Exhibit 99.2
CONFORMED COPY
DATED 26TH SEPTEMBER 2003
TRENWICK HOLDINGS LIMITED (1)
and
BESTPARK LIMITED (2)
------------------------------
AGREEMENT
for the sale and purchase of
the entire issued share capital of
TRENWICK INTERNATIONAL LIMITED
------------------------------
CLYDE & CO
Beaufort House
Chertsey Street
Guildford
Surrey GU1 4HA
Tel: 01483 555555
Fax: 01483 567330
Ref: VJV/AH/0304250
CONTENTS
1. INTERPRETATION........................................................1
2. SALE AND PURCHASE....................................................12
3. CONSIDERATION........................................................12
4. CONDITIONS...........................................................13
5. ACTION PENDING COMPLETION............................................14
6. COMPLETION...........................................................19
7. WARRANTIES...........................................................24
8. REPORTING OBLIGATIONS OF THE COMPANY.................................25
9. LIMITATION ON LIABILITY..............................................25
10. CONFIDENTIAL INFORMATION.............................................26
11. EMPLOYEES............................................................27
12. ANNOUNCEMENTS........................................................31
13. REMEDIES.............................................................31
14. COSTS................................................................32
15. FURTHER ASSURANCE....................................................32
16. GENERAL..............................................................32
17. INTEREST.............................................................34
18. PAYMENTS.............................................................35
19. ASSIGNMENT...........................................................35
20. COUNTERPARTS.........................................................36
21. NOTICES..............................................................36
22. GOVERNING LAW AND JURISDICTION.......................................37
SCHEDULE 1.................................................................38
THE COMPANY.............................................................38
SCHEDULE 2.................................................................39
THE WARRANTIES..........................................................39
Part A - General.....................................................39
Part B - Commercial..................................................47
Part C - Taxation....................................................54
Part D - Intellectual Property, Confidential Information, Hardware
and Software................................................64
SCHEDULE 3.................................................................67
MANAGEMENT AND REPORTING REQUIREMENTS OF THE COMPANY....................67
SCHEDULE 4.................................................................74
INVESTMENTS.............................................................74
SCHEDULE 5.................................................................75
MANAGEMENT AGREEMENT....................................................75
SCHEDULE 6.................................................................86
LIMITATION OF THE VENDOR'S LIABILITY....................................86
SCHEDULE 7.................................................................92
FORM OF POWER OF ATTORNEY...............................................92
SCHEDULE 8.................................................................94
FORM OF CLAIMS NOTIFICATIONS ABOVE(POUND)25,000.........................94
SCHEDULE 9.................................................................95
CONTINGENT DEFERRED CONSIDERATION.......................................95
SCHEDULE 10................................................................98
INTRA GROUP LOANS.......................................................98
SCHEDULE 11................................................................99
Part A - Hardware....................................................99
Part B - Software...................................................100
2
THIS AGREEMENT is made on 26th September 2003
BETWEEN:
(1) TRENWICK HOLDINGS LIMITED (registered in England and Wales under number
2488310) whose registered office is at 2 Minster Court, Mincing Lane,
London EC3R 7FL (the "Vendor"); and
(2) BESTPARK LIMITED (registered in England and Wales under number 04860253)
whose registered office is at Thompson House, 3-6 Richmond Terrace,
Blackburn BB1 7AU (the "Purchaser").
IT IS AGREED as follows:
1. Interpretation
1.1 In this Agreement, unless the context otherwise requires, the following
expressions have the following meanings:
"Act" the Companies Act 1985;
"Accounts" the audited report and accounts of
the Company for the financial year
ended on the Accounts Date
including the auditor's and the
directors' reports and the notes
to the accounts;
"Accounts Date" 31 December 2002;
"Associate" any person who is a connected
person (as defined in section 839
of ICTA) of the Vendor;
"Bank Consortium" the banks participating in the
credit facility agreement dated as
of November 24, 1999 as
subsequently amended and restated
between
1
Trenwick America Corporation, the
Vendor, such lending institutions,
JP Morgan, Chase Bank (as
administrative agent), Wachovia
Bank, National Association (as
syndication agent) and Fleet
National Bank (as documentation
agent);
"Business Day" a day other than a Saturday or
Sunday or public holiday in
England and Wales;
"CAA" the Capital Allowances Act 2001;
"Company" Trenwick International Limited,
brief details of which are set out
in Schedule 1;
"Company Intellectual Property" all Intellectual Property used by
the Company in, or in connection
with, its business;
"Completion" completion of the sale and
purchase of the Shares in
accordance with the terms of this
Agreement;
"Completion Disclosure Letter" the letter from the Vendor to the
Purchaser in relation to the
Warranties to be delivered
immediately prior to Completion
(which letter shall only contain
disclosure with respect to
specific events or matters that
have occurred or arisen between
the date of this Agreement and
Completion or which are known to
those individuals identified in
the Disclosure Letter as not
having had the opportunity to
review the final form of the
Disclosure Letter prior to its
issue, but shall incorporate by
reference the Disclosure Letter in
respect of events and matters that
occurred or arose prior to the
2
execution hereof);
"Conditions" each of the Conditions contained
in clause 4;
"Confidential Information" information (however stored)
relating to or connected with the
business, clients, customers,
suppliers or financial or other
affairs of the Company, details of
which are not in the public domain
including information concerning
or relating to the Company
Intellectual Property, any other
property of the Company in the
nature of Intellectual Property,
any technical process, or the
marketing of goods or services and
any other matters concerning the
clients, customers or suppliers
of, or other persons having
dealings with, the Company;
"Contingent Deferred
Consideration" the contingent deferred
consideration (if any) payable to
the Vendor in accordance with the
terms of clause 3 and Schedule 9;
"Deed of Undertaking" the deed of undertaking in the
agreed form between the Company,
LCL, LCL Acquisitions Limited, the
Vendor, the Purchaser, TMA, TUKMS
and LCG, to be entered into on
Completion;
"Disclosed" fairly disclosed to the Purchaser
by being set out in the Disclosure
Letter or the Completion
Disclosure Letter and those
matters referred to in paragraph
2.2 of Schedule 6;
3
"Disclosure Letter" the letter from the Vendor to the
Purchaser in relation to the
Warranties having the same date as
this Agreement;
"Distributions" means (i) distributions (as
defined by section 263(2) of the
Act) but ignoring the exceptions
set out in paragraph (c) of that
section, (ii) distributions by way
of or following a reduction of
capital and (iii) distributions to
members on a winding up; in each
case made in cash by the Company;
"Eastcheap Guarantee" means the guarantee given by the
Company in respect of certain
premises at 16 Eastcheap, a copy
of which has been Disclosed;
"Employees" those individuals who are both (i)
employed in whole or in part in
the business carried on by the
Company and (ii) employed by TMS
and the French Staff;
"Encumbrance" a mortgage, charge, pledge, lien,
option, restriction, right of
first refusal, right of
pre-emption, third party right or
interest, other encumbrance or
security interest of any kind, or
another type of preferential
arrangement (including a title
transfer and retention
arrangement) having similar
effect;
"Exit" means (i) a disposal of the entire
issued share capital of the
Company; (ii) a disposal of the
whole or the material part of the
Company's assets of business
(whether by one transaction or
4
a series of transactions), (iii)
the approval of a compromise or
arrangement in relation to the
Company under section 425 of the
Act, or (iv) the winding up of the
Company following the passing of a
resolution for the voluntary
winding-up or a petition for the
compulsory winding-up or
administration of the Company, or
following the appointment of a
supervisor to the Company pursuant
to any voluntary arrangement;
"FA" the Finance Act;
"Final Payment Date" the date of completion of an Exit;
"French Lease" the lease in relation to 264 Rue
du Faubourg Saint Honore 75008
Paris between the Company and
Hornby Road Investments Ltd;
"French Liabilities Indemnity" an indemnity from the Underwriting
Members of Lloyd's comprising
Syndicate 893 as constituted for
the 2002/2003 years of account
(acting through TMA or TUKMS) to
the Company in respect of ongoing
liabilities relating to the French
Staff and the French Lease;
"French Staff" all persons employed by TIL and
working for the Paris branch of
the Company prior to Completion;
"FSA" the Financial Services Authority;
"FSMA" the Financial Services and Markets
Act 2000;
5
"Group Commitments
Termination Deed" a deed between the Company, the
Vendor, TMS, SRU, TUKMS, TMA and
the Purchaser in the agreed form;
"Group Relief" group relief under section 402
ICTA;
"Hardware" the computer hardware listed in
Part A of Schedule 11 and the
computer hardware owned, leased
to, or used by the Company;
"ICTA" the Income and Corporation Taxes
Act 1988;
"Initial Consideration" (pound)1,999,999;
"Intellectual Property" know-how, trade secrets and other
confidential information,
copyrights, database rights, trade
marks, service marks, business
names, trade names, moral rights,
registration of or an application
to register any of the aforesaid
items, rights in the nature of any
of the aforesaid items in any
country, and rights to sue for
passing off;
"Investments" those securities held by the
Company as at 30 June 2003 which
are listed in Schedule 4;
"IHTA" the Inheritance Tax Act 1984;
"LCG" Litigation Control Group Limited
(company number: 4409120) whose
registered office is at 9 St
Claire Street, London, EC3N 1LQ;
"LCL" Litigation Control Limited
(company number:
6
3681642) whose registered office
is at Thompson House, 3-6 Richmond
Terrace, Blackburn, BB1 7AU;
"LCL Acquisitions Limited" LCL Acquisitions Limited (company
number: 4860541) whose registered
office is at Thompson House, 3-6
Richmond Terrace, Blackburn BB1
7AU;
"Liabilities" all liabilities of any nature
whatsoever including actual or
contingent liabilities and
unquantified or disputed
liabilities;
"Management Accounts" the unaudited balance sheet and
profit and loss account of the
Company in respect of the period
from 1 January 2003 and ended on
30 June 2003;
"Management Agreement" the run-off management agreement
between the Company and LCL in the
form set out in Schedule 6;
"Management Data" the data held by the Company
and/or TMS, in whatever form and
whatever medium, which is not
Personal Data;
"Observer" the observer nominated by the
Vendor and approved by the
Purchaser pursuant to Schedule 3;
"Personal Data" personal data (as defined in the
Data Protection Act 1998), held by
the Company and/or TMS, in
whatever form and whatever medium;
7
"Purchaser's Group" the Purchaser and any subsidiary,
holding company or shareholder of
the Purchaser and any subsidiary
or shareholder of any such holding
company;
"Purchaser's Solicitors" Clyde & Co of Beaufort House,
Chertsey Street, Guildford, Surrey
GU1 4HA (Ref: AH/0304250);
"Relevant Breach" a matter, fact or circumstance
which arises after the date of
this Agreement but prior to
Completion and which constitutes a
breach by the Vendor of:
(a) clauses 5.1, 5.3 or 5.5; or
(b) the Warranties (or which
would constitute such a
breach but for the provision
of the Completion Disclosure
Letter by the Vendor
pursuant to clause 7.2),
which in each case could
reasonably be expected to give
rise in the case of an individual
breach to a cost to the Purchaser
and/or the Company of at least
(pound)10,000 and which when
aggregated together with all such
individual breaches amounts to a
cost to the Purchaser and/or the
Company of at least (pound)100,000
which would not have arisen but
for such event, fact or
circumstance;
"Shares" the whole of the issued share
capital of the Company, being
75,000,000 ordinary shares of
8
(pound)1 each;
"Software" the software listed in Part B of
Schedule 11 and the software
owned, licensed to, or used by the
Company;
"Tax Acts" has the meaning ascribed thereto
by section 831(2) of ICTA;
"Taxation" or "Tax" any form of taxation, charge, duty,
import, withholding, levy or
contribution of whatever nature
(including any related fine, penalty,
surcharge or interest) imposed by a Tax
Authority acting in its capacity
as such;
"Tax Authority" any local, municipal,
governmental, state, federal or
other fiscal, revenue, customs or
excise authority, body or official
anywhere in the world including,
without limitation, the Inland
Revenue, H.M. Customs & Excise,
the US Internal Revenue Services
and the Bermuda Monetary
Authority;
"Tax Deed" a deed relating to Taxation in the
agreed form;
"Tax Liability" has the meaning ascribed to that
term by the Tax Deed;
"TCGA" the Taxation of Chargeable Gains
Act 1992;
"TMA" Trenwick Managing Agents Limited
(company number 1514453) whose
registered office is at 2 Minster
Court, London EC3R 7FL, a member
of the Vendor's Group;
9
"TMS" Trenwick Management Services
Limited (company number 2279272)
whose registered office is at 2
Minster Court, London EC3R 7FL, a
member of the Vendor's Group which
provides management services to
the Company;
"TMS Purchase Agreement" the agreement in the agreed form
between Bestpark and the Vendor in
relation to TMS and SRU;
"Transfer Regulations" the Transfer of Undertakings
(Protection of Employment)
Regulations 1981;
"TUKMS" Trenwick UK Management Services
Limited (company number 2733994)
whose registered office is at 2
Minster Court, London EC3R 7FL, a
member of the Vendor's Group;
"VATA" the Value Added Tax Act 1994;
"Vendor's Group" the Vendor and any subsidiary or
holding company of the Vendor and
any subsidiary of any such holding
company at the date of this
Agreement but excluding the
Company;
"Vendor's Solicitors" CMS Cameron McKenna of Mitre
House, 160 Aldersgate Street,
London, EC1A 4DD (Ref:
WMC/110370.1); and
"Warranties" the statements referred to in
clause 7 and set out in Schedule 3
and "Warranty" means any one of
them.
10
1.2 In this Agreement:
(a) where the context admits, words and phrases, the definitions of
which are contained in the Act and the Companies Act 1989, shall be
construed as having the meanings thereby attributed to them;
(b) any phrase introduced by the terms "including", "include", "in
particular" or any similar expression shall be construed as
illustrative and shall not limit the sense of the words preceding
those terms; and
(c) words importing the singular include the plural and vice versa,
words importing any gender include every gender and references to
persons include individuals, bodies corporate, unincorporated
associations and partnerships.
1.3 References in this Agreement to statutory provisions shall be construed as
references to those provisions as respectively replaced, amended or
re-enacted or as their application is modified by other provisions from
time to time (whether before or after the date of this Agreement) and
shall include any provisions of which they are re-enactments (whether with
or without modification) and any subordinate legislation made under such
provisions except to the extent that an amendment, modification, or
re-enactment or subordinate legislation enacted after today's date would
create or increase any liability of the Vendor under this Agreement, in
which case, to that extent, it shall be ignored.
1.4 A reference in this Agreement to a document or agreement "in the agreed
form" means in the form of the draft of the document or agreement signed
for the purposes of identification by or on behalf of the parties to it
with such alterations (if any) as may subsequently be agreed by or on
behalf of such parties.
1.5 Unless otherwise stated, references in this Agreement to clauses and
schedules are to clauses of and schedules to this Agreement, references to
paragraphs are references to paragraphs in the clause or schedule in which
the reference appears and references to this Agreement include the
schedules.
11
1.6 The headings to the clauses of this Agreement do not affect its
interpretation.
1.7 The Interpretation Act 1978 shall apply to this Agreement in the same way
as it applies to an enactment.
1.8 Any statement in this Agreement qualified by the expression "so far as the
Vendor is aware" or "to the best of the Vendor's knowledge, information
and belief" or any similar expression shall be deemed to refer to the
actual knowledge or awareness of Michael Watson, having made due and
careful enquiry of Alan Barlow, Jeremy Cadle, Terry Tannett, Adrian
McCarthy, Amanda Fetto, Darshan Koya and David Prince.
1.9 A reference in this Agreement to a SSAP means a statement of standard
accounting practice issued by the Institute of Chartered Accountants in
England and Wales and adopted by the Accounting Standards Board and any
reference in this Agreement to a FRS means a financial reporting standard
issued by the Accounting Standards Board and which may, where directed by
the Accounting Standards Board, supersede a SSAP.
2. Sale and purchase
2.1 The Vendor shall sell the Shares to the Purchaser with full title
guarantee.
2.2 The Vendor shall sell the Shares fully paid and free from all Encumbrances
and together with all benefits and rights attaching to the Shares,
including all dividends and other distributions declared, paid or made on
or after the date of this Agreement.
2.3 The Purchaser shall purchase the Shares on the basis set out in clause 2.2
but it shall not be obliged to complete the purchase of the Shares unless
the purchase of all the Shares is completed simultaneously.
