax returns and
computations of the Company and its Subsidiary for all accounting
periods ended on or prior to the Accounts Date provided that the Vendor
shall not without the prior written consent of the Purchaser (not to be
unreasonably withheld or delayed) transmit any communication (written
or otherwise) to the relevant Taxation Authority or agree any matter
with the relevant Taxation Authority.
8.4 The Purchaser shall and shall procure that the Company and its
Subsidiary shall, at the Vendor's cost and expense,
(a) afford such access to their books, accounts and records as is
necessary and reasonable to enable the Vendor or its duly
authorised agent to prepare and agree the corporation tax
returns and computations of the Company and its Subsidiary for
all accounting periods ended on or before the Accounts Date
and conduct matters relating to them in accordance with this
paragraph 8;
(b) ensure that any correspondence which relates to the
corporation tax returns and computations of the Company and
its Subsidiary for all accounting periods ended on or before
the Accounts Date, if received by the Purchaser, the Company
or its Subsidiary (or their agents or advisers) is properly
copied to the Vendor.
8.5 The Vendor shall take all reasonable steps to ensure that the
corporation tax returns and computations of the Company and its
Subsidiary for all accounting periods ended on or before the Accounts
Date are prepared and agreed with the relevant Taxation Authority as
soon as reasonably possible.
8.6 The Purchaser or its duly authorised agent shall at the Purchaser's
cost and expense prepare, or procure that the Company and/or its
Subsidiary shall prepare the corporation tax returns and computations
of the Company and its Subsidiary for the accounting period ending on
the date of Completion, to the extent that the same have not been
prepared before Completion, and submit them to the Vendor.
8.7 The Purchaser shall procure that the corporation tax returns referred
to in paragraph 8.6 shall be authorised, signed and submitted to the
relevant Taxation Authority without amendment or with such amendments
as the Vendor shall suggest to make the returns and computations
complete, true and accurate in all respects (provided that for the
avoidance of doubt the Purchaser shall not have to take into account
any amendments suggested by the Vendor unless by not making such
amendment the returns and computations would not be true, complete and
accurate in all respects) and shall give the Vendor or its agent all
such assistance as may be reasonably required (at the Vendor's cost and
expense) to review and amend those returns and computations provided
that the Purchaser shall not be obliged to take any such action as is
mentioned in this paragraph 8.7 in relation to any return that is not
true and accurate in all material respects.
71
8.8 The Vendor shall use its reasonable endeavours to ensure that the
Company and its Subsidiary which is party to a group payment
arrangement ("Group Payment Arrangement") with the Inland Revenue under
section 36 of the Finance Act 1998 (as part of the group of companies
of which the Vendor is a member) is as soon as reasonably practicable
removed from the Group Payment Arrangement as provided for in the Group
Payment Arrangement.
8.9 The Vendor shall use its reasonable endeavours to ensure that the
nominated company (nominated for discharge of any liability to pay
corporation tax under the Group Payment Arrangement) exercises its
rights to apportion and re-apportion payments under the Group Payment
Arrangement so far as reasonably practicable to ensure that any
Liability for Taxation of the Company or its Subsidiary for which
recovery would otherwise be available by the Purchaser under the Tax
Covenant are fully and expeditiously discharged.
8.10 The Vendor will use its reasonable endeavours to ensure (to the extent
permitted by law and for no consideration) that any Degrouping Charge
for which recovery would otherwise be available by the Purchaser under
the Tax Covenant or under the Tax Warranties is treated as accruing not
to the Company or its Subsidiary but to the Vendor or a member of the
Retained Group and the Purchaser will procure that the Company or its
Subsidiary executes all claims, elections, consents or other documents
relevant for that purpose.
8.11 For the avoidance of doubt:
o where any matter relating to Tax gives rise to a Tax Claim, the
provisions of paragraph 9 shall take precedence over the provisions of
this paragraph 8; and
o the provisions of this paragraph 8 shall not prejudice the rights of
the Purchaser to make a claim under this Tax Covenant in respect of any
Liability for Taxation.