12
3. Consideration
3.1 The consideration for the Shares shall comprise the Initial Consideration
and the Contingent Deferred Consideration (if any). The Contingent
Deferred Consideration (if any) shall be payable in accordance with
Schedule 9 up to and including the Final Payment Date.
3.2 Subject to any express terms of this Agreement, no further payment shall
be made to the Vendor by the Purchaser after it has satisfied its
obligations in respect of the making of Distributions up to and including
the Final Payment Date, whether by way of Contingent Deferred
Consideration or otherwise, save as set out in Part 4 of Schedule 3.
4. Conditions
4.1 Subject to clause 4.2, Completion is conditional upon the following
Conditions being satisfied:
(a) the Purchaser having received a notice of approval from the FSA in
terms satisfactory to the Purchaser (acting reasonably) of all
persons who will acquire control of the Company on Completion in
accordance with section 184 of FSMA that there is no objection to
the Purchaser and all other relevant persons becoming controllers of
the Company or, in the absence of such notification, the period
during which the FSA may serve a notice of objection pursuant to
section 186 of FSMA in relation to the Purchaser and such other
relevant persons having elapsed without the FSA having served any
notice of objection;
(b) the FSA not prior to Completion:
(i) withdrawing or giving notice to withdraw any permission
required for or in connection with the carrying on of the
business of the Company; or
(ii) imposing, or giving notice that it intends to impose, any
restriction or requirement on, or on the business of, the
Company; or
13
(iii) imposing, or giving notice it intends to impose, any other
restriction, requirement or condition of whatever form not
satisfactory to the Purchaser;
(c) the Purchaser and the Vendor agreeing the form of the French
Liabilities Indemnity, to be entered into on Completion; and
(d) the Purchaser and the Vendor agreeing the form of the Group
Commitments Termination Deed, to be entered into on Completion.
4.2 Each of the Vendor and the Purchaser (as appropriate) shall use all
reasonable endeavours to procure that each of the Conditions are fulfilled
as soon as practicable and in any event by the date set out in clause 4.3.
4.3 The Conditions contained in paragraphs (c) and (d) of clause 4.1 may only
be waived with the prior written agreement of the Purchaser and the
Vendor.
4.4 If the Conditions are not fulfilled or waived on or before the date
falling three months after the date of this Agreement (or such later date
as the Vendor and the Purchaser may agree) then all obligations and
liabilities of the parties under this Agreement shall cease and determine
and no party shall have any claim against the other except for a breach of
clause 4.2 and provided always that obligations of confidentiality in
clause 10 and the provisions of clauses 11 (Announcements), 13 (Costs), 17
(Interest) and 22 (Governing law and jurisdiction) shall remain in full
force and effect.
5. Action pending Completion
5.1 The Vendor shall ensure that, subject always to its and the Company's
regulatory and legal obligations, pending Completion:
(a) if the Company owes any monies to the Vendor or any of its
Associates, the Vendor shall procure that prior written notice is
given to the Purchaser of such amounts, prior to seeking the
repayment of such monies from the Company;
14
(b) there shall be delivered to the Purchaser a weekly summary of:
(i) cash flow payments; and
(ii) all claims notifications above (pound)25,000 per claim
(provided that connected claims shall be aggregated for this
purpose) received by the Company in the form set out in
Schedule 8,
no later than three business days after the end of each week, other
than during the period that the Company is preparing its quarter end
reports, where the Vendor shall ensure that the Purchaser has access
to bank reconciliation records relating to the Company;
(c) the Company will operate its business as an insurance company in
run-off consistent with the basis on which it has been carried on
since 29 November 2002 and the net assets of the Company will not be
depleted save in the ordinary course of trading or pursuant to a
right or obligation under this Agreement;
(d) the Purchaser and its agents (including, without limitation, LCL)
will, upon reasonable notice to the Company, be allowed not more
than fortnightly access to, and to take copies of, the books and
records of the Company including the statutory books, minute books,
leases, licences, contracts, details of receivables, Intellectual
Property, supplier lists and client or customer lists in the
possession or control of the Company;
(e) all claim notifications above (pound)100,000 (provided that
connected claims shall be aggregated for this purpose) received by
the Company are notified to LCL (whether these relate to paid
claims, reserves or precautionary advices) in advance of their
settlement and LCL shall be consulted as to such claims;
(f) the Company will not make any commutation offers or enter into
commutation agreements for liabilities and obligations in excess of
(pound)25,000 without
15
notifying LCL in advance and LCL shall be consulted as to such
commutations;
(g) the Company will not agree to any new letters of credit, or
increases in existing ones, without the prior written agreement of
LCL, such agreement not to be unreasonably withheld or delayed; and
(h) the Company in so far as it is within its control shall maintain in
force all insurance and reinsurance policies on an assumed and ceded
basis in respect of its business with the exception of any properly
commuted contracts.
5.2 The Purchaser may waive any of the requirements set out in clause 5.1 by
prior written consent to the Vendor.
5.3 Without prejudice to clause 5.1 but subject to clause 5.4, pending
Completion, the Vendor shall procure that the Company shall not without
the prior written consent of the Purchaser (such consent not to be
unreasonably withheld and if no response is provided by the Purchaser for
its consent under this clause 5.3 within three Business Days of request,
such consent shall be deemed to have been given):
(a) create, issue, allot, repay, repurchase or redeem any shares or loan
capital or grant options over or rights to subscribe for or convert
into any shares or loan capital;
(b) reorganise its share capital in any way (including any reduction in
its share capital, any variation of share rights, subdivisions or
consolidations);
(c) register any transfer of shares or other investments;
(d) pass any shareholder's resolution;
(e) establish a subsidiary or subsidiary undertaking;
(f) acquire any shares or other interest in a body corporate or
participate in any partnership or joint venture;
16
(g) create any Encumbrance over any of its assets or give any guarantee
or undertaking in respect of a third party;
(h) borrow any money or obtain any advance or credit;
(i) provide any credit or make any loan or advance to or for the benefit
of any person or provide any financial assistance (as defined in
section 152 of the Act) to any person;
(j) dispose of or acquire any business or any material part of a
business or (otherwise than in the ordinary course of business) any
other material assets of any nature;
(k) enter into any long term, onerous or unusual contract, commitment,
obligation, agreement or arrangement;
(l) diminish or reduce the tax losses of the Company that exist at the
date of this Agreement;
(m) make any payment to or declare any dividend or distribution in
favour of any member of the Vendor's Group;
(n) amend the terms of or terminate any contract, commitment,
obligation, agreement or arrangement if such amendment or
termination would have a material adverse effect on the Company;
(o) enter into or vary any contract, agreement or arrangement (whether
legally binding or not) in which the Vendor or any Associate is
interested;
(p) incur any expenditure or liability, in either case, of a capital
nature;
(q) commence, settle or abandon any litigation or admit any liability in
respect of such litigation above(pound)25,000 per claim;
17
(r) save as set out at clause 5.1(h) and save to the extent that such
amendments or variations of an administrative nature, enter into or
vary the terms of any insurances or reinsurance agreements of the
Company;
(s) enter into any service agreement, contract of employment, personal
services consultancy agreement or arrangement;
(t) provide any credit or make any loan or advance to or for the benefit
of any of the directors, officers or employees; or
(u) declare, pay or make any dividend or other distributions.
5.4 Clause 5.3 shall not restrict the Company from:
(a) doing any act or thing which is required or contemplated:
(i) by the terms of this Agreement; or
(ii) by the terms of the Group Commitments Termination Deed (once
such Deed is in agreed form); or
(iii) by any rule or requirement of law or any regulatory authority;
or
(b) subject to clause 5.5, undertaking any surrender by way of Group
Relief of any trading losses of the Company for which Group Relief
may be claimed arising in accounting periods of the Company ended
before Completion, or entering into any agreement therefor.
5.5 (a) Clause 5.4(b) shall not apply to the extent that, if the Company
were to make the Election the Company would have a liability to pay
an amount in respect of corporation tax (after taking into account
all carried forward trading losses and available reliefs) for the
accounting period ended on the Accounts Date.
(b) If prior to Completion the Company intends to surrender by way of
Group Relief any trading loss of the Company arising in the
accounting period ended
18
on the Accounts Date for which Group Relief may be claimed (a "Tax
Loss Surrender"), the Vendor shall (or shall procure that the
Company shall) give notice to the Purchaser of such surrender as
soon as is reasonably practicable (and in any event before
Completion).
(c) For the purposes of this clause, "Election" means a valid election
of the Company in respect of the accounting period ended on the
Accounts Date under section 107(4) of the FA 2000 that (pound)15
million of the technical provisions made by the Company for that
accounting period shall not be taken into account in computing for
tax purposes the profits of the Company's trade for that accounting
period.
5.6 The Vendor shall promptly notify the Purchaser and the Purchaser's
Solicitors in writing if it becomes aware of any Relevant Breach which
arises on or before Completion.
5.7 Without prejudice to any other rights or remedies available to the
Purchaser if:
(a) the Purchaser or the Purchaser's Solicitors receive a notice from
the Vendor under 5.6; or
(b) a Relevant Breach arises prior to Completion,
and the Vendor does not rectify such Relevant Breach within 5 Business
Days, the Purchaser shall have the right to terminate this Agreement by
notice in writing to the Vendor prior to Completion in which case:
(i) this Agreement shall terminate and have no further effect
(subject only to this clause, clauses 10 (Confidentiality), 14
(Costs), 17 (Interest) and 22 (Governing law and jurisdiction)
which shall continue in force; and
(ii) subject to any liability which may arise under this clause,
the parties shall be released from all liabilities and
obligations hereunder.
19
6. Completion
6.1 Completion shall take place at the London offices of the Purchaser's
Solicitors five Business Days after the last Condition is fulfilled or, in
the absolute discretion of the Purchaser, waived.
6.2 On Completion the Vendor will deliver to the Purchaser's Solicitors:
(a) duly executed transfers of the Shares in favour of the Purchaser (or
as it directs) together with any power of attorney under which such
transfers have been executed;
(b) the certificates representing the Shares or an indemnity in the
agreed form for any lost share certificates;
(c) any waiver, consent or other document necessary to give the
Purchaser (or its nominees) full legal and beneficial ownership of
the Shares;
(d) the Tax Deed duly executed by the Vendor;
(e) the written resignations in the agreed form, executed as a deed, of
the directors and the secretary of the Company, in each case
acknowledging that he has no outstanding claim against the Company
whether for loss of office or otherwise;
(f) all credit, debit or other payment cards belonging to or in the name
of the Company and in the possession of the Vendor and/or the
Employees;
(g) all mobile phones, fax machines, lap top computers or other computer
or telecommunications equipment (including all computer disks
containing information relating to the Company belonging to or in
the name of the Company and in the possession of the Vendor and/or
the Employees;
(h) a release in the agreed form from Barclays Bank Plc releasing the
Company from guarantees, charges or other security given to it by
the Company;
(i) the Management Agreement duly executed by the Company;
20
(j) a copy of minutes of a duly convened and held meeting of the board
of directors of the Company authorising the entry into by the
Company of the Group Commitments Termination Deed, the Deed of
Undertaking and the French Liabilities Indemnity;
(k) the Deed of Undertaking executed by the Vendor, TMA, TUKMS and the
Company;
(l) copies of the Group Commitments Termination Deed executed by the
Company, the Vendor, TMS, SRU, TUKMS and TMA;
(m) the French Liabilities Indemnity duly executed by the Company and
the other party thereto;
(n) the TMS Purchase Agreement duly executed by the Vendor; and
(o) a copy of the written break notice served by TMS and Wereldhave
Property Corporation PLC pursuant to clause 5.16 of the Underlease
of the Third Floor of 16 Eastcheap dated 22 May 1991 made between
Wereldhave Property Corporation PLC, Sorema (UK) Underwriting
Management Limited and Sorema (UK) Group Limited and Sorema (UK)
Reinsurance Limited.
6.3 The Vendor will procure delivery of the following to the Purchaser (or as
it may direct):
(a) the certificate of incorporation and common seal of the Company and
each register, minute book and other book required to be kept by the
Company under the Act duly made up to Completion;
(b) all financial and accounting books and records relating to the
Company;
(c) copies of statements for all bank accounts of the Company made up to
a date not more than two Business Days prior to Completion and bank
reconciliation statements in respect of each such account for the
period up to (and including) Completion;
21
(d) all current cheque books, paying in books and unused cheques of the
Company; and
(e) a duly executed power of attorney in favour of the Purchaser in the
form set out in Schedule 7.
6.4 The Vendor will, and will procure that its Associates will, repay all
monies owing by it to the Company and will execute a deed of release, in
the agreed form, releasing the Company from any Liabilities that may be
owing to it by the Company.
6.5 The Vendor will procure that a board meeting of the Company is held at
which the directors of the Company shall resolve to:
(a) register the transfers referred to in clause 6.2(a) (subject to
stamping);
(b) change the Company's registered office to 9 St Claire Street, London
EC3N 1LQ;
(c) appoint Philip Holden, Andrew Brannon, Keith Towers and Anson Game
as directors and Keith Towers as secretary of the Company;
(d) accept the resignations of the directors and secretary referred to
in clause 6.2(e);
(e) revoke all current instructions to bankers and replace them with new
instructions stipulated by the Purchaser;
(f) instruct LCL to manage the Company's bank accounts and investment
portfolio as part of its duties under the Management Agreement;
(g) execute the Group Commitments Termination Deed;
(h) execute the Management Agreement;
(i) execute the French Liabilities Indemnity; and
22
(j) execute the Deed of Undertaking.
6.6 The Purchaser will not be obliged to complete the purchase of any of the
Shares unless:
(a) the Vendor complies with all of its obligations under clauses 6.2 to
6.5; and
(b) the purchase of all the Shares is completed simultaneously.
6.7 Upon completion of the matters referred to in clauses 6.1 to 6.5, the
Purchaser shall immediately following Completion:
(a) pay the Initial Consideration by electronic transfer of funds to the
client account of the Vendor's Solicitors at Lloyds TSB Bank Plc,
sort code 30-00-09, number 0230949, quoting reference
WMC110370.00001;
(b) deliver to the Vendor a duly executed counterpart of the Tax Deed;
and
(c) deliver to the Vendor a counterpart of the Management Agreement duly
executed by LCL;
(d) deliver to the Vendor a counterpart of the Deed of Undertaking duly
executed by LCL, LCG, LCL Acquisitions Limited and the Purchaser;
and
(e) deliver to the Vendor a counterpart of the TMS Purchase Agreement
duly executed by the Purchaser.
6.8 On and from Completion:
(a) the Vendor shall procure the written release of any securities,
guarantees or indemnities given by or binding on the Company in
relation to any debt or obligation of the Vendor or any of its
subsidiaries (other than the Company) save for the Eastcheap
Guarantee; and
23
(b) to the extent that all or any securities, guarantees or indemnities
referred to in clause 6.8(a) shall not be released on or before
Completion, the Vendor shall use all best endeavours to procure that
written releases are given as soon as practicable after Completion
and, pending releases being given, the Vendor shall indemnify and
keep indemnified the Purchaser and the Company from and against all
losses, costs, expenses, liabilities incurred or suffered by any of
them in connection with those securities, guarantees or indemnities
PROVIDED THAT the Vendor shall be under no obligation to indemnify
the Company or the Purchaser in respect of losses, costs, expenses,
liabilities incurred or suffered by them under the Eastcheap
Guarantee after Completion.
6.9 Following Completion, the Purchaser shall procure that (to the extent that
it has not already done so) the Company enters into such documentation as
the Vendor may reasonably require, at the cost of the relevant member of
the Vendor's Group, to give effect to the Tax Loss Surrender.
6.10 If for any reason the provisions of clauses 6.2 to 6.6 (inclusive) are not
fully complied with on Completion the Purchaser may by notice to the
Vendor:
(a) defer Completion to a date not more than 28 days after the date
fixed for Completion (so that the provisions of this clause shall
apply to Completion as so deferred); or
(b) proceed to Completion so far as practicable (but without prejudice
to its rights under this Agreement); or
(c) rescind this Agreement.
7. Warranties
7.1 The Vendor warrants to the Purchaser at the date of this Agreement and at
Completion in the terms of the Warranties.
24
7.2 Each of the Warranties is given subject to the matters Disclosed in the
Disclosure Letter and in the case of the Warranties given at Completion,
the Completion Disclosure Letter.
7.3 Each of the Warranties is a separate and independent Warranty and, except
where a contrary intention appears or is expressed, no other Warranty or
other clause in this Agreement restricts or limits the extent or
application of any other Warranty or other clause.
7.4 The Vendor agrees to waive any rights or claims it may have against the
Company, or any Employee of the Company in respect of any information or
opinions supplied or omitted to be supplied to the Vendor for the purpose
of assisting the Vendor to give a Warranty or prepare the Disclosure
Letter or the Completion Disclosure Letter.
7.5 The Purchaser agrees to waive any rights or claims it may have against any
Employee or any individual or person whatsoever (whether a director or
employee of the Vendor or otherwise), other than the Vendor, in respect of
any information or opinions supplied or omitted to be supplied to the
Purchaser for the purpose of this Agreement or any breach of this
Agreement by the Vendor. This waiver shall not apply in relation to any
fraud or dishonesty.
7.6 The Warranties shall remain in full force and effect notwithstanding
Completion.
8. Reporting obligations of the Company
The provisions of Schedule 3 shall apply.
9. Limitation on liability
In the absence of fraud, dishonesty, wilful concealment or a breach of
section 397 of the FSMA by or on behalf of the Vendor the liability of the
Vendor in respect of the Warranties:
25
9.1 shall not arise in respect of any individual claim unless the amount that
would be recoverable from the Vendor in respect of that claim
exceeds(pound)10,000;
9.2 shall not arise unless and until the amount of all claims made in respect
of the Warranties exceeds(pound)100,000, in which case the Vendor shall be
liable for the whole amount and not just the excess;
9.3 shall not exceed in aggregate the total amount of the Initial
Consideration and the Contingent Deferred Consideration received or
receivable by the Vendor; and
9.4 shall not arise unless the Purchaser has given the Vendor or the Vendor's
Solicitors notice of the claim including details of the claim and, if
practicable, the amount of the claim:
(a) in respect of a claim under the Warranties contained in Part C of
Schedule 2 and any other matters relating to Taxation on or before
the seventh anniversary of Completion; and
(b) except where clause 9.4(a) applies, on or before 31 July 2005.
9.5 In addition the provisions of Schedule 6 shall apply to limit the
liability of the Vendor.
10. Confidential Information
10.1 The Vendor hereby undertakes with the Purchaser that:
(a) it shall not at any time after the date of this Agreement use or
disclose to any person any Confidential Information; and
(b) if it has obtained trade secrets or other confidential information
belonging to a third party under an agreement containing
restrictions on disclosure it will not at any time infringe such
restrictions.
10.2 This clause shall not prevent disclosure of Confidential Information by
the Vendor:
26
(a) to a director, officer or employee of the Purchaser or of a member
of the Purchaser's Group (including, after Completion, the Company)
acting in the proper course of his duties and whose function
requires him to have the Confidential Information;
(b) where it is required to be disclosed by law or by any regulatory
authority or Tax Authority and provided that the Vendor shall, where
practicable and unless prohibited from doing so by law or by any
regulatory authority or Tax Authority, first consult with and take
into account the reasonable requirements of the Purchaser in
connection with the required disclosure;
(c) to an adviser for the purpose of advising the Vendor; or
(d) which has entered the public domain otherwise than as a result of
the Vendor's breach of clauses 10.1 or 10.2.
10.3 For a period of five years following Completion, the Purchaser shall
provide TMA (at TMA's cost) with such information, documents or other
materials as TMA may reasonably request as it requires for the purposes of
providing any report or returns or information which TMA is required to do
by law or regulations or requires for the purpose of its business. The
obligations of the Purchaser under this clause 10.3 shall not extend to
providing information which is reasonably regarded as confidential to the
ongoing business of the Company or the Purchaser.
11. Employees
11.1 The Vendor shall procure the discharge of all amounts due in respect of
salaries, wages, sick pay, maternity pay, accrued bonuses, accrued holiday
pay, pension contributions and other remuneration in respect of the
Employees up to and including Completion and any liability to Taxation in
respect of the Employees up to and including Completion. The Vendor shall
indemnify and keep fully and effectively indemnified upon demand the
Purchaser against all liabilities (including all legal costs reasonably
and properly incurred) from any failure to discharge such amounts.
27
11.2 The Vendor shall indemnify and keep fully and effectively indemnified upon
demand the Purchaser and the Company against any liabilities, expenses or
costs (including all legal costs reasonably and properly incurred), which
arise out of or in connection with any act or omission by the Vendor or
any member of the Vendor's Group up to and including Completion in respect
of the Employees or any other person employed by the Vendor or any member
of the Vendor's Group.
11.3 Without prejudice to clause 11.1 the Purchaser shall discharge all of the
amounts referred to in clause 11.1 (save any accruals up to and including
Completion) for its own account in respect of the period from the day
following Completion and the Purchaser shall indemnify the Vendor against
all liabilities arising from the Purchaser's failure to discharge such
amounts arising after Completion.
11.4 If any contract of employment relating to a person employed by the Vendor
or any member of the Vendor's Group and not being an Employee is found to
have effect as if originally made between the Purchaser and/or the Company
and that employee as a result of the application of the Transfer
Regulations on the sale and purchase of the Company pursuant to this
Agreement:
(a) the Purchaser or the Company (as the case may be) may, (without
prejudice to any other rights or remedies available to it) upon
becoming aware of that effect, terminate the contract of employment
of such persons having followed their normal employment procedures,
and met the requirements of all common law, statutory and other
legal and contractual obligations owed to or in respect of the
relevant Employee in carrying out such termination (including
without limitation the rights not to be unfairly dismissed); and
(b) if the Purchaser or the Company does terminate the contract in
accordance with clause 11.4(a) the Vendor shall indemnify and keep
fully and effectively indemnified upon demand the Purchaser and the
Company against any liabilities, expenses or costs (including all
legal costs reasonably and properly incurred) sustained or incurred
by the Purchaser and/or the Company by reason of or on account of
such termination and any sums payable under the contract of
employment following Completion.
28
11.5 Subject to 11.6, 11.7 and 11.8 below the Vendor shall indemnify and keep
fully and effectively indemnified upon demand the Purchaser, any member of
the Purchaser's Group and the Company against any liabilities, expenses or
costs (including all legal costs reasonably and properly incurred)
sustained or incurred by the Purchaser, any member of the Purchaser's
Group and/or the Company whenever arising following Completion by reason
of or on account of the termination of the employment of any Employee or
Employees where such termination arises during the six months following
Completion PROVIDED THAT the Purchaser, any member of the Purchaser's
Group and/or the Company shall have followed their normal employment
procedures in carrying out such termination; and met the requirements of
all common law, statutory and other legal and contractual obligations owed
to or in respect of the relevant Employee in carrying out such termination
(including without limitation the rights not to be unfairly dismissed).
11.6 The right to indemnity contained in clause 11.5 shall not prevent the
Purchaser, any member of the Purchaser's Group and/or the Company
compromising any such claims arising out of the termination of the
employment of any Employee or Employees provided that that Vendor agrees
in writing, such agreement not to be unreasonably withheld or delayed.
11.7 The indemnity contained in clause 11.5 shall not apply to the extent that
the relevant liabilities, expenses or costs have been increased by any
acts or omissions of the Purchaser, any member of the Purchaser's Group
and/or the Company (or their respective employees) following Completion in
relation to the relevant Employee (other than in respect of contractual
and redundancy entitlements on termination).
11.8 The indemnity contained at clause 11.5 shall only take effect to the
extent that the Purchaser, any member of the Purchaser's Group and/or the
Company shall already have sustained or incurred liabilities, expenses or
costs (including all legal costs reasonably and properly incurred) in
relation to the termination of any Employees after Completion which would
otherwise have been reasonable under clause 11.5 of (pound)824,000 in
aggregate.
29
11.9 If the Purchaser notifies the Vendor of a claim by an Employee which it
considers is potentially or actually a claim in respect of which the
Vendor has agreed to indemnity the Purchaser under the terms of clause
11.5 ("Employee Claim"), the Vendor shall be entitled to require the
Purchaser (subject to the Purchaser being indemnified and secured to its
reasonable satisfaction against all reasonable costs and expenses for
which TMS or the Company may be liable) to take such action as the Vendor
may reasonably request to avoid, dispute, resist, appeal, compromise or
defend or mitigate any such Employee Claim.
11.10 The Company and/or any member of the Purchaser's Group shall be entitled
to the benefit of and to enforce the indemnity from the Vendor contained
at Clause 11.5 notwithstanding the provisions of Clause 16.4.
11.11 The Purchaser shall indemnify and keep fully and effectively indemnified
upon demand the Vendor and any member of the Vendor's group against any
liabilities, expenses or costs (including all legal costs reasonably and
properly incurred) which arise out of or in connection with:
(a) any act or omission by the Purchaser, any member of the Purchaser's
Group or the Company in relation to an Employee on or following
Completion; or
(b) the Purchaser's, any member of the Purchaser's Group's or the
Company's failure to comply with its obligations under Regulation
10(2)(d) or (3) of the Transfer Regulations; or
(c) any substantial change made or proposed by the Purchaser, any member
of the Purchaser's Group or the Company in the working conditions
and/or terms and conditions of any of the Employees which is
detrimental to any of the Employees; or
(d) a change in the identity of the employer of all or any of the
Employees where that change is a significant change and to the
detriment of all or any of the Employees; or
30
(e) any claim by an Employee under the guarantee provided by the Vendor
to such Employee in support of his or her employment contract.
12. Announcements
12.1 Subject to clauses 12.2 and 12.3, neither party may make any public
announcement or disclosure or issue any communication or publicity
relating to the subject matter or terms of this Agreement without first
obtaining the other party's written consent, which shall not be
unreasonably withheld or delayed.
12.2 Clause 12.1 shall not apply to any announcement, disclosure, communication
or publicity required by law, by any regulatory or Tax Authority or by any
rule or regulation of the FSA provided that the party required to make or
issue it has if practicable consulted with and taken into account the
reasonable requirements of the other party.
12.3 The parties shall use their best endeavours to agree the terms of an
announcement o be made upon Completion describing the sale of the Company
and the ongoing Management Agreement but without references to the
payments being made for this purpose.
13. Remedies
13.1 The Purchaser acknowledges and declares that in entering into this
Agreement it has not relied and is not relying on any warranties,
representations, covenants, undertakings, indemnities, promises, forecasts
or other statements whatsoever whether written or oral (and whether
implied or otherwise) (collectively "Representations"), other than those
expressly set out in this Agreement, and the Purchaser hereby irrevocably
and unconditionally waives any right it may have to claim damages for, or
to rescind this Agreement by reason of, any Representation not expressly
set out in this Agreement or the Tax Deed unless such Representation was
made fraudulently, dishonestly or in breach of section 397 of FSMA.
31
13.2 The sole remedy following Completion against the Vendor under the Tax Deed
or for any breach of this Agreement by the Vendor shall be an action of
damages. Save in the event of fraudulent misrepresentation, dishonesty or
a breach of section 397 of FSMA, no right of rescission shall be available
after Completion to the Purchaser.
14. Costs
14.1 Except as provided in clause 14.2 below, each party shall pay the
Purchaser's Solicitors (pound)10,000 plus VAT (if applicable) towards the
cost of preparing the first draft of this Agreement and thereafter its own
costs relating to the negotiation, preparation, execution and performance
of this Agreement and of each document referred to in it.
14.2 If the Purchaser exercises any right conferred by this Agreement to:
(a) rescind this Agreement in accordance with clause 5.7; or
(b) if this Agreement becomes null and void in accordance with clause
4.3 in circumstances in which the Vendor is in breach of its
obligations under the Agreement,
the Vendor shall indemnify the Purchaser against all reasonable costs
incurred by it in the negotiation, preparation, execution and performance
of this Agreement and of each document referred to in it.
15. Further assurance
Each party shall use all reasonable endeavours at its cost to do, or
procure to be done, all further acts and things and execute, or procure
the execution of, any other documents which the other may from time to
time reasonably require for the purpose of giving the other the full
benefit of the provisions of this Agreement.
32
16. General
16.1 No variation of this Agreement or any of the documents referred to in it
shall be effective unless it is in writing and signed by or on behalf of
each of the parties.
16.2 All provisions of this Agreement shall continue in full force and effect
notwithstanding Completion except in respect of those provisions already
performed at Completion.
16.3 The rights and remedies of the parties under this Agreement are cumulative
and are not exclusive of rights or remedies provided by law or otherwise.
16.4 A person who is not a party to this Agreement has no right under the
Contracts (Rights of Third Parties) Act 1999 to benefit from or enforce
any term of this Agreement but this clause does not affect any right or
remedy of a third party which exists or is available apart from that Act.
16.5 No neglect, delay or indulgence on the part of either party in enforcing
any term of this Agreement will be construed as a waiver and no single or
partial exercise by either party of any right or remedy under this
Agreement will preclude or restrict the further exercise or enforcement of
any such right or remedy.
16.6 Any waiver of any breach of any provision of this Agreement shall not,
unless the terms of the waiver expressly provide otherwise, be construed
as a waiver of any continuing or subsequent breach of such provision or a
modification of that provision.
16.7 If any term or provision of this Agreement is held to be illegal or
unenforceable, in whole or in part, under any enactment, regulation or
rule of law, that term or provision shall to that extent be deemed not to
form part of this Agreement but the enforceability of the remainder of
this Agreement shall not be affected.
16.8 In the event that any amount is agreed to be due or owing to the Purchaser
by the Vendor under or by reason of this Agreement or a breach of this
Agreement, the Tax Deed or under any other agreement entered into pursuant
to the terms of this Agreement, the Purchaser shall be entitled:
33
(a) to set off such agreed amount against any amount owing to the Vendor
under this Agreement (save for the Initial Consideration) or any
agreement entered into pursuant to the terms of this Agreement; and
(b) if no amounts are owing to the Vendor under this Agreement, or any
agreement entered into pursuant to the terms of this Agreement, at
the date the amount is agreed, to retain 100% of the Distributions
that may be paid by the Company to the Purchaser from time to time
until it shall have retained an amount of Distributions equal to
such agreed amount,
and the amount so retained under this clause 16.8 shall pro tanto satisfy
the liability concerned.
16.9 An amount shall be regarded as agreed for the purposes of clause 16.8 if
either:
(a) the Purchaser and the Vendor (or their respective solicitors) shall
so agree in writing, such agreement not to be unreasonably withheld
or delayed following oral agreement between the parties; or
(b) a court has awarded judgement in respect of the claim.
16.10 Except as provided in clauses 16.8 and 16.9, the Purchaser shall have no
right of set off against the Vendor in respect of, and it shall pay in
full all amounts due to the Vendor and the Contingent Deferred
Consideration without any deduction, withholding or counterclaim
whatsoever, save where any deduction or withholding is required by English
law.
16.11 This Agreement, and the documents referred to in it, constitute the entire
agreement and understanding of the parties and supersede any previous
agreements between the parties relating to the subject matter of this
Agreement or the subject matter of the documents referred to in it.
34
17. Interest
If any party defaults in the payment when due of any sum payable under
this Agreement or the Tax Deed (whether determined by agreement or
pursuant to an order of a court or otherwise) interest shall be payable by
that party on such sum from the date when such payment is due until the
date of actual payment (as well after as before judgement) at a rate per
annum of three per cent above the base rate from time to time of National
Westminster Bank Plc. Such interest shall accrue from day to day on the
basis of the actual number of days elapsed and a 365-day year and shall be
payable on demand and compounded monthly.
18. Payments
18.1 Subject to the provisions of clause 16.8, all payments to be made by
either the Purchaser or the Vendor under this Agreement shall be made free
from any deduction or withholding and without any set-off or counterclaim
save as may be required by law. If any deductions or withholdings are
required by law the payer shall (except in the case of interest payable
under clause 17) be obliged to pay to the payee such additional amount as
will result in the receipt by the payee of a net amount equal to what it
would have been entitled to receive in the absence of the requirement to
make a deduction or withholding.
18.2 If any Tax Authority charges to Taxation any sum payable under this
Agreement (except in the case of interest payable under clause 17 and
ignoring any reliefs available to the payee) then the amount payable shall
be grossed up by such amount as will ensure that after payment of the
Taxation so charged (or which would have been so charged if any reliefs
available to the payee were ignored) there shall be left a sum equal to
the amount that would otherwise be payable under this Agreement.