9. CONDUCT OF TAX CLAIMS
9.1 If the Purchaser, the Company or its Subsidiary becomes aware of a Tax
Claim, the Purchaser shall give or procure that notice in writing is
given to the Vendor as soon as is reasonably practicable of the Tax
Claim, provided that if the Vendor receives any Tax Claim for whatever
reason, it shall notify the Purchaser in writing as soon as is
reasonably practicable and the Purchaser shall be deemed on receipt of
such notification to have given the Vendor notice of such Tax Claim in
accordance with the provisions of this paragraph 9 provided always that
the giving of such notice shall not be a condition precedent to the
Vendor's liability under the Tax Covenant.
72
9.2 If the Vendor so requests in writing, the Purchaser shall provide the
Vendor with all reasonable and relevant details, documents and
information as the Vendor may reasonably request relating to the Tax
Claim in the possession or under the control of the Purchaser or the
Company or its Subsidiary.
9.3 Provided that the Vendor indemnifies the Purchaser and the Company or
its Subsidiary (as appropriate) to the Purchaser's reasonable
satisfaction against all liabilities, costs, damages or expenses which
may be incurred thereby including any additional Liability for
Taxation, the Purchaser shall take and shall procure that the Company
or its Subsidiary shall take such action as the Vendor may reasonably
request by notice in writing given to the Purchaser, the Company or its
Subsidiary to negotiate, avoid, dispute, defend, resist, appeal or
compromise any Tax Claim and any adjudication in respect thereof (such
a Tax Claim where action is so requested being hereinafter referred to
as a DISPUTE), provided that neither the Purchaser, the Company nor its
Subsidiary shall be obliged to appeal or procure an appeal against any
assessment to Tax raised on any of them if, the Vendor having been
given written notice of the receipt of such assessment, the Purchaser
has not within 14 days of the date of the notice, received instructions
in writing from the Vendor to do so.
9.4 If:
o the Vendor does not request the Purchaser to take or request the
Purchaser to procure that, the Company or its Subsidiary takes any
action under paragraph 9.3 or fails to indemnify the Purchaser, the
Company or its Subsidiary to the Purchaser's reasonable satisfaction
within a period of time (commencing with the date of the notice given
to the Vendor) that is reasonable having regard to the nature of the
Tax Claim and the existence of any time limit in relation to avoiding,
disputing, defending, resisting, appealing or compromising such Tax
Claim, and which period will not in any event exceed a period of 21
days; or
o the Vendor (or the Company or its Subsidiary (in each case) before
Completion) has been involved in a case involving fraudulent conduct in
respect of the Liability for Taxation which is the subject matter of
the Dispute; or
o the Dispute involves an appeal against a determination by the Special
Commissioners of the VAT and Duties Tribunal, unless the Vendor has
obtained the opinion of Tax counsel of at least 5 years' standing that
there is a reasonable prospect that the appeal will succeed,
the Purchaser, the Company or its Subsidiary shall have the conduct of the
Dispute absolutely (without prejudice to its rights under this Tax Covenant) and
shall be free to pay or settle the Tax Claim on such terms as are reasonable in
the circumstances.
9.5 Subject to paragraph 9.3, by agreement in writing between the Purchaser
and the Vendor, the conduct of a Dispute may be delegated to the Vendor
upon such terms as may be agreed from time to time between the
Purchaser and the Vendor, provided that, unless the Purchaser and the
Vendor specifically agree otherwise in writing, the following terms
shall be deemed to be incorporated into any such agreement:
73
o the Purchaser, shall be entitled to see and keep copies of all
correspondence or other written records of telephone conversations or
meetings (in each case) with the relevant Taxation Authority relating
to the Dispute and, in the event that there is no written record, shall
be given an immediate report of any telephone conversation with any
Taxation Authority to the extent that it relates to a Dispute;
o the appointment by the Vendor of solicitors or other professional
advisers to act in relation to the Dispute shall be subject to the
approval of the Purchaser, such approval not to be unreasonably
withheld or delayed;
o all material written communications pertaining to the Dispute which are
to be transmitted by the Vendor to the relevant Taxation Authority
shall be first submitted to the Purchaser for approval and shall only
be finally transmitted to the relevant Taxation Authority if such
approval is given, which approval is not to be unreasonably withheld or
delayed;
o the Vendor shall make no settlement or compromise of the Dispute or
agree any matter in the conduct of the Dispute which (in each case) is
likely to affect the future liability to Tax of the Purchaser, the
Company or its Subsidiary without the prior approval of the Purchaser,
such approval not to be unreasonably withheld or delayed.