19. Assignment
19.1 A party may not assign, transfer or sub-contract or purport to assign,
transfer or sub-contract (whether at law or in equity) any right or
obligation under this Agreement or the Tax Deed except that all (but not
some only) of the provisions of this Agreement (including the benefit of
the Warranties) and of the Tax Deed may be assigned or transferred:
35
(a) by the Purchaser or its permitted assigns to a member of the
Purchaser's Group; or
(b) by the Vendor to JP Morgan Chase Bank as the agent bank acting on
behalf of the Bank Consortium and JP Morgan Chase Bank may only
assign or transfer the benefit of all or any part of the provisions
of this Agreement and/or the Tax Deed to any other party with the
prior written consent of the Purchaser (such consent not to be
unreasonably withheld or delayed) (but such assignment or transfer
shall not extent to such amount of the Contingent Deferred
Consideration (if any) as the Vendor requires to meet the costs of
its winding up),
but only if such transfer does not result in any increase in liability to
the non-assigning party.
20. Counterparts
This Agreement may be executed in any number of counterparts each of which
when executed shall be an original but all the counterparts shall together
constitute one and the same agreement.
21. Notices
21.1 Any notice or other communication given under this Agreement shall be in
writing and shall be delivered personally or sent by first class pre-paid
recorded delivery or registered post or by fax to the parties' respective
registered offices or other addresses set out in this Agreement or as
otherwise notified by them from time to time (in accordance with the
provisions of this clause).
21.2 In the absence of evidence of earlier receipt, a notice or other
communication is deemed given:
(a) if delivered personally, when left at the address referred to in
clause 21.1;
36
(b) if sent by post, two Business Days from the date of posting; and
(c) if sent by fax, on completion of its transmission.
21.3 In proving the giving of a notice it shall be sufficient to prove that the
notice was left or that the envelope containing such notice was properly
addressed and posted or that the fax was transmitted to the fax number of
the relevant party.
22. Governing law and jurisdiction
22.1 This Agreement shall be governed by and construed in accordance with
English law.
22.2 The parties irrevocably agree to submit to the non-exclusive jurisdiction
of the courts of England to settle any disputes which may arise out of or
in connection with this Agreement and agree that this Agreement may be
enforced in any court of competent jurisdiction
37
Schedule 1
The Company
1. Registered number: 2494812
2. Date of incorporation: 23 April 1990
3. Place of incorporation: England & Wales
4. Authorised share capital: (pound)75,000,000 divided into 75,000,000
ordinary shares of (pound)1 each
5. Issued share capital: 75,000,000 ordinary shares of(pound)1 each
6. Registered office: 2 Minster Court, Mincing Lane, London
EC3R 7FL
7. Principal business address: as above
8. Directors: Robert Demichele, James Giordano, Alan
Hunte, David Prince, Paul Tester, Michael
Watson and Stephen Wilcox
9. Secretary: Kevin Ryan
10. Accounting reference date: 31 December
11. Auditors: PricewaterhouseCoopers LLP
12. Tax residence: United Kingdom
13. Tax district and reference
number: City Large Business Office 51770 01692
14. VAT registration number: 577653102
15. Charges: Barclays Bank Plc fixed charge created 21
December 1994
38
Schedule 2
The Warranties
Part A - General
1. Capacity and information
1.1 The Vendor has full power and authority and has taken all action necessary
to enter into, deliver and perform this Agreement and the documents to be
delivered by the Vendor at Completion and to sell and transfer all the
Shares to the Purchaser on the terms of this Agreement without the consent
of any third party.
1.2 The obligations of the Vendor under this Agreement and the documents to be
executed by the Vendor at Completion are, or will when executed
constitute, valid and binding obligations enforceable in accordance with
their terms.
2. Accuracy of information
The information given by, or on behalf of, the Vendor to the Purchaser
prior to and during the negotiation of this Agreement taken as a whole was
when given complete and accurate and not misleading in relation to the
business of the Company taken as a whole.
3. The Company
3.1 The Company is duly incorporated and validly existing under the laws of
England and Wales.
3.2 The particulars relating to the Company set out in the recitals and
Schedule 1 are true and accurate.
3.3 The Company does not have a subsidiary or subsidiary undertaking.
3.4 The Company does not control or manage any other company or business.
39
3.5 The Company is not, nor has it ever been or agreed to become, the
registered holder or beneficial owner of any share or loan capital in any
company.
3.6 The Company does not use any name other than its corporate name for any
purpose.
3.7 The Company does not have any directors, shadow directors or alternate or
associate directors other than the persons listed in Schedule 1.
3.8 The Company has at all times carried on its business in all respects in
accordance with its memorandum and articles of association for the time
being in force.
3.9 All dividends or other distributions declared, made or paid by the Company
have been declared, made or paid in accordance with its memorandum and
articles of association and the Act.
3.10 No power of attorney has been granted by the Company which remains in
force and no person, as agent or otherwise, is entitled or authorised to
bind or commit the Company.
3.11 The Company has not at any time carried on any business other than that of
an insurance and reinsurance company in the classes of business authorised
by the FSA (or its predecessor regulatory authorities).
4. Share capital
4.1 The Shares constitute the whole of the issued and allotted share capital
of the Company and have been properly and validly allotted and issued and
are fully paid or credited as fully paid.
4.2 There is no agreement or arrangement in force which provides
(conditionally or otherwise) for the issue, allotment or transfer of any
share or loan capital of the Company (including any option or right of
pre-emption or any conversion or subscription right) and no person has
claimed to be entitled to any right or benefit in relation to the unissued
share capital of the Company.
40
5. The Accounts
5.1 The Accounts have been prepared in accordance with all applicable
legislation and in accordance with accounting standards, principles and
practices generally accepted in the United Kingdom and the bases and
accounting policies adopted for the purposes of preparing the Accounts are
consistent with those adopted in preparing the audited accounts for the
previous three financial periods apart from changes required to conform to
current FRS.
5.2 The Accounts to the extent required by the Act and any relevant FRS give a
true and fair view of the assets, liabilities and state of affairs of the
Company at the Accounts Date and its profits or losses for the financial
year ended on the Accounts Date.
5.3 There were no proposed capital commitments as at the Accounts Date.
5.4 The Company's accounting records are in its possession or under its
control, and have been maintained as required by section 221 of the Act.
6. The Management Accounts
6.1 The Management Accounts were prepared in good faith and in all material
aspects in accordance with accounting policies and principles consistent
with those used in preparing the Accounts.
7. Changes since the Accounts Date
7.1 Since the Accounts Date:
(a) the business of the Company has been operated in the ordinary course
for an insurance company in run-off as regards the nature, scope and
manner of carrying it on, without any material interruption or
alteration and so as to maintain it as a going concern;
41
(b) there has been no material adverse change in the financial or
trading position or prospects or turnover of the Company;
(c) there has been no material reduction in the net assets of the
Company;
(d) no resolution has been passed by the members (or any class of
members) of the Company;
(e) no dividend or other distribution has been declared, made or paid by
the Company except as provided in the Accounts;
(f) the Company has not made or agreed to make any capital expenditure
or incurred or agreed to incur any capital commitments, in each case
in excess of (pound)5,000 in aggregate;
(g) the Company has not acquired or disposed of, or agreed to acquire or
dispose of, any asset other than in the ordinary course of its
business;
(h) the Company has not repaid or become liable to repay any loan or
indebtedness in advance of its stated maturity;
(i) the Company has not created, allotted, issued, acquired, repaid or
redeemed share or loan capital or made any agreement or obligation
to do so;
(j) the Company has not entered into any transaction or assumed or
incurred any Liabilities or made any payment not provided for in the
Accounts, in either case in excess of (pound)5,000, other than in
the ordinary course of its business; and
(k) the Company has not made or received any surrender relating to group
relief or the benefit of advanced corporation tax.
7.2 Details of all claims under any insurance or reinsurance agreements to
which the Company is a party in excess of(pound)25,000 which have been
received by the Company since the Accounts Date have been Disclosed.
42
7.3 The Company has not since the Accounts Date become a party to any service
agreement, contract of employment, consultancy agreement or arrangement in
respect of the provision of services from individuals.
7.4 The Company has no interest in, or liability in respect of, any freehold
or leasehold property or any interest of any kind in real property.
8. Debts
8.1 No amount included in the Management Accounts has, except where an
appropriate provision has been made, been written off nor has any debt
been released on terms that the debtor has paid less than the full book
value of his debt. All debtors over 12 weeks have been Disclosed.
9. Returns and records
9.1 The register of members and other statutory books of the Company have been
properly kept and contain a complete and accurate record of all matters
with which they should deal and there has been no notice of any
proceedings to correct or rectify any of the statutory books.
9.2 The copy of the memorandum and articles of association of the Company
attached to the Disclosure Letter is complete and accurate in all respects
and has embodied in it or annexed to it a copy of each resolution referred
to in section 380 of the Act.
9.3 All returns and resolutions required to be filed by the Company with the
Registrar of Companies and the Financial Services Authority have been
accurately prepared and filed.
9.4 All charges in favour of the Company have (if appropriate) been registered
in accordance with Part XII of the Act.
43
9.5 The Company has in its possession all documents relating to the title to
its material assets, an executed copy of all subsisting written agreements
to which it is a party which are in force and are material.
10. Assets
The Company is the sole owner free from all Encumbrances, hire or hire
purchase agreements, of all tangible assets included in the Management
Accounts or acquired since 31 July 2003, or which it uses in the business
and the Company has not agreed to create or grant any Encumbrance over
such assets.
11. Finance and borrowings
11.1 Full details of all money borrowed by the Company and all debentures,
acceptance lines, overdraft facilities, loans and other financial
facilities outstanding or available to the Company are contained in the
Disclosure Letter.
11.2 The total amount borrowed by the Company does not exceed any limitations
on its borrowing powers contained in its articles of association or in any
debenture or other deed, instrument, agreement or document to which the
Company is a party and the amount borrowed by the Company from its bankers
does not exceed the overdraft facility.
11.3 The Company has no outstanding loan capital, nor has it agreed to create
or issue any loan capital; nor has it factored any of its debts or engaged
in financing of a type which would not have to be shown or reflected in
the Accounts or the Management Accounts or borrowed any money which it has
not repaid (save for borrowings not exceeding the amounts shown in the
Management Accounts).
11.4 The Company has not received notice (whether formal or informal) which
remains outstanding from any lenders requiring repayment or intimating the
enforcement of any security the lender may hold over any of the Company's
assets and so far as the Vendor is aware there are no circumstances likely
to give rise to any such notice.
44
12. Guarantees and indemnities
12.1 Other than guarantees issued in the ordinary course of the Company's
business of writing insurance policies, there are no guarantees or
indemnities (whether secured or unsecured) given by the Company in respect
of which obligations or liabilities are still outstanding.
12.2 No part of the loan capital, borrowing or indebtedness in the nature of
borrowing of the Company is dependent on the guarantee or indemnity of, or
security provided by, another person.
13. Loans by and debts due to the Company
13.1 The Company has not lent any money which has not been repaid to it, nor
does the Company own the benefit of any debt (whether or not due for
payment) other than debts which have arisen in the ordinary course of
business which will not be discharged as at Completion.
13.2 The amounts owed by the Company to the Vendor and its Associates at the
date of this Agreement and the amounts owed by the Vendor and its
Associates to the Company are set out in Schedule 10.
14. Undisclosed Liabilities
Save for liabilities which on normal accounting principles would have
appeared in the Accounts, the Company has no Liabilities other than
liabilities disclosed or provided for in the Accounts or the Management
Accounts or liabilities incurred in the ordinary course of business since
the date up to which the Management Accounts were prepared.
15. Effect of sale
15.1 Compliance with the terms of this Agreement and the documents to be
executed by the Vendor at Completion does not and will not:
45
(a) breach, or constitute a default under any provision of any agreement
or instrument to which the Company is a party;
(b) breach any provision of the memorandum or articles of association of
the Company;
(c) relieve any person from any obligation (which would be adverse to
the Company) or enable any person to terminate any agreement under
which rights or benefits are enjoyed by the Company; or
(d) cause any Encumbrance over any asset of the Company to crystallise
or become enforceable or any present or future indebtedness of the
Company to become due and payable prior to its stated maturity.
16. Investments
All the Investments of the Company are investments of the type and
duration listed in Schedule 4.
46
Part B - Commercial
1. Contracts
1.1 The Company is not a party to any agreement, contract, transaction,
arrangement or liability which:
(a) is of an unusual or abnormal nature or outside the ordinary course
of business of the Company;
(b) is for a fixed term of more than twelve months;
(c) is unlikely to have been fully performed, in accordance with its
terms, more than twelve months after the date on which it was
entered into or undertaken (other than any long term contract of
insurance or agreement relating to the use of Intellectual
Property);
(d) is not on an arm's length basis on normal commercial terms;
(e) is incapable of termination by the Company in accordance with its
terms on 60 days' notice or less;
(f) involves payment by it of amounts determined by reference to
fluctuations in the index of retail prices or any other index or in
the rate of exchange for any currency;
(g) involves an aggregate outstanding expenditure by it of more than
(pound)10,000;
(h) is a contract for hire or rent, hire purchase or purchase by way of
credit sale or periodical payment; or
(i) is an agreement for the supply of services (other than gas, water or
electricity).
47
1.2 The Company is not a party to any agency, distributorship, marketing,
purchasing, manufacturing or licensing agreement or any agreement or
material arrangement (other than any agreement relating to any
Intellectual Property) which in any way restricts its freedom to carry on
its business in any part of the world in such manner as it thinks fit.
1.3 The Company is not, nor has it agreed to become, a member of any joint
venture, consortium, partnership or other unincorporated association and
it is not, nor has it agreed to become, a party to any agreement or
arrangement for sharing commissions or other income.
2. Default under agreements
2.1 So far as the Vendor is aware, the Company is not in default under any
material agreement, arrangement or undertaking to which it is a party or
in respect of any other obligations or restrictions binding upon it and
TMS is not in default under the Lloyd's Licence.
2.2 The Vendor is not aware of the invalidity or grounds for rescission,
avoidance or termination of:
(a) any agreement or other transaction to which the Company is a party;
or
(b) the Lloyd's Licence;
and so far as the Vendor is aware, the Company has not received notice of
any intention to terminate, repudiate or disclaim any agreement or other
transaction and TMS has not received notice of any intention to terminate,
repudiate or disclaim the Lloyd's Licence.
2.3 So far as the Vendor is aware, no party to:
(a) any agreement with the Company; or
(b) the Lloyd's Licence,
48
is in material breach of the same and there are no circumstances likely to
give rise to a material breach.
3. Outstanding offers
Save for offers or tenders relating to the Company in the ordinary course
of its business, no offer (including an offer of employment) or tender is
outstanding which is capable of giving rise to a contract by acceptance or
some other unilateral act of a third party.
4. Insider arrangements
4.1 The Company is not, and has not at any time during the last three years
been, a party to any contract or arrangement in which the Vendor or any
director or former director of the Company (insofar as they would be
required to be disclosed pursuant to section 317 of the Act), or any
Associate of any of them, is or was, directly or indirectly, interested.
4.2 There is no outstanding indebtedness of the Vendor or any Associate of the
Vendor to the Company or of the Company to the Vendor or any Associate of
the Vendor which will not be discharged at the date of Completion.
5. Conduct of business and compliance
5.1 So far as the Vendor is aware, the Company is carrying on its business and
dealing with its assets in all respects in accordance with applicable
laws, regulations and administrative requirements in the jurisdiction in
which it conducts business.
5.2 The Company has not received notice that it or any of its officers is in
breach of or has failed to comply with any statutes or binding regulations
applying to or affecting the business or activities of the Company.
5.3 The Company has obtained all licences, permits and consents from any
regulatory authority or body required for the lawful conduct of its
business and all those licences,
49
permits and consents so far as the Vendor is aware are valid and in full
force and effect.
5.4 So far as the Vendor is aware, the Company is not in breach of any of the
terms or conditions of any of the licences, permits or consents and no
regulatory authority has notified the Vendor of circumstances that have
arisen which entitle any regulatory authority to suspend, cancel, modify
or revoke any of them.
5.5 The Company has not received any written notice to the effect that there
are any investigations being made by or on behalf of any governmental or
other regulatory body in respect of the affairs of any alleged material
wrong doing by the Company and so far as the Vendor is aware none have
been threatened.
6. Computer records and data protection
6.1 All the records and systems (including but not limited to the Hardware and
Software), and data and information (including but not limited to Personal
Data and Management Data) of the Company and TMS are recorded, stored,
maintained or operated or otherwise held by the Company or TMS and are not
wholly or partly dependent on any facilities or means (including any
electronic, mechanical or photographic process, computerised or otherwise)
which are not under the exclusive ownership and control of the Company or
TMS as appropriate.
6.2 Both the Company and TMS are duly registered as data controllers under the
Data Protection Act 1998 for all purposes for which notification is
required in respect of the businesses of the Company and TMS; such
notifications are up to date; and accurate and complete particulars of the
relevant notifications are set out in the Disclosure Letter.
6.3 No other member of the Vendor's Group is a data controller in respect of
the business of the Company or TMS for the purposes of the Data Protection
Act 1998.
6.4 The Company and TMS have complied with all relevant requirements of the
Data Protection Act 1984 at all times while the Act was in force and have
complied with all
50
relevant requirements of the Data Protection Act 1998 since the later Act
came into force.
6.5 Neither the Company nor TMS have received a notice (including, without
limitation, any information or enforcement notice), letter or complaint
from the Information Commissioner alleging breach by either company of the
Data Protection Act 1984 or the Data Protection Act 1998.
6.6 There are no unsatisfied requests made to the Company or TMS by data
subjects in respect of personal data held by the Company and/or TMS, nor
any outstanding applications for rectification or erasure of personal data
which have not been addressed by the Company or TMS (as appropriate).
6.7 No individual has been awarded compensation from the Company or TMS under
the Data Protection Act 1984 or the Data Protection Act 1998. No claim for
such compensation is outstanding.
6.8 So far as the Vendor is aware, no order has been made against the Company
or TMS for the rectification, blocking, erasure or destruction of any data
under the Data Protection Act 1984 or the Data Protection Act 1998.
6.9 So far as the Vendor is aware, no warrant has been issued under schedule 4
of the Data Protection Act 1984 or schedule 9 of the Data Protection Act
1998 authorising the Data Protection Commissioner (or any of her officers
or servants) to enter any of the premises of the Company or TMS (as
appropriate).
7. Litigation
7.1 Other than claims in the ordinary course of business under contracts of
insurance where the Company's liabilities as insurer are likely to be no
more than (pound)100,000 per claim and collection of debts not exceeding
(pound)5,000, the Company is not a party to, or involved in, any
litigation, arbitration, prosecution, administrative or other legal
proceedings.
51
7.2 Other than claims in the ordinary course of business under contracts of
insurance where the Company's liabilities as insurer are likely to be no
more than (pound)100,000, there are no litigation, arbitration,
prosecution, administrative or other legal proceedings in any jurisdiction
(whether criminal or civil) threatened against the Company or any person
for whose acts or defaults the Company may be vicariously liable or in
respect of which the Company is liable to indemnify any party concerned.
7.3 All litigation under contracts of insurance has been reserved in
accordance with the Company's usual reserving policy.
7.4 There is no dispute with any regulatory body or with any revenue or other
official government department in relation to the business or affairs of
the Company and as far as the Vendor is aware there are no facts which may
give rise to any dispute.
7.5 There is no outstanding judgement order, decree, arbitral award or
decision of a court tribunal, arbitrator, regulatory body or government
agency in any jurisdiction in connection with the Company's business
against the Company or a person for whose acts or defaults the Company is
vicariously liable.
7.6 The Company is not bound by any undertaking or assurance given to any
court, regulatory authority or governmental agency or body.
8. Insolvency
8.1 No order has been made, petition presented or resolution passed for the
winding up of the Company or for the appointment of a provisional
liquidator to the Company or for an administration order in respect of the
Company.
8.2 No distress, execution or other process has been levied in respect of any
asset of the Company which remains undischarged.
8.3 No administrative or other receiver has been appointed over the whole or
any part of the assets or business of the Company.
52
8.4 No voluntary arrangement has been proposed under section 1 of the
Insolvency Act 1986 in respect of the Company. No compromise or
arrangement has been proposed, agreed to or sanctioned under section 425
of the Act in respect of the Company.
8.5 The Company has not stopped payment of its debts as they fall due nor is
it insolvent or unable to pay its debts within the meaning of section 123
of the Insolvency Act 1986.
9. Insurance
9.1 The Company is and has been at all material times fully covered by valid
insurance against the normal risks for the type of business carried on and
assets and stock in trade owned or used by it (including adequate
insurance for the full reinstatement value of such business, assets and
stock in trade and against loss of profit but excluding risks arising from
its activities as an insurance provider ("Relevant Insurance")).
9.2 Full details of all Relevant Insurance policies effected by the Company
are contained in the Disclosure Letter. So far as the Vendor is aware,
those policies are in full force and effect and nothing has been done, or
omitted to be done, which could make any policy void or voidable.
9.3 No claim is outstanding under any Relevant Insurance policy and so far as
the Vendor is aware no circumstance has arisen which at the date of this
Agreement would entitle the Company to make a claim under a Relevant
Insurance policy.
10. Commissions
No person is entitled to receive from the Company any finder's fee,
brokerage or other commission in connection with the sale of the Shares to
the Purchaser.
53
Part C - Taxation
1. General
1.1 Records, notices and returns
The Company has in all material respects maintained all records and,
within applicable time limits, made all returns and provided all
information required for Tax purposes and has complied with all notices
served on it and any other requirements lawfully made of it by any Tax
Authority. All returns of the Company have been made on a proper basis and
were, when submitted, correct and no such return is, or so far as the
Vendor is aware is likely to be, the subject of any dispute with any Tax
Authority.
1.2 Payment of Tax due
The Company has duly and punctually paid all Tax which it has become
liable to pay and is not, and has not within six years prior to the date
hereof been, liable to pay any penalty, fine, surcharge or interest in
connection with Tax.
1.3 Deductions and withholdings of Tax
The Company has within six years prior to the date hereof deducted or
withheld all Tax which it has been obliged by law to deduct or withhold
from payments made by it and has properly accounted to the relevant Tax
Authority for all amounts so deducted or withheld.
1.4 PAYE
In the six years prior to the date hereof, the Company has in all material
respects operated the Pay-As-You-Earn system (including in relation to
national insurance contributions) accurately and correctly and has
complied in all material respects with all reporting obligations in
connection with benefits provided (whether by the Company or by any other
person) for directors, other officers and employees of the Company.
54
1.5 Investigations
The Company has not in the six years prior to the date hereof been subject
to any audit, investigation, discovery or access order by any Tax
Authority and the Company has not received any communication from any Tax
Authority from which it appears likely that an audit, investigation,
discovery or access order will be made.
1.6 Calculation of Tax liability
The Company has sufficient records to calculate the Tax liability or
relief which would arise on a disposal or on the realisation of each asset
owned by it at the Accounts Date or acquired by the Company since the
Accounts Date but before the date hereof.
1.7 Claims, disclaimers and elections
The Company has duly made and submitted all claims, disclaimers and
elections and given all notices and consents assumed to have been made,
submitted or given for the purposes of the Accounts .
1.8 Concessions and arrangements
The amount of Tax chargeable on the Company during any accounting period
ending on or within six years of the Accounts Date has not depended upon
any concession, agreement or other formal or informal arrangement with any
Tax Authority.
1.9 Treasury consents
(a) The Company has not without the prior consent of HM Treasury done or
been a party to the doing of any act which amounted to or resulted
in or formed part of a series of acts which together resulted in or
amounted to or will amount to or result in a transaction which would
be unlawful under section 765 of ICTA in the absence of such
consent.
(b) The Company has complied in all respects with the requirements of
section
55
765A(2) of the ICTA (supply of information on movement of capital between
residents of member states) and any regulations made or notice given
thereunder.
1.10 Residence
The Company is and has at all times been resident for Tax purposes only in
the jurisdiction in which it is incorporated.
2. Non-arm's length transactions
2.1 Transfer pricing
2.2 The Company has retained documents and other evidence demonstrating that
the terms of or the provisions made by means of or imposed by all
transactions, agreements and arrangements to which the Company is or has
been a party and in respect of which sections 770 to 773 of or Schedule
28AA to ICTA might otherwise apply are such as would have been made
between independent enterprises and the nature, form and content of such
documents and other evidence complies with all relevant legislative
provisions and Inland Revenue guidelines.
3. Chargeable gains
3.1 De-grouping
Neither the execution of this Agreement nor the performance of any
obligation contained herein nor the satisfaction of any condition to which
this Agreement is subject nor any other event occurring since the Accounts
Date will result in any chargeable asset being deemed to have been
disposed of and reacquired by the Company under section 179 of the TCGA.
3.2 Notional transfers and reallocation of gain or loss within a group
The Company has not joined in making, and has not incurred an obligation
to join in making, any election under section 171A or section 179A of the
TCGA.
56
3.3 Depreciating assets
The Company has not made any claim under sections 152 or 153 of the TCGA
to which section 154 of the TCGA applies in relation to any assets owned
by the Company on or after the Accounts Date (except where the held-over
gain is treated as having accrued before the Accounts Date).
4. Capital allowances
4.1 Availability of allowances
The Company retains sufficient records to such expenditure to allow all
expenditure incurred by the Company (or in respect of which the Company
has any subsisting commitment) on the provision of buildings, structures,
qualifying, hotels, machinery or plant which has qualified or may qualify
(if not deductible as a trading expense of the Company) for an industrial
buildings allowances, first year allowances or writing down allowances (as
the case may be) under the CAA to be the subject of a claim for such
allowances.
5. Distributions
5.1 Issue of securities
The Company has not issued or agreed to issue securities (as defined by
section 254(1) of ICTA) in respect of which the payment of interest falls
to be treated as a distribution under either sections 209(2)(d),
209(2)(da) or 209(2)(e) of ICTA.
5.2 Repayments of share capital
The Company has not made or agreed to make a repayment of share capital to
which section 210 of ICTA applies nor issued or agreed to issue share
capital as paid up other than by the receipt of new consideration within
the meaning of Part VI of ICTA.
57
5.3 Demergers
The Company has not been concerned in any exempt distribution as defined
by section 213(2) of ICTA nor has it received a chargeable payment
connected with an exempt distribution for the purposes of section 214 of
ICTA.
6. Intangible fixed assets
6.1 Basis of computation
Gains and losses in respect of all intangible fixed assets (as defined for
the purposes of Schedule 29 to the FA 2002):
(a) which are or have at any time been held by the Company, and
(b) to which the provisions of Schedule 29 to the FA 2002 apply or may
apply,
are and have at all times been computed in accordance with generally
accepted accounting practice (as defined by section 836A of the ICTA).
6.2 Election for fixed-rate basis
The Company has not made an election under paragraph 10 of Schedule 29 to
the FA 2002 in respect of any intangible fixed asset (as defined for the
purposes of that Schedule).
6.3 De-grouping
Neither the execution nor the performance of, nor any action taken in
pursuance of, this Agreement, nor the satisfaction of any condition to
which this Agreement is subject, nor any other event, transaction, act or
omission since the Accounts Date will result in any asset of the Company
being deemed to have been disposed of and reacquired under paragraph 58 of
Schedule 29 to the FA 2002.
58
6.4 Reallocation of de-grouping charge within a group
The Company has not joined in making, and has not incurred an obligation
to join in making, any election under paragraph 66 of Schedule 29 to the
FA 2002.
7. Financial instruments
7.1 Basis of accounting
All profits and losses on all qualifying contracts which are or at any
time have been held by the Company have been computed on an accruals basis
which satisfies the requirements of section 156 of the FA 1994.
8. Derivative contracts
8.1 Basis of accounting
All profits and losses on all derivative contracts (as defined by Schedule
26 to the FA 2002) which are or at any time have been held by the Company
and to which the provisions of that Schedule have applied or may apply,
are and have at all times been computed on an accruals basis of accounting
which is treated as authorised for the purposes of that Schedule.
9. Loan relationships
9.1 Basis of computation
In respect of every loan relationship (as defined by section 81 of the FA
1996) to which the Company is or has been a party the Company has used in
its statutory accounts an accruals basis of accounting which is an
authorised accounting method for the purposes of Chapter II of Part IV of
that Act and has used that method consistently and without variation for
all relevant accounting periods.
10. Group Matters
59
10.1 Group relief, consortium relief, ACT and Tax refunds
The Company has complied with the terms of all arrangements and agreements
relating to the surrender of:
(a) group relief (as defined by section 402 of ICTA);
(b) the benefit of any advance corporation tax under section 240 of
ICTA; or
(c) Tax refund under section 102 of the FA 1989
made within six years prior to the date hereof to which it has been a
party and has made and filed all claims and elections relating to such
arrangements within the appropriate time limit.
10.2 Liability to make payment
The Company has no outstanding liability to make any payment in respect of
the surrender of: any group relief; any Tax refund; or the benefit of any
advance corporation tax and any such payments made are not liable to be
refunded in whole or in part.
10.3 Receipt of payment
The Company has received all payments due to it under any arrangement or
agreement for the surrender of: any group relief; any Tax refund; or the
benefit of any advance corporation tax and such payments are not liable to
be refunded in whole or in part.
10.4 Group income elections
The Disclosure Letter contains details of all group income elections made
by the Company under section 247 of ICTA within six years prior to the
date hereof. The Company has not paid any dividend without advance
corporation tax or made any payment without deduction of income tax in the
circumstances specified in section 247(6) and no assessment has been made
on the Company in respect of advance corporation tax which ought to have
been paid or income tax which ought to have
60
been deducted.
11. Close companies
11.1 Close company status
The Company is not and has not at any time within the six years prior to
the date hereof been a close company within the meaning of sections 414
and 415 of the ICTA.
12. VAT and duties
12.1 Registration records, returns and payments
The Company:
(a) is a taxable person duly registered for the purposes of VATA;
(b) has in all material respects complied with all statutory provisions,
rules, regulations, orders and directions in respect of VAT, has
submitted accurate returns and the Company maintains all material
records, invoices and other documents appropriate or required for
the purposes of the VATA;
(c) has duly paid on a timely basis and full and proper provision has
been made in the Accounts for all amounts of VAT for which the
Company is liable.
12.2 Security
The Company has not within the six years prior to the date hereof been
required to give security under paragraph 4 of Schedule 11 to the VATA.
12.3 Payments on account
The Company is not under a duty to make payments on account of VAT
pursuant to any order may under section 28 of the VATA.
61
12.4 VAT groups
The Company is not and has not within the six years prior to the date
hereof been a member of any group of companies for the purpose of section
43 of the VATA and no act or transaction has been effected in consequence
of which the Company is or may be held liable for any VAT arising from
supplies made by another Company and no direction has been given under
Schedule 9A of the VATA as a result of which the Company would be treated
as a member of a group for the purposes of the VATA.
12.5 Penalties
The Company is not and has not within six years prior to the date hereof
been liable to a penalty under section 63 of the VATA.
12.6 Capital goods scheme
The Company does not own any asset which is a capital item, the input tax
on which may be subject to adjustment in accordance with Part XV of the
Value Added Tax Regulations 1995.
12.7 Elections to waive exemption
(a) Neither the Company, nor any company of which the Company is a
relevant associate (as defined by paragraph 3(7) of Schedule 10 to
the VATA) has elected to waive exemption under paragraph 2 Schedule
10 in relation to any land except disclosed in the Disclosure Letter
and:
(i) neither the Company nor any relevant associate has any
obligation to elect to waive exemption in respect of any land;
(ii) all things necessary for each election disclosed in Disclosure
Letter to have effect have been done and in particular any
notifications and information required by paragraph 3(6) of
Schedule 10 has been given and any permission required by
paragraph 3(9) of Schedule 10 have been properly obtained;
62
(iii) no election to waive exemption which has been made by the
Company or any relevant associate has been disapplied or
rendered in effective by the operation of paragraph 2(3AA) of
Schedule 10.
(b) Neither the Company nor the Vendor has received a notice that the
grant to the Company of an interest in or right over land or of a
licence to occupy land will not be an exempt supply by reason of an
election made under paragraph 2 of Schedule 10 to the VATA.
13. Stamp duty and stamp duty reserve tax
13.1 Documents duly stamped and stamp duty reserve tax paid
(a) All documents on which the Company must rely in order to enforce any
right have been duly stamped;
(b) The Company has duly paid all stamp duty reserve tax for which it
has at any time been liable.