9.6 The Purchaser shall provide and shall procure that the Company or its
Subsidiary provides to the Vendor and the Vendor's professional
advisors reasonable access to premises and personnel and to any
relevant assets, documents and records within their power, possession
or control during normal business hours for the purpose of
investigating the matters relating to the Tax Claim or Dispute and
enabling the Vendor to take such action as is referred to in this
paragraph 9.
9.7 Subject to the Vendor complying with the provisions of paragraph 9.3
the Purchaser shall keep the Vendor fully informed of the conduct of
the Dispute and shall forward to the Vendor copies of all such
correspondence as is relevant to the Dispute received or sent by or to
the Purchaser, the Company or its Subsidiary relating thereto.
9.8 Neither the Purchaser, the Company nor its Subsidiary shall be subject
to any claim by or liability to the Vendor for non-compliance with any
of the provisions of this paragraph 9 if the Purchaser, the Company or
its Subsidiary has bona fide acted in accordance with the instructions
of the Vendor.
10. GROSSING UP
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10.1 All sums payable by the Vendor to the Purchaser under the Tax Covenant
shall be paid free and clear of all deductions or withholdings
whatsoever unless the deduction or withholding is required by law. If
any deductions or withholdings are required by law to be made from any
of the sums payable under the Tax Covenant, the Vendor shall pay to the
Purchaser such sum as will, after the deduction or withholding has been
made, leave the Purchaser with the same amount as it would have been
entitled to receive in the absence of any such requirement to make a
deduction or withholding.
10.2 If the Purchaser is required to pay Tax on any sum paid by the Vendor
to the Purchaser under the Tax Covenant, the amount so payable by the
Vendor shall be increased by such amount as will ensure that, after
payment of such Tax, the Purchaser is left with a net sum equal to the
sum it would have received had no such Tax been required to be paid.
10.3 If the Purchaser would, but for the availability of a Purchaser's
Relief, incur a liability to pay Tax falling within paragraph 10.2, it
shall be deemed for the purposes of that paragraph to have incurred and
paid that liability.
10.4 If the Purchaser assigns the benefit of the Tax Covenant or any part of
this agreement, the Vendor shall not be liable pursuant to paragraph
10.1 or paragraph 10.2, save to the extent that the Vendor would have
been so liable had no such assignment occurred.
11. VALUE ADDED TAX GROUPS
11.1 The Purchaser shall procure that the Company shall notify HM Customs &
Excise, as soon as reasonably practicable after Completion, that
Pascall Electronics Systems Limieted and Pascall Microwave Limited are
to be excluded from the value added tax group consisting of the
Company, its Subsidiary, Pascall Electronics Systems Limited and
Pascall Microwave Limited ("VAT GROUP") and that such exclusion is
sought to have effect from not later than Completion. The Vendor shall
provide the Purchaser with such information and assistance as the
Purchaser may reasonably require for the purposes of this paragraph
11.1.
12. GROUP RELIEF
12.1 If the Vendor is liable to make any payment to the Purchaser under this
Schedule, and such liability arises in relation to a Liability for
Taxation which is capable of being mitigated or eliminated by the
surrender of Group Relief, the Vendor shall be entitled to or to
procure the surrender of Group Relief to the Company or its Subsidiary.
Such surrender shall be made for no consideration and shall discharge
the relevant liability of the Vendor under this Schedule.
12.2 If the Company or its Subsidiary holds any Relief (other than a
Purchaser's Relief) which is capable of being surrendered as Group
Relief by the Company or its Subsidiary to the Vendor or any company
nominated by the Vendor, the Vendor shall be entitled to request such
surrender to be made for no consideration.