13.2 Claims for relief
The Company has not within 3 years prior to the date hereof made any claim
for relief or exemption under section 42 of the FA 1930, sections 75, 76
or 77 of the FA 1986 or section 151 of the FA 1995.
14. Overseas elements
14.1 Liability to foreign Tax
The Company will not at Completion have any liability for any Tax outside
the United Kingdom.
63
Part D - Intellectual Property, Confidential Information, Hardware and Software
1. Intellectual Property
1.1 The Company is the sole unencumbered legal and beneficial owner and, where
registered, the sole registered proprietor of all the Company Intellectual
Property, capable of transferring the same with full title guarantee, save
for those of which it is licensee as are set out in detail in the
Disclosure Letter.
1.2 The Company Intellectual Property comprises all Intellectual Property
necessary for the Purchaser to carry on the business of the Company and
TMS in materially the same manner as carried on at the date of this
Agreement.
1.3 All of the Company Intellectual Property which is owned by the Company is
valid and enforceable, not restricted in any way and, as far as the Vendor
is aware, is not being infringed by any third party.
1.4 Neither TMS nor the Company have any registered Intellectual Property.
1.5 No claims have been received by the Company or TMS for infringement of any
Intellectual Property used (or which has been used) by the Company or TMS.
2. Confidential Information
2.1 Neither TMS nor the Company use any processes and is not engaged in any
activities which involve the misuse of any confidential information
belonging to any third party.
2.2 The Vendor is not aware of any misuse by any person of any of the
Company's Confidential Information.
64
2.3 Neither TMS nor the Company have disclosed to any person any of its
Confidential Information except where such disclosure was disclosed to any
of its professional advisers, or required to be disclosed by law or any
regulatory authority, or was properly made in the normal course of the
Company's and/or TMS's business or was made subject to an agreement under
which the recipient is obliged to maintain the confidentiality of such
Confidential Information.
2.4 Confidential Information used by the Company and TMS is kept confidential
and the Company and TMS operate and comply with procedures maintained to
preserve confidentiality.
3. Hardware and Software
3.1 So far as the Vendor is aware, the Company and TMS have in force
maintenance contracts for all material items of Hardware (including
operating systems) and software support contracts for all material items
of Software.
3.2 So far as the Vendor is aware, neither TMS nor the Company suffered any
failures or breakdowns of or bugs in the Hardware or Software during the
year preceding the date of this Agreement which resulted in any material
interruption to the operation of the business of the Company or TMS.
3.3 So far as the Vendor is aware, the Company and TMS have operated and used
the Hardware in accordance with the manufacturers' recommendations
including any recommendations as to environmental conditions and power
supply.
3.4 So far as the Vendor is aware, all material Software (including programs
and data held on silicon chips, disks and any other media, manuals and
operator guides) is either owned by the Company or TMS or held by either
the Company or TMS on licence the terms of which have been disclosed in
the Disclosure Letter.
3.5 So far as the Vendor is aware, together, the Company and TMS own and have
access to all documents and information (including source codes and all
working papers
65
relating to such source codes) which are required to enable the Company
and TMS to adapt, modify or improve the Software economically and have the
right to make such adaptations, modifications or improvements without the
consent of any third party.
3.6 So far as the Vendor is aware, both TMS and the Company have taken proper
precautions to preserve the availability, confidentiality and integrity of
the Hardware, Software and computer systems.
3.7 All material Software (including all programs and data in such Software)
and all media on which such Software is stored are in working condition
and so far as the Vendor is aware contain no programs or data which are
either intended to or which have the effect of modifying, deleting or
otherwise impairing such Software (or any of the programs or data in such
Software) or any other programs or data which are either intended to or
which have the effect of impairing any Hardware.
3.8 The Vendor is not aware of any case where unauthorised access to the
Company's or TMS's computer systems has taken place, or where any of the
Software or data in those computer systems has been modified without the
Company's or TMS's (as appropriate) express authority or where fraud has
been committed against the Company or TMS by use or abuse of either
company's computer systems whether alone or in conjunction with any third
party.
3.9 So far as the Vendor is aware, neither TMS nor the Company is in any
dispute with any person relating to the Company's or TMS's computer
systems or any element of them, including without limitation, to any
proprietary or other rights in any of the Software and/or Hardware.
66
Schedule 3
Management and Reporting Requirements of the Company
Management of the Company
Part 1 : Purchaser's Undertakings
1.1 Notwithstanding the provisions of the Management Agreement, the Vendor and
the Purchaser agree that the Company shall be managed in accordance with
the provisions of this Schedule from Completion until the Final Payment
Date.
1.2 The Purchaser shall not, except as permitted by paragraph 1.4 below,
without the prior consent of the Vendor until the Final Payment Date,
permit the Company to do any of the following:
(a) carry on any business or activity other than the completion of the
run-off of the Company's insurance business which exists as at the
date of this Agreement;
(b) acquire any other business or acquire or subscribe for shares in any
other company;
(c) make loans otherwise than on arm's length terms and strictly for the
purpose of the business of, and for the benefit of, the Company;
(d) save in the ordinary course of the Company's insurance and
reinsurance business, provide security to borrow monies, save to the
extent that such security provides that the liabilities so secured
rank for payment behind the Contingent Deferred Consideration;
67
(e) make any material change or allow any material change to be made to
the Management Agreement that would lead to greater charges or fees
to be payable by the Company or is otherwise adverse to the
Company's interests;
(f) cease to maintain the business of the Company at Completion as a
separate operating entity;
(g) dispose of all or any of or any interests in the shares of the
Company;
(h) transact any of its business otherwise than on commercially
reasonable arm's length terms in the ordinary course of business and
for its own benefit;
(i) any action which is intended, directly or indirectly, artificially
to reduce, inhibit or frustrate the profitability of the Company or
artificially to defer its profits or accelerate its expenditure;
(j) merge or amalgamate the business of the Company with any other
company or business;
(k) allow the Company to make any scrip dividends or otherwise
capitalise its profits or reserves or carry out any redemption or
purchase of shares or distribute assets to its shareholders except
in the form of cash;
(l) cease to carry on (other than pursuant to completion of the run off
of the Company) or dispose of the whole or any material part of its
assets or business whether to a third party or to any member of the
Purchaser's Group (and whether by one transaction or a series of
transactions); or
(m) pass any resolution for the winding up or petition for the winding
up or administration, enter into any voluntary arrangement or
composition with its creditors or fail to discharge any distress,
execution, sequestration or other process within 5 Business Days.
68
1.3 The Purchaser shall procure that until the Final Payment Date:
(a) it shall not seek to impose upon the Company the adoption of
policies in relation to the running of its business or operations
which are likely to have an adverse effect on the profitability of
the Company save as set out elsewhere in this Agreement; and
(b) the Vendor shall have the right (but not the obligation) to nominate
an Observer in respect of whom the provisions of Part 3 of this
Schedule shall apply;
(c) the Company shall not be required or prevented from trading or
dealing with any particular person firm or company and the Purchaser
shall not impose a requirement on the Company to buy or sell goods
or to provide or receive services at any particular price other than
to ensure that all trade and related transaction of the Company
(including transactions between members of the Purchaser's Group)
will be freely negotiated on arms' length terms;
(d) it will comply with its obligations and procure that the Company and
insofar as it is able, LCL shall comply with their obligations set
out in the Deed of Undertaking; and
(e) other than as provided for in the Management Agreement, no
directors' fees or management, administrative, consultancy,
commission or other charges or fees whatsoever are paid or become
payable by the Company to any member, holding company, employee,
director or officer of or former employee, director or office of the
Purchaser's Group or to any employees, directors or officers of any
members of the Purchaser, other than amounts agreed between the
Vendor and the Purchaser for the Observer.
1.4 The restrictions in paragraphs 1.2 and 1.3 shall not apply (save where
such event results from a breach or breaches by the Purchaser of its
undertakings contained in this Schedule 3):
69
(a) to the extent that the Company is in provisional liquidation,
liquidation, company voluntary arrangement, or administration,
administrative receivership or scheme or composition with its
creditors; and
(b) at the time that it enters such a procedure the Company is unable to
pay its debts within the meaning of section 123(2) of the Insolvency
Act 1986; or
(c) (in relation to paragraph 1.2(m) only) where the directors of the
Company convene a meeting to pass a resolution for the winding up of
the Company if the Company is unable to pay its debts within the
meaning of section 123(2) of the Insolvency Act 1986.
1.5 Notwithstanding any other provision in this Agreement the Purchaser
undertakes to act in good faith towards the Vendor with regard to its
interests in respect of the Contingent Deferred Consideration and subject
to paragraph 1.4, the Purchaser shall use its reasonable endeavours to
promote and support the Company's operations.
Part 2 : Further undertakings by the Purchaser
The Purchaser undertakes to the Vendor that it will use all reasonable
endeavours to deliver to the Vendor (or the Vendor's representative if the
Vendor also specifies) until the Final Payment Date:
2.1 a copy of the audited accounts of the Company, when filed at Companies
House;
2.2 a copy of any independent actuarial statements prepared for the Company,
within four days of the final statements being submitted to the Company;
2.3 a copy of any annual filings filed by the Company with the FSA, when
submitted to the FSA; and
2.4 a copy of the annual management accounts for the Company detailing major
expense items within four weeks of the end of the Company's financial
year.
70
Part 3: The appointment and role of the Observer
3.1 The Observer and any replacement Observer shall be nominated by the Vendor
and must be a knowledgeable financial insurance executive. Any such
proposed appointment must be approved by the Purchaser, such approval not
to be unreasonably withheld.
3.2 The Observer will act as a representative of the Vendor at board meetings
of the Company and he shall be entitled to receive notice of all meetings,
to attend and speak at such meetings, to receive copies of the minutes of
such meetings and of all other papers and reports provided to the
directors as part of the board documentation and to review any
representations to be made to the FSA seeking approval for the making of
Distributions. The Observer shall not be entitled to vote at any board
meeting of the Company.
3.3 The Observer shall be paid a fee by the Company commensurate with his
duties and obligations and the initial fee payable to the Observer shall
be a maximum of (pound)20,000 per annum, payable quarterly in advance.
Part 4: Exit
4.1 The Purchaser shall use its best endeavours to achieve an Exit, subject to
obtaining the Vendor's prior written consent, during the period prior to
such date as is the fifteenth anniversary of Completion, and (to the
extent that it has not already done so) shall effect an Exit promptly
following such date as is the fifteenth anniversary of Completion.
4.2 Immediately prior to an Exit (as defined in paragraphs (i) and (ii) of the
definition of Exit), the Purchaser shall set out details of the proposed
sale or other disposal or dealing, specifying the shares or business
affected and the proposed price of such sale or other disposal or dealing,
in a dated notice to the Vendor (the "Exit Notice").
71
4.3 The Vendor shall, within ten Business Days of the date of the Exit Notice,
notify the Purchaser if it wishes to purchase the shares or business
affected by the Exit Notice at the price and on the terms specified in
that notice ("Purchase Notice").
4.4 If the Purchaser:
(d) receives a Purchase Notice under paragraph 4.3, it shall sell or
dispose of or deal with the relevant shares or business to the
Vendor; and
(b) does not receive a Purchase Notice under paragraph 4.3 within ten
Business Days of the date of the Exit Notice, the Purchaser may
sell, dispose or deal with the relevant shares or business to a
third party (including a member of the Purchaser's Group) on terms
no less favourable than those set out in the Exit Notice.
4.5 Following a sale, disposal or dealing under paragraph 4.4(b) and on
receipt of the price and after deduction of all expenses or costs
(including legal costs), the Purchaser shall pay seventy-five per cent of
the net sale proceeds (including any deferred elements) (in each case, if
any) to the Vendor.
4.6 If the Purchaser shall enter into a scheme of arrangement under paragraph
(iii) of the definition of Exit, on receipt of any net proceeds or final
distribution (as the case may be) from such process once it has completed
and all expenses or costs (including legal costs) have been paid, the
Purchaser shall pay seventy-five per cent of such amount (if any) to the
Vendor.
4.7 If the Purchaser shall pass a resolution or petition or enter into any
voluntary arrangement under paragraph (iv) of the definition of Exit, on
receipt of any net proceeds or final distribution (as the case may be)
from such process once it has completed and all expenses or costs
(including legal costs) have been paid, the Purchaser shall pay
seventy-five per cent of such amount (if any) to the Vendor.
72
4.7 The Purchaser shall have no further obligations or liabilities whatsoever
to the Vendor after completion of any of the procedures detailed in
paragraph 4.1 save as set out in paragraphs 4.5 to 4.7.
73
Schedule 4
Investments
74
Schedule 5
Management Agreement
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made with effect from _________________ 2003 (the "Effective
Date"), BY AND BETWEEN
Litigation Control Limited, a company incorporated in England under number
3681642 having its principal office at Thompson House, 3-6 Richmond Terrace,
Blackburn, Lancashire BB1 7AU (hereinafter referred to as "LCL"); and
Trenwick International Limited, a company incorporated in England under number
2494812 having its principal office at 2 Minster Court, Mincing Lane, London
EC3R 7FL (hereinafter referred to as the "Company").
WITNESSETH:
WHEREAS, the Company desires to employ LCL to manage and perform all operational
functions in relation to the operation and management of the Company's insurance
and reinsurance business (such business to be referred to herein as the "Subject
Business"); and
WHEREAS, LCL has the necessary knowledge, skills, infrastructure and facilities
to provide such services and desires to provide such services in return for the
remuneration provided herein.
NOW, THEREFORE, in consideration of their respective promises and covenants
herein contained, LCL and the Company hereby agree as follows:
Clause 1: Appointment of LCL
1.1 The Company hereby appoints LCL to manage the operation and management of
the Subject Business as more fully set forth herein (the "Management
Services"), and LCL hereby accepts such appointment and undertakes and
agrees to manage such business in good faith and diligently and upon the
terms and conditions herein specified and subject to the following:
1.1.1 LCL will act, in its performance of its duties hereunder on
behalf of the Company, as a prudent person acting in good
faith would act in the management of its own affairs, without
any conflicting interest or promoting LCL's own interests. If
a conflict of interest could arise in the performance by LCL
of its duties hereunder (including, without limitation,
between the Company and LCL) or the Company and a person for
which LCL is acting as agent may have competing, conflicting
or opposing interests, LCL will ensure that the Company will
not be disadvantaged.
75
1.1.2 It is understood that, save to the extent authority is
delegated to LCL under this Agreement, the business and
affairs of the Company shall be managed by the Board of
directors of the Company, and, to the extent delegated by such
Board, to the Company's appropriately designated officers.
1.2 It is understood that no legal interest or right whatsoever in the Records
(as defined below) shall be transferred to LCL under the terms of this
Agreement.
1.2.1 "Records" means the books and records received or subsequently
held by LCL in the performance of its duties under this
Agreement, including, but not limited to, the Data.
1.2.2 "Data" means all data of the Subject Business belonging to the
Company which is processed or stored on the System.
1.2.3 "System" means the computer systems on which the Subject
Business is currently processed from time to time
Clause 2: Term and Termination
2.1 This Agreement shall commence on the Effective Date and shall remain
effective and in force until the Exit. The Exit shall mean (i) a disposal
of the entire issued share capital of the Company; (ii) a disposal of the
whole or the material part of the Company's assets of business (whether by
one transaction or a series of transactions), (iii) the approval of a
compromise or arrangement in relation to the Company under section 425 of
the Act, or (iv) the winding up of the Company following the passing of a
resolution for the voluntary winding-up or a petition for the compulsory
winding-up or administration of the Company, or following the appointment
of a supervisor to the Company pursuant to any voluntary arrangement.
2.2 Without prejudice to any other right or remedy, either LCL or the Company
may terminate this Agreement immediately by written notice to the other
party, being LCL or the Company, as the case may be, if the other party:
2.2.1 breaches any material term of this Agreement and, in the case
of a breach which does not fall within Clause 2.2.2 and which
is capable of remedy, fails to remedy such breach within
ninety (90) days after receipt of a written notice requiring
the breach to be remedied; or
2.2.2 commits an act of fraud or gross or material and wilful
misconduct.
For the purpose of Clause 2.2.1, a breach shall be considered capable of
remedy if the party in breach can comply with the relevant provision in
all respects (other than as to the time of performance, provided that the
delay in time is not materially prejudicial to the Company).
2.3 Termination of this Agreement shall, however, not relieve LCL or the
Company of liability for the performance of any obligations imposed upon
the said party during the
76
effective period of this Agreement which have not been performed at the
time of its termination.
2.4 Neither the right to terminate this Agreement given by this Clause 2 nor
termination shall prejudice any other right or remedy, if any, of any
party in respect of the breach concerned, or any other breach of this
Agreement.
2.5 Without limiting the provisions of Clause 2.5, within thirty (30) days of
the termination of this Agreement, the Company shall be entitled to
require LCL to carry out one or more of the following: (a) deliver to the
Company all the Records relating to the Subject Business, including any
off-line storage and security copies of the Data; (b) store on magnetic,
optical or other media all or any of the information then stored on-line
relating to the Subject Business and to deliver such media to the Company;
(c) make and deliver to the Company such print-outs of information
relating to the Subject Business as the Company may reasonably require;
provided, that all reasonable costs incurred by LCL in complying with its
obligations under this Clause 2.6 are reimbursed by the Company to LCL in
full upon demand. If this Agreement is terminated by the Company for any
reason, LCL agrees to assist the Company in transferring the information
referred to in this Clause 2.6 to a replacement service provider.
Clause 3: Duties of LCL
3.1 LCL represents and covenants that at all times during the effectiveness of
this Agreement:
3.1.1 it and any permitted affiliated company or third party
appointed company which provide any of the services to be
provided under this Agreement are and will be properly
incorporated and subsisting under their relevant laws of
incorporation;
3.1.2 it has and will have all requisite corporate power and
authority to enter into this Agreement on the terms described
herein;
3.1.3 it and any permitted affiliated company or third party
appointed company have and will have the necessary knowledge,
skills, facilities, licenses, and authorisations to provide
such services;
3.1.4 it shall inform the Board of Directors of the Company in the
event that it or any permitted affiliated company or third
party appointed company should represent any other party in a
matter such as to give rise to an actual or potential conflict
of interest in providing any material services to the Company;
and further represents that, to the best of its knowledge, no
such conflicts exist as of the Effective Date.
3.2 Without limiting LCL's obligations hereunder to supervise and manage the
Subject Business in accordance with its status as a Financial Services
Authority ("FSA") regulated insurer it shall perform the following
services:
77
3.2.1 provide all management functions as required by FSA for
regulated entities, including ensuring that the controlled
functions specified by FSA are discharged;
3.2.2 provide all necessary office space and staff to manage the
Subject Business;
3.2.3 utilise the Company's existing underwriting, administrative
and accounting computer systems, appropriate to the Subject
Business, and, to the extent required, make such modifications
and undertake such steps as may be necessary;
3.2.4 provide all accounting services required for the purposes of
the management of the Subject Business, including financial
reporting in the form required by any regulatory authorities
having jurisdiction over the Company (and to file on a timely
basis such reports with such regulatory authorities in the
form or forms prescribed by such regulatory authorities) and
such financial reports as may reasonably be required by the
shareholders of the Company;
3.2.5 provide claims management services in respect of the Subject
Business including but not limited to investigation of inwards
claims, management of current third party providers, reporting
of outwards claims, agreement settlement, compromise, payment
and commutation of inwards and outwards claims and treaties,
as well as to retain as needed consultants for the
investigation of underlying ceding company records when
appropriate;
3.2.6 be responsible for the handling, administration and management
of legal proceedings arising from Clause 3.2.4;
3.2.7 collect any funds due in respect of the Subject Business and
provide summary and detailed quarterly reports to the Company
as to such collections;
3.2.8 provide the Company with all other reports as agreed from time
to time;
3.2.9 maintain records in respect of the Subject Business;
3.2.10 manage all aspects of the Company's investment policy
including the supervision of investment managers.
3.3 LCL shall provide written notice to the Board of Directors of the Company
of any payment in excess of US$500,000 whether for expenses, losses,
premiums or refunds made on the Subject Business prior to making, or
committing to make, such payment.
3.4 LCL shall make such broker appointments for the Company as are necessary
for conduct of the Subject Business.
3.5 LCL acknowledges that it is aware of the contents of Schedule 4 of the
share purchase agreement dated [ ] August 2003 and undertakes to use its
reasonable endeavours
78
to ensure that its management of the Company's affairs shall at all times
be strictly in accordance with the provisions of that Schedule.
3.6 Appointment of third party administrators and service providers
Without prejudice to LCL's overriding obligation to provide or procure
provision of the Management Services, LCL may amend, vary or terminate or
replace third party outsourced contracts, which have been entered into by
the Company prior to the date of this Agreement for claims management,
investment management, custodian, claims investigation, legal services,
broking services, and any other related activity, so long as the Company
does not suffer any additional economic cost or decline in the level of
services currently provided. Without prejudice to the generality of the
foregoing, LCL may arrange for claims management services including but
not limited to those currently conducted by GAB Robbins, Capita Insurance
Services (UK), Miller Farrell Liability, Collegiate Management Services
Ltd, Marine Claims Ltd to be conducted by other third party contractors or
by itself or its subcontractors.
3.7 Inspection by the Company
LCL shall, at any time reasonably requested by the Company, allow the
Company and/or anyone authorised by the Company to audit, inspect and take
copies of its books and records in relation to the Subject Business. For
the avoidance of doubt, a request by the Company is agreed to be
reasonable if it is made 30 days or more since the last such request and
the time requested for access to such books and records is more than 5
business days after such request is made.
Clause 4: Duties of the Company
4.1 The Company represents that as of the Effective Date:
4.1.1 it is properly incorporated and subsisting under the relevant
laws of incorporation,
4.1.2 it has all requisite corporate power and authority to enter
into this Agreement on the terms described herein, and
4.1.3 it is in compliance with all applicable laws and regulations
with respect to its business.
4.2 The Company agrees to respond promptly to any reasonable request for
instructions or information which LCL may need in order to perform its
duties efficiently.
4.3 The Company will establish and maintain such bank accounts as may be
required by LCL to carry out the purposes of this Agreement.
79
Clause 5: Bank Account
5.1 LCL shall maintain all bank and investment accounts on the Company's
behalf, subject to the conditions contained in Clause 5.2.
5.2 All premiums and other sums collected or received on the Company's behalf
by LCL shall be deposited directly and immediately in an account at a bank
designated by the Company, in the Company's name and for the Company's
benefit; and a summary and reconciliation of such receipts shall be
delivered to the Company promptly at the end of each month. All interest
that accrues on the funds in such account shall be the sole property of
the Company. In no event and for no period of time shall any of the
premiums and other sums mentioned in the immediately preceding sentence be
deposited by LCL in an account in the name or for the benefit of any
person other than the Company.
Clause 6: Compensation and Outsourcing Costs
6.1 Base Fee
In consideration of the services provided by it hereunder, including but
not limited to providing all management functions as required by FSA for
regulated entities and ensuring that the controlled functions specified by
FSA are discharged, the Company shall pay to LCL (pound)593,750 on the
Effective Date and (pound)593,750 per quarter thereafter for the five-year
period following the Effective Date ("Base Fees"). Thereafter, for the
duration of the Agreement in consideration of the services provided by it
hereunder, the Company shall pay to LCL a Base Fee at a reasonable
commercial rate based on the level and quality of services provided and as
approved by the Board and the Financial Services Authority. The Base Fee
shall be reviewed annually but in any event is not to exceed
(pound)296,875 per quarter.
6.2 Outsourced fees
In addition to the Base Fee
(a) For all Accounts and for the corporate governance and regulatory
requirements in respect of the Company
LCL shall be entitled charge the Company for bureau fees and the
reasonable professional third party fees and expenses properly incurred in
connection with the provision of investment management audit, actuarial
and legal services to the subject business.
(b) For all accounts with the exception of the General Aviation, Liability PI
and Yacht accounts
LCL shall be entitled charge an amount to the Company for to all
reasonable professional third party fees and expenses properly incurred in
connection with the inspections and legal fees and disbursements in
dealing with the accounts, claims and pursing recovery actions.
(c) For the General Aviation, Liability, PI and Yacht accounts
80
(1) In the event that LCL arranges for the claims management and claims
handling of the General Aviation, Liability, PI and Yacht accounts to be
carried on by persons other than those contracted to do so at the date of
this Agreement ("Third Party Claims Handler"), LCL will be entitled to
charge to the Company a reasonable amount in respect of the Claims
Handling Costs. "Claims Handling Costs" are the claims management and
handling fees charged by the Third Party Claims Handler together with
legal defence and associated costs of dealing with the claim including
disbursements, expert witnesses, solicitors' and counsel's fees and
including costs of third parties providing legal defence. Claims Handling
Costs exclude exceptional costs set out at Clause 6. 2(c)(2).
For the five year period from the Effective Date the maximum amount which
LCL can charge the Company in respect of the Claims Handling Costs in
respect of all 4 accounts in aggregate shall not exceed (pound)1,200,000
per annum.
Thereafter for the duration of the Agreement and provided that LCL
continues to outsource the claims management and claims handling of any of
these Accounts LCL, shall be entitled to charge Claims Handling Costs (for
the accounts outsourced) at a reasonable commercial rate based on the
level and quality of services provided and as approved by the Board of the
Company and the Financial Services Authority. The Claims Handling Costs
shall be reviewed annually but in any event the maximum amount which LCL
may charge the Company in respect of Claims Handling Costs for all 4
accounts in aggregate are not to exceed (pound)600,000 per annum.
The Company shall pay to LCL the Claim Handling Costs quarterly in
arrears.
(2) In very exceptional circumstances a matter may arise in connection with
the General Aviation, Liability, PI and Yacht accounts where LCL
reasonably believes that specialist expertise or assistance (including
specialist legal advice) would enable the Company to achieve a substantial
net benefit or savings in excess of those that might be achieved by a
Third Party Claims Handler, LCL will be entitled to instruct the necessary
specialists to represent the Company at the Company's cost and expense and
such costs shall not be Claims Handling Costs. LCL must obtain the prior
approval of the Board of Directors of the Company before formally
instructing the specialists and incurring fees.
6.3 Commutation
In addition to the Base Fee LCL shall be entitled to 25% of any savings
achieved from commutations and portfolio transfers to another insurer
("Savings").
For these purposes a commutation is:
1) mutually agreed termination of an assumed or ceded facultative/treaty
reinsurance contract or inwards insurance contract;
81
2) the commutation payment must represent full and final settlement so that
no future liabilities can arise in respect in the future in respect of
that contract;
3) it excludes settlement of individual claims on inwards insurance contracts
except where those inward claims are ceded as part of an excess of loss
treaty.
To determine the Saving the commutation payment is compared to the net of
reinsurance reserves held by the Company as at Q2 2003 for the contract
being commuted taking into account including:
o Case reserves and IBNR reserves booked by the Company;
o Provisions for reinsurance bad debt where allocated to the
reinsurance contract;
o Claims expected to arise from unearned exposures;
o Potential outwards reinsurance recoveries on proportional and
non-proportional covers;
o Expected investment income on reserves until payment (assuming no
commutation);
o Recoveries achieved by LCL in excess of ultimate reinsurance balance
(net of bad debt).
PricewaterhouseCoopers or another "Top Four" accounting firm shall be
requested by the Company to allocate incurred but not reported reserves by
contract or, if impractical, by class of business, to provide a benchmark
against which to measure Savings and to review the bad debt provision and
assign the general provision to specific reinsurers.
This Savings fee shall be payable by the Company quarterly in arrears
based on Savings statements presented to the Company by LCL.
6.4 In the event that this Agreement is terminated by the Company in
accordance with Clause 2 of this Agreement, LCL shall be entitled to fees
and reimbursement of its expenses up to the effective date of termination
subject to any claims which the Company may have where it has terminated
the agreement pursuant to Clause 2.3.
6.5 VAT
No VAT is payable in respect of LCL's services and in the event that any
VAT does become payable this will be paid for by the Company against a VAT
Invoice provided by LCL and the fees payable in respect of LCL's services
shall be net of VAT.
Clause 7: Indemnity
If LCL or any of its affiliates or any of the past or present employees of LCL
or such affiliates (hereinafter referred to as "LCL and Employees") becomes
involved as a defendant in any action or legal proceedings brought by a third
party as a consequence of properly performing their duties under this Agreement,
the Company agrees to defend, indemnify and hold LCL and Employees harmless to
the full extent permitted under English
82
law against all damages, claims, losses, fines, penalties, disputes and
liabilities, whether legal or otherwise, including reasonable attorney's fees
and other costs of defence, special, indirect, consequential, punitive,
extra-contractual, or exemplary damages of any nature or description whatsoever
unless the liability etc. arises by reason of (1) any breach of applicable law
or binding regulatory rule of Lloyd's or the FSA which applies to the conduct of
the Company's business (2) gross negligence or wilful misconduct or a grossly
negligent or wilful breach of the Agreement on the part of LCL and Employees or
their delegates.
Clause 8: Jurisdiction
This Agreement and all matters relating to it shall be governed by and construed
in accordance with English Law.
Clause 9: Confidentiality
Save as may be reasonably necessary for the proper performance of their
respective duties under this Agreement, LCL, its affiliates, the directors,
officers, employees or agents of LCL or its affiliates shall not for any reason
during the period of this Agreement or at any time after the termination of this
Agreement disclose to any person or otherwise make use of any information of
which in the course of the operation of this Agreement they have or may have
become possessed, relating to the Agreement, the implementation of the
Agreement, the Subject Business or the Company, without the Company's prior
written authority.
Clause 10: Notices
All notices and other communications between the parties to this Agreement shall
be in writing and delivered to each party listed below at the addresses written
below by hand delivery, first class post or facsimile, provided that all notices
and communications shall be deemed to have been received on the next business
day following hand delivery or facsimile transmission (if received after the
normal business hours of the addressee), and on the tenth business day following
posting:
To the Company:
9 St Claire Street
London
EC3N 1LQ
To LCL:
5th Floor
40 Lime Street
London
EC3M 5BS
Fax Number 020 7623 4352
Either party may change its address for notice by giving notice pursuant to this
Clause 10.
83
Clause 11: Entire Agreement
This Agreement constitutes the entire agreement among the parties hereto
relating to the subject matter hereof and supersedes any and all prior oral or
written agreements, representations or warranties, contracts, understandings,
correspondence, conversations and memoranda, whether written or oral among the
parties hereto or between or among any agents representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in interest,
with respect to the subject matter hereof. Nothing in this Agreement shall
exclude liability for fraud.
Clause 12: Counterparts
This Agreement may be executed in counterparts, each of which shall be
considered an original and all of which together shall constitute one and the
same agreement. A facsimile, telecopy or other reproduction of this Agreement
may be delivered by one or more parties hereto, and an executed copy of this
Agreement may be delivered by one or more parties hereto by facsimile or similar
instantaneous electronic transmission device pursuant to which the signature of
or on behalf of such party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes.
Clause 13: Severability
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, each party
hereto directs that such court interpret and apply the remainder of this
Agreement in the manner which it determines most closely effectuates its intent
in entering into this Agreement, and in doing so particularly take into account
the relative importance of the term, provision, covenant or restriction being
held invalid, void or unenforceable.
Clause 14: Waiver or Amendment
The provisions of this Agreement may be modified or amended, and waivers and
consents to the performance and observance of the terms hereof may be given,
only by written instrument executed and delivered by each of the parties hereto.
The failure at any time to require performance of any provision hereof shall in
no way affect the full right to require such performance at any time thereafter
(unless performance thereof has been waived in accordance with the terms hereof
for all purposes and at all times by the parties to whom the benefit of such
performance is to be rendered). The waiver by any party to this Agreement of a
breach of any provision hereof shall not be taken or held to be a waiver of any
succeeding breach of such provision or any other provision or as a waiver of the
provision itself.
Clause 15: Assignment.
Neither this Agreement or any rights or benefits under this Agreement shall be
assignable by any party hereto, but shall be binding on their respective
successors in interest.
IN WITNESS WHEREOF each of the parties hereto have executed this Agreement on
the day and year first above written.
84
LITIGATION CONTROL LIMITED
By:
-----------------------------
Name:
Title:
TRENWICK INTERNATIONAL LIMITED
By:
-----------------------------
Name:
Title:
85
Schedule 6
Limitation of the Vendor's liability
1. General
1.1 The provisions of this Schedule shall operate to limit the liability of
the Vendor under and in respect of the Warranties (in addition to any
other provision which limits the Vendor's liability set out in this
Agreement).