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12.3 The Vendor and the Purchaser shall procure that all relevant claims,
elections and surrenders and all other actions are taken as are
required to effect the surrender and utilisation of the Group Relief
referred to in this paragraph 12.
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SCHEDULE 6 PARTICULARS OF PROPERTIES
PART 1. FREEHOLD PROPERTIES
- -------------------------- ----------------------- -----------------------
DESCRIPTION OF THE
PROPERTY
- -------------------------- ----------------------- -----------------------
OWNER
- -------------------------- ----------------------- -----------------------
REGISTERED/UNREGISTERED
(AND TITLE NUMBER)
- -------------------------- ----------------------- -----------------------
OCCUPIER
- -------------------------- ----------------------- -----------------------
USE
- -------------------------- ----------------------- -----------------------
IS THERE AN INVESTMENT
LEASE?
- -------------------------- ----------------------- -----------------------
TENANT UNDER AN
INVESTMENT LEASE
- -------------------------- ----------------------- -----------------------
CONTRACTUAL DATE OF
TERMINATION OF
INVESTMENT LEASE
- -------------------------- ----------------------- -----------------------
PART 2. LEASEHOLD PROPERTIES
- -------------------------- ----------------------- -----------------------
DESCRIPTION OF THE Westridge Business
PROPERTY Park, Ryde, Isle of
Wight
- -------------------------- ----------------------- -----------------------
OWNER Pascall Electronics
Ltd
- -------------------------- ----------------------- -----------------------
REGISTERED/UNREGISTERED Unregistered
(AND TITLE NUMBER)
- -------------------------- ----------------------- -----------------------
CONTRACTUAL DATE OF
TERMINATION OF LEASE
- -------------------------- ----------------------- -----------------------
OCCUPIER PEL and Performance
in People Limited
- -------------------------- ----------------------- -----------------------
USE B1 Town & Country
Planning (use
Clauses) Order 1987
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IS THERE AN INVESTMENT Yes
LEASE?
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TENANT UNDER AN Performance in
INVESTMENT LEASE People Ltd
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CONTRACTUAL DATE OF
TERMINATION OF
INVESTMENT LEASE
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PART 3. OTHER REAL PROPERTY
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SCHEDULE 7 ACCOUNTING POLICIES TO BE ADOPTED IN THE COMPLETION ACCOUNTS
AND NET ASSETS
1. The Completion Accounts shall:
1.1 take into account full accrual for the 2004 rent review in respect of
the Westridge Property and back dated interest thereon;
1.2 In computing the deferred tax provision in the Completion Accounts no
account shall be taken if any losses that are or are due to be
surrendered by the Company or its Subsidiary to the Vendor or any other
company it may nominate.
2. The Net Assets shall:
2.1 include cash and borrowings but shall not include any of (i) costs or
liabilities under finance or hire purchase leases, (ii) the Intelek
Debt, (iii) amounts related to the Pension Scheme (including
specifically pre-payment of (pound)242,000 in respect of the of Pension
Scheme) and (iv) any goodwill arising on consolidation.
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SIGNED as a deed by )
INTELEK PROPERTIES LIMITED )
acting by its director )
and secretary or two directors )
Director.../s/ Ian Duncan Brodie
Director/Secretary.../s/ Kevin Neil Edwards
SIGNED as a deed by )
XCEL CORPORATION LIMITED )
acting by its director )
and secretary or two directors )
Director.............../s/ Carmine T. Oliva........
Director/Secretary.../s/ Graham J. Jefferies.......
SIGNED as a deed by )
INTELEK PLC )
acting by its director )
and secretary or two directors )
Director.../s/ Ian Duncan Brodie
Director/Secretary.../s/ Kevin Neil Edwards
SIGNED as a deed by )
EMRISE CORPORATION )
acting by its director )
and secretary or two directors )
Director............/s/ Carmine T. Oliva...........
Secretary............/s/ Randolph D. Foote.........
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