1.2 References in this Schedule to a "Relevant Claim" include any claim
against the Vendor for breach of the provisions of this Agreement referred
to in paragraph 1.1 above.
2. Disclosure
2.1 The Vendor shall not be liable in respect of a Relevant Claim if the
subject matter thereof arises from or consists of any fact or matter which
has been Disclosed to the Purchaser.
2.2 The following matters shall be treated as Disclosed to the Purchaser by
the Vendor in respect of the Company:
(a) the contents of this Agreement and all transactions herein
envisaged;
(b) all information contained or referred to in the Accounts or the
Management Accounts;
(c) all matters and information which would have been revealed by a
search of the microfiche of the files of the Company at Companies
House on the Business Day prior to the date of this Agreement;
86
(d) all matters, information and circumstances known to the Purchaser at
the date of this Agreement; and
(e) all matters deemed to have been disclosed pursuant to the Disclosure
Letter (or the Completion Disclosure Letter) including without
limitation the contents of the documents as identified in the Data
Room Control Document dated 12 August 2003 (which were provided for
inspection in the data room) and as listed in the schedule of Data
Requests and Transition Documents Schedule as attached to the
Disclosure Letter.
3. Mitigation
Notwithstanding the other provisions in this Schedule, the Purchaser shall
use its reasonable endeavours to mitigate and to procure that the Company
shall mitigate any loss or damage which it or the Company may suffer in
consequence of any breach by the Vendor of the terms of this Agreement or
in consequence of any matter giving rise to a claim against the Vendor
under this Agreement.
4. Obligation to bring proceedings
Any Relevant Claim made before the relevant dates specified in clause 12.3
shall, if it has not been previously satisfied, settled or withdrawn, be
deemed to have been withdrawn and shall become fully barred and
unenforceable (and the Vendor's liability in respect of such Relevant
Claim shall absolutely terminate) on the expiry of the period of twelve
months after notice of such Relevant Claim was given to the Vendor in
accordance with clause 10.4, unless proceedings in respect thereof shall
have been commenced against the Vendor (and for this purpose proceedings
shall not be deemed to have been commenced unless they shall have been
issued and validly served upon the Vendor).
87
5. Specific limitations
5.1 The Vendor shall have no liability in respect of any Relevant Claim if and
to the extent that such Relevant Claim (or the subject matter thereof):
(a) occurs or arises or is increased as a result of any legislation not
in force at the date hereof or any change of law, regulation,
directive, requirement or administrative practice (including by the
Inland Revenue or any other taxing authority) or any change in the
rates of Taxation which in each case is not in force at the date
hereof;
(i) occurs or arises or, such Relevant Claim otherwise having
arisen, is increased, as a result of any change made after the
date hereof in any accounting or taxation policies of any
company in the Purchaser's Group (a "Group Company");
(ii) would not have arisen or occurred but for (or is increased as
a result of):
(1) any voluntary act, event, omission, transaction or
arrangement after Completion by the Purchaser or any
Group Company (or on their respective behalves)
otherwise than, in the case of any Group Company, in the
ordinary course of its business as now carried out; or
(2) any claim, election, surrender or disclaimer made, or
notice or consent given after Completion (other than
anything the making, giving or doing of which was taken
into account in computing any provision for Taxation in
the Accounts or the Management Accounts) by any Group
Company in connection with the provisions of any
enactment or regulation relating to Taxation; or
(3) any failure or omission by the Company to make any
claim, election, surrender or disclaimer, or give any
notice, or consent or do any other thing, in connection
with the provisions of any
88
enactment or regulation relating to Taxation after
Completion, the anticipated making, giving or doing of
which was taken into account in computing the provision
for Taxation in the Accounts or the Management Accounts;
or
(iii) arises from an act, event, omission, transaction or
arrangement of the Vendor or the Company prior to Completion
occurring at the written request or written direction of the
Purchaser.
(b) The Vendor shall have no liability in respect of any Relevant Claim:
(i) to the extent that allowance, provision or reserve has been
made in the Accounts or the Management Accounts in respect of
the matter to which such liability relates; or
(ii) to the extent of the amount by which any liability (including
any provision against liabilities) included in the Accounts or
the Management Accounts is overstated.
6. Recovery
6.1 Where the Purchaser or any Group Company is or may be entitled to recover
from some other person any sum in respect of any matter or event which
could give rise to a Relevant Claim, the person so entitled shall use his
reasonable endeavours to recover that sum before making the Relevant Claim
(keeping the Vendor fully and promptly informed of the conduct of such
recovery) and any sum recovered will reduce the amount of the Relevant
Claim.
6.2 Without prejudice to the provisions of paragraph 6.1 if the Vendor pays to
the Purchaser an amount in respect of any Relevant Claim, and the
Purchaser or any Group Company subsequently recovers (whether by payment,
credit, discount, relief or otherwise) from a third party (including any
Taxation Authority) an amount which is referable to the matter giving rise
to such Relevant Claim then:
89
(a) if the amount paid by the Vendor in respect of such Relevant Claim
is more than Sum Recovered (as such term is defined in paragraph 6.3
below), the Purchaser shall (or, where appropriate, shall procure
that the Company in the Purchaser's Group shall) immediately pay to
the Vendor the Sum Recovered; and
(b) if the amount paid by the Vendor in respect of such Relevant Claim
is less than or equal to the Sum Recovered, the Purchaser shall
immediately pay to the Vendor an amount equal to the amount paid by
the Vendor
so as to leave the Purchaser, taking into account the amounts received
from the third party and from the Vendor and those payable to the Vendor
under this paragraph in no better or worse position than it would have
been in had the Relevant Claim not arisen.
6.3 For the purposes of this paragraph, the expression "Sum Recovered" means
an amount equal to the amount recovered from the third party (and for this
purpose, in addition to any cash payment, any payment in kind or discount,
credit or like benefit obtained shall constitute an amount recovered) plus
any repayment supplements in respect of the amount recovered from the
third party (as defined in section 85 of ICTA) plus any interest in
respect of the amount recovered from the third party less all reasonable
costs and expenses incurred by the Purchaser or (as the case may be) the
relevant Group Company in recovering the amount from the third party and
any tax suffered on the receipt.
7. Contingent liabilities
If any Relevant Claim arises by reason of a liability which is a
contingent liability when the Relevant Claim in respect thereof is
notified to the Vendor, then the Vendor shall not be liable to the
Purchaser until such time as the contingent liability ceases to be
contingent and becomes an actual liability and is due and payable. So long
as any Relevant Claim arising by reason of a contingent liability shall
have been notified to the Vendor in accordance with clause 12.3, then
paragraph 4 shall be amended in relation to such Relevant Claim so as to
require that proceedings be commenced
90
within twelve months from the date on which the said liability ceases to
be contingent.
91
Schedule 7
Form of Power of Attorney
Trenwick Holdings Limited (no. 2488310) ("the Vendor"), being the sole member of
Trenwick International Limited (no. 2494812) ("the Company") hereby irrevocably
and unconditionally appoints Bestpark Limited ("the Purchaser") to be the
Vendor's true and lawful attorney (with full power to appoint substitutes)
pending registration of the Purchaser as the legal owner of the entire issued
share capital of the Company held by the Vendor ("the Shares") and in the
Vendor's name or otherwise on the Vendor's behalf and as the Vendor's act and
deed to do exercise and perform any of the acts and things to be done and
performed or that may be done and performed by the Vendor and to execute any
documents necessary to be or, if the Purchaser deems desirable, that may be
completed or executed by the Vendor as the Vendor's attorney shall think to do
and perform and execute in connection with the legal or beneficial ownership of
all or any of the Shares as if it were the legal and beneficial owner of the
Shares and in particular but without limitation:
(a) to do and perform any of the acts and things and to approve and
execute any document or documents necessary to be completed or
executed by the Vendor for transferring the Vendor's legal or
beneficial interest in all or any of the Shares into the name of the
Purchaser or its nominee(s) or other person(s) nominated by the
Purchaser or any person(s) purchasing all or any of the Shares from
the Purchaser; and
(b) to receive or accept service of or agree to waive all or any notices
or to agree to accept short notice for and to attend and vote and
demand and vote on a poll or otherwise at all or any meetings or
class meetings of the holders of shares or securities in the
Company,
in all cases as amply and effectually as the Vendor could do if this Power of
Attorney had not been made and no sale of any legal or beneficial ownership of
the Shares had taken place by the Vendor.
92
The Vendor hereby undertakes, to ratify whatever the Vendor's attorney shall
lawfully do or cause to be done under the authority or purported authority of
this Power of Attorney.
This Power of Attorney is given to secure the proprietary interest of the
Purchaser in the Shares and is irrevocable without the consent of the Purchaser
for so long as the Vendor has that proprietary interest.
This Power of Attorney shall terminate upon registration of the Purchaser or its
nominee(s) or other person(s) nominated by the Purchaser or any person(s)
purchasing all or any of the Shares from the Purchaser.
Date: 2003
EXECUTED as a DEED )
for and on behalf of )
TRENWICK HOLDINGS )
LIMITED by ) -------------------------------
Director
-------------------------------
Director/Secretary
93
Schedule 8
Form of Claims Notifications above (pound)25,000
New and Revised Estimates as at 1st August 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Claims payments
- ------------------------------------------------------------------------------------------------------------------------------------
Risk Event Claim Assured Class FGU Loss Description Opening Gross Closing Paid Movement
number code No. /Cedant OS Paid OS Claims this
Claims Claims Claims this week week
(pound) (pound) (pound) (pound) (pound)
- ------------------------------------------------------------------------------------------------------------------------------------
Facultative 1998
- ------------------------------------------------------------------------------------------------------------------------------------
10122 1449 4 Project Latent NA 1.7.1998. Property 0 151,679 165,000 79,276 244,276
Builder Defects at Old Brookhouse
Barn, Framfield.
Mrs MacDonald. UCR
- Direct
- ------------------------------------------------------------------------------------------------------------------------------------
0 151,679 165,000 79,276 244,276
- ------------------------------------------------------------------------------------------------------------------------------------
Facultative 1999
- ------------------------------------------------------------------------------------------------------------------------------------
857 1344 1 Whitbread Liability AUD 12.6.200. Claimant 35,000 139,448 44,212 128,585 137,797
Insurance 113,007 Mr Haddad allegedly
Brks fell off horse. UCR -
665Sugarloaf
- ------------------------------------------------------------------------------------------------------------------------------------
35,000 139,448 44,212 128,585 137,797
- ------------------------------------------------------------------------------------------------------------------------------------
Treaty 2000
- ------------------------------------------------------------------------------------------------------------------------------------
350122 1395 1 R.J. Financial GBP 3.1.2001. Banque Leumi 72,355 96,178 0 96,178 23,823
Wallace Institutions 1,651,258 France new claim.
Awaiting full loss
details. UCR -
429002555
- ------------------------------------------------------------------------------------------------------------------------------------
72,355 96,178 0 96,178 23,823
- ------------------------------------------------------------------------------------------------------------------------------------
Total Claims payments 107,355 387,305 209,212 304,038 405,896
- ------------------------------------------------------------------------------------------------------------------------------------
94
Schedule 9
Contingent Deferred Consideration
1. Limited recourse payment of the Contingent Deferred Consideration and
Distributions
1.1 The Contingent Deferred Consideration shall only be paid if and to the
extent Distributions are made by the Company and paid to the Purchaser
from time to time and shall be paid in accordance with the provisions of
this Schedule. The Vendor acknowledges that the Company may not make
distributions without the consent of the FSA.
1.2 The Purchaser shall satisfy its obligations to pay the Contingent Deferred
Consideration by making the following payments out of the Distributions in
the following order of priority:
(a) first, one hundred percent of the amount of any Distribution which
the Purchaser is entitled to retain pursuant to clause 16.8 shall be
paid to and retained by the Purchaser for its own account;
(b) secondly, fifty per cent of the amount of any Distribution not
retained under paragraph 1.2(a) above ("Non-Retained Distributions")
shall be paid to and retained by the Purchaser for its own account
and fifty per cent of the amount of the Non-Retained Distribution
shall be paid into a trustee bank account with such bank as may be
nominated from time to time by the Vendor, in the name of the
Purchaser, but the monies held in which shall be held on trust for
the Vendor and the account signatories of which shall be nominees of
the Vendor ("the Account") until (pound)2,000,000 of Non-Retained
Distributions have been retained by the Purchaser in total; and
(c) thirdly, once (pound)2,000,000 of Non-Retained Distributions have
been retained by the Purchaser, seventy-five per cent of any
additional Distributions shall be
95
paid into the Account and twenty-five per cent retained by the
Purchaser for its own account.
1.3 The Purchaser undertakes to the Vendor that it shall use its best
endeavours to procure that the Company makes Distributions to its maximum
extent possible and as soon as possible. The obligation shall include:
(a) making appropriate representations to the FSA to seek approval for
the making of Distributions and keeping the Vendor informed of any
proposed representations; and
(b) where the FSA agrees to a Distribution but the Distribution cannot
be made because the Company does not have realised profits for the
purpose of the Act then the Purchaser shall use its reasonable
endeavours to procure that the Company shall reduce its capital or
carry out any other transaction or scheme that would create
sufficient realised profits for this purpose.
1.4 Notwithstanding the provisions of paragraph 1.3, the Purchaser undertakes
to the Vendor that it shall make appropriate representations to the FSA to
seek approval for the making of Distributions at such time as the audited
accounts of the Company show that is has distributable reserves of at
least (pound)2 million, unless at such time the payment of a Distribution
would not be permitted by the Act.
1.5 Immediately upon payment to the Purchaser of any Distributions by the
Company, such percentage of the Distributions which are payable to the
Vendor under paragraph 1.2 shall be held on trust for the Vendor by the
Purchaser until such payment is paid to the Vendor, and shall be
immediately paid by the Purchaser into the Account. The Purchaser shall
not deal with such Distributions in any whatsoever, save to hold such
Distributions on trust for the Vendor and to pay such sums forthwith into
the Account. Any monies held in the Account shall be beneficially owned by
and vested in the Vendor absolutely and it shall form part of the Vendor's
legal estate.
1.6 On the Final Payment Date the Contingent Deferred Consideration shall
immediately cease to be payable to the Vendor by the Purchaser with no
further obligations or
96
liabilities on the Purchaser save those obligations specifically set out
in Part 4 of Schedule 3.
1.7 If the Company enters into liquidation, administration or administrative
receivership at any time before the Final Payment Date, and at the time
that it enters such a procedure the Company is unable to pay its debts
within the meaning of section 123(2) of the Insolvency Act 1986, the
Contingent Deferred Consideration shall immediately cease to be payable to
the Vendor by the Purchaser with no further obligations or liabilities on
the Purchaser save those obligations specifically set out in Part 4 of
Schedule 3.
2. Payment of amounts in respect of Contingent Deferred Consideration
Payment by electronic funds transfer to the Account by the Purchaser shall
constitute full discharge by the Purchaser of its obligations to pay the
Contingent Deferred Consideration to the Vendor and if confirmation of
despatch of the funds transferred is received by or on behalf of the
Purchaser this shall evidence full satisfaction of the relevant obligation
by the Purchaser. If payment is made by another method at the direction of
the Vendor, the Purchaser is not responsible for amounts lost or delayed
in the course of the transfer or in carrying out those directions. The
Purchaser shall provide such assistance to the Vendor, at the Vendor's
cost, as the Vendor may reasonably request if, not withstanding the
despatch of funds to the Account, such funds are not received in the
Account.
97
Schedule 10
Intra Group Loans
98
Schedule 11
Part A - Hardware
Server 09 Gentia
AS400 Reapps
Server 10 Sun Account's SQI Server
38 PCs currently used by permanent and temporary staff of TMS dedicated to the
Company's operations
99
Part B - Software
Reapps/AS400
REAPPS Software License
Miscellaneous
Accurate (bank reconciliations)
Services
Sungard Disaster Recovery Contract
Back up service for servers London09 and London10 (provided under a
contract between Televault and TMA)
Re-activate Orbit for LPC messages
Spyview, licensed from Magellan (now Gauss)
100
AS WITNESS the hands of the duly authorised representatives of the parties on
the date which first appears on page 1.
SIGNED by ) David Prince
for and on behalf of )
Trenwick Holdings Limited )
SIGNED by ) Andrew Brannon
for and on behalf of )
Bestpark Limited )
101